Iran has offered to supply natural gas at $2.95 for a urea plant that India will set up at Chabahar port on the Persian Gulf, but New Delhi wants rates to be lowered. With the US and other western powers easing sanctions against Iran, India has been in talks with Tehran to set up a gas-based urea manufacturing plant at the Chabahar port, besides developing a gas discovery ONGC had made. The total investment in the projects will be around Rs 1,00,000 crore, Road Transport, Highways and Shipping Minister Nitin Gadkari said today. Asked about the development of the port, he said: "Various ministries will give their report by September 28, based on which a final decision will be taken. India is ready to invest more than Rs 1 lakh crore, but that depends on negotiations with Iran." On talks on supply of natural gas, Gadkari further said: "Iran is offering gas to India at $2.95 per million British thermal unit to set up urea plant at the Chabahar port in Iran. India is negotiating the gas price and has demanded it at $1.5 per mmBtu rate." The rate offered by Iran is less than half the rate at which India currently imports natural gas from the spot or current market. Long-term supplies from Qatar cost four-times the Iranian price. India, which imports around 8-9 million tonnes of the nitrogenous fertiliser, is negotiating for a price of $1.5 per mmBtu with the Persian Gulf nation in a move which if successful will see a significant decline in the country's Rs 80,000 crore subsidy for the soil nutrient. India has already pledged to invest about $85 million in developing the strategic port off Iran's south eastern coast, which would provide India a sea-land access route to Afghanistan bypassing Pakistan. "India is ready to make huge investments in Iran. If urea plant is set up, it will result in slashing of urea prices in India by 50 per cent and cut on huge subsidy on urea, which is Rs 80,000 crore," he added. Earlier this month, Gadkari said: "I had been to Iran and we are trying to procure gas at a very economical rate. In 2013, they had offered it at the rate of 82 cents, less than a dollar. We make urea from naphtha. We are trying to set up a urea plant in Iran." Ministries of Chemical & Fertiliser and Petroleum are working on the proposed 1.3 million tonnes per annum plant, which once successful will led to urea prices coming down by 50 per cent, he had said then. The Minister had visited Tehran in May, and both the nations had inked a pact to develop the Chabahar port. Iran's Foreign Minister Mohammad Javad Zarif had also called on Gadkari last month. In August, Gadkari said Iran has given "very good offers" to India to develop the integrated Chabahar port, which has a special economic zone (SEZ). (PTI)
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In a stern message to states, Finance Minister Arun Jaitley on Sunday said states cannot expect public sector banks to fund the deficits faced by power distribution companies due to levy of inadequate tariffs. Expressing concern over the financial health of some state-owned power distribution companies (discoms), the minister said some states are not levying adequate electricity tariff. His remarks came against the backdrop of many discoms facing financial stress, which has also resulted in rising non-performing assets in the banking sector. "Some states were not charging adequate money for power, which was affecting the discoms, and these states can not expect the PSU banks to fund the deficit of discoms," Jaitley said while addressing investors and business leaders in Hong Kong. The combined debt of discoms is estimated to be more than Rs 3 lakh crore leading to acute financial stress, with many of them not even able to purchase electricity. The gross Non Performing Assets (NPAs) of state-owned banks at the end of March quarter stood at 5.20 per cent of their total loan portfolio. NPAs have surged mainly due to stress in infrastructure sectors like highways, steel, power and state discoms. Recently, Power Minister Piyush Goyal had said the Centre cannot be considered as a bailout bank for helping debt-ridden discoms and states would have to find a way out of the crisis. "Some states have serious crisis (power) looming large. But at the end of the day, the government of India can only facilitate the turnaround of these discoms. And we cannot finance it," Goyal had said. Problematic utility debts account for a quarter of all restructured bank loans in India. In total, utilities owe $66 billion. New Delhi has identified about $22.7 billion of debt held by financially stretched utilities as most at risk, one of the sources said, adding to the urgency to relieve a banking system weighed down by bad loans. Under a rescue proposal, New Delhi wants to persuade state governments to take over some of their utilities' debt. (Agencies)
