Mukesh Ambani-led Reliance Industries Ltd posted a sharper than expected 7.7 per cent fall in quarterly profit as a steep decline in global crude oil prices hurt profitability at the energy conglomerate's core refining business.A nearly 60 per cent drop in crude oil prices since June has led to inventory losses and tepid interest from buyers, Reliance said in a statement on Friday, hitting the company's flagship refining operations.Reliance, which operates the world's largest refinery complex in Gujarat, has been investing heavily in consumer-facing areas like retail and telecoms to expand beyond refining and petrochemicals.The company's gross refining margin, or profit from each barrel of crude oil refined, fell to $7.3 per barrel in the quarter ended on Dec. 31, down from $7.6 per barrel a year ago, Reliance said.Net profit was Rs 5085 crore ($822 million) in the December quarter on a standalone basis, down from Rs 5511 crore in the year-ago period, the Mumbai-based conglomerate said.Analysts, on an average, expected the company to report net profit of Rs 5270 crore, according to Thomson Reuters data.Sales for the quarter fell in the company's petrochemicals, refining, and oil and gas businesses, pushing consolidated revenue down by more than a fifth to Rs 96,330 crore.But the company said future earnings would get a boost from major expansion projects planned across its businesses coming on stream."We continued to advance our refining and petrochemicals business capital investments, which will come to fruition over the next 4-6 quarters," chairman Mukesh Ambani, India's richest man, said in a statement. SC Grants 6 Weeks To RILThe Supreme Court, meanwhile, granted six weeks time Reliance Industries Ltd (RIL) to respond to the final CAG report which found alleged irregularities including in payments made to the contractors on drilling of D6 wells at the Krishna-Godavari basin.The apex court posted the next hearing for March 20 during which it would examine the RIL's response to the CAG report that had sought disallowance of $357.16 million (about Rs 2,179 crore) expenditure RIL incurred on drilling of wells and payments to contractors in KG-D6.The order was passed during a brief hearing of petitions filed in 2013 by senior CPI leader Gurudas Dasgupta and NGO Common Cause, challenging the then UPA government decision to double the price of natural gas from $4.2 to $8.4 per mmbtu and seeking cancellation of RIL's contract for exploration of oil and gas from the KG basin.The third PIL on the issue has been filed by advocate M L Sharma.In its second audit of RIL's eastern offshore KG-D6 block, the CAG on November 28, 2014 recommended disallowing the company from recovering $279.8 million in cost of three wells as well as a part of expenditure the firm had incurred in area which was improperly declared discovery area.The CAG, in its report tabled in the Parliament, found irregular payment of $427.48 million to contractors, of which it sought disallowance of at least $77.36 million cost.(Agencies)
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Supreme Court on Friday (16 January) granted six weeks time to Mukesh Ambani's Reliance Industries Ltd (RIL) to respond to the final CAG report which found alleged irregularities including in payments made to the contractors on drilling of D6 wells at the Krishna-Godavari basin. The apex court posted the next hearing for March 20 during which it would examine the RIL's response to the CAG report that had sought disallowance of $357.16 million (about Rs 2,179 crore) expenditure RIL incurred on drilling of wells and payments to contractors in KG-D6. Solicitor General Ranjit Kumar said the Centre can make comments on the Comptroller and Auditor General (CAG) recommendations and findings only after getting the report of the Parliament's Public Account Committee which is examining it. The order was passed during a brief hearing of petitions filed in 2013 by senior CPI leader Gurudas Dasgupta and NGO Common Cause, challenging the then UPA government decision to double the price of natural gas from 4.2 US dollar to 8.4 dollar per mmbtu and seeking cancellation of RIL's contract for exploration of oil and gas from the KG basin. The third PIL on the issue has been filed by advocate M L Sharma. A bench headed by Justice T S Thakur also allowed Dasgupta and other petitioners to file their response to the NDA government's fresh guidelines which would "supersede" the earlier UPA dispensation's policy on price fixation for natural gas, including that from KG basin, which has been the bone of contention between the Centre and RIL. The Solictor General on November 14, 2014 had said before the bench, which also comprised justices J Chelameswar and Kurian Joseph, that the 'new domestic natural gas policy' was approved by the government on October 18 raising natural gas price to $5.61 per mmbtu from November 