The government on Thursday said it would not ask oil marketing companies to bear any more subsidy burden in a bid to check fuel prices low.
A top finance ministry official on Thursday said the government asking oil marketing firms to absorb a price cut of Re 1 a litre on petrol and diesel last week was a “one-time measure”.
Shares of oil companies had plummeted on fears that the latest government move was the start of a new trend which would hit their profitability. Analysts, too, had criticised the move, while several foreign funds had sought legal advise on whether government fiats to listed companies which were technically run by shareholders did not compromise corporate governance standards.
The official also clarified that upstream oil companies such as ONGC would not be asked to share the subsidy burden by selling crude at lower or subsidised rates.
ONGC has been complaining that it now has debt on its books after it was virtually forced to purchase shares in refiner HPCL as well as gas blocks belonging to Gujarat State Petroleum Corporation.
Last week, the government had cut excise duty on petrol and diesel by Rs 1.50 per litre and asked state-owned oil marketing companies to subsidise the two fuel by another Re 1 a litre. However, the cut did not have any impact on public sentiment as crude oil prices kept climbing.
Shares of OMCs surged as much as 19 per cent intra-day, defying the broader market trends. Shares of HPCL surged 19 per cent to hit a high of Rs 215.40 before closing at Rs 207.15 on the BSE. The BPCL scrip jumped 7 per cent to Rs 284.80 intra-day and closed at Rs 278.65. IOC gained nearly 8 per cent to hit a high of Rs 134 before ending at Rs 131.