Union government paid Rs7.03 trillion in fuel subsidies since 2011-12
The Union government has paid Rs7.03 trillion in fuel subsidies since 2011-12, minister of state for petroleum and natural gas, Rameswar Teli said in a reply in Lok Sabha today. “The prices of petroleum products in the country are linked to the price of respective products in the international market. The Government continues to modulate the effective price to consumer for subsidised domestic LPG,” ministry of petroleum and natural gas said in a statement. Price of non-subsidised domestic cooking gas has been increased in the backdrop of the finance ministry slashing allocation for petroleum subsidy by two-thirds to ₹129.95 billion for FY22. “The Budget Estimates for F.Y. 2021-22 for LPG & Natural Gas (NG) subsidy is Rs. 129.95 billion,” the statement said. India had 287.4 million LPG consumers as on 1 January 2021, with the Pradhan Mantri Ujjwala Yojana, a government programme that aims to provide free cooking gas connections to poor families, increasing India’s LPG coverage to 99.5% on 1 January this year from 61.9 % as on 1 April 2016. “The prices of non-subsidized Domestic LPG are however determined by the OMCs in line with changes in the international markets. The subsidy on the product increases/decreases with the increase/decrease in the product price in international market and decision of Government on subsidy,” the statement added.
Final phase of Ennore LNG pipeline to be completed by Feb 2022
IndianOil has said it will complete the final phase of Ennore LNG pipeline by February, 2022 which will link Ennore and Ramnad. The 1,444 km long LNG pipeline, which is being laid by the pipelines division of IndianOil Corporation, has completed about 85% of the work, said executive director and state head of Indian Oil, P Jayadevan. “We have completed the construction and commissioned the gas supply through the main trunk (i.e) gas pipeline from Ennore to Manali currently, and will soon complete the third and final phase by February, 2022,” he added. The LNG Pipeline commencing from this terminal in Ennore would run alongside the existing Chennai, Trichy, Madurai pipeline for liquid fuels and touch all these major cities. From Madurai it would be linked to the Ramnad – Tuticorin section of the pipeline which has already been commissioned and is operational from February this year. The main Pipeline would be connected through branch lines and spur lines to all the major commercial and industrial clusters in Kanchipuram, Asanur, Puducherry, Sriperumbudur, Cuddalore, Nagapattinam. The pipeline would also have a separate loop line passing through Tiruvallur to Bengaluru. Along its route the LNG line would cover three states and 21 districts.
Cairn tax case: Parliament passes bill to bury ghost of retrospective taxation
Parliament on Monday cleared a bill to burry the ghost of retrospective taxation which had created “discontent” among foreign investors even as Finance Minister Nirmala Sitharaman assured the Rajya Sabha that the legislation does not dilute the sovereign right of India to levy taxes. The Rajya Sabha returned The Taxation Laws (Amendment) Bill, 2021 after a brief discussion. Opposition parties, Congress, DMK and TMC had walked out of the House to protest against listing of the bill in the supplementary business circulated just hours before the House took it up. The amendment bill, passed by the Lok Sabha last week, will enable the government to withdraw all tax demands made on companies like Cairn Energy and Vodafone using a 2012 legislation on indirect transfer of Indian assets prior to May 28, 2012. The 2012 legislation, commonly referred to as the retrospective tax law, was enacted after the Supreme Court in January that year rejected proceedings brought by tax authorities against Vodafone International Holdings BV for its failure to deduct withholding tax from USD 11.1 billion paid to Hutchison Telecommunications in 2007 for buying out its 67 per cent stake in a wholly-owned Cayman Island incorporated subsidiary that indirectly held interests in Vodafone India Ltd. The Finance Act 2012, which amended various provisions of the Income Tax Act, 1961 with retrospective effect, contained provisions intended to tax any gain on transfer of shares in a non-Indian company, which derives substantial value from underlying Indian assets, such as Vodafone’s transaction with Hutchison in 2007 or the internal reorganisation of the India business that Cairn Energy did in 2006-07 before listing it on local bourses. Using that law, tax authorities in January 2013 slapped Vodafone with a tax demand of Rs 14,200 crore, including principal tax of Rs 7,990 crore and interest. This was in February 2016 updated to Rs 22,100 crore plus interest. Replying on the debate, Finance Minister Nirmala Sitharaman said, “This (bill) is appealing enough and putting an end to this ghost which we have been carrying all these while from 2012.” She stressed that the government has a right to tax, “but to apply it in retrospective has created a lot of discontentment”. “I seek support of the House to make India look very clear, transparent and fair taxation land. …this whole thing about retrospective amendment bill, which was brought in, since then we were bearing