Fuel tax to swell revenue of states past pre-Covid highs
Revenue of India’s top ten states is set to exceed the pre-pandemic levels on account of rise in tax collection on petroleum products, according to a Crisil report. “We expect sales tax revenue for states to increase 30 per cent this fiscal from FY20 levels, even as fuel volume remains 2-3 per cent lower than the pre-pandemic levels. The price of crude oil is seen hovering at $70 per barrel on average this fiscal,” said Manish Gupta, senior director, Crisil Ratings. These states include Maharashtra, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh, Telangana, Rajasthan, West Bengal, Madhya Pradesh, and Kerala. This also explains why both the Centre and the states are reluctant to reduce duty on petroleum products. The report stated that most of these ten states had hiked sales tax on fuel sales by 6-7 per cent or between Rs 1.5-1.8 per litre last fiscal. That, combined with the `10-13 per litre increase in central excise imposed last year makes petrol prices above Rs 100 in many cities. For states, central taxes typically account for a quarter of revenues, state GST for 21 per cent, and grants from the Centre 17 per cent. Sales tax from petrol and alcohol contribute 13 per cent, and the rest comes from non-tax revenue, excise duty, stamp duty and others. The Crisil report also pointed out that GST collections are expected to be marginally better than the pre-pandemic levels. “While the second wave of the pandemic may moderate GST collections in June and July, we expect a recovery to pre-pandemic levels by August,” Gupta noted. However, despite the spike in taxes, these states would still fall short of budget estimates.
India petrol, diesel consumption to grow by 14%, 10% respectively in FY22: ICRA
In an indication of the Indian economy’s revival, the country’s petrol and diesel consumption is expected to grow by 14% and 10% respectively in FY22, according to rating agency ICRA. This assumes importance given that energy consumption, especially electricity and refinery products, is usually linked to overall demand in the economy. “Benefitting from the anticipated rise in mobility and economic recovery aided by an acceleration of the coverage of covid-19 vaccines, ICRA has forecasted the YoY growth in the consumption of MS and HSD in FY2022 at 14% and 10%, respectively, on the low base of FY2021. Our forecasts suggest that consumption in FY2022, relative to the pre-covid level of FY2020, will be 6.7% higher for MS, and 3.3% lower for HSD,” Aditi Nayar, chief economist, ICRA Ltd said in a statement. This comes in the backdrop of India, the world’s third-largest oil importer, witnessing an upward trajectory of transportation fuel prices. Diesel and petrol prices have already breached the ₹100 mark in several parts of India. “Benefitting from the revival in consumption of fuels, the aggregate revenue generated from the cesses imposed by the Government of India (GoI) on MS and HSD is estimated to expand by 13% or ₹0.4 trillion to ₹3.6 trillion in FY2022. If this additional revenue of ₹0.4 trillion is foregone, it can support a reduction in cesses by ₹4.5/litre each on MS and HSD,” the statement said. Any increase in global prices can affect its import bill, stoke inflation and widen trade deficit. Following the covid outbreak, crude prices for Indian basket of crude had plunged to $19.90 in April last year during the first wave before recovering to $66.95 a barrel in May, data from the Petroleum Planning and Analysis Cell showed. “Such a revenue neutral cut in cesses on fuels would shave off a modest 10 bps from ICRA’s forecast of 5.25% for the CPI inflation for July 2021, in terms of the first-round impact, with a similar second round impact likely with a moderate lag,” the statement added. Global crude oil prices are expected to be in the $75-80 per barrel range till September, Care Ratings said in a report on Thursday. The Indian economy contracted by 7.3% in FY21 due to the first wave of the covid-19 pandemic. With many states easing the lockdowns imposed during the second wave of the pandemic, India’ growth projections have been subdued and below 10% for the current financial year. “The favourable prospects of a global economic rebound brought by the vaccine rollout optimism, have resulted in a nearly uninterrupted increase in the international crude oil prices since January 2021. Reflecting this, a weaker INR, higher cesses imposed by the GoI since March 2020 and the increase in Value Added Tax (VAT) rates by more than three-fourths of the state governments in 2020, have seen the average retail selling prices (RSP) of MS and HSD in the four metro cities increase to record-high levels of ₹99.54/litre and ₹92.03/litre, respectively, as on June 25, 2021,” the ICRA statement added. Generation of electronic permits for goods movement, or e-way bills, picked up further momentum in the third week of June, indicating that economic activity was on the rise in line with the lifting of regional restrictions on mobility. Also, Indian power firms and ports will be better able to weather the impact of the second wave as compared to airports and toll roads, Moody’s Investors Service said in a report on Wednesday. “Given the current scenario where domestic sentiment demand has been signed by the impact of the second wave of covid-19, the all-time high retail prices of fuels are both weighing upon disposable incomes and consumption, and feeding into inflationary pressures,” the ICRA statement said.
