OMCs plan LPG pipeline worth Rs5,000 crore to support Ujjwala scheme
To meet the increasing demand for cooking gas or liquefied petroleum gas (LPG) in the country, the three oil marketing companies (OMCs)—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)—are planning to set up a 1,450-kilometre pipeline to service central India, said three officials aware of the discussion. The pipeline would emerge at Kandla port or Mundra port, both in Gujarat, and will run via Bhopal, Kanpur and Lucknow to terminate at Gorakhpur in Uttar Pradesh. The total cost of the pipeline would be around Rs.5,000 crore and the pipeline would be set up under a joint venture in the next 3-4 years, said the people quoted above, on the condition of anonymity. “We have begun preliminary discussions on this proposal. Details of equity participation and commercial structure are yet to be worked out. We have chosen this pipeline route as many below poverty line (BPL) families live in the Central India belt. This pipeline fits well with meeting demand that would emerge from government’s Ujjwala scheme,” said one of the people quoted above, who is a director at one of the oil marketing companies. He requested anonymity as he is not authorized to speak to the media. The pipeline would be important from an infrastructure development standpoint as most of the LPG in the country is transported through road which not only makes it expensive but also unsafe. Demand for LPG in March reached a record high of 1.835 million metric tonnes (mmt), up 14.16% year-on-year, driven by the government’s push to increase LPG penetration in rural households. Last month, the government approved the Pradhan Mantri Ujjwala Yojana to provide free LPG connections to women from BPL households. Under the scheme, Rs.8,000 crore has been earmarked for providing 50 million LPG connections to poor households. Eligible households will be identified in consultation with state governments and Union Territories. The scheme will be implemented over the next three years. “The proposed pipeline would see 2.5-3 million tonnes per annum of imported LPG. It will help us meet demand in low LPG penetration areas such as Meghalaya, Assam, Jharkhand and Bihar, among others,” said the second person quoted above, who is a senior official at HPCL. Indian oil marketing companies produce as well as import LPG to meet local demand. “LPG has broadly two cost elements: security deposit and cost of stove/connection which together is around Rs.3,500 apart from recurring cylinder cost that a family has to incur. This makes LPG affordability in rural areas difficult. Besides, reach of LPG is poor in many areas and transporting the fuel in many terrains is difficult. Pipelines thus become important,” said Saurabh Kamdar, director, CRISIL Infrastructure Advisory. OMCs are also planning to invest to create LPG import facilities and additional bottling plans. HPCL will spend a total of Rs.1,500 crore in setting up an LPG import facility and another 7-10 bottling units, said the HPCL official quoted above. HPCL is scouting for land to build a new LPG bottling plant of 60 million tonnes per annum (mtpa), he added. Meanwhile, BPCL is building an LPG import terminal at West Bengal’s Haldia, for Rs.800 crore. The company has acquired 35 acres for the purpose and plans to complete the project in three years. “We have prominent presence in the western and southern regions but not the eastern region. Bihar, Northeast, Jharkhand, eastern Uttar Pradesh and West Bengal are where we need to build a market. Our import terminal at Haldia will help us meet demand in the eastern region,” said a BPCL official, one of the three people quoted above. IOCL is already constructing an LPG import facility of 600,000 tonnes per annum at Paradip, Odisha, for Rs.690 crore. In January 2015, it decided to invest Rs.5,300 crore for the facility and for laying pipelines. Josh Kline Authentic Jersey
PM Narendra Modi to launch Rs 8,000 crore scheme for free LPG connections to poor
Prime Minister Narendra Modi will on May 1 launch an ambitious Rs 8,000 crore scheme to provide 5 crore free LPG connections to BPL families using the money saved from 1.13 crore cooking gas users voluntarily giving up their subsidies. Modi will launch the Pradhan Mantri Ujjwala Yojana at Ballia in Uttar Pradesh on May 1 and do a repeat function at Dahod in Gujarat on May 15. Though ‘Give-it-Up’ campaign seeking the well-heeled to voluntarily surrender cooking gas subsidies for one year was launched in January, 2015, Modi on March 27 last year officially launched the programme. “Since the launch, 1.13 crore people have given-up LPG subsidies and are buying cooking gas at market price,” Oil Minister Dharmendra Pradhan told