Search This Blog

RS Butola takes over as Chairman, IndianOil  

RS Butola takes over as Chairman, IndianOil

Mr. R.S.Butola has taken over as Chairman of Indian Oil Corporation Ltd., India’s flagship oil & gas major. Before joining IndianOil, Mr. Butola was the MD of ONGC Videsh Ltd. (OVL). Under his stewardship, OVL built a formidable E&P portfolio comprising both discovered and producing assets in over 15 countries.

In a career spanning about three decades out of which two decades is in the hydrocarbon industry, Mr. Butola has shouldered various responsibilities prominent among which are the appraisal and evaluation of the Mumbai High Redevelopment Scheme as well as the implementation of ONGC’s first ERP. As the first Chief-Commercial of ONGC, Mr. Butola was instrumental in negotiating and executing the first Crude Oil Sales Agreement with the Refineries upon dismantling of the erstwhile Administered Pricing Regime. Mr. Butola holds a MBA from the Faculty of Management Studies, Delhi and is a Certified Associate of the Indian Institute of Bankers (CAIIB).

AddThis Social Bookmark Button

Bio-Asia 2011  

Scientists told to improve life of common man

Photo: G. Krishnaswamy

Top-notcher: Governor E.S.L. Narasimhan giving away Dr. YSR Innovation award to Reddy Chaitanya at valedictory of Bio-Asia 2011 on Thursday. Also seen is Prof. D. Balasubramanian of LV Prasad Eye Institute.

HYDERABAD: Governor E.S.L. Narasimhan has asked bio-technologists and scientists to ensure that the fruits of research and development touched the lives of common man and bring about visible improvements.

In his valedictory address at Bio Asia 2011 that concluded here on Thursday, he said the world awaited major breakthroughs in the biotechnology domain at affordable costs. The twin challenges before agri-bio scientists and technologists today were shrinking land and a burgeoning population. In the field of medicine, the challenge was coming up with products that had the efficiency to hold off attacks from virus and improve longevity at costs within the reach of the common man, Mr. Narasimhan said.

Director of Research, L.V. Prasad Eye Institute, D. Balasubramanian said 45 per cent of the world's vaccines were from Hyderabad and explained how the city had become a BT hub. He took the audience, comprising delegates from 38 countries and students from the State, on a 60-year journey of biotechnology, with development of vaccines and medicines for various diseases, its inputs in the green revolution and development of high-yielding crop varieties.

Ambassador of Georgia, Zurab Katchkatchishvili said his country would participate in the prestigious event when it was held next. “We will be present to share our modest success in the sector and learn a lot from India's experiences,” he said.Bio Asia's Convenor B.S. Bajaj said that for the first had the event had attracted delegates from China, apart from having a 20-member group from Iran. The Iranian stalls got the Best Trade show award. The YSR Innovation Award was bagged by Reddy Chaitanya, a young student of dentistry from Vishnu Dental College, Bhimavaram for her invention of a ‘manually-operated mobile air compressor' to help in dental procedures, while the Bio Asia Young Minds award went to Vignesh Sridharan, a student of Class XII in Sri Sankara Senior Secondary School, Chennai

AddThis Social Bookmark Button

Cracking down on oil mafia  

Our hands are tied in going after oil mafia: Maharashtra DGP

MUMBAI: In a statement that has left the government red-faced, Maharashtra Director General of Police (DGP) D. Sivanandhan has alleged that a government resolution (GR) tied the hands of the police from cracking down on the oil mafia. Mr. Sivanandhan's remarks come in the wake of the gruesome murder of Nashik Additional Collector Yashwant Sonawane last month.The DGP was speaking in Aurangabad on Wednesday in response to media queries. He said while the State decision prevented the police from going after the mafia, in the aftermath of Sonawane's killing, the government was now putting the blame on the force.

Charges refuted

Refuting Mr. Sivanandhan's allegations, Food, Civil Supplies Minister Anil Deshmukh told The Hindu that the comments were “totally wrong.”“Yes, there was a GR in 2004, which said that the police alone should not conduct raids as there were many complaints [of them taking bribes]. But his GR it was rectified in 2005 and the Police, Revenue and Civil Supplies officials were given back all the powers,” he said.

