Strongly backing the decision to hike diesel price and cap on supply of subsidised LPG, Planning Commission on 14 September said the country needs lot of tough decisions and diesel and petrol prices should be deregulated in phases to cut down deficit."Diesel price hike is a tough decision and we need lot of tough decisions to get to 8 per cent growth rate," Planning Commission Deputy Chairman Montek Singh told reporters in New Delhi."I think they have taken a very important step. I am very glad that the government has taken this decision (to hike diesel price)," he said.The government on 13 September hiked diesel price by Rs 5.63 per litre and capped supply of subsidised LPG to 6 cylinders per household in a year."This is not complete deregulation. Both petrol and diesel price should be deregulated. It has to be done in steps," he said.Referring the huge subsidises borne by the government on petroleum products and the resulting budget deficit, he said there should be greater alignment of domestic prices with international rates.Acknowledging opposition to the government's decision, he said, "Any effort to raise price always creates problem. We should not have an impression that not raising diesel prices is a costless option."The real question is could government have afforded not to have raised diesel prices. The answer is no," he said adding diesel was a general purpose fuel which is an input into all economic activity.He said the options before the government were either the budget bear the burden, plan will take a cut on growth or starve the petroleum sector, which will be a disaster."Energy security is very important. We need to economise energy. We need to put resources in exploration, production and development," he said adding that lack of movement in this regard could condemn the country to low growth rate.(PTI)
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The alleged irregularities in the coal block allocations came under judicial scrutiny on 14 September with the Supreme Court directing the Centre to explain if the guidelines were strictly followed in allotting the natural resource to private companies.Turning down the Centre's plea that the court should not go into the issue as it is being looked into by a Parliamentary committee, the apex court said "these are different exercises."A bench of justices R M Lodha and A R Dave said the petition raised serious questions and "it requires explanation from the Government"."There is difference in exercise done by the Public Accounts Committee (PAC). Parliament and PAC can proceed with the issue on the basis of the CAG report. We don't want to encroach upon their exercise but the petition raises different things altogether. There are sufficient averments which require explanation from you," the court said.The bench also made it clear that it is confining itself only to the aspect of guidelines formulated by the Centre for allocation of coal blocks.The court passed the order while hearing a PIL filed by advocate M L Sharma on the alleged coalgate scam. The bench rejected Solicitor General Rohinton Nariman's contention that the petition based on the CAG report was "premature" and should not be entertained.Saying that the report of a constitutional body like CAG can be relied upon, the bench directed the secretary of Union Coal Ministry to file a counter affidavit within eight weeks dealing with the several aspects involved in allocation of coal blocks.The bench said the affidavit shall cover the guidelines framed by the government for the allocation of coal blocks.It said the secretary should also elaborate the process adopted for allocation of these coal blocks and whether the guidelines had an in-built mechanism to ensure that the allocation of coal blocks does not lead to distribution of largesse unfairly in the hands of few private companies.The bench also sought to know whether the guidelines for allocation of coal blocks were strictly followed and whether by their allocation, the objectives of policies were realised.The bench also sought the government's response on as to what were the hindrances for not following the policy of "competitive bidding" adopted by in 2004 for allocation of the coal blocks.Lastly, the court wanted to know what steps were proposed to be taken against the allottees who have not adhered to the terms of allocation or have breached the agreement. (PTI)
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The Manmohan Singh government has finally bitten the bullet. Despite stiff opposition from allies in the UPA government, the Cabinet Committee on Political Affairs (CCPA) hiked the price of diesel by Rs 5 per litre excluding value added tax (VAT).In a move to decontrol LPG (liquefied petroleum gas) prices, it has restricted the number of subsidized LPG cylinders to six in a year. This means that during the current financial year, subscribers will be entitled to another three subsidized LPG cylinders. Consumers can get any number of additional LPG cylinders at market prices. While LPG cylinders cost Rs 399 in Delhi, oil marketing companies will announce the market rate of LPG on a monthly basis.However, petrol and kerosene prices are unchanged.Out of the Rs 5 per litre increase in diesel prices, Rs 1.50 per litre is on account of increase in excise duty. The balance increase of Rs. 3.50 per litre will help reduce the under-recovery of oil marketing companies by about Rs 15,000 crore for the remaining part of the fiscal. The under-recovery on sale of diesel during 2012-13 after this price hike is estimated to be over Rs 103,000 crore. In Delhi diesel will retail at 46.95 per litre from the current Rs 41.32 per litre.Prices of petrol remain unchanged, despite an under-recovery of about Rs 6 per litre. The loss to the oil companies will be offset by a reduction in excise duty by Rs 5.30 per litre.Restricting subsidised LPG cylinders to six is expected to reduce the under-recovery by about Rs 5,300 crore for the remaining part of the financial year. The under-recovery on sale of LPG during 2012-13 even after this measure is estimated to be over Rs 32,000 crore.These decisions are expected to reduce the under-recovery of OMCs by about Rs 20,300 crore and the under-recovery for 2012-13 will be about Rs 1,67,000 crore which is more than the under-recovery of Rs 1,38,541 crore incurred by OMCs during 2011-12.New Delhi subsidises the prices of diesel, cooking gas and kerosene to dampen inflation and protect the poor, a popular policy that has nevertheless put a severe strain on public finances.However, fears of a political backlash mean pump prices have remained unchanged for more than a year. The price increase will almost certainly trigger street and political protests ahead of state elections.The government has always acknowledged that a price hike is essential for curbing the fiscal deficit, a pre-condition for reviving growth in Asia's third largest economy.A price increase will also aggravate inflation, as costs, such as road freight rates, will rise.
