Reliance Jio-bp starts India’s largest EV charging hubs in Delhi
A joint venture of billionaire Mukesh Ambani’s Reliance Industries Ltd (RIL) and energy supermajor BP has opened one of the country’s largest EV charging hubs in Delhi, as the duo scale up the fuel retail network, offering multiple fuel choices including EV charging infrastructure. Reliance BP Mobility Limited, operating under the brand name Jio-bp, is working with multiple demand aggregators, original equipment manufacturers (OEMs) and technology partners with a vision of being the leading EV charging infrastructure player in India, RIL had said in its third quarter earnings announcement last week. “Jio-bp has constructed and launched one of the country’s largest EV charging hubs in Dwarka, Delhi with BluSmart as its primary customer,” it had said. RBML had launched its first Jio-bp branded Mobility Station at Navde, Navi Mumbai in October last year. And since then it has been scaling up the network. In 2019, BP had bought a 49 per cent stake in over 1,400 petrol pumps and 31 aviation turbine fuel (ATF) stations owned by Reliance for USD 1 billion. The existing petrol pumps of Reliance had since been transferred to the joint venture, which plans to scale them up to 5,500 by 2025. Reliance holds the remaining 51 per cent stake in Reliance BP Mobility Limited (RBML). RBML has already received the marketing authorisation for transportation fuels. Petrol pumps with RBML have since increased to 1,448, according to latest information available from the petroleum ministry. RBML had 1,427 outlets at the end of September 2021. India’s auto fuel retailing is dominated by public sector oil companies that own the majority of 81,099 petrol pumps in the country. Rosneft-backed Nayara Energy is the largest private fuel retailer with 6,496 pumps. Shell has 310 petrol pumps. Jio-bp is looking to set up a network of EV charging stations and battery swap stations, at its petrol pumps, which the firms refer to as ‘Mobility Stations’, and other standalone locations – Mobility Points. The joint venture aims to become a leading EV charging infrastructure player in India. State-owned Indian Oil Corporation (IOC) is the largest fuel retailer with 33,546 petrol pumps. Privatisation-bound Bharat Petroleum Corporation Ltd (BPCL) has 19,668 outlets and Hindustan Petroleum Corporation Ltd (HPCL) has 19,602 petrol pumps. “The existing network of over 1,400 fuel pumps will be rebranded as Jio-bp, presenting a new range of customer value propositions over the coming months,” Reliance-bp had said in October last year when they launched the first Jio-bp outlet. India’s market for fuels and mobility is rapidly growing. It is expected to be the fastest-growing fuels market in the world over the next 20 years. “Jio-bp Mobility Stations are designed to help meet this growing demand and are ideally located to suit customer convenience. They bring together a range of services for consumers on the move – including additivised fuels, EV charging, refreshments & food, and plan to offer more low carbon solutions over time,” it had said. The joint venture plans to leverage Reliance’s vast presence and deep experience in consumer businesses across India, with its hundreds of millions of customers in Jio and Reliance Retail, and bp’s extensive global experience in high-quality differentiated fuels, lubricants, convenience and advanced low carbon mobility solutions. “Instead of regular fuels, Jio-bp Mobility Stations across the country will offer additivised fuel, at no extra cost. The fuel offering will contain internationally developed ‘ACTIVE’ technology, which forms a protective layer on critical engine parts to help keep the engines clean,” the statement had said.
Can we future-proof natural gas plants with hydrogen?
