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Impact on companies in Refineries sector

Issues

• Rationalisation of sales tax for petrochemical products.
• Formation of a regulatory body.
• Marketing rights for standalone refiners

Initiatives

• APM to be dismantled by March 2002
• 8 per cent excise on LPG and kerosene to continue
• SED on motor spirit at 16%

Post-budget show - Underperformed

The move to deregulate the sector as per schedule by March 2002 will make it one of the most exciting segments to watch out for.

However, the budget did not mention the need to rationalise sales tax rates across the country. Oil refineries will remain unaffected by the restoration of excise rates for high speed diesel and motor spirit to pre-September rates as the increase will be transferred to the oilpool account.

Indian Oil Corporation

Since the rise in excise for high speed diesel to 16 per cent and motor spirit to 32 per cent will not be passed down to consumers, analysts say it will be adjusted to the oilpool account. This means IOC will be reimbursed, though the payment will be delayed by the government. IOC's strong marketing will shield it from the dismantling of APM and deregulation.

Reliance Petroleum

The company will not be impacted by the rise in excise duty for kerosene and motor spirit. The indefinite extension of carry-forward of depreciation, effective 2002, will benefit RPL. However, the company was expecting an announcement from the finance minister to extend marketing rights to stand-alone refining companies, which did not materialise. BPCL It will not be impacted by the restoration of excise rates though it may experience delayed payment from the oilpool account. If the rise in excise is not passed down to consumers, it would mean a delay of 6 months, over and above the already-delayed receivables from the oilpool account.

Source: Business Standard

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The Rediff-Business Standard Budget Special
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