The risk of fuel subsidies may hurt the stocks of crude-oil producers ONGC and Oil India after a gap of about two years, capping near-term gains.
Concerns over subsidy are emerging because of the lower provisioning of fuel subsidy for the next fiscal year in the Union Budget. The government has provisioned a fuel subsidy of Rs 20,800 crore for FY19, which is 5 per cent lower than last fiscal year. Typically, higher crude oil translates into higher fuel subsidy as under-recoveries on cooking fuel such as LPG and kerosene inch up.
Besides this, the scope of the Pradhan Mantri Ujjwala Yojana (PMUY) has increased to include 80 million households from 50 million currently. The expanding scope will increase LPG consumption and the subsidy burden for the government. More than two-thirds of the total subsidy burden is contributed by LPG and kerosene. Read More…
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