Politics invariably takes precedence over economics. At least when it comes to addressing the problems of oil marketing companies — Bharat Petroleum Corp. (BPCL), Hindustan Petroleum Corp. (HPCL) and Indian Oil Corp. (IOC) — in India.The government's seeming inability (owing to impending elections in states such as West Bengal and Tamil Nadu) to raise fuel prices is hurting OMCs. The unrest in Libya has caused Brent crude to touch the $115 per barrel mark. Collectively, the three OMCs are losing Rs 350 crore daily. These OMCs have projected a revenue loss of Rs 77,500 crore in 2010-11, almost double the Rs 35,000 crore provided for in the revised budget estimates for 2010-11. There was no guidance in the budget on how the remaining losses will be dealt with either. Besides, the OMCs projected these losses prior to the trouble in West Asia and north Africa. "We are sure that this time, too, they (government) would come to our rescue," says S.K. Joshi, director, finance at BPCL. The markets have reacted accordingly. Stocks of OMCs such as BPCL, HPCL and IOC have fallen about 6-7 per cent in the past month. Moreover, the rollback of petrol de-control policy announced in 2010 is not ruled out either. "There is no plan to regulate petrol prices now, but if prices go up astronomically then the government may intervene," says Sudhir Bhargava, additional secretary, petroleum ministry. Analyst say stocks of OMCs will continue to slide until there is some clear signal from the government on the loss-sharing front.(This story was published in Businessworld Issue Dated 21-03-2011)
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There are satellites and satellites. Some towns have been planned to serve specific commercial needs of the mother city, such as HITEC City in Hyderabad; and there are those that have naturally evolved from villages or small transport hubs such as Faridabad or Pimpri-Chinchwad near Pune. Here, we sample five typical satellite cities on India's fast-expanding urbanscape.Delhi's Two Sparkling SatellitesWhile the North Okhla Industrial Development Authority (Noida) was a planned greenfield development, Gurgaon has been spurred on by private developers such as DLF and Unitech. Noida, though just 20 km south east of Delhi across the Yamuna, is part of Uttar Pradesh's Gautam Budh Nagar district. Spread over 20,316 hectares, it was created as an integrated township with planned sectors. About 36 per cent was set apart for residences, sector 18 for markets, and another 175 acres for an industrial zone. There is also the 200-acre Noida City Centre under development that will serve as the city's hub with hotels and corporate parks.Gurgaon, 30 km south of Delhi, has a more chaotic history and developed from a rustic Haryanvi small town to a swanky corporate and mall city. Unlike Noida, its development was driven by acquisition of farm lands by developers who initially set up corporate offices and attracted companies to glass-clad buildings close to both the international airport as well as to the seat of power. Says Anshuman Magazine of broking house CB Richard Ellis: "Gurgaon is the last in a long line of satellite extensions of Delhi - first there was Vasant Kunj and then Rohini, and Dwaraka in the 1980s and 1990s." Gurgaon is a typical example of urban infrastructure being retrofitted after malls and corporate parks came up. The 1990s and early 2000s saw an influx of multinationals to Gurgaon, but infrastructure linkages came much later. Other civic facilities like electricity, water and public transport are a nightmare even now.Boom And Bust At Whitefield Whitefield is a name synonymous in the real estate lexicon with crashing property prices. The small village in eastern Bangalore made a name as a retirement enclave for the Anglo-Indian community in the 1980s. Its growth impetus came from being selected as Bangalore's first planned technology hub. Tata Elxsi was the first to move into Whitefield, followed by IT and ITES giants such as TCS, Accenture and Wipro.Developed by Ascendas, the largest and best known IT campus in Whitefield is the International Tech Park (ITPB). It went onstream in 1998, and hosts nearly 250 firms and 350,000 professionals. Spread over 26 acres, it is the first hi-tech park to create the integrated 'work and play' environment through its six posh towers. Supporting Whitefield's large IT community is a clutch of upscale hotels such as the Vivanta by Taj, Hilton Whitefield and Mapple Resorts.Expectedly, Whitefield saw a residential boom with all of Bangalore's developers frenetically constructing homes for what they saw as a bottomless IT market. The result: heavy over-supply. With the IT industry at a standstill during the 2008-09 recession, Whitefield was among the worst hit. At one point, prices in