State-owned Oil and Natural Gas Corp (ONGC) may have overstated the natural gas reserves in its much-talked about KG basin KG-DWN-98/2 block, which sits next to Reliance Industries' prolific KG-D6 fields.Cairn India, which had made four discoveries in the KG-DWN-98/2 block before selling 90 per cent out of its 100 per cent stake in the block to ONGC in 2005, has written to the oil regulator DGH saying the state-owned firm is grossly overstating the reserves in block, sources said.It believes that "the hitherto discovered oil and gas resources in the block are only marginal to non-commercial, because of their small size and the potential high development costs due to water depth versus the prevailing gas prices."ONGC estimates that the blocks holds an in-place volume of 25.61 million tonnes of oil and 197 billion cubic metres of natural gas. It is proposing an investment of over USD 7.3 billion to produce up to 30 million standard cubic metres per day of gas.The warning by Cairn, which holds a 10 per cent interest in the acreage and is credited with finding oil in an area in Rajasthan where global giant Royal Dutch/Shell exited saying there was no hydrocarbons, is significant in view of the fall in gas output from Reliance's neighbouring KG-D6 block.Reliance had in 2007 estimated that the Dhirubhai-1 and 3 fields in the KG-D6 block would hit 69 mmscmd of output, but production has fallen to 40 mmscmd due to what the Mukesh Ambani-led firm says are reservoir complexities. (PTI)
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Finance minister Pranab Mukherjee said on Tuesday the country has resumed talks with Mauritius on a double taxation avoidance agreement."So far as the Mauritius double taxation avoidance agreement negotiations are concerned, it is an old one. For some time the talks were suspended; now it has resumed," Mukherjee said.The Indian government has been under pressure from opposition parties to renegotiate a treaty blamed for huge revenue losses, as Indian investors ship their money to Mauritius and then funnel it back untaxed.Officials have said the country was losing more than $600 million every year in revenue because of the tax treaty, besides incurring the risk of militant groups using it to route money into India.(PTI)
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India's vital monsoon this year is expected to be just below an earlier normal forecast, the weather office said on Tuesday, but the rains could pick up after July 15, the key planting month for rice, sugarcane and corn.India's Meteorological Department said in a statement this year's monsoon rains would be 95 per cent of the long-term average overall, down from its April forecast of 98 per cent and just short of the 96-104 per cent range which counts as normal monsoon.India, one of the world's largest producers and consumers of crops such as rice, sugar and corn, relies heavily on the June to September monsoon for agricultural output.It had the driest monsoon season in over three decades in 2009, which pushed it onto international markets to buy sugar, triggering price gains to record highs.A normal monsoon could have encouraged the government to free up stocks in rice, sugarcane and cotton for exports, and helped boost consumer demand in the countryside to push economic growth in Asia's third-largest economy.While rains could be slightly lower than normal in July, India's chief forecaster said distribution was key."There are chances the monsoon will pick up after July 15 once it covers the entire country," said D. Sivananda Pai, director at the state-run National Climate Center."Don't go by the numbers, it is the distribution (of the rains) which we are still hoping to be good."The weather office predicted 27 centimetres of rain in July compared with long-term average rainfall of 29 centimetres, and rains at 24 centimetres in August, when seeds start maturing, compared with long-term averages of 26 centimetres."There is no need to press the panic button, as June rains are still above normal," said Shailesh Nayak, the top civil servant in the ministry of earth sciences which controls the country's weather office.Poor rainfall can trigger demand from farmers for higher rates for produce and waiver of loan repayment and electricity charges, hitting public finances.(Reuters)
