Cairn sets eyes on more state-owned assets to recover dues from Indian govt
UK’s Cairn Energy is targeting assets abroad of more state-run companies in a bid to recover dues from the government on the backdrop of the arbitration victory of the company over the Indian government. According to people in the know, the British energy major may file lawsuits across several countries to make government firms and banks liable to pay the dues. Cairn Energy already moved courts in the US, UK, Canada, France, Singapore, the Netherlands and three other countries to register the December 2020 arbitration tribunal ruling that overturned the Indian government’s Rs 10,247 crore demand in back taxes and ordered New Delhi to return $ 1.2 billion in value of shares it had sold, dividends seized and tax refunds withheld to recover the tax demand. After reports of identification of Indian assets overseas worth $70 billion by Cairn for potential seizure came out, government sources said that the Centre is well aware of its legal rights and will defend its case in courts if such proceedings materialise. Official sources said that the government is confident of winning its appeal in The Hague. Sources further pointed out that Cairn did not pay a single rupee tax anywhere in the world in respect of the impugned transactions. Cairn had also lost its appeal before the income-tax tribunal.
Budget 2021-22 – Expectations from the Oil & Gas sector
Given the onset of the COVID-19 pandemic, the past 12 months have been quite challenging for the oil and gas industry. Global crude demand dropped by about 30 percent and oil prices had a free fall. The Indian oil and gas industry responded commendably and operated safely during this period. Oil fields continued operation, refineries managed huge demand fluctuations (without shutting down even for a day), and fuel retailing (including LPG supplies to more than 250 million households) continued uninterrupted. Normalcy is gradually returning with demand reaching the pre-pandemic levels in many product categories and crude prices are back in the US$50/barrel plus range. The sector not only survived the crisis but also supported public finances of both the centre and state governments in terms of increased contribution of excise duty and Value Added Tax (VAT). However, the current crisis will have a lasting impact on the industry. This is because changes in operating models, travel habits, accelerating digitisation, and finally urgency for decarbonisation will result in demand rebalancing in the medium term and decline in the longer run. The oil and gas ecosystem will have to reconfigure based on these changing demand patterns and actions of governments and regulators, and investors’ preference. At regular intervals, Prime Minister Modi has articulated his vision for the Indian energy sector. These include the need to reduce import dependency in crude oil by 10 percent, increasing the share of gas in India’s energy supply basket, cleaner use of fossil fuels, promoting biofuels, moving to emerging fuels (such as hydrogen), and promoting digital innovation across the energy value chain. This vision has been put to action through a series of policy measures. These measures include the following: introducing Open Acreage Licensing Policy (OALP); moving to a revenue-sharing model, Hydrocarbon Exploration Licensing Policy (HELP); launching the Ujjwala scheme to increase LPG access using Jandhan-Adhaar-Mobile (JAM) for subsidy delivery; initiating City Gas Distribution (CGD) licensing rounds; rising capital expenditure to improve gas infrastructure; creating a gas exchange; using LNG as a transport fuel; putting in place a liberalised fuel retail licensing policy and a unified tariff structure for gas; and moving towards BSVI fuel through bio-fuel policy. When Finance Minister Nirmala Sitharaman will present the budget, the industry will be expecting fiscal interventions and support as the pace of recovery is still low and the oil and gas sector is at a historic crossroads. Contrary to PM’s expectation of increased domestic production, crude oil production has been continuously falling from its peak of 38 MTPA to 32 MTPA per Petroleum Planning and Analysis Cell (PPAC) data. A few fiscal tweaks may help reverse this trend. Oil industries development cess applicable on Pre-NELP exploratory blocks was raised from INR 2,500/tonne to INR 4,500/tonne in March 2012. This was changed to 20 percent ad-valorem in March 2016. The industry is asking for halving this cess to 10 percent as crude prices have been in the US$40−60 range for the past few years. This US$5−6 per barrel concession will make production viable in many fields. There is a perceived anomaly in tax law with the exclusion of ‘natural gas’ from the definition of ‘mineral oil’ for the purpose of tax holiday. This needs to be fixed. When Goods and Services Tax (GST) was introduced, petroleum products were excluded from the scope. This leads to stranded taxes, distorted tax value chain, and price inefficiency. Though this matter is the GST Council’s prerogative, a directional view from the finance minister will be soothing for the industry. As an interim measure, the industry expects the government to allow cross utilisation of GST Input Tax Credit (ITC) against excise duty or sales tax, which will at least take care of some stranded taxes. An estimated investment of US$60 billion is lined up to develop gas pipelines covering 14,700 km, a city gas