Price of non-subsidised cooking gas (LPG) was on Monday (1 December) cut by a steep Rs 113 per cylinder and that of jet fuel (ATF) by 4.1 per cent as international oil rates slumped to multi-year lows.A 14.2-kg cylinder of non-subsidised LPG will now cost Rs 752, down from Rs 865 previously, in Delhi, oil companies announced today.This is the fifth straight reduction in rates of non-subsidised or market priced LPG, which the customers buy after exhausting their quota of 12 cylinders at subsidised rates, since August.In five monthly reduction, non-domestic LPG rates have been slashed by Rs 170.5 per cylinder, bringing the price at three-year lows.On similar lines, the price of aviation turbine fuel (ATF), or jet fuel, at Delhi was cut by Rs 2,594.93 per kilolitre, or 4.1 per cent, to Rs 59,943 per kl. This is the fifth straight monthly reduction in rates.This reduction follows a steep 7.3 pr cent or Rs 4,987.7 per kl, cut in prices on November 1.Since August, ATF prices have been cut by 14.5 per cent or Rs 10,218.76 per kl and rates have dipped below Rs 60,000 per kl level for the first time in three years.Brent, the benchmark grade for more than half of the world's oil, have dropped to USD 68.34 a barrel, the lowest level since October 2009. Prices declined 18 per cent last month and are 38 per cent lower in 2014.In Mumbai, jet fuel will cost Rs 61,695 per kl from today as against Rs 64,414.98 per kl previously. The rates vary because of differences in local sales tax or VAT.(PTI)
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Eight non-metro airports modernised using public money have no scheduled flights operating there, leading them to incur a total loss of about Rs 82 crore in the last three years. As the Indian government pushes for air connectivity in remote areas, official figures show that these eight airports have jointly incurred a total loss of over Rs 25 crore in 2011-12, over 27 crore in 2012-13 and almost Rs 30 crore in 2013-14, official sources said. Reacting sharply to the "precarious" situation prevailing at these airports, aviation industry experts said only market conditions and operational viability and "not political compulsions" should determine developing airports or creating new ones. The airports, which were modernised and upgraded by state-run Airports Authority of India (AAI) but have no scheduled flights, are at Akola (Maharashtra), Bikaner and Jaisalmer (Rajasthan), Coochbehar (West Bengal), Cuddapah (Andhra Pradesh), Pathankot and Ludhiana (Punjab) and Puducherry. Details regarding the cost of modernising these airports were not immediately available. Similarly, the figures on losses of Bhatinda and Jalgaon airports, also modernised by AAI with no scheduled flights operating from there, were also not available. Asked why airlines were not flying to these places, official sources said it was up to the airline operators to provide air services to such places "depending on the traffic demand and commercial viability", apart from the route dispersal guidelines. Airlines Not ConsultedHowever, industry experts disagreed saying airlines should be consulted first before investments are made for developing airports. "It is a precarious situation. Airports should not be developed merely because of political compulsions, but only on the basis of operational feasibility and market conditions. Airports do not just mean plush terminal buildings like shopping malls. The apron and the runway are crucial for flight operations," said Debashis Saha, senior executive of the professional aviation body Aeronautical Society of India. Therefore, detailed feasibility studies for short, medium and long term flight operations should be carried out, both for passenger and cargo operations, "before any decision is taken to upgrade an airport or create a new one," he said. Giving examples of other countries, he said airport operators like Changi in Singapore "attract airlines by offering special schemes including no or low charges and marketing budget". "Government should make available some funds to attract airlines to Tier-II and III cities at least for three years so as to enable airlines to achieve market capitalisation and help air traffic in these sectors grow," Saha said. Airlines should be consulted and asked to study the market potential of an airport in a remote or a non-metro city so that they can sustain day-to-day operations, Saha said, adding the airlines should also be asked to commit to launch operations if found viable. Cost of day-to-day operations include those for maintenance of all technical equipment, the terminal, payment for staff, location of fire and security services. Saha said the costs incurred in these areas have led to the eight airports to run into losses without having even a single scheduled flight. Though AAI was providing incentives like no landing or parking charges and priority of slots to flights between Tier -II and Tier-III cities, he said unless the airlines were consulted beforehand, these incentives would not work and "the AAI would continue to incur heavy losses". (PTI)
