Gujarat Govt Reduces VAT On Aviation Fuel By 5%, Aims To Boost Tourism And Connectivity
In a bid to boost tourism and connectivity, the Gujarat government has announced. a reduction in value-added tax (VAT) on prices of aviation fuel. The decision taken by Gujarat Chief Minister Bhupendra Patel on Monday came in view of the directions given by the Union Aviation Ministry. Meanwhile, as per a statement by the Chief Minister’s Office (CMO), the price of Aviation Turbine Fuel (ATF) has been reduced by 5 per cent. “The state government said that this people-oriented decision of Patel will boost the tourism activities in the state,” it added. Notably, the price of aviation fuel plays a major role in the operating cost of airlines, and further the tax levied on ATF contributes significantly to its price. Also, other states and union territories (UTs) including Uttarakhand, Himachal Pradesh, Haryana, Madhya Pradesh, Jammu and Kashmir, Ladakh and Andaman and Nicobar have already reduced the cost of Aviation Turbine Fuel (ATF) by 4-1 per cent. Aviation Ministry urges states and UTs to reduce VAT on aviation fuel Earlier in August, Union Minister for Civil Aviation, Jyotiraditya Scindia in a written letter to 22 states and UTs had urged them to rationalize the value-added tax on ATF across all airports in their states within the range of 1 per cent to 4 per cent. He had also asked them to take the necessary decision in view of a common intention to boost air travel, connectivity, and further accelerate its economic development. “Addressing this issue would enable a force multiplier effect with regard to air connectivity”, he added. Further citing examples of other states such as Kerala, Andhra Pradesh, Sikkim, Meghalaya, Nagaland, and Telangana, Scindia noted that they have already reduced the rates of aviation fuel followed by a substantial jump in the number of aircraft movements has also been recorded. Meanwhile, the 22 states and Union territories to which the letters were written include Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Madhya Pradesh, Mizoram, Rajasthan, Tamil Nadu, Tripura, Uttarakhand, Uttar Pradesh, Jammu and Kashmir, Delhi, Ladakh, the Andaman and Nicobar Islands, and Dadra and Nagar Haveli and Daman and Diu
India’s MRPL operating refinery at full capacity, eyes profit in FY22
State-run Mangalore Refinery and Petrochemicals Ltd aims to continue operating its southern India refinery at full capacity on improved cracks and as it commissions a desalination plant to improve water supply, its managing director said. The refiner has been cutting its crude processing for decades, mainly during the June quarter, due to shortages of water which is needed for cooling operations and power generation. “We have installed a desalination plant. It is under commission so we don’t anticipate any (water) shortages from next year,” M.Venkatesh told Reuters in a phone interview. Instead of drawing water from a river, MRPL will process sea water. Venkatesh expects MRPL’s 300,000 barrels per day refinery to operate at full capacity. “The current Singapore cracking margins are quite healthy and demand projections are good so it is warranting 100% production”. MPRL posted a loss in its financial years to the end of March 2020 and 2021 as the pandemic reduced fuel demand and subsequently squeezed refining margins. “This year we may be turning positive because October-November physicals are fantastic,” he said, adding that his firm had already implemented major maintenance shutdowns in August and September. However there could be some ‘minor’ shutdowns of secondary units in the next financial year from April. Venkatesh said the merger of ONGC-Mangalore Petrochemicals Ltd (OMPL) with MRPL, which it aims to complete this year, would raise his company’s gross refining margins by 50 cents to $1/barrel and give it the flexibility to switch between the production of gasoline and paraxylene to maximise profits.
TOYO awarded contract for refinery in India
Toyo Engineering India Private Ltd (TOYO), a wholly owned subsidiary of Toyo Engineering Corporation (Toyo-Japan), has been awarded a contract by Numaligarh Refinery Ltd (NRL) for the EPCC of a 3.55 million tpy diesel hydrotreating (DHT) unit in Assam state of India. NRL is a public sector undertaking governed by the Ministry of Petroleum and Natural Gas (Government of India). It is undertaking a major expansion project from 3 million tpy to 9 million tpy consisting of several process units with total project cost of Rs 280.26 billion, which is part of Government’s hydrocarbon vision 2030 for the economic growth to meet the deficit of petroleum products in north east India. This will be one of the largest investments in the region. This DHT will produce the diesel confirming to BS VI specifications by hydrotreating a blend of refinery products. TOYO had executed another unit for NRL, back in 2006 on an EPCm basis. In India, which has a vast population and huge middle-class population strata that continues to grow, TOYO is committed to contributing to the economic development of the country.
