Australia's Perdaman Chemicals and Fertilisers sought to widen its legal battle against Lanco Infratech over a stalled coal-to-urea project by launching a A$3.5 billion damage claim against ICICI Bank, the lender to Lanco's Griffin Coal unit. Perdaman filed its application in federal court in Perth, Australia, on January 2, the company said in an email on 10 January' 2013. Lanco called Perdaman's move a "desperate attempt" and said ICICI Bank had no contractual relationship with the Australian company. It said the case has not yet been admitted by the court. Perdaman filed a lawsuit against Lanco in 2011 in the Supreme Court of Western Australia seeking compensation of A$3.5 billion for breach of a coal supply agreement. Lanco termed Perdaman's claims baseless and said in its statement on Thursday that it expected the case to be decided in its favour shortly. Shares of ICICI, India's No.2 lender, fell as much as 1.63 per cent in early trade in a flat Mumbai market. They pared losses to trade down 0.8 per cent, at 1,171 rupees at 8:13 GMT. A Bank of America-Merrill Lynch analyst said in a note to clients he did not expect the lawsuit to have "any material impact" on ICICI shares. ICICI officials declined to comment. Lanco Infratech acquired Griffin Coal Mining Co in 2011.(Reuters)
Read More
A diesel price hike stretching over months with price rising by only Re 1/ litre every month? This could well turn out to be real if the Cabinet approves a proposal made by the petroleum ministry. The oil ministry has proposed a Rs 3-4.50 per litre hike in diesel price and Rs 100 in LPG rates along with raising the number of subsidised cooking gas cylinders for households to nine a year from the current cap of six.On diesel, it has proposed a 3-4.50 per litre hike in one go or in monthly instalments of Re 1 or Rs 1.50 per litre. From April, it wanted Re 1 a litre increase every month till such time that the current loss of Rs 10.16 is wiped out. The ministry has moved a note for consideration of the Cabinet proposing options for meeting a record Rs 160,000 crore deficit arising from selling auto and cooking fuels below their cost.Sources said that since the finance ministry has refused to bear additional subsidy arising from raising cap on supply of subsidised LPG, the ministry has proposed to make up for the shortfall by raising prices.It has proposed to raise LPG rates by Rs 100 per 14.2-kg cylinder in two instalments to make up for a fifth of the Rs 490.50 per bottle loss being incurred currently.Sources said the ministry has also proposed raising kerosene price by 35 paise a litre per month or Re 1 a litre per quarter till March 2015.The ministry's proposal, however, is unlikely to come up at the 10 January 2013 Cabinet meeting, they said.According to ministry estimates, raising the cap to nine subsidised cylinders would lower savings to Rs 2,500 crore per annum, compared to the savings of Rs 12,000 crore estimated when six cylinders are issued at subsidised rates and the rest sold at market price. In September, the government limited the supply of subsidised LPG cylinders to six per household in a year, leading to protests from both within the ruling alliance and outside.Sources said the ministry's note to Cabinet is based on recommendation of the Vijay Kelkar Committee, which was appointed by the Finance Ministry to suggest a roadmap for fiscal consolidation.The panel had recommended an immediate hike in price of diesel by Rs 4 per litre, of kerosene by Rs 2 a litre and of LPG by Rs 50 per cylinder.Price of diesel, which currently costs Rs 47.15 per litre in Delhi, was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. Kerosene rates have not changed since June 2011 and it currently costs Rs 14.79 per litre in Delhi.Subsidised LPG costs Rs 410.50 per 14.2-kg cylinder and any household requirement beyond current cap of 6 cylinders is to be bought at near market price of Rs 895.50 per bottle.State-owned oil companies currently sell diesel at a loss of Rs 10.16 per litre, kerosene at Rs 32.17 a litre and LPG at Rs 490.50 per 14.2-kg cylinder.Oil Minister M Veerappa Moily had last week stated that the government was considering raising the cap on supply of subsidised cooking gas (LPG) cylinders and Kelkar committee recommendations were being "processed" to be put up before the Cabinet at an appropriate time. India, which imports more than 80 per cent of its fuel needs, liberalised petrol prices in June 2010 but continues to regulate diesel prices to protect the poor.Prime Minister Manmohan Singh has recently said the country must gradually bring local fuel prices in line with global prices.(Agencies)
Read More
India cut its forecast for fuel demand in the current fiscal year by nearly 1 per cent to 155.6 million tonnes, government data showed, due to a slowdown in economic activity. The economy, which grew at 6.5 per cent in the year ended March 2012, is expected to grow 5.7 per cent to 5.9 per cent this fiscal year, the slowest since 2002-03. Local fuel sales -- a proxy for oil demand in India -- are now expected to grow at 5.2 compared with 5 per cent in the previous fiscal year, when India consumed 148.13 million tonnes of fuel, according to data released by the Petroleum Planning and Analysis Cell (PPAC), a unit of the oil ministry. PPAC had earlier projected India would consume 157.07 million tonnes of refined oil products this fiscal year, a growth of 6.1 per cent over 2011-12. PPAC has halved its projection for growth in demand of liquefied petroleum gas (LPG) in this fiscal year to 5.6 per cent as the use of the fuel has decreased after India capped sale of subsidised cooking gas cylinders at six per household. Diesel accounts for over 40 per cent of refined fuel consumption in India and according to the latest PPAC estimate, demand for the fuel is set to rise 8.3 per cent compared with a previous projection of 5.9 per cent as it is considerably cheaper than petrol. India, which imports more than 80 per cent of its fuel needs, liberalised petrol prices in June 2010 but continues to regulate diesel prices to protect the poor. Prime Minister Manmohan Singh recently said India must gradually bring local fuel prices in line with global prices. He also called for creating public awareness on the need for curbing energy subsidies.(Reuters)