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Coca-Cola will invest more than Rs 1,000 crore in a new plant at an industrial area in Karnataka and create jobs for 500 people, the state government said. The project is being established at Kadechur and Badiyala villages of Yadgir district. Top officials of Hindustan Coca-Cola Beverages Pvt Ltd met Chief Minister Siddaramaiah and gave him details of their proposal in the Yadgir industrial area, the chief minister's office said in a statement. Siddaramaiah supported the proposal and advised company officials to provide employment to the family members of those whose land would be acquired for the project. Hindustan Coca-Cola Beverages, which has 24 bottling plants across India, has been allotted 250 acres of land, where it will produce aerated soft drinks. The chief minister said a proposal has been submitted to the Ministry of Environment and Forest for environmental clearance for the Yadgir industrial area. The industrial area needs require 25 million litres of water daily that would be sourced from the Joladgi-Gudur barrage built across the river Bhima. Rail Coach FactorySiddaramaiah also reviewed other land acquisitions and projects in the industrial area for which 3,232 acres of land has acquired. A railway coach factory has been allotted 150 acres of land while Mphanite Solutions has been offered 125 acres in the industrial area. Mphanites will be investing Rs 489 crores, generating employment for 1,160 people. The railway department has floated a tender for setting up the railway coach factory and construction work is likely to commence by March 2015. About 53 pharmaceutical companies from Andhra Pradesh have shown interest in investing in Yadgir, the chief minister's office said. These companies will invest Rs 1,297 crore and create employment for 10,779 people. Land required for these facilities will be about 640 acres. Pointing out that five textile units have also shown interest to invest in the Yadgir industrial area, the statement said their combined investment will be to the tune of Rs 835 crore and total land required will be 255 acres. Out of 3,232 acres of land acquired under the Karnataka Industrial Area Development Act for developing the industrial area, compensation to land owners of 1,959 acres of land has been paid. About 95 acres is government land.
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Essar Group, a $39 billion conglomerate, is looking to tap frozen Iranian oil revenues to pay for its steel exports to Tehran, in a novel attempt to work around Western financial sanctions against the OPEC member state. The National Iranian Oil Company (NIOC) proposed the payment mechanism in August, potentially opening a new way to release oil export proceeds tied up in India under Western sanctions linked to Tehran's disputed nuclear programme. According to industry and government sources, and letters reviewed by Reuters, Essar has asked the Indian government to free it from paying its share of oil dues to Iran, and instead offset them against a $2.5 billion deal to supply steel plate to a NIOC affiliate. The back-to-back scheme comes to light at a critical stage in talks between Iran and six world powers on its nuclear programme, suspected by the West of seeking to develop an atomic bomb. Iran denies this. Negotiators this week extended talks on a deal to mid-2015, and with it an interim agreement allowing Iran to be paid for some of its oil exports. NIOC declined to comment when contacted by Reuters for this article. India's finance ministry declined to comment. Supplying steel to Iran is "prohibited", while dealing with NIOC "is very likely to fall foul of European Union and U.S. sanctions legislation," said Jonathan Moss, partner and head of marine and trade at law firm DWF in London. Another London-based lawyer who has advised Indian firms supplying Iran, however, said progress in the nuclear talks could soften the West's resolve. "I don't see it being covered by sanctions," said Sarosh Zaiwalla, founder of Zaiwalla & Co. "Unless it can be alleged by the Americans that the steel is being used for nuclear proliferation, it would be a perfectly legal transaction." At a Nov. 3 meeting at India's oil ministry, which included the commerce and finance ministries and oil refiners, agreement was reached in principle on the deal, subject to final government approval, oil ministry sources said. Arm's LengthCritical to the oil-for-steel deal's viability is whether its two parts are conducted at arm's length, as argued by Essar, which was founded in 1969 by brothers Shashi and Ravi Ruia and now spans steel, energy, infrastructure and services. Essar Oil said it imported oil from Iran in its normal course of business and paid for it in line with an agreement between Iran and India. Essar Steel India Ltd exports steel plate to Iran through the State Trading Corporation of India (STC). "This is in conformity with export-import policy of the Government of India. It