July shouldn't be a flash in the pan — that is what India's cement companies are praying for after witnessing a spurt in sales last month. The first three months of this fiscal (April-June 2011) were not encouraging — at less than 5 per cent, the industry posted the lowest growth in over a decade. The pressure is mainly on three fronts: increasing input costs, slackening demand and surplus capacity.In July, Swiss major Holcim outperformed the industry in sales volume. ACC and Ambuja Cements, controlled by Holcim, saw 28 per cent and 14 per cent growth, respectively, compared to the same period last year. Aditya Birla Group-controlled UltraTech's sales volume went up 7.4 per cent, while JP Associates' rose 19 per cent.Analysts say heavy monsoons last year slowed down demand, but the conditions were better this July. And companies are hoping for more. "The government has not released any major orders. Real estate and retail business, which essentially boosts the cement demand, is not seeing any recovery," says a Mumbai-based analyst.After announcing the June-quarter results, ACC and Ambuja blamed higher prices of raw materials such as coal, diesel, freight, flyash, gypsum and power for the drop in profitability. UltraTech said the quarter was affected by the 30 per cent increase in domestic coal prices in March 2011. Moreover, prices of imported coal, too, rose by 30 per cent, resulting in a substantial escalation in costs.Coal accounts for nearly one-third of a cement maker's costs. ACC's dependence on import and auction is 40-45 per cent, while Ambuja's is 55 per cent. With 65 per cent, UltraTech's exposure to coal import and auction is the highest. In terms of power supply, too, the cement companies (which depend on power supplied from the central grid) are facing increased input costs. Many are now setting up captive power plants to address this issue. Another increased expense has been for transportation because of non-availability of wagons and vessels.Ambuja Cements managing director Onne van der Weijde recently said the company would continue to take measures to improve productivity and operational efficiency to partly mitigate the pressures. The same holds true for other cement companies as well.According to Motilal Oswal Securities, capacity utilisation declined to about 74 per cent in the June-quarter compared to 80 per cent in the quarter ended March. The infrastructure companies expect the government to award more projects after the extended monsoon across the country. However, the realisation on sales, say analysts, will be delayed by about six months even if the projects are awarded now.Some blame the companies' capacity additions for the dire situation. Macquarie Equities Research sees at least a two-year wait for a bull cycle in cement to return to India, the world's second largest cement producer after China. UltraTech executives admit that the surplus scenario is likely to continue over the next 2-3 years, which will result in the selling prices remaining under pressure.Moreover, if the global economic slowdown impacts India, it will worsen the bad phase that the cement sector is going through. Companies are keeping their fingers crossed.(This story was published in Businessworld Issue Dated 22-08-2011)
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Sunlight has been around long before humans arrived on earth. However, it had not been harnessed for power till recently. As the world heads towards a shortage of fossil fuels, everyone is looking to tap solar energy. India is among the countries that has the highest solar radiation. For solar to be a mass energy source, costs have to come down substantially. That's what James Abraham, managing director and CEO, SunBorne Energy, is banking on. He spoke to Businessworld's Anup Jayaram on the potential of solar energy in India. Excerpts: The government has set a target of 20 GW (gigawatts) of solar power by 2020. Do you see that being achieved? Achieving or exceeding that is based on getting solar power costs down. If costs remain as they are in the next 10 years, we won't get anywhere near that number. Our forecast is that by 2016-17, the cost should get to Rs 7 per kilowatt hour. So I should be building plants. If we get to that number, then 20 gigawatts will be blown out of the water. KPMG's estimate is 66 gigawatts by 2022. So it is linked completely to the achievability of the cost target. If it is achievable, then we can get to 66 GW. Most people who bid in the first round of the Jawaharlal Nehru National Solar Mission have looked at technologies around the world, and how much we can make in India. The plants being built in India today are already 20-30 per cent lower in cost than the best plants globally. To achieve the next level, we need to innovate — not imported innovation, but local innovation. I am not talking of R&D, but practical applications engineering like how do you make structures that hold mirrors, how do you focus the energy, how do you make the materials and construction methods simple. That is the innovation we need.You have joined hands with Suntech Power for solar power. Could you give us some details on this project? We have an agreement to source 100 MW from Suntech over the next set of projects. It is based on continuously decrea-sing prices from their side. They will help meet some local content requirements. Suntech's panels are high on quality. If we can build demand, they will come and manufacture panels in India. We built our first 10 MW out of that in Gujarat. We will source the rest over the next two years. Our total target in the next 30 months is to do 200 MW. Suntech will be a part of it. Our focus is on