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Russia has invited Oil and Natural Gas Corp Ltd (ONGC) to consider buying a stake in the Magadan 2 field operated by Rosneft in the northern part of the Sea of Okhotsk, its deputy energy minister said on 14 October. India, which imports about 80 per cent of its oil needs, is on the hunt for supplies to power its near-$2-trillion economy, while Russia is keen to tap its vast offshore reserves. "We have suggested that ONGC look at (investing in) Magadan 2," Russian Energy Deputy Minister Yury Sentyurin told reporters on the sidelines of energy conference Petrotech. He said he had made the proposal to Indian oil ministry officials at the India Russia Joint Working Group meeting on 13 September. The New Delhi government has told state firms to secure energy assets overseas as the country's own output is well below demand in an economy expected to grow 6.5 per cent this year, and already suffering hefty power shortfalls. Sentyurin added that the size of any possible stake was up for negotiation. D. K. Sarraf, Managing Director of ONGC Videsh Ltd, the overseas investment arm of ONGC, confirmed that the company has viewed data relating to the field Russia granted exploration licenses for five areas in the Sea of Okhotsk - Magadan-1, -2 and -3, Lisyansky and Kashevarovsky - to Rosneft without bidding at the end of last year. Recoverable resources in the area are estimated at 2.8 billion tonnes of oil equivalent, according to Rosneft's annual report. Rosneft recently teamed up with Norway's Statoil in four new joint ventures, including exploring the Magadan 1, Lisyansky and Kashevarovsky license blocks, with prospective recoverable resources at more than 1.4 billion tonnes. ONGC already has a stake in Russia's Sakhalin-1 oil and gas project in the Pacific, and in 2008 it bought the Imperial Energy oil company in western Siberia. (Reuters)
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The cabinet headed by Prime Minister Manmohan Singh may discuss raising the prices of heavily subsidised fuels including diesel at a meeting on 13 September and could take a decision, government officials told Reuters.Meanwhile, a private TV channel reported that the finance ministry has proposed a minimum hike of Rs 4 per litre of diesel and Rs 100 per cylinder of cooking gas (LPG).No hike has been proposed in the prices of PDS kerosene, they added.Oil Minister Jaipal Reddy is also attending the meeting.New Delhi subsidises the prices of diesel, cooking gas and kerosene to dampen inflation and protect the poor, a popular policy that has nevertheless put a severe strain on public finances.While the issue is not on the committee's agenda, it will likely be discussed, three officials said. The meeting of the Cabinet Committee on Political Affairs is due to take place at 6:30 p.m.A meeting of the full cabinet is scheduled for 14 September, where other ways of reviving the economy are to be discussed, including a proposal to allow foreign airlines to invest in domestic carriers. The rising bill from the fuel subsidy and the resulting strain on public finances have put India's investment grade credit rating in peril.However, fears of a political backlash mean pump prices have remained unchanged for more than a year. A price increase will almost certainly trigger street and political protests ahead of state elections.The government acknowledges a price hike is essential for curbing the fiscal deficit, a pre-condition for reviving growth in Asia's third largest economy.A price increase will also aggravate inflation, as costs, such as road freight rates, will rise.Analysts estimate a Rs 5 increase in diesel prices, which now stand at Rs 40.91 per litre, will add 0.5-0.8 percentage points to headline wholesale price inflation, currently a little below 7 percent.
