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Selling fuels below the market price  

Petroleum Ministry seeks Rs 5,000 cr more for oil cos

New Delhi, Oct 29 : : The Petroleum Ministry has sought from the Finance Ministry an additional Rs 5,000 crore for compensating the public sector oil marketing companies (OMCs) for selling fuels below the market price during April-September 2010. The Petroleum Minister, Mr Murli Deora, met the Finance Minister, Mr Pranab Mukherjee, here on Friday for this purpose. According to the Petroleum Ministry, the total under-recovery for April-September 2010, is estimated to be Rs 31,367 crore.

The Petroleum Ministry wants the Finance Ministry to shoulder at least 50 per cent of the total under-recovery. It had sought Rs 15,000 crore from the Finance Ministry to compensate the three public sector oil companies for the first half of the current fiscal. The Finance Ministry has paid only Rs 10,000 crore towards this. Oil and Natural Gas Corporation, GAIL (India), and Oil India will shoulder a burden of Rs 10,456 crore of the Rs 31,367 crore.

… From Our Bureau…of HINDU Business Line..newspaper.

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Diesel price deregulation Not possible with current prices  

IndianOil FPO in Jan-Mar, says oil secy

New Delhi: The government plans to sell more of its stake in state-owned Indian Oil Corp Ltd and via follow-on public offers in January-March, petroleum and natural gas secretary S Sundareshan said.

It is for the department of disinvestment in finance ministry to allocate slots for the FPO, Sundareshan said. The petroleum and natural gas secretary also said the government has no plan to deregulate retail price of diesel from its control for now, as it will lead to an unacceptable rise in price.

“(Diesel price deregulation)... Not possible with current prices (of global crude oil prices)... Diesel deregulation at this point will lead to price increase and it is unreasonable to accept it at this juncture,” Sundareshan said at the second day of the Economic Editors’ Conference.

International crude oil prices have risen to about $85 per barrel now from about $75 per barrel since the diesel price was hiked last time in June, he said. In June, the government allowed state-owned marketing companies to sell petrol at market-driven prices, leading to its price going up by Rs 3.5 per litre immediately.
TickerNews / The Financial Express

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Status of domestic cooking gas supply  

No shortage of domestic cooking gas, say refiners

Our Bureau, Mumbai, Oct. 25 : from the pages of Hindu business line newspaper.

Public sector oil marketing companies have reiterated that there is adequate supply of LPG cylinders and that the shortage is being ‘artificially created' thanks to panic booking during festivals. “There is no shortage of domestic cooking gas in the country and temporary backlogs, largely due to logistic issues, will be wiped out by the month-end,” Mr Subir Roy Chaudhary, Chairman and Managing Director, Hindustan Petroleum Corporation, said here on Monday.

“We are confident that we will meet demand. However, we cannot cope with panic booking and it will be very difficult to maintain the distribution system,” he added. Demand during April-September increased by 10 per cent.

“We have increased supply to meet the demand which has increased by 15 per cent during the festive season. It may now come down to 11 per cent by the end of this month,” Mr Roy Chaudhary said.“We have got 12 crore customers and are covering 50 crore of the population. The LPG cylinders are normally delivered within 48 hours of booking,” he said.

Mr S. Sundareshan, Petroleum Secretary, had a review meeting with the chiefs of oil marketing companies in New Delhi to ensure constant LPG supply across the country. It was decided that the heads of IndianOil, HPCL and Bharat Petroleum Corporation would monitor the situation daily with regional offices checking the backlog. All the bottling plants, working on a single shift, are being converted to double shift and without weekly offs till this backlog is completely liquidated.

LPG losses

LPG losses for the three oil majors are at an average of Rs 180 per cylinder which works out to Rs 8,700 crore for this fiscal. With demand expected to increase, the companies are ramping up import facilities, Mr Mr Roy Chaudhary said. Mr B. Mukherjee, Director (Finance), said the total under-recoveries for HPCL in the first half totalled Rs 6,833 crore of which it has received Rs 2,278 crore from upstream companies and Rs 2,174 crore from the Centre as part-compensation.

“It is yet to be seen what the balance amount would be as the account books are still to be closed,” he said. The total fuel losses for the three oil majors in the first half of this fiscal are Rs 31,372 crore.

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India’s Most Valuable Brands in 2010  

IndianOil: One of ‘India’s Most Valuable Brands 2010’

An iconic, heritage and much-loved brand in the country, IndianOil has once again been recognized as one of the TOP 5 of India’s most valuable corporate brands.

In a detailed study conducted by Economic Times in association with Brand Finance, ‘India’s Most Valuable Brands 2010’, IndianOil was ranked 5th with a current value of $ 4,304 million. Besides IndianOil, other corporates in the top 5 list include Tata Motors (1), RIL (2), SBI (3) and TCS (4).

Brand Finance is the world’s leading brand valuation consultancy, which provides consultancy on the ways and means to maximise brand value for the benefit of a company. During the study ‘India’s Most Valuable Brands 2010’, only firms listed on BSE were taken into account. Besides, firms comprising a number of stand-alone brands were eliminated. In order to ascertain the five years of historic revenues and current market value of the firms, Bloomberg and other publicly-available sources were considered, wherein public data encompassing broker reports, annual reports and market research were used. Brand Finance uses the ‘Relief from Royalty’ — a simple approach that assumes that a company does not own its own brand and calculates how much it would need to pay to license it from a third party. The present value of that stream of (hypothetical) royalty payments represents the value of the brand.

Brand Finance started its annual report on the world’s most valuable brands in 2006 and has valued leading global brands like Wal Mart, Coca-Cola, IBM, Microsoft and Google to name few among the list of 500. This interpretation is not only directed towards highlighting the country’s most powerful brands, but also at initiating a discussion on what is exactly valuable for Indian firms.

