ONGC, Oil India extend gains as government exempts companies from sharing subsidy

MUMBAI: Shares of ONGC and Oil India extended overnight gains as sentiment turned bullish following media reports that the government has exempted the duo from sharing any subsidy in the fourth quarter of FY15.

ONGC shares surged as much as 3.46 per cent intraday to end the day at Rs 327.5, up 3.25 per cent. Oil India rallied 2.56 per cent in intraday trade to end the day up 1.69 per cent or Rs 8.45 at Rs 508.6.

Government sources indicate that Finance Minister Arun Jaitley has decided to exempt upstream explorers from any kind of subsidy payout for the fourth quarter of the last fiscal.

Deregulation of diesel prices in October last year and crash in global crude prices resulted in fuel subsidy bill for Financial Year 15 nearly being cut by half to around Rs 74,000 crore from Rs 1,40,000 crore last year.

With over Rs 67,000 crore already accounted for in the first half, the government is expected to foot the remainder Rs 5300 crore for the fourth quarter, without any burden to ONGC or OIL India.

Upstream companies are reeling under the pressure due to 60 per cent reduction in global crude prices which has squeezed their net realisations in just six months. With financials in jeopardy, any relief on the subsidy compensation is something the sector will be pleased to accept.