Gujarat, Rajasthan and parts of Andhra Pradesh. Gujarat and Rajasthan have the best solar radiation. As solar power tariffs will be high, State Electricity Boards (SEBs) will not be in a position to buy power. How will it reach the consumer? The National Solar Mission scheme goes through the NVVN (NTPV Vidyut Vyapar Nigam) and is sold as bundled power to SEBs. If you look at SEBs payments to the central government, their records are unblemished. Coal import costs are rising and there are availability issues. So we'll get covered. Next year, solar power will get parity with diesel power and will start to get parity with distributed power. By 2017, we should be able to compete with gas-based power and by 2022, with coal-based power. By then, the price of coal-based power will also rise from the current Rs 2.5-3 per unit to about Rs 5 per unit. The focus of the government in renewable energy is largely on solar power. Your comment?I am not sure if they are looking more at solar than others. Solar is more expensive, so the government is providing more subsidy. They are doing this with the idea that one day it will cost less. If you aggregate all the renewable (power) available today, it is just a fraction of the potential of solar. Just 5 per cent of India's desert can power all of India. If you take 5 per cent of India's desert and cover it with currently available solar technology, then you can shut down every other power plant in the country. That is the sheer abundance of solar power. The government has approved over 800 MW of grid-connected solar projects this year. Do you see all that happening? They approved 500 MW of solar thermal and over 200 MW of photo voltaic (PV). All of these have apparently gone through financial closure. I think things are moving. That they have achieved financial closure is a big, big step. This is the year of execution. At the start of the year, India had 10-15 MW, at the close of the year you will have 200 MW.(This story was published in Businessworld Issue Dated 22-08-2011)
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Adani Gas, a unit of Adani Enterprises, will pick up 20 per cent equity in Green Gas Ltd, a joint venture between state-run gas utility GAIL India and Indian Oil Corp (IOC), the Business Standard reported on Friday.Green Gas supplies city gas and compressed natural gas in Agra and Lucknow cities in Uttar Pradesh, the report said.Gail and IOC hold 22.5 per cent each in the company, while Uttar Pradesh State Industrial Development Corp holds five per cent, it said.Aditya Vikram Birla Group and financial institutions IDFC and Unit Trust of India together hold 50 per cent stake in Green Gas, it said."We have signed a memorandum of understanding with Green Gas to pick up 20 per cent equity in the company. We will merge our assets with Green Gas," the report quoted Rajeev Sharma, chief executive officer, Adani Gas, as saying."...since both of us were in the same city, we decided to work together so that there is no hassle. Also, now, wherever we go we will go together."The report did not mention the deal value.(Reuters)
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The prized KG-D6 fields of Reliance Industries produced 31 per cent less than previously projected natural gas output in the April-June quarter, Oil Ministry said on Tuesday."The average gas production during April-June 2011 from KG-DWN-98/3 (KG-D6) block is 48.60 million standard cubic meters per day which is less than the approved Field Development Plan (FDP) rate of 70.39 mmscmd," Minister of State for Petroleum and Natural Gas R P N Singh said in a written reply in Rajya Sabha.The present output is made up of about 8 mmscmd from the MA oil field in the predominately gas-rich KG-D6 block off the Andhra coast. The rest comes from the Dhirubhai-1 and 3 (D1 and D3) gas fields, the largest of the 18 natural gas finds Reliance has made in the block."The contractor (Reliance) was adviced by (oil regulator) DGH to expeditiously drill more development wells in D1 and D3 field as per FDP in order to enhance gas production in KG-DWN-98/3 block," he added.Singh, however, did not mention if Reliance has complied with the direction of drilling more wells. He also did not say what action the government could take in case of default.Reliance has so far drilled only 20 out of the committed 22 wells on D1 and D3 as reservoir has not performed on expected lines. Pressure in the wells has dropped sharply and there is an increased water ingress, resulting in lower per-well gas output.Of the 20 wells drilled, only 18 wells are under production. Further in the FDP approved in 2006, Reliance had committed to drill 31 wells by end of current fiscal.Reliance currently holds 90 per cent interest in KG-D6 while the rest is with Niko Resources of Canada. It is selling 30 per cent in the block and 22 others to UK's BP Plc for over $7 billion.To a separate question, Singh said an Empowered Group of Ministers (EGoM) had in September 2007, after considering the price proposal submitted by Reliance-Niko, approved a price formula for gas produced from KG-D6 for five years from date of commencement of supply."The price obtained from the basis/formula (approved by EGoM) comes to $4.2 per million British thermal unit for crude oil price (if it is) equal or greater than $60 per barrel," he said.Reliance started natural gas production from KG-D6 fields from April 1, 2009.(PTI)