reporters here. Maharashtra tops the list with 16.44 lakh consumers giving up subsidies. Uttar Pradesh saw nearly 13 lakh users give up subsidies, followed by Delhi (7.26 lakh). Prime Minister’s home state of Gujarat was way down the list with just 4.2 lakh giving up subsidies. Pradhan’s home state of Odisha was even lower at 1.3 lakh. “Five states of Maharashtra, Uttar Pradesh, Delhi, Karnataka and Tamil Nadu account for roughly half of the people who have given up LPG subsidies,” Pradhan said. Consumers are currently entitled to 12 cylinders of 14.2 kg each or 34 bottles of 5 kg each in a year at subsidised rates. A subsidised 14.2-kg cylinder is currently available at Rs 419.13 per bottle in Delhi while the 5-kg pack costs Rs 155. Market-priced LPG is available at Rs 509.50 per 14.2-kg cylinder. Giving up subsidised LPG will help cut the government’s subsidy bill, which was at Rs 30,000 crore on the fuel last fiscal. Nearly Rs 5,000 crore of subsidy saved through the campaign is being used to provide LPG connection to the poor. “We have released 60 lakh new connection to poor in the last one year,” he said. Modi, Pradhan said, will on May 1 launch the Pradhan Mantri Ujjwala Yojana for providing providing free LPG connections to women from BPL households. “Under the scheme, Rs 8,000 crore has been earmarked for providing 5 crore LPG connections to BPL households,” he said, adding that in the first year 1.5 crore connections will be provided. The scheme provides a financial support of Rs 1,600 for each LPG connection to the BPL households. The identification of eligible BPL families will be made in consultation with the State Governments and the Union Territories, he said. Justin Hardy Jersey
India exploring long-term gas contracts at $5/mmbtu: Piyush Goyal
India is exploring gas purchase contracts spanning 10-15 years for power projects at a fixed price of $5 per mmbtu, power, coal and renewable energy minister Piyush Goyal said. Goyal said with about 28 GW of stranded gas assets, the country is a huge and promising market as long as the prices are right. “Given the current Baltic index, I believe this is a viable proposition,” the minister said at a renewable energy investors round table co-hosted by the Confederation of Indian Industry and the US India Business Council in New York on Thursday. Goyal projected India’s growth to be in double digits by next year, the caveat being that the country needs to get a strong monsoon. The country is open to help power sector investors hedge risk by linking the debt to a basket of currencies or exploring inflation linked tariffs,” he said. During his visit to the UK and the US, the minister discussed the need for a stable and simplified policy and regulatory regime, standardised power purchase contracts and equipment standardisation with the investors.
Give-it-Up: Over 1 crore LPG users gave up their subsidies
More than 1 crore LPG consumers have given up their cooking gas subsidies in one year since Prime Minister Narendra Modi made a call to the well-heeled to give up the same. Since Modi made the appeal in March last year, 1,00,06,303 LPG consumers have stopped using subsidised cooking gas, helping the exchequer save a few thousand crores of rupees in doles, oil ministry officials said. Consumers are currently entitled to 12 cylinders of 14.2 kg each or 34 bottles of 5 kg each in a year at subsidised rates. A subsidised 14.2-kg cylinder is currently available at Rs 419.13 per bottle in Delhi while the 5-kg pack costs Rs 155. Market-priced LPG is available at Rs 509.50 per 14.2-kg cylinder. Giving up subsidised LPG will help cut the government’s subsidy bill, which was at Rs 30,000 crore on the fuel last fiscal. Those who have decided to give up their subsidies have to buy the product at the market price. The surrendered subsidy is used by the government to provide cooking gas connection to the poor in rural households free of cost, the official said. On March 27, Modi had officially launched the ‘Give-it-Up’ campaign, urging the well-off to surrender their LPG subsidy so that it can be targeted for the needy. The aim is also to bring down the country’s dependence on energy imports by 10 per cent by 2022. The country has 15.34 crore LPG connections, of which 1 crore have now given up subsidies. LPG subsidy is transferred to beneficiaries directly in their bank accounts in advance. “Gas cylinders surrendered by them would be transferred to the poor who use wood for cooking. If one crore people give up their LPG subsidy, one crore poor people will benefit as they will be given new LPG cylinders instead,” he had said. Consumers can opt out of the subsidy by submitting written request to the distributor or electronically at mylpg.in.
