PE-backed Invenire Energy may acquire Tata’s oil and gas business
Invenire Energy Pvt. Ltd will likely acquire Tata Petrodyne Ltd, the upstream oil and gas business of the diversified Tata Group, said three people aware of the matter. Invenire Energy is backed by a consortium of private equity firms for the potential deal, the people who didn’t wish to be named said in an interview. The transaction is expected to close shortly, they said without disclosing the estimated value of the deal. Tata Petrodyne is a wholly owned unit of Tata Sons Ltd, the group’s holding company. It has a net worth of about Rs 4 billion. “It is a corporate-level transaction for 100% shares of Tata Petrodyne. Invenire is positive about the hydrocarbon assets which Tata Petrodyne holds,” said the first person cited above. Directors of Chennai-based Invenire Energy include Vinod Kumar Saraogi, Manish Maheshwari, Rahul Saraogi and Prakash Kumar Saraogi. Rahul Saraogi is also the founder and managing director of Atyant Capital Advisors. Rahul Saraogi did not respond to an email seeking comment. A spokesperson for Tata Sons also declined to comment. Invenire Energy has allocated an initial capital of $500 million towards building a sustainable oil and gas portfolio with a production rate of about 10,000 barrels of oil per day in South-East Asia. The interest in Tata Petrodyne is part of that ambition. Mint in January reported that the Tata Group has hired EY to explore the sale of Tata Petrodyne. The deal follows Tata Sons’ chairman N. Chandrasekaran’s statement last July that the conglomerate is looking to prune its portfolio and exit businesses that are not offering returns. The Tata Group may use the sale proceeds to repay part of its debt, said the second person mentioned above. The group’s companies, Tata Power Ltd, Tata Steel Ltd and Tata Motors Ltd have a combined debt of about Rs2.3 trillion. Tata Petrodyne has a participating interest in four oil and gas blocks in India and one each in Indonesia and Tanzania. In its Indian blocks, the company holds between 21-30% stake in four oil and gas blocks. Its partners are Hardy Exploration and Production (India) Inc, Hindustan Oil Exploration Co Ltd, Oil and Natural Gas Corp. Ltd and Cairn India Ltd. Over the past few years, Tata Petrodyne has not expanded its hydrocarbon business given its limited success in the sector. “Tata Petrodyne has frozen hiring and also slashed salaries of a few employees,” said the third person cited above. Sammie Coates Jersey
DSF Bid round-II may attract $1.2 billion investments: DGH
The Director General of Hydrocarbons Wednesday said the ongoing Discovered Small Filed (DSF) second round bidding, once completed, will entice about $1.2 billion worth of investments by the successful bidders. “The total investment committed in the DSF-I was $600 million. We expect it to double this time at least double to $1200 million ($1.2 billion). Here the area is also doubled and reserves are also doubled 9 when compared to the round one). The area is 3000 Sq Km and reserves are 190 mmtoe ( million metric tonnes of oil equivalent),” VP Joy, Director General of Directorate of Hydrocarbons told reporters. He was in the city to participate in the investor meet organised by the DGH for the DSF Bid Round-II. He said under the current round 25 contract areas covering 59 discovered oil and gas fields spread over 3000 Sq Km with prospective resource base of over 190 mmtoe was announced. The e-bidding portal was open since August 9 and would continue till December 18. The government had in 2016 brought a new DSF policy, offering “idle” small discovered fields of state-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) in an auction on liberalised terms including marketing and pricing freedom and lower taxes. In the first round of bidding for DSF last year, 134 bids were received for 34 blocks out of 46 on offer. Joy said within this financial year the contracts would be awarded to the successful bidders who were supposed to start production within three years after being awarded the contract. “The successful bidder will get the Petroleum Mining Lease on their name. They will have to submit the field development plan. Then drill the wells and start the production. As per the terms and conditions they will have to start production within three years after they were awarded,” he explained. Replying to a query on the National Seismic Programme, he said the government has earmarked Rs 30 billion for the purpose and about Rs 10 billion was spent on that. Joy said the processed data pertaining to Mahanadi Basin has already been published and about 60 percent of the data has been acquired. “Rajasthan data we are hoping to display next month,” he said. The DGH had identified 26 basins across the country and out of which only seven are witnessing commercial production and another five basins have been identified of having good potential of oil and gas reserves. Adarius Glanton Womens Jersey
