Although the restructuring of the National Highway Authority (NHAI) has moved so far at a snail's pace, companies in the sector have sought one more improvement. They have suggested that a new post, member (land acquisition), be created.Land acquisition, companies say, is the most difficult problem in executing projects. "Land acquisition and permissions required from railway authorities are the single-biggest stumbling block we are facing at present," says T.S. Venkatesan, vice-president, developmental projects (roads and bridges) for L&T. "That's why the industry is keen that a member be entrusted only with this single task."The exercise to restructure the NHAI has been restarted by roads and highways minister C.P. Joshi, who took charge this January. NHAI is supposed to have six full-time members, but for many months now, three of those posts have been lying vacant.The exercise to choose a new full-time chairman has also been in limbo, primarily due to differences between the minister and the Prime Minister's Office. While the latter wants a bureaucrat be appointed to the position, Joshi is understood to be keen on a technical person as the chief, even if he is not part of the Indian Administrative Services. He is open to inviting applications from experts in the the private sector too. In the absence of a consensus, the roads secretary is currently acting as the NHAI chairman, as an additional charge. This is a situation that the companies are not too happy with as a full-time chairman is expected to facilitate quicker decision making. The NHAI is expected to grant projects worth about Rs 80,000 crore this year alone.In fact, in the absence of a full-time chairman and several members, the process of handing out contracts, opening of bids and handing out letters of intent has taken something of a beating in the past six months. The Prime Minister, however, has said last week that a new chairman will be appointed within three months.The Cabinet had, in July 2007, cleared a number of proposals to restructure NHAI, whose scope and mandate has grown at a rapid pace due to the increasing number of National Highway Development Projects. The number of full-time board members was increased from five to six, and part-time members from four to six. These members would be from the non-government sector — one from IITs/ IIMs and the other from financial institutions.One important change welcomed by the companies was making the process of bidding more transparent. NHAI has now moved to annual prequalification of road developers for highway projects that are to be developed through the PPP mode. Earlier, companies had to pre-qualify for each and every project. This meant submitting documents, running to 2,500 to 3,000 pages, all of which cost time and money. Also, many companies often felt that they were unfairly disqualified at pre-qualification stage in cases where the bid process seemed "less than transparent" and where it seemed that the "winning bid has been pre-decided".In other words, NHAI officials will no longer be able to reject applications on flimsy grounds during the qualification stage. Companies believe that this will reduce the time NHAI takes to award projects.(This story was published in Businessworld Issue Dated 01-08-2011)
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India's immediate strategy to deal with the loss of crude from Iran in August is to buy more from Saudi Arabia and Iraq, while inventories and plant maintenance give refiners breathing space as they seek to establish new supply lines.Iran has cut supply as it tries to put pressure on Indian refiners to settle $5 billion in debt for oil supplied, and to find a way to pay for future shipments.The halt has given regional rival and US ally Saudi Arabia an opportunity to grab a bigger share of the market in Asia's third-largest oil consumer. If Saudi Arabia fills the gap, tension on oil policy between Riyadh and Tehran could worsen."For meeting immediate needs and even longer term, Saudi Arabia would be the main source," said Paul Tossetti, senior advisor for oil markets at PFC Energy."They have offered to supply extra crude to Asian refiners... Looking beyond 2011, Iraq production should see a major increase in late 2012 and that would be another opportunity."Iran-led opposition defeated a Saudi proposal for a coordinated supply rise at an OPEC meeting in June. Saudi Arabia said it would boost supply anyway, a move Iran has criticised.Iran has cut sales of 400,000 barrels per day (bpd) of crude to India, near 12 percent of the nation's demand of 3.46 million bpd, because New Delhi has failed to find a way around US sanctions that make paying Tehran for oil difficult.Indian refiners Bharat Petroleum, Hindustan Petroleum and Essar have contacted state oil firm Saudi Aramco to secure supplies to plug the gap in supply from Iran, an Aramco source said on Wednesday.Additional cargoes from Kuwait, the United Arab Emirates and possibly further afield, as