11 August 2008; economictimes.indiatimes.com: Rajeev Jayaswal: NEW DELHI: The high-powered BK Chaturvedi Committee, set up to examine the financial position of oil companies, has suggested a price hike of Rs 2.5/litre for petrol and Rs 0.75/litre for diesel every month so that these fully reflect global price scenario by March 2009 and 2010, respectively. The gradual increase in prices of auto fuels would impact the big cities even more. They will have to shell out an extra Rs 0.50/litre for a specified period. And for those who live in big cities and love fuel-guzzling sports utility vehicles (SUVs), diesel may cost Rs 2/litre more under ‘Metro Extra’. The committee has recommended scrapping import duties on petrol and diesel and fixing the price at which refineries sell fuel to oil marketing companies (OMCs) at the price at which they can export their produce. This means considerable reduction in the selling price of refineries from its present level. This, in turn, means reducing the protection that refineries have from external competition to the cost of freight and insurance on imports, if imports were to be undertaken. Recommending city-specific dual-pricing mechanism for auto fuels, the committee has suggested increasing the selling price of petrol from the present Rs 42/litre (excluding state and local taxes) to Rs 53/litre for cities selling fuel with Bharat Stage (BS)-II specification. The same would be Rs 55.50/litre for BS-III cities. BS-III-specified fuels are sold in 11 cities — National Capital Territory of Delhi (NCT), Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Kanpur, Pune, Surat and Agra. The panel, however, made out a case for cushioning the price increase by reducing excise duty on petrol from Rs 13.75/litre (including education cess of 3%) to Rs 10/litre. “This motor spirit (petrol) prices should fully reflect the pricing formula suggested here by March 2009. In other words, motor spirit sales by March 2009 will no longer have to be supported either by upstream discounts (or special oil tax) or through the issue of oil bonds,” the committee said in its report. A similar recommendation has been made for diesel: “It is recommended that the retail selling price (before state and local taxes) be raised by 75 paise/litre each month till the net sales realisation to the OMC — less distribution and marketing expenses — becomes equal to the refinery gate price.” The premium of Rs 0.50/litre for BS-III as well as ‘Metro Extra’ of Rs 2/litre are expected to be put in place through increments of 50 paise per litre over five months of the adjustment period, it added. The committee, however, is in favour of increasing the current excise duty (Rs 3.71/litre) on diesel in the medium term to reduce the difference with petrol, a reason for price distortion. It has also suggested that OMCs should charge prices of fuel excluding state-level taxes so that the onus of putting local tax burdens on consumers would lie with respective state governments. To effect this, it has suggested that retail outlets should explicitly display the price components — refinery gate price, distribution and marketing costs, metro extra (where applicable), central taxes and state taxes, including irrecoverable taxes such as octroi. Another suggestion is to allow OMCs to adjust prices for specific cities to factor in transportation costs. It stressed on the need to extend the Rs 2/litre ‘Metro Extra’ price on diesel beyond the 11 BS-III cities. “The objective of ‘Metro Extra’ is to capture the significant use of subsidised diesel by private cars and sports utility vehicles (SUVs). It may be pointed out that there is little justification in excluding large and growing cities such as Chandigarh, Jaipur, Lucknow, Bhopal and other major cities from the ambit of ‘Metro Extra’, which is primarily meant to make users of diesel-fired cars and SUVs pay a price that is more reflective of cost.”
Brazil's Petrobras buys part of Exxon's Chile unit
09 August 2008; economictimes.indiatimes.com: SAO PAULO: Brazil's state-run oil company announced a deal on Friday to buy Exxon Mobil's fuel distribution operations in Chile, continuing its expansion across Latin American energy markets.
Petroleo Brasileiro SA said it will pay US$400 million to takeover Exxon's Chilean retail, industrial and aviation fuel businesses by June 2009, giving the Brazilian company control of 16 percent of Chile's retail fuel market.
Exxon Mobil last year sold about 134,000 cubic meters of fuel to the three sectors, sending 55 percent of that to retail outlets and gas stations, Petrobras said in a statement.
The deal means that Petrobras will acquire 230 Chilean service stations from Esso Chile Petrolifera and other Exxon affiliates, along with six fuel distribution terminals and 11 airport distribution and sales centers, helping to "consolidate" the company's presence in Latin American fuel markets, Petrobras said.