distribution network, LNG regasification terminals, etc. Budgetary provision for viability gap funding and incentives for pension funds to invest in this segment would help fund this investment plan for the gas sector. Customs duty on LNG can be removed (quite similar to crude) from the current 2.5 percent. In 2018, National Biofuel Policy was launched to promote biofuels in mass scale with a target of 20 percent ethanol blending in petrol and 5 percent of bio-diesel by 2030. There is a roadmap to set up 5,000 compressed biogas plants with a target of 15 MMTPA and an investment of US$25 billion. Oil Public Sector Units (PSUs) account for a majority of the biofuel investment. Similar to the renewable energy sector, this budget must bring a mechanism for private-sector participation in the biofuel sector. This would imply government support in the form of capital grants or lower interest rates to offset high upfront capital costs. The government could play a role in streamlining feedstock availability viz. crop residues, and municipal solid waste for entrepreneurs in this segment. Tax incidence on retail prices of auto fuels, such as petrol and diesel, are high. As crude prices are increasing, retail prices are reaching an all-time high every day. Crude prices are expected to remain extremely volatile with an upward bias in the future. The finance minister may spell out a graded excise duty in different ranges of crude prices. By the next decade, India is expected to move towards multiple clean transportation choices, such as current Internal Combustion (IC) engines (using petrol and diesel), Electric Vehicles (EV), gas-based transportation, and hydrogen. Policy parity and consistency will be quite important. Clearly defining a roadmap for each fuel and factoring co-existence of clean fuels are important. This clarity will help drive investments for each fuel area. The proposal of having ‘green tax’ on older vehicles is a welcome move. A similar tax on the use of pollution-causing fuels by the industry wherein a gas network is available, will lead to an increase in share of gas in the primary energy basket.
Biden to pause oil and gas sales on public lands: Reports AP
President Joe Biden is set to announce a wide-ranging moratorium on new oil and gas leasing on U.S. lands and waters, as his administration moves quickly to reverse Trump administration policies on energy and the environment and address climate change. Two people with knowledge of Biden’s plans outlined the proposed moratorium, which will be announced Wednesday. They asked not to be identified because the plan has not been made been public; some details remain in flux. The move follows a 60-day suspension of new drilling permits for U.S. lands and waters announced last week and follows Biden’s campaign pledge to halt new drilling on federally controlled land and water as part of his plan to address climate change. The moratorium is intended to allow time for officials to review the impact of oil and gas drilling on the environment and climate. Environmental groups hailed the expected moratorium as the kind of bold, urgent action needed to slow climate change. “The fossil fuel industry has inflicted tremendous damage on the planet. The administration’s review, if done correctly, will show that filthy fracking and drilling must end for good, everywhere,” said Kieran Suckling, executive director at the Center for Biological Diversity, an environmental group that has pushed for the drilling pause. Oil industry groups slammed the move, saying Biden had already eliminated thousands of oil and gas jobs by killing the Keystone XL oil pipeline on his first day in office. “This is just the start. It will get worse,” said Brook Simmons, president of the Petroleum Alliance of Oklahoma. “Meanwhile, the laws of physics, chemistry and supply and demand remain in effect. Oil and natural gas prices are going up, and so will home heating bills, consumer prices and fuel costs.” Kathleen Sgamma, president of the Western Energy Alliance, which represents oil and gas drillers in Western states, said the expected executive order is intended to delay drilling on federal lands to the point where it is no longer viable. Her group pledged to challenge the order in court. “The environmental left is leading the agenda at the White House when it comes to energy and environment issues,” she said, noting that the moratorium would be felt most acutely in Western states such as Utah, Wyoming and North Dakota. Biden lost all three states to former President Donald Trump. The drilling moratorium is among several climate-related actions Biden will announce Wednesday. He also is likely to direct officials to conserve 30% of the country’s lands and ocean waters in the next 10 years, initiate a series of regulatory actions to reduce greenhouse gas emissions and issue a memorandum that elevates climate change to a national security priority. He also is expected to establish a White House office on environmental justice to serve low-income and minority communities that suffer disproportionately from air and water pollution and industrial waste and are often located near hazardous sites such as power plants, landfills and incinerators. Biden also will direct all U.S. agencies to use science and evidence-based decision-making in federal rule-making and announce a U.S.