Even though it was always a bitter, head-to-head battle of nerves, the latest flash between Ambani brothers, Mukesh and Anil, has set a new trend in fighting over the minutiae in the multi-billion dollar stakes.The two split a Rs 100,000-crore empire; battling over a gas find worth Rs 2,11,500 crore; and, are lobbying against each others' high-stakes business interests. But on 22 September, sparks flew over an amount as low as Rs 12 lakh when Mukesh Ambani-controlled Reliance Industries (RIL) suspended gas supply from RIL's KG Basin-6 fields to 220 MW Samalkot power project in Andhra Pradesh owned by Anil Ambani's Reliance Infrastructure.The clash was triggered by a letter from Anil-owned Reliance Infrastructure on Tuesday, refusing to pay a marketing fee of $0.13 per British thermal unit of gas. The dispute is over just one month's marketing margin. ADAG's relied on a letter sent by petroleum ministry to power ministry dated 11 August which said, "Government has not... fixed or approved the quantum of marketing margin for sale of natural gas by any contractor." Clearly, with the battlefield techniques morphing into such details, a public fatigue is setting in around this dispute. var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } (This story was published in Businessworld Issue Dated 05-10-2009)
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The insistence of Tamil Nadu on getting all of the surplus electricity surrendered to the Centre by Delhi and the eastern region, keeping out other power-starved states, has led to a stalemate. Tamil Nadu moved the Supreme Court (SC) in October demanding full allocation by the Centre. With the matter in court, two months have already gone by. The surplus power hanging in the balance is 1,724 MW, with nearly1,490 MW from Delhi and 230 MW from the eastern region. Seven states — Tami Nadu, Andhra Pradesh, Karnataka, Uttar Pradesh, Assam, Rajasthan and Kerala — and Dadra and Nagar Haveli had written to the power ministry seeking a share. The northern and eastern regions of the country are usually power-surplus during the winter months, which they surrender to the Centre until March. The Centre then allocates the surplus to power-starved states. “We were surplus by over 1,450 MW which we surrendered to the Centre till the month of March. Of this, over 450 MW is round-the-clock electricity and around 1,000 MW is off-peak power,” said P.D. Sudhakar, chairman of the Delhi Electricity Regulatory Commission.1,724 MW of power is at stake, with the decision now resting with the SCIn September alone, Tamil Nadu had a power deficit of 17.3 per cent; Andhra Pradesh was higher at 22 per cent; Karnataka was deficient by 16.5 per cent; Uttar Pradesh by 16 per cent, Assam by 6.2 per cent, Rajasthan by 3.3 per cent, Kerala by 2.9 per cent and Dadra and Nagar Haveli by 0.5 per cent. Tamil Nadu has been facing a severe power crisis for over a year now. Of its total requirement of 12,000 MW, the state is only able to meet 8,000 MW of demand. And of this, 3,396 MW comes from central generating stations allocated to the state. Given the situation, Tamil Nadu, fearing that the Centre would not heed its demand for full allocation, went to the apex court in October, pre-empting any move by the Centre to take a decision. With the matter sub judice, the Union power ministry cannot allocate the surplus power to any of the power-starved states. Click here to viewMeanwhile, the Centre has informed the court about its inability to allocate the entire surplus to Tamil Nadu, citing the lack of grid strength in the state, among other reasons. Projects adding up to 1,700 MW are scheduled to be commissioned by March in Tamil Nadu. But all of them have run into problems due to labour issues and delay in procuring plant equipment. “We have projects in the pipeline that will soon get commissioned. Till then, power shortage will continue,” says an official from the Tamil Nadu Generation and Distribution Corporation. Tamil Nadu’s move has meant prolonged agony for many of its southern neighbours who continue to reel under power cuts.(This story was published in Businessworld Issue Dated 17-12-2012)
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The confusion in the coal and power sectors continues with the tussle over signing fuel supply agreements (FSA) between Coal India (CIL) and power producers showing no signs of coming to an end. In April, the government ordered CIL to sign FSAs guaranteeing 80 per cent of the agreed supply of coal for 20,000 MW of power capacity, after the Maharatna firm missed its 31 March deadline. What followed was a prolonged debate over conditions in the FSAs — including the low penalty of 0.01 per cent on CIL should it fail to keep its end of the bargain. Power producers objected to this low penalty, among other clauses, and refused to sign the FSAs, even approaching the power ministry. CIL had to finally knuckle down and agreed to pay a penalty of up to 40 per cent for supplies under 50 per cent of the annual contract value (ACV). But only 33 power producers have signed the FSAs, while over 70 (including NTPC) are still holding out. S. Narsing Rao, CMD of CIL, while admitting that the power producers had made representations to the power ministry, said they were over “minor” issues. What is interesting, though, is that while the tug of war is on, CIL continues to supply coal to these power producers; it is supplying around 49 million tonnes (mt) to power producers (commissioned since 2009) based on memorandums of understanding (MoU). 