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Four contract workers were exposed to radiation at a nuclear power unit at Kakrapara in Gujarat, with the plant operator maintaining that the exposure was lower than that which can cause adverse health effects.The incident took place on May 30 and came to light when the contract workers approached district authorities with complaints that they were not given proper medical treatment.The workers were carrying out painting work in the spent fuel transfer duct (SFTD) when the control room released a pair of spent fuel bundles."Inadvertently a fuel discharge operation was initiated resulting in increased radiation field in the SFTD area which led to radiation exposure of four workers," a Nuclear Power Corporation of India Limited (NPCIL) statement said.The NPCIL, which operates 20 nuclear power plants across the country, said fuel discharge operations and the painting work were immediately suspended and the workers were removed from any further activity involving radiation.An NPCIL official said that the control room operators have been sent to training and an internal inquiry has been ordered into the incident.The affected workers are Jaysingh Chaudhary, Bachu Chaudhary, Dinesh Chaudhary and Dilesh Chaudhary who suffered radiation effects of 90.72 mSv, 66.12 mSv, 58.70 mSv and 23.23 mSv, respectively. The workers were immediately given treatment at a medical facility at the Kakrapara Atomic Power Station (KAPS)."The level of exposure of the four workers is significantly lower than that which can cause adverse health effects," the NPCIL said, adding the exposure was lower than 100 mSv permissible as per regulatory stipulation under emergency situation.Detectable health effects are observed beyond 500 mSv of radiation dose.A radiation dose of 3000 mSv and above can prove to be fatal.The contractual workers had approached Tapi district authorities demanding permanent job at the KAPS.(PTI)
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Brent shed 26 cents to $116.55 a barrel by 0643 GMT. U.S. crude slipped 43 cents to $94.46 after trading as low as $93.42 on Monday, its lowest since late June, on news that the world's manufacturing expanded at its weakest pace in two years last month.In Washington, the focus now turns to the Senate, where the $2.1 trillion deficit-cutting plan is expected to be approved in a vote on Tuesday, the deadline to lift the nation's debt limit."The market is going to be thinking about the fundamental side of the economy, as well as what is going on in Washington, so it should be volatile" in coming days, said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.The debt plan "is cutting back on the fiscal stimulus, but there is still enough ammunition for the Fed to keep growth going for the remainder of the year," he added.Earlier, U.S. crude rebounded from a one-month low after the House passed the budget deal, restoring some optimism to markets battered by the disappointing economic data.The U.S. Institute for Supply Management manufacturing report, a gauge of factory activity in the world's largest economy, fell to 50.9 in July, its lowest since July 2009.Brent crude edged higher on Monday as North Sea oilfield maintenance and violence in the Middle East offset the weaker global factory data.BP said the North Sea Forties Pipeline System would be closed for five days this week to allow workers to remove an unexploded mine from World War II discovered in water near the pipeline.France's Total shut its North Sea Elgin platform, which pumps 104,000 barrels per day of condensate, for summer maintenance, the company said, without disclosing the duration.Rising StockpilesU.S. crude oil inventories probably rose by 1.2 million barrels last week as increased supplies from the Strategic Petroleum Reserve offset losses due to Tropical Storm Don, a Reuters poll showed on Monday.Gasoline stockpiles were projected unchanged for the week, the poll showed, while distillate stocks were expected to have risen 1.5 million barrels.Industry data on inventories from the American Petroleum Institute (API) will be published on Tuesday, followed by government statistics from the Energy Information Administration on Wednesday.Tropical Storm Emily formed near the Caribbean's Lesser Antilles islands on Monday, far from oil and gas-production facilities in the U.S. Gulf of Mexico.In other markets, Asian shares fell on Tuesday on concerns about the health of the global economy, while a strengthening yen prompted speculation that Tokyo may intervene in the markets to curb the currency's value. (Reuters)
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C. Northcote Parkinson, British Naval Historian and author of myriad observations about public administration, once said that delay is the deadliest form of denial.It is an epigram that many observers are applying to Vedanta Resources' $9.6-billion takeover deal of Cairn India that has hit its latest roadblock eight months after the deal was announced. They believe the deal will fall through, perhaps even die.Petroleum and natural gas minister S. Jaipal Reddy passed on the onus of approving the deal to the Cabinet Committee on Economic Affairs, which in turn has referred it to a group of ministers (GoM) headed by finance minister Pranab Mukherjee. And since he is in West Bengal campaigning in the state elections, a decision on the matter is likely to be deferred till after the elections are over.Both Cairn Energy and Vedanta Resources have extended the deadline for closing the deal from 15 April to 20 May, and this after Bill Gammell, chairman of Cairn energy, said there would be no extensions. "Cairn and Vedanta continue to work with the government of India to secure the necessary consents and approvals," said a Cairn Energy statement.As readers will recall, a conclusion to the deal is stuck on the critical issue of royalty: as of now, ONGC, which is a 30 per