Exxon Mobile Corp will keep its chemical, lubricant and specialty businesses in Chile, Petrobras said. A statement emailed from Exxon's South America spokesman confirmed the deal.
Petrobras, one of the world' biggest oil companies, exported US$1.5 billion worth of oil, natural gas and oil products to Chile last year. It also runs a network of nearly 1,000 service stations service stations in Argentina, Colombia, Paraguay and Uruguay, and supplies more than 80 percent of retail fuel sold in Brazil.
Exxon in April sold its Brazilian distribution centers and service stations to Cosan SA Industria e Comercio, Brazil's largest sugar and ethanol producer, for US$826 million.
By law, fuel sold at service stations in Brazil must be a 75-25 percent blend of gasoline and ethanol. Service stations also sell pure ethanol. Petrobras produces gasoline and disributes ethanol produced by large sugar plantations owned by individuals and corporations.
Exxon Mobil's shares rose 1.65 percent to close at US$78.72 on the New York Stock exchange. US-traded shares of Petrobras fell dropped 2.01 percent to close at US$51.06 in New York.
09 August 2008; timesofindia.indiatimes.com: Pankaj Doval: NEW DELHI: Czech automaker Skoda has recalled the petrol version of its Fabia hatchback for rectifying a technical glitch that was affecting fuel efficiency and performance of the car.
According to sources, the company has called back the 1200cc and 1400c variants of the Fabia petrol for a "technical upgradation". When contacted, the company confirmed that it had recalled the car, but blamed "inconsistent fuel quality" behind the step.
Due to inconsistent fuel quality in India, Skoda India has done minor change in the software to attain better fuel economy and driving performance, the company said.
Skoda is assembling the Fabia at its Aurangabad factory. Many of the critical components on the car are imported and may not be suitable for local conditions or available fuel quality. According to sources, several customers had experienced problems with the car and some even complained that the brake pedal became hard, while driving at a high speed.
Skoda officials said they would rectify the problem free of cost. "We are not charging anything for this and customers would just need to spend about 20-30 minutes at the dealerships," a company spokesperson said. All manufacturers do constant upgradations of their products so that the customer always enjoys the best quality and service, the company further said.
Fabia, which also has a diesel version, is expected to lead Skoda's charge in India and get volumes for the company. The company had launched the 1200cc version of the car only in May this year to compete with models like Suzuki Swift and Hyundai Getz.
Fuel efficiency is a very important factor in determining the success of cars not only in India, but even in developed markets like the US and Europe, considering high price of crude. Recalls for replacing faulty parts or rectifying technical glitches are not a common phenomenon in India as companies fear negative publicity would impact demand for the model. Globally it is not uncommon to see that companies are making recall announcements.
Last year, Honda India had recalled 2310 units of its luxury sedan Accord sold in 2005 and 2006 for replacement of a faulty relay in the fuel-pump of. This company had done this as part of a global recall. In 2005, Maruti had also recalled about 500 units of its Zen model for coolant leakage. Bajaj Auto had also recalled its scooter Kristal last year for a fuel pump problem.
Skoda has lined up an ambitious strategy for the Indian market. The company not only plans to bring in an all-new small car in the Rs 3-5 lakh range but will also introduce an all-new low-price "successor" to its Octavia sedan that would be priced below Rs 10 lakh. It also plans to bring in 'Greenline' Fabia range, currently sold in major European markets.
09 August 2008; economictimes.indiatimes.com: Lijee Philip: MUMBAI: For the first time since 2005, passenger vehicle sales, including cars and utility vehicles, are registering an absolute decline. Although the rate of growth has been falling since April 2008, its only in July that sales were 3% less than the previous comparable period.
Sales grew by a robust 19.8% in April, fell to 14.5% in May and in June it was a single-digit growth rate at 6%. Small cars, which account for more than 65% of the passenger car industry, are the main culprit, and what is worse is that the outlook for August-September looks bleak.
