Uttar Pradesh Petroleum Traders Association has requested Chief Minister Akhilesh Yadav to reduce VAT rates on petroleum products and bring it at par with Delhi and Haryana."The sale of diesel and petrol in UP is low in comparison to the neighbouring states because of high VAT rates being charged here. We request the CM to look into the matter and ensure that VAT is reduced and bring it at par with Delhi and Haryana", said B N Shukla, President of the association.At a meeting of the association yesterday, the members urged the government remove VAT on lubricating oil, he said.Shukla said the state government should abolish licence on diesel as dealers have to suffer harassment at various official levels for its renewal.The other demands of the association included simplification of various taxes being charged from petrol pumps by municipal corporations, Jal Sansthans and Zila Parishads and payment of pending bills for diesel and petrol supplied during elections.(PTI)
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Twenty-five years after Hyderabad-based entrepreneur E. Sudhir Reddy started engineering and construction company IVRCL, he is fighting the battle of his life to save his firm from being acquired by Subhash Chandra-led Essel Group. IVRCL has a presence in water infrastructure, construction of roads and railway tunnels, buildings and industrial structures as well as power transmission and distribution projects. It had revenues of Rs 5,651.4 crore and a net profit of Rs 157.9 crore in 2011. IVRCL has not declared its numbers for the financial year ending 31 March 2012, and its board a few days ago passed a resolution extending its 2012 financial year by another three months. The takeover battle for IVRCL mounted by Essel, however, has meant that its scrip is on fire, up from Rs 27 to Rs 71 in the past three months.Reddy's current plight comes from a series of miscalculations. In order to fund aggressive growth, Reddy over a period of time over-leveraged the company by borrowing at high cost. IVRCL's average cost of debt is around 12-13 per cent, which meant that interest outgo alone was about 5.5 per cent of sales. Revenue growth in the past few quarters has been impacted due to lack of clearances for a few projects in which the company is involved and slow decision-making because of the overall economic slowdown. A Motilal Oswal Securities report in February pointed out that execution slippages had led to dismal performance.What has, however, come to haunt Reddy is the low promoter holding of 11.2 per cent. "This is what happens when a promoter gets careless and allows his ambition for growth to override everything else. In fact, Reddy was aware of the perils of having such low holding and had actually improved it from the 9.5 per cent he held in 2010. But the action was too little and may eventually prove to be too late. One comfort for him is that hostile takeovers in India have rarely succeeded and Essel might still exit after getting a huge premium," says an analyst with a leading brokerage. Essel has declared that it now has 12.3 per cent stake in the company.Reddy is not giving up without a fight. He has quietly unfurled the banner of regional pride as an Andhra entrepreneur becoming under attack and projecting the current bid as a North versus South Indian company fight. More practically, he is trying to bring down IVRCL's debt of Rs 2,500 crore in the parent company and an additional Rs 2,000 crore debt in various special purpose vehicles it has, to more manageable proportions by cashing out of some build-operate-transfer (BOT) projects, even as he tries to shore up his holding. The outcome of the current takeover battle might ultimately be decided by institutional investors such as Government Pension Fund Global, a Norwegian sovereign wealth fund, which holds a 9.7 per cent stake and is the single largest shareholder other than the promoters and Essel. However, a recent report by Nirmal Bang Securities says: "Developments like the Essel Group making a hostile bid for IVRCL would lead to a short-term upside in the share price, which, we believe, may not be sustainable." Whoever wins the battle, will have to fix the fundamentals of the business.(This story was published in Businessworld Issue Dated 16-04-2012)
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In a bid to meet the obligations of supplying a minimum assured quantity of coal to power producers under the Presidential directive, Coal India may resort to imports, its Chairman and Managing Director designate S Narsing Rao said on Friday."We have to see how much we can increase production to meet the commitment. CIL will do the imports if it is inevitable," Rao, who is currently heading state-run Singareni Collieries said.The company had earlier said it was not in the business of importing coal.The government on April 3 issued a Presidential directive to the Maharatna PSU to sign fuel supply agreements (FSAs) with the power producers assuring them of at least 80 per cent of the committed coal delivery in face of strong protest from independent directors on the Coal India board.The directive came in the wake of Coal India failing to meet the deadline of March 31, set by the Prime Minister's Office for CIL to enter into FSAs with power producers for minimum assured supply.However, even a Presidential directive is unlikely to relieve domestic coal shortages in the near-term, as was pointed out by ratings agency Fitch on April 