The upstream oil companies slipped in trade on Thursday after sources told PTI that the government may levy an oil tax to ease the rising fuel prices.

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ONGC lost more than 4% while Oil India lost 7% in Thursday's market session, while oil marketing companies (OMCs) extended losses on high oil prices.

Diesel prices increased by 19 paise to Rs 68.53 per litre in Mumbai and by 20 paise to Rs 72.96 per litre in Delhi on Wednesday. The previous day, the prices were pegged at Rs 68.34 and Rs 72.76, in the cities. Fuel prices rose for the eleventh consecutive day on Wednesday.

The government may levy an oil tax on the producers as part of a permanent solution to moderate the rising retail prices of petrol and diesel.

Reports suggest windfall oil tax on @ONGC_ in offing to soften fuel prices. Catch former ONGC Chairman RS Sharma & Deven Choksey of KRChoskey with a likely impact on the stock @Latha_Venkatesh @_anujsinghal pic.twitter.com/4zRwQwQRxY

— CNBC-TV18 News (@CNBCTV18News) May 24, 2018

The tax will kick in the moment oil prices cross $70 per barrel, sources had told PTI.

Sources said the thinking in the government is to levy a cess on all oil producers - both public and private sector - so as not to attract criticism of stifling state-owned explorers.

The rising oil prices have been consequent to rise in the fuel prices. The oil prices, though steady at the moment on the expectations that Organization of the Petroleum Exporting Countries (OPEC) countries will bridge the supply gap, still remain as a concern. The Indian market seems to bearish in trade as HPCL, BPCL and other downstream or oil marketing companies continue to lose in trade.

HPCL and BPCL lost around a percent in Thursday's market session. The stocks, however, recovered from its lows after the oil tax on upstream firms' buzz.

The rise in the oil prices was a major concern for the OMCs as it would mean that the companies would have to bear the brunt of the rise in the costs.

The costs become higher as OMCs come under the downstream category and these companies will have to bear high costs for buying the raw materials.

The supply shortage came after political tensions in Venezuela. The country has been going through economic and political issues and with US sanctions coming in, it pointed that the oil supply will go down by one of the OPEC producer countries.

First Published:May 24, 2018 5:28 PM IST