cent partner with Cairn Energy in developing the oilfield in Rajasthan, has been paying royalties to the government; the royalty is high, at 20 per cent, but this deal was struck with the government's approval in 1998, much before the New Exploration and Licensing Policy was formulated.In a newspaper interview some months ago, former ONGC chairman R.S. Sharma said that Barmer in Rajasthan in one of 28 such blocks on which operating agreements were entered into by ONGC (on behalf of the government); at that time, the production sharing contract (PSC) — the model on which financial terms for oil exploration are structured today — was not in wide use.The regime then was that ONGC and Oil India, the other government company that exploration companies had to partner with, had fixed rates of return. And, as Sharma pointed out in his interview, the royalty terms were different in different exploration blocks.ONGC claims that the royalties it pays should be included as costs of development — the so-called recoverable costs that exploration companies use to recover their high-risk investment. In most PSCs, exploration companies calculate recoverable costs after royalty payments. In a way, ONGC was a representative of the government, which was using the oil company to pay itself the royalties.And to be fair to ONGC, it has been in discussion with the government since 1997 on ‘suitable compensation', meaning recovering costs that the government asks it to bear during the exploration phase, a part of which constitutes royalties. The petroleum ministry may have sought this arrangement, but the finance ministry — which authorises any such recoveries — has been asking why royalties cannot be made cost-recoverable. With the Cairn-Vedanta deal, all of these issues have come to a head.Analysts say that international investors are getting nervous. What seems to be a difference of opinion between two ministries of the same government is holding India's attractiveness as a investment destination hostage to bureaucratic rivalry. But the petroleum minister disagrees. "There are some complex issues. The cabinet committee felt such a decision should not be taken in a hurry," he said at a press meeting.Cynics are not convinced; they refer to another Parkinson, to describe what has happened to the government in this case: difficulties with movement and coordination that stem from a brain disorder, called Parkinson's disease.(This story was published in Businessworld Issue Dated 18-04-2011)
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India has made its first payment in more than five months for crude oil its buys from Iran when a $100 million wire-transfer by Mangalore Refinery and Petrochemicals Ltd (MRPL) was received by Tehran via Turkey.MRPL last week deposited an equivalent of $100 million in a rupee account in the New Delhi branch of Union Bank of India which then routed euros equivalent to state-owned Turkiye Halk Bankasi (Halkbank) in Istanbul.Halkbank has since transferred the money to the account of the National Iranian Oil Co (NIOC), sources said."The pipeline (for payments) has been opened... we have confirmation that money transferred has reached the intended beneficiary," a source said.MRPL's was a test payment and now more refiners will use the same route to pay Iran. Essar Oil, the nation's second biggest importer of Iranian oil after MRPL, is to transfer money today and will be followed by state-owned Indian Oil and Hindustan Petroleum, each sending USD 50 million.This is the first payment Indian refiners have made to Iran since February when it had paid 1.5 billion euros through German-based Iranian bank Europisch- Iranische Handelsbank AG (EIH Bank). But soon after that payment, US convinced Germany to block that conduit.India owe more than $7 billion to their second biggest oil supplier after Saudi Arabia.Iran had yesterday stated that the payment problem, which arose when RBI in December last year unilaterally scrapped a long-standing mechanism of trade through region's central bank, with India has been resolved. The Iranian Oil Ministry's website SHANA yesterday quoted NIOC Managing Director Ahmad Qalebani to say that "the problem of India payments for imported oil from Iran has been solved".It quoted NIOC's Director for International Affairs Mohsen Qamsari as saying that "the two sides had reached an agreement on the arrear payments... related bank accounts have been announced to Indian side and the amount deposited into our accounts would be revealed by reopening of the international banks on Monday".Iran's 4 lakh barrels per day of oil exports, which is 12 per cent of India's needs, were "going on as usual", he said.The Reserve Bank of India (RBI) had on December 23 last year scrapped the Asian Clearing Union (ACU), winning appreciation from the US, which is using sanctions to force Tehran to halt its nuclear programme.Sources said Iran, which has been supplying some 400,000 barrels of oil per day on credit since the RBI move, had previously provided no plans for shipping oil in August but refiners can expect crude as usual.Iran had on June 27 written about stopping supplies from August if the dues are not paid.Qamsari said, "A notice had been sent to Indian indebted oil refineries, but this did not mean stoppage of oil exports to the country"."NIOC has no plan to suspend oil exports to India," he said, pointing to good relations with India.Indian refiners had tapped Saudi Arabia, Kuwait and Iraq to cover for any supply disruption from Iran.MRPL is the largest buyer of Iranian crude, at 1,42,000 bpd, while Essar buys 1,10,000 bpd of oil from Tehran.(PTI)
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