The government on Friday increased excise duties on select fuel exports in a bid to increase tax revenues from refiners which have been minting windfall gains from exporting refined product which yields better realisations. The move was also taken to ensure enough supply of fuel in the domestic market with a minimum quota being set for domestic supply.
A duty of Rs 6 per litre on the export of petrol, Rs 13 per litre on diesel exports and Rs 1 per litre on Aviation Turbine Fuel will be levied. Additionally, an additional Rs 23,250 per tonne tax on domestically produced crude oil, according to a Finance Ministry notification issued Friday.
As per CLSA- IOCL, BPCL and HPCL will not be hurt by the taxes as they hardly export such products. In their view, this can, in fact, be a margin relief for HPCL which is dependent on procuring nearly 40% of products as exporters will now look to sell volumes domestically and some of these may be available at a discount to international price due to the export tax.
On Reliance, CLSA expects that the hit could be US$10-11/bbl on Reliance’s GRM. However, CLSA sees limited downgrade risk as they are currently not building-in the ongoing supernormal refining margins in their estimates. Their analysis suggests that Reliance’s refining margin may be US$13-17/bbl higher in 1QFY23 versus the average of FY22. In comparison, they are modelling only US$2/bbl higher GRMs in their models. Therefore, in their view, this tax will simply reduce the gains that Reliance may be able to capture from the ongoing supernormal refining margins.
Reliance Industries ended Friday with a cut of 7% after seeing the biggest intraday fall since November 2020 while HPCL, BPCL, IOC ended the day with gains of 3-5%.