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In a "jaw-dropping" and "epic" case, an Indian-American couple here has been charged with raking in over $460 million in crooked cash through a record-setting corruption scam.Reddy Allen and Dr Padma Allen have been indicted on federal fraud and kickback charges in relation to the scandals surrounding mayor Michael Bloomberg administration's CityTime project, intended to modernise the municipal payroll system.A grand jury said yesterday that more than $600 million of the project's bloated budget is "tainted" by fraud.The couple secured a lucrative, no-bid subcontract for the CityTime that made it look like their firm, TechnoDyne, was "a successful and fast-growing company," the New York Post reported.But the "engine of its growth" was actually an overbilling scam in which the Allens paid out more than $15 million in kickbacks and hired a bevy of crooked subcontractors, according to the indictment unsealed in Manhattan federal court.Authorities say the brazen corruption was part of a "massive and elaborate scheme" involving high-ranking executives at prime contractor Science Applications International Corp who pocketed $5 for every hour worked by 300-plus consultants.CityTime was initially budgeted at $63 million, but has cost taxpayers more than $720 million to date.Manhattan US Attorney Preet Bharara called the alleged scam "truly jaw-dropping" and "epic in duration, magnitude and scope."Bharara said prosecutors were seeking to have the Allens extradited from their native India, where they fled in February after getting slapped with grand-jury subpoenas.(PTI)
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High crude prices may derail growth in China and India, the two nations that have helped the global economy overcome the financial crisis, the International Energy Agency said.Asian countries led by China and India are tightening monetary policies to battle a surge in inflation, partly caused by high oil prices as geopolitical tensions in the Middle East and Africa reduce crude supply. Brent crude has peaked at just above $127 a barrel so far this year."High oil prices are a significant risk to derailing the economic recovery not only in the OECD countries, but also in China and India," the IEA's Chief Economist Fatih Birol told Reuters in the city state."China and India are two most important economies which helped us get out of the economic crisis. If they go for tightening of monetary policies, this may lead to a slowdown in their economies which is bad news for all of us."Oil prices will stay above $100 a barrel in the next year as supply worries outweigh concerns about flagging global economic growth, a Reuters survey of oil industry officials, executives and traders showed last week.Eight of 20 participants said they saw oil trading between $110 and $130 a barrel in June 2012, eight saw prices between $90 and $100 and three saw prices above $130. Only one respondent saw prices between $70 and $90 per barrel."If you look at the average over the year, oil prices are still significantly higher than the average for 2008," Birol said. "I'm also looking at the next couple of quarters and we expect that there will be strong demand growth and sluggish non-OPEC production."Higher oil prices will also lead to a rise in fuel subsidies despite efforts by China and Iran to reduce them, he said.The West's energy watchdog raised its five-year global oil demand forecast by an average of 700,000 bpd compared with the previous medium term report issued in December on growth from non-OECD countries. China alone accounts for more than 40 percent of the increase.Tighter SupplyGlobal oil production is expected to reach 96 million barrels per day (bpd) in 2035 with the Middle East and North Africa regions accounting for 90 percent of this volume, according to the IEA.The world will need more oil production from OPEC, Canada and also non-gas liquids as many oil fields outside OPEC are maturing, Birol said."The era of cheap oil is over," Birol said, as the world tries to recover from a "terrible economic crisis."Still, investments in the Middle East and North Africa may be deferred and it could be difficult to send in workers because of the unrest, he said.By 2035, IEA expects global energy use to grow by 36 percent with non-OECD countries - led by China, where demand is expected to surge by 75 percent by then - accounting for almost all of the increase.Strong growth in oil demand is mainly from transportation sector where there are limited alternatives, Birol said.Gas BoostChina will still have to import half of its gas needs to meet requirement as domestic output lags growth in demand. China will import about 50 billion cubic metres of liquefied natural gas (LNG) by 2015, equivalent to imports by Europe, he said.Australia will be a key supplier to China as the country looks set to overtake Qatar as the world's top exporter of the fuel by 2020, Birol said.His comments come as analysts express doubts over some of the Australian projects coming up on time due to higher costs and delays in environmental approvals.Growing concerns about safety of nuclear power plants following the Fukushima crisis in Japan could boost demand for LNG, coal and renewables.In some countries, plans to build nuclear plants are being revised or deferred, while existing units are getting forced into early retirement, Birol said.Last year, IEA forecast that the global nuclear capacity will grow by 360 gigawatts between 2008 and 2035.If the capacity growth is reduced by half to 180 gigawatts, the share of nuclear in the global energy mix will fall to 10 percent from 14 percent, Birol said."You will have less eggs in the basket" for energy diversification, he said.Coal usage will increase about 6 percent compared with IEA's forecast last year, while that for gas will rise by an additional 80 billion cubic metres, he said, adding that one more Qatar will be needed to meet requirement."Nuclear is still very important for the global and Japanese energy system," Birol said. "Without nuclear, we will see higher energy prices and less energy security and higher carbon emissions."(Reuters)