33 power firms have signed FSAs, over 70 have not.NTPC currently gets coal for its 4,300 MW generating capacity (commissioned between 2009 and 2011) based on a 2009 MoU, which has been periodically reviewed and extended. “We are hopeful of getting more coal for these units by the time the FSA is signed,” said an NTPC official. The power ministry didn’t reply to BW’s queries. But CIL is now mulling not supplying coal based on just MoUs, thus, forcing power producers to sign the FSAs. “If they continue to get coal through MoUs and not sign FSAs, they will be the losers since there is no obligation on our part to supply coal,” says Rao. The MoUs do not have a penalty clause. The CIL board is serious about converting the MoUs to FSAs; it is expected to take a final ‘this far and no further’ decision on 12 December. Rao says CIL is not in a position to continue supplies under the conditions of the old FSAs because of the shortage of coal vis-à-vis the demand. “Despite CIL expressing its inability to supply coal, the Letters of Assurance have been issued by the government,” he says. But this shortage isn’t because CIL doesn’t have enough coal resources. Evacuation is the fundamental issue. To address the problem, the company, under its subsidiary Mahanadi Coalfields, is looking to set up a 1,600 MW power project in Orissa. “The logic is to utilise coal from mines where they are unable to evacuate coal,” says Rao, adding that the proposed project will not interfere with CIL’s responsibilities towards other power producers since the Mahanadi plant will require just 8 million tonnes of coal per annum. At present, CIL is supplying 39 mt as per the terms of 33 new FSAs and 306 mt according to old FSAs. Production has grown by 6.9 per cent compared to last year, while offtake has increased by 8.1 per cent.(This story was published in Businessworld Issue Dated 17-12-2012)
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In yet another setback to embattled Indian infrastructure major GMR, a Singapore court on 6 December ruled that the Maldives government can take back the Male International Airport from the private firm."Singapore Court of Appeal has passed judgement that the Maldives government has the authority to take back the airport," Maldives President Mohamed Waheed's Press Secretary Masood Imad said in Male.He further said, "Maldives will go ahead with the transfer as scheduled".The ruling comes after an order won on 3 December by GMR that had suspended the government's decision to cancel the contract, although the Maldives had still been pressing ahead with plans to take over the airport."The Maldives government has the power to do what it wants, including expropriating the airport," Sundaresh Menon, the Chief Justice of Singapore, said in court.Shares in GMR were down about 3.5 per cent following the ruling after earlier being in positive territory on the day.A GMR spokesman declined immediate comment."We don't see any hiccups now. There won't be any problem. They will hand over to us by December 7. All senior managers and consultants are working on that now," a Maldives government official told Reuters, declining to be named.The standoff over the project threatens to cloud foreign investor sentiment towards Maldives, which is seeking overseas cash for many of its tourism projects. The country terminated an agreement with GMR last week, rattling its relations with India.Maldives had in a surprise move on November 27 terminated the over $500 million contract awarded to GMR during the previous regime of Mohamed Nasheed to upgrade its Male airport and to build a new terminal.The government had said it was terminating the contract because it was signed under "dubious conditions" and was void, a charge hotly contested by the infrastructure major.Following the termination, GMR had approached the Singapore High Court which had stayed the scrapping of contract. However, the Maldives government remained defiant and asserted that it would take over the airport from GMR on Saturday, a day after the notice period ends.After 6 December ruling, Imad told PTI, "We are not doing anything against the law. We are just following the law. Now, even the Singapore court has given us the permission to go ahead".As per the project contract, in case of any differences between parties, the law of either Singapore or UK would apply. Taken by "surprise" over the GMR issue, India had conveyed to Maldives that the move will have serious consequences on the bilateral ties as it is considering a "series of options", including slowing down cooperative programmes, if legal course is not followed.India acknowledges that the Maldivian government's decision to cancel GMR's contract for building Male airport is a domestic issue but it is upset over "anti-India sentiment being whipped up" in connection with the issue there.Sources said the possibility of some external forces playing a role in the cancellation of the airport contract cannot be ruled out, even though there was no clear evidence of Chinese angle so far.(Agencies)
