If you can't stand the LPG limit, build another kitchen
Sunday, 26 February 2012
27 Feb 2012;business-standard.com:Ajay Modi:New Delhi: The oil ministry has launched a drive to do so. A household with one kitchen can have only one cooking gas connection irrespective of the number of family members. It can have two connections only if there are two kitchens. For a new connection, consumers are now required to give an undertaking that they will not position any other LPG installation in the same kitchen that also includes a piped gas connection. Following an amendment issued by the ministry of petroleum and natural gas to the LPG marketing rules some months back, gas agencies now seek an undertaking from new consumers as well as those consumers who seek fresh connections against termination to give an undertaking agreeing to various conditions in the form of a notarised affidavit on non-judicial stamp paper. Those having ration cards, however, can give the undertaking on a plain paper. The 10-point one-page undertaking has several conditions, such as neither the applicant nor any other member of his family living in the same house with a common kitchen has any LPG connection from PSU oil companies or a piped gas connection. The consumer is also required to state the connection will be used at the address mentioned in the form and only for domestic cooking. In case the consumer does not abide by the undertakings, the oil company will seize the connection and forfeit the security deposit. There is no recovery drive by the oil companies for households that have single kitchens but multiple connections but oil companies maintain it is illegal and should be surrendered. Government-owned oil marketing companies, IndianOil, Bharat Petroleum and Hindustan Petroleum, which together cater to the entire nation’s demand, currently lose Rs 378 on every domestic cooking gas cylinder. A 14.2-kg LPG cylinder meant for domestic use sells at Rs 399.26 in Delhi compared to Rs 1,349 for a commercial cylinder of 19 kg, which is market-linked. The huge difference provides an incentive for black marketing and diversion towards commercial use. It also leads to indiscriminate use of the cooking fuel.The annual subsidy on domestic LPG is usually in the range of Rs 25,000-30,000 crore. For the nine months of the current year, the gross subsidy on LPG has been Rs 20,516 crore. "Domestic LPG is a highly subsidised product. A household with multiple connections usually does not use it and it gets misused by distributors and diverted by distributors for commercial use. Instead of going for multiple connections, a family should go for a double-bottle connection that allows two cylinders on one connection," said G C Daga, former director (marketing) at IndianOil. A proposal last year to limit the number of subsidised cylinders consumers could get in a year was dropped after opposition from key UPA allies, the DMK and Trinamool Congress. The petroleum ministry had made proposals to cap subsidy to the committee on direct transfer of subsidies headed by Unique Identification Authority Chairman Nandan Nilekani. The ministry wanted to bring an income-based cap on cooking gas so that the subsidy benefit was targeted at economically weaker sections.
US, Saudi manoeuvre to contain Iran oil market threat
Saturday, 25 February 2012
26 Feb 2012;business-standard.com:Washington/New York: Saudi Arabia has raised oil exports and the United States is considering releasing crude from its strategic reserves as oil prices hit nine-month highs on Friday and concerns deepened over Iran's nuclear program. Brent crude surged to over $125 a barrel after the United Nation's nuclear watchdog issued a report flagging the potential military nature of Iran's nuclear program, following an aborted UN inspection mission to Iran this week. The report heightened fears of a supply disruption and could stoke worries in Israel, which has threatened Iran with pre-emptive strikes on nuclear sites. That would send shockwaves across the region and almost certainly drive oil prices even higher. Top oil exporter Saudi Arabia increased exports over in the past week and offered additional crude to its biggest customers to tame runaway prices, industry sources told Reuters on Friday. US sanctions on Iran's oil buyers, as well as a European Union oil embargo to begin July 1, have already forced its customers in Europe and Asia to curb purchases from the world's fifth-largest crude exporter. The Saudi move comes as the Obama administration studies tapping crude from the Strategic Petroleum Reserve among possible measures to offset any Iranian supply disruptions, according to sources familiar with the discussions. Treasury Secretary Timothy Geithner told CNBC on Friday there may be a case for using the reserve. "Obviously Iran can do a lot of damage to the global economy," Geithner said. "We are working very carefully to try to minimize that risk." The fear of tightening supplies, including a threat from Tehran to close the Strait of Hormuz -- the main Gulf oil shipping lane -- have lifted oil prices 11 per cent this year, putting political pressure on President Barack Obama, who is running for re-election in November. Prices at the US gasoline pump are the highest on record for February. They hit $3.65 a gallon on Friday, up 13 per cent from last year, according to AAA. That has raised concern that any oil market disturbance could hoist them well over $4.00 during the US summer driving season -- when demand in the world's largest oil consumer tends to be highest.