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When it comes to criminals, a great many Indians think that the real problem with India is its laws, or lack of them. We hear cocktail party chatter that criminals should be shot out of hand and that corrupt politicians should be sent to jail without trial and so forth. Not that we don't already shoot criminals out of hand: what else are 'encounters' but assassinations? Lately, we also seem to be sending a lot of people to jail without any great 'legal' reason to do so. I will give you some examples. This new trend first emerged in October 2010 when Satyam's promoter Raju had his bail cancelled by the Supreme Court because he was "involved in one of the greatest corporate scams of the commercial world". In the old world, businessmen didn't go to jail for economic offenses, not for long anyway. Then it got worse. Notwithstanding that it is no part of an auditor's job to discover accounting frauds (Fall Guys), Satyam's internal and external auditors were tossed into jail too and, when the Andhra Pradesh High Court finally let them out, the Supreme Court send them right back. You could have spotted a paradigm shift right there.Then there was the Pune-based stud farm owner Hassan Ali Khan, who is accused of stashing away humungous amounts of cash in Swiss bank accounts. Like it or not, this rather dodgy looking man, who is also defending a Rs 70,000 crore tax demand, has been attending Enforcement Directorate summons in its on-going investigation for money laundering for nearly ten years! In all these years, the Directorate has not been able to gather material sufficient to arrest him. In March this year, the Supreme Court suddenly decided that custodial interrogation of the man was a good idea. Am I the only one who thinks that in the best tradition of the inquisition, the Enforcement Directorate has received carte blanche to 'cleanse his soul through pain' till he squeals and they have a case against him?Not that anyone cares about this Khan or the Satyam protagonists. Two of them are seriously crooked and the others are either dumb or easily corrupted. Yet the fact remains that if you look at the law on bail as it stands, what is happening here is not right. Let me share some nitty gritty legal stuff with you.Since at least 1978, the law on letting people out on bail has been clear to the legal community. In the 1978 Gudikanti Narasimhulu case, the Supreme Court ruled that there were primarily only two reasons to keep a man in jail: (a) to make sure he turns up for his trial and (b) to keep him from interfering with witnesses. In the colourful words of Justice V.R. Krishna Iyar: "Realism is the component of humanity which is the heart of the legal system…the injustice of innocence long in rigorous incarceration inflicted by the protraction of curial processes, is an irrevocable injury". Okay, that was comic relief for you! I think Justice Iyar is saying that unless we have a very good reason to deny it, we must protect a man's liberty! Who can disagree and still claim to be a liberal?There is another critical spin we need to put on the table. The 2004 Delhi High Court judgment in Court on its own motion versus CBI arose when the first secretary in the Embassy of Tanzania made some fast bucks by issuing visas for cash. The CBI concluded its investigation and filed the charge sheet in court without ever arresting this hotshot. Could he be arrested after the case went to court? The high court said no. A man who does not flee and does not interfere with witnesses during an investigation is not likely to do so later. You'd think that was the last word on the subject. Not so.Look what is happening in the 2G case. Throughout the investigation, the CBI never made any arrests at all. Once the case went to court, we find powerful businessmen, not so powerful employees of powerful businessmen and a poetic politician —and a woman too — chucked into the slammer for a good bit. Why? The Delhi High Court judgment defeats me when it argues that the CBI's failure to arrest these persons during investigation "gives an insight into the influence wielded by the petitioners during investigation". Damned if you do and damned if you don't, isn't it? That not being enough, the court also said that just because these accused behaved perfectly "cannot be guarantee that during trial, the petitioners would not try to interfere with the process of