Indian Oil Corp, the country's biggest refiner, will cut petrol prices by a rupee from Tuesday, 2 April 2013, as global prices of the fuel have declined and the rupee has marginally strengthened against the dollar, it said in a statement.India's three state-run fuel retailers - IOC, Bharat Petroleum Corp and Hindustan Petroleum Corp - tend to move their prices together.The government deregulated gasoline prices in June 2010.In January it allowed fuel retailers to raise the price of subsidised diesel by 50 paise a litre every month and asked bulk buyers to pay market rates.(Reuters)
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State-run Bharat Petroleum Corp plans to shut a diesel hydro desulphurisation unit (DHDS) at its Mumbai refinery for about a month of maintenance in November, a company source said on Monday, 1 April 2013."We have to replace catalysts at both the reactors in the unit to improve yield," said the source, who did not want to be named as he is not authorised to speak to the media.BPCL is operating the unit, which removes sulphur from high sulphur gas oil, at 6,000 tonnes a day, although its capacity was recently boosted to 10 percent higher than that.Diesel demand usually climbs towards year-end as Europe imports additional cargoes of the heating fuel during winter. But as this shutdown has been planned well in advance, it is unlikely have a major impact on the spot diesel market, a Singapore-based trader said.As well as its 240,000 bpd Mumbai refinery in western India, BPCL operates a 190,000 bpd plant in southern India's Kochi.It has a majority stake in the 60,000 bpd Numaligarh refinery in northeast India and the 120,000 bpd Bina plant in the centre of the country.(Reuters)
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India is set to halt all crude imports from Iran because insurance companies in the country have said refineries processing the oil will no longer be covered due to Western sanctions, the head of refiner MRPL said on Friday, 8 March, 2013.India is Iran's second-largest buyer, taking around a quarter of its oil exports worth around $1 billion a month."If cover is not available then all Indian refiners will have to halt imports from Iran or else they will have to take a huge risk," P.P. Upadhya, managing director of Mangalore Refinery and Petrochemicals Ltd, told Reuters in a telephone interview. MRPL is India's biggest buyer of Iran crude."Insurance companies said if I buy Iranian crude my refinery's insurance cover will be cancelled ... If we don't get insurance for the refinery then we will stop buying Iranian crude."It was not immediately clear why this has become an issue now, several months after Europe and the U.S. introduced tough sanctions aimed at Iran's oil trade to force Tehran to the negotiating table over its nuclear programme.But in a letter in January seen by Reuters, the General Insurance Corp of India, the national reinsurer, told the General Insurance Council, an industry group, that it had "dawned" on insurers that cover and losses on processing the crude would not be payable by reinsurers due to existing sanctions.A source at another refiner that buys Iranian crude, Hindustan Petroleum Corp (HPCL), also said imports were threatened by the insurance problems."Iran imports will be stopped soon," the HPCL source told Reuters. "As far as insurance is concerned, we are all sailing in the same boat."HPCL is Iran's third-biggest Indian buyer and warned last month that insurers may withdraw cover because of sanctions.MRPL's Upadhya declined to say how soon the company would have to stop Iranian imports. But MRPL has issued tenders to buy three cargoes of 650,000 barrels of crude to load in April, according to documents seen by Reuters. Two of the cargoes are high sulphur and could be used to replace Iranian oil."There is a problem on the insurance front for Iran oil," Upadhya said when asked about the tenders.Oil is Iran's biggest income generator so a halt in sales to India would be a heavy blow for Tehran. Sanctions more than halved the country's crude exports in 2012.In January, India imported over 286,000 barrels per day (bpd) of Iran's around 1.1 million bpd total exports.InsuranceThis is the first time that insurance problems have had a direct impact on refineries processing Iranian crude.The lack of insurance cover dates back to April 2012, Upadhya said, but was clarified by insurers only in February this year.MRPL has written to India's federal oil ministry asking for an alternative insurance mechanism, Upadhya said."Refineries processing Iranian