the enclave fell 40-50 per cent from the highs of Rs 4,000-4,500 per sq. ft. Currently, residential housing has recovered to a Rs 3,500-4,000 per-sq. ft range, but still far below the boom-time highs.break-page-breakNavi Mumbai: A Dormitory Town New Bombay, or Navi Mumbai as it is known now, has been in gestation since 1964, but has prospered only in the past decade. Planned as a 'Twin City on Water' with several nodes linked along the railroad across the harbour, it covers about 345 sq. km. spread over Raigad and Thane districts. It probably has succeeded in absorbing 2 million or more people that may have gone on to crowd Mumbai, but most other targets have remained on paper. Rahul Mehrotra of non-profit Urban and Regional Development Institute (UDRI) notes the government never moved to Navi Mumbai as was originally planned. This deprived the new city of the core catalyst that would have propelled autonomous growth. Ultimately, Navi Mumbai remained dependent economically on the mother city, becoming a 'dormitory' suburb with trainloads of commuters shuttling in and out of Mumbai every day. "With prices touching Rs 10,000-12,000 a sq. ft, even Navi Mumbai has become out of reach for middle classes over the past 5-6 years," says UDRI's Pankaj Joshi. Sirish Patel, structural engineer and one of the original trio of planners that conceived Navi Mumbai, told BW he would give the satellite city 3 marks on a scale of 10. "The only area it has succeeded in is it is self-financing through land sale," says Patel. But Mehrotra grudgingly concedes: "New Bombay, yet, holds the hope for structured growth in the Mumbai Metropolitan Region." Rajarhat, Kolkata's Modern HubSalt Lake City in Kolkata was conceived in the 1960s as a 3,000-acre township for middle-class housing and an infotech hub. It was built by filling up tanks of old fisheries by dredging slurry from the Hooghly river. Then came the bigger and better Rajarhat Newtown in the north-west of the city. Today, Rajarhat is a planned layout of 7,625 acres, nearly two-and-a-half times that of Salt Lake City. It integrates high-quality residential complexes, an IT and electronics hub, and malls and retail outlets. For Kolkata, ever suffering from traffic snarls, Rajarhat has given an alternative route to the airport, giving it a geographical advantage.Rajarhat has been carved out with four action areas stretching from Salt Lake Sector V to the Netaji Subhash Chandra Bose Airport. Land was allotted to developers such as DLF, Bengal Shrachi, Ambuja Realty and Bengal Peerless. City Centre: Newtown, for instance, has a 400,000-sq. ft mall by Ambuja Realty that has a catchment area spread over Kolkata's outskirts of Ultadanga, Baguiati, Dum Dum, Barasat and Birati. Axis Mall, by Bengal Peerless, targets the prospective 200,000 IT professionals.The recession hit real estate activity hard and many of the 7-8 malls in the pipeline have been converted to commercial space. While many ser-vice and office complexes have got operational, the success of the township will depend on how fast residential projects can go live. Retail sales are dependent on a high density of high-income, residential population, and it remains to be seen if Rajarhat will become another Gurgaon.gurbir(dot)singh(at)abp(dot)in(This story was published in Businessworld Issue Dated 20-06-2011)
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Top oil exporter Saudi Arabia has offered more crude to Asian refiners in July, evidence that it is taking steps to unilaterally increase supplies after OPEC talks collapsed earlier this week.India's Mangalore Refinery and Petrochemicals Ltd. has bought about 600,000 barrels of extra oil for July from the kingdom, two sources with direct knowledge of the matter said.Two or three Asian buyers are keen on more oil, and will finalise any additional volumes in coming days, a separate refiner source said.Adding to indications that the Saudis are prepared to go it alone in meeting rising demand for oil, a Saudi newspaper on Friday said the world's top exporter would lift output in July to 10 million bpd, from 8.8 million bpd in May.The additional offers to refiners come after the Organization of the Petroleum Exporting Countries failed to take a decision on raising output on Wednesday, resulting in the talks breaking down in acrimony.Crude futures fell on Friday on the news of extra Saudi supply, paring earlier gains after Brent rose to a five-week high of $120 a barrel.Asia, led by China, is driving the global increase in oil consumption, so higher Saudi supply would benefit refiners in the region.Oil prices were near their 2-1/2 year highs in recent weeks in part due to concerns of supply disruption from the Middle East and North Africa amid rising demand from emerging nations such as China and