07 Jan 2009;business-standard.com:Mumbai: Chennai-based India’s second largest commercial vehicle manufacturer, Ashok Leyland today posted a decline of 74 per cent in domestic sales in December at 1,420 units as against 5,488 units sold in the same month a year ago.
In addition, to bring its inventory under control, the company was forced to shut down production at its plants resulting into a cut in output by more than 86 per cent during the same month.
Its output fell to only 960 units during the month as compared to 7,110 units produced in the corresponding month a year ago. Company executives had mentioned earlier that the company will undertake heavy production cuts during December and January.
Lack of financing from banks and high interest rates impacted the company’s goods carrying medium and heavy commercial vehicle (M&HCV) segment. This truck segment suffered massively as sales plunged by almost 87 per cent at 637 units as against 4,153 units.Exports of the company, however grew marginally by 5.75 per cent at 901 units as against 852 units.
RIL gives in to US pressure, stops gasoline to Iran
Tuesday, 06 January 2009
07 Jan 2009;business-standard.com:Nevin John:Mumbai: Reliance Industries (RIL), the largest private company in the country, has decided to stop gasoline supplies to Iran after fulfilling all contractual obligations. This follows a letter written by eight US Congressmen to that country's Export-Import Bank (Exim Bank) asking it to immediately suspend all financial assistance to RIL until the company agrees to stop selling gasoline to Iran. The Exim Bank has provided two separate loan guarantees worth $900 million, including a $400-million loan by JPMorgan in August. The loan was for funding RIL's expansion programme. Sources in the know said the decision will not impact RIL's business as the quantity of supplies was not substantial. The company has diverted supplies to other regions, including Europe and the US. When contacted, an RIL spokesperson said, "As a corporate policy and to maintain business confidentiality, we don’t comment on specific transactions." The letter written by the eight Congressmen said that RIL, being a major supplier of gasoline to Iran, is detrimental to the national security interests of the US and the loan is in direct collision with its foreign policy on Iran. The four-page letter was signed by Congressmen Brad Sherman, Mark Steven Kirk, Howard L Berman, Edward R Royce, Steve Israel, Steven R Rothman, Ron Klein and Gary Ackerman. Of these, while Berman is chairman of the powerful House Committee of Foreign Relations, Sherman, Ackerman, Klein and Royce are its members. Israel and Rothman are members of the House Appropriations Committee. "Given the apparent lack of consideration of the relationship between Iran and RIL during the approval of the two loan guarantees packages for RIL, we further urge that you take whatever action necessary to secure an understanding with Reliance that before any undisturbed guarantees are released, Reliance will commit to ceasing its gasoline shipments to Iran," the lawmakers said. The letter from the House of Representative members follows another sent by Senators Joe Lieberman and Jon Kyl early November, who also raised similar concerns about Ex-Im Bank's ties with RIL. Ex-Im had then defended its role saying, "Ex-Im is not aware that Iran is among the largest markets of RIL's energy products. In fact, RIL has informed us that sales to Iran from its existing refinery present only a small portion of RIL's total trade activities." "The bank has communicated to RIL regarding the letter from the lawmakers and put pressure on them to withdraw from supply to Iran. The company has responded to the concerns of the bank and lawmakers immediately since it did not want to spoil its relations in the US," the sources said.
Govt gets tough on oil strike, says no need to panic
Monday, 05 January 2009
06 Jan 2009;timesofindia.indiatimes.com;NEW DELHI: After executives of state-owned oil industry rejected all peace overtures, the government on Monday decided to take gloves off and reveal its iron fist against their planned strike from Wednesday, even as it assured consumers of uninterrupted supplies and appealed against panic buying of motor and kitchen fuels. The Centre asked states to invoke drastic laws meant for maintaining essential supplies. In places where such laws are not available, the National Security Act will be applied. Simultaneously, the oil companies are moving contempt proceedings as the strike has been called despite the Delhi High Court's stay. They are also rotating personnel not under the strike call to man key posts. Despite the tough measures, oil minister Murli Deora hoped the government will not have to use them. "I appeal them against striking work. This is not the time. It will hurt the economy and people. The PM has set up a mechanism for redressal. But still if they stick to their guns, they will have to face the music.'' In the same vein, petroleum secretary R S Pandey too said, "I believe in the goodness of basic human nature''. A strike seems certain at this point as the agitating officers rejected even an offer to explain their grievances against new salaries to a ministerial panel under home minister P Chidambaram. Pandey had succeeded in persuading Chidambaram to let the association office-bearers themselves explain their grouse. The committee was set up after Deora personally took up the issue with the PM. The strike, if it happens, will not affect the marketplace for 3-4 days if there is no panic buying. One, Hindustan Petroleum officers are not joining and GAIL and Oil India executives have assured they will not hamper operations. Private refiners Reliance Industries and Essar have also been put on notice to supply fuels if need be. "There is no shortage of products. We have 30 days' supplies in stock. The important thing is loading them into truck- and rail-tankers or push through pipelines. For a few days, there will be no affect. But if the strike goes on for long, then we need to see the how the situation works out,'' IndianOil chairman Sarthak Behuria said. On its part, Oil Sector Officers Association (OSOA), representing 45,000 oil PSU executives, tried to rope in pump owners. Ajay Bansal of the pump owners' federation said they sympathise with the oil executives and will "lend support'' if need be.
