The Oil Ministry is likely to move the Cabinet Committee on Political Affairs (CCPA) soon with an expert panel recommendations of raising kerosene price by Rs 4 a litre and cooking gas (LPG) rates by Rs 250 per cylinder.The ministry is preparing a draft note for consideration of the CCPA on pricing of diesel, kerosene and LPG, official sources said here.Endorsing the previous UPA government's monthly 40-50 paisa per litre increase in diesel prices, the ministry is likely to propose that the monthly revisions may continue till the present Rs 3.40 a litre loss on the fuel is fully bridged.After the diesel subsidy is eliminated during the course of the year, the ministry wants CCPA to authorise it to decontrol or free price of diesel as was done in case of petrol in June 2010.Since its decontrol, petrol rates are revised on 1st and 16th of very month based on average cost in the previous fortnight. Barring a few exceptions, petrol prices have moved in tandem with cost since then.Sources said the ministry wants the CCPA to consider recommendations of an expert panel headed by former Planning Commission member Kirit S Parikh.The committee had in October last year recommended to the government that diesel prices should be hiked by Rs 5 per litre, kerosene by Rs 4 a litre and domestic LPG rates by Rs 250 per cylinder immediately to cut fuel subsidy bill by Rs 72,000 crore.But as the monthly increases have led under-recoveries, or the difference between cost and retail price, falling below Rs 5, the ministry is unlikely to press for implementation of the panel's recommendation on diesel.Besides diesel, state-owned oil firms at present lose Rs 33.07 a litre on kerosene sold through the public distribution system (PDS) and Rs 449.17 on LPG, they said. The Parikh Committee had suggested liquiditing all of the diesel subsidy within one year and was for restricting supply subsidised LPG cylinders to 6 bottles of 14.2-kg per household in a year. Currently, households are entitled to 12 cylinders of LPG on subsidised rates.The sources said the ministry is not taking this recommendation of the panel to the CCPA.If rates are not increased, state-owned oil firms are projected to end the current fiscal with Rs 1,07,850 crore of under recovery or revenue losses. This will have to be met through a combination of government cash subsidy and contribution from upstream firms like ONGC.The sources said the ministry is also taking to the CCPA the expert panel's recommendation of continuation of existing pricing principles for controlled petroleum products despite the Finance Ministry's objections.The Finance Ministry is pushing for refiners being paid the equivalent of rates they would have realised if diesel, kerosene and LPG were exported. The export parity pricing (EEP), it feels, will cut its subsidy outgo by Rs 13,000 crore.After discounting the quality specification of fuel exported by private refiners, the difference between the EPP and currently practiced trade parity pricing was only Rs 108 per kilolitre or 1.5 per cent.(Agencies)
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Brent crude futures steadied near 14-month lows above $101 a barrel on Wednesday (20 August), with ample supplies putting prices at risk of further losses as worries over geopolitical tensions ease.The oil benchmark has fallen more than 12 per cent from this year's peak of $115.71 reached in June due to the turmoil in Iraq. While the conflict there continues, there has been no significant disruption to oil supply from the No. 2 OPEC producer, giving space for a sustained retreat in prices.Brent crude for delivery in October was little changed at $101.51 a barrel by 0325 GMT. The contract fell to $101.07 on Tuesday, its lowest since June 26, 2013.Lukoil, Russia's second biggest oil producer, said on Tuesday (19 August) it had shipped 1 million barrels of oil produced from southern Iraq's giant West Qurna-2 oilfield, its first shipment from the field, despite a surge of violence in the country.In Libya, a spokesman for National Oil Corp said the country's total oil production had risen to 562,000 barrels per day (bpd) from 535,000 bpd at the weekend."That's very much what the market is focusing on, the abundance of supply and the decreasing risk in terms of the geopolitical tensions," said Ben Le Brun, market analyst at OptionsXpress in Sydney."It appears the traders are thinking that there's still risk to the downside when it comes to oil prices."Delegates from three members of the Organisation of the Petroleum Exporting Countries (OPEC) said the group was not worried about a slide in oil prices towards $100 a barrel.Current levels were seen as acceptable while higher seasonal demand in the coming weeks was expected to support the market, the delegates said.But September US crude edged higher after falling sharply on Tuesday ahead of the contract's expiry on Wednesday.US oil rose 49 cents to $94.97 per barrel after falling as much as $2.15 overnight to hit $94.26, its lowest since January.Brent's premium over the U.S. contract, or West Texas Intermediate, widened to $8.82 on Friday, the biggest since June, following a spike in Brent that proved to be short-lived. The gap returned to similar levels on Tuesday after WTI's slide.'Shorters'A decline in U.S. crude stockpiles last week also aided WTI. Crude inventories fell by 1.4 million barrels in the week to Aug. 15 to 362.8 million barrels, slightly more than analysts' expectations for a