India.The Paris-based International Energy Agency (IEA) expects Asia to burn 900,000 barrels per day (bpd) more oil in 2011 than 2010, over 70 percent of the 1.29 million bpd global demand growth forecast for the year.NOT ALL NEEDEDStill, many regional refiners already have what they need for July, industry sources with direct knowledge of negotiations said on Friday, so have declined Saudi Arabia's offer of additional supplies."They are asking if anybody has an interest in additional volumes," a source at a north Asian refiner said. "They have not asked us for a while."At least two Asian term buyers said Saudi Arabia will supply them with full contracted volumes of crude oil in July, steady from June.There were no adjustments in allocated volumes of heavy and light crude grades, the sources said, adding that the move was "in line with expectations."Saudi Arabia made no changes to the operational tolerance in the supply allocations, the sources added, meaning buyers have the option of asking for cargoes to be loaded with up to 10 percent more or less crude than contracted.OPEC estimates show an implied market requirement of about 2 million barrels per day more of oil for the third quarter and 1.5 million bpd for the fourth quarter of this year, and Saudi Arabia would be keen to keep its share in fast growing markets.OPEC and non-OPEC oil producers are competing hard for the market in China. Riyadh, unwilling to give up ground, supplied Beijing with more oil even as the kingdom instigated OPEC's record supply cuts as recession engulfed many of the world's major economies in 2008-2009.China is expected to bring online around 500,000 bpd of new refining capacity this year.(Reuters)
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The cabinet may consider approval for the sale of a stake of British oil explorer Cairn Energy's India unit to Vedanta Resources next week, Oil Minister S. Jaipal Reddy said on Friday.Cairn agreed in August to sell up to 51 per cent of Cairn India for up to $9.6 billion to Vedanta Resources, in a deal which originally had a cut-off date of May 20.The deal has been delayed due to a dispute over royalty payments with Cairn India's partner in the Rajasthan project, state-run Oil and Natural Gas Corp.Reddy also said the government was considering a proposed deal between India's largest listed firm Reliance Industries which wants to sell a stake in 23 of its oil and gas blocks, including some in the KG basin, to BP in a $7.2 billion transaction.The minister also said no dates had yet been fixed for a meeting of a ministerial panel to consider increasing fuel prices. He said he was concerned at the under-recoveries of state-run oil marketing firms due to higher global crude prices.(Reuters)
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Saudi Arabia faced resistance on Wednesday from OPEC producers opposed to an increase in oil supplies that may help ease crude prices.Under pressure from consumer countries to contain fuel inflation, Riyadh hopes to convince the Organization of Petroleum Exporting Countries to lift its production target by 1.5 million barrels a day at the meeting today, Gulf delegates said.Riyadh has support from its Gulf Arab allies Kuwait and the United Arab Emirates to meet rising demand in the second half of the year.But five countries -- long-time price hawks Iran and Venezuela plus Ecuador, Iraq and Angola -- have said they see no need to increase output.All want to keep oil prices above $100 a barrel. Brent crude traded at $116 a barrel on Wednesday.Iran and Venezuela are expected to provide the toughest opposition to an increase but Iran's acting oil minister Mohammad Aliabadi struck a conciliatory note at the start of the meeting."Iran is a member of OPEC and will go with the decision of the majority," Aliabadi told reporters."We do not agree with production being increased now, we must continue to consolidate balance in the market and we have to defend fair prices," Venezuelan President Hugo Chavez said on Tuesday in Ecuador.As OPEC's biggest producer and the only one with any significant spare capacity, Saudi usually gets its way.But it could be a close call.Apparently backing the Gulf producers are Nigeria and Algeria who sit on a committee that has recommended a one-million-bpd increment.That makes five for an increase and five against. Qatar, which has not spoken, would normally be expected to back its Gulf Arab allies. Libya's representative Omran Abukraa has yet to be spotted.At a minimum, Gulf producers want to close the 1.4 million bpd gap between OPEC's two-and-a-half year old official production limit of 24.8 million bpd and actual output, estimated by OPEC in April at 26.2 million.Beyond that, it will be up to Saudi Arabia to deliver more oil.Regardless of the policy decision, Riyadh will pump more.A Gulf official said Saudi was already raising output by at least 500,000 bpd in June to 9.5-9.7 million bpd.Saudi output was last as high in the middle of 2008 after oil prices set a record $147 a barrel, shortly before recession sent prices crashing.The numbers suggest more oil is required to stop oil prices rising again.OPEC's Vienna secretariat is forecasting that demand in the second half of the year will be 1.7 million bpd higher than current cartel output.(Reuters)
