18 Jan 2012;business-standard.com:Ahmedabad: In a major blow to the Ruias-led Essar Oil, the Supreme Court on Tuesday rejected the company’s 125 per cent sales tax deferment benefit claim on its investment in the Vadinar refinery project. The company will now have to fork out at least Rs 6,300 crore in sales tax to the Gujarat government. A bench comprising Justice Ashok Kumar Ganguly and Justice Jagdish Singh Khehar said the company could not claim the benefit of an exemption scheme as it had not started production at its refinery in Vadinar during the qualifying period. The news had a big impact on both Essar Oil and Essar Energy’s stocks. Over a quarter of Essar Energy’s value was wiped off after the news broke. London Stock Exchange-listed Essar Energy owns 87 per cent stake in Essar Oil, which is listed on the Indian exchanges. Essar Energy shares were trading down 27 per cent on the LSE, their lowest level since the company listed in London in 2010, knocking around £ 540 million off the company’s value. The Ruia family owns 77 per cent of the company as its promoter. “We welcome the Supreme Court’s decision on our appeal against Essar Oil’s tax benefit claim. While it is too early to comment on the exact amount to be paid by the company, it would be more than Rs 6,000 crore,” state industry minister Saurabh Patel told Business Standard. Informing the Bombay Stock Exchange later in the day, Essar Oil stated, “The Supreme Court has set aside the judgment of the Gujarat high court by which Essar Oil was entitled to avail of a sales tax deferment scheme i.e. to pay sales tax in deferred instalments. The company had availed of about Rs 6,300 crore of sales tax benefit as of December 2011, which was to be paid in deferred instalments.” In April 2008, the Gujarat high court had allowed the company to avail itself of sales tax deferment benefit for eligible capital investment under the new capital incentive policy scheme, 1995-2000, of the Gujarat government. However, the state’s industries department challenged the order in the apex court on the ground of a delay in commencement of production at the refinery by August 15, 2003. It said production started only in 2006. Under the Capital Incentive to Premier and Prestigious Units Scheme, 1995-2000, Essar Oil was given a provisional ‘premier’ registration when it was setting up an integrated greenfield refinery with facilities to process nine million tonnes per annum of crude oil at an investment of Rs 5,500 crore. In its argument, Essar had held a natural calamity, a cyclone that hit the region in 1998, responsible for the delay. Under the scheme, the state had allowed sales tax deferment not beyond 17 years on projects meeting certain investment eligibility criteria, such as investment of more than Rs 1,000 crore. The state government said the sales tax accruing to the companies investing under the scheme could be paid after 17 years in six equal installments. That meant the company could retain the sales tax for 17 years and use it as its cash flow. Some big-ticket investments such as Reliance Industries’ refinery project were considered eligible under the scheme along with Essar Oil’s refinery.
18 Jan 2012;timesofindia.indiatimes.com:Sachin Parashar:NEW DELHI: Even as China cuts down drastically its oil imports from Iran, which is soon likely to run into fresh sanctions from the US and the EU, India on Tuesday declared it will continue to import crude oil from the country. Brushing aside US sanctions that prevent financial institutions from doing business with Tehran and its central bank, foreign secretary Ranjan Mathai stated that India will only accept sanctions imposed by the UN. "We have accepted sanctions which are made by the UN. Other sanctions do not apply to individual countries. We can't accept that," said Mathai, adding that India had not sought any waiver from US sanctions. This was even as EU high representative for foreign affairs , Catherine Ashton, told TOI on Tuesday that the sanctions against Iran by the EU, which is on the verge of banning oil imports from Iran, are designed to make Iran fulfill its obligations as a signatory to the NPT. "It's not impossible for countries like India to have a strategic relation with Iran and yet convey that it is not fulfilling its international commitments in pursuing a nuclear weapons programme. The sanctions are designed to prevent Iran's nuclear programme and nothing beyond that," Ashton said.
17 Jan 2012;business-standard.com:Mumbai: Maruti Suzuki, India's top carmaker, has raised prices of all its vehicles by 0.3-3.4% due to adverse foreign exchange movements and a rise in commodity prices, a company source told Reuters on Tuesday. Domestic rivals of Maruti, 54.2% owned by Japan's Suzuki Motor Corp, such as Mahindra & Mahindra and South Korea's Hyundai Motor Corp have already raised prices citing rising input costs.
