MUMBAI, 26 February 2007 — India’s private oil firms are set to emerge as the big gainers as state-run giants’ profits are squeezed by the government’s renewed drive to curb inflation that is running at a two-year high.
State oil firms, which control 85 percent of India’s crude output, 70 percent of refining capacity and more than 90 percent of sales in gas stations, have attracted investors in recent months, but analysts say their best is now behind them.
A cut in state-set retail fuel prices last week could cost state-run firms a combined $6.5 million a day, with market leader Indian Oil Corp. expected to lose nearly 4 billion rupees ($90 million) in revenue by the end of March.
Private and state refiners posted strong October-December profits as oil prices fell from July’s record $78.40 per barrel, pushing up their shares by as much as 45 percent since end-July. “There’s no downside to oil stocks, especially Reliance Industries,” said Gautami Desai of UTI Asset Management, who manages more than $45 million in India’s sole petroleum sector fund. State-run oil firms, which dominate the retail market, are more vulnerable to government pricing than private operator Reliance, which depends primarily on exports.