OIL and ONGC pay differential royalty to State of Assam
Public Sector Upstream Oil Companies- Oil India Limited and ONGC Limited today made a payment to the Government of Assam, towards differential royalty on pre-discount price for the period from 1st February, 14 to 31st March, 16. The amount paid by OIL is Rs. 11.4924 billion and the amount paid by ONGC is Rs. 3.0064 billion. The cheques were handed over by the CMDs of ONGC and OIL to the Chief Minister of Assam, Sarbananda Sonowal at New Delhi, in the presence of Petroleum Minister, Dharmendra Pradhan and other dignitaries. Speaking on the occasion, the Petroleum & Natural Gas Minister Dharmendra Pradhan said that injustice was being done to Assam due to political reasons in the payment of royalty. He said the differential royalty being paid today was Assams right. The Minister said that the natural resources of a place belong to the people living there and, hence, it was proper that full royalty should be paid to Assam for the oil explored there. He said that this gesture will provide the feel-good factor and improve cooperation between the oil companies and Assam. Assam Chief Minister, Sarbananda Sonowal thanked the Petroleum & Natural Gas Minister for releasing the amount due to it in a single installment. He said that Assam is suffering from a natural disaster and is in acute need of funds. He also thanked the Oil PSUs for contributing Rs. 150 million towards the CM Relief Fund from their CSR initiative. As per statutory provisions, royalty on production of crude oil in the state of Assam is paid by ONGC and OIL to Assam Government. Effective from 2008-09, the royalty to all State Governments including Assam was being paid on post-discount price of crude oil realized by ONGC and OIL from the Public Sector Oil Marketing Companies (OMCs). In view of the litigation arising out of the loss of royalty to State Governments due the discounts being provided by the ONGC and OIL to public sector OMCs and interim decision of the Supreme Court dated 13th February, 14, MoP&NG vide letter dated 15th July, 16 has decided that ONGC and OIL will pay royalty to all crude oil producing states at pre-discount prices effective 01.02.14, pending the outcome of the SLA (Civil) No. 1596/2014 filed by ONGC Ltd. before the Honble Supreme Court. Lee Smith Womens Jersey
Govt could save Rs 20 billion on LPG subsidy through sustained LPG price hikes
The government could save petroleum under-recoveries to the tune of Rs 9.10 billion in the current financial year if the price of subsidized cooking gas or Liquefied Petroleum Gas (LPG) is raised by Rs 1.95 per cylinder per month till March 2017. The savings would stand at a whopping Rs 20 billion for the next financial year in case the price rise is sustained at the current level of volumes. The Oil Marketing Companies (OMCs) – Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) – had on Monday raised the price of domestic cooking gas by Rs 1.93 per cylinder. Post the hike, a subsidized LPG cylinder now costs Rs 423.09 in Delhi as against RS 421.16 previously. This was the second straight monthly increase in subsidized LPG prices. “The OMCs may continue to increase retail prices of subsidised domestic LPG by Rs 2 per cylinder every month, similar to subsidised kerosene retail price hike by Rs 0.25per liter per month. If price hike continues, the move would be an important step in the right direction. Besides, a small quantum of price hike could lighten the burden on the consumers considering the politically sensitive nature of the product,” said K Ravichandran, Senior Vice President at research and ratings agency ICRA. According to the current under-recovery sharing formula, the centre bears domestic LPG subsidy upto Rs 18 per Kilogram (around Rs 255 per cylinder) under the Direct Benefit Transfer for LPG (DBTL) scheme. For the month of August 2016, the subsidy on domestic LPG stands at Rs 64 per cylinder. This provides comfort to the state-owned oil firms. “As the domestic LPG under-recoveries of upto Rs 255 per cylinder are to be borne by the centre, the major benefit from fall in Under-Recoveries on domestic LPG would accrue to the government. Also, the benefit of lower under-recoveries would increase with rise in subsidised LPG consumption volumes,” Ravichandran said. The move to increase price follows various steps taken by the government to reduce subsidy including DBTL, cancellation of fake connections and the GiveItUp campaign. The steps have led to total subsidy savings of Rs 212 billion in the past two financial years according to government estimates. A gradual increase in subsidised LPG prices would also be positive for OMCs as they gain from marginal savings on interest burden due to lower under-recoveries. Domestic LPG subsidy was earlier expected to reach Rs 255 per cylinder at an Indian Basket crude oil price of $60 per barrel. Beyond that level of crude oil prices, either the consumers or oil companies would have to bear under-recovery on LPG. According to ICRA, following the total increase of Rs 17.55 per cylinder in subsidised LPG prices, the government may continue to bear threshold LPG subsidy upto crude oil prices of $63-65 per barrel. This would be positive for PSU oil companies over the long term in case crude oil prices increase beyond $65per barrel. Andrew MacDonald Womens Jersey
Barring five, all petroleum items under GST regime
