Prime Minister Narendra Modi will review the progress of infrastructure sectors including roads, railways and power in the presence of senior officials of concerned ministries on November 5. "The Prime Minister has called a meeting to review the progress of various infrastructure projects being implemented under different ministries on November 5," a source said. "Since the Commission has been monitoring infrastructure sectors, the Prime Minister will review the progress report prepared by body", he said. According to the information available, Planning Secretary Sindhushree Khullar will also be present at the meeting to brief the Prime Minister about the monitoring report on infrastructure prepared by the Commission. The Commission has been calling meetings of various officials these days to finalise its assessment report on different infrastructure sectors. In order to push infrastructure development in the country, Modi had asked his ministers to electronically monitor the progress of projects and directed the Railways to submit a comprehensive plan for encouraging foreign direct investment in the last review meeting held on September 12. There are instructions to review progress of eight major infrastructure sectors - Civil Aviation, Ports and Inland Waterways, Railways, Roads, Telecom, Power, Coal, and New and Renewable Energy on monthly basis. (PTI)
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DLF Ltd, India's biggest listed property company, on Wednesday appealed for interim relief from a three-year ban from accessing capital markets by the regulator. DLF lodged its appeal with the Securities Appellate Tribunal, which will conduct its next hearing on Oct. 30. In its harshest ever punishment, the Securities and Exchange Board of India (Sebi) on Oct. 13 barred DLF and some of its executives from capital markets, penalising them for failing to disclose key information at the time of the company's record-breaking 2007 market listing. "By doing what the order has done, namely to say that for three years you will not access capital markets and you will not deal in securities, it is as good as writing the death warrant of this company," Janak Dwarkadas, a lawyer representing DLF, told the tribunal. DLF asked the tribunal to allow it to redeem thousands of crores worth funds locked in mutual funds and other securities. The tribunal adjourned the matter as it sought a response from Sebi on DLF's plea. DLF said it needs to redeem funds, including around Rs 2,000 crore locked in mutual funds as also through redemption of certain bonds worth further thousands of crores of rupees, but the Sebi order has restrained its position to access capital. Last month itself, DLF had received shareholdes' approval to raise up to Rs 5,000 crore through non-convertible debentures (NCDs). An intervention petition was also filed at SAT by Kimsuk Sinha, on whose complaint the Delhi High Court had directed Sebi to probe the case. However, Sinha's plea was opposed vehemently by DLF counsel and the petition was not admitted. Earlier this month, Sebi barred DLF and six others from capital markets for three years for "active and deliberate suppression" of material information at the time of its IPO over seven years ago. DLF's initial public offer in 2007 had fetched Rs 9,187 crore -- the biggest IPO in the country at that time. While the regulator did not impose any monetary penalty, the prohibition has barred DLF and the six persons, from any sale, purchase or any other dealings in securities markets for a period of three years, including for raising funds. (Agencies)
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The recent announcement by the union government on coal auctions is a baby-step compared to what is required in the sector to push growth.It was hoped that following the landmark Supreme Court judgement cancelling 214 coal mining licences last month, the first announcement by the government would have some grounding in concrete realities.Unfortunately, the ordinance approved for end-user based e-auctioned mines by the Union Cabinet on Monday – October 20, leaves a lot unsaid.“The ordinance shows the intent to go on to auction mines, but the auctioning policy is yet to be finalised”, says Kameswara Rao, Leader Government Reforms and Infrastructure Development, PwC India.What Finance Minister Arun Jaitley said at a press briefing post the cabinet meeting was this: “The ordinance will clear the problem created by coal blocks being allocated through a screening committee mechanism. The ordinance will also resolve the pending issues arising out of the Supreme Court judgment quashing the previous coal block allocations... But the Coal Mines Nationalisation Act remains intact.”The ordinance is essential but needs to be followed up with many more regulatory changes.In its present form it implies that auctions will remain highly government controlled and the natural resource remains accessible only to those with end-use plants. E-auctions are to be initiated within the next three to four months (SC deadline for the government to put in place a new mechanism is March 2015) through which proceeds will be handed over to state governments, say authorities promising speedy action. Everyone with an end-use project is free to bid from the private sector, while NTPC and State Electricity Boards will be allocated blocks as per their requirement. And