Budget 2012 : ONGC and LIC biggest losers today

If there was any doubt that LIC was made a scapegoat by the government, this year’s budget has proved it beyond all doubts.

After literally arm-twisting the insurance company to subscribe to a major chunk of ONGC auction and earning Rs 12,000 crore in the process, finance minister has now hit the oil major by imposing a new cess.

Pranab Mukherjee, in his budget speech, said that cess for crude, petroluem oil will be revised to Rs 4,500 per tonne from the existing level of Rs 2,500 per tonne. This imposes an extra cost on all oil producing companies like ONGC, Cairn, Reliance among others. Cess is deducted from the realised crude oil price.

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ONGC produces nearly 27 million tonnes of oil, which means that the company will now have to cough out Rs 5,400 crore to the government.

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ONGC has reacted to the budget development by falling 5.11 percent to Rs 271.95.

LIC in turn has already lost Rs 1,320 crore on its investment of Rs 12,146 crore.

While investing in the oil company’s auction, LIC had justified investing 95 percent of the shares on auction by saying that, it sees a lot of value in the company. Unfortunately for it, the government also sees a lot of value in ONGC, which it continues to extort.