Clarity on the applicability of goods and service tax (GST) on petroleum products may be absent but analysts say a dual tax regime for the oil and gas industry will make compliance difficult. Products like kerosene, naphtha and LPG will be under the ambit of GST, while five items in the basket — crude oil, natural gas, aviation fuel, diesel and petrol — have been excluded during the initial years. Abhishek Jain, tax partner, EY India, said the oil and gas industry would largely be negatively impacted by the introduction of GST. “Because of the peculiarity, this industry would be pained to comply with both the current tax regime as well as the GST regime,” he said. While compliance is one reason, taking tax credit would be another issue. Besides, there would be non-creditable tax costs. Jain cited the example of a refinery producing diesel and petrol that would pay GST on the procurement of plant, machinery and services; GST would not be creditable against the out-excise duty and VAT levied on petrol and diesel. “The said tax costs would have an inflationary impact on the overall economy,” he said. Under the proposed GST regime and the current VAT structure, tax on inputs are deducted from the tax payable on the final product. Besides plant and machinery, crude oil and natural gas, which are processed to get various petroleum products, do not attract GST. For instance, LPG is produced both from natural gas and crude oil. While LPG would be part of GST, crude oil and natural gas would not be. The constitutional amendment Bill cleared by the Rajya Sabha is an enabling legislation. It is expected that clarity on what happens to the rates on petroleum products covered under the GST ambit will come only after the central GST Bill is passed by the Union government and after the states pass their respective GST Bills. The Constitutional Amendment Bill passed by the Upper House on Wednesday said petroleum” would be under the purview of GST. It is not clear which products are covered under the generic terms. Oscar Lindberg Authentic Jersey
GST roll out may improve ease of doing business: Govt
The government has set April 1, 2017 as the target date for introducing the goods and services tax, even as it said there are challenges to meet it. GST may improve ease of doing business and bring down prices in the long run though much of it would also depend on the rates that are yet to be decided, it said. Addressing a press conference a day after the Rajya Sabhha passes the much-awaited Constitution amendment Bill, Finance Minister Arun Jaitley said the government has given notice to table the changes to the Bill in the Lok Sabha, which has already cleared the earlier version of the Bill. The Bill will go to 29 state assemblies whose monsoon sessions are on currently. The states where the session is not on can call special session, he said. In a presentation, Revenue Secretary Hasmukh Adhia said the target date for GST roll out is April 1, 2017. To a query over this, Jaitley said, “We are going to try to make it as reasonably quick. Which is a date is yet to be seen,” he said. However, he also added that setting target is better than having none. Adhia spelt out seven challenges that the government has to address to meet the deadline. These include calculation of revenue base of Centre and States, along with compensation requirements of Centre, GST rates structure, list of exemptions, forming of consensus on model GST Bill, threshold limits, compounding limits and avoiding dual control over scruity and assessment. The finance minister said once GST is rolled out, ease of doing business would improve in the country and in long run the tax rate would also come down. “It is obvious that many items may see reduction in prices,” he added. However, to a query that the countries who have introduced GST saw rise in inflation initially, he said,”there is no settled model in this regard.” He said all this would also depend on the GST rates and slabs, a decision which is yet to be taken by the GST council. When asked about the 18% tax rate which the Congress demanded based on the chief economic adviser Arvind Subramanian report, he said CEA had suggested rates in the range of 16.9-18.9%, which when rounded off becomes 17-19%. “This 18% has been thrust on CEA,” he said. The finance minister said 60-70% of items attract 27% tax, including Central and states. If cesses, surcharges and local taxes are also included it goes up to at least 30%. Now, Empowered Committee of state finance ministers, he said had resolved to bring down GST rate from this level. However, the rate should also meet the states development goals. This balance will be decided by the proposed GST council, he said. Chris Carson Womens Jersey
Detailed feasibility study underway for setting up of Mega Oil Refinery on west coast of Maharashtra
he Petroleum Minister Dharmendra Pradhan informed the Rajya Sabha in a written reply today that Oil PSUs namely Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) have announced the plan to jointly set up an integrated refinery-cum-petrochemical complex with a refining capacity of 60 MMTPA (million metric tons per annum) in 2 phases in Maharashtra. Engineers India Limited (EIL) is carrying out detailed feasibility study. Oil PSUs and EIL are in the process of site selection for the refinery in consultation with Govt. of Maharashtra. Setting of operationalisation targets depend on land availability, environment clearance etc. David Pastrnak Womens Jersey
How will GST impact India’s energy sector?