Stop shale gas exploration move
The Anti-Methane Project Movement has urged the State Government to prevent Oil and Natural Gas Corporation from establishing a new well for shale gas exploration in the vicinity of a discarded well at Anjaruvarthalai in Tirumanancheri Panchayat in the district. “The ONGC is making preparations for drilling a new well by hydraulic fracking process under the pretext of carrying out cleaning works in the existing well. Paths were being created for movement of heavy vehicles and a pond has been created for holding the waste water generated in the process of deep drilling,” T. Jayaraman, Chief Coordinator, Anti-Methane Project Movement, said in a petition submitted to the Mayiladuthurai district administration on Friday. Prof. Jayaraman sought to know on what basis the ONGC was preparing to drill a new well to extract shale gas now that the State Government has made known its clear stand to the Centre that no new exploration activity will be permitted in the Cauvery Basin under the Tamil Nadu Protected Agricultural Zone Development Act, 2020. In the backdrop of Tamil Nadu rejecting ONGC’s application recently for establishing 15 hydrocarbon wells in Ariyalur and Cuddalore districts by taking a categoric position that exploration of methane or shale gas will not be permitted, “drilling of any new well was illegal and must be stopped”, Prof. Jayaraman said in his petition, a copy of which was addressed to the Chief Minister’s office as well. Though the Union Ministry of Petroleum and Natural Gas had taken a policy decision in 2013 that exploration activity in already awarded acreages was permissible, it was irrelevant in Tamil Nadu as the previous as well as the new government in the State have been consistent in their decision not to permit ONGC and Oil India Limited to derive any leverage from the Central Government’s permission in the nine shale blocks, Prof. Jayaraman pointed out.
Assam cabinet increases compensation to be paid by oil exploration companies for private land acquisition
The Assam cabinet on Thursday increased the compensation to be paid by oil exploration companies for private land acquisition. The amount will be Rs 12 lakh for a bigha in the case of land within 10 km radius of a town and Rs 10 lakh if it is in rural areas. Minister and cabinet spokesperson Pijush Hazarika said that different rates prevailed in different districts. “The cabinet has decided that hydrocarbon exploration companies including Oil India Limited (OIL) and ONGC will pay compensation in enhanced format.” He added, “The amount will be Rs 12 lakh for a bigha in the case of land within 10 km radius of a town and Rs 10 lakh if it is in rural areas. Presently it is around Rs 3 lakh per bigha.” As part of administrative reform, the Cabinet empowered the Deputy Commissioners to allot land for government institutions at rural areas on the basis of recommendations of Land Acquisition Committees. Accordingly, from now onwards no file on such matters is required to be sent by the Deputy Commissioners to the Revenue Department.
World is entering a new energy era and Mukesh Ambani wants to be a part of it
Indian tycoon Mukesh Ambani unveiled an ambitious push into clean energy involving 750 billion rupees ($10.1 billion) of investment over three years, marking a new pivot for one of the world’s biggest fossil-fuel billionaires. Reliance Industries Ltd., which gets 60 per cent of its revenue from oil refining and petrochemicals, plans to spend 600 billion rupees on four “giga factories” to make solar modules, hydrogen, fuel cells and to build a battery grid to store electricity. An additional 150 billion rupees will be invested in value chain and other partnerships, Asia’s richest man told shareholders on Thursday. The move toward green by the Mumbai-based giant, which reported an annual revenue of $63 billion, offers a glimpse of the new order awaiting some of the world’s major fossil-fuel producers. Global giants such as Exxon Mobil Corp. and TotalEnergies SE have been under pressure to pare their carbon footprint, as governments, investors and consumers join to fight climate change and global warming. Speaking at the company’s virtual annual meeting, Ambani gave scant details of how he would execute the plan. He was ranked No. 4 among global fossil-fuel billionaires by Bloomberg Green last year. The $10 billion in green investment over three years compares with a Fitch Ratings’ estimate — published Wednesday — of $7.4 billion in annual average capital expenditure by the Reliance group through March 2025. Shares of the company fell 1.9 per cent as of 9:37 a.m. in Mumbai on Friday, extending declines following their biggest loss in more than two months the previous day. “Reliance is branching out into completely new businesses,” said Horace Chan, an energy analyst at Bloomberg Intelligence. “That raises concerns whether the investments could generate acceptable return and payback period, given the time to acquire technology know-how and seek strategic partners.” Ambani isn’t entirely turning his back on his legacy oil and petrochemicals business. On Thursday, he said that a delayed plan to bring Saudi Arabian Oil Co. as an