Centre seeks legal opinion to let BPCL sell subsidised LPG after stake sale
A two-decade-old LPG supply order restricting supply of domestically produced LPG to only state-owned oil companies has stymied plans to allow Bharat Petroleum Corporation Ltd (BPCL) to continue selling subsidised cooking gas (LPG) after its privatisation. A legal opinion has now been sought to ascertain if privatised BPCL will be eligible to receive liquefied petroleum gas (LPG) produced by companies such as ONGC and GAIL, two government officials with knowledge of the development said. Currently, BPCL has more than 84 million domestic LPG customers, including 21 million Ujjwala customers. The company does not produce enough LPG at its refineries to be able to cater to the requirement of all these. It, like other oil marketing companies, buys LPG from state-owned firms like Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd as well as private companies such as Reliance Industries Ltd. The Liquefied Petroleum Gas (Regulation of Supply and Distribution) Order, 2020, known as LPG Control Order of 2000, restricts sale of indigenously produced cooking gas only to state-owned oil marketing companies — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and BPCL. It restricts supply of LPG produced by firms such as ONGC and GAIL to private firms. Private LPG retailers, called parallel marketeers, have to use imported gas for supplying to customers. The 2000 Control Order was issued as the nation is short in LPG production. Once BPCL is privatised, the 2000 order will bar ONGC and GAIL from selling LPG to BPCL, the officials said. “Post divestment of the government’s stake in BPCL, it shall cease to be a government oil company in terms of clause 2(g) of LPG Control Order of 2000,” an official said. With no access to indigenously produced LPG, BPCL won’t be able to serve its customers and it would not be possible to shift the customers to IOC and HPCL as LPG cylinder equipment at customer end will need to be changed. Also, IOC and HPCL may not have the required infrastructure to cater to such a large customer base, the officials said. As a way out, it is being considered to continue to treat BPCL as a government company for the purpose of the 2000 Control Order for three years, the officials said adding that a legal opinion has been sought to ascertain if such a move is tenable under the law. The other alternative is to amend the LPG Control Order itself to allow private firms to access indigenously produced LPG. This would open up LPG retailing to other private firms. Officials said law ministry opinion has been sought to determine if the term government oil company in the LPG Control Order necessary requires the company to be a government company and if BPCL post privatisation can be notified as a government oil company. To interpret the term ‘government company’, the opinion of the Ministry of Corporate Affairs (MCA) as well as the Ministry of Consumer Affairs (MoCA) has been sought, they said. MCA because it is the administrative ministry for purposes of administration of the Companies Act, 2013 and MoCA because it is the administrative ministry/department for the purposes of administration of Essential Commodities Act, 1955, under which the LPG Control Order of 2000 was issued. Officials said the new owner of BPCL will after three years of takeover get a right to decide on retaining the business of selling subsidised LPG. The firm’s cooking gas LPG customers will be transferred to IOC and HPCL in case the new owner does not want to continue with such a business, the officials added. The government gives 12 cooking gas (LPG) cylinders of 14.2-kg each to households in a year at a subsidised rate. There is no subsidy being paid in most parts of the country but a subsidy will be directly paid into the bank accounts of the users in case prices rise steeply. The government is selling its entire 53 per cent stake along with management control in BPCL. The new owner will get 15.33 per cent of India’s oil refining capacity and 22 per cent of the fuel marketing share. It also owns 18,652 petrol pumps, 6,166 LPG distributor agencies and 61 out of 260 aviation fuel stations in the country.