1 and had said that "recommendation of the Rangarajan Committee would not be given effect". The Rangarajan formula on gas pricing was approved by the previous UPA government. Rangarajan was Chairman, Economic Advisory Council to the then Prime Minister. In its second audit of RIL's eastern offshore KG-D6 block, the CAG on November 28, 2014 recommended disallowing the company from recovering USD 279.8 million in cost of three wells as well as a part of expenditure the firm had incurred in area which was improperly declared discovery area. The CAG, in its report tabled in the Parliament, found irregular payment of $427.48 million to contractors, of which it sought disallowance of at least $77.36 million cost. Earlier RIL's senior advocate Harish Salve had said "he is not happy with the new guidelines (on gas pricing)". While the Centre has maintained that the issue raised by Dasgupta has been addressed with the new guidelines, advocate Prashant Bhushan, appearing for the NGO, had said several other issues needed to be argued. He had said that the draft CAG report itself suggested that RIL "hugely over-estimated" the reserves of the KG gas block and other irregularities are cited. Among the other issues, the NGO has alleged that fraud was committed by RIL requiring government to take back the field and there was a need for court-monitored probe on the issue. Dasgupta and the NGO had said government should be asked not to make "any further increase" in the price of gas produced by RIL from KG basin. RIL has refuted the allegation of extraneous consideration for the increase in the gas price from 4.2 dollar to 8.4 dollar per mmbtu for the gas taken from the existing fields like KG D-6 basin. RIL had submitted that the gas output from KG basin has fallen to 8 mscmd against expected 80 mscmd due to "technical reason". M Veerappa Moily, the then Union Minister of Petroleum and Natural Gas, was also named as one of the respondents in the petitions. The PILs have also sought imposition of penalty on private parties for failure in adhering to commitments. The petitioners have sought a direction for a thorough audit by CAG of the working of the production-sharing contract (PSC) governing KG block, gold plating by RIL, underproduction by RIL and all related issues. The former CPI MP had alleged collusion between the government and the company, saying RIL "is holding country's energy security to ransom". He also said that natural resources belong to the citizens and the government. The Common Cause has supported Dasgupta's arguments and referred to controversial intercepted telephonic conversations between former corporate lobbyist Niira Radia with others to support the allegation of collusion. The NGO has urged that Centre should wait for the outcome of the two petitions pending before the apex court. (PTI)
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Petrol price was cut by Rs 2.42 per litre and diesel by Rs 2.25 a litre on Friday (16 January) after an excise duty hike limited the benefit of global crude prices slumping to six-year low.The reduction would have been almost double but for the government also raising excise duty by Rs 2 per litre on both petrol and diesel today.This is the ninth straight reduction in petrol prices since August, and fifth in diesel since October.New rates will be effective midnight tonight, Indian Oil Corp, the nation's largest fuel retailer, announced here.In Delhi, petrol will cost Rs 58.91 a litre, the lowest in 44 months, as compared to Rs 61.33 a litre now. Similarly, diesel will cost Rs 48.26 a litre in Delhi, the lowest since April 2013, as against Rs 50.51 currently.This is the fourth hike in excise duty since November and cumulatively customers have been denied the benefit of Rs 7.75 per litre reduction in petrol and Rs 6.50 a litre cut in diesel rates that was warranted due to the slump in oil price to $46 per barrel.A Finance Ministry notification said the excise duty on unbranded petrol is being hiked to Rs 8.95 per litre and that on unbranded diesel to Rs 7.96 per litre.The four excise duty hikes will result in about Rs 20,000 crore in additional revenue this fiscal and will help the government meet its fiscal deficit target of 4.1 per cent of the GDP.Petrol and diesel prices were last cut on December 16 by Rs 2 per litre each.Including today's reduction, petrol price have been cut by Rs 14.69 per litre on a cumulative basis since August, while diesel rates in five downward revisions have been slashed by a total of Rs 10.71 a litre.Crude oil price in June was at $115 per barrel. The Finance Ministry notification said the excise duty hike will be effective from midnight tonight.The government had last raised the excise duty on petrol and diesel by Rs 2 per litre each from January 2. Prior to that, the tax was hiked by Rs 1.50 a litre each from November 12 and Rs 2.25 per litre on petrol and