Oil tax to be negative for sector valuations: Morgan Stanley

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.

While ONGC will be worst affected, RIL can manage the changes better, Morgan Stanley said.

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.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Commodities
Photos