24 Feb 2012;business-standard.com:New Delhi: The government has sought to increase crude oil inflow from Saudi Arabia by five million tonnes from 27.33 million tonnes, as supplies from Iran is set to decline following US sanctions. “We have sought five million tonnes (mt) of more crude oil from Saudi Arabia in 2012-13,” Minister of State for Petroleum and Natural Gas R P N Singh told reporters after a meeting with Abdul Aziz Bin Salman bin Abdulaziz, Assistant Minister for Petroleum Affairs, Saudi Arabia, here. India also sought more LPG from Saudi Arabia to meet growing energy needs. India imports nearly two mt of LPG from Saudi Arabia. The Saudi minister said his country had spare production capacity of 2.5 million barrels a day, beyond the current output of 9.8 million barrels a day. Singh said he conveyed India’s requirement of incremental quantities of Saudi Arabian oil imports in the years ahead considering the expansion in refining capacity in the country. “Other related issues such as the imposition of arbitrary cuts imposed by Saudi Aramco on supply of butane and propane from time to time, MRPL’s request for supply of crude oil on the basis of parent company guarantee instead of letter of credit and others were taken up with the Saudi side,” said a government statement. India invited Saudi participation in upcoming investment opportunities in its petroleum sector — upstream and downstream — including OPaL’s Petrochemical project at Dahej and OMPL’s Petrochemical project at Mangalore. “An offer was made to the Saudi side for considering equity participation in these projects as a strategic investor,” it said. Other proposed investment opportunities such as IOC’s LNG project at Ennore, BPCL’s LNG terminal at Kochi, HPCL’s grassroot refinery in Vizag and IOC’s petrochemical plant at Paradip were also discussed. “The Saudi side assured affirmative consideration of India’s request for larger quantities of crude oil and LPG while also agreeing to look into the issues raised by India relating to the hydrocarbon trade and investment between the two countries,” the statement added.
23 Feb 2012;business-standard.com:Ajay Modi:New Delhi: With non-revision in prices of controlled petroleum products such as diesel and continued surge in crude oil price, state-owned oil marketer Hindustan Petroleum (HPCL) is looking to increase its borrowing limit by Rs 10,000 cr to Rs 42,000 cr. The country’s biggest oil marketer Indian Oil had earlier raised borrowing limit by Rs 30,000 cr to Rs 110,000 cr in October last year. HPCL’s borrowings recently touched an all-time high of Rs 31,000 cr, surpassing the earlier record of Rs 28,000 cr in 2008 when crude oil had hit an all-time high of $147 a barrel. “Since there is a delay in the compensation of under-recoveries by the government, we are seeking shareholders’ approval to increase borrowing limit from net worth plus Rs 20,000 cr to net worth plus Rs 30,000 cr. The company’s net worth is Rs 12,000 cr,” said B Mukherjee, director (finance). There has been a continuous increase in crude oil prices with the Indian basket of crude rising close to $120 a barrel from the average price of around $110 in January. However, prices of controlled petroleum products have not increased due to assembly elections in five states. Even prices of petrol, a decontrolled product, have been not increased. Oil companies have an under-recovery of Rs 12.31 on every litre of diesel, Rs 28.77 on kerosene and Rs 378 on cooking gas cylinder. Companies are also losing around Rs 3.20 on every litre of petrol. This has caused an increase in the under-recovery or revenue losses of these companies. At the same time, there is a delay in grant of cash compensation from the government with the result that borrowings of these companies to fund working capital requirements have been going up. The last revision in prices of three controlled products was made in June last year. Due to a non-revision in prices, companies have declared loss in the nine month period of the fiscal. HPCL had declared a net loss of Rs 3,720 cr in the period.