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Core sector growth numbers for september 2009 show a 3.8 per cent fall as compared to a growth of 7.8 per cent in August 2009. The slowdown in growth in the six core sectors — crude oil, petroleum products, coal, electricity, cement and finished steel — is also going to reflect in the index of industrial production (IIP) growth numbers, which have shown a rebound and even touched 10.4 per cent in August 2009 (core sector has a weight of 26.68 per cent in IIP). According to D.K. Joshi, principal economist with rating agency Crisil, the IIP for September will not be in double digits. However, the bleak numbers of core sector growth should not trigger a panic of a slowdown. First, slowdown in core sector during September, is partly on account of a dip in the growth of coal production. But this is also the month where hydel power generation picks up and coal-based stations are either shut or reduce generation, therefore, requiring less coal. Second, IIP numbers form an important input in projecting the GDP (gross domestic product) growth for the entire fiscal. If there were signs of a slowdown in GDP, then these would have been reflected in even the Prime Minister's Economic Advisory Council's (EAC) projections made a few days ago. EAC put the growth of Indian economy at 6.5 per cent during this financial year. "The long-term view is that it has grown 5 per cent during the first half of this fiscal, which we expect will be strengthened in the coming months," says Joshi. var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } (This story was published in Businessworld Issue Dated 09-11-2009)
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Maldives will wrest control of its international airport from GMR Infrastructure, cancelling its biggest foreign investment project, despite an order from a Singapore court suspending the project's termination. The standoff over the $511 million project threatens to cloud foreign investor sentiment on Maldives, which is seeking overseas cash for many of its tourism projects. The country terminated an agreement with GMR last week, rattling its relations with India. "We will continue the airport takeover and Inshallah next Saturday onwards MACL (state-controlled Maldives Airport Company Ltd) will be running the airport," Mohamed Nazim, defence minister and acting transport minister, told a press conference in the capital Male on Monday. Earlier in the day, GMR won a stay order from a Singapore court, which the company says has jurisdiction over disputes in the agreement, on cancellation of the airport contract. GMR said it would continue to operate the airport as normal. "We have obtained an injunctive stay on the operations of that (contract termination) letter," said Arun Bhagat, spokesman for the GMR group. The government of the Maldives, a tropical island chain south-west of India famous for its luxury beach resorts and white sands, cancelled the 2010 agreement saying that it was not valid. The cancellation follows President Mohamed Waheed's failure to renegotiate terms, sources close to president's office told Reuters, and comes after a year of political turmoil that saw the ousting of its former president and months of unrest. Shares in GMR closed up 5.4 per cent at 19.60 rupees in a Mumbai market that ended down 0.2 per cent. "We would fight for our rights all the way, through the court. That is very clear," Andrew Harrison, chief executive officer of the GMR airport project, told CNBC-TV18 news channel. "We expect that under the terms of the concession agreement ... any orders issued by the (Singapore) court would be respected, because that is enshrined within the agreement." Imad Masood, a spokesman for the President of Maldives said he had not received the court's order, when contacted by Reuters. Strained RelationsThe project cancellation exacerbated already strained relations with neighbouring India, which last week warned it would "take all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives". The move sent a "very negative signal" to foreign investors, India added. "If they don't comply (with the stay order), the Maldives will no longer be respected as upholding its obligations under international law, which will be very detrimental to future foreign investment," Fayyaz Ismail, a lawyer for GMR told Reuters. "Hopefully they will be reasonable." The contract to upgrade and operate the airport and build a new terminal came after a global tender overseen by the World Bank and signed under former president Mohamed Nasheed's administration. The project was implemented through a joint venture company comprising GMR Infrastructure Limited and Malaysia Airports Holding Berhad. However, Nasheed's rivals filed legal action saying the contract was invalid as it contained a $25 airport development charge per outgoing passenger which was not authorised by parliament. "Waheed cannot ignore international law at his whim and fancy. Rules are rules and they must be respected," Nasheed told Reuters in an e-mail on Monday.(Reuters)