the negativity of this all over the world.” The minister also told the House the bill provides for no payment of interest on refunds made under this and the parties seeking relief would not pursue further appeals or litigation in these cases. Seeking support of the House for the legislation, Sitharaman assured the Rajya Sabha: “We continue to have the sovereign right intact. That is not getting diluted. This is just a right decision which had to be taken years ago”. The minsiter said the government waited for the decision of arbitrations before bringing in the amendment. She further stressed that any correction in retrospective taxation “should be through Indian laws and not through any of the court outside”. While introducing the bill in the Rajya Sabha, Sitharaman also took a jibe on the Congress party saying it takes different positions in Parliament and outside on the same issue. While there was no substantial amount involved in the Vodafone case, in the case of Cairn Energy, the tribunal had asked the Indian government to return the value of the shares it had seized and sold, tax refund withheld and dividend confiscated to enforce the retrospective tax demand. With the government refusing to honour the award, Cairn Energy Plc moved a court in the US to seize assets of Air India. It got an order from a French court to freeze 20 Indian properties in Paris to recover USD 1.2 billion-plus interest and penalties. The move clubbed India with nations such as Pakistan and Venezuela that have faced similar actions by entities seeking enforcement of awards. Finance Secretary T V Somanathan said a total of Rs 8,100 crore was collected using the retrospective tax legislation. Of this, Rs 7,900 crore was from Cairn Energy alone. This money will be repaid. As much as Rs 1.10 lakh crore in retro taxes was sought from 17 entities that were levied taxes using the 2012 legislation. Of these, major recoveries were made only from Cairn.
High spot price for LNG this time of the year
Spot prices for LNG in Asia rose this week (August 1-8) to their highest for this time of the year since 2013, as buyers prepare for more extreme temperatures amid a supply crunch. The average LNG price for September delivery into Northeast Asia LNG-AS is now estimated at about $16.90 per MMBtu, up $1.30 from the previous week according to industry sources. Besides buyers already securing demand ahead of winter, temperatures in China and Japan have been soaring, increasing demand for air-conditioning, and consequently higher demand for electricity/LNG. Even though prices do usually peak during summer and winter months on account of extreme weather but it also falls in between. The prices have not fallen this year. According to “LNG Global” industry sources, Beijing Gas bought one cargo to be delivered between Sept. 26-30 into the Yuedong terminal at a price well above $15 per MMBtu. China’s Shenzhen Energy bought a cargo for Aug. 19-27 delivery to the same terminal at $16.20 per MMBtu. PetroChina sold a cargo for delivery into the Fujian terminal in China over Sept. 4-8 at $16.14 per MMBtu during the S&P Global Platts’ pricing process on Thursday. The United States continued record exports to make up for the supply disruptions elsewhere. The long term contracts are looking much more encouraging today even with crude prices hovering around $72 per barrel. The Henry Hub linked contracts are also looking good though high shipping costs can be killing. In this scenario, swapping USA supply contracts with European countries appears to be an attractive proposition for both Europe as well as India (GAIL). Well, some exciting times ahead for the LNG industry, especially for GAIL who is well endowed with US contracts
ONGC’s share in India’s oil, gas production rises
State-owned ONGC, which is often perceived as a drag on the crude oil and natural gas produced in the country, has actually seen its share in India’s oil and gas production rise over the last three years. “The share of ONGC’s crude oil production in the country’s total crude oil output has increased from 61.7% in 2018-19 to 66.5% in 2020-21,” minister of state for petroleum and natural sas Rameswar Teli said in a written reply to a question in the Lok Sabha on Monday. The same was also true for gas. Oil and Natural Gas Corporation (ONGC) operates the country’s oldest fields where a natural decline in output has set in. Other major fields in the country too are facing similar issues, leading to lower production as a whole. According to the minister’s reply, ONGC’s production has declined but it is slower than the national average. “Challenges faced in operation of exploration and production (E&P) activities are generic and ONGC is taking appropriate steps to address these,” he said. ONGC produced 21.11 million tonne out of the national output of 34.2 million tonne in 2018-19. In 2020-21, it produced 20.273 million tonne out of the national output of 30.49 million tonne. “The share of ONGC’s natural gas production in the country’s total natural gas output has increased from 75.3% in 2018-19 to 77.1% in 2020-21,” he said. It produced 24.74 billion cubic meters of gas out of the national production of 32.87 bcm in 2018-19. In 2020-21, it produced 22.09 bcm out of 28.67 bcm national output.