the coal monolith Coal India remains unaltered. And as Debasish Mishra, Senior Director Consulting at Deloitte Touche Tohmatsu India Pvt. Ltd. says, “The ordinance is an attempt to ease the process of takeover of mines by new users.” He explains the ordinance does not provide for commercial mining as that is not possible without the amendment of the coal nationalisation act brought in by Indira Gandhi to allegedly counter the coal mafia in the 1970s. As long as the Coal Mines Nationalisation Act remains intact, the worries of the coal industry will remain. The Act bans commercial sale and purchase of coal in the open market by private parties. Analysts have also blamed the provisions of this Act for the coal mess of today – given that it provides next to no flexibility or room for open market mechanisms of price control and demand-supply balancing of coal.The auctioning policy initiated by the former UPA government fell far short of the requirement and the current draft leaves many questions unanswered. Earlier this year in February, authorities had attempted to auction 6 blocks under the new policy but did not find enough bidders and had to roll back the policy. The policy required bidders to pay 10 percent upfront calculated on the potential coal reserves in the mines and a production/ extraction based fee per tonne – it did not account for the cost-value changes in the commodity. A few clauses added to the auctioning policy suggest that those allotted coal blocks now deemed illegal, will be paid the land value of the time it was purchased along with 12 percent carry forward value, cost of equipment etc. But there is nothing about other costs incurred by the mine owners like access roads built by them or geological studies carried out etc. Considering that now all coal blocks need to be auctioned (except the 4 ultra mega power projects (UMPPs) exempted under the SC judgement), these gaping holes are worrying mine owners. Added to this, coal pricing remains a big ambiguity that is yet to be addressed or resolved. The irregularities in the coal sector exposed by CAG two years back cleared proved the need for sweeping reforms in the sector. Instead, the government is still taking cautious piece-meal steps towards opening up the sector. It is hoped the bidding documents and current discussions on the subject rocking the power corridors will result in a substantial action plan to ensure economic growth and energy security in the very near future. Moyna@businessworld.inmmatbworld@gmail.com
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The chief executive of French oil major Total, Christophe de Margerie, was killed when a business jet collided with a snow plough during takeoff at Moscow's Vnukovo International Airport, the company and airport officials said. The collision occurred late on Monday, just minutes before midnight Moscow time, the airport said in a statement. The Dassault Falcon business jet carrying de Margerie had been due to travel to Paris. "Total confirms with deep regret and great sadness that Chairman and CEO Christophe de Margerie died just after 10 p.m. (Paris time) on October 20 in a private plane crash at Vnukovo Airport in Moscow, following a collision with a snow removal machine," the company said in a statement. The plane's three crew also died, said Total, France's second-biggest listed company with a market value of 102 billion euros. There was no immediate word on the cause of the collision. Visibility was 350 metres (1,150 feet) at the time, the airport said. "During run-up at 11.57 pm there was a collision with the airport's snow plough. As a result of the crash the passenger and all the crew members died," the airport said. Russian investigators have opened a criminal probe into breaches of aviation safety rules causing multiple deaths through negligence, and would invite French authorities to take part in the investigation. Vnukovo is Moscow's oldest and third biggest airport. Located southwest of the capital, it is used by President Vladimir Putin and other government officials. De Margerie, 63, was on a list of attendees at a Russian government meeting on foreign investment in Gorki, near Moscow, on Monday. According to Russian business daily Vedomosti, hours before his death the Total CEO met Russian Prime Minister Dmitry Medvedev at his country residence outside Moscow to discuss investment in Russia. With his distinctive bushy moustache and outspoken manner, de Margerie was one of the most recognizable figures among the world's top oil executives and oversaw major expansion of oil reserves at the French energy giant. "France is losing an extraordinary business leader who turned Total into a world giant," French Prime Minister Manuel Valls said in a statement. "France is losing a great industry captain and a patriot." Potential SuccessorsA graduate of the Ecole Superieure de Commerce business school in Paris, de Margerie became chief executive officer of Total in February 2007, taking on the additional role of chairman in May 2010, after previously running its exploration and production division. During a 40-year career that began in Total's finance unit, he helped the French company enter remote energy markets and became known for his geopolitical understanding of oil-producing regions. De Margerie said in July that he should be judged based on new projects launched under his