(Source: The Economic Times), New Delhi, October 25, 2010

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Spreading wings over solar, wind, nuclear and gas hydrates  

‘R-LNG is the answer as natural gas output could stagnate in 5-6 years’ says Chairman in an exclusive interview with FE

The Financial Express, New Delhi, October 25, 2010

B M Bansal


India’s largest commercial enterprise IndianOil (IOC) is rapidly diversifying into all sources of energy generation seeking to meet the needs of the second fastest growing major economy in the world. For Brij Mohan Bansal, the man at the helm, this is the journey towards making IOC, “the energy company” of the nation. This chemical engineer from Delhi IIT with more than 35 years of experience in the hydrocarbon sector, is now presiding over IOC’s consolidation of traditional business of refining and marketing crude oil derivatives, while at the same time, spreading its wings over new sources of energy such as solar, wind, nuclear and gas hydrates. Bansal spoke to FE’s Gireesh Chandra Prasad and KG Narendranath about IOC’s journey forward. Excerpts from an interview:

How do you plan to use the proceeds of your follow-on public offer, which is expected by the end of this fiscal?

We will use a part of the proceeds to lower our debt burden, which is about $10 billion at present. Right now, our debt equity ratio is 0.9%. We would like to bring it down so that even after new projects, our debt equity ratio would stay at a maximum of 1. We have many new projects. A naphtha cracker unit and a polymer unit in Panipat have already been commissioned. It produces paraxylene using captive naphtha from our refineries, which is subsequently converted to purified trephthalic acid or PTA. In addition to that, some new petrochemical projects are in the approval stage.

How do you assess the scope for capacity creation in the PTA business, considering the huge capacity that private sector player Reliance, already has?

The proposed plant in Gujarat has a 600,000-tonne capacity. It will help bridge the gap between our capacity and those of private players.

The potential for growth is quite good in this segment. PTA is the raw material for synthetic textiles. The sector is growing at 10-12% a year, a rate higher than the growth in cotton textiles, even as India’s cotton production has increased substantially in recent years. China has a big presence in the global synthetic textiles market. Increasingly, synthetics are replacing cotton, even as cotton textiles are becoming a niche market. Earlier, cotton was the poor man’s cloth and synthetic was the choice of the well off. Now, this has reversed.

Once our new plants get commissioned, our total PTA capacity would be roughly 1.1 million tonne a year.

Also, because of our lack of strength in synthetics, are we not doing as well as China in export markets?

Yes, China and Indonesia have large PTA capacities which help them in texitle business also.

How do you compare your refining margins with those of your competitors?

Our refining margin is better compared to that of other public sector oil marketing companies (HPCL and BPCL). But if you compare our plants with those of the private refiners (like Reliance), they have the advantage of size and state of the art technology and hence, their refining margin is slightly better than ours. But our large refineries in Panipat and Mathura are competing with them. Our new refineries are going to be larger in size.

Do you have plans of setting up refineries abroad with a focus on the export market?

Earlier, we studied the option of setting up refineries in a few countries, including Nigeria and Turkey. But suddenly in 2008, crude oil price went up sharply and under-recovery became very high, straining our finances and halting our expansion plans. We cannot make huge investments abroad unless we are sure of our cash flow. Even now, (after petrol-price deregulation), we are not certain about our cash flow due to the high under-recovery in diesel, LPG and kerosene.

If diesel is also de-regulated, will you revive your overseas expansion plans?

Unless the under-recovery is taken care of in the Union Budget or there is certainty on how it would be compensated, OMCs cannot make investments that have long-term implications.

So your overseas expansion is contingent on further deregulation of fuel pricing?

Yes. There should be some kind of certainty to oil marketing companies on how they would be compensated for their under-recovery. We are not therefore, making new capital expenditure in downstream sectors abroad.

This, however, does not apply to our upstream expansion abroad. Our global projects in hydrocarbon exploration are on. If we make a discovery there, we will surely spend on developing and putting that field on production.

There is an intense global competition for acquiring producing blocks. Don’t you also focus on such fields? What is your budget for E&P ventures abroad?

We are also looking at a number of producing blocks. We have not been able to agree on the price being asked for some of these blocks. We do not want to acquire blocks at any price. We are ready to spend up to $1 billion (for E&P ventures abroad). But if it comes to paying up to $1.2-1.3, we would still consider it if the block is so promising. In Venezuela, we have (along with ONGC Videsh, Oil India Ltd) acquired a block recently with hydrocarbon discovery.

Currently, we are in negotiations for a couple of blocks but it is too early to discuss them. Going forward, we see IOC not only as an integrated company, but also as “the energy company” of the country. We are now present in alternative sources of energy as well, including bio-diesel, wind power and solar power. Some projects such as the one on wind power is already commissioned, while some others are in the approval stage. A solar power project is in the approval stage, which will be implemented now. We are also getting into nuclear energy with 26% equity with the Nuclear Power Corporation of India.

What about shale gas (unconventional gas from fine grained sedimentary rocks) and gas hydrates (an ice like formation in which a gas molecule is caged by water molecules around it)?

Shale gas is a new area. The available technology is few and the return may not be as high because the cost of production itself is high. But in India, interest in shale gas is growing with the government planning to come out with a bidding round next year.

On gas hydrates, we are doing the research and development work. India has vast potential in gas hydrates (with abundant reserves found in Krishna Godavari basin and near Andaman Islands) and we are one of the pioneers in this area. Gas hydrates can potentially reduce our over-dependence on coal. It would, however, take some time for the technology to fructify in the commercial arena.

In conventional gas too, we have our presence. We have made discoveries in a few blocks, for example, in Mahanadi, where IOC’s share is 20% with ONGC as the partner. We have also made a small discovery in the Assam region. Besides, we are already marketing 10 million standard cubic metres a day (mmscmd) of re-gassified liquefied natural gas (RLNG). Now, they (Tamil Nadu Industrial Development Corporation Ltd (TIDCO) are building an LNG terminal at Ennore. (IOC and TIDCO signed a deal this August to set up a-2.5 million tonne a year LNG import and re-gasification terminal and a gas fired power plant that is expected to benefit Karnataka, Andhra Pradesh, Tamil Nadu and Puducheri.)