Bharat Petroleum collaborates with BARC for green Hydrogen production
Bharat Petroleum Corporation Limited (BPCL), a ‘Maharatna’ and a Fortune Global 500 Company has collaborated with Bhabha Atomic Research Centre (BARC) to scale-up Alkaline Electrolysertechnology for Green Hydrogen production. Presently, ElectrolyserPlants are imported. This is a first-of-its-kind initiative to support the country’s commitment to achieve renewable energy targets and reduce greenhouse gas emissions. Refineries use large quantities of Hydrogen for de-sulfurization to make petrol, diesel and other chemicals. Currently, Hydrogen is made at the Refinery via. Steam Reforming of Natural gas, but this results in high CO2 emission. Therefore, Refiners are setting up large scale electrolysers to produce Green Hydrogen from water and therebydecarbonizeHydrogen production. Speaking on the occasion, Mr. Arun Kumar Singh, C&MD –Bharat Petroleum Corporation Ltd. said,“BPCL is fully committed towards environment protection and ensuring a greener planet. We have been extensively leveraging technology in all our activities. Today, through collaboration with BARC, we intend to scale up Indigenous Alkaline Electrolyser Technology and look forward to commercializing it for large use especially in Refineries. This will be another step towards “Atmanirbhar Bharat” in our journey for achieving Net Zero Emissions by 2040.” Bharat Petroleum has plans to expand its portfolio of renewable energy with solar, wind and biofuels thereby reaffirming its commitment towards sustainability and reduction of carbon footprint. Furthermore, the Company intends to meet power requirement for new projects in its Refineries, primarily from renewable sources.
India To Release 5 Million Barrels Of Crude Oil From Its Strategic Petroleum Reserves
In a bid to provide relief to citizens from the rising fuel prices, India will release 5 million barrels of crude oil from its strategic petroleum reserves as a part of a coordinated move with other major global energy consumers such as the USA, China, Japan and South Korea. The Minister of State (MoS) for Petroleum and Natural Gas said this in the Rajya Sabha on Monday. The minister in his speech said that domestic price of crude linked to international benchmarks of crude prices. These get affected by many factors, including the supply and demand, futures’ trading, impact of Covid-19 and other geopolitical situation. Linear co-relation such as pricing and any one of these factors in isolation indeterminable. The government consistently reviewing high petroleum and diesel prices domestically. The Centre had reduced ‘central excise duty’ on petrol and diesel by Rs 5 per litre and Rs 10 per litre, respectively, on November 3. It was followed by reduction in VAT on fuel by several state governments, said MoS Petroleum and Natural Gas. The move is being seen as a strategic step to rein in spiralling global crude oil prices and to keep them under check. In response, the OPEC+ group of oil exporting countries, which accounts for about 50 per cent of global crude supply, has indicated that it may reconsider plans to restore production over the coming months. A release of 5 million barrels of crude oil would equate to about 12. 8 per cent of India’s strategic oil reserves of 5.33 million tonnes of crude oil, which is estimated to be equivalent to 9.5 days of its crude oil requirement.
Is cost of maintaining a strategic petroleum reserve justified?