watch, such as a string of African fields. He also said then that Total would seek a successor from within the company rather than an outsider. Philippe Boisseau, head of Total's new energy division, and Patrick Pouyanne, who was tasked with reducing the group's exposure to unprofitable European refining sectors, have long been seen as potential successors. A staunch defender of Russia and its energy policies amid the conflict in Ukraine, de Margerie told Reuters in a July interview that Europe should stop thinking about cutting its dependence on Russian gas and focus instead on making those deliveries safer. He said tension between the West and Russia were pushing Moscow closer to China, as illustrated by a $400 billion deal to supply Beijing with gas that was clinched in May. "Are we going to build a new Berlin Wall?" he said in the interview. "Russia is a partner and we shouldn't waste time protecting ourselves from a neighbour ... What we are looking to do is not to be too dependent on any country, no matter which. Not from Russia, which has saved us on numerous occasions." Total is one of the majors most exposed to Russia, where its output will double to represent more than a tenth of its global portfolio by 2020. Big Investor In RussiaTotal is also one of the top foreign investors in Russia, but its future there grew cloudy after the July 17 downing of a Malaysian passenger airliner over Ukrainian territory held by pro-Russian rebels worsened the oil-rich country's relations with the West and raised the threat of deeper sanctions. Total said last month that sanctions would not stop it working on the Yamal project, a $27 billion joint venture investment to tap vast natural gas reserves in northwest Siberia that aims to double Russia's stake in the fast-growing market for liquefied natural gas. De Margerie said then that Europe could not live without Russian gas, adding there was no reason to do so. Total is the fourth largest by market value of the western world's top oil companies behind Exxon, Royal Dutch Shell and Chevron. Russia accounted for about 9 per cent of Total's oil and gas output in 2013. The company's $228 billion in annual sales exceeds the total economic output of many countries. The company's reserves are so huge that it can fill a supertanker every 40 hours.The oil company had forecast in April that Russia would become its biggest source of oil and gas by 2020 due to its partnership with Russian energy company Novatek and the Yamal project. Like other big oil companies, Total has been under pressure from shareholders to cut costs and raise dividends as rising costs in the industry and weaker oil prices squeeze profitability. The company last month said it would step up asset sales and overhaul exploration after cutting its oil output targets. Total, which has struggled with production outages in Libya, Kazakhstan and Nigeria, launched a "high-risk, high-reward" drilling strategy two years ago. But this has had disappointing results as high-cost investments did not lead to large discoveries. Russia has a patchy air-safety record. In December 2012, a Russian airliner flying without passengers broke into pieces after it slid off the runway and crashed onto a highway outside Vnukovo Airport upon landing, killing four of the eight crew on board. (Agencies)
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The glass is half full, the glass is half empty. It all depends on the perception of the viewer. The revised natural gas price announced by the NDA government also falls in the same category. The price of $5.61 per million metric British Thermal Units (MMBTU), is 33 per cent higher than the current price but it is also 33 per cent less than the previously decided price of $8.4 by the UPA government under the Rangarajan Formula.Moreover, the decision seems to have gone against the Mukesh Ambani owned Reliance Industries Ltd, which was not allowed any hike forits D1 and D3 gas blocks in the KG basin till the final decision on the arbitration between the comgpany and the government came.“The operator (Reliance Industries) would be paid the earlier price of $4.2/MMBTU till the shortfall quantity of gas is made good. It is proposed that the difference between the revised price and the present price ($4.2 per MMBTU) would be credited to the gas pool account maintained by GAIL and whether the amount so collected is payable or not, to the contractors of this block, would be dependent on the outcome of the award of pending arbitration and any attendant legal proceedings,” read the government press release.To all the critics it is a perfect punishment for the company that has not only been indicted by the Comptroller and Auditor General of India for violating the production sharing contract but for also making wrong projections of gas reserves to get approval for higher recovery on capital investment in the gas field.Is the glass half empty for Reliance? A careful reading of the following lines presents a different perspective on the government’s pricing formula.