India’s crude output falls but consumption soars
Domestic crude oil production fell for the fourth straight year in 2015-16, even as oil consumption rocketed 11%, pushing up India’s import dependence. A collapse in oil prices coupled with a rapid economic growth helped push up oil consumption at home. More vehicle purchases, increased use of diesel for irrigation due to weak monsoon and rising air traffic chiefly drove up consumption to 183.5 million metric ton (mmt), compared with 165.5 mmt in the previous year. In comparison, India produced just 36.9 mmt of crude oil in 2015-16, lower than 37.5 mmt in the previous year. The country’s largest oil producer, state-run Oil and Natural Gas Corporation (ONGC), witnessed an output decline to 18.5 mmt from 18.6 mmt in the previous year. Oil producers have been struggling with ageing fields where outputs have been falling. Their inability to bring fresh big reserves into production lately has kept production stagnant. “The bigger problem is that the exploration activity didn’t pick up in the last decade,” said Gaurav Moda, consultant at KPMG, underlining the need to enhance exploration activity in the country to be able to accelerate output in the future. Without which, Moda says, India’s dependence on overseas oil will only grow in future. India’s import dependence in oil rose to 81% in 2015-16 from 78.5% in the previous year. Just last year Prime Minister Narendra Modi had set a target of bringing this down to 67% by 2022. The government has unveiled new exploration policies for its oil and gas blocks lately, aiming to plug loopholes in its previous policies that encouraged only limited participation of resource-rich foreign oil companies and couldn’t dramatically boost the domestic output. India imported 202 mmt of crude oil in 2015-16, nearly 7% higher in volume, but paid just $64 billion, 43% lower due to the global oil collapse. Natrural gas consumption marginally rose to 52 billion cubic meters, aided by 14% rise in imports while domestic production fell 4%. Lower prices have raised consumption of gas by industry and the transport sector. The consumption of petrol and diesel rose 14% and 7.5% respectively even though the government imposed more taxes and didn’t pass on the entire benefit of crude oil plunge to the consumers. The consumption of aviation turbine fuel (ATF), which contribute about 40% of airlines’ operating cost, grew 8.8% as airlines lowered fares and attracted more passengers.
Diesel Vehicles To Be Imposed With 30 Percent Green Tax
Diesel vehicles in India are being deemed as polluting and dangerous to the environment. Now the diesel vehicles could be imposed with a green tax up to 30 percent. The suggestion was provided by Environment Pollution Control Authority (EPCA). A final decision on imposing of 30 percent green tax on diesel vehicles will be made on April 30, 2016. The goal is to regulate the use of diesel vehicles that ply on Indian roads. The main focus is to improve the quality of air in the country and the impact of diesel exhaust on health. Currently, the Delhi Government has banned the sale of diesel vehicles in the capital. No manufacturer is permitted to sell diesel vehicles over 2,000cc in the Delhi-NCR region. In an attempt to curb rising air pollution, the Delhi Government has reintroduced the odd/ even driving scheme. Green Tax will be applicable on all diesel vehicles that ply on Indian roads. This will provide authorities to check toxic emissions from diesel vehicles. Officials could also keep track the number of diesel-powered vehicles that ply on the road and could even stop high-polluting vehicles on roads.