On November 23, the United States administration authorised the release of 50 million barrels of crude oil from the strategic petroleum reserve (SPR) operated by the US Department of Energy (DOE). Fifty million barrels of oil is about half the global oil consumption per day, and about three days of US oil consumption. Oil prices had touched levels not seen in seven years driving the US decision to release SPR oil crude oil. In the words of the secretary DOE, the release of oil from the SPR underscored the US President’s commitment to use the tools available to bring down costs for working families (by reducing the retail price of gasoline in the US), and continue economic recovery. The decision to release SPR oil by the US was co-ordinated with parallel decisions in China, India, Japan, South Korea, and the United Kingdom. India’s share in the co-ordinated release of oil stored in SPRs was 5 million barrels, not sufficient to influence oil prices given that the world consumes 100 million barrels a day (b/d). The goal of SPR oil release was not achieved as oil prices increased marginally by $1/barrel, after the announcement of SPR release. But when news of a new COVID-19 variant in South Africa broke on November 26, it did what the release of the SPR by the Joe Biden administration could not — reduce oil prices and that too by a significant 10 percent. This implies that expectations of oil demand growth influenced by factors such as the pandemic are more important in moving oil prices than expectations of supply corrections such as the oil release by the SPR. The apparent impotence of the SPR release raises questions over the costs and benefits of maintaining SPRs. Indian Strategic Petroleum Reserves Limited India’s SPR is managed by the State-controlled Indian Strategic Petroleum Reserves Limited (ISPRL), which was set up in 2004 as a wholly owned subsidiary of Indian Oil, and then handed over to Oil Industry Development Board (OIDB) in 2006. Under Phase I, the ISPRL established petroleum storage facilities with total capacity of 5.33 million tonnes (MT) at three locations: Vishakhapatnam (1.33 MT), Mangaluru (1.5 MT), and Padur (2.5 MT), all of which have been filled with crude oil. This will be sufficient to meet nine-and-a-half days of India’s crude requirement. In July, the government approved establishment of two additional commercial-cum strategic facilities with total storage capacity of 6.5 MT underground storages at Chandikhol (4 MT) and Padur (2.5 MT) under the public private partnership (PPP) mode under phase II of the SPR programme. When phase II is completed, it will meet an additional 12 days of India’s crude requirement. The capital cost for constructing the SPR facilities (phase I) was estimated to be Rs 23.97 billion at September 2005 prices. The revised cost estimate for the three locations stands at Rs 40.98 billion. Most of the capital cost was met with funds available with the OIDB while Hindustan Petroleum Corporation Limited (HPCL) met the cost of 0.3 MT compartment at Visakhapatnam. Operation and maintenance cost of the strategic reserves is met by the Government of India. In the year 2019-20, the ISPRL recorded a net loss of over Rs 1 billion. Origin and Rationale of SPRs The dramatic increase in the price of oil in the late 1970s redefined the energy policies of industrialised nations from one that managed abundance to one that managed scarcity. Countries in Western Europe, barring France, and the US reached an agreement to create the International Energy Agency (IEA) in 1974 to counter actions of the OPEC (Oil Producing and Exporting Countries). Though Henry Kissinger who co-ordinated the international response to the oil crisis had ambitious plans for the IEA, it eventually became a modest mechanism for managing scarcity through an oil sharing arrangement between member countries that required maintenance of strategic oil stocks to mitigate supply risk. All oil-importing member countries of the IEA have an obligation to hold emergency oil stocks equivalent to at least 90 days of net oil imports. Industrialised countries represented by the IEA pushed for China and India to build and maintain strategic stocks of oil to address short-term volume, and price risk. Crude oil price increases generally result from actual or anticipated increase in demand, or decrease in supply, or both. The logic is that the release of SPR oil would potentially provide temporary relief from rising prices, but more importantly make up for temporary supply losses that are behind the price rises. Issues Though strategic stockpiling of oil was promoted by policymakers as the best way of insuring against supply shocks, questions remain as to whether the high cost of maintaining these stocks justified the benefits, especially for developing economies. Theoretically, the release of SPR oil by rich industrialised nations to influence crude oil prices provides a global public good of lower oil prices. No country can be excluded from lower prices that is expected follow the release of SPR oil, and therefore, it is possible for poor countries to ‘free ride’ on the SPRs held by industrialised countries. But industrialised countries have put pressure on India and China, now large importers of oil