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Under attack over coal block allotments, Indian government on 13 September decided to de-allocate four blocks and encash bank guarantees of three others belonging to private companies for failing to meet timelines on production and development of mines. The government decision came shortly after an Inter- Ministerial Group (IMG) made such a recommendation after evaluating the performance of each of the cases in respect of factors like approval of mining plan, grant of environment clearance, status of forest clearance and land acquisition. The IMG, in its meeting held 12 September, had deliberated upon the cases of five companies which were allocated eight coal blocks, a statement issued by the coal ministry said. The statement noted that the IMG had recommended de-allocation of four blocks -- Bramhadih Block in Jharkhand allocated to Castron Mining Ltd in 1996, Chinora and Warora (southern part) blocks in Maharashtra given to Fieldmining and Ispat Ltd in 2003, Lalgarh (North) block in Jharkhand allotted to DOMCO Smokeless Fuels Pvt Ltd in 2005. The IMG also recommended deduction of Bank Guarantee (BG) in case of Marki Mangli-II, III and IV Blocks in Maharashtra allocated to Shri Virangana Steels Ltd, the statement said. The Group also recommended that in the case of Utkal B2 Block in Odisha allocated to Monnet Ispat & Energy Ltd in 1999 "where there was substantial progress but no provision for BG, the allocattee may be asked to submit BG amounting to three years royalty within a period of one month from date of letter in this regard failing which the block may be deallocated", it said. Sources said the BG in case of Shri Virangana Steel, now Topworth Urja and Metals Ltd, is Rs 2 crore, while that for Monnet Ispat is Rs 90 crore. "Recommendations (of IMG) have been accepted by the government," the Ministry statement said. The eight blocks are among 58, which are under scrutiny of the IMG. It has so far taken up the cases of 29 allocated to private companies. While these eight blocks were reviewed Wednesday, 10 more cases will be taken up on 14 September . Monnet Ispat was allocated Utkal B2 coal block in Odisha in 1999, which has an estimated reserves of 77 million tonnes (MT). The official statement said IMG has been reviewing the developments of blocks on individual basis and also obtained a status paper from Coal Controller/Ministry of Coal. This is the first recommendation by the IMG ever since the controversy over the allocation of coal blocks broke out with the CAG estimating undue benefits of Rs 1.86 lakh crore to private firms due to allocation of 57 mines sans auction. IMG, headed by Additional Coal Secretary Zohra Chatterji, formed earlier this year, had sent out show-cause notices to 58 block allottees, including 20 mentioned in the CAG report, for furnishing the cause of delay in developing the mines. The panel heard representations by 29 block allottees, all of whom are from the private sector, on September 6-8. The allottees had said delays in starting the production resulted due to lack of various clearances from different state governments. Tata Steel, Reliance Power, JSW, Grasim Industries, Kesoram Industries, IST Steel & Power, SKS Ispat and Power, Bihar Sponge Iron, among others, had appeared before the IMG. The remaining 29 coal blocks, which were given show-cause notices, are with public sector companies, including MMTC, Chhattisgarh Mineral Development Corporation and Jharkhand State Mineral Development Corporation. (PTI)
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Minister of state in PMO, V Narayansami on 13 September said the central government is examining demands for including coal block allocations made during NDA rule within purview of CBI probe. "There are demands from various quarters to include coal block allocations made during BJP-led NDA rule from 1999 to 2004. Union coal ministry is looking into it," he said in Bhubaneshwar. Maintaining that Centre had taken pro-active step by ordering probe into the allocations in March 2012, much before CAG gave its report, he alleged BJP is finding CBI probe "inconvenient as it fears that its own leaders would be exposed." Dismissing BJP's demand for SIT probe into the alleged irregularities in coal blocks distribution, Narayansami said CBI is very much an independent agency with a reputation for impartiality, making many states recommend for probe by it. "Action will be taken against anyone found guilty in CBI probe ... including chief ministers, ministers or officials," he said. Holding coal bearing states, including those ruled by BJP, responsible for coal block allocations, Narayansami said about 90 per cent work relating to allotment, starting from sending recommendations to endorsing and executing the allocation, is vested with the states. Stating that 39 coal blocks were allocated during BJP-led NDA rule without following any guidelines or transparent policy, he said when UPA came to power the prime minister sought allocation of coal in a transparent way. When views of states were sought, states like Odisha, Madhya