4."The FSAs signed under this directive will initially have little effect on domestic coal supply as the reasons for lower output, including infrastructure bottlenecks, lack of environmental clearances, problems in land acquisition, high rainfall and labour, need long-term solutions.""Over the long-term, we believe FSAs signed under the directive could help overcome some of the bottlenecks and improve the long-term availability of coal," the agency said.When asked about the options of imports following PMO's directives to ink FSAs, CIL's acting Chairperson Zohra Chatterji in February had said, "We are not in the business of importing coal...it is one of the ways to meet the demand theoretically."Rao, who is due to take the charge of the company shortly, said the PSU would weigh various options of importing coal that will include direct imports, if required."Coal India may import directly. At the same time there are public sector undertaking like MMTC which are there for a long time in the business. They have expertise...All options we should see if that (import) is inevitable...," Rao said.Asked, how, he views the Presidential directive at a time when the company is battling on various fronts including delays in regulatory clearances, Rao said, "It is a very logical directive. They are only saying that supply more coal."Rao, who was handed over the appointment letter for Coal India's top post on April 4, added that apart from imports, the company may also think of diverting coal meant for e-auction to power firms.The Rs 50,000 crore PSU is the largest domestic producer of dry-fuel and recorded an output of 435.84 million tonnes (MT) of coal in the just-concluded fiscal, missing its revised target of 447 MT.It's production is almost stagnant for the last three years as the company says it is battling to get various regulatory clearances for expansion to augment production. India's non-coking coal production grew by a mere 13 MT over FY09-FY11, sufficient to fire only 2.3 GW of coal capacity, whereas over the same period thermal capacity addition was nearly 16 GW."We believe coal will remain the dominant fuel for the Indian power sector due to lower-than-expected gas production from existing fields and no new major gas discoveries," the rating agency observed.The Indian power sector received strong investor interest during 2008-2010 and this Presidential directive is part of the Government's efforts to save that investment from going bad, it noted."Although improvements in coal supply over the medium to long-term could help save investments that were recently completed or are in the pipeline, fresh investments in the coal-fired power generation sector are likely to remain subdued," the rating agency added.
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The Obama administration's man in charge of squeezing Tehran over its nuclear program is unapologetic for the difficulties faced by banks in their dealings with Iran since the US tightened sanctions against the country.The price of oil has shot up nearly 15 percent since January, companies that trade with Iran are struggling to get paid and the biggest Asian countries are scrambling to work around US sanctions that aim to deprive Tehran of revenue needed to develop its nuclear program.David Cohen, undersecretary for terrorism and financial intelligence at the US Treasury Department, said that pressure has forced Iran to pay attention to US demands."Do we think we have the attention of the leadership on their end? We have it like never before," Cohen said in an interview.Cohen's comments are the latest display of administration confidence in the measures, d espite obvious signs their bite is rippling through the marketplace faster than many had expected.J.P. Morgan warned on Thursday of an acceleration of Iranian oil cutbacks, predicting Iranian supplies could be slashed by one million barrels a day in the first of the year.The White House has not yet stated its position on proposed new bipartisan Iran sanctions legislation in the United States that would target Iran's main oil and tanker companies, as well as tighten up other loopholes.Mindful of the potential to cause more uncertainty over supply and push world oil prices higher, some senators are seeking amendments to the new sanctions package to assure insurers of allowed oil shipments that they will not be stung by sanctions. But Senate Majority Leader Harry Reid has so far said he does not want to allow the package to be amended.Not A Hermetic SealUS entities have been prohibited from working with Iran for years. But what Washington and its allies see as signs that Iran is closer to getting atomic weapons and unleashing a nuclear arms race in the Middle East have triggered Washington to increase the heat on the country. Tehran says its nuclear activities are peaceful.Over the past three months, Cohen and other top Obama administration officials convinced Europe to impose similar sanctions on Iran's main recipient of oil payments, the Central Bank of Iran. As well, the administration has been twisting arms trying to get Iran's biggest oil buyers, China, India, Japan and South Korea, to stop relying on Iranian crude.The current US sanctions allow President Barack Obama to block foreign financial firms from US markets if they continue to deal with Iran's central bank starting June 28. However, if countries manage to reduce their Iranian oil imports, they can win exemptions from the U.S. law so that their