justice by tampering with witnesses". What can you say? Why don't I get sent to jail because there is no guarantee I won't drive dangerously and kill someone next week?What comes through in all this legal speak is that since last year, the courts have found a way to send and keep a great many corrupt types in jail for long periods. The courts have done so in the face of clear and established law thus unsettling well settled principles of law. Most people would agree that at least some of these people deserve to be in jail. Isn't this doing wrong things for the right reasons?All this may seem very cerebral, arcane and remote because you are dealing with corruption in high places and exotic laws. What happens if these same issues face you? Have you ever tried to get your burnt out electricity meter changed or hook your spanking new house to the municipality's sewerage line. Would you like to spend a long hot summer in jail because you need to move into your new house and can't get a completion certificate without paying someone off? Sure Unitech can live without a telecom license, like you can manage without electricity…Seen at a distance, I see a clear pattern emerging. As I have already argued (A Century After), the serendipity of changing dynamics in the Indian climate is creating something of an inflection point. The first of these dynamics is political. Having only just managed to put Bofors behind it, very few people believe that the Congress party has a realistic chance of winning another election without doing something about corruption. King Singh wants to do something and Madame agrees. The time has come.Then there are the changing dynamics within the Indian judiciary. We finally have a man of impeccable integrity at the head of the Supreme Court, determined to undo the damage his two immediate dubious predecessors have done. We also have amongst us now a new breed of crusader lawyers - Prashant Bhushan amongst them - who care nothing for the risk they run in what they are trying to do. These forces have come together to try to initiate change that India desperately needs. Suddenly, corruption is not okay, and we are attacking it at the top.But there is a problem. In this august quest for a better cleaner society, we are seeing a certain subversion of the very legal system that we have so doggedly and meticulously developed. In our quest for a more obtuse, elusive sense of justice, we are handing out judicial order that on the face of it are unjust. You can be cynical and say this is just collateral damage but can you afford such damage? I think we need to pause and ponder because history shows that when you start to tamper with something as complex as India's judicial system in this radical way, the Law of Unintended Consequences may have some really nasty surprises yet. And the erosion of individual liberty may be the first of them.The author is managing partner of the Gurgaon-based corporate law firm N South and author of the pioneering business book Winning Legal Wars. He can be contacted at rcd@nsouthlaw.com
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Nokia Chief Executive Stephen Elop unveiled a new smartphone on Tuesday that uses software the firm plans to ditch, a move analysts said would do little to halt the Finnish firm's slide in market share for handsets.Nokia, once the ubiquitous name in hand phones, has lost ground in the smartphone market to Apple's iPhone and Google's Android devices, and in the low end of the market to Asian rivals such as ZTE and Micromax.At a telecoms conference in Singapore, Elop reiterated that Nokia would launch its first smartphone using Microsoft's Windows platform later this year, even as he unveiled the new N9 smartphone, which uses a platform called MeeGo."Our primary smartphone strategy is to focus on the Windows phone," said Elop, who moved to Nokia from Microsoft last year."I have increased confidence that we will launch our first device based on the Windows platform later this year and we will ship our product in volume in 2012," Elop said.Analysts said the firm's strategy would condemn the all-screen N9 to being a niche product.The model -- Nokia's first and last to use MeeGo -- can be navigated by a single finger swipe and comes in black, cyan and magenta colours in a polycarbonate design."The N9 comes too close to the expected launch of Nokia's Windows Phone device to have any impact on its current smartphone woes," said Ben Wood, head of research at London-based mobile consultancy CCS Insight."The strength of rival ecosystems leaves little room for MeeGo powered devices. It's difficult to see the N9 being anything more than a niche device ... the N9 will be a tough sell."The MeeGo platform -- a newcomer in the market dominated by Google Inc and Apple Inc <AAPL.O> -- was born in February 2010 when Nokia and Intel unveiled a merger of Nokia's Linux Maemo software platform with Intel's Moblin, which is also based on Linux open-source software.After