ONGC, OIL face $54/b cap on sales to state refiners
17 Jan 2012;economictimes.indiatimes.com:Rajeev Jayaswal:NEW DELHI: The government plans to cap the price of crude oil sold by ONGC and Oil India to state refiners at $54/barrel this financial year despite an average market price of $110/barrel to help them sell diesel, kerosene and cooking gas below market rates. The move, which is under inter-ministerial consultation, will severely hurt finances of ONGC but ease government's subsidy burden and help it in containing fiscal deficit, government officials said requesting anonymity. The finance ministry has expressed deep concern over widening fiscal deficit and has proposed a new subsidy-sharing formula where larger contributions are sought from upstream firms such as ONGC, government officials said. "The proposal is part of the finance ministry's fiscal management plan," one official said. Finance minister Pranab Mukherjee raised concerns about the fiscal situation on Saturday and said India should learn lessons from the Euro-zone crisis and it should not allow fiscal deficit to go beyond a certain limit. It is estimated that state oil firms Indian oil Corp, Hindustan Petroleum and Bharat Petroleum would incur about Rs 140,000 crore revenue loss in 2011-12 for selling fuel at controlled rates, officials said. So far, the finance ministry has agreed to provide Rs 30,000 crore to oil companies, which have suffered a revenue loss of Rs 64,900 crore and a net loss of Rs 23,440 crore in the first half of 2011-12. Officials said state fuel retailers were already in red and they could not absorb any losses. "As the government has limited resources, upstream firms have to bear a larger burden. After all the government has given them oil blocks on nomination basis (without global biddings)," one official said requesting anonymity. Officials said that the government would not hesitate to impose a heavier burden on upstream firms if international crude oil prices surge further. A senior ONGC official said that the proposed could derail ONGC's investment plans. The company plans to invest about Rs 56,000 crore in the next financial year. ONGC's net realization on crude oil sale was $66.52/barrel in the first half of 2011-12 after shouldering one-third subsidy burden. The company is expected to announce its third quarter results on February 2.
17 Jan 2012;hindustantimes.com:New Delhi: A fire broke out at an Indian Oil Corporation petrol pump in south Delhi’s Munirka area, injuring four people on Monday. Two of the injured suffered 90% burn injuries and are in a critical condition in Safdarjung Hospital. “The victims have severe burn injuries,” said a doctor at Safdarjung hospital. Eyewitnesses said the fire first broke out in a car parked at the pump and then spread. Sixteen fire tenders rushed to spot to douse the blaze. “We received a call at 8.25pm about the fire at a pump near the Vasant Vihar bus depot,” a fire department official said. “The exact cause could not be ascertained but there was apparently a leakage in an underground fuel tank and the car was right above it,” said the official. Four people, including two pump employees, were at the place when the accident took place. The fire was spotted at the right corner of the fuel station where some LPG cylinders were kept, the official said. The entire area, which is close to a slum cluster, was cordoned off. “The slum dwellers have been moved to a safer place,” the official added. “We had to use foam to control the fire as extinguishers were not of much help. The fire was spreading fast,” the official said, adding that around 2,000kg of gas was still left in the tank and the blaze would continue till it is all burnt.
16 Jan 2012;economictimes.indiatimes.com:Rajeev Jayaswal:NEW DELHI: The oil ministry's technical arm, Directorate General of Hydrocarbons (DGH), has told the government it cannot stop Reliance Industries from recovering costs incurred in the D6 block because it does not have the power to initiate the enabling resolution in the management committee (MC) for the block, government officials said. The MC, chaired by the DGH, can take a decision only if it is backed by parties representing at least 70% stake in the block, along with the support of one government nominee in the committee. In D6, neither the government, nor any state-run firm has any stake. The views of the DGH, the government's only advisor on technical issues in oil and gas fields, add a new dimension to the company's conflict with the oil ministry. RIL has initiated arbitration fearing that the oil ministry will not allow it to recover all development costs on the grounds that output did not match initial expectations. Sources said that the DGH is still inclined to penalise Reliance for the fall in gas output, which the technical advisor feels is because the company did not drill enough wells, while RIL has argued that it is a victim of geological uncertainty. But the DGH says the administrative mechanism would come in the way of penalising the company. "The government's resolution to suspend the contractor's cost recovery will be defeated in the committee where any motion should be backed by the majority participating interest of at least 70% with one positive vote by the government," said an official, who did not want to be identified. The oil ministry and DGH did not respond to ET's queries. Oil and gas exploration blocks awarded to private firms under the new exploration licensing policy are governed by production sharing contracts (PSCs) between the government and companies. According to the contract, blocks are managed by respective MCs, with two government representatives. If private participation is through a consortium, each partner has one seat in the MC. Reliance (90%) and its minority partner Niko have one representative each in the MC of the D6 block. BP, a new partner of RIL in the block with 30% interest, is yet to formally join the PSC. DGH has also told the government that apart from the MC, another body that runs day-to-day operations, the operating committee, is also important in taking such decisions. The committee only has representatives of companies awarded the block, and not government official. It prepares the agenda for the MC.The contract has a provision, article 6.8, which allows any member to raise any urgent matter in the MC meeting, but this can be done only if every other member of the MC agrees, a DGH official said. Industry experts say the only way the government can penalise RIL in cost recovery is to retrospectively amend the contract, but the oil minister has already declared publicly that the petroleum ministry would not change the contract. "The issue is still under examination and the government will take a decision after legal vetting," a government official with direct knowledge of the matter said. But the oil ministry shares the DGH's view that Reliance did not adhere to the approved plan, the official said.
Petrolstop is a division of Car Fuel Info Solutions, LLC Petrolstop.com is a registered trademark owned by Car Fuel info Solutions, LLC Website Design by Onazari Technical Solutions