investor in the energy division — announced two years ago — will be finalized this year. He didn’t elaborate. In a move to reassure investors, he also said Aramco Chairman Yasir Al-Rumayyan will join the board of Reliance. Aggressive Targets The proposed green transformation aligns with the priorities of Prime Minister Narendra Modi’s government, which has been debating aggressive climate targets that would cut net greenhouse gas emissions to zero by mid-century, a decade before China. Though fellow tycoon Gautam Adani, who built a coal-centered conglomerate of mines, ports and power plants, is already pursuing a similar path expanding his presence in wind and solar energy, Ambani’s plans are more ambitious in scope. “The world is entering a new energy era, which is going to be highly disruptive,” said Ambani, 64. “The age of fossil fuels, which powered economic growth globally for nearly three centuries, cannot continue much longer. The huge quantities of carbon it has emitted into the environment have endangered life on Earth.” One of Reliance’s “giga factories” will manufacture solar modules, enabling 100 gigawatts of solar energy by 2030, including on rooftop installations in villages across the country; the second involves large-scale grid batteries to store electricity, for which Reliance will collaborate with global leaders on the technology; and, the third will build and install electrolysers for separating green hydrogen from water. Fuel Cells “Is this doable from a standing start in nine years? It’s a stretch, it’s not impossible,” said Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis. “There’s an element of wanting to align with the Indian government and profit in the process. Don’t forget they’ve seen Adani make a lot of money in this. It’s not altruism.” The fourth factory would be for fuel cells, which use oxygen from the air and hydrogen to generate electricity — a technology that’s being promoted by carmakers including Hyundai Motor Co. but famously dismissed as “mind-bogglingly stupid” by Tesla Inc.’s Elon Musk. The announcement comes the year after India’s most valuable company raised more than $30 billion selling stakes in its technology and retail units, and through a sale of shares to existing investors. Reliance brought on board Silicon Valley giants such as Google and Facebook Inc. to help grow its digital and e-commerce footprint in a $1 trillion retail market of more than 1.3 billion people. The investment inflows, which Ambani called “vote of confidence” in his businesses, have helped Reliance’s stock rally more than 90 per cent since the beginning of April 2020. Ambani’s net worth is about $82 billion, according to the Bloomberg Billionaire’s Index. Adani Plans The Adani-led group is also raising its game in clean energy goals. Adani Green Energy Ltd. agreed last month to buy SoftBank Group Corp.’s $3.5 billion renewable power business in India, in a bid to achieve its goal of having 25 gigawatts of renewable power capacity by 2025. The green focus has led to a share rally with Adani Green jumping more than 580 per cent and Adani Total Gas Ltd. — a joint venture with TotalEnergies — by 670 per cent since the beginning of last year. Reliance last year set itself a target of becoming a net-zero carbon company by 2035 – a timeline shorter than the self-imposed 2050 cut-off of many of its global peers including BP Plc. and Royal Dutch Shell Plc. Ambani’s group bought its first cargo of carbon-neutral crude oil in February and said it was looking for more such partnerships. India’s government plans to expand its renewable energy capacity nearly fivefold to 450 gigawatts by 2030, as the nation aims to reduce its dependence on coal. “Reliance’s strategy on energy, data and consumer will ensure the company continues to grow sustainably bucking all cyclical trends,” said Sunil Chandiramani, chief executive officer at Nyka Advisory Services. However, “it will need to navigate challenges of technology innovation, talent acquisition, investor expectations and global turmoil,” he said.
Assam cabinet increases compensation to be paid by oil exploration companies for private land acquisition
The Assam cabinet on Thursday increased the compensation to be paid by oil exploration companies for private land acquisition. The amount will be Rs 12 lakh for a bigha in the case of land within 10 km radius of a town and Rs 10 lakh if it is in rural areas. Minister and cabinet spokesperson Pijush Hazarika said that different rates prevailed in different districts. “The cabinet has decided that hydrocarbon exploration companies including Oil India Limited (OIL) and ONGC will pay compensation in enhanced format.” He added, “The amount will be Rs 12 lakh for a bigha in the case of land within 10 km radius of a town and Rs 10 lakh if it is in rural areas. Presently it is around Rs 3 lakh per bigha.” As part of administrative reform, the Cabinet empowered the Deputy Commissioners to allot land for government institutions at rural areas on the basis of recommendations of Land Acquisition Committees. Accordingly, from now onwards no file on such matters is required to be sent by the Deputy Commissioners to the Revenue Department.
