Cairn faces Rs 102.47 billion fine on top of Rs 290 billion tax demand
British oil explorer Cairn Energy Plc faces up to Rs 102.47 billion penalty over and above the Rs 290 billion in tax and interest demand slapped on it by the I-T Department using a retrospective legislation. In a circular to shareholders, the company said it had on February 4 received “a final assessment order from the Indian Income Tax Department in amount of Rs 102.47 billion plus interest back dated to 2007 totalling Rs 188 billion. “The aggregate amount of Rs 290 billion excludes any applicable penalties which may also be applied to the final assessment (potentially up to 100 per cent of the final assessment order, excluding interest).” The I-T Department had on January 22, 2014 issued a draft assessment order of Rs 102.47 billion on alleged capital gains Cairn made in a 2006 reorganisation of its India business. The final assessment order was issued on February 4, 2016. The notice was, however, issued before Finance Minister Arun Jaitley in his Budget for 2016-17 made a one-time offer to waive interest and penalty if the companies paid the principal amount to settle the retrospective tax disputes. “Cairn strongly contests the final assessment proceedings in India and is pursuing its rights under Indian law to appeal the assessment, both in respect of the basis of taxation and the quantum assessed and to protect from enforcement against the assets of CUHL,” the company said in the circular. CUHL is a Cairn subsidiary. Enforcement of any tax liability deemed due by the Indian Income Tax Department “will be limited to the assets of CUHL which have a current value of approximately USD 477 million, and comprise principally Cairn’s residual 10 per cent shareholding in Cairn India, which has already been provisionally attached by the Indian Income Tax Department,” it said. IT Department alleges that Cairn Energy made a capital gain of Rs 245.035 billion in 2006 when it transferred shares of Indian assets that were held in a subsidiary set up in the tax haven of Jersey, to newly incorporated Cairn India.
LPG pipelines to kitchens soon, says MP
If everything goes as planned, pipelines will bring liquid petroleum gas (LPG) to your kitchens in 2-3 years. The Indian Oil Corporation and Adani Company have taken up a scheme that envisages laying of pipelines 53km around Hubballi and Dharwad and 2,300km in the twin cities to supply cooking gas. MP Prahlad Joshi, who held a meeting of stakeholders at the deputy commissioner’s office on Wednesday, said the scheme was sanctioned by the Centre last year but the work of laying underground pipeline could not be taken up as the roads were being dug up for other works. A meeting of officials of the Hubballi-Dharwad municipal corporation and the district administration to finalize the tender will be held soon. “Under the Deendayal Rural Development Programme, Rs 400 million has been released and the amount will be spent on installing smart boards in schools and solar grid at government hospitals,” Joshi said.
IOC looking at buying stake in Nagarjuna group Cuddalore unit
More than a decade after it declined to take a stake in Nagarjuna Group’s refinery in Tamil Nadu, state-owned Indian Oil Corp (IOC) is looking at buying equity stake in its six million tonnes a year Cuddalore refinery. IOCBSE 0.56 % has held preliminary discussions on a possible equity stake in the project, highly placed sources said. The move follows talks by Singapore-based Netoil to buy a stake in Nagarjuna Oil Corp (NOCL) broke off in February this year. Nagarjuna Oil Refinery Ltd (NORL) holds 46.78 per cent of the equity share capital of Nagarjuna Oil Corporation (NOCL). Tatas too are a shareholder in the refinery. Sources said IOC had in 2002 declined to take a majority stake in the project on the grounds that the country has surplus refining capacity. Also, it had reasoned that the IOC subsidiary Chennai refinery was being expanded and a new 15 million tons a year refinery being set up at Paradip in Odisha to cater to the fuel demand in the southern and eastern India. Chennai refinery has since been expanded to 10.5 million tons and the Paradip refinery commissioned recently.IOC has now begun discussing the equity participation in the project again, they said. Nagarjuna Oil Refinery had in September last year stated that a confimatory due diligence of NOCL was being undertaken by Netoil to acquire the project for Rs 3,600 crore. The six million ton refinery is the first phase of a Rs 25,000 crore project that will have an ultimate capacity of 12 million tons. The project was delayed due to damages caused by a cyclone some years back as well as funding problems due to global economic slowdown later. Around 15 lenders have invested in the project and they have reportedly sought Reserve Bank’s dispensation in view of the assets likely to be classified by RBI as non-performing. The project originally involved relocation of an existing refinery of Mobil, Germany with total refurbishment, revamp, upgradation and modernisation, coupled with addition of several new plants and equipments including captive power plant and captive port terminal. he health check and residual life assessment have been done by RWTUV, Germany and Engineers India Ltd who have certified the residual life of the refinery as more than 20 years, sources said. The project is being implemented by ABB Lummus, who has provided guarantees for completion and performance. Crude supply and export product offtake are provided by Caltex. Domestic product off-take, operation and maintenance, training and other technical advisory services are being sought from IOC, they said.