well as inventories held by refiners in India should prevent any supply squeeze, analysts said."I don't think that the availability of crude is an issue." said Sushant Gupta, an analyst with Wood Mackenzie. "There will be alternatives from the Middle East and West Africa. They have the flexibility to reschedule crude cargoes and have some inventories as well."Most Indian refiners can process regional Middle East and West African grades, said Gupta. MRPL, HPCL, IOC, BPCL and Essar between them buy already about two-thirds of their oil from the Middle East.Mangalore Refinery and Petrochemicals Ltd., Iran's biggest Indian buyer with around 150,000 bpd, was already in talks to boost supply from Saudi Arabia and Gulf ally the UAE.The company had started looking for alternative suppliers even before Iran halted shipments to India this week as the dispute that rose in December over payment between New Delhi and Iran dragged on. MPRL struck its first ever supply deal with Kuwait earlier this year to buy 20,000 bpd.HPCL plans to open talks to boost supply from Saudi Arabia, Kuwait, the UAE and Iraq, K. Murali, the company's head of refining, said on Wednesday.Essar, too, has been busy bringing in supplies from other sources. It raised oil imports from Iraq five fold in the first six months of the year and from the UAE by about 70 percent, according to refining data obtained by Reuters.India and Iran have struggled since December to find ways for New Delhi to pay for imports, after India's Reserve Bank of India stopped payments through the Asian Clearing Union (ACU) mechanism. There is no ban against buying Iranian crude, but sanctions have made financing the deals difficult.The RBI's move won praise from Washington and came close on the heels of a visit to India by U.S. President Barack Obama last year. Obama has endorsed India's bid for a permanent seat on the U.N. Security Council.Refinery MaintainanceIndian refiners have some breathing space to seek more oil supply as they undertake planned maintenance at plants.Essar, Iran's second-largest buyer in India, plans to shut its 280,000 bpd Vadinar refinery in September. Indian Oil Corp plans to take down its 160,000 bpd Mathura plant in August, when MPRL will also shut a crude unit at its sole refinery.That should limit any need for Indian refiners to seek prompt cargoes."I don't think there will be an immediate need to tap spot markets," an Asian oil trader said.Indian refineries on average keep crude stocks equivalent to about 10 days' throughput, an oil ministry source said. Ships en route to India at any time hold about another 8-10 days of refinery needs, the source added. Refineries also have around 30 days of stocks of oil products such as diesel and gasoline stocks to cushion any supply disruption, he said.Refiners could pool import needs together to hire the largest crude carriers to bring oil shipments, he said.Latin AmericaIn the longer term, India's smaller refiners could follow the trail blazed by Reliance Industries in Latin America.Reliance, which runs the world's biggest refining complex, raised imports from mainly Venezuela and Colombia after it stopped buying from Iran in 2010, under U.S. pressure. Brazil, too, is a potential source of future supplies as it ramps up output from its massive deep sea reserves.Indian Oil is considering importing oil from Africa and South America for its 300,000 bpd Paradip refinery in eastern India, due to start up next year. MRPL plans to lift 110,000 bpd from Venezuela by 2017. Selling to India fits into Venezuela's strategy to divert cargoes from the United States."There is growing production from Latin America and in some cases like Venezuela they want to divert supply away from the U.S. - that's a political decision," said Victor Shum, an analyst at Purvin and Gertz.Reaching out to Latin America even though freight costs could add to expenses for refiners that already incur billion of dollars of losses selling fuel at government controlled prices highlights the desire of India's refiners to diversify supply.There are other challenges aside from distance for India in switching to Latin American grades. Only the country's newer and more complex refineries have the units needed to refine the oil."Much of the Latin American oil is lower quality - heavy and with high sulphur. But as Indian refiners become more sophisticated with installation of crackers and cokers, more of this oil can be refined," said Tossetti.(Reuters)