India is likely to soon approve a key legislative change required for the implementation of the much-awaited Goods and Services Tax (GST) regime. The Goods and Services Tax law seeks to subsume all central and state levies and is being debated in the Upper house of Parliament. Currently, while the centre is constrained from levying taxes on goods beyond the point of manufacturing, state governments cannot levy taxes on services. Thus, an amendment in the constitution is needed to simplify and unify the indirect tax structure. According to Morgan Stanley, implementation of GST will be one of the most significant reforms affecting all factors of production and economics. One of the main energy sub-sectors to be impacted post the implementation of GST is renewables. The sector currently enjoys various fiscal incentives like 100 per cent tax holiday on earnings for 10 years, concessional excise and custom duties and so on. All these incentives will come to an end in the new GST regime. The indirect tax reform through the GST could, therefore, hike renewable energy costs and pricing and hit investors. The Ministry of New and Renewable Energy (MNRE) has worked out a possible scenario of these impacts. The GST’s effect on cost of setting up of renewable projects would vary across segments, MNRE said in a recent report. The impact includes a 16-20 per cent rise in Solar Off Grid costs; 12-16 per cent rise in Solar PV Grid installations and a 11-15 per cent jump in the cost of setting up wind energy projects. Also, biomass projects could see their costs rising by 11-14 per cent while setting up small hydro projects could become costlier by upto 11 per cent. Analysts also expect some negative impact of the new taxation regime on the oil and gas sector even as consumption, logistics and industrial manufacturing could get a fillip. As per brokerage Motilal OSwal, GST is likely to benefit the light electrical sector on reduction of tax rates. “Overall, GST should be positive for the sector, since it lowers the effective indirect taxes to around 18% from the current 29-30%. We believe GST will be more positive for the Light Electricals segment, where companies may benefit from volume growth and margin expansion,” Motilal Oswal said in a report. It further said for industrial capital goods, the benefits will be passed on to customers owing to the current weak demand scenario. Zach Cunningham Authentic Jersey
India’s July Iranian crude imports surge 21% to five-month high
India’s July oil imports from Iran rose by over a fifth from June, surging to its highest level in five months as two state-run refiners resumed shipments from Tehran after a gap of years, preliminary tanker arrival data obtained by Reuters show. Hindustan Petroleum Corp and Bharat Petroleum, India’s second- and third-biggest state-owned refiners respectively, halted Iranian oil imports after western sanctions against Tehran’s nuclear programme barred insurance cover for plants processing Iranian oil. India shipped in 461,000 barrels per day (bpd) of Iranian oil in July, nearly a 21 per cent increase from June and more than double than the about 215,000 bpd imported a year ago, tanker arrival data and ship-tracking services on the Thomson Reuters terminal show. India’s oil imports from Iran for the fiscal year that began in April are set to surge to a seven-year high, with the nation’s state-owned and private refiners together buying at least 400,000 bpd. While BPCLBSE -1.24 % previously took an oil cargo from Iran in November 2011, HPCL last imported oil from the country in May 2013, according to data available to Reuters. For the first seven months of 2016, India imported about 359,000 bpd of Iranian oil, up 67 per cent from the same period a year ago, the data showed. In April to July, the first four months of the current fiscal year, India’s Iran oil purchases rose about 43 per cent to 404,000 bpd from about 283,000 bpd in the same period a year ago, the data showed. Indian Oil Corp, the country’s biggest refiner, was the top buyer of Iranian oil in July, shipping in about 158,000 bpd oil, while Essar Oil slipped to the No. 2 position with 126,300 bpd, the data showed. Since a landmark nuclear deal was reached with major powers in 2015 leading to the lifting of sanctions, Iran has been planning to boost crude production and exports to the pre-sanction levels. Imports of Iranian oil by four major buyers in Asia in June jumped 47.1 per cent from a year ago to the highest level in more than four years. Marian Gaborik Authentic Jersey
Indian Oil Corp to import gasoline until year-end: Sources
India’s biggest refiner Indian Oil Corp will continue to import gasoline until at least December due to a heavy maintenance line-up and the slow start-up of a key unit at a new refinery, sources with direct knowledge of the matter said. The Fuel trader said they had expected IOC to stop importing gasoline and halt naphtha exports once a unit involved in the production of the motor fuel started up at the 300,000 barrel-per-day refinery in Paradip on India’s northeast coast. IOC started up the Paradip plant last year and is still commissioning some units. In March, it commissioned Paradip’s continuous catalytic reformer (CCR), which uses naphtha as a feedstock to produce reformate, a product used to make gasoline. “The CCR was functional for a week (and) after that there was a problem with the compressor,” said one of the sources. It is not clear when the CCR will start back up, and IOC did not