The goverment’s decision to slap an export tax on petrol, diesel and jet fuel (ATF) while imposing a windfall tax on crude oil produced locally is incrementally negative for sector valuations, Morgan Stanley said in a research note on Friday. While ONGC will be worst affected, RIL can manage the changes better, it said.
A Rs 6 per-litre tax on export of petrol and ATF and Rs 13 per-litre tax on export of diesel is effective from Friday, finance ministry notifications showed. Additionally, a Rs 23,250 per-tonne tax has been levied on crude oil produced domestically.
Higher cess of $40/bbl for ONGC and OIL on domestic crude production was a negative surprise and should imply downside risks for the sector multiple over the medium term, the note said, adding that the move will have impact of 36% and 24% on FY23 earnings of ONGC and OIL, respectively.
“Assuming the full impact of the regulations on both diesel and gasoline, RIL’s GRM would be negatively impacted by US$6-8/bbl realistically vs last week’s margin of US$24-26/bbl. This would still be above our base case estimates on earnings. Every US$1/bbl impacts RIL’s earnings by 2.5 – 3%,” Morgan Stanley said.
