To take an example is an investor of market leader ONGC. Despite being the largest oil producer in the country, a retail investor will perhaps be better off holding shares in private competitors like Cairn India or Reliance Industries . Why so? ONGC operates in a fully regulated regime where almost 30-40 % of its profits are shaved off bearing subsidy burdens for its brethren in the refining and marketing space. Also, the subsidy sharing is totally ad hoc, where the company or the investor is left to guess how much of the company's earnings will go towards subsidies.
As per the policy ONGC like every other oil producer is permitted to sell crude oil benchmarked to the internal oil price. Thanks to the government's skewed pricing policy ONGC ends up selling oil at a discounted price anywhere between 20% and 30%, if not more. Even this could be acceptable as oil producing companies, in other countries as well, chip in to share the subsidy given to consumers at abnormal times (when crude oil prices are abysmally high) through special profit petroleum tax. To know more........
Psu-divestment-clear-the-mess
No comments:
Post a Comment