-hosted climate leaders summit on Earth Day, April 22. The conservation plan would set aside millions of acres for recreation, wildlife and climate efforts by 2030, part of Biden’s campaign pledge for a $2 trillion program to slow global warming. Under Trump, federal agencies prioritized energy development and eased environmental rules to speed up drilling permits as part of the Republican’s goal to boost fossil fuel production. Trump consistently downplayed the dangers of climate change, which Biden, a Democrat, has made a top priority. On his first day in office last Wednesday, Biden signed a series of executive orders that underscored his different approach – rejoining the Paris Climate Accord, revoking approval of the Keystone XL oil pipeline from Canada and telling agencies to immediately review dozens of Trump-era rules on science, the environment and public health. A 60-day suspension order at the Interior Department did not limit existing oil and gas operations under valid leases, meaning activity would not come to a sudden halt on the millions of acres of lands in the West and offshore in the Gulf of Mexico where much drilling is concentrated. The moratorium also is unlikely to affect existing leases. Its effect could be further blunted by companies that stockpiled enough drilling permits in Trump’s final months to allow them to keep pumping oil and gas for years. The pause in onshore drilling is limited to federal lands and does not affect drilling on private lands, which is largely regulated by states. Oil and gas extracted from public lands and waters account for about a quarter of annual U.S. production. Extracting and burning those fuels generates the equivalent of almost 550 million tons (500 million metric tons) of greenhouse gases annually, the U.S. Geological Survey said in a 2018 study. Under Trump, Interior officials approved almost 1,400 permits on federal lands, primarily in Wyoming and New Mexico, over a three-month period that included the election, according to an Associated Press analysis of government data. Those permits, which remain valid, will allow companies to continue drilling for years, potentially undercutting Biden’s climate agenda. The leasing moratorium could present a political dilemma for Biden in New Mexico, a Democratic-leaning state that has experienced a boom in oil production in recent years, much of it on federal land. Biden’s choice to lead the Interior Department, which oversees oil and gas leasing on public lands, is New Mexico Rep. Deb Haaland. If confirmed, she would be the first Native American to lead the agency that oversees relations with nearly 600 federally-recognized tribes. Haaland, whose confirmation hearing has been delayed until next month, already faces backlash from some Republicans who say expected cutbacks in oil production under Biden would hurt her home state. Tiernan Sittenfeld, a top official with the League of Conservation Voters, called that criticism off-base. “The reality is we need to transition to 100% clean energy” in order to address climate change, she said Tuesday. “The
Government to monetise Rs 60 billion GAIL pipelines through InvIT
The oil ministry is eyeing the InvIT (Infrastructure Investment Trust) the route to monetise pipelines worth about Rs 60 billion built by India’s largest gas utility GAIL, charting a new course for raising funds for the government as the pandemic spooks big-ticket disinvestments such as of Bharat Petroleum. Discussions on InvIT are on in the ministry in parallel to preparations for carving GAIL’s countrywide gas pipeline network into a fully-owned subsidiary. The ministry may seek Cabinet approval, although technically the GAIL board can decide to divest stake in pipelines through InvIT. The Dabhol-Bengaluru and the Dahej-Uran-Panvel pipelines will be the first to be monetised. “There could be gradual dilution, say in tranches of 10-20% stake, to begin with, but GAIL will retain majority stake,” one official said. GAIL will be the second state-run entity to dilute stake in projects through InvIT. The power ministry had in September 2020 secured Cabinet approval for PowerGrid to monetise transmission lines worth Rs 71.46 billion via InvIT. Under the InvIT route, the parent company gets the proceeds and the government makes money through capital gains tax etc. In case of public sector projects, the government, as the owner, can additionally demand higher dividend from the parent. The InvIT route fits well with GAIL’s bifurcation, after which the parent will continue to market gas and build pipeline connectivity. The subsidiary will operate the transportation network and continue to raise funds by monetising minority stake in pipelines. The government will retain control of the infrastructure, considered strategic asset, through GAIL and an independent TSO (transport service operator) will manage 25% of the network capacity under the open access policy. Typically, companies hive off projects to InvITs, or trusts formed to manage infrastructure assets, once they become operational and begin regular earning. This allows other investors in search of an assured return to step in, providing funds to the promoter for new projects. The government had last year suggested the InvIT route to state-run entities as an alternative mechanism for raising funds to reduce dependence on government support. Indeed, around August last year, during presentations to PM Narendra Modi, his economic advisers had suggested assets monetisation as a way to cover a part of the higher spending needed for providing additional economic stimulus to revive growth.