Not a deterrent

Mr. Deshmukh said the Essential Commodities Act was not as much of a deterrent as was the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act. “The latter empowers the Collector, Superintendent of Police and the Commissioner of Police to take stringent action, but few are aware of this,” he said.Commenting on the top officer's remark, a senior official from the State Secretariat, who did not wish to be named, told The Hindu that the DGP should “not have said it” for it is likely to “instigate” the people even more.“It is an off-hand response to a question. Nothing prevents the police from asking if there is a case of wrong-doing. The police officer is empowered to take action. If he or she sees kerosene being mixed with diesel, can't that officer act?” the official retorted.

AddThis Social Bookmark Button

Indian Energy Exchange launches trading in Renewable Energy Certificate  

Trading in renewable energy certificate launched

NEW DELHI: Indian Energy Exchange (IEX) has announced the launch of trading in Renewable Energy Certificate (REC) on its platform. A total buy bid of 125 non-solar REC and 11 solar REC was received in the first trading session, the country's leading electricity exchange said here in a statement. “This is a great milestone in the history of renewable energy in India. It will create new opportunities for renewable and co-generation power plants,” the statement added.

“IEX is committed to prove its power market acumen by creating a complete marketplace not only for electricity but also for REC market,” IEX Managing Director and Chief Executive Jayant Deo said. “We have some critical mass available with us in the form of utilities from 25 States and four Union Territories, 110 captive generators and over 655 industrial consumers, who are currently participating on IEX for trading in electricity. They will be active in REC market too,” he added. RECs represent the attributes of electricity generated from renewable energy sources. One REC represents delivery of 1 MWh of renewable energy to the grid and all associated environmental benefits of displacing 1 MWh of conventional power. REC trading will be through closed double-sided auction on the last Wednesday of every month.

AddThis Social Bookmark Button

Jet Airways to increase fuel surcharge in domestic routes  

Jet hikes fuel surcharge on local flights; others may follow


Mumbai/New Delhi, Feb. 23:

Flying is set to become more expensive with Jet Airways announcing plans to increase fuel surcharge on its domestic network from Saturday. The airline will be charging Rs 100 more on routes under 1,000 km and Rs 200 on routes over 1,000 km, it said in a communication to travel agents on Wednesday. This would mean that from Saturday a passenger flying between Mumbai and Ahmedabad, for example, will have to pay Rs 100 more, while a Mumbai-New Delhi ticket will cost Rs 200 more.

“We are increasing our fuel surcharge levels on all domestic Jet Airways, Jet Airways Konnect and Jet Lite flights for sales effective February 26, 2011,” said Vice-President, Passenger Sales for India, Ms Sonu Kriplani, in a note sent to the agents.

Though other domestic airlines did not reply to queries, indications are that they will follow suit. Jet, Kingfisher Airline and Air India had revised fuel surcharges in the similar range in the first week of January. Indian oil marketing companies have been increasing aviation turbine fuel (ATF) prices on the back of rising international crude oil prices. The Jet increase comes after the latest 4 per cent hike in the ATF prices on February 16. Since January 1, when the airlines increased fuel surcharge, the ATF prices have gone up by 11 per cent.

AddThis Social Bookmark Button

Inter-ministerial task force under Nandan Nilekani to study subsidies on kerosene  

Nilekani to head task force on subsidies for kerosene, LPG


NEW DELHI: The government today constituted an inter-ministerial task force under UIDAI chairman Nandan Nilekani for evolving mechanisms to provide direct subsidies on kerosene, cooking gas (LPG) and fertilisers to intended beneficiaries. "In order to evolve a suitable mechanism for direct subsidies to individuals and families who are entitled to kerosene, LPG and fertiliser ... the Government of India has constituted a Task Force," the Finance Ministry said in a release.

Former chief of IT major Infosys, Nilekani is currently the chairman of the Unique Identification Authority of India (UIDAI). He is also handling several government IT projects including one on the proposed Goods and Services Tax (GST). The government has constituted the task force in light of the "overwhelming evidence" that the present policy of giving subsidy on kerosene is resulting in "waste, leakage, adulteration and inefficiency", the statement said.

Government provides Kerosene at subsidised prices to BPL families under the Public Distribution System (PDS). "Therefore, it is imperative that the system of delivering the subsidised kerosene be reformed urgently," it added. Similarly, the statement said that the system of provision and delivery of subsidised LPG to intended beneficiaries needs to be reformed.