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Parsvnath Developers Ltd has surrendered six in-principle approvals it had received to set up Special Economic Zones (SEZs) across various regions in the country, a top official said."Now since the government of India has put all taxes back into SEZ projects, we decided not to acquire the land and we applied to the government to surrender our six in-principle approvals," Chairman Pradeep Jain told Reuters on Friday.The company had received in-principle approval to set up SEZs in Moradbad, Jaipur, Pune and Agra, besides in Tamil Nadu and Haryana, he said, adding the realtor has not acquired any land parcels in these regions.The company did not also make any investments for the planned projects, he added."We have decided to cancel it, basically because of the tax and there is no great potential (for SEZs) in the market," adding the company was unlikely to get tax holidays for SEZs were brought under Minimum Alternate Tax (MAT) ambit.The finance minister in the country's budget had proposed to levy a 18.5 percent MAT on the book profits of SEZ developers, Kunal Dalal, research head at K.R. Choksey said.This was slated to impact the sector, he added.At 2.48 p.m, shares of the company were lower by 0.31 percent at 48.30 rupees in a strong Mumbai market.(Reuters)
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The cabinet on Friday approved Reliance Industries' plan to sell 30 percent in 21 oil and gas blocks, instead of the 23 originally planned, to BP as part of a $7.2 billion deal, Indian Oil Minister S. Jaipal Reddy said. Reddy said the cabinet has not approved the remaining two blocks in north eastern India's north for "technical reasons" and did not disclose any details on the plans for those two sites. The approval for one of the largest investments in India's oil and gas sector will pave the way for Reliance to benefit from BP's deepwater exploration expertise, partly in its key gas fields off India's east coast, where gas output has been slowing for many months. The two companies signed the deal in February. "BP is keen to be a long term partner with India in its quest for energy security. We will now work to complete the commercial agreements with Reliance and move forward with this exciting venture," BP said in a statement. A Reliance spokesman declined comment. Reddy said India, which imports more than 80 percent of its crude oil, "needs gas desperately." "One hopes that the consortium will do their best to ramp up production," Reddy told reporters after a cabinet meeting. In May, India's upstream regulator said Reliance was producing 48 mscmd (million standard cubic metres per day of gas) from its main D6 block in the KG basin, lower than the 60 mscmd it produced last year, and far off the planned peak capacity of 80 mscmd. Reliance has been under fire over the past few months from the upstream regulator, investors and analysts due to the slowing gas output, and its shares have been under pressure, down nearly 17 percent compared to the 8.7 percent fall in the main index. "The market had been expecting the approval. BP's expertise will certainly help them. It will allow more collaboration," said Alok Deshpande, oil & gas sector analyst at Mumbai's Elara Securities. Reddy declined to comment whether the two companies had been set a timeline to boost production, but said "the deal would involve induction of vast technical expertise in India's hydrocarbon sector." The Indian government last month gave conditional approval to Vedanta Resources' $6 billion deal to buy a stake in British oil explorer Cairn Energy's Indian business, after a delay of more than 10 months. Ahead of the news, shares in Reliance, which is India's top listed firm, closed 1.5 percent higher at 873.35 rupees in a firm Mumbai market. The company is expected to report a record quarterly profit when its reports earnings on Monday. (Reuters)
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Reliance Industries' controversial decision to keep the gas production from the premier KG D6 block down has put all the fifty odd suppliers in a tizzy. Moreover, sensing the courtroom's mood, where government officials may be asked to review the priorities of the sectors where gas has to be supplied, corporate entities have already started lobbying for their respective segments.This includes Reliance Industries Ltd (RIL), whose two petro-chemical plants are getting only 20 per cent of the allocated gas. However, RIL is pushing its case hard with the ministry of petroleum and natural gas to bring petro-chemical within the ambit of priority segment.The company, reportedly, has demanded preferential treatment in allocation of gas from its Andhra offshore field on the ground of being the producer. The company has written a letter to the Petroleum Minister S Jaipal Reddy seeking preferential allocation of gas for their Jamnagar refinery as well as the petrochemicals units at Dahej and Nagothane, all in Gujarat. An EGoM, earlier scheduled for the first week of July, was "deferred indefinitely" to save the government from the blushes at the court. The EGoM may now be rescheduled for the first week of August. Add to this, sponge iron players like Welspun, Essar Steel and Ispat have also moved court seeking directions for ensuring gas supplies to their respective plants. They have been facing 80 per cent cut in supplies, since the May 2011 orders of the Ministry for Petroleum and Natural Gas after KG D6 depletion.Post the