decrease of 1.2 million barrels. [API/S]While geopolitical worries have eased, they are far from getting resolved and Le Brun at OptionsXpress said any escalation of tensions in the Middle East "will definitely see risk premiums reapplied to oil prices fairly quickly".Islamic State insurgents posted a video on Tuesday purportedly showing the beheading of U.S. journalist James Foley and images of another US journalist whose life they said depended on how the United States acts in Iraq.The posting of the video followed nearly two weeks of US air strikes that have pounded militant positions and halted the advance of Islamic State."But at this stage, the shorters have a lot more interest in this market than the traders on the long side," said Le Brun.Investors are also eyeing the annual meeting of central bankers in Jackson Hole, Wyoming, that kicks off on Thursday. Federal Reserve chief Janet Yellen speaks on Friday in an address that could give clues on the timing of a U.S. interest rate increase.Keeping US rates lower for longer in aid of the economy should spur appetite for risky assets including oil.(Reuters)
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Housing projects for the urban poor have failed to keep up with the pace of urbanisation in India. As a consequence, several families live in cramped, sub-standard and often rented accommodation, with limited access to civic amenities. And it is not just the poor. Even families with a monthly household income of Rs 10,000-25,000, who can afford to buy houses priced between Rs 4 lakh and 10 lakh without any aid from the government, face similar conditions.According to our State of the Low-income Housing Market report, 15 million new homes in the low-income category are required, translating into an opportunity of Rs 9 lakh crore for developers and Rs 7 lakh crore for housing finance companies.An Active But Limited Private SectorThe report highlights that 78,000 houses (built on private land) have been sold in over 130 projects across 22 cities in India by private developers without any significant assistance from the government. In fact, with access to housing finance for formal and informal (with no proof of income) low-income customers improving, private developers are building more low-income housing (LIH).While this clearly demonstrates the viability of low-income housing, the numbers are way short of what is required. We need millions of houses, not tens of thousands. Ashish Karamchandani, Vikram Jain & Aditya AgarwalAn Emerging EcosystemDevelopers building LIH are mid-sized, see opportunity, and intend to continue developing LIH:• The vast majority, 86 per cent of the 27 LIH developerswe interviewed, was confident about the viability of their business. And 90 per cent intended to continue build ing LIH. The fact that two-thirds of the developers were already on their second or third project goes to show the economic viability of the business• The developers were typically small and medium regional developers who started serving the segment because of the potential demand and not social motivations.Most LIH projects sell 80 per cent units within 12 months, confirming the robust demandMost LIH projects are mixed-income and most houses are between Rs 6 lakh and Rs 10 lakh:• Sixty per cent of the total supply is in mixed-income projects with units above and below Rs 10 lakh• Thirty per cent of LIH supply was priced under Rs 6 lakh. A robust supply was also seen in Rs 10-12 lakh price point (see Limited Supply) Housing finance companies (HFC) serving informal low-income buyers are enabling inclusion:• Nearly 75 per cent of the informal sector customers had never taken a loan from a formal financial institutionbefore• The new HFCs have a combined loan portfolio of Rs 1,000 crore. Growing at 100-300 per cent per annum, they have near-zero non-performing assets (NPA). The number of players is growing and so is the geographic coverage of each playerEncouraging The Private Sector The government is becoming increasingly cognisant of the role the private sector can play in addressing the housing needs of low-income families. A number of government initiatives at the Centre (like Affordable Housing Task Force recommendations), state (Rajasthan and Orissa’s affordable housing policies) and urban local body level have taken steps to incentivise the private sector to create housing for the urban poor. They have used various supply-side interventions, including mandating reservations, providing subsidies (extra floor space index, reduced taxes), faster approvals and earmarking land for low-income group housing. The government has also introduced demand-side interventions for beneficiaries, including interest rate subsidy and reduced taxes (stamp duty, registration, etc.).The greater the number of beneficiaries served by the private sector, the lower is the burden on the government and the incidence of new slums. This way cities can soon become ‘slum-free’. break-page-breakPoor Man’s Dream The report further shows that low-income customers are happy with their new homes. Improved living conditions, secure neighbourhoods, bigger homes and better utilities are some of the functional benefits cited by them. The houses have also had a positive psychological impact on people. They felt a sense of upgradation, a feeling of belonging,pride of ownership and a surge in aspirations.Lack of clarity on maintenance responsibilities, longer commutes to workplaces and