Modi Cabinet approves policy to promote and incentivize ER for oil & gas
The Union Cabinet chaired by Prime Minister Narendra Modi has approved the Policy framework to promote and incentivize Enhanced Recovery (ER) Improved Recovery (IR) Unconventional Hydrocarbon (UHC) production Methods/techniques to improve recovery factor of existing hydrocarbons reserves for augmenting domestic production of oil and gas. The ER includes Enhanced Oil Recovery (EOR) and Enhanced Gas Recovery (EGR), Unconventional Hydrocarbon (UHC) production methods include Shale oil and gas production, tight oil and gas production, production from oil shale, gas hydrates and heavy oil. Enhanced Recovery, Improved Recovery, and exploration and exploitation of unconventional hydrocarbons are capital intensive, technologically complex and challenging in nature. It calls for supporting infrastructure, logistic support, fiscal incentives and enabling environment. The strategic objective of the Policy is to build a supportive ecosystem through academic and research institutes, industry-academia collaboration and to support and encourage Exploration and Production (E&P) Contractors to deploy ER/IR/UHC Methods/ techniques. The Policy will be applicable to all contractual regimes and Nomination fields. This policy initiative is expected to spur new investment, provide impetus to economic activities and generate additional employment opportunities. The Policy is expected to facilitate induction of new, innovative and cutting-edge technology and forging technological collaboration to improve the productivity of existing fields. The Policy envisages a systemic assessment of every field for its ER potential, appraisal of appropriate ER techniques and fiscal incentives to de-risk the cost involved in ER Projects to make the investment financially viable. Mandatory Screening of fields through designated institutions, to be notified by Government, and conducting Pilot before actual implementation of ER Project on a commercial level, are other prominent features of the Policy. An Enhanced Recovery (ER) Committee comprising of representatives of Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons (DGH), experts from the upstream sector, and academia would monitor and implement the Policy. The Policy, having a sunset clause, will be effective for 10 years from the date of its notification. However, the fiscal incentives will be available for a period of 120 months from the date of commencement of production in ER/UHC projects. In the case of IR Projects, the incentives will be available from the date of achievement of the prescribed benchmark. Defined timelines have been prescribed to complete the various processes under the Policy. The fiscal incentives are extended in form of a partial waiver of applicable Cess/Royalty on incremental production resulting from the adoption of ER methods on designated wells. Technological interventions have significant potential in stimulating the recovery of hydrocarbon reserves from the matured/aging fields. An increase of 5% in the recovery rate of original in-place volume in oil production is envisaged producing 120 MMT additional oil in next 20 years. In case of gas, an increase of 3% recovery rate on original in- place volume is envisaged, leading to the additional production of 52 BCM of gas in the next 20 years. Jordan Bell Womens Jersey
BPCL to shift LPG facility from Mumbai refinery; other refineries also to follow
State-run Bharat Petroleum Corporation (BPCL), which had a string of fire accidents this year at all its facilities, including the recent blasts at its flagship refinery here, is planning to shift the LPG facility out of the city to the nearby Rasayani, as part of its efforts to strengthen safety measures. The second largest state-run refiner and oil marketer is also planning similar options for its other refineries in Kochi, and its joint venture refineries at Numaligarh in Assam and Bina in Madhya Pradesh as well, a top company official said here Tuesday. “Will look at moving some of the related facilities, especially the LPG facility, to an alternate location for safety and commercial reasons,” said D Rajkumar, chairman and managing director, BPCL. The relocation of the LPG facility from