“For all discoveries after this decision, in ultra deep water areas, deep water areas and high pressure-high temperature areas, a premium would be given on the gas price to be determined as per the prescribed procedure.”This means that the gas price decided by the government does not concern the deep, ultra deep and other high-pressure areas, which would be eligible for a premium on the current price.Deepak Mahurkar Leader Oil & Gas, PwC India interpreted the clause in following lines, “For the first time the government has decided that the selling price of gas will be based on the type of block or development. Which means the link to cost of development is given recognition. Deep water blocks will get more price than the onshore blocks."The KG D6 basin so far has been talked about as a deep water block, which makes it eligible for a premium over the decided price of $5.61 per MMBTU. Even though the definition of deep water block is not clear in the Indian context, worldwide it is accepted that gas being extracted from the depth of 400 meters or above is a deep water block.While the original PSC signed under the New-exploration and Licensing Policy (NELP) did not differentiate between the deep water and the onshore blocks for deciding the price of natural gas, the latest policy decision is likely to benefit RIL and ultimately give it a price quite close to the one decided by the Rangaranjan Committee, if not more. The government needs to make it clear whether RIL’s D1 and D3 and other blocks being operated on by the RIL in the KG basin are eligible for a premium over the price of $5.61 per unit of gas or it is for the future discoveries that would be made on the block bid in the next round of bidding.“EAS Sarma, former secretary to the government of India said,” the PSC does not make a distinction between deep water, ultra deep water and onshore blocks. According to article 21 of PSC the price of natural gas has to be arrived at through arm’s length pricing. The government is changing the PSC by bringing in new definition. According to the original PSC if the block is not viable at the arm’s length pricing, it should not be explored”.It would be interesting to know what would be the final price that a deep water or ultra deep water block would get for producing gas. Ideally, the government should have the mechanism and resources to arrive at the well-head cost (the cost of gas at the source of production) of natural gas before calculating the premium for any category of blocks.So long as the government does not reveal the criteria for giving a premium to deepwater blocks, the glass is half full for Reliance Industries.Neeraj@businessworld.inneeraj.epiphany@gmail.com
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India moved a step closer to selling a stake in state-run oil company ONGC on Monday (20 October), keeping up Prime Minister Narendra Modi's momentum on economic reform after bringing prices of diesel and natural gas closer in line with the market. A barn-storming performance in two state elections last week capped several days of action on the economic front and has given Modi more room to cut through a thicket of regulations and state controls he says holds back Asia's third-largest economy. The administration's top privatization official met bankers on Monday in the financial capital, Mumbai, to discuss the sale of a stake of 5 per cent in Oil and Natural Gas Corp (ONGC). The finance ministry hopes to raise up to $3 billion from the sale, almost a quarter of its target for asset sales for this financial year. "It is the right time for disinvestment in ONGC," a top finance ministry official with direct knowledge of the matter told reporters in a briefing. "We are following it very fast," said the official, when asked whether the share sale, first approved in September, could happen next month. Citigroup and HSBC are among five banks chosen to manage the planned sale of a stake in ONGC, sources told Reuters in August. The finance ministry official, who declined to be identified because of the sensitivity of the topic, also told reporters the government wanted to pass a bill in parliament's next session to free up foreign investment in the insurance industry. The measure will need backing from across political parties, because the government does not have a majority in the Rajya Sabha. Saturday's (October 18) decision to free diesel pricing of government intervention makes ONGC more attractive to investors because it will reduce the hefty discount on crude sales that the country's top oil producer must give to fuel retailers. ONGC, the second-largest listed firm in India by market value, also stands to benefit from a decision on Saturday to raise the price for natural gas by a third to $5.61 per mmBtu. Shares in ONGC gained 5.6 per cent on Monday. The government has a stake of 68.94 per cent in the company, which has stakes in oil and gas fields across the globe. In his maiden budget in July, Finance Minister Arun Jaitley set a target of Rs 584.25 billion to be raised by the sale of shares in state-run companies and minority stakes in private companies. Another major planned sale is of a 10 per cent stake in giant Coal India. The income is key to meeting a challenging fiscal deficit goal of 4.1 per cent of gross domestic product for the year ending March 31. Tax revenue has been less than budgeted this year, and government finances have been stung by a large bill for tax rebates. Modi was elected in May on promises of creating jobs and bringing the bounce back to the Indian economy, but investors and economists were disappointed by his first budget and a lack of early structural economic reforms. In the last week he has gone some way to quell those concerns, putting in a reform-minded team at the finance ministry that includes prominent economist Arvind Subramanian to help formulate the budget and policy. He also kicked off an overhaul of creaky labour rules, cutting the power of labour inspectors and slashing the red tape for small companies that makes India one of the toughest places in the world to do business. (Reuters)