orders, Reliance has been asked to meet the entire requirement of consumers in the priority sectors of fertiliser, power, city gas distribution and LPG plants and told to supply to non-core sectors only if there is gas left after that. As per records, the priority sector has been allocated 47.5 mmscmd of KG-D6 gas, leaving very little for non-core users. This worries the refineries as Indian Oil, country's biggest oil marketing company, has already shown its inability to control deficiency in diesel pool if gas supply to its refineries are not maintained. The sector has allocation for 5 mmscmd gas. But while gas supply agreements have been signed for supply of 3.46 mmscmd gas, they are getting only 0.69 mmscmd gas. "This (supply) is nothing. Petroleum products are one of the most essential items for the nation. We need to formulate a policy for the allocation of gas, and understand that refineries are much high on priority," said an IOC official.However, Petroleum and Natural Gas Regulatory Board chairman Labanyendu Mansingh is pushing hard to keep city gas distribution (CGD) in the core sector. The players from other sectors are pushing that the gas from CGD could be cut to ensure their supplies, or at least increase the throughput. Mansingh says CGD is not only allowing cleaner gas for consumers but is also an alternative for the LPG, which is highly subsidized, and more CGD penetration would mean saving of national resources. It could be added that three years ago, in May 2008, anticipating that the gas find in D1 and D3 wells along with the MA fields at the KG D6 block will yield a throughput of more than 65 mmscmd gas, the government had set the priority for allocating gas to nearly 60 projects keeping sensitive sectors like fertilizers and power in the core. The rest include city gas distribution, refinery, Liquefied Petroleum Gas plants, steel and petro-chemicals. They had allocated on the assumption of the demand at approximately 63 mmscmd gas. But for the last seven months, the output from this field could not peak 47 mmscmd. Although, the rivals of RIL say the company is deliberately keeping the production low for commercial gains, the company has another story to tell.
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India may miss a $500 billion target for infrastructure investment for the five years through 2012, but will likely create at least two $10 billion debt funds for the sector in the next few months, Montek Singh Ahluwalia, deputy chairman of Planning Commission, said on Thursday.Creaky infrastructure has been blamed as one of the drags on the growth prospects of Asia's third-largest economy, which policymakers expect to grow between 8 and 8.5 per cent for the current fiscal that ends in March."We think our investment will probably be little short of the $500 billion target," Ahluwalia said at a conference about meeting fast-growing India's needs for roads, ports, power and railways."I would not be surprised if it is 10 per cent or even 12 per cent short," he said.Ahluwalia also stressed the need for more infrastructure debt funds, the guidelines for which will be released soon."We need several 10 billion dollar funds. I expect at least two ($10 billion funds) to start off (in the current fiscal year)," Ahluwalia said.Over the next five years ending March 2017, India plans to invest $1 trillion in building infrastructure.(Reuters)
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State-owned oil firms may have to raise petrol prices by as much as Rs 3 per litre as the rupee touched two-year low against the US dollar, increasing the cost of importing crude oil."Oil retailers are losing Rs 2.61 per litre or Rs 15 crore per day on sale of petrol. Together with local taxes, the hike needed to level domestic rates with international prices is about Rs 3 per litre," a top government official said.IOC, BPCL and HPCL have lost Rs 2,450 crore this fiscal on selling petrol -- whose rates were freed from government control in June last year -- below the cost."At current rate, oil firms will accrue another Rs 2,850 crore of loss on sale of petrol, taking the total loss on a fuel that was freed from control, to Rs 5,300 crore for the full fiscal," the official said, adding, "Oil firms will have to take a call on raising petrol price soon."Besides petrol, the three firms are losing Rs 263 crore per day on selling diesel, domestic LPG and kerosene below cost. Diesel is being sold at a subsidy of Rs 6.05 a litre, kerosene at Rs 23.25 per litre while domestic LPG rates are under-priced by Rs 267 per 14.2-kg cylinder."The industry lost around Rs 65,000 crore in the first half of the current fiscal on the three products and for the full year the revenue loss is estimated at Rs 121,571 crore at the price of Indian basket at $110 per barrel," said the official.Rupee fell to 48 per dollar on Wednesday for the first time since September 2009. "Every rupee depreciation, the under- recovery (revenue loss) increases annually by around Rs 9,000 crore," he said, underscoring the need for action on the price front on all the three products. Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) had last raised petrol price by Rs 5 a litre in May. Diesel, domestic LPG and kerosene price were hiked in June by Rs 3 per litre, Rs 50 per cylinder and Rs 2 per litre.The government had in June last year decontrolled petrol price but continues to dictate diesel, domestic LPG and kerosene rates. However, petrol price has not moved in tandem with its cost, keeping in mind the government's concerns on inflation which climbed to 9.78 percent in August."The losses on the four products have meant that oil companies borrowed to meet even their working capital requirement," the official said.The combined borrowing levels of the oil marketing companies has increased from Rs 96,700 crore in March 2011 to Rs 120,000 crore in August 2011. "The increase is mostly towards short term borrowings to fund working capital requirements," he said.The basket of crude oil that India buys had averaged $85.09 per barrel in 2010-11. From April-September, it has averaged $111.64 per barrel, a 31 per cent increase over the last fiscal (2010-11).The Indian basket of crude oil averaged USD 106.94 per barrel in August and $110.88 a barrel in September."Due to hardening of crude/petroleum product prices in the international market and depreciation of rupee viz-a-viz dollar, the under-recoveries of oil marketing companies have been increasing during 2011-12," the official added.(PTI)
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Think of it as the New Silk Route: a gas pipeline from the Amu-Darya Basin in Turkmenistan, near the ancient town of Daulatabad (which is on the other side of the fence in Iran) to the sleepy town of Fazilka on the Sutlej river in Punjab (India). Covering 1,680 km, it will pass through a beautiful green belt in Turkmenistan, enter Afghanistan and run along with the newly constructed Kandahar-Herat highway. From the desert of south Afghanistan, it enters Pakistan near Quetta, touches the green pastures in Multan before finally reaching Fazilka. Romantic as it sounds, it will probably remain in the imagination.The agreement for the Turkmenistan-Afghanistan-Pakistan-India (Tapi) project has been signed between the partners for laying the pipeline and sale of gas, but the logistical and security concerns seem insurmountable. In south Afghanistan, the Taliban is still active. Baluchistan and south Punjab in Pakistan are disturbed areas with threat from fundamentalist. The Afghan government is deploying 7,000 security personnel along the route, and Pakistan has made similar assurances, but trust is hard to come by.Asian Development Bank (ADB) chief Haruhiko Kuroda said the project would be hard to complete. Security and high-quality construction work is mandatory for funding by the finance institutions. But there are others who have a great interest in its success. Tapi is also a dream for the US, to be able to bring gas out of Central Asia without going through Russia or China (Turkmenistan already has gas supply pipelines to Iran, Russia and China). In theory, this offers some comfort in security terms. Turkmenistan is important to world energy markets because it contains over 100 trillion cubic feet of proven natural gas reserves.For Afghanistan, the economic benefit — roughly $1.4 billion in transit fees from India and Pakistan — could be huge. The pipeline is expected to cost $3.3 billion, with an annual throughput of 33 billion cubic metres of gas. India may sign a gas purchase agreement with Turkmenistan in February 2011 when their oil minister Bayramgeldi Nedirov visits Delhi.But the costs for India may be too high. Officials at the petroleum and natural gas ministry estimated the landed cost in Punjab at $10 per unit, compared to around $7-8 that customers pay for gas from Reliance Industries' KG Basin, though less than the $12 some buyers pay for imported liquefied natural gas. Besides, current agreements have a commitment of 13.4 billion cubic metres of gas that would be provided regardless of circumstances.Cost aside, the government is confident there will be no security risk — as was with the Iran-Pakistan-India (IPI) pipeline. Tapi is backed by the US and the ADB. Despite that, India has pushed for an inter-government agreement, to have clarity and ensure a minimum supply.But there is a trust deficit in governments, especially in relation to Pakistan. The IPI has almost been shelved since the Mumbai attacks. There is an embargo on any talks with Pakistan currently. Memories of how the Myanmar-India pipeline was stopped by the Chinese — who have considerable influence with the military junta — are still fresh. So here's the question: should we continue to invest time and money into the project, or give it up as a lost cause?(This story was published in Businessworld Issue Dated 03-01-2011)
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