Fertiliser is given to farmers at subsidised rates. "It is not possible to differentiate the segments for which the subsidy should be given in this (fertiliser) sector. There is a need to evolve a suitable mechanism for direct subsidies to individuals who are entitled to them," it said. The Task Force would submit its interim report within four months of its constitution.

The recommendations of the report would be implemented on a pilot basis by the concerned ministries under the supervision of the Task Force in the following six months from the date of submission of the interim report, it added. Besides, the Task Force would evolve a model of direct transfer of subsidies on these items by re-engineering existing systems, processes and procedures in the implementation process.

The panel has also been asked to design appropriate IT systems and aligning these (the issue of subsidies) with the issuance of UID numbers, and bringing about changes in the administration and supply chain management. Besides Unique Identification Authority of India (UIDAI) chairman, the team will consist of secretaries from finance, chemicals & fertilizers, agriculture, food & public distribution, petroleum & natural Gas and rural development along with DG UID Authority. Courtesy: ET

AddThis Social Bookmark Button

ONGC FPO slatd for March  

Oil & Natural Gas Corp (ONGC) expects to launch the offer in mid-March.

The  FPO is expected to raise Rs. 125-130bn, depending on the government's pricing.

ONGC, may  get good response from foreign and retail investors.

The government, which owns 74.14% of ONGC, plans to sell 5% in this offer.

AddThis Social Bookmark Button

Updates on Indian Oil FPO- Rs 20,000-crore public offer  

IOC follow-on offer on hold due to high crude prices

State-run Indian Oil Corporation on Thursday said its Rs 20,000-crore public offer is on hold due to unfavourable market conditions and rising global crude oil prices.“We found in September/October (that) global oil prices (had) started rising and inflation is also high,” IOC Chairman Mr S V Narasimhan told reporters explaining the reasons for putting the follow-on public offer (FPO) on hold.“I don’t think it is feasible at this stage to think of an FPO,” he said.The FPO, previously planned for first quarter of 2011 calendar year, involved a 10 per cent stake sale by the government and an equal number of new shares by IOC. IOC had even appointed six merchant bankers for the sale of 10 per cent equity shares in the FPO.

“There is no timeframe (to launch the FPO) at the moment,” he said, adding the company is still awaiting government approval for the share sale.Following the stake sale, the government’s holding in IOC would reduce to 64.57 per cent from the existing 78.92 per cent. The twin share sale programme was expected to garner close to Rs 20,000 crore.IOC had hired six investment banks — Merrill Lynch, Citigroup, ICICI Securities, Morgan Stanley, SBI Capital and UBS to manage the public offer.The mega offer was part of the government’s Rs 40,000 crore disinvestment programme for the current financial year.

Under the follow-on public offer, the government was to divest a 10 per cent stake in the company, translating into 24.27 crore equity shares. In addition, the company would have also issued fresh equity equivalent to another 10 per cent.
Source New Delhi, Feb 10: ....from the pages of THE HINDU newspaper..

AddThis Social Bookmark Button

ONGC to float tenders for Rs 8,000 crore surface facility revamp programme  

ONGC to float tenders worth Rs 8,000 cr

The Hindu Business Line

ONGC expects to float tenders for the Rs 8,000 crore surface facility revamp programme in its three onshore assets in Gujarat within a month.

The tendering process is expected to be over in three months. The three mature assets — Mehsana, Ahmedabad and Ankleswar — contribute a little over one fifth of ONGC's total domestic crude production of 27 million tonne (including the equity-oil contributions from joint ventures in India). “We are in the advance stage of finalising the tender documents. The entire process is expected to be over in three months,” a company source told Business Line. According to him, the project aims at replacing the old pipelines and other surface infrastructure in the next three years.

“Some of these pipelines are three to four decades old and leakages are common, leading to operational as well as environmental concerns,” the official said. Apart from pipelines, the company is also investing in expanding the capacities of its effluent treatment plants in the onshore assets. Apart from tacking environmental concerns, this will help the company treat the increasing proportion of water in the well head production of crude — a common phenomenon in mature fields — and inject the same back into the reservoir to maintain the reservoir pressure.