Flaming petrol prices to fuel CNG vehicles adoption: Report
Elevated prices of petrol due to a steep increase in taxes in the recent past is set to increase the adoption of compressed natural gas (CNG)-driven vehicles, Crisil Research said. Accordingly, the last time petrol prices had crossed the Rs 80 per litre mark was in October 2018, when Brent crude had surged to $80.5 per barrel. In contrast, the price has now touched an all-time high of Rs 85.2 per litre in New Delhi even though Brent has slid to $55 per barrel. The increase is due to higher excise duty, which rose by Rs 13 to Rs 32.98 per litre in 2020 and value-added tax. “Tax now accounts for over 60 per cent of the retail selling price of petrol, compared with 47 per cent in 2019,” said Hetal Gandhi, Director, CRISIL Research. “Given that the government has to find the money to ramp up public spending – and is also promoting usage of cleaner fuels – it is unlikely that the tax on petrol will come down to previous levels anytime soon.” In the current fiscal, the government is expected to earn incremental revenue of Rs 1400 billion because of higher excise duty – despite petrol and diesel sales volume likely declining 10-16 per cent. Besides, in 2021, Crisil Research expects Brent crude to rise 23 per cent on-year to an average $50-55 per barrel from $42.3 per barrel in 2020, riding on a gradual recovery in economic activity globally. “That would mean a 4 per cent increase over the average closing price of December 2020.” “In comparison, domestic gas prices are expected to rise over 20 per cent to $2.5-3.5 per million British thermal unit (mBbtu) in calendar 2021 from $2.45 in 2020.” Furthermore, the percentage increase in domestic gas prices is similar, the differential between petrol and CNG retail prices will remain wide because of higher taxes on the former. Parallelly, the government is ramping up city gas distribution (CGD) networks, which would also drive up CNG consumption. “Within CGD, the CNG segment – accounting for 40 per cent of CGD demand is expected to log a compound annual growth rate of 25 per cent between fiscals 2021 and 2023.” At present, CNG vehicles account for only 5 per cent of the passenger vehicles sold in the country annually. “With the implementation of Bharat Stage VI standards, prices of diesel vehicles have risen sharply, pushing most commercial players towards CNG.” “The price competitiveness of CNG is evident in consumption volumes, which have logged a CAGR of 11 per cent over the past three years.” About 1,80,000 CNG cars and passenger vehicles were sold last fiscal versus 1,40,000 in fiscal 2015. “CNG was always cheaper than petrol, but the price differential between the two has widened rapidly in the past two years,” said Mayur Patil, Associate Director, Crisil Research. “Today, the cost of running a CNG car is 44 per cent less than a petrol variant, if you consider the CNG price of Rs 42.7 per kg in New Delhi.” According to report, the ramp up in the share of natural gas in India’s energy mix is expected to take place via the trunk gas pipelines which are being laid, and deeper penetration of the CGD network. “A total of 136 ‘geographical areas’ have been awarded under Rounds 9 and 10 of CGD, which are expected to cover 71 per cent of the cumulative population.” “While growth in CNG vending outlets has more than doubled to 2,434 between 2015 and 2020, it is still significantly fewer than petrol outlets. The expansion of CGD network and increasing adoption of CNG as a fuel for personal vehicles will ensure this number increases faster than before.”