Gas turbines are getting an upgrade. Turbine makers want to make them more compatible with hydrogen fuel, which is being touted as cleaner than natural gas. A combined cycle power plant located in Bugok, South Korea. Image: Siemens Energy. With half the emissions of coal, a lower price tag and almost none of the particulates, natural gas is easy to love. It is still the fossil fuel of choice for many countries in Asia. Some, like Brunei and Singapore, are powered almost exclusively by it. Touted as a clean-enough “transition” fuel, natural gas – a mix of methane and other vapours produced from age-old biomass underground – has become a popular choice, and its use has been increasing at the expense of oil and coal. In the United States, over 100 power plants switched from coal to natural gas between 2011 and 2019. The same trend is expected in Asia in the coming years. But the case for fossil fuel reliance in the long run is getting harder. Zero-carbon energy sources like solar and wind are becoming increasingly viable as costs drop. The US Energy Information Administration predicts that electricity generated from natural gas will hit a peak around 2030 globally, with current policies. The International Energy Agency (IEA) estimates that natural gas power generation needs to fall by some 90 per cent by 2040, for the world to hit net-zero emissions by mid-century. Much will depend on whether the Asia-Pacific region, already one of the largest natural gas users globally, can wean itself off the fuel in the coming years. As it stands, demand from the region may double by 2050. Responding to such pressures, major gas turbine manufacturers are making continuous technological advancements to be hydrogen-compatible. The lightest gas on Earth combusts similarly to natural gas, producing waste heat which further rotates generators (much like in traditional combined cycle plants), with one key difference – it does not emit carbon dioxide in the process. This caveat offers a lifeline for existing investments in natural gas plants. “The ability to substitute natural gas with hydrogen over time means investments in gas power plants today will have remarkable asset resilience for investors,” said Andreas Pistauer, head of generation at Siemens Energy Asia Pacific. Making the case for retaining natural gas plants with a hydrogen swop, he details how “[this] eradicates the need to undertake huge amounts of resources to construct entirely new facilities.” Most hydrogen produced today requires the use of fossil fuels, such as coal and natural gas, generating emissions in the process. But there has been increasing interest in cleaner methods of hydrogen production. For example, ‘blue hydrogen’ and ‘green hydrogen’ as cleaner methods of production, are expected to feature widely in a net-zero world. In the production of blue hydrogen, carbon emissions are captured and stored, while green hydrogen production is powered through the use of renewables such as solar. The ability to substitute natural gas with hydrogen over time means investments in gas power plants today will have remarkable asset resilience for investors. Siemens Energy has 20 turbine models that can take on hydrogen fuel in its mix, and has been deploying such technology for industrial use since the 1960s. Explaining how this mode of hybridisation supports the shift to low-carbon fuels, Pistauer is optimistic that such turbines will reap carbon savings in the short-to-medium term while also affording time for groundwork and infrastructure to be set in place for the smooth integration of hydrogen facilities in the long run. Still, development is set to be a slow burn for now. Green hydrogen is currently selling at US$3 to US$7.50 per kilogramme, several times higher than natural gas. Its cost is expected to drop in the coming years with better technology and economies of scale, but fast growth is expected only after 2035. Burning hydrogen to generate electricity may also raise eyebrows, as electricity is needed to create hydrogen fuel from water in the first place. But Pistauer said there is a use case for hydrogen in providing back-up power for intermittent sources of energy like the wind and sun. The ability of gas power plants to provide flexible load is key when complementing, or even enabling the rapid growth of renewable, but fluctuating, capacity. While efficient, more importantly this flexibility is critical to enable large renewable capacity in the grid. The gas can also be stored for months, allowing excess solar energy generated in summer to be used in dark winters.