Import of diesel through pipeline helps NOC to save Rs 4 billion in transportation cost
The Nepal Oil Corporation (NOC) has saved around Rs 4 billion after bringing the Motihari-Amlekhgunj Petroleum Pipeline into operation. The corporation has saved Rs 3.24 billion on transportation costs and Rs 753.4 million on temperature and technical losses when it started importing diesel through pipeline from the Indian Oil Corporation (IOC). Managing Director of Nepal Oil Corporation, Surendra Kumar Paudel, said that the petroleum pipeline has not only managed the supply of diesel but also saved a large amount of money. “The pipeline has saved billions of rupees,” said Poudel. “It has saved money on transportation, temperature and technical losses.” It has made the supply of diesel much easier. The NOC started bringing diesel through pipes from September 10, 2019. The project has been constructed at the cost of Rs 4.40 billion. While India provided a grant of Rs 3.20 billion, Nepal invested the remaining Rs 1.20 billion. The project is developed by the IOC. Sushil Bhattarai, Deputy Managing Director at NOC, said that although the pipeline was built the IOC did not charge any extra amount to them. “The IOC has not charged any extra amount for the pipeline,” Bhattarai said. “It has benefited the corporation a lot.” The investment for the construction of the pipeline will be raised only from diesel import in a period of two years. It has saved Rs 4 billion in 22 months. Pradip Yadav, chief of the Nepal Oil Corporation’s provincial office in Amalekhgunj, Bara said that 1.38 billion kilolitres of diesel was imported through the pipe. “250 kiloliters of diesel is being imported per hour,” Yadav said. “Along with expenses, it has helped us to save our time.” The diesel is placed in the vertical tank. After that, the density temperature, quality is checked and loaded on the tanker and sent to other depots. The NOC has stated that the amount to be paid to the tanker operators due to technical loss and temperature has come down to zero after it started importing diesel from the pipes. “The loss has come down to zero after bringing diesel from the pipeline,” said Yadav, who is also the head of the pipeline project. Transportation fares have been saved and pollution has been reduced, quantity and quality have been ensured. Yadav said that technical losses have been reduced and leakage during transportation has been stopped. It has become easier for the corporation to supply and distribute petroleum products as per the needs of the market and the demand of the consumers. The problem of high cost of transportation by tanker, environmental pollution, traffic jam, deterioration of roads, general obstruction in transportation and shortage of petroleum products in the market have been curbed. A saving of Rs 3.24 billion has been made for transportation. After the construction of the pipeline, the corporation has imported 1.38 billion kiloliters of diesel through the pipeline. If that amount had to be transported by tankers, 69,025 tankers with capacity to carry 20,000 liters of oil each would be required. A tanker has to be paid Rs 15,000 for bringing 20,000 liters of oil from Raxaul to Amalekhgunj. The fare for bringing this amount of oil from Raxaul would cost Rs 207 million.
Government looks to scrap customs duty relief, exemptions on 97 products
From Atlantic salmon and hazelnuts to durians and certain sweet biscuits, the government has proposed to withdraw customs duty relief and exemptions for 97 products imported into the country. While the move is expected to push up the cost, it may also encourage domestic manufacturing of several items. The step follows an announcement in the Budget with finance minister Nirmala Sitharaman articulating that certain outdated customs exemptions are proposed to be done away with as part of an exercise to streamline the structure. Now, the Central Board of Indirect Taxes and Customs (CBIC) has released the list for public consultation with feedback to be given over the next one month. “…last year, we started overhauling the customs duty structure, eliminating 80 outdated exemptions… I now propose to review more than 400 old exemptions this year. We will conduct this through extensive consultations, and from October 1, 2021, we will put in place a revised customs duty structure, free of distortions. I also propose that any new customs duty exemption henceforth will have validity up to the March 31, following two years from the date of its issue,” the finance minister had said in her Budget speech. The list has a wide range of products, including some medicines and basic drugs, contraceptives, oil seeds, and seeds of flowers and vegetables and upholstery fabrics of certain types. Several types of machinery and components used by sectors such as textiles, power, oil & gas and electronics and telecom are also expected to see an impact as the relief to these products is proposed to be scrapped. The government has faced criticism for increasing tariffs over the last few years but in several cases, officials have argued that there is little justification for relief.