respond to a request for comment. The refiner – which has handled most of India’s gasoline imports in the surge of shipments that started in April of last year – has kept taking gasoline to fill the domestic supply gap, putting out a recent tender seeking up to 30,000 tons (255,000 barrels) of the fuel for an Aug. 5-7 delivery. India’s overall gasoline imports hit a peak in May at 160,000 tons, highest since June 2015, before falling to 40,000 tons in June of this year, according to official data. Little impact on market India’s imported volumes, however, have not had a significant impact on the Asian market, because there have been ample supplies of gasoline since February this year due to high refinery throughput. One result from the slow refinery start-up is that IOC started exporting naphtha from Paradip in January, starting with a small monthly volume of 17,000 to 19,000 tons. The naphtha export volumes have since grown more than five-fold to about 107,000 tons for August loading, adding pressure on a market that is already oversupplied. That has prompted Indian premiums on naphtha cargoes to flip to discounts and pulled spot prices on a cost-and-freight (C&F) basis to depths not seen in more than a year. State refiners – which control India’s retail oil market – typically buy fuel from private refiners Reliance Industries Ltd and Essar Oil or import them to meet their shortfalls. India’s fuel demand has been surging over the past 1-1/2 year, driven by a growing appetite for gasoline-guzzling vehicles. Disputes over the terms of purchase, however – such as which party will absorb sales tax and freight costs – often push the state refiners to look for overseas suppliers. Potentially further boosting IOC’s imports of gasoline or other fuels is a long list of maintenance plans or work relating to fuel upgrades stretching from August to early 2017. Cody Parkey Authentic Jersey
Petroleum Ministry asks FinMin to consider reduction in oil cess
The Ministry of Petroleum and Natural Gas has asked the Ministry of Finance to consider a reduction in the cess levied on hydrocarbon exploration and production companies for producing crude oil. This was stated by Dharmendra Pradhan, Minister of State (Independent Charge) for Petroleum and Natural Gas, who was speaking at a seminar organised by industry chamber Assocham. “Government had changed the method of cess calculation to an ad-valorem basis in the budget…However, in-principle I do agree with the industry that the cess should be in accordance with the dynamics of the market. Therefore, I have recommended to the Finance Ministry for looking into the demand of the industry in this regard,” said Pradhan. Earlier at the event, D K Sarraf, Chairman and Managing Director of ONGC, said, “Cess is still high. We are hopeful that the amount of cess comes down. It was made ad-valorem but the percentage is still too high and I would like the government to consider a reduction.” From a fixed amount of ? 4,500 per ton, which translated to around $9 per barrel in February 2016, the government had changed the cess calculation to 20 per cent on an ad-valorem basis. At the time, the cess was working out to be $6 per barrel. The Oil Industry (Development) Act provides for a cess as duty of excise on indigenous crude oil. This is a production cess, and has to be borne by the producers as it is not a pass through. Darius Slay Authentic Jersey
Oil consumption growth likely to spike this fiscal year
Oil consumption growth in the current fiscal year will likely exceed 10.9% of the previous year, if the current consumption trend continues, an oil ministry arm has said. A 7.8% jump in the consumption of petroleum products in the country in April-June, compared to 5.2% in the year-ago period, has prompted this prediction from the Petroleum Planning and Analysis Cell (PPAC). “Typically, April-June is sluggish in performance than the rest of the year. Going by the trend, it’s likely petroleum products consumption growth for 2016-17 could be better than that of last year,” the PPAC said in its monthly review. A higher fuel consumption signifies faster clip of economic growth for the country, currently growing at 7.6% annually. In April-June, the biggest consumption growth was recorded in petrol (10%), liquefied petroleum gas (7.8%), fuel oil (22.9%), bitumen (13.9%) and aviation turbine fuel (12.1%). For diesel, the most consumed petrol product in India, it rose 4.7%. Kerosene dived 7.7% following a general shift towards cooking gas and increased power availability. In June, diesel consumption grew 1.5%, the slowest month-on-month pace since July 2015, mainly because people anticipated favourable prices in May and July and shifted some offtake away from June, according to PPAC. Domestic prices follow international trends and are revised fortnightly, prompting dealers to temper order sizes on price change anticipation. Higher power availability and good monsoon, that affects road transport and lowers diesel consumption for farm pumps too contributed to lower diesel figures, the PPAC said. In June, petrol sales rose 4.4%, much lower than quarterly growth of 10%, primarily due to shifting of offtake as buyers anticipated lower prices in May and July, PPAC said. Growth in consumption of petrol was higher than diesel mainly due to increasing consumer preference for petrol-driven vehicles as the price differential has waned and policy thrust on scrapping older diesel vehicles gotten louder, PPAC said. Noah Hanifin Authentic Jersey