Do you think that considering the volatility in RLNG prices, the likely re-configuration of the fuel mix and the requirement of infrastructure facilities for re-gasification, it will be a viable business for the future?

Indeed it will be. Natural gas production in the country is expected to stagnate after five-six years, while demand for it will be high. In that case, RLNG is the answer. (Now the country produces a little less than 150 mmscmd of gas and imports about 25-30 mmscmd of RLNG).

Do you expect any policy change before your follow on public offer later this fiscal, which could help the scrip reflect the company’s intrinsic strengths?

We expect clarity on the sharing of under-recovery (losses arising from selling fuel below cost). We also understand from the media about the government’s intention to let natural gas producers discover the sale price of gas from the market, which will be approved by the government while allocating the fuel to various consumers.

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Coal India IPO over subscribed by 15 times  

 Coal India IPO over  subscribed by 15 times

India's biggest initial public offering (IPO) has been billed a game-changer and it is living up to all the hype. The Coal India issue witnessed unprecedented demand, with the qualified institutional book, which includes the foreign institutional investors, mutual funds and insurance firms, seeing subscriptions of over 24 times.

The non-institutional quotas too have seen robust demand of 25 times. The retail book too has been fully subscribed taking the overall subscription for the issue to over 15 times. The government is clearly overjoyed by the blockbuster response to the issue.

Excerpts from After the Bell on CNBC-TV18 Watch the full show »

Giving a thumbs up to the issue, Finance Minister Pranab Mukherjee says, “This is a premier public sector organisation. It speaks that how much confidence the PSUs and private sector units enjoy with the prospective investors.”

Divestment secretary Sumit Bose too says the government is very happy particularly with the phenomenal response that the IPO has received from the retail segment.

Both, employees and retail investors are being given a 5% discount to the issue price. “We will continue to have an employee quota in all issues. The idea is to give employees an opportunity to partake of these shares. We hope they more employees will participate,” Bose says.

Talking about other issues in the pipeline, he says, Power Grid is the next public sector issue that will hit the markets. “Manganese Ore, SCI and Hind Copper issues will happen this year, while, IOC, SAIL and ONGC issues are scheduled for the next fiscal. This gives us the confident that we will achieve Rs 40,000 crore divestment target.”

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Sudhir Vasudeva -the new Chairman and Managing Director of ONGC  

Sudhir Vasudeva selected to head ONGC


NEW DELHI: Sudhir Vasudeva , head of offshore oil and gas fields of Oil and Natural Gas Corp (ONGC), was on Tuesday selected to head the nation's most valuable state-owned firm by market cap. The Government's headhunters Public Enterprise Selection Board (PESB) selected Vasudeva, 56, to takeover as Chairman and Managing Director of ONGC after interviewing eight candidates here today, sources in know said.

PESB named R K Tyagi, Chairman and Managing Director, Pawan Hans Ltd Chairman and an ex-ONGC, as its number two choice to head ONGC when the present incumbent R S Sharma retires on January 31, 2011 on attaining superannuation age of 60 years. Vasudeva is currently Director (Offshore) in ONGC and is incharge of fields like the nation's prime Mumbai High where he has deployed innovative approach and new technology to arrest decline in output from the ageing fields.

Rabi Narayan Bastia, the man who discovered India's biggest gas field, was among the eight candidate who appeared for personal interviews before the PESB board. Bastia, who quit ONGC in 1996 to join Reliance Industries , is credited with discovering the gigantic Dhirubhai-1 gas field at the Krishna Godavari basin deep-sea block D6 in 2002. It was ranked as the biggest gas find in the world over the last decade.

Sources said that others who appeared before for PESB interview included ONGC Director (Finance) D K Saraf, Oil India Director (Exploration) B N Talukdar, Imperial Energy CEO Ashok Verma and GAIL Executive Director B N Trivedi. ONGC Videsh Managing Director R S Butola, who along with oil regulator DGH head S K Srivastava were among the 19 candidates applying for the top job at ONGC at close of application in May, did not attend the interview. Butola was last month selected to head Indian Oil Corp.

Srivastava too did not attend the interview today. Sources said that Vasudeva, who has being trying to put back on track the derailed redevelopment of ageing fields like Mumbai High since taking over as Director (Offshore) on February 1, 2009, will as head of ONGC need to get the company's exploration strategy right. Oil Minister Murli Deora had at a function in Mumbai yesterday chided ONGC for not discovering enough new reserves. He told an audience, which included whos-who of oil and gas industry in India, that he does not accept dividend cheque from ONGC as the company has not done enough to raise oil and gas output. Courtesy:ET

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Indian Oil IPO to raise about Rs 19,000 crore  

Indian Oil Corp may hit Street in Jan with Rs 19,000-crore offer

NEW DELHI: State-run Indian Oil Corp (IOC) will start short listing merchant bankers next week for its public issue that is likely to raise about Rs 19,000 crore, making it the largest-ever equity offer in the country, three government officials and a company executive said. Half the proceeds would go to the government, which will offload 10% of IOC shares to help it meet its disinvestment target of Rs 40,000 crore this fiscal. In addition, the company will issue new shares amounting to another 10% of its equity capital to help the country’s largest state refiner build new units. The Rs 19,000-crore public offer, which would top Coal India’s Rs 15,000-crore offering, may hit the market by January, adding to the rush of equity and debt issues aggregating to an estimated Rs 80,000 crore in the next six months. Coal India managed to sell about a third of its shares offered in the IPO on Monday, the first day of the issue. “The Cabinet note is under circulation. After views of relevant departments are incorporated, the Cabinet’s approval will be sought,” an oil ministry official said, requesting anonymity.