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After two years, a fair wind seems to be blowing behind the sails of Suzlon Energy. India's largest and one of the top four wind turbine makers in the world has posted a profit (Rs 431.5 crore) for the first time since December 2009 in the fourth quarter of 2010-11 (against a loss of Rs 188 crore in Q4 last year)."Key initiatives focused on lowering operating costs, rationalising inventories and improving operating efficiency delivered the results," says Robin Banerjee, chief financial officer of Suzlon Energy on the seeming turnaround. In addition to lowering the cost base, Suzlon brought down its net debt-to-equity ratio to 1.36, maintained a tight focus on cash flow and drove orders.Suzlon's troubles stemmed from a combination of factors — the global economic slowdown that dried up orders for wind energy, equipment (rotor blades) malfunction that forced an expensive blade retrofitting programme for all its turbines, foreign exchange losses and a mounting debt burden of over Rs 12,600 crore that it incurred for the acquisition of its subsidiaries, German REpower and Belgian gear-box maker Hansen Transmission.Chairman and managing director Tulsi R. Tanti and family cut their stake in the company from 65.83 per cent in March 2009 to 54.84 per cent in March 2011 to infuse funds. Suzlon also sold its 35 per cent share in Hansen for more than Rs 1,700 crore to service loans and undertook a debt-restructuring programme.Old turbine models were phased out and more efficient new models brought in; Suzlon recently launched new generation S9X machines in the market and production of another model S95 turbine will begin soon, followed by launch of S97 series in the fourth quarter of FY12. REpower is also launching new larger offshore wind turbine variants.Will Suzlon maintain its recent profitability? The firm pins its hopes on the growing demand for cleaner energy and large capacity additions. "The case for wind is stronger than ever, and I remain very optimistic about the future of our company and the industry," says Tanti. Those hopes are based on an order book of 4,639 MW (to date) worth Rs 30,100 crore, a jump of almost 60 per cent over the previous year (FY12 revenues are expected to be Rs 24,000-Rs 26,000 crore; FY 11 revenues were Rs 18,000 crore).Nevertheless, Suzlon's financial troubles are far from over. A foreign currency convertible bond (FCCB) of Rs 2,570 crore is due in 2012-13, and Rs 100 crore in January 2012.The competition is causing sleepless nights as well. Gamesa and Siemens are setting up manufacturing bases in India, where Suzlon has over 50 per cent of the market share for the past 12 years. Tanti can breathe easy for now, but not for too long: the winds could just as easily begin blowing the other way.(This story was published in Businessworld Issue Dated 13-06-2011)
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Maharashtra chief minister Prithviraj Chavan is determined to reengineer Mumbai. Following the Adarsh scam, Chavan has the mandate from Congress president Sonia Gandhi to clean up the real estate sector, and he seems to be taking his job seriously.Over the past few months, a series of decisions considered ‘soft' on developers have been rolled back. The controversial public parking policy that allowed builders to build multi-storey public parking lots in exchange for 50 per cent additional floor space index (FSI) has been scrapped recently. The policy, introduced in 2008 by the previous chief minister, Ashok Chavan, had cleared 28 projects. The beneficiaries of this policy included all the big developers including Indiabulls, DB Realty, and the Lodhas, but fortunately only five of them took off before the axe fell. A new parking policy has been introduced last month, but it restricts vertical development and ensures the government gets a 40 per cent share of the additional revenue generated.Further, two huge slum redevelopment projects — in exchange for equivalent FSI for saleable realty — have been unilaterally cancelled. The Malvani project had a layout of over 100 acres, while another in Chembur covered over 60 acres. Both these projects were cleared under the Section 3-K(1) of the Maharashtra Slum Areas Act, 1971, which allows the state government to