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If the nation is banking on rural India to trigger its next wave of growth, it would be naïve to expect that to happen unless India builds a web of world-class highways. The neoclassical growth theory tells us that highways play a three-pronged role in economic development. First, good highways are indirect inputs into waste-free production processes.Second, they improve productivity of labour. And, third, they attract industrialisation and labour migration. The Prime Minister recently spoke of how new roads boost both overall infrastructure and other sectors such as automobiles. It is in this context that Union Road Transport Minister Kamal Nath's announcement last week — that all procedural bottlenecks in awarding projects have been removed — is crucial. Nath told BW that all new procedures, ironed out after incorporating developers' concerns would be notified in a couple of weeks. These pertain to qualification parameters, termination clauses, forfeiture of deposit money and conflict of interest arising on account of crossholdings in separate companies.This is a positive development for a sector that has promised action, but has shown little results. The government planned to award around 120 projects with investments of Rs 80,000 crore under the current fiscal. But this date has already been extended to June 2010. Close to five months after Nath took charge, the government is far from achieving its target of building 20 km of highways every day. Monthly data show that construction is still limping at around 3-6 km a day. To achieve the target, several bottlenecks have to be removed. The very open stand-off between Planning Commission and the road transport ministry on conditions in bid documents (RfQ and RfP — request for qualification and request for price) as well as model concession agreements had scared investors away. Over the past four months, discussions between developers and government resulted in a list of recommendations made by a committee headed by member of Planning Commission B.K. Chaturvedi on what needed to be done with some of the tricky clauses in the documents. This was then taken to the cabinet committee on infrastructure headed by the Prime Minister and a decision was taken in early October.However, as this decision was not made public, there was intense speculation among developers and even in the road transport ministry on whether the tricky clauses had been modified. Or whether the Planning Commission still prevailed over what clauses need to be incorporated in the bid documents.However, this week, all this speculation was put to rest when Nath went a step further and declared that all future decisions on amending the RfP and RfQ will be taken by the road transport ministry and need not go through the long- winding tortuous route of inter-ministerial discussions that tend to go on for months. One important element in expediting road construction would be to ensure that there are no delays in land acquisition. As delays are often at the state level, expect some action in the coming days where the Centre is going to tie release of funds from the central road fund to states meeting their side of the bargain by acquiring land for the projects. And if there is consensus between the Centre and the state on this issue, that would be a quantum leap forward in developing our highways to growth. kandula dot subramaniam at abp dot in var intro = jQuery.trim(jQuery('#commenth4').text()) var page = jQuery.trim(jQuery('#storyPage').text()) if (page.indexOf(intro) < 0) { jQuery('#commenth4').attr('style', 'display:block;') } (This story was published in Businessworld Issue Dated 16-11-2009)
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Faced with soaring demand, stagnant output at home and a need to diversify from Iranian crude imports lost to Western sanctions, Indian oil companies are hungry for deals like ONGC's Kashagan buy that promise supplies sooner rather than later. State-run ONGC Videsh has agreed to pay about $5 billion for 8.4 per cent of the Kashagan field in Kazakhstan, the world's largest oilfield discovery in four decades - which could boost its output by about 16 per cent within a year. The deal adds to a stable of assets that span some of the trickiest territories in the world - Sudan, Iran, Iraq, Syria and Libya among them - accumulated as parent Oil and Natural Gas Corporation (ONGC) struggled with domestic output. But it's a drop in the ocean for the world's fourth-biggest crude importer - it buys in 3.5 million barrels per day (bpd) - where the energy gap triggers constant power cuts. Asia's third-largest economy plans to hit 8 per cent growth in 2014/15 and by 2030 that could lift it to be third-largest in the world and also the No. 3 energy consumer, according to BP. Oil supplieshave become more urgent as Western sanctions over