Confirming the development, a senior IOC executive said the company was in the process of appointing a merchant banker. “If things move as per the present plan, the company may enter the market in January 2011,” a government official directly involved in the stake sale said. “The company has planned to issue expressions of interest for the appointment of merchant bankers sometime this week,” he said. As per the official, IOC is already working on the draft red herring prospectus internally and once the bankers are appointed, they will finalize the prospectus and file it with market regulator Sebi. “Subsequently, the company will enter the market shortly as it qualifies under the fast-track norms,” he said, referring to Sebi’s rules that allow some companies to enter the market immediately after filing the prospectus. There are chances that the IOC issue will enter the market even before the Rs 8,000-crore issue of SAIL, scheduled for January, the official said. The government will give priority to the IOC issue, as it would fetch the exchequer over Rs 9,000 crore while in case of SAIL, the government’s share would be Rs 4,000 crore, he added. Of the disinvestment target of Rs 40,000 crore in the current fiscal, the government has already raised Rs 2,090 crore by selling stakes in Satluj Jal Vidyut Nigam and Engineers India .

After issues of Coal India and Power Grid, the government would have mopped up about Rs 22,000 crore. After IOC, Hindustan Copper and Manganese Ore, the total proceeds will cross Rs 35,000 crore. And with the SAIL issue, the government will achieve its disinvestment target. At the last closing price of Rs 405.50 per share on Monday, the market capitalization of IOC is Rs 98,453 crore. At this price, the offer size will be Rs 19,690 crore. “Since the issue is a follow-on public offer (FPO), it may be priced at a marginal discount of 5-10%, resulting in an offer size of Rs 17,700-18,700 crore,” said another official involved in the sale of government stakes. Following the issue, the government’s stake will come down to 62.65% from 78.92% at present.

Of the current float size of 21.08%, ONGC owns 8.77% and another 2.42% is owned by the two trusts created after the merger of BRPL and IBP. In order to issue 24.27-crore fresh shares, the IOC board has already approved the increase in authorized capital to Rs 6,000 crore—comprising 600-crore equity shares of Rs 10 each—from the current authorized capital of Rs 2,500 crore. After the issue, the paid-up capital of the company will increase to Rs 2,670 crore from the current level of Rs 2,427.90 crore.

By….Arun Kumar & Rajeev Jayaswal / The Economic Times..newspaper

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Why you should subscribe IPO Coal India?  

Coal India is the only unlisted navaratna public sector company.

Coal India is the largest coal mining company in the world in terms of reserve-base and annual production.

This is by far the largest IPO in India (Rs 15,100 crore).

Coal India is a holding company for 11 subsidiaries which are engaged in the development and operation of coal mines as well as exploration and design, making it an integrated coal mining company.

Coal India is a near monopoly with 82 per cent share of India's total coal production.

Its fundamentals are strong, given the widening demand-supply gap for coal and the company's improving operating metrics.

High return on equity (38 per cent for 2009-10), despite significant cash balances, too bolster prospects.

At the likely cut-off price (upper end of band), after factoring in a 5 per cent discount, the price for retail investors works out to Rs 232.75.

This price values the company at a modest 10.8 times the estimated FY-12 earnings (consolidated).

 The EV/EBITDA for FY-12 works out to 4.8 times. This places it at a discount to global peers such as China Shenhua Energy, China Coal Energy, Yanzhou Coal Mining (China) and Peabody Energy (US).

According to Bloomberg estimates, the EV/EBITDA multiple for the calendar year 2011 for these companies were in the range of 6.5-9 times.

The company has huge cash coffers of Rs 39,000 crore (around Rs 62/share) to fund future capex and overseas mine acquisitions.

According to SRK Consulting, a UK-based mine auditor, the current resource base of Coal India is 64 billion tonnes with 21 billion tonnes of extractable reserves. The extractable reserves are sufficient to sustain current levels of production for 50 years.

Coal India operates 471 mines, of which 163 are open cast mines, 273 under-ground and 35 mixed mines. More than 90 per cent of the present production comes from open cast mines, which have a low stripping ratio. Stripping ratio is the ratio between thickness of coal seam and above lying strata.

This reduces the time required for development and allows high mechanisation that improves productivity. This improvement in development and operational parameters has been the key factor underpinning Coal India's financial performance. Despite having two sick subsidiaries (negative net worth) under its belt, it continues to be among the most profitable companies.

The sales grew at 14 per cent, compounded annually over the period FY2007-10, while the net profit clocked a 32 per cent growth. The company's operating margins stood at 22 per cent for the year ended March 2010, which is expected to improve on the back of rising realisations and falling costs.

Of the 142 mines to be tapped over the next decade, 77 are being developed and have already received environment approvals. Almost 90 per cent of the land for the projects coming up in Eleventh Plan is also owned by the company, reducing execution risks.

Demand-supply gap

According to Ministry of Coal, the domestic demand-supply gap of coal for 2009-10, at 67 million tonnes or 11.5 per cent of demand, was bridged through coal imports.

The gap is expected to widen to over 120 million tonnes by 2012 despite domestic production ramping up.

Coal India may see its production increase from 435 mtpa (million tonnes per annum) to 643 mtpa (a 6 per cent CAGR) over the next seven years.

Demand on the other hand is expected to grow in double digits, translating into better realisations. According to the offer document, non-coking coal and coking coal demand are expected to grow at a compounded rate of 11.3 per cent and 9.7 per cent up to FY-2014.

The company is looking at overseas acquisitions to augment supplies. It entered Mozambique through its subsidiary to develop coal in that country and is exploring opportunities in Indonesia, Australia and the US. While the majority of power projects are attempting to tap captive coal mines, these projects are still in the drawing board stages. In the near term, they have to turn to imports or buy in e-auction at market determined rates (from which CIL is a beneficiary).

To improve the production and reduce costs, Coal India is reviewing legacy mines and negotiating with buyers for higher coal prices that can ensure at least a 12 per cent return.

The proportion of expensive under-ground mines has fallen from 13.3 per cent in 2005-06 to 10 per cent as of March 2010.

The impact of this on the cost structure is quite high as the current cost of mining per tonne from open-cast mines is at Rs 520 per tonne compared to Rs 2,145 per tonne in under-ground mines.

Mechanised open cast mining trims employee costs for the company; the employee base is already down 3.7 per cent over the last three years and a net reduction of 11,000 employees is expected this year; from the current base of 4 lakh.