Read More
Pia Singh, daughter of DLF chairman K P Singh, on 8 January 2013 sold 42.5 lakh shares of the realty major worth nearly Rs 100 crore to six other promoter entities.As per bulk data available with the stock exchanges, Singh, one of the promoters of DLF, offloaded 42,49,600 shares of the realty major.These shares were sold on an average price of Rs 235 aggregating the deal size to Rs 99.86 crore, the data showed.In an inter-promoter transfer, shares were acquired by Kavita Singh, wife of Pia's brother, and five other promoter entities --DLF Investments, Kohinoor Real Estates Company, Madhur Housing & Development Company, Sidhant Housing & Development Company and Vishal Foods & Investments.Last month, DLF had informed the stock exchanges that Pia Singh would sell up to 50 lakh shares or amounting to 0.29 per cent stake in the company, at Rs 217.17 per share by January 31, 2012.Shares of DLF grew by 0.74 per cent to settle at Rs 236.65 apiece on the BSE.(PTI)
Read More
Mining firms and their trysts with local communities living in mineral belts have been anything but smooth. And reaching a consensus on compensation paid to the locals in exchange for their land isn’t smooth sailing either. Land acquisition for mining projects has been a sticky subject, given the vociferous debates over whether affected communities are worse off post-acquisition. Many believe land acquisition practices disenfranchise these communities; mining firms on their part say projects have been lying undeveloped for years because they are unable to acquire land. A big problem has been how much and to whom the compensation is to be paid. Oxfam India’s CEO Nisha Agrawal believes the sector needs a major regulatory makeover. Agrawal points to Chhattisgarh, one of the most mineral-rich states, yet poorest in terms of per capita income, as an example of why sharing benefits with affected communities is imperative.26% equity in the mining projects/firms has been proposed for the affected localsShe recommends giving affected communities 26 per cent equity in the project or in the mining firm undertaking it; this was suggested in 2010 when the government sought to make affected locals stakeholders in mining projects. The draft Mines and Minerals (Development and Regulation) Bill, or MMDR Bill, includes a 26 per cent sharing of net profits for coal and lignite; for other major minerals, an equivalent amount of royalty paid annually. Narsing Rao, CMD of Coal India, says it is simply not practical. “We keep acquiring land, so how many times can we keep issuing equity?” He acknowledges the need to protect the welfare of those giving up the land, but says the main issue is discovering the “real market rates”, not government ones, for land. Others agree. Kameswara Rao, leader of energy, utilities and mining at PricewaterhouseCoopers, calls the idea “populist...but not so straightforward”. What happens if the firm goes bankrupt: does the community’s stake get liquidated? People could also sell their shares. “Royalty is a better development tool since it’s easily measurable, identifiable, recurring and stable...Royalty would continue to be paid even if the company is loss-making,” he says. The Bill says these payments must be made annually to the District Mineral Foundation. But R.K. Goyal, MD of Kalyani Steels, has another question: “We already pay 12 per cent royalty to the state in Karnataka, but where does it go?” Goyal says payments should be audited to ensure they are spent for the intended purpose: the community’s development. He thinks auctioning mines and giving a good chunk of the money to the locals may be a better process. Also, they should be given employment that guarantees consistent income. “Companies could build schools, hospitals and other infrastructure as part of their CSR programme that can be linked to the size of mines,” he says. Is there an optimal method? Agrawal’s solution of equity-sharing brings mining companies and the locals into direct dialogue, but some say there are chances of manipulation by the former. Rao suggests creating a non-profit, state-sponsored agency to buy the land first and build trust on both sides. This Gordian knot of a problem needs Alexander’s sword to cut it. (This story was published in Businessworld Issue Dated 07-01-2013)
Read More
Mining firms and their trysts with local communities living in mineral belts have been anything but smooth. And reaching a consensus on compensation paid to the locals in exchange for their land isn’t smooth sailing either. Land acquisition for mining projects has been a sticky subject, given the vociferous debates over whether affected communities are worse off post-acquisition. Many believe land acquisition practices disenfranchise these communities; mining firms on their part say projects have been lying undeveloped for years because they are unable to acquire land. A big problem has been how much and to whom the compensation is to be paid. Oxfam India’s CEO Nisha Agrawal believes the sector needs a major regulatory makeover. Agrawal points to Chhattisgarh, one of the most mineral-rich states, yet poorest in terms of per capita income, as an example of why sharing benefits with affected communities is imperative.26% equity in the mining projects/firms has been proposed for the affected localsShe recommends giving affected communities 26 per cent equity in the project or in the mining firm undertaking it; this was suggested in 2010 when the government sought to make affected locals stakeholders in mining projects. The draft Mines and Minerals (Development and Regulation) Bill, or MMDR Bill, includes a 26 per cent sharing