is not a barter deal," Essar said in an e-mail response to questions from Reuters. The transaction could become a test case for the 'smart' sanctions imposed from 2012 by the United States and the European Union to increase pressure on Tehran to comply in the nuclear talks. India is not a party to these measures, but does back United Nations sanctions intended to prevent Iran from acquiring nuclear equipment and materials. Companies like Essar adhere to the Western sanctions, though, to avoid any negative fallout for their U.S. businesses. In 2007, Essar, which owns a steel plant in Minnesota, backed out of plans to invest in Iran's energy sector following U.S. objections. The U.S. Treasury's spokeswoman on sanctions, Hagar Chemali, declined to comment on the proposed Essar deal. The Iran Freedom and Counter-Proliferation Act of 2012 lists steel as a commodity subject to sanctions. Sanctions ShuffleIndia settles 45 percent of its oil trade with Iran in rupees, with the rest held back by the refiners who buy the oil. These unpaid funds are released as and when the West allows Iran access to them. Essar Oil buys oil from NIOC, while Essar Steel agreed in January to supply steel plate to Iranian Gas Engineering and Development Co (IGEDC), a NIOC affiliate. Deliveries of steel began in May, said a knowledgeable person at STC, adding that steel worth $100 million had been shipped so far. A source at the oil ministry valued the sales at $550 million. Ghadir Movahedzadeh, NIOC's financial director, proposed drawing on the 55 percent tranche of oil dues to pay for the steel deliveries in a letter to Essar Oil dated Aug. 26. In the letter, a copy of which was reviewed by Reuters, Movahedzadeh suggested Essar Oil could settle $1 billion in payments through this mechanism, and asked the company to obtain approval from the government and Reserve Bank of India to do so. Essar subsequently approached the finance ministry to seek exemption from hefty local taxes on the oil funds that it is seeking to draw in payment for the steel exports. (Reuters)
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A Supreme Court order scrapping most coal extraction permits given to companies would have a likely impact of 964.84 billion rupees ($15.6 billion) on state-run lenders, the junior finance minister told parliament on Friday. The government had deduced the impact of the cancellation of the so-called coal block allotments on banks due to likely stoppage of power production, Jayant Sinha said in a written reply to a lawmaker question on bad loans for state banks due to the verdict. It was, however, not clear whether he was referring to an increase in bad loans or loan exposure of banks to affected companies. Bankers and analysts have previously said it was difficult to quantify the increase in bad loans as the scrapped coal blocks will be returned after March and as all the loans to the affected companies may not turn sour. Sinha said bad loans of state lenders were a provisional 5.32 per cent of total loans as of end-September, while that of private sector lenders was a provisional 2.04 per cent. Bad loans of state banks in coal industry was 0.23 per cent as of end-September, while for private banks it was 0.22 per cent. The government is considering a proposal to re-introduce a bill that seeks to set up an independent coal sector regulator. The Coal Regulatory Authority Bill, 2013, had been introduced in the Lok Sabha but it lapsed with the dissolution of the 15th Lok Sabha on May 18. (Agencies)
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Brent crude fell to a four-year low under $76.30 a barrel on Thursday as it became increasingly unlikely that Opec would cut output in support of prices during a meeting in Austria. Gulf producers in the Organization of the Petroleum Exporting Countries (Opec) - Saudi Arabia, Kuwait, Qatar and the United Arab Emirates - said on Wednesday that they will not propose an output cut during the official meeting on Thursday, reducing the likelihood of any joint action to prop up prices that have sunk by a third since June. "Dreams of rising oil prices smashed with pre-Opec meeting sentiments. Brace yourselves for lower oil prices," Singapore-based Daniel Ang of Phillip Capital said on Thursday. Some analysts have said that oil prices could slide to $60 per barrel if Opec does not agree to a significant output cut. Benchmark Brent futures dropped over $1 on Thursday to $76.28 a barrel, the lowest level since September 2010. U.S. crude also dropped over $1 to a session low of $72.61. Following the sharp falls, the contracts recovered slightly to $76.62 and $72.82 a barrel, respectively, at 0444 GMT. Increasing Chinese and U.S. oil stocks boosted available supplies, further weighing on crude values. Crude inventories in the United States rose by 1.9 million barrels in week ended Nov. 21, according to the U.S. Energy Information Administration, about four times analysts' expectations for an increase of 467,000 barrels. In China, the government has quietly increased its strategic petroleum reserves (SPR) to around 30 days' worth of imports, double the amount revealed by its official schedule, as the world's top energy consumer takes advantage of the dive in crude prices to strengthen its position in the global oil market. (Reuters)
