Inflation fears dog Parikh report rollout
Mumbai, Feb. 4: The markets don’t seem to be buying the government’s intent to act of the latest report on restructuring India’s oil sector. However, they are factoring in a small increase in prices of petrol, and perhaps even a small hike in diesel prices. The key measures suggested in the report — freeing up prices of diesel and petrol — are likely to be given a miss though.
If all the recommendations of the Parikh committee are accepted, it would add close to 1.25 per cent to the wholesale price inflation, said an economist. The indirect impact on inflation may be equally large, he adds.
If these measures are carried out, it could push up the incomes of the oil marketing PSUs — Indian Oil, Bharat Petroleum and Hindustan Petroleum — by 30-50 per cent says brokerage house Morgan Stanley.
Even a hike in diesel and petrol prices that partly covers their losses wouldn’t help the oil marketing PSUs says brokerage house Goldman Sachs in its report on the subject. This is because the companies would still remain dependent on government subsidies to cover their losses on other fronts.
In fact, the broker recommends selling off the three stocks. The current stock prices factor in a benign fuel policy, the brokerage says. Other brokers too say that a full implementation of all recommendations is unlikely given the political and economic scenario.
A best case would be a phased increase in diesel and petrol prices, they say. One brokerage that stands out here is Macquarie, which has price targets on the three oil PSUs that are up to 20 per cent higher than the market price.
Age Correspondent
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