crude would be severely hit," MRPL told India's oil secretary in a letter dated February 27 and seen by Reuters. There would be no cover for claims if the plant was processing Iranian crude, MRPL said.An Indian government source said last month that New Delhi would find a way to ensure refineries have cover but gave no details.Insurers rely on European reinsurance markets to hedge their risk. EU sanctions have blocked European maritime reinsurers from any involvement in insuring shipments of Iranian oil.That forced a temporary halt in mid-2012 to imports by two of Iran's other top Asian buyers, Japan and South Korea.India's government stepped in to provide emergency insurance but it was a fraction of the $1 billion liability coverage that a supertanker would typically need and has rarely been used.India's refiners have already slashed imports from Iran as they joined other major Asian buyers in reducing purchases to secure waivers from the sanctions.MRPL had already expected to cut nearly 40 per cent or its Iranian imports in the fiscal year ending March 31.In the first 10 months of the current fiscal year, India reduced Iran crude imports by nearly 22 per cent on the year, data from trade sources shows.Nidhi Verma/Reuters
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The government has sought parliament's approval to spend an additional Rs 24,774 crore on oil subsidies in the current fiscal year that ends in March.New Delhi expects the total spending on oil subsidies for the year to be Rs 96,880 crore.Oil Minister M Veerappa Moily had said on 6 March that not compensating oil PSUs for their losses will put question mark on their survival. The three OMCs, IOC, BPCL and HPCL, are together projected to end the fiscal with a revenue loss of Rs 1,63,000 crore. Of this, the Finance Ministry wants to shave off Rs 17,000 crore by changing methodology to export parity pricing (EPP).The net cash outgo will be only Rs 40,967.27 crore, as per the Supplementary Demands for Grants tabled in Lok Sabha by Finance Minister P Chidambaram.The second and final batch of Supplementary Demands for Grants for 2012-13 includes 65 grants and one appropriation."Approval of the Parliament is sought to authorise gross additional expenditure of Rs 49,715.54 crore. Of this, the proposals involving net cash outgo aggregate to Rs 40,967.27 crore and gross additional expenditure, matched by savings of the Ministries/Departments or by enhanced receipts/recoveries aggregate to Rs 8,747.29 crore," the document said.Of the total amount, Rs 9,914.06 crore and Rs 4,753.99 crore have been sought for food and fertiliser subsidies respectively.Parliament's nod was also sought for spending Rs 24,773.75 crore for providing compensation towards estimated under recoveries to oil marketing companies on account of sale of petroleum products and subsidy to them for supply of natural gas to north eastern region has also been sought.Besides, a token provision of Rs 98 lakh was sought - Rs one lakh for each item of expenditure - for enabling re-appropriation of savings in cases involving new services or new instruments of service.The Supplementary Demands for Grants for 2012-13 was also tabled in Rajya Sabha.Diesel Subsidy Needs to Be FrozenThe government may have to freeze the diesel subsidy at the current level to protect the budget numbers at some point in time, Chief Economic Advisor to the Finance Minister, Raghuram Rajan, said earlier this week while flagging concerns over the widening current account deficit. "At some point, we should think about freezing the subsidy on diesel at the current levels until it reaches the level of world prices so that the budget is not exposed to the risks of an increase in global oil price," Rajan told the convocation of the RBI-run National Institute of Bank ManagementTerming the widening current account deficit, which had run up to a historic high of 5.4 per cent of GDP in Q2 of the fiscal, as the "biggest concern now," the noted economist said, "CAD is our biggest concern right now because as you finance from outside, you are dependent on the interest of foreign investors. They've been supporting us so far due to the search for yields. But can we continue to rely on that forbearance?"Finance Minister P Chidambaram, during his customary post-budget interaction with the industry chambers yesterday, had said that CAD is the biggest worry for him now as he could successfully meet the fiscal deficit target at 10 bps better at 5.2 per cent and said the final numbers would be lowest than this too.Uproar Over LPG Cylinder