Re 1 on diesel from December 2.Global crude oil prices have fallen almost 50 per cent since June 2014, the most since the 2008 financial crisis, as supplies swelled.Earlier in the day, Petroleum Minister Dharmendra Pradhan responded to criticism of oil firms not cutting despite near 4 per cent fall in global rates since January 1 saying the pricing was "not in our hands" as the both petrol and diesel have been deregulated."What oil companies feel appropriate they will do," he said.Along side Pradhan, B Ashok, Chairman of Indian Oil Corp, the nation's largest fuel retailer, justified the decision not to revise rates saying oil firms were saddled with huge inventory which need to be compensated.The crude oil that is being processed currently in refineries is one that was bought about 6-8 weeks back when rates were higher than present prices. By the time, it is processed and marketed its market value would have come down, resulting in inventory losses, totalling about Rs 12,000 crore."There is huge drop in crude prices which is having a tremendous impact on our inventories, its a cash loss. We are paying much higher price for the crude and today we are processing the crude at a much lower price and passing it. We are taking our decision based on that and we think we have been doing the right thing," Ashok said.(Agencies)
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The Reserve Bank of India is considering allowing banks to buy infrastructure bonds, in a bid to jumpstart a market that has suffered from low trading volumes after launching last year, said a source with knowledge of the central bank's thinking. Allowing banks to buy infrastructure bonds would mark a reversal for the central bank, which last year allowed lenders to only issue the debt, while limiting purchases to investors such as pension funds, provident funds, and insurers. That limitation has backfired, according to bankers, severely crimping trading volumes in the market since lenders are the biggest buyers and traders in debt markets. Reviving investment in infrastructure is a key priority for Prime Minister Narendra Modi which has been looking to ease regulations and bottlenecks to spur the sluggish economy. "We are quite flexible on the suggestions of allowing banks to initially develop this market by buying a certain percentage of the (infrastructure) bonds," said a top policymaker. However, the policymaker cautioned the RBI could impose limits, including on how much of the debt lenders can purchase, or allowing them to hold the bonds for only a short period of time and then requiring them to sell it to long-term investors. That could soothe the RBI's concerns that risks are being excessively concentrated in debt markets, given banks are often the biggest issuers but also the biggest buyers -- meaning lenders end up purchasing each other's bonds. Infrastructure bonds were launched by the RBI last year in a bid to help the government fulfill its plan to provide affordable housing to all by 2022, a goal that needs about $2 trillion of investment. Banks issue the debt and use the proceeds to fund infrastructure projects. "Allowing banks to invest in infrastructure bonds would help improve primary and secondary market liquidity," said Shashikant Rathi, senior vice-president and head of investments, capital markets and asset liability management at Axis Bank. Since their launch in August, only around 150 billion Indian rupees ($2.42 billion) of infrastructure bonds have been issued, well below the 500 billion rupees worth of debt that traders had estimated could have been raised within the first year. Under Governor Raghuram Rajan, the RBI has been keen to develop debt markets to increase investor interest. The central bank successfully launched bond futures last year, after two previous attempts at launching bond futures in 2003 and 2009 failed because of what traders said were poor designs. (Reuters)
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India imported 42 percent more Iranian oil last year over 2013 levels as its refiners increased purchases to take advantage of an easing in sanctions targeting Tehran's nuclear programme. The jump came with an end-of-the-year boost as imports in December surged 84 percent from a year ago to 348,400 barrels per day (bpd), the highest since March. Iranian and U.S. officials are meeting in Geneva this week ahead of talks between Tehran and world powers on Sunday focused on reaching a final deal to end the sanctions against Iran in return for curbs to its nuclear programme. Diplomatic efforts to reach a final agreement last year failed for a second time in November, and a self-imposed deadline was extended to June 30 this year. Tehran says its uranium enrichment programme is for peaceful purposes only and not aimed at building a weapon. India - Iran's top oil customer after China - imported 276,800 bpd of oil and