In the research report, the Securities Box said that most of the decline in new revenues was mostly due to export tax on steel, diesel, gasoline and additional excise on crude oil and hoped that these steps were for the short term and were not expanded to other sectors.
“We note that the stock price of all steel and many oil & gas stocks has sharply corrected the government’s steps to impose new taxes. New taxes are very damaging because they use income and thus, have a disproportionate impact on income,” said Securities Box .
According to the report, new taxes or footage fortune can increase the level of fair concern among investors (both directly and portfolio) about the overall investment climate in India and also contrary to what the Indian government has done before.The Indian government has cut company tax rates in September 2019 and exits with incentive schemes related to production to encourage domestic manufacturing.
The government’s decision to impose customs to crude oil, effectively limit the price of net realization to around $ 70-75/BBL will then reduce investment sentiment for public sector shares.
The government’s decision will reduce the benefits of the upstream oil (PSU) public sector unit, not helping downstream oil marketing PSU.The latter will continue to make large losses on diesel and gasoline retail sales unless the government reduces customs in diesel and gasoline with an equivalent amount and allows oil marketing companies to maintain its benefits; This did not happen last time the government cut off excise on diesel and gasoline.
Increased uncertainty in metal and oil & gas PSU revenues will injure investment sentiment for further PSU shares and also, has the potential to thwart government privatization programs, the Securities Box said.
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