05 Jan 2009;economictimes.indiatimes.com:Rajeev Jayaswal:NEW DELHI: The government is working on a bailout package to prevent its three blue chip oil companies ”Indian Oil, Bharat Petroleum and Hindustan Petroleum" from closing 2008-09 in the red. The package, which is currently being worked out between the finance and petroleum ministries, proposes to provide additional oil bonds of Rs 30,000 crore to the oilcos to compensate them for losses incurred on fuel sales at government-controlled prices, a government official in the know said. According to the proposal, the government may issue bonds worth Rs 30,000-31,000 crore in the current fiscal that will absorb the OMCs entire loss including their earlier contribution of Rs 21,957 crore in the first half (H1) towards fuel subsidy. Upstream companies Oil & Natural Gas Corporation (ONGC) and Oil India (OIL) share may also be restricted to Rs 30,000 crore, most of which was already paid in H1. The total subsidy for 2008-09 is estimated at around Rs 1,06,000 crore. A proposal of the oil ministry to absolve the three public sector oil marketing companies (OMCs) from sharing underrecoveries is under consideration, an official in the finance ministry, on conditions of anonymity said, It is unjustified to ask loss-making OMCs to share underrecoveries. The three OMCs have, for the first time, reported a combined loss of Rs 14,431 crore in the first half of 2008-09.¯ Underecoveries are losses suffered by oil companies for selling fuel at government controlled prices that do not cover costs. If the proposal is accepted, the government may have to issue additional oil bonds of worth Rs 30,000 in 2008-09. It has already sanctioned about Rs 45,000-crore oil bonds in H1. The government gives oil bonds to the state-run OMCs to partly compensate their losses for keeping retail prices of four fuels below market rates. The compensation was based on a burden sharing formula approved by the Cabinet on October 11, 2007 while extending fuel subsidy schemes up to April 1, 2010. According to the formula, 42.7% of OMCs total underrecoveries was to be borne by the government in the form of oil bonds and one-third of the total underrecoveries was to be shared by upstream companies. Due to an unprecedented jump in crude oil prices, the formula was later abandoned. The crude oil prices had peaked at $147 a barrel in mid-July 2008. Currently, global crude oil prices are hovering between $40 and $45 a barrel. The average price of the country crude oil imports (the Indian basket) has been $40.82 a barrel in December which was about $10 a barrel lower than the November average. The average crude oil import price in the first three quarters was $96.51 a barrel compared to $79.25 a barrel in the same period the previous year.
05 Jan 2009;timesofindia.indiatimes.com:Sanjay Dutta:NEW DELHI: Here's a bit of sunshine amid the forecast of economic recession continuing in 2009. You can expect fuel prices to become cheaper by Rs
10 a litre or so of petrol and remain that way through the year if the peak winter trend in the international oil market is anything to go by. Polltime political compulsions of brushing up a people-friendly image will make sure the government utilises the window of opportunity provided by oil's continued low run.
Broadly, present petrol and diesel prices are in tune with $55-60 a barrel crude level. By all indications, crude is unlikely to sustain that level this year. The forecasts range between $30 a barrel by Goldman Sachs to $43 by JP Morgan, at least in the first three months. The outlook is unlikely to change drastically in the remaining months as demand forecasts, such as the one by Deutsche Bank, too project more than a 1% decline.
The short $2 surge in the last few days, on the back of the flare-up in West Asia and Russia stoking gas shortage fears after it shut supplies to Ukraine, is temporary.
That leaves the government plenty of room to lower pump prices of at least motor fuels. Kerosene and cooking gas, however, are another story. Despite the low international crude and petro products prices, the lopsided subsidy mechanism still leaves state-run oilmarketers with a loss on these two products. The oilmarketers are earning a profit of roughly Rs 15 a litre on petrol and Rs 3 on diesel but lose Rs 17 on a litre of kerosene and Rs 148 per cooking gas refill.
No wonder, the government is reworking its arithmetic and working out another round of price cut for motor fuels -- and possibly cooking gas -- without hurting the oilmarketers too much. Last week, oil minister Murli Deora told TOI the cut could be expected later this month. Though the jury is still out, that cut could be of the order of Rs 5 a litre of petrol, Rs 1-2 of diesel and maybe Rs 20 per cylinder of cooking gas.
There may be further reductions down the road as it now looks certain that oil's heady days are over -- at least in the near future. Oil has stumped Opec's sharpest-ever production cut and failed to get excited by geopolitical events. If taken as a full-year average, crude prices have dropped 54% in 2008 from $96 a barrel to a tad above $44 on December 31. In between, of course, it created history by spiking to a little over $147 on July 11.
If anything, crude will stabilise at a level that will make a reduction in pump prices comfortable for all stakeholders. Many industry watchers say a floor will take time in coming until the market sees demand getting destroyed in a sustained fashion. At that point, prices could first level off in the upper $20-30 a barrel range before beginning to push back toward $50 in the third quarter or so.
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