Fears of "WINDFALL TAX" on Private Oil Companies

Cairn India runs out of fuel on fears of windfall tax

Cairn India lost 2.51% to Rs 245.20 at 13.29 IST on BSE on reports that the government is considering imposing windfall profit tax on private oil & gas companies to share the huge subsidy burden in the oil sector.

The stock hit a high of Rs 248.95 and a low of Rs 242 so far during the day. The stock had a 52-week high of Rs 342.50 on 21 May 2008 and a 52-week low of Rs 134.60 on 17 August 2007.

The large-cap private sector oil exploration firm has an equity capital of Rs 1894.43 crore. Face value per share is Rs 10.

A windfall tax is normally levied on oil exploration and production companies who reap huge profits when global crude prices increase. A decision to this effect is expected towards the end of this month. Refinery companies, like Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation are facing pressure on their margins due to surge in crude oil prices

The under-recoveries of oil marketing companies (OMCs) on the sale of petrol, diesel, PDS kerosene and domestic LPG is reportedly estimated at around Rs 2.45 lakh crore for 2008-09. Currently, the under recoveries are split by the public sector companies like ONGC, Oil India and Gail India.

On 4 June 2008, the government increased prices of three sensitive fuel products — petrol by Rs 5 per litre, diesel by Rs 3 per litre and cooking gas by Rs 50 per cylinder. Even after the price increase, public sector oil marketing companies are reportedly losing Rs 14.92 per litre on petrol, Rs 24.90 per litre on diesel, Rs 38 per litre on kerosene and Rs 338.53 on every LPG cylinder.

Cairn India reported a net loss of Rs 8.74 crore in Q1 March 2008 as compared to net loss of Rs 8.54 crore in Q1 March 2007. Sales rose 78% to Rs 0.89 crore in Q1 March 2008 over Q1 March 2007.

Cairn India’s principal activity is to explore, develop and produce crude oil and natural gas.