CIL also plans to add 111 million tonnes of coal washeries which would improve the beneficiated coal output, which has higher calorific value.

The average price realised for beneficiated coal (Rs 2134/tonne in FY-2010) is almost double the average price for the entire output, with only marginal addition to costs for washing. Currently the high grade coal is sold at import parity price unlike cost plus in case of low-grade coal.

The proportion of coal sold through e-auctions is also expected to go up to 20 per cent from the current 13 per cent, owing to the demand-supply gap.

While the existing fuel supply agreements (FSAs) with power projects stipulate that Coal India meet 90 per cent of its commitment or else pay a penalty to the clients, the commitment is lower at 60 per cent for non power sectors.

New power FSAs too have a 50 per cent commitment. This allows room for Coal India to sell larger quantities through e-auction.

Execution delays may crop up owing to regulatory, legal and environmental hurdles, land acquisition delays, political risks and social disturbances.

Geographical concentration of resources may impose logistical problems. ECL and BCCL, wholly owned subsidiaries, despite turning profitable recently have negative net worth of Rs 6015 crore and Rs 5400 crore respectively. These companies' contributed 36.4 per cent to the overall employee costs but only 13.4 per cent to the revenues of the parent.

The new MMDR Bill may require Coal India to set aside 26 per cent of the profits for resettlement and rehabilitation activities of project affected persons. However, given the company's monopoly status and pricing power, the additional costs can be passed on to consumers.

The accounting treatment for over-burden removal may change once IFRS accounting principles are adopted.

This would mean charging the expense in the same accounting year, instead of spreading it over the life of the project. There may be a dip in profits once IFRS is adopted from April 2011 and profits may also be lumpy on account of the same.

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Pakistan de-regulates of oil prices  

PAKISTAN : Oil prices deregulation approved

ISLAMABAD The Economic Co-ordination Committee (ECC) of the Cabinet has approved, in principle, de-regulation of oil prices and Inland Freight Equalisation Margin (IFEM). The ECC has also approved to fix margins of oil marketing companies (OMCs) and dealers which will result in reduction of oil prices by 35 paisa per litre if calculated based on price of October, an official of Petroleum Ministry said.

The ECC has also directed Petroleum Ministry to seek ratification of decision from the Cabinet before its implementation. "IFEM will fall in controlled-deregulation because the Oil and Gas Regulatory Authority (Ogra) will notify it from one destination to other destination but so far as prices of petroleum products are concerned, refineries and OMCs will determine the prices on monthly basis whereas Ogra will monitor it," the official said, adding that imported price will be benchmark for prices and refineries as well, as OMCs will not be allowed to charge over set 'bench mark price' to protect consumers interests. He said that in new oil pricing formula, the role of Ogra was more effective.

The official said that in the new approved oil pricing formula, the distortion in prices between locally produced and imported product had been removed by setting 'actual import price' as bench mark for prices of all petroleum products. The government had fixed margins of OMCs and dealers, which will be slashed from existing 1.75 per litre to Rs 1.50 per litre and Rs 2.17 per litre to Rs 1.87 per litre on petrol respectively. The margin of OMCs on HOBC will decline from existing Rs 1.98 per litre to Rs 1.72 per litre and dealers margin from existing Rs 2.48 per litre to Rs 2.15 per litre.

Oil refineries have been urging government to link price of motor gasoline with 'actual import price' to secure them from loss of Rs 3 to Rs 4 per litre. "Now, the distortion impact in price of petrol between locally produced and imported has been removed after fixing 'actual import price' as bench mark for motor gasoline," the official said, adding that due to difference between imported and locally produced motor gasoline, OMCs had submitted claims to release money on account of price differential claims. "After new pricing formula, the government will have to face no burden on account of price differential claims on imported motor gasoline," he added. Courtesy: BUSINESS RECORDER

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Retired bureaucrats to fill the post of independent directors in public sector firms  

Retired bureaucrats board market-bound PSUs

NEW DELHI: The government is hand-picking retired bureaucrats to fill the post of independent directors in public sector firms slated to hit the market this year, diluting the spirit of the norms governing such appointments in the rush to meet the Rs 40,000-crore divestment target. Clause 49 of the listing agreement requires companies to have independent directors in half of the board positions. The government is under pressure to fast-track these appointments as it could raise only Rs 2,090 crore so far this year from PSU selloffs. Several companies that will be taken up for divestment in the coming months do not have the required number of such directors.

The move to appoint former bureaucrats as independent directors may hamper the autonomy of these PSUs in the long run, said a senior official with the department of public enterprises (DPE), the nodal agency for nodal agency for all central PSUs. “As most of these officials have been in the government, how do you expect them to exercise their independent view,” he said, requesting anonymity. “There can also be vested interests involved.”

A quick look at the recent director-level appointments reveals that the government has preferred to name former bureaucrats, rather than searching for competent people from the industry. Recently, the government appointed Sheela Bhide and AK Rath as independent directors at Coal India, slated to list this month. Both are former Indian Administrative Services (IAS)officers. A large number of retired bureaucrats are serving as independent directors on the board of several PSUs such as Shipping Corporation of India, which recently appointed former financial services secretary Arun Ramanathan on its board. Satluj Jal Vidyut Nigam, which hit the bourses in April 2010, appointed two independent directors in March — Ravi Dhingra and Bharti Prasad — again, both are former IAS officers.

The trend is also evident in the appointment of directors in National Hydro Power Corporation, which hit the bourses in August 2009. Of the six directors, two are ex-IAS officers. “A company needs to make a judgement on the purpose of appointing an independent director,” said Planning Commission member Arun Maira. “Does it want the independent directors to add value to the company by backing its judgment by his/her sound domain knowledge, or is the independent director being appointed to provide a moral compass to the company.”