of net profits for coal and lignite; for other major minerals, an equivalent amount of royalty paid annually. Narsing Rao, CMD of Coal India, says it is simply not practical. “We keep acquiring land, so how many times can we keep issuing equity?” He acknowledges the need to protect the welfare of those giving up the land, but says the main issue is discovering the “real market rates”, not government ones, for land. Others agree. Kameswara Rao, leader of energy, utilities and mining at PricewaterhouseCoopers, calls the idea “populist...but not so straightforward”. What happens if the firm goes bankrupt: does the community’s stake get liquidated? People could also sell their shares. “Royalty is a better development tool since it’s easily measurable, identifiable, recurring and stable...Royalty would continue to be paid even if the company is loss-making,” he says. The Bill says these payments must be made annually to the District Mineral Foundation. But R.K. Goyal, MD of Kalyani Steels, has another question: “We already pay 12 per cent royalty to the state in Karnataka, but where does it go?” Goyal says payments should be audited to ensure they are spent for the intended purpose: the community’s development. He thinks auctioning mines and giving a good chunk of the money to the locals may be a better process. Also, they should be given employment that guarantees consistent income. “Companies could build schools, hospitals and other infrastructure as part of their CSR programme that can be linked to the size of mines,” he says. Is there an optimal method? Agrawal’s solution of equity-sharing brings mining companies and the locals into direct dialogue, but some say there are chances of manipulation by the former. Rao suggests creating a non-profit, state-sponsored agency to buy the land first and build trust on both sides. This Gordian knot of a problem needs Alexander’s sword to cut it. (This story was published in Businessworld Issue Dated 07-01-2013)
Read More
There is just one word that probably describes how most power company CEOs are feeling: powerless. As the year draws to a close, many privately held power producing firms are now feeling the effects of the issues that have been simmering for a long time, but without resolution. The paucity of domestic fuel, much higher international coal prices, and long outstanding dues from distribution companies have forced power producing firms to run their plants at a low plant load factor (PLF), which implies much lower-than-optimal efficiency. And while last year has been particularly bad for the Indian power sector, power producers nevertheless managed to carry on with their capacity addition plans. But now, funding sources such as banks and financial institutions are also washing their hands of the new power projects; power producers feel they are being left in the lurch, looking for other funding sources to keep their expansion plans going, but in many cases without much luck. This may well force some of them to throw in the towel. Among the first to feel the pinch is Lanco Infratech. One of the bigger private players in India, Lanco has put its 1,200 MW Udupi power plant in Karnataka on sale. For its part, the company insists that this is a regular exercise. “We are always looking for a good valuation for an asset,” says K. Raja Gopal, director and CEO, Lanco Power. “This is being done for the general purpose of unlocking the value of good assets.”1,200 MW is the capacity of the Udupi plant, which is on sale. For some time, the market has been rife with speculation about Lanco’s financial troubles in recent times. The 1,200 MW Udupi power plant has had a poor run of late. Early in the year, the plant was running at a dismal 45 per cent PLF; the project was also caught up in tariff wrangles. Company officials, however, seem positive about the plant’s future. “The plant has come out of all the risks and is generating revenue presently,” says Raja Gopal, insisting that Lanco will get good value for the Udupi asset. Monnet Ispat & Energy has also been looking for investors to divest 20 per cent of its stake in the power business to address cash flow problems. Seshan Balakrishnan, director-transaction advisory services, infrastructure, at Ernst and Young, says there are many firms that are in the market looking for similar deals. “These companies are looking to raise funds to finance their growth plans and given the current market conditions, the traditional route for funding has all but dried up,” he says. “This is a great opportunity for foreign players to buy some good assets in the Indian power sector.” While bigger players such as Tata Power have not encountered any funding problems yet, the firm admits that in the absence of solutions to the critical issues faced by the sector, interest among private players may be waning. “With all the issues prevalent in the sector, we don't see private power players retaining much interest in it,” says Anil Sardana, managing director, Tata Power.(This story was published in Businessworld Issue Dated 07-01-2013)
Read More
Reliance Industries will restart a crude distillation unit one to two days after a fire at its older, 660,000 barrels-per-day (bpd) refinery in Jamnagar, a company spokesman said. The fire broke out during maintenance on the unit, which was shut at the time, said Reliance spokesman Tushar Pania said. Pania said the fire was minor and was contained immediately. The company is still investigating the cause of the fire, he said, without providing details of the unit's capacity. No firm dates have been set yet for a separate planned maintenance at Reliance's newer 580,000 bpd Jamnagar refining complex in January, Pania said. The company is planning to shut a 13.5 metric tonnes per annum (270,000 bpd) crude distillation unit for about 40 days in January, industry sources have said. It is also planning to shut a 6.5 mmtpa vacuum gasoil hydrotreater unit, one of the sources said. (Reuters)
Read More