the Mumbai refinery complex to Rasayani, which is around 60 km off the eastern waterfront, will be completed in the next two years, he said, adding this will help cut down truck movement near the refinery by as much as 43 per cent. But Rajkumar, addressing the media after the AGM here late last evening, was quick to add that there is no plan to move the refinery itself to an alternate location. BPCL’s director for refineries, R Ramachandran, said the Rasayani facility over the years will attract Rs 36,000-38,000 crore of investments over the next few years as the company is also planning a petrochemical facility there. “The investment plans are still at the drawing board level, except for the LPG facility which is already underway. We already have taken 250 acres and the entire plan will involve taking in an additional 500 acres. And thankfully land acquisition will not be an issue as the land was earlier an industrial plot,” said Ramachandran. The first phase will have the LPG bottling facility, followed by a poly-propylene block, and the second phase will have an enthoneyline plant, he added. Rajkumar also said BPCL will invest around Rs 7,400 crore towards capital expenditure this fiscal year, of which around Rs 5,300 crore will be managed through internal accruals and the rest will be debt. He said most of the capex will go into the upcoming petrochemical facility in Kochi as it will be focusing big on the petrochemicals sector going forward. He also said the next focus area will be LNG and with the latest auctions, the company will have licences for 25 cities, up from the existing 14 cities. But he ruled out setting up an LNG terminal for now. The Mumbai refinery had fire accident in July which left close to 50 employees injured, and a commercial loss of about Rs 97 crore. And the company attributed the incident to a material-related failure. On the impending sanctions on Iran crude imports, Rajkumar said, the company has already sourced about 3.8-million tonnes (mt) of the 4.2 mt contracted for this year, and if need be, will take in the balance of 0.5 mt. Rajkumar also said the refinery has not booked cargo from Iran since August. “Last year, we imported 4.25 mt. Till September, we have imported 3.08 mt, that is around 73 per cent of what we have imported last year. Even if we really want to import, we will end up importing 0.56 mt more. That is the shortfall we can think of. We are hopeful that now there are alternative sources,” he said. He further said BPCL has already booked Louisiana crude recently and will continue to do so going forward. “If it is going to work out economically for us to procure US crude, then we will do that. We believe that enough sources are available. Our refineries are versatile. We can process 108 types of crudes and we have 96 potential crudes in our baskets. I don’t see any problem in sourcing crude even if it not going to come from Iran,” he said. When asked whether any direction from government on freezing petrol and diesel prices which are at a record high now, Rajkumar said, “There is no communication whatsoever from the government so far. We are passing on the spike in crude prices and there is no plan to absorb the hike at all.” BPCL is also developing an oil block in Brazil through a 50:50 joint venture with Videocon, which is at the bankruptcy court now. The chairman said the ongoing insolvency proceedings against Videocon will not have any negative impact on the future investments in this block. On the Mozambique oil field joint venture, where the company has a 10 per cent equity consideration and has already pumped in over $700 million so far, Rajkumar said, the firm have entered into a legal framework with the government and will shortly be signing the final investment plan (around $22 billion) as well. Cam Newton Jersey
Oil prices slip as economic growth concerns counter tighter supplies
Oil prices fell on Thursday, reversing some of the strong gains from the previous session, as economic concerns raised doubts about ongoing fuel demand growth. US West Texas Intermediate (WTI) crude futures were at $69.91 per barrel at 0220 GMT, down 46 cents, or 0.6 per cent, from their last settlement. Brent crude futures slipped 38 cents, or 0.5 per cent, to $79.36 a barrel. The falls came on the back of a potential slowdown in fuel demand growth because of trade disputes between the United States and China as well as emerging market turmoil. American companies in China are being hurt by tariffs in the growing trade war between Washington and Beijing, according to a survey of hundreds of firms, prompting the US business