condensate last year, compared with 195,600 bpd in 2013, according to tanker arrival data obtained from trade sources and Thomson Reuters Oil Research & Forecasts. Indian refiners bought about 39 percent more Iranian oil in December compared with November, the data also showed. Annual imports of Iranian oil rose sharply last year as refiners ramped up purchases in the first quarter to make up for a big decline in shipments in 2013 as insurers had not extended coverage for processing oil from the sanctions-hit nation. Private-refiner Essar Oil was the biggest Indian client of Iran in 2014, followed by Mangalore Refinery and Petrochemicals Ltd and Indian Oil Corp. Iran remained the seventh-biggest oil supplier to India in 2014, while its share in overall purchases rose to 7.3 percent last year, compared with 5.1 percent in 2013, the data showed. The current sanctions allow Iran access to some of its frozen oil revenue overseas and restrict its oil sales at about 1 million to 1.1 million bpd. Overall, India imported 3.84 million bpd of oil in December, up 9.4 percent from a year earlier. Imports for the full year fell 1.4 percent to 3.81 million bpd. In the January-December period India imported about 3.9 percent more oil from Latin America, with the region accounting for about 20.1 percent of overall imports, up from about 19.1 percent a year ago. The Middle East region supplied about 59 percent of India's oil imports in January to December, compared with 62.3 percent a year ago. Africa's share jumped to 16.7 percent from 15.4 percent. In the fiscal year to March 31, 2014, India cut its imports from Iran by 15 percent to 220,000 bpd to get a waiver from U.S. sanctions on the Islamic republic. India's annual oil contracts with Iran follow the country's April-March fiscal cycle. In the first nine months of the year to end March 31, 2015, Indian refiners have shipped in about 250,200 bpd of Iranian oil, up 41 percent from the same period a year ago. (Reuters)
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An Australian environmental group launched a legal challenge against Adani Enterprises' $7 billion Carmichael coal mine project in the Galilee Basin, renewing the focus on a key issue in a rancorous election campaign in Queensland state.Conservative state Premier Campbell Newman has put development of the Galilee Basin at the heart of his bid for re-election, in a campaign that is being seen as a guide to the fortunes of Prime Minister Tony Abbott's federal government.The court fight is the latest in a string of challenges to a project that the national and state governments are keen to see go ahead, but which is opposed by green groups and tourist operators concerned about climate change and potential harm from shipping through the Great Barrier Reef.Infrastructure conglomerate Adani, whose founder has close ties to Indian Prime Minister Narendra Modi, last year signed a memorandum of understanding for a loan of up to $1 billion from the State Bank of India for the mine, rail and port project, which it aims to build by end-2017.The Mackay Conservation Group (MCG) is calling for the mine's approval to be rendered invalid on the grounds that Environment Minister Greg Hunt failed to take into account the impact of carbon emissions from burning coal produced by the mine. All of the coal produced is expected to be exported to India and South Korea."By approving Adani's Carmichael proposal, the Australian Government is in major breach of its own environmental regulations," Ellen Roberts, coordinator at MCG, said in a statement on Thursday.Newman called the snap poll this month amid fears his party's grip at the local level is being eroded by Abbott's toxic poll numbers after a first year in office hobbled by missteps and a souring economy.He has promised to take a minority stake in the railway line necessary to bring the coal to port, as well as to develop an onshore disposal site for dredge spoil in a bid to add thousands of jobs to his state.The leader of the state's opposition Labor Party has said that her party would not subsidise the project's rail line, and challenged claims about the amount of revenue the mine would generate for the state.Analysts and project finance experts believe Adani may have underestimated the challenge of raising funds for the project.Much bigger coal rivals, such as BHP Billiton and Glencore, have shelved coal developments at a time when a third of Australia's coal output is making losses.An Adani spokesman said the firm could work with both sides of politics, citing comments by Australian head Jeyakumar Janakaraj to the Australian Financial Review.(Reuters)