The geo-politics of gas pipelines
While world’s attention has been focussed on the controversy of European and US opposition to Nord Stream II pipeline from Russia to Germany, it was a European Pipeline project that met a quiet death this January. The US State department announced it no longer supported the much-touted 1,900 km, €6 billion East Mediterranean (EastMed) natural gas pipeline on grounds of financial viability, environmental concerns and political tensions. The Cyprus government, its leading protagonist, has been touting EastMed as a project of the century that was meant to transform the divided island into an energy exporter to be reckoned with, but has not yet accepted the reality to throw in the towel. The reasons are political – Cyprus ruling party Democratic Rally ( DISY) has long hyped the pipeline as a major vote catcher and the next Presidential elections are not far off. There is a widespread feeling the supposed economic advantages of the pipeline were oversold to the average Cypriot who knows how fragile the island nation’s economy is. The country’s over dependence on tourism and financial services and ongoing European investigations into a controversial passport sale scheme worry the well read Cypriots who are looking to find economic competitiveness for the country, respect and dignity in the European Union. The US volte-face on EastMed does not come as a surprise to the discerning observers and analysts who had for long decried the pipeline as unviable. They believed the project was too ambitious and complicated. The gas fields are located in the sea shelf south of the country and exploratory drilling has faced several hurdles. The gas was to be pumped to the island and then to EastMed pipeline from Cyprus’s northwest coast, under the Mediterranean sea to Greece and then to Italy’s southern coast. The 1,900-km long pipeline plan was vulnerable to many vagaries of technology, engineering, environment and Turkish belligerence. At a time the whole world is leaning towards clean energy, the island with more than 340 days of sunshine has not joined the India and France-led International Solar Alliance and has a low renewable energy component, depending heavily on imported fossil fuels. Energy experts have repeatedly questioned the viability of large investments in gas pipelines while Cyprus could substantially cut its energy costs by allowing investments in renewables and use the gas for its own competitiveness. Turkish victory The factor that seems to have played the biggest role in the American decision is the dogged opposition of Turkey which is permanently at war with Cyprus. Turkish leadership has made it clear that EastMed cannot happen without its participation. It has been fighting hard for a sizeable share of the natural gas revenues for the northern Turkish Cyprus enclave that it occupies since the invasion of 1974 through a puppet government and for itself, making spurious claims to Cyprus’s exclusive economic zone and interfering with the gas drilling. Turkey is a thorn in the flesh of Cyprus but it carries enormous influence with Washington due to its NATO membership and as a gateway to the Black Sea. It considers the US pull-out from EastMed as a victory of sorts. With such large geopolitical stakes, in the end, the Cypriot plan looked impressive only on the drawing board and did little more than energise the now dashed hopes of the island’s voters for a decade. All this comes in the context of wider geo-politics of global gas supplies. The US, which has only 5 per cent of global gas reserves, is now the world’s biggest gas exporter having made large investments in LPG plants and gas tankers. The US is pitted against Russia which at 24 per cent has the largest proven gas reserves of the planet. Russia’s gameplan Traditionally Russian export of gas has been to Europe through pipelines that pass through Ukraine and Eastern Europe. These pipelines have come under increasing pressure due to increased US influence over eastern European countries and recently over Ukraine. Another Russian ally and gas transit country Belarus is under western sanctions. Russia therefore decided to bypass both Ukraine and Belarus and build a direct pipeline to Germany, to the industrial heartland of Europe and invested over $9 billion in the construction of NordStream pipeline. However , approval from the German regulators for this pipeline to become operational has stalled as the US has increased sales of LPG to Europe and has tried to capture the market. The European Union has tried for years to cut its dependency on Russian natural gas. But a number of EU countries, particularly Germany, are still very keen on stable long-term supply contracts with Moscow. Russia has also pivoted east and is building the Power of Siberia pipeline to China from its gas fields in the Arctic circle. China wants to lower its energy dependence on the US and its allies, too. In the larger context of competition between great powers, and US commercial interests in supplying their own gas to Europe, EastMed was of no relevance to global gas markets and thus no relevance to India. India imports LPG from open markets through very large tankers. Qatar, Australia and the US are the largest suppliers to India. In future, India is very likely to buy LPG from Russia where India has been making substantial investments in petrocarbon extraction. Russia has commissioned 10 ice-breaker gas tankers to deliver LPG gas to markets round the year from the Arctic. By diversifying its sourcing and betting on reliable and large gas exporters, the Indian government has ensured energy security. The only relevant pipeline from the Indian point of view can one day be the TAPI (Turkmenistan Afghanistan Pakistan India ) pipeline from Turkemenistan’s Galkynish gas fields, the world’s second largest proven gas field with natural gas and proven commercial reserves of 2.8 trillion cubic metres. The pipeline, if completed, will deliver 33 billion cubic metres (1.2 trillion cubic feet) of natural gas per year to Afghanistan, Pakistan and India. Despite the political upheavals in Afghanistan and strained
