Reliance Industries stock tumbles over 7 pc; ONGC tanks more than 13 pc
PTI, Jul 1, 2022, 5:40 PM IST
Shares of Reliance Industries tumbled over 7 per cent on Friday, with its market valuation falling by Rs 1.25 lakh crore after the government imposed an export tax on petrol, diesel, and jet fuel (ATF).
The government on Friday slapped an export tax on petrol, diesel and jet fuel while also joining nations like the UK in imposing a windfall tax on crude oil produced locally.
Shares of Reliance Industries fell 7.14 per cent to settle at Rs 2,408.95 apiece on the BSE. During the day, it tumbled 8.82 per cent to Rs 2,365.
The market valuation of Reliance Industries eroded by Rs 1,25,447.5 crore to Rs 16,29,684.50 crore.
It was the biggest drag among the Sensex firms.
Shares of ONGC tanked 13.40 per cent to Rs 131.15 apiece and Vedanta declined 4.04 per cent to Rs 213.95 on the BSE.
Among others, Oil India tanked 15.07 per cent, Mangalore Refinery and Petrochemicals dived 9.99 per cent, Chennai Petroleum Corporation cracked 5.23 per cent and Hindustan Oil Exploration Company declined 3.18 per cent.
The BSE energy index fell by 3.99 per cent to 7,635.10.
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 July 1, finance ministry notifications showed.
Additionally, a Rs 23,250 per tonne tax was levied on crude oil produced domestically.
The export tax is to deter companies such as Reliance Industries and Rosneft-based Nayara Energy from preferring overseas markets over domestic supplies.
The levy on crude, which follows record earnings by state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) and private sector Cairn Oil & Gas of Vedanta Ltd, alone will fetch the government over Rs 7,000 crore annually on about 30 million tonnes of crude oil produced domestically.
A windfall tax is a one-off tax on companies that have seen their profits surge extraordinarily not because of any clever investment decision they’ve taken or an increase in efficiency or innovation, but simply because of favourable market conditions.
Recently, the UK levied a 25 per cent tax on ”extraordinary” profits from North Sea oil and gas production to raise USD 6.3 billion to help fund its support package.
”Unfavorable cues from the domestic market led to a weak start due to weakness in the rupee and selling in oil refineries as the government imposed an additional export duty on petrol and diesel,” said Vinod Nair, Head of Research at Geojit Financial Services.
The BSE benchmark Sensex declined 111.01 points or 0.21 per cent to settle at 52,907.93.
”Reliance is witnessing a sharp fall after the government levied taxes on windfall gains made by domestic refineries. Earlier, Reliance was firing on all cylinders but now there is a break in its refinery business as the commodity cycle is also reversing, however other verticals have strong growth potential,” said Santosh Meena, Head of Research, Swastika Investment.
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