United States became fourth-largest crude oil supplier to India in 2020: Report
The United States became the fourth-largest supplier of crude oil to India in 2020, according to BP’s latest report. The US supplied 10.7 million tonnes of crude oil to India in 2020, behind Iraq’s 47 million tonnes, Saudi Arabia’s 38 million tonnes, and UAE’s 22 million tonnes, said the BP’s Statistical Review of World Energy. The US supply accounted for about 5% of India’s total imports of 204 million tonnes in the year, a big jump for the country which had started exporting oil to India in 2017. It also turned out to be the fourth-largest natural gas supplier to India in 2020. Indian refiners have been trying to diversify their supply base to reduce dependence on West Asia, which still accounts for the lion’s share. West Asian countries made up 64% of India’s imports while the two American continents accounted for 18%. India imported 8 million tonnes of crude oil from Mexico and one million tonnes from Canada. Kuwait supplied 9.9 million tonnes. Iraq has been India’s top supplier for the past few years, staying ahead of Saudi Arabia, which has been producing less than its capacity to meet OPEC supply curb commitments. Saudi Arabia was the biggest supplier of crude oil to China, the biggest oil importer in the world in 2020. China imported 557 million tonnes, with Saudi Arabia (85 million tonnes), Russia (83), Iraq (60), South and Central America (72) and West Africa (72) as its main suppliers. The US supplied 20 million tonnes of crude oil to China, almost double that of India. India imported nearly 36 billion cubic metres (bcm) of liquefied natural gas (LNG) in 2020, with Qatar (14 bcm), UAE (5), Nigeria (4), US (3) and Angola (3) being the top suppliers. China imported 94 bcm of LNG during the year, with Australia (41), Malaysia (8) and Indonesia (7) as top suppliers. Japan remained the top LNG importer in the world, with imports of 102 bcm in 2020. Global LNG trade rose 0.6% year-on-year in 2020.
Can BPCL get domestically produced LPG after privatisation?
A two-decade-old LPG supply order restricting supply of domestically produced LPG to only state-owned oil companies has stymied plans to allow Bharat Petroleum Corporation Ltd (BPCL) to continue selling subsidised cooking gas (LPG) after its privatisation. A legal opinion has now been sought to ascertain if privatised BPCL will be eligible to receive liquefied petroleum gas (LPG) produced by companies such as ONGC and GAIL, two government officials with knowledge of the development said. Currently, BPCL has more than 8.4 crore domestic LPG customers, including 2.1 crore Ujjwala customers. The company does not produce enough LPG at its refineries to be able to cater to the requirement of all these. It, like other oil marketing companies, buys LPG from state-owned firms like Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd as well as private companies such as Reliance Industries Ltd. The Liquefied Petroleum Gas (Regulation of Supply and Distribution) Order, 2020, known as LPG Control Order of 2000, restricts sale of indigenously produced cooking gas only to state-owned oil marketing companies — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and BPCL. It restricts supply of LPG produced by firms such as ONGC and GAIL to private firms. Private LPG retailers, called parallel marketeers, have to use imported gas for supplying to customers. The 2000 Control Order was issued as the nation is short in LPG production. Once BPCL is privatised, the 2000 order will bar ONGC and GAIL from selling LPG to BPCL, the officials said. “Post divestment of the government’s stake in BPCL, it shall cease to be a government oil company in terms of clause 2(g) of LPG Control Order of 2000,” an official said. With no access to indigenously produced LPG, BPCL won’t be able to serve its customers and it would not be possible to shift the customers to IOC and HPCL as LPG cylinder equipment at customer end will need to be changed. Also, IOC and HPCL may not have the required infrastructure to cater to such a large customer base, the officials said. As a way out, it is being considered to continue to treat BPCL as a government company for the purpose of the 2000 Control Order for three years, the officials said adding that a legal opinion has been sought to ascertain if such a move is tenable under the law. The other alternative is to amend the LPG Control Order itself to allow private firms to access indigenously produced LPG. This would open up LPG retailing to other private firms. Officials said law ministry opinion has been sought to determine if the term government oil company in the LPG Control Order necessary requires the company to be a government company and if BPCL post privatisation can be notified as a government oil company. To interpret the term ‘government company’, the opinion of the Ministry of Corporate Affairs (MCA) as well as the Ministry of Consumer Affairs (MoCA) has been sought, they said. MCA because it is the administrative ministry for purposes of administration of the Companies Act, 2013 and MoCA because it is the administrative ministry/department for the purposes of administration of Essential Commodities Act, 1955, under which the LPG Control Order of 2000 was issued. Officials said the new owner of BPCL will after three years of takeover get a right to decide on retaining the business of selling subsidised LPG. The firm’s cooking gas LPG customers will be transferred to IOC and HPCL in case the new owner does not want to continue with such a business, the officials added. The government gives 12 cooking gas (LPG) cylinders of 14.2-kg each to households in a year at a subsidised rate. There is no subsidy being paid in most parts of the country but a subsidy will be directly paid into the bank accounts of the users in case prices rise steeply. The government is selling its entire 53 per cent stake along with management control in BPCL. The new owner will get 15.33 per cent of India’s oil refining capacity and 22 per cent of the fuel marketing share. It also owns 18,652 petrol pumps, 6,166 LPG distributor agencies and 61 out of 260 aviation fuel stations in the country.