Pradesh, Chhattisgarh, Jharkhand and West Bengal opposed auction mode, he said, adding that coal bearing states were party to allocation as the screening committee included their chief secretaries. Slamming BJP for making an "unreasonable, unethical and unfair" demand for resignation of the Prime Minister, Narayansami said nowhere in the CAG report there is any mention about "any scam in coal allocation." "The name of Prime Minister also does not figure, it was UPA government which framed guidelines and procedures for coal block allotment in 2005," he said. He said before demanding Prime Minister's resignation, the BJP should ask its chief ministers to resign for their "role" in coal block allocation. He also accused BJP of "forgetting" that its chief ministers had "strongly opposed" auction mode for allocations. Hitting out at BJP for stalling Parliament over the issue, Narayansami said the impasse prevented passage of several important bills and discussion on burning issues. Accusing BJP of "destabilise the government and nation" by blocking proceedings in the Parliament, Narayansami said government as well as most political parties, including many NDA allies, were in favour of debate on the coal issue. "Now BJP is no more seeking prime minister's resignation but wants cancellation of coal block allocations," he said. Rejecting the demand for cancellation of allocations, the Union minister said it would be unfair and unethical to do so in view of time spent and investments already made.(PTI)
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The country’s largest natural gas reserve at the Krishna-Godavari (KG) basin is losing steam. Natural gas production at the D6 block, controlled by Reliance Industries (RIL), has gone down to 24–25 million standard cubic metres a day (mscmd), down 60 per cent from its peak output. The fall happened as RIL shut six out of the 18 wells due to high water and sand ingress. The expected output from RIL and its partners — BP Plc and Niko Resources — was 80 mscmd of gas. The situation is going out of control, said an RIL executive, who did not want to be named. “At present, we are not thinking about raising output. We need to at least stabilise the production at 24 mscmd.” Another company official said that if the decline is not arrested, production will hit zero in a few years. On 9 October, oil secretary G C Chatur-vedi agreed with the analysts, who said that RIL and its partners may have to shut the underperforming D6 fields by 2015–16. A day before, Morgan Stanley analysts had said that the fields could be exhausted in five years. But low production is just one side of the coin, the other being pricing. RIL had asked the Centre to increase rates from $4.2 per million British thermal unit (mBtu) to import parity rates of around $14.2 per mBtu. Such a rate hike would add around $4.1 billion to RIL’s revenue, making the development of the KG basin more economically viable for it. Deven Choksey, CEO and managing director of KR Choksey Securities, says, “The basic fact in this issue is that production from KG D6 is becoming economically unviable at the government-approved price. RIL may not spend further to sort out the technical issues if the government doesn’t revise the gas price in line with the market price.” RIL says it is also waiting for many government approvals to sort out issues. “The work programme and budget for D1 and D3 discoveries are lying with the government for the last two years,” the RIL executive said. To cut the water and sand ingress, RIL needs to inject mono ethyl glycol (MEG) in the wells and install a booster compressor; it is also looking to convert the oil wells at its MA oilfield in KG-D6 into gas wells. “We need approvals from the government for all these jobs,” the official said. The government-led management committee has not yet approved the declaration of commerciality of the R-Series cluster comprising D29, D30 and D31 gas discoveries, citing technical reasons. Though the management committee had approved field development investments for D6 for three years in August, RIL is awaiting an official communication from them, said an official. In January, RIL told the petroleum ministry that the reserves in its main production gas fields in the KG-D6 basin were only 3.10 trillion cubic feet (tcf), about 70 per cent lower than the original estimates, which it blamed on “unforeseen geological surprises” in the field. But government is not buying RIL’s explanation for the fall in production, saying that the company is intentionally keeping the output level low. “We are not convinced (that the fall is due to geological complexity). The director general of hydrocarbons is not convinced. Therefore, the matter has been referred to arbitrators,” Union petrol and natural gas minister S. Jaipal Reddy said. The ministry has referred the issue to arbitrators. With the two sides sticking to their positions, the country’s largest natural resource pool looks set to languish indefinitely. (This story was published in Businessworld Issue Dated 22-10-2012)
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