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Oil prices edged up in early trading in Asia on Monday (21 September) as US drilling slowed and analysts estimated that $1.5 trillion worth of planned American production investment was uneconomical at prices of $50 per barrel or lower.Crude oil prices have plunged almost 60 percent since June 2014, when soaring global production started to clash with slowing demand. This includes losses of more than a quarter since June this year as a sharp slowdown in China has sparked concerns over the health of the world economy.Analysts said the low prices were beginning to impact production as drillers slow down new projects, especially in cost-sensitive North America where drillers react fast to changing prices.US energy firms cut oil rigs for a third week in a row last week, a sign that the latest crude market weakness was causing drillers to put on hold production plans, triggering an increase in prices on Monday.US West Texas Intermediate (WTI) crude futures were trading at $45.04 per barrel at 0421 GMT, up 36 cents from their last settlement. Globally traded Brent futures were at $47.84 per barrel, up 37 cents."The current rig count is pointing to US production declining sequentially between 2Q15 and 4Q15 by 255,000 barrels per day at the observed path of the US horizontal and vertical rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays," Goldman Sachs said."The implied year-on-year growth by 4Q15 of 120,000 barrels per day is lower than the prior week's estimate of 125,000 barrels per day," it said.Analysts said low prices would have a bigger impact in the longer term as producers struggle to cut enough costs."While operators are seeking an average cost reduction of 20-30 percent on projects, supply chain savings through squeezing the service sector will only achieve around 10-15 percent on average," energy consultancyWood Mackenzie said."$1.5 trillion of uncommitted spend on new conventional projects and North American unconventional oil is uneconomic at $50 a barrel," Woodmac added.(Reuters)
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Weak economic revival and global trade continue to impact the traffic at 12 major ports in the country, according to a study by BofA Merrill Lynch Global Research. The weaker-than-expected domestic revival has impacted non-oil-non-gold imports while weak global growth continues to hit exports growth, says the study. The port sector witnessed a tepid 3.9 per cent year-on-year (y-o-y) growth in the first half of the calendar year 2015. After registering a robust 11 per cent y-o-y growth during 9MFY15, container traffic has slowed down to just 3 per cent y-o-y in in the first half of the calendar year 2015 due to weak EXIM trade. The BofA Merrill Lynch Global Research has recently cut its growth estimates for non-oil-non-gold imports as well as for exports. Despite India's muted power demand growth at 0.5 per cent in in the first half of the calendar year 2015 against robust 8.5 per cent domestic coal production growth, the study says that the growth in coal traffic has remained strong at 20 per cent mainly driven by a robust 24 per cent y-o-y growth in thermal coal. Coal imports growth would turn flat in FY17 before starting to decline from FY18 as Coal India to ramp-up its production at 11 per cent CAGR in FY15-19 (versus just 4 per cent in the last decade). Port traffic growth has a strong correlation with GDP. However, despite an improving economy, based on bottom-up cargo-wise analysis, the study says port traffic to register a CAGR of only 4.5 per cent in FY15-19 against 4.7 per cent recorded during FY10-15. Weak port traffic growth for the sector would also impact private sector operators. The study has cut port traffic growth estimate for Adani Ports to 14 per cent Compound Annual Growth Rate (CAGR) in FY15-19 (against 18 per cent earlier) and for Gujarat Pipavav to 9 per cent CAGR in FY15-19. However, these ports would continue to gain market share from the inefficient and congested major ports operated by the government and given their strategic location on India's west coast.