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Over the past six months, global crude oil prices have been on a steady decline. The India basket of crude has fallen from $112 per barrel in mid-June 2014 to $75.5 per barrel in mid-November ber. The almost $40-perbarrel fall in the Indian crude basket has meant a decline in the country’s oil import bill. India’s oil import bill during the last fiscal was around $150 billion. It is estimated that a $25 fall in crude oil prices translates into a $10 billion stimulus to the Indian economy. Much of that fall in prices has been passed onto consumers who have seen the price of petrol fall six times from Rs 73.6 per litre in early July to Rs 64.24 per litre now in Delhi. Diesel prices too have fallen from Rs 57.84 a litre in early July to Rs 53.35 per litre in Delhi. That has helped the government to remove subsidies on diesel. While the fall in prices is a massive stimulus to the Indian economy, it has not made any significant difference to the fortunes of state-owned oil companies. Now, oil companies too have started to realise the need to earn while prices are low. Although crude prices have continued to fall, the government has refrained from reducing prices further. It has kept prices steady while hiking the excise duty on both petrol and diesel by Rs 1.50 per litre. That will ensure an increase of Rs 6,000 crore in tax collections this fiscal. The government has taken this route as it would not like to hike prices in case there in an upturn in crude oil prices. Should such a situation arise, the government can simply forego the hike in excise duty while keeping fuel prices at current levels. Keeping prices flat and raising the excise duty has twin advantages for the government. One, it can reduce the duty when crude prices start rising, without raising fuel prices for customers. Two, the government will be spared from taking the unpleasant step of raising fuel prices once customers get used to lower prices. While the government has devised a way to take advantage of the falling crude prices, state-owned oil companies have yet to benefit from lower prices. The reason is clear: since most oil companies trade through oil futures, by the time they end up buying, prices have fallen further. As a consequence, they end up paying more when prices are falling by the day.
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The proposed sale of power assets of Jaiprakash Power Ventures (JPV) has been making news for over a year now.The latest development is that the company has entered into a binding agreement with Sajjan Jindal-owned JSW Energy to sell its power plants, which have a combined generation capacity of 1,891 megawatts (mw). The bouquet includes the 300 mw Baspa-II Plant, the 1,091 mw Karcham Wangtoo (KW) Hydro-electric Plant and the 500 mw Bina Thermal Power Plant. Before the MoU for this deal was signed, two other companies had shown interest in JPV’s hydro assets.One of them, PJSC or Taqa — a consortium led by Abu Dhabi National Energy Co. — withdrew from the agreement to purchase two of JPV’s hydro plants for Rs 9,689 crore on 24 July 2014. The other was Anil Ambani-owned R-power, which entered into a non-binding MoU with JPV to buy its three operational hydro power plants for Rs 12,000 crore. The deal fell through in just two months.Irrespective of whether JPV proves lucky this time with JSW Energy, the failed deals will definitely raise some tough questions. The first being whether there was something that sent away the previous prospective buyers. And if there was something, was it a problem specific to the project or symptomatic of the larger issues plaguing India’s energy projects.While Taqa said its decision to pull out was triggered by a change in the business strategy and priorities of the group, R-power never gave any official reason for its decision to backtrack.All that is known is last month the Central Electricity Authority issued a show-cause notice to JPV for violation of Techno Economic Clearance (TEC) conditions granted to KW project, casting a shadow over the future of the plant. The KW project, marred by tariff issues, was part of the bouquet of plants that JVP was selling in all the three MoUs it signed.While the valuation of the power assets looks good, lack of clarity on the future revenue stream of the KW project could make it difficult for the prospective buyer to arrange finances for the deal.JPV did not reply to BW’s queries seeking clarity on the proposed deal.Valuation of power plants in India has always been tricky. There are underlying regulatory, financial and fuel issues that have to be taken note of. And JPV is no different. neeraj@businessworld.in@neerajthakur2
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