Budget: Bring natural gas under GST to realise PM’s vision of gas-based economy, says industry
The government should bring natural gas under the goods and services tax (GST) regime to realise Prime Minister Narendra Modi’s vision for a gas-based economy and raising the share of the environment-friendly fuel in India’s energy basket, an industry body that represents the likes of Reliance Industries as well state-owned firms, has said. Natural gas is currently outside the ambit of GST, and existing legacy taxes — central excise duty, state VAT, central sales tax — continue to be applicable on the fuel. In its pre-budget memorandum to the finance ministry, Federation of Indian Petroleum Industry (FIPI), which boasts of members from across the oil and gas spectrum, also demanded rationalization of GST on transportation of natural gas through pipeline as well as on re-gasification of imported LNG to help bring down cost of the environment friendly fuel. The Prime Minister has set a target of raising the share of natural gas in the country’s primary energy basket to 15 per cent by 2030, from 6.2 per cent currently. Greater use of natural gas will cut fuel cost as well as bring down carbon emissions, helping the nation meet its COP-26 commitments. “Non-inclusion of natural gas under the GST regime is having adverse impact on natural gas prices due to stranding of taxes in the hands of gas producers/suppliers and is also impacting natural gas-based industries due to stranding of legacy taxes paid on it,” FIPI said. VAT rate on natural gas is very high in some states — Andhra Pradesh levies 24.5 per cent tax, Uttar Pradesh 14.5 per cent, Gujarat 15 per cent and Madhya Pradesh 14 per cent. Inclusion of natural gas under GST is required to provide uniform taxation and to encourage free trade of it across the country without any tax anomalies. “This is one of the key prerequisites for the development of gas exchange in the country,” it said. FIPI said non-inclusion of basic petroleum products such as crude oil, natural gas, petrol, diesel and ATF under the newly introduced GST regime is affecting the sector adversely. “Presently, industry is paying GST on procurement of plant machinery and services and is unable to get the input tax credit as the final product is not included under GST. This is leading to immense pressure on the industry, which, in turn, is straining the entire economy,” it said. It sought earliest inclusion of petroleum products such as crude oil, natural gas, petrol, diesel and ATF under the GST regime. The industry body also sought lowering of import duty on LNG to make it competitive with polluting liquid fuel. Liquefied natural gas (LNG) is a clean fuel and mainly used in the fertilizer and power sector. Recognising the shortage of gas in the country, the government has encouraged import of LNG. Presently, import of LNG attracts customs duty of 2.5 per cent plus SWS cess of 10 per cent. “However, the basic customs duty levied on import of crude oil is only Rs 1 per tonne. Since LNG falls in the same logical category as crude oil, they must have the same level of taxation as applied to crude oil,” it said, seeking exemption from levy of customs duty on import of LNG. Import of LNG for exclusive consumption in generation of electric energy for public distribution is exempt from custom duty subject to certain conditions. However, other important sectors like fertiliser, LPG, CNG and petrochemicals bear the burden of effective custom duty of 2.75 per cent. “The custom duty increases the landed cost of imported LNG for domestic and industrial consumers. Since the domestic production of natural gas is not enough to cater the increasing demand, import of LNG at large scale is required to augment supply of natural gas for priority sectors such as fertiliser, CNG, piped natural gas, LPG etc,” it said. FIPI said the imported LNG has to be re-gasified and converted into natural gas (known as RLNG – regasified liquefied natural gas) for transportation and consumption in India. The activity of regasification of LNG presently attracts a high GST of 18 per cent. “The levy of GST at a higher rate of 18 per cent on the regasification of LNG increases the landed cost of imported LNG for domestic industrial consumers. “Natural gas is kept outside the ambit of GST (but) regasification of LNG is under GST ambit resulting in stranding of taxes, and a higher rate of tax owing to limited clarification is reducing the competitiveness of RLNG with other polluting fuels,” it said.
Oil breaks $90/bbl for the first time since 2014 on Russia tensions
Oil touched $90 a barrel for the first time in seven years on Wednesday, supported by tight supply and rising political tensions in Europe and the Middle East that raised concerns about further disruption in an already-tight market. Brent crude rose $1.67, or 1.9 per cent, to $89.87 by 10:40 a.m. EST (1540 GMT), after hitting $90.02, the first time the global benchmark has broken that level since October 2014. U.S. West Texas Intermediate (WTI) crude was up $1.69, or 2 per cent, to $87.28. U.S. President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine. On Monday, Yemen’s Houthi movement launched a missile attack on a United Arab Emirates base. “Anxiety over potential supply disruptions in the Middle East and Russia is providing bullish fodder for the oil market,” said Stephen Brennock of oil broker PVM. The tensions have raised concerns about various factors contributing to an already tight market. The United States is more than a million barrels short of its record level of daily output, and OPEC+ is having trouble meeting its monthly production targets as it restores supply to markets after drastic cuts in 2020. The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, meets on Feb. 2 to consider another output increase. Inventories in the United States rose in the most recent week, with crude stocks up by 2.4 million barrels, against expectations for a modest decline in stocks. Gasoline inventories rose to their highest levels in almost a year – a needed salve for the market.