increased cost of living were some of the challenges cited by customers, but for most of them it was a dream come true.Private Sector’s Limitations The LIH market — housing and housing finance — has grown manifold. Yet, the gap between the current supply and the estimated demand is significant. For a potential need of 13-15 million units for households that earn between Rs 10,000-25,000 per month, so far 78,000 LIH units have been launched as per our records.The top three challenges cited by LIH developers are rising land prices, construction costs and long approval timelines. Limited access to debt and high cost of debt are the two key challenges cited by HFCs. The affordability of low-income customers has to be improved so more familiescan be a part of this growing market.Empowering LIGsThe government can create a conducive environment to enable millions of low-income customers to buy a pucca house. It can ensure faster approvals, develop infrastructure to increase supply of affordable and serviced land, ensure conducive regulation that directs housing companies to treat debt to low-income customers as priority sector lending (and thereby address the access and cost concerns of the housing finance companies) and reduce stamp duty and registration taxes for the end-customer, among other things.In a private sector-driven market, where the developer determines the price, any subsidy given to the developer may not be passed on to the beneficiary. If subsidies are to be provided — and they should be provided to enable more low-income families to buy private-sector-led housing — they should be given directly to customers. A good example of this is the interest rate subsidy provided to low-income group customers (a 5 per cent interest rate subsidy on loans up to Rs 5 lakh) by the government.What The Government Needs To Do?While foreign direct investment has been relaxed, most of the development seen in this sector is by small developers who typically do not have access to these funds. The sum of Rs 4,000 crore that has been offered to National Housing Bank should help reduce the cost of home financing, but first the supply of housing has to be upped. While the recent announcements signal good intent, their impact could be limited. The government needs to be more active about creating an enabling environment — as described above — to help realise the dreams of millions of low-income Indian families.Jain, Agarwal and Karamchandani are with Monitor Inclusive Markets, a unit of Deloitte(This story was published in BW | Businessworld Issue Dated 08-09-2014)
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Brent crude edged up towards $102 a barrel on Tuesday (19 August), but stayed near a 14-month low reached in the previous session on weak demand and easing concerns over risks to supply.Brent shed nearly $2 on Monday (18 August), as investor worries over conflict in Iraq eased, and as higher Libyan oil output added to already ample supplies."There is still plenty of oil in the market, mostly due to weak demand from refineries in Europe and Asia," said Yusuke Seta, a commodity sales manager at Newedge Japan."At the moment, I don't see any factors that could possibly bring demand back into the market."Brent crude for October delivery had risen 23 cents to $101.83 a barrel by 0522 GMT, after closing $1.93 a barrel lower on Monday.US crude for September delivery was 34 cents higher at $96.75 a barrel. The contract, which expires on Wednesday (20 August), ended the previous session down 94 cents."Brent could test $100, but should find very very strong support at that level. OPEC countries will take action if oil goes below $100 because they won't be able to maintain their budgets," said Seta.Higher US Oil StocksIraqi and Kurdish forces recaptured Iraq's biggest dam from Islamist militants with the help of US air strikes to secure a vital strategic objective in fighting that threatens to break up the key oil producing country.In Ukraine, government forces advanced on pro-Russian rebels, but continued fighting in the country suggests the risks are far from over. Dozens of people, including women and children, were killed on Monday as they fled fighting in eastern Ukraine when their convoy of buses was hit by rocket fire.The US dollar gained against a basket of major currencies, while global equities also rose with Nasdaq hitting a 14-year high on Monday, supported by positive US housing data and decreasing worries over Ukraine. A stronger greenback could drag on dollar-denominated oil.The UN nuclear watchdog chief on Monday said Iran had begun implementing transparency measures ahead of an Aug 25 deadline, as part of a long-running investigation into suspected atomic bomb research by Tehran.US commercial crude oil and refined product stockpiles were forecast to have fallen in the week to Aug 15, a preliminary Reuters survey of analysts showed.The analysts estimated, on average, that crude oil stocks decreased 1.5 million barrels last week. Distillate stockpiles were seen down 200,000 barrels, and gasoline inventories down 1.7 million barrels.The survey was taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) due at 2030 GMT and from the US Department of Energy's Energy Information Administration (EIA) due on Wednesday.Despite falling inventories in the United States, large crude builds globally in the second quarter is now reflected in the weak market structure known as contango, where prices for prompt delivery is cheaper than for future months, analysts at Energy Aspects said in a note."Signs of a sustained demand recovery, and hence stockdraws, are needed to change the shape of the further forward Brent structure, even if potential new supply disruptions did not materialise," the analysts said."The market may need flat price to fall below $100 in order to stimulate demand, especially given the weakening macroeconomic backdrop," they said.(Reuters)