Nokia pulled back from the project four months ago, other vendors have become more interested in the technology as Nokia's dominant role in the project had held back others from adopting it.Nokia has thrown in its lot with Microsoft, with whom it will co-develop its next generation of smartphones. It hopes to get the kind of attention Apple and Google have attracted from software developers who enrich their devices.Little Update On StrategyElop's speech in Singapore was billed by Nokia as "an update on progress in our new strategy", but he provided few details on how he planned to tackle the company's troubles.Last month, Nokia said it had abandoned hope of meeting key targets just weeks after setting them, raising questions over whether Elop can deliver on a turnaround he promised in February.Nokia's market value has plunged by more than half since February, after the leak of a memo from Elop that compared the company's market position to a man standing on a burning oil platform.The company said it plans to launch up to 10 new smartphones using its own Symbian operating system. It introduced three affordable handsets which features dual sim-card, years after its Asian rivals put that feature into their phones."Any new products by Nokia will be a stop-gap ... until its first Microsoft phone is out in the market," said Seo Won-seok, an analyst at NH Investment & Securities in Seoul."It won't be easy for Nokia to aggressively market these products and even new product lineups will be limited given that it is spending heavy resources in developing Windows phones. Under such circumstances, I'm quite doubtful whether they'll get a strong response from customers."The partnership with Windows may not be a panacea for Nokia's troubles since rivals including Taiwan's HTC and China's ZTE will bring out devices based on Microsoft's software.Some phone users said the N9 held no appeal versus its rivals."It will be too much of a hassle to switch all of my applications to some other device, so I'd need a lot of convincing to switch to a new type of device like the N9," said Mark Fox, managing director of NetEvents International."I'd rather take the easier life and stick with the Apple, which I am happy with. With the iPhone, it's the user interface and the ease of use, how easy they've made it to use the different types of apps."In a research note this month, Nomura said Samsung Electronics would become the world's largest smartphone maker this quarter and Apple would take the number two spot next quarter, pushing Nokia to third place.Nokia had led the market since 1996 when it launched the Communicator, a smartphone that is popular in the business community for its ability to browse the internet as well as to receive and send emails, data and fax.(Reuters)
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High oil prices are bad not just for consumers but also for producers. And there is a reason to believe that. In a recent interview with CNN, Saudi prince Al-Waheed expressed his fears about the high oil prices and that they might accelerate the US and the European attempts to go and find alternatives and bring in the ultimate demand destruction for oil. Being at the helm of an economy that still gets 80 per cent of its budget revenues from oil, he knows what that means. He would want the prices to be in $70-80 per barrel while the current prices are hovering at $100.Given the highly inelastic nature of oil demand, it is a double edged sword for the oil kingdom. Automobiles are not like soaps which you could change every month but once you've bought a car, it stays with you for three, four or even ten years. Therefore even if the prices are oil prices are high, people cannot junk their cars at once. This is why the higher oil prices can sustain. But the other side is once a consumer picks up an alternative energy car he would not return as an oil customer for many years, even if the oil price reduces. And therefore as and when the side-effects of high oil prices will become evident, they will do so in a very sudden manner. Infact OPEC officials have often expressed their concerns about the alternatives becoming more competitive due to higher oil prices. But there is nothing new about these worries. Such fears have cropped up after each oil shock and yet there has really been no alternative to oil till now. And this time could be no different except for the fact that the alternatives today are much closer to reality than they were any time before.Oil shocks have happened in past. After the oil shock of 1970s, countries around the world started contemplating to reduce their dependence on oil, US congress even introduced a 55 mph limit on highways to save oil, but that was back then. After the oil shock much of that focus disappeared. And none of that was because of any love for oil but for the lack of any practical alternatives. And that is where things are no longer the same.From fuel cell vehicles and electric cars