Why crude prices are on the rise again
Global crude oil prices have risen substantially in the past 30 days, inching toward the $90 a barrel mark and igniting concerns of higher inflation in both international and domestic markets. On January 20, Brent crude oil was trading at $86.95 a barrel in the international market. Oil prices have moved up by around 30 per cent since the end of November on stronger-than-expected demand despite the third wave of the pandemic, and supply outages that have tightened the market. This has led to buyers in Asia paying sharply higher premiums for spot cargoes. Goldman Sachs Group has predicted that crude oil prices will touch the $100 mark in the third quarter of 2022, and the International Energy Agency (IEA) has said that demand is on track to hit pre-pandemic levels. Oil was at $69 a barrel on December 1. The immediate rise in prices was sparked by renewed tensions in the Middle East following a drone attack on three oil tankers in Abu Dhabi that killed three people, including two Indians, and wounded several others. Yemen’s Houthi rebels have claimed responsibility for the attacks. Hours later, Saudi Arabia retaliated by launching air strikes at targets in the Yemeni capital of Sanaa, triggering a fresh spate of violence in the region that sent oil prices soaring. Meanwhile, the massing of troops by Russia near the Ukraine border is cited as yet another reason for the oil market to heat up, as the West fears a Crimea-style annexation attempt by Russia in the region. Russia, meanwhile, has denied having any such intent, but has demanded guarantees from the West that NATO will not expand to Ukraine and other former Soviet nations or place its troops and weapons there. In India, higher oil prices should have led to an increase in fuel prices. However, oil companies are yet to pass on the higher crude prices to consumers. Analysts do not expect the government to increase petroleum prices anytime soon, considering that five states are going into assembly elections in February. But going forward, the rise in crude prices will lead to higher fuel prices in India. In early November, the Centre had cut excise duty on petrol and diesel by Rs 5 and Rs 10, respectively, following criticism that the government was continuing to tax fuel heavily, leading to high prices. This was followed by reduction in value added tax on fuel by several states. Petrol prices still continue to be high in some cities, reigning at Rs 110 in Mumbai, Rs 101.40 in Chennai and Rs 104.67 in Kolkata on January 20. It is priced at Rs 95.41 in New Delhi. Diesel, meanwhile, cost Rs 86.87 a litre in New Delhi, while it cost Rs 94.14 in Mumbai on January 20. Analysts estimate that every $10 rise in crude prices will increase the fiscal deficit by 10 basis points. High crude prices, therefore, can upset the fiscal calculations of the Union government close to the Budget presentation on February 1. It may also compel the Reserve Bank of India to withdraw from its accommodative monetary policy stance or easy monetary policy stance, that allows it to expand overall money supply to boost the economy when economic growth is slowing down. In its last monetary policy review in early December, the central bank had held on to key interest rates, on concerns that any lowering of rates will further fuel inflation. According to the IEA, crude oil prices increased in 2021 as rising Covid vaccination rates, loosening pandemic-related restrictions, and a growing economy resulted in global petroleum demand rising faster than petroleum supply. The spot price of Brent crude oil, a global benchmark, started the year at $50 per barrel and increased to a high of $86 per barrel in late October before declining in the final weeks of the year. It has since then risen again, touching $88.44 a barrel on January 19. The IEA said that Brent’s 2021 annual average of $71 a barrel is the highest in the past three years. The price of West Texas Intermediate (WTI) crude oil traced a similar pattern to Brent and averaged $3 per barrel less than Brent in 2021. On the other hand, global petroleum production increased more slowly than demand, driving prices higher. The slower increase in production was mostly attributable to crude oil production cuts by OPEC or the Organisation of Petroleum Exporting Countries and some other nations including Russia (referred to as OPEC+) that started in late 2020. On November 23, India said it will release five million barrels of crude oil from its strategic petroleum reserves in a concerted effort with other major oil consuming countries such as the US, China, UK, Japan and South Korea, to bring down global crude oil prices. The US, meanwhile, said it will release 50 million barrels of crude oil from its strategic petroleum reserves in the next several months. The UK has said that it would release 1.5 million from its reserves. China and Japan did not disclose a specific number for the reserves they would be releasing. In all, around 70-80 million barrels of oil will be released by these countries in a co-ordinated fashion over six months, which would translate into 400,000 barrels a day. However, this measure has not proved to be helpful. What is being released by these countries is a very small amount, considering that global oil demand is 97 million barrels a day and OPEC produces around 30 million barrels a day. The coming days may witness a further rise in crude oil prices, with the IEA already hiking its oil demand growth forecast for the coming year by 2,00,000 barrels a day.