Cochin Shipyard stuck with three LNG carriers as private companies back out
State-run Cochin Shipyard may alone have to build three liquefied natural gas (LNG) carriers as private yards baulk, raising the risk of delivery delays for GAIL’s ship charter plan, a key ‘Make in India’ initiative in the oil sector. GAIL plans to charter at least nine LNG vessels to bring home from the US up to 5.8 million ton of gas annually from early 2018. After multiple tenders and extensions, the company has received bids from two Japanese consortiums for this. Each bidder had to bid for at least three ships of which at least one has to be made locally. “Bids are not fully aligned with the tender,” a source close to GAIL said. The Japanese consortiums have sought several deviations in their bids and GAIL executives will spend a month or so talking to bidders, understanding their points, persuading them to withdraw those deviations and reach a common ground, sources said. Once the common ground is reached on techno-commercial criteria, probably in two months, GAIL will open price bids, a source said. GAIL may award fewer than nine LNG carriers, sources said, as it is looking to partly sell gas at source in the US and may not need to bring the entire commodity home. Since transporting gas from the US is fairly expensive, GAIL is also exploring the option to swap some of its US gas for five years. It has floated tenders seeking vendors interested in taking its gas from the US for own consumption or clients and delivering the equivalent quantity in India. The Japanese consortium of Mitsui OSK Lines Ltd (MOL), Nippon Yusen Kabushiki Kaisha Ltd (NYK Line) and Mitsui & Co Ltd has bid to supply six vessels while the other group of Mitsubishi Corporation, Kawasaki Kisen Kaisha Ltd (K Line), Gas Log Ltd and Foresight Oil Ltd has bid for four ships, sources close to GAIL said. Both the consortiums have partnered with Cochin Shipyard to meet the local manufacturing condition, sources said. Cochin Shipyard has no experience in building LNG ships, which require far more sophisticated technology than ordinary carriers. Which is why Cochin has partnered with Samsung, which would help build a third of the LNG ships in India while building the balance at its Korean shipyard. Earlier two other Korean shipmakers – Hyundai and Daewoo – were keen on participating in the process but dropped plans after their local partners L&T and Pipavav shipyards respectively pulled back. A source close to GAIL played down fears of delivery risk by allowing Cochin to build all three local vessels, arguing the yard would have nearly six years to deliver the first ship and another year for additional ships. The usual time to build an LNG vessel is 30-33 months, he said, adding that Samsung can do most of its design and engineering at its Korean shipyard and undertake only key construction works at Cochin, helping save time. The vessels from foreign shipyards have to be delivered between January-May 2019 and from Indian shipyards between July 2022 and June 2023, according to the tender document. An LNG vessel on average cost about $200 million.
GAIL India to swap US LNG
State-owned gas utility GAIL India Ltd will swap one-third of the liquefied natural gas (LNG) it has contracted from the US with a gas seller nearer to the country to save on transportation costs. GAIL, in two deals, contracted 5.3 million tonnes a year of super-cooled gas (LNG) from the US starting 2018. Of this, it reckons 3-3.5 million tonnes will be shipped to India for consumption by local industries like power and fertiliser plants. “Transporting LNG in cryogenic ships from the US will not just be time-consuming, but will add a little extra to the cost, wiping away some of the gain accruing from a Henry Hub linked price for gas,” a senior company official said. To overcome this, GAIL plans to swap 1-2 million tonnes per annum of LNG from the US with a seller in Africa, the Middle East or Asia-Pacific. GAIL has issued a tender seeking expression of interest (EoI) from swapping part of the 3.5 million tonnes per annum of LNG it has contracted from Sabine Pass Liquefaction, LLC, US on FOB basis for 20-year period with supplies expected to commence from Q1, 2018. “There are suppliers who sell LNG to Europe from the Middle East or East Africa or the Asia Pacific region. GAIL’s US LNG can be supplied to European users and an equivalent volume shipped to India,” the official said. Doing this would help GAIL save on 10-15 days needed for a ship to travel from the US to India and back. For the other seller, the same benefit will accrue, besides saving on the transportation cost. “We would like the saving the seller makes through the swap to be shared with GAIL. We believe we can save 40-50 cents per million British thermal unit through the swap,” he said. In the tender, GAIL said it wants to swap some of the US LNG volumes from Sabine Pass with firms that have customers in countries in which LNG trade is not prohibited by US law and sanctions. In exchange it wants equivalent supplies on a delivered basis at Dahej import terminal in Gujarat and Dabhol facility in Maharashtra. GAIL sought bids from interest parties by May 5 for a five year swap. The company has two US deals — one with Cheniere Energy Partners to buy 3.5 million tonnes a year of LNG from Sabine Pass Liquefaction, a subsidiary of Cheniere, and another a 20-year sales and purchase agreement with Dominion Resources for supply of 2.3 million tonnes per annum. Supplies from both deals begin in 2018. GAIL also holds a 20 per cent stake in Carrizo’s Eagle Ford Shale acreage in the US. Of the US volumes, the company has sold 2 million tonnes of LNG to overseas users.