SubsidiesLok Sabha witnessed uproar over government's assertion that six subsidised LPG cylinders were enough for a normal family per year.During Question Hour, members made a strong pitch for increasing the number of subsidised LPG cylinders from current nine to 12 per connection per year."Ninety per cent population uses nine LPG cylinders per year. Based on a survey, for a normal family six cylinders are enough," Minister of State for Petroleum and Natural Gas Panabaka Lakshmi said.Her reply to supplementaries asked by Raosaheb Danve Patil (BJP) triggered uproar as UPA constituents NCP and DMK joined the opposition in raising slogans for increasing the number of subsidised LPG cylinders.Speaker Meira Kumar urged members to calm down and allow a woman to answer the question. She pointed out that today was international women's day.Gorakhnath Pandey (BSP) remarked that perhaps the government had not consulted its women members while finalising the subsidy on cooking gas.Lakshmi said ever since a cap on subsidised LPG cylinders was introduced, domestic consumption has reduced by 5.4 per cent and commercial consumption has increase by 12.5 per cent."Oil Marketing Companies undertake regular surprise inspections at distributor's premises, conduct refill audits and surprise checks at customer's premises and en-route checking of delivery vehicles," she said.The minister said if LPG distributors were found guilty of any malpractice, punitive action was taken in accordance with provisions of the marketing discipline guidelines.(Agencies)
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Realty firm Godrej Properties said on Friday, 29 March 2013, it has signed an agreement to redevelop a private housing society in suburban Malad. The project, spread over 1.3 acres, will be developed by the company's wholly-owned subsidiary Godrej Projects Development Pvt Ltd (GPDPL) and will offer around 95,000 sqft of free sale area. The existing 118 members of the housing society will be rehabilitated as part of this project."This redevelopment project fits well with strategy of building our presence in high quality locations across Mumbai.We hope to create an excellent luxury development in this project," Godrej Properties Managing Director and Chief Executive Officer Pirojsha Godrej said.(PTI)
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Modi would not disclose his costs of production, but asked about a figure below $2 per mmBtu he said that was "in the right ball parkIndian coal bed methane (CBM) pioneer Yogendra Modi believes the country's huge coal fields could provide 10 percent of its fast-growing gas needs within 20 years, displacing some potentially costly imports.His company, London-listed Great Eastern Energy Corp Ltd (GEECL), is set to deliver its first annual net profit this year as it ramps up CBM output ahead of a share sale in its home country.GEECL makes its money persuading industrialists in West Bengal to convert their generators from heavy fuel oil, or furnace oil, to natural gas. The gas is fed to their doorsteps through GEECL's proprietary pipelines from rich virgin coal deposits less than 60 kilometres away.The selling point? It's half the price of furnace oil and other liquid oil fuels, still the second most important industrial energy source in the country behind coal.Modi offers his customers gas at $12 per million British thermal units (mmBtu) delivered via its own 100 kilometre pipeline network to the steel works and food processors of Asansol, Raniganj and Durgapur."Some industry is even setting up in West Bengal specifically to take advantage of our gas," Modi told Reuters in an interview. Conversion costs can be recovered in less than a month, he said, and can result in fewer clean-up stoppages due to the cleaner-burning nature of gas.Modi would not disclose his costs of production, but asked about a figure below $2 per mmBtu he said that was "in the right ball park".The Drag Of Fixed PricesGEECL has been drilling for coal bed methane (CBM) since 2006, and unlike many other gas suppliers, who are obliged to sell at a fixed low price to the power and fertilizer industries, it has a government contract allowing it to charge market prices that are some three times higher.It will remain a small player, and India's CBM fields are too small to interest big corporations, but Modi believes his localised, integrated West Bengal model can be replicated to great effect.Government data predicts Indian imports of Liquefied Natural Gas (LNG) will multiply five-fold to over 10 billion cubic feet a day by 2022 when it will satisfy half the country's predicted gas demand.Yet India, the third largest coal producer in the world, could become the number four producer of CBM, according to a 2011 study in the International Journal of Chemical Engineering and Applications.The gas price restrictions that experts say are holding back domestic gas output growth are under review as part of a government re-think of gas policy.Although GEECL can already charge free market prices, Modi worries that continued price restrictions will delay development of local resources and leave the country increasingly dependent on LNG imports and gas potentially piped in from nearby Pakistan, Bangladesh or Myanmar.