lobbies behind the poll to urge the Trump administration to reconsider its approach. The Trump administration has invited Chinese officials to restart trade talks, just as Washington prepares to escalate the US-China trade war with tariffs on $200 billion worth of Chinese goods. The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday reduced its forecast for 2019 global oil demand growth, pointing to economic risks. In its monthly report, OPEC said world oil demand next year would rise by 1.41 million barrels per day (bpd), 20,000 bpd less than last month and the second consecutive reduction in the forecast. TIGHTER SUPPLY Despite this, the short-term outlook for oil markets is for tighter supply. Brent rose above $80 per barrel the previous session for the first time since May, spurred by expectations that US sanctions against Iran’s oil exports, which will start in November, will tighten global markets. WTI was pushed over $70 the previous session due to falling crude inventory and production levels. US crude inventories fell 5.3 million barrels in the week to Sept. 7 to 396.2 million barrels, the lowest since February 2015 and about 3 per cent below the five-year average for this time of year, the US Energy Information Administration (EIA) said on Wednesday. Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore, said the inventory data showed “a much deeper drop than analyst’s expectations.” US crude oil production fell by 100,000 bpd, to 10.9 million bpd, as the industry faces pipeline capacity constraints. Innes said the slight dips on Thursday came as rising refined product inventories, which the EIA also reported, “slightly dampened market overexuberance” as it indicated that US fuel demand may be weakening. Gasoline stocks rose 1.3 million barrels, while distillate stockpiles, which include diesel and heating oil, climbed by 6.2 million barrels, the EIA data showed. Marcus Maye Womens Jersey
Fuel prices on the boil, petrol breaches Rs 81 for the first time in New Delhi
Retail prices of petrol and diesel breached record levels again on Thursday with Oil Marketing Companies (OMCs) raising rates by 13 paise per litre and 11 paise per litre respectively for the two automobile fuels in the national capital. Oil Minister Dharmendra Pradhan and Piyush Goal, Minister for Railways and Coal yesterday during a press briefing refused to take any questions on rising fuel prices. Post the price hike, non-branded petrol was priced at Rs 81 per litre in Delhi while diesel costs Rs 73.08 per litre – the highest ever prices recorded in the country’s history. Petrol, diesel prices have been hiked continuously since 1 August, with petrol prices being increased by Rs 4.69 per litre and diesel prices by Rs 5.26 a litre in the national capital, on the back of a depreciating Rupee against the dollar and an increase in global fuel prices. Government has ruled out any cut on excise duty for the two fuels, citing fear of revenue loss. Law minister Ravi Shankar Prasad on Monday blamed Organization of Petroleum Exporting Countries (OPEC) for the surge in international prices of crude and said that the solution for the fuel price hike in not in government hands. “An atmosphere of fear is being created. When there is no support to the protests, they are resorting to violence. We stand with the people on this issue but the solution to the increase in petrol and diesel prices is not in our hands,” Prasad said. He added, “There is political instability in Venezuela. An attempt was made on the life of the Venezuelan president. There are US sanctions on Iran. The oil production in US has decreased. We have to depend on imports for oil.” While, Oil Minister Pradhan had on Saturday last week said that a weak Indian rupee against the US dollar and supply side constraints have led to high domestic fuel prices. The government had in May this year — when petrol, diesel prices had reached their earlier peaks — said it is working on a long-term solution to reign in fuel prices when they reach uncomfortable levels. The centre is yet to disclose such a strategy. Petrol prices were increased to Rs 88.39, Rs 82.87 and Rs 84.19 per litre in Mumbai, Kolkata and Chennai respectively on Tuesday. Diesel prices in the three cities were also raised today to Rs 77.58, Rs 74.93 and Rs 77.25 per litre, respectively. Rajasthan government has already announced a four percentage point cut in Value Added Tax (VAT) on petrol and diesel, while Andhra Pradesh announced a Rs 2 cut in petrol and diesel prices on Monday by slashing sales tax on the fuels. Phillip Gaines Authentic Jersey