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Sutanu Guru on how 'bidding' is often a farce in India On the face of it, the news seems extremely positive. Andhra Pradesh recently invited bids for ten 50 MW solar power projects under the National Solar Mission. The response was overwhelming. The total bids received amounted to 5,500 MW - ten times more than required. Even more heartening, and surprising, is the fact that in many of the bids, the per kilo watt hour cost of power works out to about Rs 5. If that does pan out, India is indeed on the cusp of a Green Energy Revolution. And the oft-repeated statements of Power Minister Piyush Goyal about India generating 100,000 MW of solar power by early next decade appears credible. So is it time to stand back and start applauding? Wait. As with most things in India, there could be a catch. The landscape is littered with examples of "low cost" and transformational Public-Private Partnerships that have flattered to deceive, or even hoodwink if you prefer so. Across a broad range of infrastructure projects, private sector companies have won contracts through aggressive bidding. Almost invariably, after the project is in the bag, the private companies have announced that they are unviable since there has been significant escalation in costs. In many cases, financial audits and other investigations have discovered that the "transparent and open" bidding process that led to the award of infrastructure projects was often a sham, or a scam. Just three examples will show how. The most egregious example of this is the issue of gas supply from the famous (or notorious) KG basin by Reliance Industries Ltd. When the Government of India awarded the exploration, discovery and exploitation rights of the KG basin to a consortium led by Reliance, it was estimated that the gas supplied from the KG basin will be priced at $2.34 per btu. For Indian companies investing in downstream projects like power and fertilizer plants, this was a dream come true. And tens of thousands of crores were committed to building power and fertilizer plants that would get gas from the KG basin; at $2.34 per btu. Reliance Industries even signed a commercial agreement with state owned NTPC to supply gas at $2.34 per btu. We all know what happened after that. A few years down the road, Reliance claimed that the capital costs were far higher than originally estimated and that it would not be viable to supply gas at $2.34 per btu. Reliance then wanted to sell the gas at more than $4 per btu; and then at more than $ 8 per btu and then again at more than $12 per btu. Power and fertilizer plants that were depending on gas from the KG basin have been left high and dry and billions of dollars lent by banks for these projects have become "distressed assets"; euphemism for loans that might never be repaid. The KG basin gas mess is yet to be completely sorted out. The second high profile case of a "prestigious" infrastructure project becoming an albatross for consumers was the privatization of the Delhi Airport. Once again, there was "transparent and open" bidding and an emerging super star of infrastructure called GMR won the project by quoting a total cost in the region of Rs 4,600 crores. A few years after it bagged the project, GMR announced that the costs were far higher than originally estimated and the project was unviable unless it was allowed to charge a development fee to every passenger that walked through the Delhi airport. Astonishingly, GMR was allowed to charge Rs 200 from domestic passengers and Rs 1,200 from international passengers and keep charging till an incensed Supreme Court ordered an end to this practice. From the initial estimate of about Rs 4,600 crores, the final cost ballooned to more than Rs 13,500 crores. The "consumers" in this case, airlines and their passengers continue to bear the brunt of this alleged "gold plating". Incidentally, both the KG basin gas and the Delhi Airport privatization project have received blistering criticism from the CAG. The third such project was the Delhi Airport Express Metro line. This was another PPP venture between Delhi Metro and a consortium dominated by the ADAG group. The same story was repeated here. Costs were far higher than initially estimated and ADAG "discovered" that the project was not really commercially viable. In 2013, it withdrew from the project and the line is now being operated by the state owned Delhi Metro. So before cheering the Rs 5 per kilo watt hour price of new solar energy projects coming up after "transparent and open" bidding, let's look at the fine print. The devil always lies in the details.
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Indian real estate market faces a tremendous shortage of quality product, said Anand Piramal, executive director of the Piramal Group.Piramal on Tuesday (15 September) launched a new residential project in Mumbai’s Thane suburb spread over 32 acres (or 3 million square feet) designed by Chicago-based architects HOK. About 16 acres has been reserved for greenery, including 6,000 existing trees. The company is offering a safety net to buyers through a buyback plan anytime from the date of booking to before possession at 95 percent of the market value to demonstrate its assurance to buyers. Piramal Realty is also building residential projects in Byculla, Worli Sea Face, Mulund, and an office complex in Kurla. Anand Piramal was hopeful of a pickup in demand for office space in Mumbai too as the country’s economic growth picks up. We see positively on the real estate, he replied cautiously. The company has a strong balance sheet, he said. He declined to share details or make predictions since the unlisted company has Rs 2,700 crore investment by Goldman Sachs and Warburg Pincus. The investors require the company to avoid sharing too many details, he said.