(Reuters)
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Red-flagging the Finance Ministry's move to cut subsidises by changing the fuel pricing norm, Oil Minister M Veerappa Moily on 6 March' 2013 said not compensating oil PSUs for their losses will put question mark on their survival. The Finance Ministry wants petrol and diesel to be priced at a rate they can get in the export market, rather than current practice of pricing the fuels after adding transportation and customs duty to the international price. "From 2005-06, the oil marketing companies have not been adding any margin on crude oil or on petroleum products. What is import price plus transportation and taxes is all that is there in the selling price," he told reporters here. Moily said the three OMCs, IOC, BPCL and HPCL, are together projected to end the fiscal with a revenue loss of Rs 1,63,000 crore. Of this, the Finance Ministry wants to shave off Rs 17,000 crore by changing methodology to export parity pricing (EPP). "If you decrease their compensation by Rs 17,000 crore, where will they get money for expansion and modernisation of refineries," Moily asked. Citing example of China which has been expanding refineries at a massive scale, he said oil firms need $80 billion to modernise and expand old and obsolete units. The government compensates most of the revenue loss that the OMCs incur on selling diesel, domestic LPG and kerosene at controlled rates which are way below the cost. "Where do we get the money if the actual losses are not compensated. They cannot expand or modernise refineries... It is a hand-to-mouth situation for oil companies, they earn in the morning and by evening spend all the money. There is no surplus generated," he said. Moily said Finance Minister P Chidambaram has been pitching for more investments to revive the slagging economy "but if there is no money, where can the investments come from." "I can understand that in the process of consolidation of finance, reducing the fiscal deficit (is important). Merely deducting under recoveries is not going to improve the situation," he said. The Minister said he will shortly meet Chidambaram to discuss the auto fuel pricing as the very future of oil companies was at stake. "This is a matter of great concern because overall oil import is 84% of our requirement," he said. "No country can survive if these (oil) companies cannot survive." "We need to modernise refineries for which surplus needs to be generated. Not covering under-recoveries (on fuel sales) will ultimately sink the oil companies," he added. The Finance Ministry has informed the Oil Ministry that auto fuels need to be priced at a rate at which it can be exported. Currently, price of petrol and diesel at refinery gate is calculated by adding 2.5 per cent customs duty and freight of shipping the fuel to the international prices. The Finance Ministry wants to eliminate freight as well as the 2.5 per cent customs duty from the pricing as the duty was adding to the under-recoveries of the state-run oil marketing companies without contributing any revenue to the exchequer. The difference between the refinery gate price and retail selling price is under-recovery, which the government compensates from the Budget. Elimination of freight and duty will lower its subsidy outgo, the Finance Ministry feels. The Oil Ministry, however, feels that oil companies have to actually pay import duty as well as freight on crude oil, the raw material for making petrol and diesel, and denying the same would play havoc with their finances. Moily said the current pricing methodology was suggested by expert panels headed by C Rangarajan and Vijay Kelkar and the new pricing model proposed by the Finance Ministry was one based on the recommendation of BK Chaturvedi committee, which had been rejected by the government previously. The Finance Ministry felt that the current