Chiefs of several PSUs, however, do not feel that having former bureaucrats as independent directors will undermine their autonomy. “One should understand that these people know in and out of the government functioning. There are certain issues in which their expertise will come in handy,” said the chairman of a PSU, who asked not to be named. There are, however, certain reservations within the government on such appointments. The DPE has, time and again, raised the issue of freeing the appointment of independent directors from the administrative ministries of these companies. The Planning Commission had also earlier suggested an expert panel of independent directors created by an autonomous body.

Although DPE maintains a data bank of independent directors with names such as TR Doongaji (MD, Tata Services), Aman Mehta (ex-CEO, HSBC) and CJ George (MD, Geojit Financial Services), PSUs rely more on the diktat from their administrative ministries. According to the current practice, administrative ministries recommend names of three candidates for the post of an independent director in a PSU. A search committee comprising officials of DPE and PESB selects one of them. The administrative ministries, thus, indirectly control the appointment of independent directors in PSUs.

By…….Dheeraj Tiwari & Subhash Narayan / The Economic Times

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Oil minister to felicitate Indian winners of Commonwealth Games  

Murli Deora to felicitate CWG winners

Rajeev Jayaswal / The Economic Times

NEW DELHI: Oil minister Murli Deora will felicitate Indian sports-persons at a gala event next month for their remarkable performance at the Commonwealth Games. The event, where cricket superstar Sachin Tendulkar is likely to be present, will not only be about mere praise. The oil ministry will give Rs 10 lakh to winners of gold, Rs 7.5 lakh to the silver medalists and Rs 5 lakh to those who got bronze in the games.

“This will not be a one-time thing. We will institutionalize it to encourage sports. Our oil PSUs are already contributing in this field,” the minister told ET. The event is not just a reaction to the successful conclusion of the Delhi Commonwealth Games. “We had announced the prize much before the event. Yes, I was inspired by the former prime minister Indira Gandhi,” he added. Deora recalled his conversation with the then Prime Minister Indira Gandhi, 27 years ago. “It was July 1984. If I’m not mistaken it was July 28, the day US president Ronald Reagan officially opened the Los Angeles Olympic games. Mrs Gandhi was in Mumbai and while travelling in the same car with her she told me that sports are a cohesive force, the spirit that binds the nation,” he recalled.

The Los Angeles 1984 Olympics were legendary. The Games notched a healthy profit for the first time to become the model for the future and were a great success despite a boycott by the Soviet Union. They also saw the rise of a superstar Carl Lewis who matched the Berlin 1936 achievement of Jesse Owen. Earlier, railway minister Mamta Banerjee had announced awards for those medal winners in the Indian contingent who worked for the railways. The awards would be Rs 10 lakh for gold medal winners, Rs 6 lakh for silver and Rs 4 lakh for bronze. Defence minister AK Antony has also announced cash awards of Rs 12 lakh for winners of gold medals, Rs 7 lakh for silver medals and Rs 5 lakh for bronze.

Among the state governments, West Bengal will felicitate the 10 Commonwealth Games medallists from the state and give them Rs 5 lakh for gold, Rs 3 lakh for silver and Rs 2 lakh for bronze medals. Uttar Pradesh chief minister Mayawati announced that athletes from the state who have won medals will be given Rs 15 lakh for gold medals in a singles event and Rs 10 lakh and Rs 8 lakh for silver and bronze medals at the CWG while Andhra Pradesh chief minister K Rosaiah announced a prize of Rs 10 lakh for gold medal winners, Rs 7.5 lakh and Rs 5 lakh for silver and bronze medal winners. Sukhbir Singh Badal, deputy chief minister of Punjab announced cash prizes of Rs 7 lakh for gold medal winners, Rs 5 lakh for silver and Rs 3 lakh for bronze while Karnataka chief minister BS Yeddyurappa, too, announced cash prizes for the sportspersons who have won medals.

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Obama administration approved production and sale of gasoline with up to 15 percent ethanol for 2007 and newer motor vehicles  

US : Ethanol15 approved


The lack of general public understanding of the differences between E10 and E15 increases the risk that boaters may misfuel their engines once E15 becomes readily available.Washington, D.C. — Despite broad-based opposition that included sportsmen, environmentalists and industry, the Obama administration has approved production and sale of gasoline with up to 15 percent ethanol for 2007 and newer motor vehicles. Until the Oct. 13 announcement by the U.S. Environmental Protection Agency (EPA), the maximum allowed had been 10 percent.

"Thorough testing has now shown that E15 does not harm emissions control equipment in newer cars and lights trucks," said EPA Administrator Lisa Jackson. "Wherever sound science and the law support steps to allow more home-grown fuels in America's vehicles, this administration takes those steps."

But just because the fuel is "home-grown" does not mean that it's a wise move, insist critics who include the National Marine Manufacturers Association, Friends of the Earth and the National Petrochemical and Refiners Association, among others. "We are extremely disappointed that EPA is allowing this fuel to enter the market without the appropriate scientific data or consumer and environmental safeguards," said NMMA President Thom Dammrich.

"This decision not only adversely impacts marine manufacturers, but creates a significant risk of misfueling for the nation's 66 million boaters who will be left holding the bag for performance issues and expensive repairs. We are astonished that EPA has decided to move forward with a fuel that will increase pollution and damage hundreds of millions of existing products."

Margaret Podlich of BoatU.S. echoed Dammrich's concerns, adding that the newest marine engines are warranted up to only 10 percent ethanol. "Many boaters already are working hard to keep ethanol out of their engines," she said. "They'll have to work even harder now." For older marine engines, as well as lawnmowers and other products that burn gasoline, the problem with ethanol is that it is a potent solvent. Along with destroying rubber and plastic parts, it dissolves gunk from tank walls, which then blocks fuel lines.

Of course, anglers and other boaters will not be required to run their engines with E15, just as they were not with E10. But adding another option at the pumps creates complications that the EPA has not addressed. "We understand that E10 is in about 75 percent of gasoline now," Podlich said. "There are some areas where boaters can find ethanol-free and others where they can't." Courtesy: BASSMASTER

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Petrol price hike in Delhi, Kolkata, Mumbai & Chennai,  

1. In the second round of increase in petrol prices since the government lifted its controls on the fuel, state-run Bharat Petroleum has decided to raise its pump price by 70 paise, or 2%, a litre from Friday midnight.

