Commodity Online
MUMBAI: Oil exploration companies lose ground on the note that the government might put a cap on profits by imposing additional tax on the earnings of crude oil producers as a part of a transparent and sustainable subsidy-sharing system for the oil sector.

Private sector oil exploration companies, including Cairn India and Reliance Industries Ltd lost heavily on the Bombay Stock Exchange (BSE). Cairn India Ltd lost by over 3.5% at Rs.213.49 during the afternoon trading session. Country’s largest private sector conglomerate, Reliance Industries Ltd, plunged marginally by 0.5% at Rs.2173 during the day.

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However, public sector oil exploration firm, ONGC Ltd surged by 0.51% at Rs.1043.25 during the afternoon trading session. Sectoral index, BSE oil & gas index fell marginally by 0.12% at 9802 points during afternoon trading session. Meanwhile, benchmark index, Sensex extended loss from its peak during the day. The index was trading at 13842 points down by 0.32% from its Friday’s close.

The proposed imposition of special oil tax was a part of the recommendations of the BK Chaturvedi Committee, who has been appointed to look into oil pricing as a replacement for the current subsidy-sharing plan, which was believed to be less transparent.

The new government had initiated reforms in the oil and gas sector, and its priority is to ease the subsidy burden that is hurting the financials of blue-chip oil companies and the fiscal health of the government.

The committee, in August last year, had recommended that public sector oil companies including ONGC and Oil India Ltd should contribute their revenues beyond USD 75 per barrel to the central exchequer, while private producers need to chip in with 50% of their incremental earnings.

The government had spent Rs.1,03,182 crore on oil subsidies during 2008-09 to keep the pump prices of motor fuel and cooking gas under control.