Iraq Replaces Saudi Arabia As India’s Top Oil Supplier In August
Iraq replaced Saudi Arabia in August as the top oil supplier to India, data from industry and shipping sources showed, as refiners turned to Iraqi barrels to compensate for a lower intake of Iranian oil ahead of US sanctions in November. The United States is reimposing sanctions on Iran following Washington’s decision in May to withdraw from a 2015 international deal aimed at curbing Tehran’s nuclear programme. While some sanctions were implemented from Aug. 6, those affecting Iran’s petroleum sector take effect only from Nov. 4. Imports of Iranian oil by India, Tehran’s top oil client after China, fell by about a third to about 523,000 bpd in August from July as state-refiners slowed purchases due to a delay in securing government approval to use Iranian ships. Despite the lower purchases, Iran remained the third biggest oil supplier to India in August, the data showed. Washington will consider waivers for Iranian oil buyers such as India but they must eventually halt imports as sanctions are imposed on Tehran, US Secretary of State Mike Pompeo said last Thursday. Iraq and Saudi Arabia continued to be the two biggest oil suppliers to India last month, the tanker arrival data obtained from sources showed. The sources declined to be identified. India refiners shipped in 1.02 million barrels per day (bpd) of Iraqi Basra oil in August, an increase of about 46 percent from the previous month, while imports from Saudi Arabia declined 5 percent to about 747,000 bpd during the period, the data showed. India imported less Nigerian oil in August as the west African nation’s output was hit by outages in a couple of major streams such as Bonny Light and Tornados. Also, Asian buyers opted to take light sweet US oil rather than Nigerian. India’s imports of US oil in August rose to a record 275,000 bpd, accounting for about 6 percent of its overall purchases, the data showed. India refiners had booked US oil cargoes in June when discounts between US crude future and Brent was wide enough to make arbitrage economics feasible for India. India’s monthly oil imports from Nigeria declined by about 34 percent to about 279,000 bpd, the data showed. Overall India’s monthly oil imports in August rose 3.1 percent to about 4.7 million barrels, while they were up 15.8 percent from a year earlier, the data showed.
Why you shouldn’t expect a cut in fuel prices any time soon
Even as petrol and diesel climbed to all-time highs and the Opposition protested across the country Monday, the government ruled out any immediate reduction in excise duty in order to bring down the retail prices of auto fuels, and instead urged the states to take action. While Andhra Pradesh announced a Rs 2 per litre cut in VAT on petrol and diesel following poll-bound Rajasthan’s announcement of a 4 percentage point cut Sunday, states have been largely unenthusiastic. Why is it so difficult for governments to cut taxes on auto fuels? Taxes on petrol and diesel are a key revenue source for both the Centre and states, and a cut will hit their fiscal position. The Centre mopped up Rs 2,290 billion from excise duty on petroleum products in 2017-18 and Rs 2420 billion in 2016-17. Excise duty on petrol is currently Rs 19.48 per litre, and on diesel, Rs 15.33 per litre. The Centre raised excise duty nine times between November 2014 and January 2016 to shore up its finances as global oil prices fell. It cut excise duty just once — by Rs 2 per litre — in October last year. Crude petroleum attracts 20% oil industry development cess, and a National Calamity Contingent Duty (NCCD) of Rs 50 per metric tonne. There’s no Customs duty on crude, but petrol and diesel attract a Customs duty of 2.5%. Rates of state sales tax or Value Added Tax (VAT) vary from state to state. Unlike excise duty, VAT is ad valorem, and results in higher revenues for the state when rates move up. States’ earnings through sales tax/VAT on petroleum products increased to Rs 1840 billion in 2017-18 from Rs 1660 billion in 2016-17. Maharashtra earned Rs 256.11 billion from sales tax/VAT on petroleum products in 2017-18, the highest in the country — followed by UP (Rs 174.20 billion), Tamil Nadu (Rs 155.07 billion), Gujarat (Rs 148.52 billion) and Karnataka (Rs 133.07 billion). Also, most states that impose the highest tax rates on petrol and diesel are struggling with high gross fiscal deficit as a percentage of their GDP (see chart). Assam, for instance, has a fiscal deficit of 12.7% and imposes a VAT of 32.66% or Rs 14 per litre, whichever is higher, on petrol, and 23.66% or Rs 8.75 per litre, whichever