ONGC is at present commissioning a similar project worth Rs 2,500 crore to revamp the surface infrastructure in oilfields in Assam.

Source The Hindu Business Line

AddThis Social Bookmark Button

BPCL reported 50.6 per cent dip in net profit for the third quarter  

BPCL net dips 50% in Dec quarter

Business Standard

State-owned Bharat Petroleum Corporation (BPCL) has reported a 50.6 per cent dip in its net profit at Rs 187.4 crore for the third quarter ended December 31, 2010. BPCL had posted a net profit of Rs 379 crore in the corresponding previous quarter.BPCL said it got Rs 8,299 crore for the April-December 2010 period as compensation by the upstream oil companies for selling diesel, petrol, kerosene and domestic LPG below market price. In April-December 2009, the company had received Rs 3,672.5 crore towards this.The average gross refining margin during the nine months was $3.63 per barrel, up from $2.70 a barrel in April-December 2009.During the quarter, income from operations rose to Rs 39,572.6 crore, up 14 per cent from Rs 34,624.9 crore in the year-ago period, BPCL said in a statement to the Bombay Stock Exchange.The scrip was down 2.5 per cent to Rs 584.20 on the Bombay Stock Exchange.

Source Business Standard

AddThis Social Bookmark Button

Subsidy on kerosene & adulteration  

P. V. Indiresan

Who benefits from subsidy?

Subsidy on kerosene has given rise to a powerful mafia involved in adulteration and smuggling, as Mr Sonawane's killing brought to light. The best solution would be to raise the price of kerosene and, simultaneously, compensate the poor families who depend on it.

On January 25, Mr Sonawane, Additional District Collector of Malegaon, was doused with kerosene and burnt to death by some members of the kerosene mafia. Mr Sonawane appears to have been a tough character. He hung on to Popat, the principal culprit, so that he too got severe burns and died a week later. The relatives of Popat bitterly complained of a conspiracy to let him die. They had made no comments when Mr Sonawane died.

The Associated Chambers of Commerce and Industry of India (Assocham) has estimated that 38 per cent of kerosene is smuggled to neighbouring countries or misused to adulterate diesel oil. Such misuse is understandable: The subsidised price of kerosene in India is barely a fourth the price of diesel; it is a fraction of what it is in neighbouring countries. That is a readymade scenario for adulteration and smuggling.


Over a dozen years ago, I visited Sunderbans in West Bengal to inspect a photovoltaic lighting system in one of the villages. The village was unbelievably poor. The mud road connecting it was so slippery that I was physically carried there by the villagers. An interesting system of photovoltaic lighting had been installed in the village and I was to report on its utility. In spite of over 50 per cent subsidy, the villagers had to pay Re 1 a day to light a 12W CFL lamp for two hours a day. That came to Rs 40 per unit of electricity, whereas, I, a far richer person, used to pay Re. 1 per unit in those days.

It would have been much cheaper to run a diesel or kerosene generator. “No,” said the villagers, “we will never get the kerosene to run the pump”. They will not get it because all kerosene was being smuggled to Bangladesh. That was the story in West Bengal run by a government dedicated to help the poor. I reported that the subsidy on kerosene did not help the Indian poor; instead, it enriched smugglers in India and in Bangladesh too. The government did not like my report; I became a persona non grata.


In general, subsidies are not meant to help the poor but to enrich – unlawfully — any number of criminals who also fund politicians. That is why the Petroleum Minister, Mr Jaipal Reddy, has rejected the suggestion that subsidy on kerosene be halted — because that is politically unthinkable. The Minister was not thinking of the poor; he was worried about his own supporters who were funding his party and other parties too. These days, as a reaction to Mr Sonawane's murder, the police are confiscating illegally stored kerosene. All that activity is in Maharashtra and in Maharashtra alone. News reports talk of unearthing a thousand litres of illegally stored kerosene. Two questions arise: Is kerosene adulteration a monopoly of Maharashtrians alone? Even if Assocham has exaggerated its estimate of misuse of kerosene, there should still be millions of litres of illicit kerosene.