“The going really looks tough. In August 2007, passenger vehicle sales stood at 1.24 lakh and after recording a negative growth rate in July, it is unlikely that sales will cross the August sales figure of last year,” said an official from a Mumbai-based car manufacturer. July sales were 1.11 lakh. High interest rates, non-availability of finance, higher fuel prices and the recent increase in car prices have triggered the current slowdown in the industry.
Analysts say that car manufacturers are offering discounts and incentives and launching new models in a bid to pep up the slowing market “Shelf life of new launches have been reducing over the last few years. It doesn’t last beyond a year,” said a car manufacturer. Recently launched vehicles like the Chevrolet Spark, Renault Logan, Suzuki SX4 and the Honda Civic are all available off the shelf, sources said. Last year, when the mid-size car market saw the launch of Logan and SX4, volumes initially surged.
Japanese firms rev up to offer superbikes at Indian prices
08 August 2008; business-standard.com: Swaraj Baggonkar: Mumbai: In an attempt to steal the two-wheeler market from the three Indian giants Hero Honda, Bajaj and TVS Motors, which collectively account for almost 85 per cent of sales, Japanese bike manufacturers like Yamaha, Honda, Suzuki and Kawasaki will launch scaled-down Indian versions of their international superbike models.
Superbikes are motorcycles that have 800cc engines and can cost upwards of Rs 10 lakh if they are bought in India. Japanese manufacturers plan to offer re-engineered versions with much smaller engines and fewer trimmings at prices ranging from Rs 50,000 to Rs 1 lakh.
The superbikes that are being considered for such an overhaul are Yamaha YZF R1, Honda CBR 1000, Suzuki GSX R and the Kawasaki Ninja.
The re-engineering exercise involves putting in a lower-capacity and fuel-efficient engine and building a new chassis on the lines of the parent model using cheaper, lighter material. Other components built by using best-in-class material in the high-end bike will be replaced by aluminum and rubber components for the Indian version.
Expensive meter console units, twin disc brakes and wide tubeless tyres — all basic features that contribute the high price tag of a superbike — will not be available in the cheaper version.
“There are some superbikes in our international line-up of motorcycles that can be fine-tuned for India,” said Naresh Rattan, divisional head (sales and marketing), Honda Motorcycle & Scooter India (HMSI).
08 August 2008; timesofindia.indiatimes.com: Sanjay Dutta: NEW DELHI: If the government was to accept the recommendations of its latest panel on oil pricing, petrol price would keep going up for the next 11-12 months and diesel for 22-23 months - provided each increase comes in Re 1 size and international crude prices stay at their present levels.
But there is no need for alarm as indications are that the Centre is not going to swallow such a bitter pill in an election year for fear of upsetting an electorate already reeling under high cost of living.
Looking at the financial health of the state-owned oil companies through a purely economic lens, the committee under former cabinet secretary B K Chaturvedi, set up by PM Manmohan Singh, has suggested bringing in transparency in the way fuel prices are worked out and government compensates oilmarketing companies' losses from selling products at state-capped prices.
One of the panel's main recommendations will need motorists to get used to monthly fuel bills going up or down in line with international crude. If that sounds ominous for consumers, packed a punch for the government-run oil producers who have seen their books grow fatter due to soaring crude.
The committee says the government should levy 'super profit tax' for fields they were given without bidding (before 1999) and use the money to help oilmarketing companies keep kitchen fuel prices low.
The super tax is unlikely to actually hurt government-run producers but will hurt private companies such as Reliance, Cairn, BG and Videocon who are partners in fields like Panna-Mukta-Tapti and Ravva.
State firms like ONGC already give away a substantial chunk of their profit to help oilmarketing companies make up part of their losses on fuel sales. The tax will leave the same amount they take home now but usher transparency in the subsidy mechanism.
It will also fulfil listing and corporate governance ethics by letting investors know of the fixed liability on investments.
For government, it is the recommendation on fuel pricing that is causing worry.
Transposing this on recent times would show your fuel bill climbing for the last 12 months or so till July 11 - when crude made record at over $147 a barrel on the New York Mercantile Exchange - and coming down since then as oil has slips to $119-120 levels.
Going by the panel's suggestion, motorists at this point would have had to pay Rs 11.60 more for each litre of petrol, Rs 23.23 for diesel, Rs 39.55 for kerosene and Rs 348.89 for each cooking gas cylinder.
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