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India has deferred the decision to raise prices of locally produced gas by three months, the oil minister said on Wednesday (25 June). "Comprehensive discussions are required on this issue," said Petroleum Minister Dharmendra Pradhan. Currently, the bulk of domestic gas is sold at $4.2/mBtu, which producers Reliance Industries and state-run ONGC say is not enough to explore new areas of India's reserves.(Reuters)
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Indian Oil Corp will cut the retail price of petrol by about 3 per cent, or Rs 2.18 per/litre in New Delhi, from Friday (14 August) as global prices of the fuel have eased since the last revision, the company said in a statement late on Wednesday.India's three state-run fuel retailers - IOC, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd - tend to move their prices together.Following are prices as charged by IOC in Delhi. Gasoline, diesel and kerosene prices are in rupees per litre, while liquefied petroleum gas (LPG) prices are per 14.2 kg cylinder.(1 US dollar = 61.05 rupees)(Reuters)
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Oil and Natural Gas Corp (ONGC) posted a 19 per cent jump in first-quarter profit, but fell short of expectations, hurt by higher exploration related write-offs and an increased subsidy payment.The company's margins have been squeezed by a heavy burden of government-imposed discounts on its crude sales to state-run refiners as part of Indian regulations to keep fuel prices in check for consumers.India regulates prices of liquefied petroleum gas, kerosene and diesel, with producers such as ONGC sharing the cost of subsidising state refiners. ONGC's cost of helping subsidise fuel rose 4.6 percent to 132 billion rupees in the quarter ended June 30.However, monthly increases in the price of diesel, the most widely consumed fuel in the country, helped improve the company's net realisation - earnings per barrel of crude - to $47.15 per barrel from $40.17 a year earlier.India's largest oil and gas exploration company posted a net profit of Rs 4782 crore ($781.2 million) for the first quarter, up from Rs 4016 crore last year.Sales rose 13.5 per cent to Rs 21,813 crore.Analysts on average expected ONGC to earn Rs 5,849 crore, according to Thomson Reuters data.Exploration-related write-offs during the quarter, on account of dry wells, more-than-doubled to Rs 3,828 crore, ONGC said in a release to the exchange.The company, which produces most of its output from aging fields in western India, has been acquiring assets overseas and trying to boost domestic capital spending in recent years to maintain output. It is aiming to produce gas from its east coast blocks by 2016/17.The company is also set to benefit from an impending rise in the price of domestically produced natural gas, which is expected to significantly add to revenue and boost investments in exploration and production activities.Shares of ONGC, the country's second-biggest company by market value, closed down 1 per cent at Rs 402 on Wednesday.(AGencies)
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Oil prices rose in Asia on Friday (8 August) after US President Barack Obama said he had authorised air strikes against Sunni extremist militants in key crude producer Iraq.US benchmark West Texas Intermediate for September delivery rose 35 cents to USD 97.69 while Brent for September gained 67 cents to USD 106.11 in mid-morning trade.Obama in an address yesterday said he ordered the air strikes to prevent "genocide" by the so-called Islamic State fighters against the besieged Yazidi minority in Iraq's north."I therefore authorized targeted air strikes if necessary to help forces in Iraq as they fight to break the siege and protect the civilians trapped there," Obama said.He did not say whether air strikes have already been carried out.Desmond Chua, market analyst at CMC Markets in Singapore, said the development could add "significant risk premium to oil prices" as dealers worry about potential supply disruptions."The announcement certainly edges up the geopolitical concerns about Iraq and the Middle East region, and comes as a bit of a surprise to investors," Chua told AFP.Islamic State insurgents now control large swathes of Iraq's north and west. The sweeping offensive that began on June 9, preventing Baghdad from exporting oil via a pipeline to Turkey and by road to Jordan.Iraq's oil ministry on July 24 said crude exports totalled 2.42 million barrels per day in June, falling far short of a budgeted projection of 3.4 million bpd.As the number-two producer in the OPEC cartel, Iraq's 11 per cent of proven world reserves plays a key role on world markets and prices after violence disrupted oil exports from Syria and Libya.The dip in exports adds to the woes of Iraq, which is heavily dependent on oil revenues while spending more on military equipment to battle the Islamic State group. (Agencies)
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