Baidyanath to start country’s first commercial LNG filling station
Makers of Ayurvedic medicines from the city, Shree Baidyanath, has diversified into liquified natural gas (LNG) sale. The company will be inaugurating the country’s first commercial LNG filling station in the city on Sunday. Located at the outer ring road towards Dighori, it has a capacity of 23 tons and will be catering to LNG driven vehicles along the national highways around Nagpur. At present, the only dispensation station is at Dahej in Gujarat. “This will be the first-ever in the country to operate on a commercial basis,” said Subbarao Vaddadi, director of B-LNG, the fuel division of Baidyanath group. “The company’s decision was following government’s decision to invest Rs10,000 crore in the LNG dispensing stations across the country,” he said. Nitin Gadkari, union transport minister and also the MP for Nagpur, who has always been pressing for alternate fuel, took the initiative to start the first set-up in the city. As the minister was looking for local companies to come forward, the Baidyanath group agreed and invested Rs 8 crore in the project. “The station will be operational from Sunday. It will take 60 vehicles a day for the pump to operate feasibly,” said Vaddadi. For this, Baidyanath has plans to convert 120 vehicles which include buses and trucks into LNG. “This will entail an investment Rs10 lakh per vehicle,” said Vaddadi. At present, it would start will 12 vehicles, he said. “LNG is not only being projected as a cheaper alternative to diesel but rates offered at the Nagpur station will be lower than the current market price of the fuel elsewhere. This is because the supply of a year has been booked at an advance rate due to which the fuel will be available at Rs 62 a liter as against Rs 72 in the market.”
Rise in petrol prices agitating people: Road transport minister Gadkari
Road transport minister Nitin Gadkari inaugurated the country’s first commercial liquified natural gas (LNG) filling station in Nagpur on Sunday and said more use of alternate fuels such as LNG, CNG or ethanol would bring respite from surging petrol prices, which are now “agitating” people. Gadkari said the use of ethanol as vehicle fuel would help save at least Rs 20 per litre despite its lower calorific value compared to petrol. His ministry is likely to announce a policy for flex-fuel engines soon, which will encourage automobile manufacturers to produce them. These engines can run on more than one fuel and also a mixture of fuels. The minister said indigenous fuels such as ethanol, methanol and bio-CNG would give tough competition to imported crude oil and that’s the only way to get the best price for consumers. Gadkari said he had urged the government to privatise the petroleum and natural gas sector, which has already been opened up. Last year, the petroleum ministry simplified guidelines for authorisation for bulk and retail marketing of petrol and diesel. This was done to increase private sector participation in the marketing of petrol and diesel. “Now, we have invited all private companies, including PSUs, in the field. Even you can import LNG,” he said, adding the clean fuel has a great future in the country. LNG is emerging as the most preferred fuel for long-haul transport across the globe. “In our economy, we are spending Rs 8 lakh crore for the import of petrol, diesel and petroleum products which is a big challenge… Being a nationalist I want that our import should reduce and export must increase.” Highlighting the economic advantage of LNG, the minister said data showed that the average cost of conversion of a conventional truck engine to an LNG engine was Rs 10 lakh. Trucks run around 98,000km in a year, so after conversion into LNG there will be savings of Rs 11 lakh per vehicle in 9-10 months. “So, the cost of conversion can be easily recovered,” he said
Hardeep Singh Puri takes charge of Petroleum Ministry
Hardeep Singh Puri on Thursday took charge of the Ministry of Petroleum and Natural Gas. He has relinquished the portfolio of civil aviation but still holds the Housing and Urban Affairs Ministry. Puri succeeds Dharmendra Pradhan as India’s new petroleum and natural gas minister. The minister was greeted by Pradhan on his arrival at the petroleum ministry. He was also accompanied by minister of state for petroleum Rameswar Teli. Puri said that the focus of the ministry under him will be to increase domestic production of crude oil and natural gas and help country become Atmanirbhar. He also said that in line with the vision to create gas based economy in the country he would see that its availability and use of clean fuel is encouraged. The former diplomat also has a tough task at hand with the global oil prices surging amid supply constraints and demand hopes. Further the ever-increasing domestic petrol and diesel prices too would remain a key issue to deal with. Pradhan, off late was urging global oil exporters including the OPEC to gradually do away with the production cuts and help lower the surging oil prices. Another major task at hand for Puri would be the privatisation of Bharat Petroleum Corporation Ltd (BPCL) which has been delayed due to initial subdued interest among the investor fraternity coupled with the pandemic-induced slowdown. The challenge must not be much different from his experience with the inordinately delayed privatisation of Air India which he tried to achieve during his stint as the Civil Aviation Minister.