pricing was protectionist and promoted inefficiencies in the system. To the Finance Ministry's argument that refineries in north-east performed better than units at locations such as Panipat, the Oil Ministry said refineries in north-east enjoyed excise duty exemption that made them more profitable. Sources said like any other product, traditionally domestic refiners enjoyed 5 per cent duty protection by way of higher customs or import duty on petroleum products (finished product) than on crude oil (raw material). So, if crude oil attracted 5 per cent import duty, finished product was charged a customs duty of 10 per cent. A few years back, the duty on finished products was brought down to 7.5 per cent and crude oil to 2.5 per cent. In fact, the duty on crude oil was brought to zero and that on products to 2.5 per cent a few years ago, effectively reducing the protection refiners enjoyed from flooding of domestic market with cheaper imported fuel. Now, if the import duty on fuel is brought down to zero, the refineries will have no protection. The 2.5 per cent import duty results in an increase of Rs 1.13 per litre on the ex-refinery price of diesel. This translates into an under-recovery of Rs 18,000 crore. On petrol, the customs duty impact is about Re 1 but it is passed on to the consumers and there is no impact on government's subsidy bill.(PTI)
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Jayalalithaa, chief minister of Tamil Nadu, wants to make her state — currently plagued by long power cuts —power surplus by the end of this year. She is personally monitoring four in-the-works power projects in North Chennai (1,200 MW), Vallur (694 MW), Mettur (600 MW) and Neyveli (115 MW). She’s had enough of delays; originally, the plants were to go onstream between 2010 and 2012. With the addition of 2,609 MW capacity when these plants are ready, the state’s installed capacity will cross 20,000 MW by mid-2014, compared to a peak demand of 14,174 MW (demand during the busiest times of the day). Three projects are likely to be commissioned by end-2013. The Mettur project, say sources, will be operational only by 2014. In the north, Punjab, too, has woken up. If all goes well, 3,920 MW will flow into the grid by the end of the next fiscal, giving Punjab surplus power. On an average, it has an annual shortage of 2,365 MW. “It (power shortage) is a legacy. To make matters worse, the tariff hikes have not been commensurate with the increasing cost of producing power. However, many projects are lined up for commissioning,” says Anirudh Tewari, power secretary of the state.The Parkash Singh Badal government in Punjab has attracted Rs 75,000 crore in investments into the power sector since 2007. A 1,980-MW thermal plant at Talwandi Sabo by Vedanta, a 1,400-MW thermal plant at Rajpura by L&T, and a 540-MW thermal plant at Goindwal Sahib by GVK, are close to completion. An additional 9,800 MW capacity is also in the pipeline.Similarly, six other states — Karnataka, Bihar, Kerala, Jharkhand, Haryana and Uttar Pradesh — want to go from being chronically power starved to supplying power to others.At present, these eight states have a peak shortage of 6,918 MW, though they intend to add 20,537 MW by the end of 12th Five-year Plan. The sense of urgency is understandable as these states are behind schedule. Tamil Nadu patched up 843 MW with the help of four central and one state project (three projects are thermal-based, while one is a nuclear power plant). Punjab added 704 MW — 34 MW hydro, 45 MW nuclear, and 625 MW thermal. Bihar managed a lowly 232 MW (55 MW hydro and 177 MW thermal), all from central power stations.The CatchThe question to ask is whether the good intentions will actually lead to a change on the ground. There are plenty of sceptics who say that these states becoming power surplus is an illusion. That’s because the Central Electricity Authority (CEA) counts central power projects as part of the installed capacity in a state which, in turn, might draw only a little from the plant. So, the entire production that the states are counting on does not actually come to them. More importantly, a lot of what is shown as installed capacity does not translate into reliable power being produced and fed. Theoretically, even today, several of these states are power surplus if only the difference between total installed power capacity and the peak demand is taken. Take Jharkhand. CEA data shows the installed capacity as 3,049 MW, which is almost three times the state’s peak demand. In reality, a lot of this capacity is sold to other