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When the railway minister gets up to present his second railway budget, Indian Railways would have more than just a blue print of modernisation and development, says Ashish SinhaMostly good reasons every one may agree that there is a buzz around Indian Railways. Not a week goes by without the official machinery of the railways coming out with some announcements here or a new initiative there. For citizens and travellers of Indian Railways, the key takeaways are: its newsy, new initiatives are in abundance and a lots of plans are in motion. By any means, Indian Railways under the Union railways Minister Suresh Prabhu is no longer the ministry that it used to be or had become under some of his predecessor’s which only made news for broadly two reasons - on the day of Railway budget presentation and again on days of any tragic events connected with rail travel. Ashish SinhaIt is not the case now. Stinking washrooms on trains may become a thing of the past with the railways launching the trial run of vacuum toilet on Dibrugarh Rajdhani from Monday (14 September). Now it is in news more often for projects like Vacuum toilets, a first in railways, and on the lines of airplanes. Vacuum toilets are currently on trials in Dibrugarh Rajdhani. In the past 15 months, IR has initiated and implemented a number of customer-centric projects like Passenger Helpline No. 138 and security helpline 182, e-catering service in trains, Smart card for cashless travel, SMS Alerts to passengers, mobile security app for woman on Mumbai suburban trains, Braille Signages on coaches, CCTV on coaches, R.O. drinking water at stations, Facility of ‘Wi-Fi’ services on Railway stations, 100 per cent FDI in identified areas of Railway, Global Positioning System(GPS) for unmanned level crossings among several others. Some of these projects have been implemented, while the work has been initiated on others. Now Japan has been convinced to pump in $140 billion over the next five years for revamping the IR network. Prabhu was in Japan recently. As part of the deal with Japan, around 400 stations have been listed in the modernisation project of the Indian public transporter network. Japan will provide its expertise in solving problems of sanitation including the development of waterless, odourless toilets in trains and stations. Some may argue about Indian Railways creating similar buzz around a decade back with Lalu Yadav at the helm of affairs. At that time too, Indian Railways was in news. Business media was following every rupee earned or proposed to be spent on railways. Stations revamp was one of the priority areas back them too. Even high speed trains or the concept of aping a high-speed train for domestic tracks was spoken about. But there is a difference. A decade back, coalition politics was at the centre stage of India. And it had its own ‘compulsions’ as often described by the political leaders back then. Coalition politics also took its toll on IR and its functioning back then. But no more now. Now, even the ministers know that if work-on-ground is not visible, the voters can be unforgiving during elections. But set aside that politics and compulsions, Prabhu is striving hard to set as many balls in motion, as possible. Efforts of Rail Bhawan and its divisions are being sensed outside India too. Reports say the Internet search engine giant Google has decided to partner with IR for 'Project Nilgiri' and is set to bring in free Wifi access across 400 stations in India. Reports say Google Fiber will be making its way to India. In US, Google Fiber provides high speed broadband. In about five months, when the railway minister gets up to present his second railway budget, Indian Railways would have more than just a blue print of modernisation and development else the buzz could simply translate into noise and chaos.
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Prime Minister Narendra Modi is set to meet bosses of loss-making electricity utilities on Monday to debate a rescue package for a sector whose vast debts weigh on the banking system and undermine promises to provide power for all. The government has identified $66 billion of troubled debt held by state-run utilities as a major obstacle to efforts to speed up growth in Asia's third-largest economy, hurting both credit growth and industrial performance. Modi earned praise for fixing the power sector in Gujarat when he was chief minister. A national solution would burnish his reputation after a series of setbacks to his agenda of economic reform in recent months. The pressure to act is rising as a three-year financial restructuring package introduced in 2012 comes to an end, with the utilities still selling power to consumers at below the cost of production and ignoring rampant theft. The prime minister will chair a meeting with finance ministry officials and the head of individual state distribution companies, a top government source and an official in the power ministry told Reuters. The government has not made public the contours of the package, but options under discussion include allowing states to take over debts of distribution companies to ease their financial crunch, in return for a renewed clampdown on electricity losses. Utilities' weak finances mean they cannot buy in more power or invest in transmission lines that are needed if Modi is to get power flowing to industry and to the 300 million Indians living without electricity. India has doubled energy generation capacity in the last decade, helping to more than halve its peak power deficit, but transmission and distribution have remained largely unreformed, leading to regular blackouts across large swathes of the country and debts that threaten the health of the banking system. A fifth of India's electricity still goes unpaid for. "The poor financial health of the distribution utilities has the potential to make all investments made in the electricity value chain unviable," said Umesh Agrawal, a power expert at PwC. "A comprehensive set of measures targeting efficiency improvements as well as setting tariffs to recover costs is required to prevent the situation becoming worse," he said. (Reuters)
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