TotalEnergies, Inpex to sell their interests in Block 14 in Angola
France’s TotalEnergies (TTEF.PA) and Japan’s Inpex Corp (1605.T) said that they had agreed to sell their interests in Angola’s Block 14 B.V. to Angolan Company Somoil for an undisclosed sum. Angola Block 14 B.V, which is owned by TotalEnergies Holdings International B.V with a 50.01% stake and Inpex Angola Block 14 Ltd with a 49.99% stake, holds a 20% interest in block 14 in Angola and a 10% interest in block 14K. Net production from Block 14 B.V. was 9,000 barrels of oil equivalent per day in 2021, TotalEnergies said. “By divesting this interest in mature fields, TotalEnergies is implementing its strategy to highgrade its oil portfolio, focusing on assets with low costs and low emissions” said Henri-Max Ndong-Nzue, Senior Vice President Africa of TotalEnergies Exploration & Production. For Inpex, Japan’s biggest oil and gas explorer, the move is part of an ongoing review of its asset portfolio amid the global trend toward decarbonisation, a company spokesperson said. Inpex said in October that it had sold all its interests in the offshore D.R. Congo Block where it had been engaged in the development and production of crude oil, following an exit from Venezuela’s oil and gas assets earlier that month. “Our core geographic areas for exploration and production (E&P) are Japan, Australia, Indonesia and Abu Dhabi, with an additional exploration focus on Barents Sea in Norway,” the Inpex spokesperson said. “We will not sell all E&P assets in other geographic areas, but we will continue to review to optimize our asset portfolio,” they added. In an effort to boost cleaner energy assets, Inpex said in December it will buy an offshore wind power generation company in the Netherlands from Mitsubishi Corp (8058.T), and that it will purchase a stake in the Muara Laboh geothermal power project in Indonesia.
Megha Engineering, Adani Total Gas Emerge As Top Winners In CGD Bidding
Megha Engineering and Infrastructures Ltd (MEIL) walked away with the most 15 licences to retail CNG to automobiles and piped cooking gas to households in the latest city gas bidding round, while a joint venture of billionaire Gautam Adani’s gas arm and Total of France got 14 licences. According to the results of the bid opening for the 11th round of city gas distribution (CGD) bidding, Indian Oil Corporation (IOC) stands to get nine licences and Bharat Petroleum Corporation Ltd (BPCL) 6. While Assam Gas Company is winning three licences, Dinesh Engineers Ltd is set to bag licences for four geographical areas (GAs). Hindustan Petroleum Corporation Ltd (HPCL), GAIL Gas Ltd, Think Gas Distribution Pvt Ltd, IRM Energy Pvt Ltd, Indraprastha Gas Ltd and Sholagasco Pvt Ltd are to get one licence each. An official of the Petroleum and Natural Gas Regulatory Board (PNGRB) said the bids have been opened and the preliminary winners decided but a formal announcement will be made in the next few days after the documents submitted by the bidders are verified. Bids for 61 out of the 65 GAs offered in the 11th round were received at the close of bidding last month. IOC had bid for 53 out of 61 GAs while Adani Total Gas Ltd had bid for 52 GAs. Adani group had originally ventured into the city gas business in a joint venture with IOC but it later tied up with Total. Adani and IOC did not put any combined bid in the latest bid round. PNGRB had bid out 65 GAs, including Jammu, Nagpur, Pathankot and Madurai, in the latest licensing round. Four GAs in Chhattisgarh did not receive a single bid. I Squared Capital-backed Think Gas Distribution Pvt Ltd was the third largest bidder as it put in offers for 44 GAs. Privatisation-bound BPCL had put in bids for 43 GAs, while GAIL Gas Ltd – the city gas arm of state gas utility GAIL India Ltd – had bid for 30 areas. HPCL bid for 37 GAs and Torrent Gas for 28. Indraprastha Gas Ltd – the firm that retails CNG in the national capital and adjoining areas – bid for 15 GAs, Gujarat Gas for 14 and Assam Gas for 10 GAs. Megha Engineering had a winning percentage of 24.6 per cent, while Adani Total Gas Ltd was successful in 23 per cent of the GAs where it had bid. IOC was successful in 14.8 per cent and BPCL’s success