Then, why the hullabaloo about detecting a thousand litres of kerosene? The whole episode is an eyewash designed to throw dust into the eyes of the unsuspecting public and to feed gullible media with irrelevant information. There are also reports of arrests of smugglers. Considering that so little action has been taken in similar cases in the past with decades wasted in lethargy, it is doubtful whether even the murderers of Mr Sonamane will be made to pay for their crimes. In any case, there is no point in catching smugglers or adulterators when the system is designed to help them. We need a change of policy which will render such criminal activity unattractive.


The main issue is to reconcile the need for low-cost fuel for the poor on the one hand, and bridge the price disparity between kerosene and diesel, on the other. The Delhi government has proposed a scheme to provide cooking gas connections to families below the poverty line, with the initial cost borne by oil companies as part of their corporate social responsibility programme. Such a scheme may work in a city like Delhi where the poor may use kerosene for cooking and have electricity for lighting. However, the main problem is in our villages, where the poor use kerosene only for lighting and not for cooking. Hence, the problem reduces to ensuring cheap fuel for lighting in villages.

We need to increase kerosene prices by at least four or five times if we want to halt its misuse. Naturally, that will raise a hue and cry. In view of the political trouble in Tunisia, Egypt, Jordan and Yemen, oil prices have skyrocketed. Hence, petrol and diesel prices have to be raised, and along with them kerosene prices too will have to be raised even higher than four or five times. It is the kind of situation that even the most popular politician would shudder to attempt. Unfortunately, if that is not done now, the situation will actually become worse.


Under the circumstances, the best course of action is perhaps to raise the prices of kerosene and simultaneously compensate poor families who depend on it. A cash payment to BPL families who do not have any electricity connection, that will compensate the increase in cost of kerosene, should do. Do we have politicians who have that kind of foresight? Twenty years ago, our politicians did have the courage to give up doctrinaire socialism and open up the Indian economy. Our Prime Minister was the prime implementer of that bold programme. Can he once again show courage by raising kerosene prices and compensating the poor?

 THE HINDU BUSINESSLINE newspaper. February 7, 2011:

AddThis Social Bookmark Button

Government decided to pay Rs 8,000 crore to oil PSU's  

Govt to pay Rs 8k-cr subsidy to oil firms

(Courtesy: The Economic Times, New Delhi, February 01, 2011)

The government has decided to pay Rs 8,000 crore to state-run fuel retailers to compensate them for selling diesel, cooking gas and kerosene below market rates.

The grant will help IndianOil, Hindustan Petroleum Corp and Bharat Petroluem Corp report a net profit in the third quarter of 2010/11. "The government will issue compensation by (Monday) evening," oil minister S Jaipal Reddy said. ET was first to report that top oil marketing firms, facing mounting losses for selling fuel below cost, were forced to postpone announcing their quarterly earnings scheduled last week.

IndianOil, Hindustan Petroleum Corp and Bharat Petroleum Corp, which run over 90% of India's 40,000 petrol pumps, face a combined net loss of about Rs 3,000 crore in the December quarter. The three marketing companies — IOC, BPCL and HPCL — are expected to announce their Q3 results by February 10. IOC, the largest by volume, has received Rs 4,442 crore compensation while BPCL and HPCL have got Rs 1,810 crore and Rs 1,748 crore, respectively, government officials said.

The Rs 8,000 crore is 80% of the compensation demanded by the oil ministry, a senior oil company executive said. "But it is sufficient to save us from reporting net losses in Q3 for none of our faults," he said requesting anonymity. The government artificially keep retail prices of diesel, cooking gas and kerosene low by forcing state-run oil marketing companies to hold price-line despite a surge in global crude oil prices. The country meets over 70% crude oil requirements through imports.

For the current fiscal year, the finance ministry has so far agreed to reimburse only one-third of the estimated revenue loss of Rs 72,000 crore, or about Rs 24,000 crore but oil ministry officials said this would be inadequate.

"The three oil marketing companies are not in a position to bear more than Rs 12,000 crore revenue loss in 2010-11. The government has to compensate a shortfall of about Rs 36,000 crore in the current fiscal," an official added. The finance ministry had released Rs 13,000 crore to compensate the three oil companies in the first half of the current financial year. Oil minister has already announced that ONGC and other upstream companies will contribute Rs 24,000 crore to subsidise fuel in the current financial year.