banks are not barred from the U.S. financial system.Despite the looming sanction deadlines, countries and companies have managed to do some business with Iran -- a provision that the Obama administration defends."I don't think the measure of an effective sanctions program is that it creates a hermetic seal through which nothing permeates," said Cohen. "The fact that they are still selling some oil, I would not chalk that up to a failure of the sanctions program," he said.Cohen said the question should be whether Iran was able to make use of the revenue that it earns from its oil sales rather than whether it was profiting from crude exports."It is increasingly difficult for Iran to make use of, or to get access to the funds that it is earning from its oil sales," he said.Permissible TradeCurrently the exemptions, which the State Department granted late last month to Japan and 10 countries in the European Union, apply only to banks.Fearing an oil crisis, where supply disruptions spark prices sharply higher, s ome of the most ardent supporters of Iran sanctions, who include a number of Republicans and some Democrats, a re urging the administration to give energy companies similar relief.A bipartisan bill introduced last month in the House of Representatives would extend those exemptions to oil traders, insurers and re-insurers and others in the energy business. The legislation would encourage companies not to shy away from deals that are allowed under U.S. law."If the administration did that it would provide more clarity and more comfort to companies engaged in trade with Iran that is permissible under U.S. law," said Mark Dubowitz, head of the Foundation for Defense of Democracies, which is well known for its forceful lobbying on tougher Iran sanctions.Insurers of oil shipments, some lawmakers say, need assurance that they will not be stung by sanctions. Already, it is clear that some contracted shipments of Iranian crude are faltering because of the concerns over insurance. An EU embargo on Iranian crude begins on July 1.A major Chinese shipper insurer will halt cover for tankers carrying Iranian crude from July, according to Reuters sources, in a sign the Iran will have trouble selling it oil to its largest customer.The House measure is one of many bills that are in limbo in Congress as Democratic and Republican Senators argue over how to move forward on broader legislation that would give the US Treasury more tools to crack down on Iran.Better To Pay The Price NowHowever, a common theme in Washington is that any price spike seen now as a result of the sanctions is better than what would happen to prices if Israel moved to strike Iran or if Iran obtained a nuclear weapon.U.S. consumers have felt the heat as average price at pump has gone to nearly $4 gallon, a new record for this time of the year."You talk about high priced oil now, but if there were loose nukes in that part of the world it would be a disaster for American and Western interests," said Dennis Blair, former director of national intelligence for the Obama administration until 2010."You're not talking $4 a gallon gasoline at that point, you're talking about the entire supply being disrupted there and not a heck of a lot that even America's tremendous conventional military capability could do," he said.(Reuters)
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Three state-owned power producers have found a way out to keep their plant output high even as they penalise defaulting utilities by cutting off power to them. National Hydro Power Corporation (NHPC), Satluj Jal Vidyut Nigam (SJVN) and North Eastern Electric Power Corporation (NEEPCO) debuted on India's first ever power exchange, New Delhi-based Indian Energy Exchange (IEX), between November 2011 and February 2012, offering 400 MW, 100 MW and 19 MW of power, respectively, for sale at the exchange. This was the power they had saved by cutting off supplies to utilities.Interestingly, although IEX has been in operation since June 2008, this is the first time that any of the state-owned power producers have used the energy bourse's platform for selling electricity. Where IEX was trading close to 33,000 MW before any of these PSUs (public sector units) started trading on it, the participation of these power producers has increased the trade volume to 40,000 MW, of which PSUs contribute a substantial 9,000 MW (22.5 per cent).It is turning out to be a bonanza for PSU power producers. While a PPA (power purchase agreement) fetches them a rate of anywhere between Rs 2 and 2.50 a unit, trading on IEX has helped them recover between Rs 3.30 and Rs 4.30 for every unit of power. SJVN has so far recovered roughly Rs 13 crore (in a period of four months) and NEEPCO close to Rs 3 crore (in three months). NHPC did not comment on the amount recovered.These companies have been reeling under substantial defaults by utilities. BSES and Uttar Pradesh Power Distribution Company defaulted on their payment to NHPC with outstanding dues of Rs 460 crore and Rs 500 crore, respectively. While BSES repeated its default story with SJVN with outstanding dues of Rs 100 crore, NEEPCO's culprit is Meghalaya Energy Corporation (MeECL) with about Rs 100 crore outstanding. "Our day-ahead market provides these producers with a perfect fit. Hydro plants like those of NHPC can calculate on a daily basis the exact quantum of electricity that can be generated and this coincides very well with our day-ahead market," says Rajesh