award a slum redevelopment project to a builder on the grounds of "public purpose" without seeking the normal statutory consent of 70 per cent of the slum families. TOUGH ACT: After the Adarsh controversy, Maharashtra chief minister Prithviraj Chavan is tightening real estate laws (Bloomberg) Not surprisingly, the recent Medha Patkar agitation demanded the repeal of this controversial section and the government has agreed to review it. In another move, Chavan has also put on hold the policy of allowing builders to go vertical, squeezing slum dwellers into multi-storey buildings, while helping themselves to large swathes of slum lands. Chavan is in favour of a height cap of 10 floors.To give teeth to his policies, the chief minister has inducted a set of senior bureaucrats with clean records. One of them, Subodh Kumar, the new municipal commissioner, has taken a dim view of builders ‘loading' their building projects with free-of-FSI embellishments such as canopies and balconies, which are then sold as part of the apartment as ‘super-built-up area' to unsuspecting customers. Referring to the trend of regularising violations by builders through the use of discretionary powers endowed on the municipal commissioner, Kumar told BW: "We are rewriting the rules wherein I will be the first to abolish my own discretionary powers. The new norms will be clear and nobody will have the scope to bend them."But beyond the clean-up campaign, Chavan is a worried man. He is grappling with the problems of a financial capital that is slowly dying because high real estate prices have over the years made it an unviable destination.Chavan recently admitted as much: "The population of the island city has actually fallen. There are jobs that can fetch you Rs 5 lakh a month in Mumbai, but these executives can't find a home easily. Many of them find it easier to locate careers in Bangalore or Hyderabad."Ironically, the Mumbai clean-up has made real estate even scarcer as building permissions have dried up. Chavan is keen to get a mass housing policy going, which will include developing affordable rental housing. But till this pans out on the ground, the dilemmas of an unaffordable city will continue to hound him.(This story was published in Businessworld Issue Dated 13-06-2011)
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In almost every case, where real estate builders run foul of the law and flout regulations, it is the buyers who pay the price. But in the Greater Noida Shahberi case, the Supreme Court has ruled in favour of investors and has asked builders to refund the money to the buyers since the land remains disputed. The judgement should be used by the government to enact a proper law that will bring some order to the unruly world of construction. Two aspects highlighted by this case require immediate attention. First, even before construction on the project starts, the developer usually uses up the funds either in completing pending projects or for buying land for future projects. This makes refund of the investors money very difficult. The guideline of keeping money raised for a project in an escrow account for use only in that particular project should be made mandatory.Second, builders must not be allowed to sell projects unless they have at least 80-85 per cent of the requisite clearances in hand. If this is made a blanket requirement, cases like Shahberi region could be prevented.Anjuli BhargavaTELECOM: Gains Of NetworkingTelecom operators in India have begun to appreciate the Swedish proverb, "Shared joy is a double joy; shared sorrow is half a sorrow." Bharti Airtel, Vodafone and Idea Cellular will share their 3G networks. Roaming agreements — both inter and intra circle — will be the norm. It will help all operators provide seamless service. Network sharing is inevitable since no private operator opted for an all-India 3G spectrum licence.Private operators paid Rs 67,719 crore in last year's spectrum auction, but only some have rolled out 3G networks so far. Also, the spectrum is being used only for voice services, instead of data services. Voice is still the priority for telecom operators.In network sharing, revenue is shared by the host and the operator in a 60:40 ratio. But this will change when the data traffic increases, says a telecom industry analyst. The current sorrow will then be transformed to shared joy.M. RajendranBirds To WatchThe Angry Birds are getting hungry. Rovio, the maker of the popular mobile/ computer game with over 250 million downloads, is now seeking to tap its huge audience for ad revenues. Its options: profile players to tempt advertisers; linkup with Facebook; and build its own social network.(This story was published in Businessworld Issue Dated 25-07-2011)
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