AddThis Social Bookmark Button

kerosene adulteration, Crude and Diesel Prices and their interplay  

Fluid logic - an article by Gireesh Chandra Prasad / The Financial Express

The kerosene adulteration scam is valued at Rs 10,000 crore based on current prices. If crude prices go up and the difference between kerosene and diesel prices rises, so does the incentive to scam

How big is the kerosene adulteration scam that took the life of Nashik additional district collector Yaswant Sonawane on January 25?

It is believed to be in the region of Rs 10,000 crore to Rs 13,000 crore a year.

What drives the scam?

The price differential between kerosene prices and those of diesel—lower-priced kerosene is mixed with diesel and sold at diesel prices. While in the public distribution system (PDS) kerosene costs Rs 12.4 a litre, diesel costs Rs 38 or so. So there’s Rs 26 to be made per litre of PDS kerosene.

So how do you get to the Rs 10,000 crore figure?

An NCAER study estimated that 35% of subsidised kerosene made available through PDS is diverted to adulterate diesel. Given that 11 million tonnes of subsidised kerosene is sold through the PDS system, the scam is easy to calculate. If there’s Rs 26 to be made per litre of kerosene and 11 million tonnes of kerosene are supplied through the PDS each year, that’s Rs 28,600 crore. If you assume 35% of kerosene is used for adulteration, though market sources say the figure is higher, that’s a scam size of Rs 10,000 crore—if you assume half of kerosene is used for adulteration, the scam size is around Rs 14,000 crore.

How much do the oil companies lose on this?

Since all fuel prices are controlled, the oil companies make losses on them. As of today, fuel retailers lose Rs 6.8 on each litre of diesel, Rs 18.66 on each litre of kerosene, Rs 366.28 on each 14.2 kg cylinder of cooking gas and Rs 1.22 on each litre of petrol, despite the recent price increase. That works out to a total of Rs 31,500 crore in just the first half of the year (see table). The oil companies are partly compensated for this by the government—in the first six months of the year, the government gave them about Rs 14,369 crore, including a freight subsidy, the rest is borne by the upstream companies like ONGC and the oil marketing companies like IOC, HPCL and BPCL. The total subsidy requirement this year is expected to be Rs 72,000 crore, against Rs 46,000 crore last fiscal.

Does anyone else lose out?

The government clearly loses since it pays part of the subsidy on kerosene, but this gets eaten away by those who use this to adulterate diesel. The biggest loser is the private individual since adulterated diesel lowers engine life.

The government also loses out in a very big way in terms of the capital value of the PSU oil firms. The Rs 18,000 crore paid out by oil firms in the first six months of 2010-11 as subsidies end up lowering their profits—Rs 36,000 crore over the year if you assume what happened in the first half of the year will get replicated in the second. If you assume, for the sake of argument, that the average price-earnings ratio of oil firms should be 20, this means the market capitalisation of these firms has gone down by Rs 720,000 crore. If the government has a shareholding of 60% in these companies, that means it lost Rs 432,000 crore.

Thanks to the subsidy burden, the price-earnings ratio for PSU oil firms is much lower than that for private oil firms like RIL. While RIL’s PE is 15.3, IOC is 9.94.

How do you tackle the scam?

Raising kerosene price to the level of diesel is the best solution, but petroleum minister S Jaipal Reddy said this would not be possible. The government is reintroducing the idea of putting in chemical markers in kerosene and pushing state level administration to put GPS devices in kerosene tankers to track movement of consignments. Markers were used and then discontinued and putting GPS devices hasn’t helped much in the past.

What did the Kirit Parikh report on this say?

The Kirit Parikh committee, which advised the government to rationalise prices said, using 2005 data, that there is scope to cut down kerosene allocation by 20% across the nation.

How many expert committees have addressed this issue in the recent past?

There was one headed by C Rangarajan and another by BK Chaturvedi.

What did these committees recommend?

All recommended rationalising the prices of fuels.

What solution did Kirit Parikh recommend?

The Kirit Parikh panel recommended de-regulation of both petrol and diesel prices at the refinery gate level and at the retail level besides raising kerosene price by Rs 6 a litre and LPG price by Rs 100 a cylinder. The panel also recommended levying extra tax on diesel cars and reducing the allocation of subsidised kerosene to states. The panel also asked the government to use kerosene and LPG subsidies only for the benefit of the poor. Using a unique identity number and smart card, this could be achieved.