23 Feb 2012;timesofindia.indiatimes.com:NEW DELHI: Making a strong pitch for raising diesel prices, Prime Minister's Economic Advisory Council chairman C Rangarajan on Wednesday said there was a need to revise prices to reduce the huge subsidy burden and bring down the fiscal deficit. While releasing the economic review for 2011-12, Rangarajan said it was earlier agreed to deregulate diesel prices but the decision was never implemented. He advocated a phased deregulation of diesel prices over the next few years and limiting subsidized LPG cylinders for domestic use. "Consumers should get a fixed number of LPG cylinders in a year and anything above that should be charged at market prices," Rangarajan suggested. When asked if it was a politically viable proposition, he said raising prices would have short-term impact on inflation but would even out in the long term. "The government will have to carry the message to the people," he added. "It will be necessary during 2012-13 to make some adjustments on diesel prices in a phased manner. We have not done this for quite some time and international crude prices have gone up... It is not possible for us to subsidize this sector beyond a level," Rangarajan said. Diesel price was last hiked in June 2011. The government had cut excise and customs duties to cushion the impact of the price rise, thus sacrificing annual revenue of Rs 38,000 crore. Pitching for deregulation of urea prices, Rangarajan said, "Partial reforms in the fertilizer subsidy regime of introducing nutrient-based subsidization will not be effective unless the price of urea is decontrolled or at least raised substantially." The government expects that its subsidy bill would increase by Rs 1 lakh crore to Rs 2.34 lakh crore, mainly on account of higher outlay towards fertilizer, food and oil.
Merchant power plants in a spot as government snaps fuel lines
Monday, 20 February 2012
21 Feb 2012;economictimes.indiatimes.com:Sarita C Singh:NEW DELHI: Merchant power projects that sell electricity in open markets face a grim future as the government has ruled out coal and gas supplies to them at a time when business is so bad that electricity rates are low despite elections which usually pump up the spot market. This has prompted private players to seek long-term power purchase agreements (PPAs) with utilities to get steady returns unlike the unpredictable and volatile spot rates that have touched extremes of Rs 1.20 and Rs 19 per unit. The government is reluctant to supply scarce fuel to merchant plants that can make a huge profit in times of scarcity, unlike the PPA-linked plants. A PM-appointed panel has instructed Coal India Ltd to sign fuel supply agreements with power plants that have entered into long-term agreements with distribution companies and are targeted to be commissioned before March 2015. Open market tariffs that usually zoom a few months during polls have remained in the range of Rs 1.20-5 per unit despite elections in five states of Uttar Pradeh, Uttarakhand, Punjab, Manipur and Goa. Lanco Infratech chief executive officer (thermal) K Rajagopal said the company would start signing long-term power purchase agreements for 2,000-mw existing and under construction capacity. "Signing long-term power contracts with states is the way forward to secure fuel tie-ups. Merchant power projects do not look good, as tariffs are not encouraging. There may not be any demand for open market power as distribution companies are cash strapped and also since fresh generation capacity is available," Rajagopal said. Association of Power Producers director general Ashok Khurana said more power producers were expected to tow the line as signing long term power contracts assures fuel and fund availability. About 15-20% of country's new capacity being added during 2009-12 is proposed to come from merchant power projects. Lanco Infratech, Monnet Ispat, Adani Power, Torrent Power and Jindal Power are among companies that planned to sell power in open market. A senior power ministry official said since coal and gas supply was limited, government would prefer giving fuel to projects that supply electricity at regulated prices. "Merchant power projects were conceived as purely market driven plants. Why should we recommend fuel to those projects when they do not benefit consumers? We can only consider such projects when there is excess fuel supply," the official said. Private power producers, however, opposed the government's decision of giving last priority to plants that sell power in open markets. "The government assured coal linkages and blocks to merchant power projects in 2007 when the concept was introduced," an official in Jindal Power Ltd. India Energy Exchange vice president Rajesh K Mediratta said short-term electricity tariffs have not risen during this elections as states were not in position to purchase power. Tamil Nadu paid Rs 17 per unit penalty for grid overdrawal and purchased power at Rs 12.5 per unit during elections in March last year. "Power rates were expected to go up to some extent in January-February. However, they remained at low levels except in southern region where tariff went up till Rs 19 per unit due to network congestion," Mediretta said. Some states also tied up medium-term power supply agreements with power producers. Power producers had pinned hopes on elections for higher tariffs. A senior official in Uttar Pradesh distribution company UPPCL said new projects in the state are helping it to cater to power demand during elections.
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