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Reliance Industries, ONGC, Cairn, Oil India earnings to get a boost as rupee tumbles

NEW DELHI: The rupee's sharp fall will boost earnings from oil and gas sales for ONGC,Cairn IndiaBSE -0.80 %, Reliance IndustriesBSE 0.68 % and Oil IndiaBSE 3.58 % as the dollar-linked price has risen about 17% in four months, but this is bad news for households as they will have to pay more for piped gas in their kitchen as well as petrol and diesel. 

State-run ONGC, the biggest 
producer of natural gas in India, may gain more than 400 crore in a quarter from natural gas alone, oil ministry officials said requesting anonymity. The gain for the other state explorer Oil India would be smaller, in line with its size. 

The rupee's value has depreciated from about 54 to a dollar in 
the middle of April to 63.2 on Tuesday, after the currency hit a record low of 64. The rupee's rollercoaster ride has shaken up financial planning of oil firms as India imports 80% of crude oil it processes and pays in dollars.

"Financial planning gets 
disturbed in such volatile situation. One rupee depreciation would mean Rs 9,000-crore loss to the oil industry," Oil India Director-Finance TK Ananth Kumarsaid. 

India controls retail prices of diesel, kerosene and cooking gas and partly compensates state retailers for their revenue losses. Apart from the government, state exploration firms and the state retailers also share the burden. Retailers' revenue losses in 2012-13 were Rs 161,029 crore.

"Upstream companies will certainly have forex gains due to unprecedented depreciation of rupee against dollar. But, private firms will have real gain. ONGCBSE 1.19 % and Oil India's gains will be neutralized by higher subsidy burden,' said RS Sharma, head of the Ficcihydrocarbon committee & former chairman of ONGC.

State explorers sell domestically produced crude oil to state-run refiners at a discount to partly compensate their revenue losses on selling diesel, kerosene and cooking gas below market rates. 

Reliance, which is currently producing 14 mmscmd gas from the KG-D6 block would also gain although income from its gas output is only a small part of its total profit. "The gain is minuscule compared to RIL's net profit of Rs 5,352 crore in the first quarter on a turnover of over Rs 90,000 crore," the 
executive said. RIL and ONGC did not respond to ET's queries.

Reliance's refining business, which forms a large chunk of its profit also sells products in dollar-linked prices. It's refining margins in rupees would rise in step with the currency's depreciation. "Both, public and private sector energy firms, wants rupee to stablise, which is good for the 
economy where they operate. At the end, it is the consumer who suffers the most," Sharma said.

Oil ministry officials say that gas utilities such as Indraprastha Gas Ltd (IGL) andMahanagar Gas Ltd (MGL) may be forced to raise compress natural gas and piped natural gas rates because they also purchase domestic gas in dollar. "The rupeedepreciation is a double whammy for IGLand MGL. Import of LNG has become costly. At the same time, domestic gas price is also jumped because it is valued in dollar since 2010," a Gail India executive said. Gail is one of the promoters in both IGL and MGL. 

Oil companies are also keen to raise diesel prices more than the approved 50 paise a month as the rupee's depreciation has wiped out all their gains from higher retail prices. State refiners are allowed to align petrol prices with global trends once a fortnight.