states through the central pool. Then, there is the problem of underperforming units. “Most of our units are old or obsolete. While the numbers might show capacity in excess of the state’s peak requirement, the ground reality is different,” says Vimal Kirti Singh, power secretary, Jharkhand.The same goes for Tamil Nadu. Its installed capacity is much more than peak demand (see table). But 3,483 MW again comes from central projects, while the state draws about 960 MW. Also, a large portion of the capacity (more than 7,300 MW) is from renewable sources like wind and biomass, which can’t be counted on to meet peak needs. In Bihar, too, central power stations supply 1,324 MW of its 1,833 MW installed capacity. break-page-breakClaims Versus RealityThe CEA reported a peak demand of 130,006 MW in 2011-12 with a deficit of 13,815 MW for the country as a whole. According to a report by McKinsey & Company, demand for power will touch 335,000 MW by 2017. The rapid growth in manufacturing, an increase in per capita consumption, and expansion in rural electrification have contributed to the surge in power demand.Moreover, if states want to attract business and investments, they have to ensure adequate power supply. Jharkhand, for instance, is expected to set up 1,374 MW capacity during the 12th Plan, according to the CEA’s November 2012 report. The state government has signed a slew of power purchase agreements (PPA) with independent power producers to almost double this capacity. “We will add around 2,600 MW in the current (Five-year) Plan. In fact, we are commissioning a project every 10 months. Our efforts to electrify villages have resulted in power requirement shooting up and we have made adequate arrangements to meet this need,” says Singh. The first unit of a 540-MW (2x270 thermal project) plant set up by the Rs 3,500-crore Adhunik Group (which has interests in mining and steel) is to be commissioned by late February. Essar is to put up 1,800 MW projects (fired by coal). There has been a delay of a few months, but it is expected to come on line in 4-5 months. Apart from these, the state government is to start work on two coal-fired projects — Patrapu and Dhumla (1,320 MW each).But signing deals is far from the reality of implementation. Kerala, for instance, is expected to receive 532 MW more power, of which about 430 MW will come from central projects in Tamil Nadu, and the rest from two state hydro projects. To be power surplus by 2014, it has to meet an increased peak demand of 3,922 MW. But an official in Kerala’s energy department says, “All these stations are still on paper. The work has not really started.” Also, the CEA does not expect any capacity to come in by end 2013.Adds S. Chandrasekhar, managing director of Bhoruka Power Corporation, and head of CII’s southern region energy committee: “It will take at least 3-4 years for the entire southern region to be power surplus. The region has the highest percentage of power deficit (20 per cent) in the country, compared to the national average of 10 per cent.” Another spoke in the wheel is shortage of fuel. Karnataka power officials admit that two projects in the Raichur district have coal linkage issues. It’s the same in Punjab. “GVK is implementing a project, but production has not started in coal mines due to land acquisition issues. We have written to the coal ministry to ask Coal India to supply to this project,” says Tewari.It might be a chicken and egg situation, but some do not see it that way. “Without firm arrangements for fuel supply, power producers should not be putting up capacity. If domestic fuel is not available, they should import it and sell electricity at a price which can absorb this cost,” says Gajendra Haldea, infrastructure advisor to the Planning Commission.Haldea says that while power from imported fuel will be more expensive, there are many consumers who want uninterrupted quality power and are ready to pay for it. “The onus is on the state governments to introduce open access reforms. But they won’t do it as it would reduce their monopolistic powers.” He feels that despite the Electricity Act (2003), the power sector is still run by state-run monopolies, and “the Centre has not pushed states hard enough”.Given that a lot of projects are not near completion or production, the states’ claims to being power surplus are merely that — claims. chhavi(dot)tyagi(at)abp(dot)inchhavityagi(dot)bw(at)gmail(dot)com(at)chhavityagibw(This story was published in Businessworld Issue Dated 25-03-2013)
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