2. IndianOil Corporation, the biggest fuel retailer, will raise its price from Saturday midnight
3. Hindustan Petroleum will also raise price.

Price after the hike
unbranded petrol will cost approximately

Rs 52.53 a litre, in Delhi,
Rs 56.39 in Kolkata,
Rs 56.95 in Mumbai 
Rs 57.01 in Chennai.

The latest price revision comes less than a month after the last increase. The three state retailers had raised prices by 27 paise a litre on September 20.

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IOC may acquire 49% stake in the joint venture with NPCIL  

IOC may acquire 49% in NPCIL JV

MUMBAI: Indian Oil Corporation (IOC) may acquire up to 49% stake in its proposed joint venture with Nuclear Power Corporation of India (NPCIL) as against the 26% holding announced earlier, says a senior NPCIL. “IOC has communicated to us internally that it will acquire 49% stake in the proposed venture which will own the seventh and eight unit of Rajasthan plant of 700 mw each,” said JK Ghai, director (finance), NPCIL.

State-run IOC had earlier said that it would invest Rs 961 crore for 26% stake for setting up the 1,400 mw nuclear power project with NPCIL. The project is being set up at a total outlay of Rs 12,000 crore, to be financed in the debt-to-equity ratio of 7:3. The state-run nuclear power producer is also forming joint ventures with other public sector enterprises such as National Aluminium Co and NTPC .

NPCIL may exceed its annual generation target of 22 billion units for 2010-11 due to availability of imported fuel, Mr Ghai said. In April-September, the utility generated 10.85 billion units of electricity, up 5% from the target for the period. “With this trend, the total generation in 2010-11 is expected to be about 10% higher than the target fixed for the corresponding period,” Mr Ghai said.

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Fast track exploration of Shale gas- A road map to chalked out soon  

Petroleum Ministry chalks out road map for shale gas exploration

Mr Jitin Prasada

Shale gas is the next buzz word in the Indian hydrocarbon scene. To facilitate fast track exploration of Shale gas, the Ministry for Petroleum and Natural Gas expects that the process of carving out suitable blocks will be completed by April 2011. This would allow floating of the first round of auctions of shale gas blocks in August next year.“The Government has worked out a road map based on which, by May 2011, we hope to have a policy framework in place exclusively for shale gas, so that the blocks can be put on offer by August,” the Minister of State for Petroleum and Natural Gas, Mr Jitin Prasada, told Business Line.

“The framework will be formulated after studying the international fiscal and contractual regimes for shale gas development,” he said adding that “Resource assessment and identification of Shale gas prospective areas is expected to be completed by March 2011.”The Directorate-General of Hydrocarbons (DGH) is working on the policy framework, which would also need to define the role of the State Governments in the development of shale gas. The floating of blocks will also mean that domestic companies such as Reliance Industries Ltd that have been acquiring shale gas assets overseas can look for opportunities in the country.

Shale gas is an unconventional source of energy which is found in non-porous rock. It has become an important source of natural gas in the US and interest in it has spread in Canada, Europe, Asia and Australia. In India, shale gas deposits are found in the basins of Gondwana (Central India), Assam-Arakan (North-East), Cambay (Gujarat), Rajasthan, Krishna Godavari (East Coast) and Cauvery.Hydrocarbon exploration and production companies such as ONGC (in West Bengal, Jharkhand and Cambay Basin), Cairn India (Rajasthan), and Joshi Technologies International (JTI), a multi-national hydrocarbon producer (in Cambay Basin), are working on shale gas prospects in the country. Currently, gas consumption in the country is 168 mscmd, of this about 130 mscmd is produced domestically. By 2015, the demand for gas in the country is estimated to be approximately 300 mscmd.

Technology support

To get better technology support, which would help in bringing down the cost of production of Shale gas, an accord is also expected to be signed on shale gas technology during the US President Barack Obama's visit next month. The US has successfully exploited its shale gas reserves, which currently account for 20 per cent of its gas production. With different types of gas sources – natural gas, R-LNG, coal bed methane, and shale gas – the pricing of the fuel will also play an important role. Cost to develop shale gas has come down over the years. Four years ago, according to studies, a shale gas project was viable at a gas price of $ 6/mbtu and now it is viable at $3/mBtu.

………by…….Richa Mishra…..New Delhi, Oct. 10….from the pages of HINDU BUSINESS LINE newspaper.

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Bergamo Acquisition Corp to set up mega solar thermal power plants in India  

Oct 8 (ANI): U S based multinational energy company, Bergamo Acquisition Corp, today announced ambitious plans to set up mega solar thermal power plants in India.

Hillard Herzog President and C E O of the company said: "The company has a comprehensive plan to set up Solar Thermal Power Plants in India up to a total capacity of 1000 MW."

"The company has identified six Indian states for the first phase under which it will set up 100 Mega Watt solar thermal power plants in each state with an investment of 400 million US dollar in each plant," he added.

He said that company would set up plant at around one lakh square land, which will create an employment opportunity to around 10,000 people of the region.

"The company has already initiated to procure all the necessary certifications and permissions and planning to launch its products by mid of November. The company will be setting up the production unit to manufacture the solar products in India by March, 2011," he added.

The company has set up a joint venture company Bergamo Harbinson Energy Limited, Gurgaon, with Esoft Informatics Private Limited, a software company based in India.

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Reliance Industries Ltd's legal battle over the Uttar Pradesh government's decision to impose 21 per cent value-added tax on gas  

RIL tax battle with UP holds up gas sale to NTPC, IOC

Reliance Industries Ltd's legal battle over the Uttar Pradesh government's decision to impose 21 per cent value-added tax on gas is holding up supply to NTPC's two power plants and Indian Oil Corporation's Mathura refinery, despite a group of ministers making allocation to them. While IOC has now approached the Ministry of Petroleum and Natural Gas for permission to receive an equivalent quantity of gas at its Panipat refinery, NTPC is hoping to sign an agreement with RIL for the uncontracted quantity soon.