Why a special tax on diesel cars?

There is a lower excise duty on diesel to keep its price low, but since this is used by richer car owners, the idea was to find a way to get this back without affecting the price of diesel. Parikh took the average consumption of diesel over the lifetime of a car, calculated the lower excise duty paid as compared to the case of a petrol car, did an NPV of this and arrived at its figure. This worked out to Rs 81,000.

Would raising kerosene prices hit the poor?

Not really, and this is where the Parikh report scores over most others. The report found that just 1.3% of all rural households use kerosene for cooking. It also found that while the number of households using kerosene fell a third between 1999 and 2005, the government cut kerosene allocations under the PDS by just 13%. Parikh also found that high-income states such as Delhi, Maharashtra, Haryana and Punjab consume 41% more kerosene than low-income states like Bihar, Jharkhand, Mizoram and Tripura.

How did Parikh arrive at his conclusions for raising prices?

He did a simple calculation based on per capita incomes. He said that, since prices of kerosene were last raised in 2002, India’s per capita incomes had risen 60%, so kerosene prices could have been raised 60% without affecting anyone’s welfare. Based on this, prices could have been raised by Rs 6 per litre instead of the Rs 3, as was done.

In the case of LPG similarly, prices can be raised by Rs 200 per cylinder without adversely affecting anyone.

At the end of all this, we’re saying the scam is restricted to Rs 10,000 crore a year?

Not at all. That’s Rs 10,000 crore based on current prices. If crude oil prices rise further and the difference between kerosene and diesel prices rises further, so does the size of the scam. If crude oil costs $100, diesel prices will need to go up to Rs 48 a litre according to the Parikh calculations. So, if there is no change in kerosene prices, the incentive rises to Rs 36 a litre, or around 40% more than what it is today. At $120, diesel needs to be priced at Rs 56 a litre, so the incentive to adulterate diesel with kerosene goes up to Rs 44 per litre, or 70% more than what it is today!

And of course, there is the huge subsidy loss that the oil PSUs have to bear, the oil subsidies the government has to shell out and the huge loss the government bears when the market value of its shares in oil PSUs falls.

AddThis Social Bookmark Button

Interim chiefs for ONGC and IOC  

ONGC, IOC appoint interim heads

Subsequent to the retirement of the Chiefs of the country's two mammoth public sector oil companies, ONGC and Indian Oil Corporation (IOC), Mr A.K. Hazarika, and Mr S.V. Narasimhan, have been respectively appointed for an interim period. According to a Petroleum Ministry statement, the competent authority has approved the proposals for entrusting additional charge of the post of Chairman, IOC, to Mr Narasimhan, and Mr Hazarika as Chairman and Managing Director, ONGC, on ad hoc basis, for a period of three months, with effect from February 1 or till a regular incumbent is appointed, or until further orders, whichever event occurs at the earliest.

Mr Hazarika, who is currently Director (Onshore) at ONGC, will succeed, Mr R.S. Sharma who attained superannuation on Monday. Mr Narasimhan, Director (Finance) at IOC, will succeed Mr B.M. Bansal, who also demitted office on Monday. In case of ONGC, Public Enterprises Selection Board (PESB) had in October last year short-listed two names for the post of Chairman and Managing Director. Mr Sudhir Vasudeva, Director (Offshore) of ONGC, emerged as the front runner. However, his name is awaiting formal approval.

Mr Hazarika will also hold additional charge as Director (Exploration) of ONGC, as the present Director (Exploration), Mr D.K. Pande, too retired on Monday. The search for IOC Chairman resulted in ONGC Videsh Ltd (OVL), Managing Director, Mr R.S. Butola, emerging as a front runner for the post. Last September, the PESB interviewed candidates and short-listed two names. Its recommendations then went to the nodal Ministry, in this case the Ministry for Petroleum and Natural Gas. After processing the names the Ministry forward it to the Appointments Committee of the Cabinet (ACC) for formal approval.

However, before the final stamp of approval was given, there was a change of guard in the Petroleum Ministry itself, with Mr S. Jaipal Reddy taking over as the Minister from Mr Murli Deora. The appointment now requires concurrence of the new Minister

Credit New Delhi, Jan 31:  Businessline

AddThis Social Bookmark Button