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The government is likely to sell 10 per cent of its stake in Indian Oil Corp, the nation's biggest company, this fiscal to raise about Rs 8,150 crore.The Department of Disinvestment (DoD) has circulated a draft note for the consideration of the Cabinet Committee on Economic Affairs (CCEA) for sale of 10 per cent out of government's 68.57 per cent stake in IOC, sources privy to the development said.It sought comments on the proposal from Petroleum Ministry as well as Departments of Expenditure, Public Enterprises and Economic Affairs. Comments of the Law Ministry and Ministry of Corporate Affairs too were sought.Sources said the plan to sell 24.27 crore equity shares in IOC was mooted after big-ticket disinvestment in Oil and Natural Gas Corp (ONGC) got stuck in subsidy woes.Finance Minister Arun Jaitley had discussed possible disinvestment candidates in oil sector, other than ONGC, with Petroleum Minister Dharmendra Pradhan on January 8.Government was to sell 5 per cent of its stake in the country's biggest oil and gas producer ONGC to raise Rs 17,000-18,000 crore.However, the double impact of tumbling global oil prices and the rising subsidy burden has left the ONGC stock battered. It has slipped from Rs 472 in June last year to Rs 343.85 (at close of market today). At current price, the government will get no more than Rs 15,000 crore.In 2014-15, the government has sold 5 per cent stake in steel major SAIL to garner Rs 1,700 crore. It is racing against time to meet its disinvestment target of Rs 43,425 crore for this fiscal. Blue-chip companies like ONGC, NHPC and Coal India had been lined up for disinvestment.Sources said disinvestment in ONGC too can happen provided the government is able to rework the subsidy sharing formula.The Oil Ministry wants the payout by ONGC and other upstream producers like OIL for subsidising LPG and kerosene to be reduced to the extent of the statutory oil cess they pay to the government.According to a new subsidy sharing formula, the payout is to be reduced to the extent of Rs 4,500 per tonne oil development cess they pay to the government. The cess in current fiscal will total Rs 10,500 crore.ONGC and OIL have already paid Rs 31,926 crore in fuel subsidy in the first half and if the ministry's proposal is accepted, their payout in remainder of the current fiscal will be no more than Rs 8,000 crore.Upstream producers like ONGC met nearly half of the revenue loss, or under-recoveries that fuel retailers incurred on selling cooking fuel and diesel until recently at government controlled rates.This dole, which was in the form of deep discounts on oil ONGC sold to refineries, had strained its balance sheet as its net realisation fell below the economic cost of oil.(Agencies)
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Oil prices slid in early Asian trade on Wednesday after touching their lowest in nearly six years the previous session, with analysts predicting further falls as oversupply plagues the market. Oil tumbled 5 percent to near six-year lows on Tuesday, with the Brent crude international benchmark briefly trading at par to U.S. prices for the first time in three months as some traders moved to take advantage of ample U.S. storage space. February Brent crude had dropped 40 cents since its last settlement to $46.19 a barrel by 0238 GMT. U.S. crude for February was trading at $45.60 a barrel, down 29 cents. Analysts said prices would stay under pressure as oversupply hurts both the American WTI contract and globally traded Brent, with some traders beginning to book ships for oil storage. "Our latest forecast calls for Brent oil to average $45 per barrel during 1Q15 (the first quarter of 2015)," Nomura bank said on Wednesday. Oil storage trends also imply further price falls, with U.S. stocks possibly approaching 80 percent of capacity by the upcoming spring season, according to U.S.-based PIRA Energy Group. "The last time the United States built inventories in December was in the middle of the financial crisis in 2008," the firm said. Outside the United States, some of the world's biggest oil traders have booked supertankers to store at least 25 million barrels at sea in recent days, seeking to take advantage of the crash in crude prices and make a profit down the line. "Once floating storage starts, there is very little support on the downside for Brent spreads," Energy Aspects said. U.S. crude prices have been cheaper than Brent almost without interruption as soaring North American shale oil production pulled down prices while the rest of the world market remained more tightly supplied. But with oil producer club OPEC deciding late last year to maintain its output despite slowing Asian and European economic growth and to defend its market share, including against surging U.S. competition, a glut has also appeared outside the United States, pulling down Brent prices close to U.S. levels. "The closing gap looks to be solidifying Saudi Arabia's strategy to curb shale production and protect market share," ANZ bank said. (Reuters)
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