Reducing oil use to meet climate targets is tougher than cutting supply
Governments around the world have been slow to make uncomfortable decisions to persuade consumers to cut energy consumption to help achieve climate targets, often because consumers are not ready to pay up or compromise their lifestyles. Researchers, policymakers and energy executives told a Reuters Energy Transition conference this week that while energy companies were under pressure to accelerate measures to reduce emissions, governments have barely addressed reducing demand for the fossil fuels that warm the planet. A growing population in Asia and booming consumerism in industrialised nations make most climate targets very difficult, if not impossible to achieve. Just this month, Swiss voters rejected environmental proposals by governments to help the country cut carbon emissions, including measures to raise a surcharge on car fuel and impose a levy on flight tickets. The International Energy Agency, the steward of energy policies in industrialised nations, last month said the world should not develop new oil and gas fields to achieve net-zero targets by 2050. But its head Fatih Birol said this week net-zero targets were a pipe dream without global consumption patterns changing. “We see a widening gap between rhetoric and what is happening in real life,” he said. So many governments are coming with net-zero targets by 2050 and the same year CO2 emissions are growing and it will be the second-largest increase in history”. Emissions are rising sharply in 2021 after falling steeply in 2020 as a result of global lockdowns to slow the spread of coronavirus.– “Consumer behaviour needs to change as a result of government steps,” he said. Emissions are rising sharply in 2021 after falling steeply in 2020 as a result of global lockdowns to slow the spread of coronavirus. In France, according to Birol, the government is taking some very early steps to discourage short-distance travel by plane. At the same time, in Britain, the government is busy brainstorming how to revive the holiday season to save the airline and tourism industries. Birol said the IEA has over 400 milestones of what needs to happen to achieve net-zero targets by 2050 and 95% of those milestones should be driven by changes in demand, not supply. Many of those targets – such as banning internal combustion engines car sold by 2030 or 50% of aviation fuels coming from non-fossil fuels by 2040 – are still wishful thinking as there is no industry-wide, country-wide or global policy approach to making those targets happen. POLITICALLY UNCOMFORTABLE DECISIONS The International Monetary Fund has repeatedly criticised developing nations for wasting hundreds of billions of dollars on subsidising cheap diesel and gasoline for the poor. But even in the United States, which consumes a quarter of the world’s gasoline, prices are just halved of those in Britain because of low taxes. The government of U.S. President Joe Biden has made no signal it would change that. The transport sector may prove to be the hardest one of all to decarbonized, and not for technological reasons, but really for political reasons, economic reasons, business model reasons and societal acceptance reasonsKelly Sims Gallagher, professor of energy and environmental policy at The Fletcher School. Instead, Biden is proposing sweeping policy efforts to quickly electrify the nation’s vehicle fleet, as well as clean up the power industry that would charge them. But none of those goals will become reality without an act of Congress, an outcome that is far from certain given the country’s deep-seated political divisions. “The transport sector may prove to be the hardest one of all to decarbonized, and not for technological reasons, but really for political reasons, economic reasons, business model reasons and societal acceptance reasons,” said Kelly Sims Gallagher, professor of energy and environmental policy at The Fletcher School. “How do you convince people to buy an electric vehicle? There really isn’t a lot on the market that a lower-income family can buy… It really is going to require governments to make politically uncomfortable decisions”. A Reuters/Ipsos poll this month showed that Americans were sceptical about new electric car and truck models, expressing concerns about the potential costs and inconveniences of owning such vehicles. Sims Gallagher says the policies that would work to incentivize EVs are politically challenging – such as imposing a fee on high emissions vehicles and rebate on low emissions vehicles. Another challenge is a clean grid and many industrialised countries have old grids that need reconstruction. Rodolfo Lacy, director at the Organisation for Economic Co-operation and Development, estimates that more than $500 billion is being given by governments on fuel subsidies globally every year in one form or another. “We need to start to think about phasing out infrastructure and technologies that we do not need for the future,” he said. Besides direct fuel burn, the jury is still out if the world can afford to continue shipping huge amount of goods daily to deliver computer equipment from China to Europe or South American fruit out of season to the United States. Asia’s rising population will encourage further energy consumption and those people too aspire to have their standards of living improve. The heads of oil majors such as BP, ENI and Equinor, who took part in the Energy Transition conference made it clear – oil and gas prices were poised to rise as producers reduce their output of fossil fuels under pressure from investors while demand keeps rising. “I don’t sit here saying we have to wait for society… If the supply-side moves too early and society doesn’t move, we’ll have a mismatch,” said BP CEO Bernard Looney.