Kumar Mediratta, senior vice-president (business development) at IEX."This will not help much in the liquidation of our outstanding dues. We might be compelled to trade this power for a longer period of time in order to bring in some much-needed working capital," confirms P.C. Barman, deputy general manager (commercial), NEEPCO. While the defaulting utilities have requested their respective producers to resume supply of their allocated power, sources say that SJVN and NEEPCO do not want to let go of the advantage (greater power generation and better collection potential) of trading in the upcoming peak season.Considering that they got much more than they bargained for it might be safely said that any future default by discoms will bring these producers back to the efficient platform of power exchanges. Given that rising demand increases the price of power in summer months, these power producers have the potential of recovering about three times more than they have recovered till now. Alas, that may not happen as supply will have to be restored as soon as the utilities pay up the dues.(This story was published in Businessworld Issue Dated 16-04-2012)
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Following furore over an initial CAG report that estimated huge losses to the exchequer in the allotment of mines, the government has said it is ready with the list of coal blocks to be bid and the auction process will kickstart by June."The work of identification of 54 coal blocks is complete ...The bidding process would begin in the first half of this year," Coal Minister Sriprakash Jaiswal told PTI.The government is also ready with the list of the blocks to be alloted to Central PSUs like NTPC and state undertakings by it, he said."Barring 12 blocks out of 54, all others would be auctioned to firms for end-use projects," Jaiswal said.The initial report of Comptroller and Auditor General (CAG) estimated that the government incurred Rs 10.67 lakh crore by allocating 155 coal blocks without auction between 2004-2009 to private and public sector companies .Jaiswal, however, had dismissed the report on allocation of coal blocks without auction as "illogical" and "baseless" arguing that when the blocks were given to the private and public sector companies for their captive usage, there was not much demand for coal.Coal India's subsidiary CMPDI has been assigned the task of hiring a consultant for coming out with a methodology of fixing the reserve price of blocks, finalising bid documents and assisting in the bidding process.(PTI)
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Shares in private power producers rose more than 2 per cent in a subdued market on Wednesday on media reports the government has issued a directive to state-backed Coal India to sign deals committing to meet 80 per cent of the coal requirement of the utilities.Average domestic coal prices are 1,600-1,700 rupees per tonne and are anywhere between 40-70 per cent below international spot prices as they are capped by the government which is keen to provide cheap electricity.Last checked, shares in Adani Power, Tata Power and JSW Energy were up between 2.3 and 3.2 per cent, while the main Mumbai index was down 0.6 per cent.(Reuters)
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Essar Oil is likely to cease fuel oil exports as early as May after starting a new delayed coker unit (DCU) at its 375,000 barrels per day Vadinar refinery last week, industry sources said on Wednesday."Essar will stop exporting fuel oil, but spot offers may still be made when margins are really good," a source familiar with the matter said."Most of Essar's volumes head into the Middle East bunker market anyways. In terms of impact, the market is not short on supply at the moment," a trader said.It was originally expected that fuel oil exports would be halted by the end of 2011, but the new unit had not been stablised by then, sources said.Essar's cargoes were on-specificaton 380-centistoke grade and traders were initially worried about the impact that this loss would have on the availability of cargoes that could be sold directly into the marine fuel market.However, the sulphur requirement for marine fuel has since changed, with a 3.5 percent limit imposed to meet international requirements under the MARPOL convention."But with the sulphur limit now lowered to 3.5 percent, Essar's cargoes at a maximum guaranteed 4 percent may require some blending as well," another source added.The refiner normally offers two spot cargoes of between 60,000-80,000 tonnes of 380-centistoke a month since 2011, which accounts for more than a third of India's total spot exports.On top of that, it also has a three-month term offering to provide one cargo monthly since last July.Essar was last seen selling an early April loading cargo to U.S.-based trader Cargill, with no new tender offering made since.With the addition of the new DCU, the refinery would be able to convert bottom-of-the-barrel vacuum residue into higher value products such as gasoline, gasoil and vacuum gasoil (VGO) instead, the company said in a news release.Essar's fuel oil output after the expansion will be "very small", CEO Naresh Nayyar had told Reuters last July.The Phase I expansion of its Vadinar refinery included the addition of secondary units as well a revamp of its crude distillation unit (CDU) and fluidised catalytic cracker unit (FCCU).(Reuters)
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