to biofuels and renewables- a score of alternative energy technologies are expanding and inching closer to being competitive with oil. Daimler and Linde are on their course to put up enough hydrogen refueling stations in Germany that fuel cell vehicles would be able to move anywhere in Germany. Hybrids and even pure electrics are already available commercially with some latest offerings available at competitive prices. According to Deutsche Bank, Hybrid electric vehicles will attain economic cost parity with gasoline cars when the oil reaches $ 110 per barrel. Oil was hovering at $100 on the last count. This explains why there is a very small margin of comfort for the oil producers. This also explains why prince Waheed would want lower oil prices. Alternative energy platforms like fuel cell vehicles and electric platforms will be much cheaper in running costs when the technology scales up. Per kilometer cost for electric vehicles can be just one-tenth of the cost incurred for gasoline vehicles.By keeping the oil prices low, the oil nations can keep the alternative energy technology away from maturing faster. Deutsche bank believes that due to falling prices for hybrid-electric car technology the point of economic parity for hybrid cars would reach at only $80 by 2015. And if the alternative energy vehicles keep selling encouraging numbers — as some are doing —the platform might achieve scales much faster and therefore gain competitiveness even faster. Automakers currently making electric vehicles want to build volumes faster to reduce costs. The high oil prices are just helping that cause. Infact oil producers would do great by using some low prices to restrict the alternative vehicles achieving scales they need to compete with oil. This will buy them some time that they need to adjust to the eventuality.Nobody doubts that eventually we will run out of oil or that we would move beyond it eventually but the crucial question is how soon will that happen. Saudi Arabia which has an economy heavily dependent upon oil is already making attempts to diversify itself. But that is not an easy task to do. UAE another oil producing nation dependent on oil is accelerating its attempts to move away from oil. It is diversifying into financial services, hospitality, and retail in order to keep itself running when the oil runs out. Yet after years of efforts, 25 per cent of its GDP is still based on Oil & Gas. Perhaps the real estate and construction sector that today accounts for a large share of GDP went bust in 2009 and threw the desert economy into a tizzy. It only underlines the fact that how difficult is to reinvent the economy and perhaps for that reason the oil kingdom of Saudi Arabia would want as much time as it can get to adjust. This also explains its intransigence on any international climate treaty.Therefore at the end while rising oil prices may be good for producers in the short term but they are risky in the long term. On the other hand rising oil prices would be painful for consumers in the short term but good in the longer term -as it will get us to shift to alternative energy platforms which are way more economical to run.In spite of the spectre of alternative energy platforms destroying demand, it will be difficult to cool off the prices. Oil is getting costlier to drill out and oil discoveries are now being made in terrains where its costlier to drill for oil.Yash Saxena is a sustainability consultant with Emergent Ventures, a climate change mitigating consultancy. He also works on innovation evangelism with Techpedia
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Oil and Natural Gas Corp's hunt for foreign expertise to develop its gas-rich block near the huge D6 producer has dropped to two players, BG Group and Eni.ONGC Chairman A.K. Hazarika said talks were continuing with Italian oil major Eni and BG Group only for the sale of up to 30 per cent in the block off India's east coast."We can go up to 30 per cent. We haven't decided yet. It will be discussed by the board," Hazarika told television channel ET NOW. Development of the block is expected to cost $7.7 billion, Hazarika said.Last year, the then head of exploration at ONGC, D. K. Pandey, said Exxon Mobil and BP were also eyeing stakes in the KG-DWN-98/2 block, from which Brazil's Petrobras and Norway's Statoil had already exited.In February, BP decided to team up with Reliance Industries, which operates the D6 field, for exploration in India and agreed to buy a 30-percent stake in 23 of its oil and gas blocks for $7.2 billion."Exxon is no longer interested," said an ONGC company official who did not wish to be identified.Foreign companies are often apprehensive about investment in India's oil and gas sector as bureaucratic delays and disputes can prove costly obstacles. BP and Reliance are still awaiting approval from the government for their deal.ONGC is currently contesting royalty payments with Cairn India, delaying the latter's sale by its parent Cairn Energy to Vedanta Resources.The ONGC official said the company's deepwater block in Krishna Godavari basin has a potential to produce at least 87 billion cubic metres of gas cumulatively.He added gas production from the block is expected to begin four years after the company gets approval from the government for drilling eight additional wells."We do not have clear approvals for drilling these additional wells," the offical said, adding the entry of foreign players is linked to government approval for this additional drilling.ONGC needs the expertise of foreign players to boost its local oil and gas output, as it struggles with declining production from its marginal and aged fields.(Reuters)