is higher, on diesel. Among the states that impose the highest VAT on petrol and diesel, Maharashtra, with a fiscal deficit of 1.8% of GDP (2017-18 revised estimates), may have some room to reduce levies. With a fiscal deficit of 0.3%, Delhi, too, has some cushion, even though its VAT rate on petrol is relatively low at 27%. Among the 29 states, Goa has the lowest VAT rate of 17%, plus a green cess of 0.5%, on petrol. Rajasthan had a fiscal deficit of 3.5% in 2017-18, and plans to keep it to 3.0% in 2018-19. Sunday’s VAT cut will make petrol and diesel cheaper by Rs 2.50 per litre, but will cost the state exchequer an estimated Rs 20 billion in revenues. Besides taxes, the Centre and the states have other earnings, too, from the petroleum sector. Adding dividend income, dividend distribution tax, corporate/income tax and profit on exploration of oil and gas, the Centre’s total earnings from crude and petroleum products were Rs 3430 billion in 2017-18 and Rs 3340 billion in 2016-17. Along with the dividend income, state governments’ earnings from crude and petroleum products stood at Rs 2090 billion in 2017-18, and Rs 1890 billion in 2016-17. Could the inclusion of petrol and diesel under GST change this situation? LPG, kerosene, naphtha, furnace oil, and light diesel oil attract GST, but five other petroleum products — crude oil, high speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel — lie outside the new tax regime. The Constitution (One Hundred and First Amendment) Act, 2016 empowers the GST Council to recommend the date on which these five items are to be brought under GST. The Ministries of Petroleum and Natural Gas and Civil Aviation have approached the Finance Ministry for inclusion of petrol and diesel, and jet fuel respectively under GST. While natural gas and jet fuel will likely be the first of the five to enter the GST tent, contingent upon approval by the GST Council, neither the Centre nor the states have so far been forthcoming on including these five petroleum products in the new indirect tax regime. Even if petrol and diesel are included under GST, prices are unlikely to fall. This is because of the GST principle of keeping rates close to the earlier tax rates. In June, Bihar Deputy Chief Minister Sushil Kumar Modi, who is a member of the GST Council, said that bringing petrol and diesel under GST would not have a big impact on prices, as states will levy additional taxes to boost revenues. “Most people feel that if we put petroleum products under GST then the highest slab of 28% will be levied and prices will come down. [In fact,] It will affect prices only in a minor way,” Modi had said at the PHD Chamber of Commerce and Industry’s national conclave on GST. The trend worldwide, Sushil Modi said, has been that if petrol and diesel are included in GST, states levy additional taxes “over and above to prop up revenue”. “If they (states) forego (tax), how will they earn revenue?” he asked. So does it mean that if the government does not cut prices, it will have insulated its finances from erosion? Not quite. The Centre may still have to bear some direct costs, since all fuel product prices are not market-linked. Kerosene and LPG prices continue to be regulated, with the government subsidising these products to protect society’s weaker sections. Budget 2018-19 put the LPG and kerosene subsidy bills at Rs 203.7780 billion and Rs 45.55 billion respectively, taking the total subsidy to Rs 249.3280 billion. The LPG subsidy includes a direct benefit transfer component of Rs
Switching to Ethanol, CNG Will Reduce Petrol, Diesel Prices In India: Union Minister Nitin Gadkari
Union Road Transport Minister Nitin Gadkari said that Chhattisgarh has immense potential for production of bio-fuel. Addressing a gathering at Charoda in Durg district of the state, he said use of alternative fuels will cut down our dependence on petrol and diesel. Gadkari laid foundation stones of or dedicated total of eight construction works worth Rs 42.51 billion, including four fly-overs between Raipur to Durg Monday. “Growth rate of the agriculture sector in Chhattisgarh is very good. Production of rice, wheat, pulses and sugarcane is abundant here, but the state can also emerge as a bio-fuel (production) hub,” he said. Bio-fuel produced from jatropha plant in Chhattisgarh was used in the first biofuel-powered flight which took off from Dehradun and landed in Delhi recently, he said. The state has immense potential for production of bio-fuel which will create job opportunities for farmers, tribals and forest-dwellers and empower them, he said. A research institute on