Shares of oil companies led by ONGC surged by nearly 11 per cent on the BSE, a day after the government more than doubled the prices of natural gas to cut the losses suffered by oil companies.
Shares of ONGC jumped nearly 11 per cent to a high of Rs. 1,141, and OIL India climbed to Rs. 1,255, up nearly 9 per cent on the Bombay Stock Exchange, in the morning trade.
Yesterday, the Cabinet hiked the prices of natural gas sold to power, fertilizer and city-gas projects from Rs. 3,200 per thousand cubic meters (USD 1.79 per million British thermal unit) to Rs. 6,818 per thousand cubic meters (USD 3.818 per mmBtu).
After adding royalty, the price for user industries would be Rs. 7,500 or USD 4.2 per mmBtu, at a par with the rate at which Reliance sells its gas.
Other energy stocks, which gained in the morning trade, were GAIL India (2.93 per cent), Bharat Petroleum Corporation Ltd (2.79 per cent), and Indian Oil Corporation Ltd (3.60 per cent).
ONGC and OIL have been making substantial losses in their gas business. Information and Broadcasting Minister Ambika Soni said yesterday that the government was prompted to raise gas prices as low rates were discouraging national oil companies from making investment on raising output.