rate was 9.8 per cent. While Torrent Gas drew blank, other major bidders had a success rate of just 1.6 per cent. The bids were decided on the basis of those offering to give most city gas connections and those setting the largest number of CNG retail outlets. PNGRB had last month stated that as much as Rs 80,000 crore investment is envisaged in setting up city gas infrastructure in the 61 GAs. The 65 GAs offered in the 11th bid round are spread over 215 districts in 19 states and one Union territory covering 26 per cent of India’s population and 33 per cent of its area. Currently, there are 228 geographical areas authorised by PNGRB in 27 states and UTs covering about 53 per cent of the country’s geographical area and 70 per cent of its population. In the last city gas distribution bidding round (the 10th CGD bidding round), 50 GAs were authorised for the development of the CGD network. In the current round, 215 districts clubbed into 65 GAs are being offered. Bids were received for 61 GAs, according to PNGRB. During 2018 and 2019, PNGRB gave out licences to retail CNG to automobiles and piped cooking gas to household kitchens in 136 GAs. This extended coverage of the city gas network to 406 districts and around 70 per cent of the country’s population. The push for city gas expansion is part of the government’s plan for raising the share of natural gas in the country’s energy basket to 15 per cent by 2030 from the current 6.3 per cent. While 86 GAs, made up of 174 districts, were offered for bidding in the 9th round that concluded in August 2018, 50 GAs, comprising 124 districts, were offered in the 10th round in 2019.
Oil, budget and economic sentiment
Traditionally, Union budgets have mattered for people at large because of two reasons: prices of goods and income tax rates. There is some merit in the argument that inflation is a bigger dampener on economic sentiment in India than low growth rates There is some merit in the argument that inflation is a bigger dampener on economic sentiment in India than low growth rates. Traditionally, Union budgets have mattered for people at large because of two reasons: prices of goods and income tax rates. With the roll-out of the Goods and Services Tax (GST) in 2017, the Budget has lost its importance as a determinant of prices. The GST has subsumed central and state indirect taxes on most domestically produced goods and rates are decided in the GST Council. However, the budget still has a major influence on the price of an important commodity: fossil fuels such as petrol and diesel. What the forthcoming budget does regarding prices of petrol and diesel will have important implications for the economy. Here are four charts which explain this in detail. Petrol-diesel taxes were increased post-pandemic As the world came to a standstill after the pandemic, consumption of petroleum products crashed. This led to a sharp fall in petroleum prices as well. Brent crude – the international benchmark for crude oil prices – fell to $9.12 per barrel on April 21, 2020, the lowest level in 21 years. The price of India’s Crude Oil Basket (COB) fell to $19.90 in the month of April 2020, the lowest level in 18 years. The government saw an opportunity in this development and significantly increased taxes on petrol and diesel. Because the base price was very low, retail prices did not increase despite the sharp rise in taxes. This is best seen in petroleum ministry statistics on price build-up of petrol and diesel. High taxes brought a fiscal windfall, but mostly for the Centre Numbers speak for themselves. Data from the petroleum ministry shows that contribution of the petroleum sector to the exchequer increased from ₹5550 billion in 2019-20 to ₹6730 billion in 2020-21. It needs to be underlined that this happened when overall GDP actually saw a contraction in India. Provisional estimates for the first half of 2021-22 put this number at ₹3500 billion. However, it was the Centre which enjoyed most of these windfall gains from petroleum taxes. While the Centre’s earnings from the petroleum sector increased from ₹3300 to ₹4500 billion between 2019-20 and 2020-21, the states actually saw a minor fall in their earnings from the sector from ₹2210 billion to ₹2170 billion. To be sure, the fall in headline numbers for states’ earnings should not be used to infer that the states did not raise taxes. It needs to be remembered that consumption of petroleum products itself saw a large fall in 2020-21, and barring the rise in taxes by states, the overall earnings would have fallen even more. One reason why the Centre’s gains in petroleum taxes did not accrue to states is that the additional taxes were kept in the category of cess, not included in the divisible pool of taxes. But retail prices started rising as crude prices recovered and taxes were not lowered Monthly average of petrol-diesel prices reached a record high in Delhi – prices vary across most districts – in October 2021. India’s COB was priced at $82.11 in that month. This is significantly lower than the price of India’s COB between February 2011 and August 2014 when it was hovering above the $100 mark. However, retail prices of both petrol and diesel were significantly lower back then, largely because of the difference in tax burden. While indirect taxes on petrol-diesel were reduced in November 2021, the tax burden is still significantly higher than pre-pandemic levels. It remains to be seen whether finance minister Nirmala Sitharaman announced a further reduction in union excise duty on petrol and diesel or keeps them at current levels. While cutting taxes is likely to give a boost to economic sentiment (more on this later) bringing tax rates to pre-pandemic levels also means foregoing ₹1000 billion in revenues. Oil prices have shown large volatility in the post-pandemic phase Brent crude experienced one of its sharpest-ever rallies to reach $85.76 per barrel in October 2021 from its 21-year low of $9.12 during April 2020 when the pandemic broke out. It has shown an almost V-shaped trajectory in the last three-four months. Brent prices were at $84 per barrel in the beginning of November 2021 and they fell to around $71 in the beginning of December 2021 and are once again close to the $84 mark now. Whether crude oil prices stay at these levels, increase further or actually come back to pre-Covid levels matters a lot for the Indian economy. This is not just relevant for the amount of taxes the government can levy without fuelling inflation – fuel inflation is one of the most important contributors to retail inflation at the moment – but also determines the net impact on trade and therefore GDP. As oil prices have increased India’s petroleum deficit as a share of GDP has been rising gradually. It is very likely that the question of whether or not to reduce petroleum taxes will come up many times when the finance minister and her colleagues are finalising the 2021-22 budget. While concerns of boosting economic sentiment demand that the taxes are lowered – contrary to popular belief the poor consume a large amount of petrol and diesel in India – the budget will have to find ways to at least partially compensate the revenue loss from such a move
HPCL to raise Iraqi oil imports by 45% in 2022
Indian state refiner Hindustan Petroleum Corp. will lift 45 percent more oil from Iraq this year to meet its expanded refining capacity, sources familiar with the matter said. The refiner will buy 3.2 million tons or about 64,000 barrels per day (bpd) from Iraq this year, up from 44,000 bpd in 2021, they said. Iraqi state-owned marketer SOMO and HPCL did not immediately respond to Reuters’ request for comment. Iraq is the top supplier of oil to India, and higher purchases by HPCL will further strengthen the Middle East nation’s share in Indian markets. As OPEC’s second-largest oil producer, Iraq will be able to boost exports by as much as 250,000 bpd from the second quarter after finishing the installation of pumping stations at its Gulf ports, an Iraqi oil source has said. Last year HPCL’s chairman M K Surana said the company’s import of high sulfur crude oil would rise after the expansion of its 166,000-bpd plant at its Vizag plant to 300,000 bpd by March this year. It aims to complete a bottom upgradation project at the Vizag refinery by the end of the year. In the last quarter of 2021, HPCL expanded capacity at its Mumbai refinery to 190,000 bpd.