|Pre Budget 2012-13||Tuesday, March 13, 2012 12:22 Hrs IST|
PRE BUDGET REPORTS
Oil drilling and Allied Services: Bestow infrastructure status & remove NCCD on crude oil
The Indian basket of crude oil prices has increased to USD 122.74 per barrel at the end of February 2012 compared to USD 110.47 in January 2012 and USD 101.62 per barrel in February 2012 mainly due to tensions surrounding Iran.
EIA expects the price of West Texas Intermediate (WTI) crude oil to average about $100 per barrel in 2012, almost $6 per barrel higher than the average price last year. Based on recent futures and options data, the market believes there is about a one in fifteen chance that the average WTI price in June 2012 will exceed $125 per barrel, and about a one in fifty chance that it would exceed $140 per barrel. For 2013, EIA expects WTI prices to continue to rise, reaching $106 per barrel in the fourth quarter of next year
Crude oil as well as Natural gas produced under NELP contracts is not liable to duties of Excise under the Central Excise Act, 1944. However Rs 2500 per tonne is being charged as cess and Rs 50 per tonne as National calamity contingent duty (NCCD). Regards Custom duty it is nil. However it attracts Rs 50 per tonne as NCCD.
Crude oil is trading at a very high price which itself makes O&G exploration activity attractive for players. Hence, GOI may not give incentive this time.
Stock to watch
ONGC, RIL, Cairn India, Oil India
Crude oil prices has remained higher in last one year due to a stronger than expected increase in demand along with supply side issues arising from unplanned outages from OPEC and the unrest in MENA (Libya, Nigeria). India imports almost three fourth of its crude oil requirement. Higher international crude oil prices situation is further aggravated by depreciation of rupee. Fuel prices (diesel, PDS kerosene and Domestic LPG) are decided by government of India. As a result OMC are currently incurring daily under recovery of Rs 474 crore on sale of diesel, kerosene and LPG. Diesel under recovery is Rs 12.17, PDS kerosene is Rs 28.66 and Domestic LPG is Rs 439. Upstream companies have to bear a portion of under recoveries of OMCs thus impacting their profitability. Industry expects clarity on subsidy sharing mechanism of under recoveries; However Budget may not be a platform for the same.