Centre to provide 1.5 crore gas connections to BPL families
The Centre will provide 1.5 crore gas connections to women members of Below Poverty Line (BPL) families during the current fiscal, Petroleum Minister Dharmendra Pradhan has said. “We will provide 1.5 crore gas connections to women members of BPL families in fiscal 2016-17 and our target is to provide gas connections to five crore women in the next three years,” Pradhan told reporters here last night. “It is a new initiative of our government led by Prime Minister Narendra Modi to provide cooking gas to women members of BPL families with state support,” he said. “After Prime Minister requested people to give up gas subsidy, 96 lakh people have surrendered it and this amount is being used to give LPG connections to women in BPL families,” he added. “The government has set aside a sum of Rs 2,000 crore in Union Budget 2016 to meet the initial cost of providing these LPG connections,” Pradhan said. According to him, the scheme will free women in rural areas from the curse of smoke while cooking and also will reduce the time spent on it. The scheme – ‘Christened Ujjwala’ provides a financial support of Rs 1,600 for each LPG connection to BPL households. The identification of eligible BPL families, as proposed in the Budget for 2016-17, will be made in consultation with the state. Terming the Budget announcement as historic, Pradhan said the scheme will not only have immense health benefits for women and their children by providing a clean cooking fuel but will also provide significant ecological dividends. Quoting World Heath Organisation estimates, Pradhan said, “About 5 lakh women die in the country due to unclean cooking fuels. Most of these premature deaths are due to non- communicable diseases such as heart disease, stroke, chronic obstructive pulmonary disease and lung cancer.” “While providing the new connections to BPL households, priorities would be given to the uncovered states and pockets, particularly in the eastern region of the country. “This will benefit about 1.50 crore lakh households below the poverty line in 2016-17,” Pradhan added.
Indian Oil Corporation to spend Rs 20,000 crore in expansion of its Gujarat refinery
Union Minister Dharmendra Pradhan today said PSU major Indian Oil Corporation was going to spend Rs 20,000 crore for brownfield expansion of its refinery near here. “IOC’s Gujarat Refinery here has been asked to jump directly from BS IV to the more stringent BS VI norms for petrol and diesel, so that cleaner transport fuels become available sooner to bring down vehicular emissions,” the Union Minister of State for Petroleum and Natural Gas said after visiting the refinery. He told PTI that the Gujarat Refinery was expanding capacity to 18 million tonnes per annum (MTPA) from the existing 13.7 MTPA. The expansion is expected to be commissioned in 2020. “After the expansion, it will become the refinery with largest capacity for the company,” the Union Minister said. Pradhan also said he would be visiting Iran on April 9, and was looking to expand energy ties with that country. The agenda of the visit includes ONGC’s participation in developing the Farzad-b gas field, buying additional crude oil and settling pending payments for earlier oil purchased from Iran, he said. “I will also discuss projects including petrochemicals and fertiliser plants in the special economic zone at Chabahar port in Iran,” he said. External Affairs Minister Sushma Swaraj will visit Iran later this month, he said. With changes in the geopolitical situation, India is in a better position to source natural gas and LPG from Iran and oil and gas from Russia, he said. “Post-sanctions Iran provides a huge opportunity for India for sourcing natural gas which would increase the availability of CNG and cooking gas in the country,” he added.
How Are Brazil and India Affecting the Crude Oil Market?