to share the burden of holding SPR reserves. Most studies estimate that the opportunity cost of holding crude oil is more than the cost of crude oil. To reduce this cost, auctioning or trading oil in SPRs is suggested. India initiated selling crude from its SPR in July, following news of China’s decision to auction crude from its SPR. India’s goal was to commercialise SPR crude reserves to generate revenue using oil stocks for trading, and from licensing capacity. The logic behind this is to purchase crude at lower levels, and supply in the domestic market when prices rise meaningfully. For example, China’s SPR crude that was bought in April-May 2020 when oil prices were about $40/b was auctioned on September 24 at $65-$70/b which helped improve refining margins for buyers of crude, and also improved state
India says oil producers artificially adjusting oil supply leading to price rise
India, the world’s third-largest oil importer and consumer, on Monday said oil prices have to be reasonable and market-determined as it expressed concern over rise in rates on supplies being artificially adjusted below demand by producing countries. With a rise in international oil prices pushing retail petrol and diesel rates to record high, India last month agreed to release five million barrels of crude oil from its Strategic Petroleum Reserves, Minister of State for Petroleum and Natural Gas Rameswar Teli said in a written reply to a question in the Rajya Sabha. This was being done “in consultation and parallelly with other major global energy consumers including the USA, People’s Republic of China, Japan and Republic of Korea”, he said. “This step is being taken in a bid to control inflationary pressures and provide relief to citizens.” This is the first time ever that India, which stores 5.33 million tonnes or about 38 million barrels of crude oil in underground caverns at three locations on the east and west coast, is releasing stocks for such purposes. While the US will release 50 million barrels of oil from its strategic petroleum reserves, the stocks to be released by India are almost equal to its daily oil consumption of 4.8 million barrels. “India strongly believes that the pricing of liquid hydrocarbons should be reasonable, responsible and be determined by market forces,” the minister said. In a reference to output quotas set by OPEC and its allies to regulate prices, he said, “India has repeatedly expressed concern at the supply of oil being artificially adjusted below demand levels by oil-producing countries, leading to rising prices and negative attendant consequences.” As per the consumption pattern of 2019-20, the total capacity in the established Strategic Petroleum Reserves (SPR) facilities is estimated to provide for about 9.5 days of crude oil requirement. Oil marketing companies (OMCs) currently have stock for 64.5 days. “Hence, total capacity storage of petroleum products is 74 days,” he said. India is 85 per cent dependent on imports to meet its oil needs and so domestic retail rates are aligned with prices of benchmark global commodities. The government, he said, has been taking all ameliorating measures to safeguard the energy security of the country by ensuring energy justice for all citizens. And, with domestic retail rates rising to record highs, it reduced the central excise duty on petrol and diesel by ₹5 per litre and ₹10 a litre, respectively, on November 3, he said. This was followed by a reduction in value-added tax (VAT) on fuel by 28 states and Union territories. “Refilling of Strategic Petroleum Reserves is undertaken keeping in mind a host of factors, including the grade of crude and international market conditions,” Teli added. International crude oil prices get affected by many factors including supply and demand, futures’ trading, the impact of the COVID-19 scenario and geopolitical situation, he said adding that linear co-relation between pricing and any one of these factors in isolation, is indeterminable. India joined other major oil consumers in releasing stocks from SPR after members of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies rebuffed repeated requests to speed up their production increases. New Delhi has been the most forceful about flexing its muscles as a major oil consumer, cutting shipments from Saudi Arabia by about a quarter after OPEC extended production cuts. Oil Minister Hardeep Singh Puri last month in Dubai had said high prices will undermine the global economic recovery. India is the world’s third-largest oil consumer and importing nation and has been severely impacted by the relentless rise in international oil prices. OPEC and other ally producers, including Russia, known collectively as OPEC, have been adding around 4,00,000 barrels per day to the market on a monthly basis, which many see as not sufficient to cool prices that had been rising as demand returns to pre-pandemic levels. India has built 1.33 million tonnes of storage at Visakhapatnam in Andhra Pradesh, 1.5 million tonnes at Mangaluru and 2.5 million tonnes at Padur (both in Karnataka). ADNOC of the UAE has leased half of the Mangalore storage, while the remaining is with state-owned MRPL. State-owned firms and the government have stocked oil at the other facilities.