The major weakening of Indian Rupee has been over the period from June 2013 to September 2013 and the impact of the same on the financials of upstream companies would get reflected from Q2 FY 14, says ICRA in its latest study on Oil & Gas sector. Significant depreciation of Rupee to offset the impact of diesel price deregulation leading to high level of under-recoveries for FY 14. Indian Rupee has depreciated sharply by around 15% against the US dollar since the beginning of the FY14. ICRA Research expects the under-recoveries to be around Rs 1500 billion for FY 14 at the average Rupee/USD of 62.2 for FY 14 and average crude oil price of US$ 108/bbl factoring in Rs. 0.5 per litre increase in diesel prices on a monthly basis. Under-recovery burden for ONGC and OIL would remain high in FY 14 due to significant depreciation in Rupee against US$ and thus, net crude oil realisations of ONGC and OIL will remain low despite high gross realisations. In this regards, it is to be noticed that the under-recovery of GAIL is expected to remain constant at Rs. 7 billion as evident from the trend of last five quarters, says ICRA in the report. The depreciated level of Rupee against US$ directly translates to the high Rupee denominated profits and cash accruals of the private upstream companies like Reliance Industries Limited (RIL), Cairn India Limited (CIL) etc as their realisations are denominated in US$ and the operating costs are a fraction of the realisation levels. We believe that CIL has upside in revenue potential of Rs. 3.0 billion per annum for every one rupee depreciation against US$, while E&P segment of RIL could have upside potential of Rs. 1.0-1.3 billion per annum for every one rupee depreciation”, says ICRA.