Gas infrastructure across Europe leaking planet-warming methane
The potent greenhouse gas methane is spewing out of natural gas infrastructure across the European Union because of leaks and venting, video footage made available to Reuters shows. Using a 100,000 euro ($119,000) infrared camera, non-profit Clean Air Task Force (CATF) found methane seeping into the atmosphere at 123 oil and gas sites in Austria, Czech Republic, Germany, Hungary, Italy, Poland and Romania this year. Methane, the biggest cause of climate change after carbon dioxide (CO2), is the main component of natural gas and over 80 times more potent than CO2 in its first 20 years in the air. Currently, the EU does not regulate methane emissions in the energy sector, meaning companies running the sites surveyed by CATF are not breaking laws because of leaks or venting. While some member states require firms to report some emissions there is no overarching framework forcing them to monitor smaller leaks, or fix them. That’s set to change. The EU is proposing laws this year that will force oil and gas companies to monitor and report methane emissions, as well as improve the detection and repair of leaks. In the energy sector, methane is emitted intentionally through venting and by accident from sites such as gas storage tanks, liquefied natural gas (LNG) terminals, pipeline compressor stations and oil and gas processing sites. CATF visited over 200 sites in seven EU countries and filmed emissions with the infrared camera in public vantage points to detect hydrocarbons invisible to the naked eye, such as methane. “Once you see it, you can’t unsee it,” said CATF’s James Turitto, who filmed the emissions. “If we have any hope of achieving only a 1.5 Celsius rise in average global temperatures, we must stop these leaks.” Altogether, CATF counted 271 incidents, with some sites leaching methane from several places. Turitto said over 90% of the sites he visited in the Czech Republic, Hungary, Italy, Poland and Romania were emitting methane while his hit rate in Germany and Austria was lower. LEAKS AND HOLES A selection of the CATF thermography, which shows hydrocarbons and volatile organic compounds, was reviewed by five technical experts contacted by Reuters. Given emissions were at installations handling natural gas – and methane is its main component – they concluded the emissions recorded by CATF were almost certainly methane. At one gas plant owned by Italy’s Eni near the town of Pineto on the country’s Adriatic coast, methane appears to be leaking from a rusty hole in the side of a tank. The footage captures a snapshot of each site’s emissions on a given day so it cannot quantify the amount of methane being emitted over longer periods. What it does reveal is emissions that could be avoided if infrastructure owners used commercially available measurement and abatement technology, emissions experts said. “If there are cracks in the storage tanks, it is a relatively easy fix to patch the tanks,” said Jonathan Dorn, an air quality expert at Abt Associates. Turitto said he called an emergency number for reporting leaks at the Eni site but the line was dead. Eni said the leak at Pineto was from a water tank which would have had negligible amounts of gas and that it had been detected and fixed during regular maintenance. “We are strengthening our efforts in the implementation of periodic leak detection and repair monitoring campaigns,” Eni said, adding that it was supportive of EU regulations to address methane emissions. COMPANIES ON NOTICE Brussels put energy companies on notice in October that it would target them with new rules on gas leaks and was also considering restrictions on venting or flaring of methane. “The Commission calls on companies in the oil, gas and coal sectors to set up more robust leak detection and repair programmes to prepare for upcoming proposals for legislation that would make such programmes mandatory,” it said. An EU official told Reuters this month that because the EU has few methane “super emitters”, the legislation would focus on tackling the smaller but far more frequent emissions that occur throughout energy sector infrastructure. “The first thing is to really try to address these more diffused emissions of methane, covering the whole energy sector,” the official, who declined to be named, said. Experts say the new rules will shake things up for every oil and gas firm in Europe, not least because the EU is considering forcing companies to find and fix even the smallest leaks. “Each company has a lot to do,” said Andris Piebalgs, professor at the Florence School of Regulation and a former EU energy commissioner. It is unlikely the new rules would take effect before 2023 but Brussels wants to get them in place early enough to contribute to its goal of cutting net emissions of all greenhouse gases by 55% by 2030 from 1990 levels. INTENTIONAL EMISSIONS The EU is not alone. U.S. President Joe Biden’s administration plans to propose new rules this year to reduce methane emissions. The New York Times used an infrared camera to identify large methane leaks at U.S. oil and gas sites in 2019 while satellite footage made available to Reuters revealed massive methane leaks from Russian gas pipelines. https://nyti.ms/3iCpJyn CATF’s footage shows Italian energy company SNAM was venting hydrocarbons consistently over three dates during a two-week period from two stacks at its Panigaglia LNG terminal near La Spezia on the Mediterranean coast. Tim Doty, a consultant in thermographic imaging in the energy sector and a former official at the Texas Commission on Environmental Quality, said the footage showed the stacks were “openly venting hydrocarbon emissions”. At a SNAM underground storage facility at Minerbio near Bologna, the infrared footage showed a plume of methane flowing out of a vent stack. SNAM said it was a member of the Oil and Gas Methane Partnership (OGMP), a voluntary group of energy companies that is committed to improving methane measurement and abatement. Eni is also a member. “Emissions recorded by CATF at the Minerbio and Bordolano storage sites