biotechnology should be set up in the state capital Raipur which can help the state lead in the production of alternative fuels in the country, he said. Switching to ethanol, methanol, bio-fuel and CNG will cut down dependence on petroleum and reduce the prices of petrol and diesel, he said. “We are importing petrol and diesel worth Rs 8000 billion and prices are increasing. Rupees is falling against dollar. I have been saying for last 15 years that farmers, Adivasi (tribals) and forest-dwellers of the country can produce ethanol, methanol, bio-fuel and can (become rich enough to) fly planes…” the Union minister said. “We have decided to exempt vehicles including auto-rickshaws, buses, taxis run on alternative fuels like ethanol, biodiesel, CNG, methanol and bio-fuel from permit requirements,” he said. “Our petroleum ministry is setting up five ethanol plants, where the fuel will be produced from paddy straw, wheat straw, sugarcane and municipal waste. (Consequently) Diesel will be available at Rs 50 per litre and petrol at Rs 55,” he said. Saying that he has approved the projects demanded by the Chhattisgarh government, he said, “I am the only minister who has no dearth of money (for his department). I have so far inaugurated works worth Rs 40,000 billion. “I have no dearth of money but I ensure that the work is done in a good way. After getting works worth Rs 40,000 billion executed, I can confidently say that no contractor had to come to the office with bills (to get them passed). All the works which were done were corruption-free and done in a transparent manner,” the Union minister said. Calvin Munson Jersey
Rising fuel prices can give windfall gains of Rs 227 billion to states: Report
The surge in petrol and diesel prices can give windfall gains of around Rs 227 billion during the current fiscal, according to a report by the Economic Research Wing of SBI, released on Tuesday. “We also estimate that since the states have an incremental revenue over the budgeted one, they could cut on average petrol prices by Rs 3.20 /litre and diesel by Rs 2.30/ litre, without affecting their revenue arithmetic,” the report, authored by Soumya Kanti Ghosh, Group Chief Economic Adviser of State Bank of India, said. The report has come at a time when the Modi government is facing harsh criticism on the fuel price situation. Fuel comes under the dual taxation system. While the Centre levies excise duty at specific rates, which are Rs 19.48 a litre for petrol and Rs 15.33 a litre for diesel, states impose sales tax/VAT at ad valorem as well as specific rates, besides cess (in some states only). The sales tax on petrol varies from 6 per cent (Andaman & Nicobar Island) to 39.12 per cent (Maharashtra – Mumbai, Thane & Navi Mumbai). Similarly, sales tax on diesel ranges from 6 per cent (Andaman & Nicobar Island) to 28.08 per cent (Andhra Pradesh). Since states have ad valorem rates i.e. certain percentage of value, and it is calculated on the base price plus excise duty, there is a possibility of windfall gains for states. The report said since March, petrol and diesel prices have increased by Rs 5.60 and Rs 6.31 respectively in Delhi. The price of petrol has now crossed Rs 89 a litre in Maharashtra (highest). “This increase in petrol and diesel prices is likely to give states windfall gains of around Rs 227 billion over and above the budget estimates for the current fiscal. Alternatively, a $1/barrel increase in oil prices translates, on average, to a Rs 15.13 billion revenue gain for all the major 19 states,” it mentioned. This windfall gain will have a positive impact on state finances, which might push down the states’ fiscal deficit by 15-20 bps (100 bps or basis points equal to 1 per cent) provided other things remain unchanged. It is believed that that states such as Maharashtra, Madhya Pradesh, Punjab, Tamil Nadu, Andhra Pradesh, Rajasthan and Karnataka have the privilege to cut petrol prices by at least Rs 3 from their existing rates and Rs 2.5 on diesel. The report noted that a cut by Rajasthan and Andhra Pradesh has already pared rates. The report recommend that if the states impose VAT on base price (crude oil+ transportation cost+ commission), then diesel prices could drop by as much as Rs 3.75 and Rs 5.75 for petrol. However, this will result in a revenue loss of around Rs 120 billion (net of Rs 346.27 billion loss and Rs 227 billion gain from oil bonanza) to the states. “The problem with the states is that even as many have a revenue surplus, they are using the surplus revenue to finance capital expenditure and interest obligations,” it said. Sam Mills Jersey