nuclear projects squeeze Iran, once India's second-biggest supplier. India's imports from Tehran slipped by nearly a fifth to 257,000 bpd in April-September. "Our priority is to look for discovered, developed and producing assets which give us production growth immediately," T.K. Anantha Kumar, head of finance for Oil India, the country's other state-run explorer, told Reuters. While not all the oil bought overseas turns up in domestic refineries, it can give companies a stake in the global crude trade, enhancing their flexibility for supplies and potentially helping profits. ONGC Videsh said in its 2011-12 annual report that its tough production targets - 20 million tonnes of oil equivalent by 2017/18 and 60 million tonnes by 2029-30 - mean it "needs to concentrate on acquiring assets in (the) development and production phase initially" before looking at exploration acreage. Parent ONGC does not have a good track record in exploration and was slated this year by the state auditor for focusing too much on producing fields at home. "Definitely we are looking at a good mix of producing as well as exploration assets because we want to increase our contribution" to India's energy security, an ONGC Videsh official told Reuters on condition of anonymity. Acquisitive Asia Indian companies will face sharp competition for these assets, however, from Asian rivals Japan and China - also major clients of Iran and facing their own demand challenges, the former because of nuclear power plant closures. With all but two of Japan's reactors idled and the government set on reducing reliance on atomic power after the Fukushima disaster, Japan's energy explorers are on a quest for upstream assets overseas, often with strong state support. Should ONGC complete the purchase of the Kashagan stake - ConocoPhillips' existing partners in the project have a right of first refusal on it - it could be working alongside Japan's biggest energy explorer, Inpex Corp, which has a 7.56 per cent share. Chinese state oil companies CNOOC, Sinopec Group, the parent of Sinopec Corp, and PetroChina have been among the world's most acquisitive oil firms in recent years. CNOOC has bid $15.1 billion for Canadian oil and gas producer Nexen, while Sinopec recently paid $1.5 billion for UK North Sea assets and $2.5 billion for a one-fifth stake in a Nigerian offshore field. Asian companies may be willing to buy into countries where the political situation deters Western buyers - reflected in the spread of their portfolios. The Kashagan field has been plagued by disputes with the Kazakh government and cost overruns. "In some cases, the political context can inhibit international oil companies from investing in a country where Chinese and other Asian companies have jumped in," said Siddik Bakir, Middle East and South Asia energy analyst at IHS World Markets Energy in London, in an e-mail. Chinese companies, which have also suffered in Sudan and Syria, are interested in investing in Myanmar and have often leveraged government-to-government deals with developing or politically risky countries where international majors can't or don't bother to go. More recently, both Chinese and Indian companies have turned their attention to OECD countries such as Canada and the United States, while maintaining their interest in the rich prospects of Latin America and Africa. ONGC Videsh, for example, is focusing on Africa and Latin America, its managing director, D.K. Sarraf, said, after a policy shift last year away from politically risky regions. Oil India is focused on North America and Africa. Big ChequesAnd while the search for fundamental energy supplies such as oil, natural gas and coal continues, new sources such as oil sands or shale deposits are taking centre stage. Chinese companies have struck multi-billion dollar deals for such assets in the United States, and an Indian consortium -- including ONGC and Oil India - is in the running for oil sands properties in Canada. ONGC Videsh "will need to be prepared to face more international competition on a regional and global level, particularly from Chinese companies," Bakir said. "Indian state-run companies don't have a good track record of competing and winning against Chinese companies in a bidding scenario, especially when you have to write a cheque for more than $5 billion," said a resources banker with a European bank in Mumbai. "In those cases, Chinese companies will continue to have an upper hand." ONGC Videsh reckons it needs $20 billion to buy the assets it needs up to 2030, while Oil India is looking to invest up to $1.82 billion for assets that could give it an extra 1.5-1.75 million tonnes a year of oil. But unlike Chinese companies which enjoy financial independence, India's state-owned energy companies have not been very successful in closing big overseas acquisitions, often because of delays in securing government approvals at home. They may be sitting on huge piles of cash, but New Delhi is in no mood to throw money around at the moment with a fiscal deficit big enough to threaten an expensive credit downgrade. (Reuters)
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