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The European Union on Tuesday agreed to spread a massive 700 billion euros permanent financial safety net to bailout euro zone nations facing liquidity crisis and thereby stave-off future sovereign debt crunch endangering their stability.The new rescue fund-- European Stability Mechanism (ESM-- will replace the present 440 billion euros temporary financial shield-- European Financial Stability Fund (EFSF)-- when it expires in mid-2013.It was set up a year ago to prevent the debt crisis in Greece from spreading to other debt-ridden countries in the euro zone such as Ireland and Portugal.The EU finance ministers finalised the terms of the proposed rescue fund as Greece struggled to avert a bankruptcy a year after receiving a 100 billion euros bailout from the EU and the International Monetary Fund in May, last year.The euro zone finance ministers, who met in Luxembourg on Sunday, delayed a decision to release the fifth tranche of that assistance amounting to 12 billion euros until the Greek government introduces further measures to stabilise the nation's crippled economy.Even though the EFSF has 440 billion euros at its disposal, its actual lending capacity was around 250 billion euros because the rest was needed to be strong enough to keep its borrowing cost low.Therefore, the finance ministers decided to raise its effective lending capacity to 440 billion euros, they said in a statement. So far, Ireland and Portugal were rescued from bankruptcy with the support of funds from the EFSF.The proposed new rescue fund will be comprised of 620 million euros in credit guarantees and 80 billion euros in cash from the euro zone member nations. The cash payment will be made in five equal tranches during the period between 2013 and 2017, the statement said.The ESM will have an effective lending capacity of 500 billion euros. It is also expected to get funds from the IMF which currently has a 250 billion euro share in the existing rescue fund."Our agreement demonstrates the determination of the euro zone nations to do everything to safeguard the stability of the euro area," Jean-Claude Juncker, chairman of the 17-nation group, said at the conclusion of their meeting.The proposed new fund aims to involve for the first time private creditors such as banks, investment funds and insurances in future bailouts to reduce their costs for the taxpayers.As the largest contributor, Germany will have to undertake guarantees for 168 billion euros and provide a cash payment of around 22 billion euros.A basic decision to set up a permanent financial rescue fund for the euro zone nations was taken by the heads of state and government of the European Union at their summit in March.They had agreed then that cash-strapped euro zone nations will be rescued from bankruptcy only as the "last resort" when the stability of the entire euro zone is in danger. They also wanted to involve for the first time private investors in future bailouts.The euro zone finance ministers said they expected to release the next trance for Greece by mid-July, but before that they wanted to ensure the government of embattled Greek Prime Minister George Papandreo survives a vote of confidence today and the parliament approves spending cuts and savings of around 28 billion euros.Greece urgently needs the latest tranche to avoid defaulting on debt repayments due next month. It will also ensure that Greece will remain solvent until September.The ministers also acknowledged Greece's needs for a second multi-billion rescue package because it will not be in a position to raise funds from capital markets at least until early next year. They agreed that the proposed bailout will include private creditors for the first time on a "voluntary basis".Juncker said after Sunday's meeting that Greece will get the next tranche as well as a second rescue package from the EU if the Greek government takes the appropriate decisions and implement them.The heads of state and government of the European Union are expected to agree on the key aspects of a second bailout ranging between 90 billion euros and 120 billion euros when they hold a summit in Brussels on Thursday and Friday.(PTI)
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