RIL supplies 3.57 million standard cubic metres a day (mscmd) of gas to four fertilizer companies in the state — to Iffco for its Aonla and Phulpur units, Kribhco for Shahjahanpur, Indo Gulf Fertilizer for Jagdishpur and Tata Chemicals for Babrala. Senior officials said pending resolution of the tax dispute, being heard in the Lucknow bench of the Allahabad high court, RIL was seeking bank guarantees from existing customers for the tax incidence on the quantity sold since April 2009. When asked, an RIL spokesperson did not comment. According to a decision of an empowered group of committee, IOC is to get a total of 1.6 mscmd of gas from Reliance's D6 block off Andhra. It is receiving about 0.9 mscmd gas at its Baroda refinery and is still awaiting signing of a gas sales purchase agreement with RIL for the remaining 0.7 mscmd.

In the case of NTPC, the EGoM allotted a total of 4.46 msmcd gas in two tranches. A gas sales and purchase agreement has been signed for 2.3 mscmd, with the two companies yet to sign an agreement for the remaining 2.16 mscmd. Of the uncontracted quantity, NTPC's Auraiya plant in UP has been allotted 0.26 mscmd and the Dadri plant another 0.54 mscmd. A senior NTPC executive added there were issues other than taxation, such as transportation, that were being sorted.RIL, that produces about 60 msmcd of gas from its D6 deepwater field, pays a central sales tax of two per cent to the Andhra government on interstate sale of gas. The company has contested imposition of the local sales tax by UP on the argument that this will lead to double taxation and increase the gas price substantially. As against $0.09 per British thermal unit of central sales tax being paid currently, gas consumers would have to pay an additional $0.88 in local sales tax.

For RIL, interstate sale takes place in Andhra Pradesh. Reliance group company Reliance Gas Transportation and Infrastructure Ltd merely transports gas on behalf of customers through its pipeline. Saloni Roy, tax partner, Ernst & Young, says local sales tax or VAT is levied only if a sale takes place within the state. "Only a second sale should attract VAT," she said, without going into the specifics of this case. CST is charged at a lower rate of two per cent if the purchaser gives to the seller an undertakng that the product would be used for power, mining, resale, manufacturing and telecommunication purposes.

……….from the pages of Jyoti Mukul & Ajay Modi / Business Standard

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Indian Oil in Facts and Figures  

  1. Indian oil owns the earliest refinery - Digboi Refinery commissioned in 1901.
  2. IndianOil controls 10 of India’s 20 refineries.
  3.  The group refining capacity is 60.2 million metric tonnes per annum (MMTPA) or 1.2 million barrels per day -the largest share among refining companies in India.
  4.  It accounts for 33.8% share of national refining capacity.
The basket of technologies, which are in operation in IndianOil refineries include:
  1. Atmospheric/Vacuum Distillation;
  2. Distillate FCC/Resid FCC;
  3. Hydrocracking;
  4. Catalytic Reforming,
  5. Hydrogen Generation;
  6. Delayed Coking;
  7. Lube Processing Units;
  8. Visbreaking;
  9. Merox Treatment;
  10. Hydro-Desulphirisation of Kerosene&Gasoil streams;
  11. Sulphur recovery;
  12. Dewaxing,
  13. Wax Hydro finishing;
  14. Coke Calcining
IndianOil refineries have an ambitious growth plan with an outlay of about Rs. 55,000 crore for capacity augmentation, de-bottlenecking, bottom upgradation and quality upgradation. Major projects under implementation include
  1.  15 MMTPA grassroots refinery at Paradip, Orissa,
  2.  Naphtha Cracker and Polymer Complex at Panipat,
  3.  Panipat Refinery expansion from 12 MMTPA to 15 MMTPA, among others.
  4. Petrol quality upgradation projects at Panipat, Mathura, Barauni, Guwahati and Digboi refineries

data compiled fro

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BPCL launching speed bay for high-end customers at Coimbatore: Jaishree Corporation  

BPCL outlet launches exclusive bay for Speed fuel

NEW facility: Executive Director (Retail) of BPCL K.K. Gupta (second right) launching the speed bay at one of the company's outlets on Avanashi Road in Coimbatore.
Coimbatore: Jaishree Corporation on Avanashi Road, a retail outlet of Bharat Petroleum Corporation Limited opened an exclusive bay for value-added fuels.K.K. Gupta, Executive Director of Retail, BPCL, in the presence of General Manager – Southern Region (Retail) in-charge Keshav V. Shenoy, General Manager (Sales), Southern Region, V. Anand, T. Peethambaran and Territory Manager V. Mohan Nair inaugurated the bay.

Bharat Petroleum also plans for exclusive offerings and services at this outlet for all their high-end customers.

The exclusive bay would dispense premium fuels namely Speed, Speed 97 and Hi-speed diesel for new generation vehicles which would not only increase the efficiency of the vehicles but also is eco-friendly. The fuel besides optimizing the engine performance would also help reduce pollution. The exclusive bay will be an automated dispenser for the premium fuels through single multi-product dispensing unit.

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3 Stages of India's thorium-based nuclear plans  

The first stage of India's grand plan is based around the country's fleet of PHWRs and state-of-the-art research facilities, which have proceeded steadily despite the country being isolated for more than 30 years from the international uranium community after it detonated a nuclear device in 1974.

But following a landmark agreement with the US in October 2008 on civil nuclear co-operation, India can now, in principle, import fuel and reactors, while building more of its own, indigenous PHWRs. These reactors burn uranium while irradiating thorium oxide to produce uranium-233.

Stage two, which seeks to plug India's energy deficit by 2050, involves using reprocessed plutonium to fuel "fast reactors" that breed further uranium-233 and plutonium from thorium and uranium.

In stage three, advanced heavy-water reactors will burn uranium-233 while converting India’s thorium reserves into further uranium in a sustainable "closed" cycle. All three stages are running parallel and each has been demonstrated on a laboratory scale.

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