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Finance Minister Arun Jaitley said on Monday (20 October) he personally believes the time is right to dilute nationalisation of the country's state-run coal industry, adding it is easier to carry out economic reforms in the first year of a government. Jaitley's comments to a television news channel came days after New Delhi lifted diesel price controls and raised the cost of natural gas. (Reuters)
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It was an NDA government that had first proposed the deregulation of diesel and petrol prices in 2002. However, it took 12 years and another NDA government to make this finally happen in case of diesel.Aided by the weakening international crude oil prices (it touched a 4-year low of $83 per barrel), the de-control not only relieves the government of the burden of high fuel subsidy but also creates a level playing field for the private fuel retailing sector vis-a-vis the government-owned marketing companies.Interestingly, the government had de-regulated the petrol price in June 2010. However, the decision did not lead to any kind of competition in the market because of the monopoly of state-owned oil marketing companies which operate in tandem with each other and announce prices hikes on the same day and at the same level. This has robbed consumers of competitive pricing by the retailers. So far, because of the high subsidy provided by the central government to the three government owned oil marketing companies (IOC, BPCL and HPCL), the private sector companies were not able to sell diesel at their shops, making them insignificant players in the business.But now, the private sector companies like Essar, Shell India and Reliance have announced their plans to start selling diesel from their outlets. The companies will have to offer competitive pricing to compete with the widely spread network of the government owned OMCs. Country’s largest fuel retailer Indian Oil Corporation (IOC) operates 23,993 outlets in the country, while BPCL has around 12,500 outlets across the country. On the other hand, Essar has just 1,400 outlets.IWho Gains & Who Loses Oil prices are in a free fall. They have fallen 15 per cent over the last quarter. This is great news for India. India imports 70 per cent of its oil requirements. India imported 185 million tones of crude oil in 2013-14MoreOC, which was anticipating the diesel price de-regulation, has already started to upgrade itself to compete with the private sector. It has brought around 6,077 of its outlets under automation. The de-control also brings in new players who will be hard-pressed to offer competitive pricing and lure the customers will other frills like cleaning up of car windshields, cheap pollution check up among others.However, the government will have to make sure that once the private sector makes investment in the business, there is no looking back.A pertinent question at this time of diesel price de-regulation euphoria is, will the government be able to stick to its decision of decontrol even if international crude prices were to spike again in the coming years? Analysts have projected that the oil prices in the international market will only go down in the coming years. According to a Crisil report, over the next five years the global oil demand is likely to increase by 4-4.5 million barrels per day, whereas crude oil supply is expected to increase by 8-10 mbpd. This, will lead to further fall in the price of crude oil.So far so good, but what if the analyst projections go wrong, as has been the case in the past? Will the government stick to its decision even if oil prices were to reach above $110 per barrel. The Geo-political reasons can turn the tide in the opposite direction anytime.“India will have to be watchful of global developments. Crude prices and therefore petroleum product prices are currently low because of low demand and appreciation of the US dollar in relation to its trading partners (measured by US Dollar index). In a scenario where even if global oil and petroleum products demand and supply remain same, depreciation of the US dollar may flare up both crude and product prices,” a report by Fitch India ratings said.The government is silent on the matter and the analysts have expressed their concern on the same.“Sunil Kumar Sinha, Principal Economist with Fitch India Ratings said that “the government should have been clear on the issue, because even though it looks highly unlikely that the crude oil prices will flare up in the near future, but it is important for the government to be clear on its future stance. The government allows the diesel prices to move in tandem with the market so that the consumers do not get a onetime shock”.Whatever be the future situation, the government will have to make sure that it does not backtrack from its decision to de-regulate the fuel pricing to ensure competition in the market and lower subsidy burden on the exchequer.
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