Enough scope for govt to cut fuel tax by 4.50 a litre: ICRA
The government can reduce fuel taxes by Rs 4.50 a litre and still keep revenue at last year’s level as the expected rise in consumption will make up loss of extra income from higher levies imposed last year, Moody’s investors service company ICRA said in a note on Friday. Such a tax cut will reduce pump prices and lower CPI (consumer price index) inflation by 10 basis-points, ease pressure on household budgets to allow a faster revival in consumer sentiment and give RBI’s monetary policy headroom to support a revival in growth, the note by ICRA chief economist Aditi Nayar said. Here’s how ICRA worked out the math. Petrol consumption is projected to post annual increase of 14% and diesel 10% in 2021-22 on the low base of 2020-21. But compared to 2019-20, sales are expected to be nearly 7% higher for petrol and about 3% lower for diesel. The increased sales will push up government’s aggregate fuel tax revenue by 13%, or Rs 40,000 crore, to Rs 3,60,000 crore in the current fiscal from Rs 3,20,000 estimated in 2020-21. If the government gives up the Rs 40,000 crore extra income, it can reduce pump prices by Rs 4.50 a litre but still have earnings at last financial year’s level. The Centre raised excise duty by Rs 13 on petrol and Rs 16 on diesel between March and May last year when oil prices collapsed due to the pandemic.
Fuel tax to swell revenue of states past pre-Covid highs
Revenue of India’s top ten states is set to exceed the pre-pandemic levels on account of rise in tax collection on petroleum products, according to a Crisil report. “We expect sales tax revenue for states to increase 30 per cent this fiscal from FY20 levels, even as fuel volume remains 2-3 per cent lower than the pre-pandemic levels. The price of crude oil is seen hovering at $70 per barrel on average this fiscal,” said Manish Gupta, senior director, Crisil Ratings. These states include Maharashtra, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh, Telangana, Rajasthan, West Bengal, Madhya Pradesh, and Kerala. This also explains why both the Centre and the states are reluctant to reduce duty on petroleum products. The report stated that most of these ten states had hiked sales tax on fuel sales by 6-7 per cent or between Rs 1.5-1.8 per litre last fiscal. That, combined with the `10-13 per litre increase in central excise imposed last year makes petrol prices above Rs 100 in many cities. For states, central taxes typically account for a quarter of revenues, state GST for 21 per cent, and grants from the Centre 17 per cent. Sales tax from petrol and alcohol contribute 13 per cent, and the rest comes from non-tax revenue, excise duty, stamp duty and others. The Crisil report also pointed out that GST collections are expected to be marginally better than the pre-pandemic levels. “While the second wave of the pandemic may moderate GST collections in June and July, we expect a recovery to pre-pandemic levels by August,” Gupta noted. However, despite the spike in taxes, these states would still fall short of budget estimates.