Odd-even impact: IGL clocks highest ever sales
Indraprastha Gas Ltd recorded highest CNG sale of 26.7 lakh kg a day this week after more vehicles switched to the cleaner fuel with the start of second round of ‘odd-even’ rule for plying of private cars. IGL is setting up one CNG dispensing station every two days, a world record, to meet the increased demand for gas. “We had an average compressed natural gas (CNG) sale of 23.5-24 lakh kg per day in 2015-16. On Monday, which was the first full working day of the odd-even restricted plying rule, we saw sale volumes jump to 26.7 lakh,” IGL Managing Director Narendra Kumar told PTI here. Previously peak sale volume was 26.4 lakh kg per day. “This is the highest ever sale we have ever achieved,” he said. “In 2015-16 we had a growth of 3-4 per cent in CNG consumption. This year (April 2016 to March 2017), we expect a growth rate of 8-10 per cent.” With the Delhi government from April 15 starting the second phase of odd-even rule under which cars will only be allowed on the road on alternate days, going by whether their number plates are odd or even. Kumar said IGL is setting up CNG dispensing stations at a record pace. “Last year we had 324 CNG stations. Beginning January, we have embarked up setting up 90 new stations and in about 100 days we have set up 55, which is one station every two days.” The remaining CNG stations would be set up by May, he said. Delhi has the highest number of CNG stations in the world and no city has ever expanded its network by more than 30 stations in a year. He said the talk of making the ‘odd-even’ rule a permanent fixture has led to more number of cars converting to CNG. “Earlier we had some 2,500 petrol or diesel run cars converting to CNG every month. But now we have about 5,000 additions every month.” IGL, the sole supplier of CNG to automobiles and piped cooking gas to households in the national capital region, is the country’s largest CNG retailer. “What is working in favour of CNG is also price cuts following global slump in energy prices. Rates were last cut by Rs 0.60 per kg and to Rs 36.60 per kg in Delhi on April 1,” he said. Also, the company offers a discount of Rs 1.5 per kg if refuling is done during odd-hours – midnight to 5 am starting this January. “While during winter months the odd-hour refueling was less, we expect this to pick up during summer,” he said. Out of the 1026 CNG stations currently in operation in the country, about 34 per cent are located in Delhi and adjoining NCR towns. “We have increased installed capacity to dispense CNG from 69 lakh kg per day to 72 lakh kg per day,” he added.
Raghuram Rajan warns against ‘euphoria’ over fastest-growing tag
Warning against being “euphoric” about India being the fastest-growing economy, RBI governor Raghuram Rajan on Wednesday sought to contextualise his “one-eyed king” remarks about India’s growth and said the country has a long way to go before it claims to have arrived. “As a central banker who has to be pragmatic, I cannot get euphoric if India is the fastest growing large economy,” he said. Seeking to explain his ‘one-eyed king’ comments, Rajan said his comments were “hung out to dry out of context” and even offered an apology to the visually-impaired for hurting them by the use of the proverb. Stating that the per-capita income of Indians remains lowest among BRICS, Rajan said, “We have a long way to go before we can claim we have arrived. We need to repeat this performance (economic growth) for 20 years before we can give each Indian a decent livelihood.” He also said India’s global reputation holds great promise, but is seen as a country that has under-delivered and that it should “implement, implement, and implement” the structural reforms. Speaking at the convocation of National Institute of Bank Management, Rajan said India is yet to achieve its potential growth though it is on the cusp of that and a substantial pick-up in growth can be achieved with pending reforms. Making a reference to his last week’s interview to a foreign publication where he likened India being the fastest-growing major economy to a case of the one-eyed man being king in the land of the blind, Rajan said his comments were interpreted as having denigrated the country’s success rather than emphasising on the need to do more. “… Every word or phrase that a public figure speaks is intensely wrung out of meaning. When words are hung out to dry out of context as in the newspaper headline, it only becomes a fair game for anyone who wants to fill in, meaning to create mischief,” he said. Finance minister Arun Jaitley had rebutted Rajan’s remarks, saying compared with the rest of the world, the Indian economy is growing much faster and, in fact, the fastest. Commerce minister Nirmala Sitharaman too had not taken Rajan’s remarks lightly, saying better words should have been used. Rajan said commonly used words or proverbs can “most easily and deliberately be misinterpreted”. “If we are to have a reasonable public dialogue, we should read words in their context, not stripped of it,” he said. He, however, apologized to the visually-impaired whose association had criticised Rajan for using the proverb. “I do want to apologize to a section of the population that I did hurt with these words, that is the visually impaired, or the blind,” Rajan said. Queried for his take on India being the ‘bright spot’, Rajan during last week’s interview had said: “I think we have still to get to a place where we feel satisfied. We have this saying ‘In the land of the blind, the one-eyed man is king’. We are a little bit that way.”