Taiwan’s CPC signs 15 year LNG deal with Qatar
Taiwan’s state-owned refiner CPC Corp said on Wednesday it had signed a 15-year LNG supply agreement with Qatar Petroleum. CPC said that from next year it will buy 1.25 million tonnes of LNG annually from Qatar, for domestic consumption. “Since our country began importing LNG from Qatar in 1997, Qatar has always been an important source of stable supplies,” CPC said. It did not provide financial details of the agreement. Australia and the United States are Taiwan’s other main sources of LNG. The government is trying to generate more electricity from LNG as it shifts away from both coal-powered and nuclear plants.
Will TAPI gas pipeline project be given formal burial if Taliban wins in Afghanistan?
As political uncertainties grip Afghanistan with the withdrawal of US troops, what will be the future of the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline? Energy experts told India Narrative that India will have to carefully adopt a wait and watch policy as Taliban has already started making rapid inroads in Afghanistan. The ambitious 1,814 km trans-country natural gas pipeline project is important not only for India but also for Turkmenistan, as this gives a new export market to Ashgabat. In fact, in February, Turkmenistan invited a Taliban delegation to discuss the future of this pipeline. Though the delegation led by Mullah Abdul Gani Baradar expressed full support and promised to protect the project, worries are rising for India. ‘The global energy landscape is changing faster than ever before, with new emerging geopolitical equations in Central Asia and in the Middle East in particular. The growing – and even muscular in some places – influence of China is omnipresent, resulting in a big recast in the energy chessboard all across from the north of Kazakhstan to Saudi Arabia and beyond,’ India’s leading energy expert Narendra Taneja said. Taneja however said that India, over the last few years, has diversified its sources of oil and natural gas. ‘India does not need to worry much in terms of oil and gas supply from the two regions as it (the supply) already stands quite diversified, but what should worry us is threat to the size of our presence in the energy chessboard, in the great energy game. The silence everywhere on TAPI is a classic example,’ Taneja said. ‘China hates TAPI,’ he noted. Though speculations are rife on whether the project will get a quiet burial, Subhomoy Bhattacharjee, Senior Adjunct Fellow at RIS (Research and Information System for Developing Countries) told India Narrative that it is too early to write it off. ‘It is true that the situation is tricky and we will have to wait to understand the dynamics in Afghanistan,’ he said. ‘Often totalitarian governments depend on natural resources and oil and gas will be an important one. So, it is possible that Taliban, if it comes to power, protects or provides support to the project there could be other international repercussions. India will have to weigh those implications,’ Bhattacharjee said. Even if the TAPI project gets wings, will India be ready to pay royalty to the Taliban government if the situation arises? Earlier an Observer Research Foundation report said that in light of these developments in Afghanistan’s politics, it would be interesting to see what position India adopts vis-�-vis TAPI gas pipeline and whether New Delhi would be ready to continue its participation in the project. ‘The US withdrawal from Afghanistan and its weakened appetite for a big foot in Central Asia are disrupting developments and can prove to be unfortunate for energy deficit giants like India,’ Taneja added. According to Upstream Online, an oil and gas weekly, Turkmenistan currently delivers the bulk of its gas production to China via a three-line gas export pipeline across Uzbekistan and Kazakhstan, with some volumes going to Russian gas monopoly Gazprom via an old route across Kazakhstan. ‘The route to China is understood to be running at almost maximum capacity, preventing Turkmenistan from increasing gas production at its highly prolific Galkynysh group of fields, while Gazprom prohibits Turkmenistan from transiting its gas to Europe,’ it said. For Ashgabat, the TAPI project gives a lease of fresh life.