India petrol, diesel consumption to grow by 14%, 10% respectively in FY22: ICRA
In an indication of the Indian economy’s revival, the country’s petrol and diesel consumption is expected to grow by 14% and 10% respectively in FY22, according to rating agency ICRA. This assumes importance given that energy consumption, especially electricity and refinery products, is usually linked to overall demand in the economy. “Benefitting from the anticipated rise in mobility and economic recovery aided by an acceleration of the coverage of covid-19 vaccines, ICRA has forecasted the YoY growth in the consumption of MS and HSD in FY2022 at 14% and 10%, respectively, on the low base of FY2021. Our forecasts suggest that consumption in FY2022, relative to the pre-covid level of FY2020, will be 6.7% higher for MS, and 3.3% lower for HSD,” Aditi Nayar, chief economist, ICRA Ltd said in a statement. This comes in the backdrop of India, the world’s third-largest oil importer, witnessing an upward trajectory of transportation fuel prices. Diesel and petrol prices have already breached the ₹100 mark in several parts of India. “Benefitting from the revival in consumption of fuels, the aggregate revenue generated from the cesses imposed by the Government of India (GoI) on MS and HSD is estimated to expand by 13% or ₹0.4 trillion to ₹3.6 trillion in FY2022. If this additional revenue of ₹0.4 trillion is foregone, it can support a reduction in cesses by ₹4.5/litre each on MS and HSD,” the statement said. Any increase in global prices can affect its import bill, stoke inflation and widen trade deficit. Following the covid outbreak, crude prices for Indian basket of crude had plunged to $19.90 in April last year during the first wave before recovering to $66.95 a barrel in May, data from the Petroleum Planning and Analysis Cell showed. “Such a revenue neutral cut in cesses on fuels would shave off a modest 10 bps from ICRA’s forecast of 5.25% for the CPI inflation for July 2021, in terms of the first-round impact, with a similar second round impact likely with a moderate lag,” the statement added. Global crude oil prices are expected to be in the $75-80 per barrel range till September, Care Ratings said in a report on Thursday. The Indian economy contracted by 7.3% in FY21 due to the first wave of the covid-19 pandemic. With many states easing the lockdowns imposed during the second wave of the pandemic, India’ growth projections have been subdued and below 10% for the current financial year. “The favourable prospects of a global economic rebound brought by the vaccine rollout optimism, have resulted in a nearly uninterrupted increase in the international crude oil prices since January 2021. Reflecting this, a weaker INR, higher cesses imposed by the GoI since March 2020 and the increase in Value Added Tax (VAT) rates by more than three-fourths of the state governments in 2020, have seen the average retail selling prices (RSP) of MS and HSD in the four metro cities increase to record-high levels of ₹99.54/litre and ₹92.03/litre, respectively, as on June 25, 2021,” the ICRA statement added. Generation of electronic permits for goods movement, or e-way bills, picked up further momentum in the third week of June, indicating that economic activity was on the rise in line with the lifting of regional restrictions on mobility. Also, Indian power firms and ports will be better able to weather the impact of the second wave as compared to airports and toll roads, Moody’s Investors Service said in a report on Wednesday. “Given the current scenario where domestic sentiment demand has been signed by the impact of the second wave of covid-19, the all-time high retail prices of fuels are both weighing upon disposable incomes and consumption, and feeding into inflationary pressures,” the ICRA statement said.
Stop shale gas exploration move
The Anti-Methane Project Movement has urged the State Government to prevent Oil and Natural Gas Corporation from establishing a new well for shale gas exploration in the vicinity of a discarded well at Anjaruvarthalai in Tirumanancheri Panchayat in the district. “The ONGC is making preparations for drilling a new well by hydraulic fracking process under the pretext of carrying out cleaning works in the existing well. Paths were being created for movement of heavy vehicles and a pond has been created for holding the waste water generated in the process of deep drilling,” T. Jayaraman, Chief Coordinator, Anti-Methane Project Movement, said in a petition submitted to the Mayiladuthurai district administration on Friday. Prof. Jayaraman sought to know on what basis the ONGC was preparing to drill a new well to extract shale gas now that the State Government has made known its clear stand to the Centre that no new exploration activity will be permitted in the Cauvery Basin under the Tamil Nadu Protected Agricultural Zone Development Act, 2020. In the backdrop of Tamil Nadu rejecting ONGC’s application recently for establishing 15 hydrocarbon wells in Ariyalur and Cuddalore districts by taking a categoric position that exploration of methane or shale gas will not be permitted, “drilling of any new well was illegal and must be stopped”, Prof. Jayaraman said in his petition, a copy of which was addressed to the Chief Minister’s office as well. Though the Union Ministry of Petroleum and Natural Gas had taken a policy decision in 2013 that exploration activity in already awarded acreages was permissible, it was irrelevant in Tamil Nadu as the previous as well as the new government in the State have been consistent in their decision not to permit ONGC and Oil India Limited to derive any leverage from the Central Government’s permission in the nine shale blocks, Prof. Jayaraman pointed out.