Deferment of gas price hike sends very bad signal to outside world: experts say
The deferment of gas price hike will create uncertainty in the industry and send a very bad signal to foreign investors, experts have cautioned.
The Congress-led UPA government had approved a near doubling of prices for gas produced domestically from April 1, but the Election Commission (EC) asked the government to defer the gas price due to its potential influence on the upcoming elections.
The deferment created around gas prices as any increase in gas prices will now depend on the new government, which will take office after May this year.
Commenting on the decision, Mumbai-based brokerage K. R. Choksey Securities's Deven Choksey said, "It sends a very bad signal to the outside world. In this country, due to elections even the commercial decisions can be postponed."
Morgan Stanley said the deferment would likely impact earnings per share of Reliance Industries Ltd (RIL) and state-run ONGC by 2 per cent 4 per cent; while CLSA said the deferment could have a huge sentiment impact on gas producers.
Companies like RIL had long been asking the government to hike the price of domestically produced gas. Last year, the government increased the price from the current $4.20 per million British thermal units to more than $8 per million British thermal units, saying it would incentivize gas producers to invest more in the oil & gas exploration sector.
As of 09.35 a. m. today, RIL shares traded down 2.8 per cent at Rs. 879 apiece, while ONGC share shed 3.3 per cent to Rs. 310.60 on the Bombay stock Exchange (BSE). The broader oil & gas index on the stock exchange slipped 2.3 per cent as against just 0.2 per cent decline in the Sensex.