Reliance Industries, Reliance-BP Mobility get fuel retailing licence
The government has granted auto fuel retailing licence to seven new entities including Reliance Industries Ltd and a joint venture of Reliance and BP, Minister of State for Petroleum and Natural Gas Rameswar Teli said on Monday. The licences were given under a new liberalised rule that allows any entity with a minimum net worth of Rs 250 crore to apply for authorisation to retail petrol and diesel. Under the November 2019 policy, “marketing authorisation” has been granted to Reliance Industries Ltd, IMC Ltd, Onsite Energy Pvt Ltd, Assam Gas Company, M K Agrotech, RBML Solutions India Ltd and Manas Agro Industries and Infrastructure, Teli said in a written reply to the Lok Sabha. RIL already had a fuel retailing licence, under which it had set up over 1,400 petrol pumps in the country. But this licence was transferred to its subsidiary Reliance BP Mobility (RBML). And so, billionaire Mukesh Ambani’s firm applied and got another licence. A separate joint venture of the firm with BP, called RBML Solutions India Ltd too has got a licence. It isn’t clear if RIL and RBML Solutions will set up separate, competing petrol pumps. The “Ministry of Petroleum and Natural Gas (MoPNG) vide Resolution dated November 8, 2019, has revised the guidelines for authorization to market transportation fuels,” Teli said. “The revised guidelines would promote ease of doing business and boost private players to invest in the retail sector.” Besides doing away with the earlier requirement of investing Rs 2,000 crore in oil and gas sector to be eligible for a fuel retailing licence, the new liberalised petrol pump norms require licensees to set up a minimum of 100 outlets with at least 5 per cent of them in remote areas. The licensee is required to “install facilities for marketing at least one new generation alternate fuels like compressed natural gas (CNG), biofuels, liquefied natural gas, electric vehicle charging points etc at their proposed retail outlets within three years of operationalisation of the said outlet.” It fixes Rs 250 crore as the minimum net worth for obtaining the licence. State-owned oil marketing companies — Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) — currently own most of the 77,709 petrol pumps in the country. RBML, Nayara Energy (formerly Essar Oil) and Royal Dutch Shell are the private players in the market but with limited presence. RML has 1,422 outlets, Nayara 6,152 while Shell has just 270 pumps. BP had a few years back secured a licence to set up 3,500 pumps but has not yet started doing so. It has since decided to venture into the business with RIL with plans to scale up RIL’s present network strength to 5,500. “The entities while applying for marketing authorization have to, inter alia, provide details about their marketing plan including details of the source of supply. Such entities are free to source their supplies from different sources including PSU OMCs in their best commercial wisdom,” Teli said. While the opening up of the retail licensing is believed to usher in competition, the minister said, “at present, it may not be possible to gauge the quantum of change in countrywide auto fuel supply as the new entities have been granted marketing authorisation fairly recently.” Those granted licences include Chennai-based IMC (once called Indian Molasses Company), which specialises in oil terminals, and Assam government firm, Assam Gas Company. Assam Gas Company is in the business of gas transportation. Not much is known about Onsite Energy which was incorporated in May 2020. M K Agrotech is part of a diversified conglomerate with interests across agricultural products such as sunflower oil, real estate, and crude oil and gas extraction, while Manas Agro Industries and Infrastructure has its own brand of Liquefied Petroleum Gas (LPG or cooking gas).