Crude oil price drivers: In this part, we’ll discuss bullish crude oil drivers, specifically in Brazil, India, and Japan. Bullish catalysts for crude oil prices Crude oil production in Brazil has fallen 0.9 MMbpd (million barrels per day) over the last six months due to huge debt, corruption scandals surrounding Petróleo Brasileiro Petrobas (PBR), and lower crude oil prices. Secondly, slowing global crude oil production has also boosted crude oil prices in the past two months. To learn more, read Why Key Oil Producers Are Slowing Their Production. The rise in gasoline demand also supported crude oil prices. To learn more, read Gasoline Stocks Fell for the Seventh Week: What’s the Impact?. Steady Chinese crude oil imports will support oil prices. Read How Will Slowing Production Impact China’s Crude Oil Imports? NYMEX-traded WTI (West Texas Intermediate) December 2020 crude oil futures contracts were trading at $47.97 per barrel on April 5, 2016. The forward curve suggests higher crude oil prices in the future. The IEA (International Energy Agency) forecast that India will surpass Japan as the third-largest crude oil consumer in 2016. India’s crude oil consumption will grow to 4.2 MMbpd in 2016, as compared to 4.1 MMbpd for Japan in 2016. In its monthly report, OPEC estimated that the global crude oil demand grew by 1.5 MMbpd to 92.3 MMbpd in 2015. Demand is expected to grow by 1.3 MMbpd to 94.2 MMbpd in 2016. Impact on crude oil stocks and ETFs The uncertainty in crude oil prices affects oil and gas producers like Ultra Petroleum (UPL), Whiting Petroleum (WLL), Northern Oil and Gas (NOG), and SM Energy (SM). The volatility also affects ETFs and ETNs like the DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bear 3x ETF (ERY), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the Guggenheim S&P 500 Equal Weight Energy ETF (RYE).
Congress demands JPC in KG basin as CAG picks other holes in Gujarat’s development
The latest CAG report on Gujarat has highlighted many such gaps in PSU projects in the states as well as development schemes, raising doubts about the ‘Gujarat model’. A decade ago, one of Gujarat’s blue chip public sector firms, Gujarat State Petroleum Corporation (GSPC), had announced, “India’s biggest gas find in 30 years” when it struck gas in the Krishna Godavari (KG) off the coast of Andhra Pradesh. Narendra Modi who was then the chief minister of Gujarat had announced the find of 20 trillion cubic meter (tcf) gas at a press conference in Ahmedabad, June 2005. Ever since, issues connected with GSPC and the KG basin have generated ripples across political circles in the country, the latest being CAG’s rap to an “inexperienced” GSPC for investing Rs 195.76 billion till March 2015 in the KG block. Since 2012 CAG has been pointing out how the cost of exploration of gas there has been higher than the outcome. The latest CAG report on Gujarat has highlighted many such gaps in PSU projects in the states as well as development schemes, raising doubts about the ‘Gujarat model’. When the CAG reports were tabled in the Gujarat Assembly towards the end of the budget session last month, the Congress MLAs had been suspended and were not present. CAG not only criticised GSPC for surrendering 37 of the total 64 oil and gas exploration blocks during the four year period between 2011-15, it also found loopholes in the working of several other state PSUs including Gujarat State Road Transport Corporation (GSRTC), Gujarat State Warehousing Corporation and another big ticket project, MEGA (Metro Link Express for Gandhinagar and Ahmedabad Company). The auditor has devoted almost 15 pages to GSPC in its report on Public Sector Undertakings. Regarding the company’s exploration activities in KG block, CAG stated: “The company did not properly address the risks associated with cost and technology which has resulted in uncertainty regarding the future prospects from the block when an investment of around Rs 195.76 billion has been made as on March 2015.” The Congress party has taken CAG’s criticism as an opportunity to get back at Modi under whom GSPC had started exploring the KG basin. However, back then, the then Union Petroleum minister Mani Shankar Iyer had not reacted negatively to the 20 tcf gas find. The Congress on Tuesday demanded a Joint Parliamentary Committee probe and said “nearly Rs 200 billion” has been squandered away” under Modi’s watch in Gujarat. It is not the first time CAG has found fault with the way GSPC functioned. In a similar report submitted in March 2012, CAG rapped GSPC for “numerous faulty investment and destructive administrative decisions” that led to a loss of Rs 70 billion to the company. It observed how the company’s exploration cost in the KG basin was 12.81 times higher than the estimated cost and the outcome much below that claimed. GSPC was also criticised for drilling wells “without obtaining approval of management committee/GoI for the field development plan.” This year, apart from GSPC, CAG also picked on a few other PSUs in Gujarat. Critisising the famed PPP (public-private-partnership) model that Gujarat government has been using to build modern “bus-ports” that are a mix of plush bus stations built alongside commercial structures by GSRTC, CAG pointed out the “undue favours” being dished out to private developers involved in building such central bus stations across the state. It also took on the state for the “infructuous expenditure” —totalling to Rs 4.45 billion — incurred after the present management of the Ahmedabad metro rail project redrew the metro routes in 2014. This was the fourth time the metro route was altered. Apart from the public sector units, the country’s top auditor also picked holes in the state’s healthcare system. CAG said that the state government’s hospitals were short of essential drugs like insulin and Hepatitis B vaccine and the drugs supplied by Gujarat Medical Service Corporation Ltd were found to be substandard. CAG has also pointed out loopholes in several skill development schemes running in Gujarat. Talking about the Craftsman Training Scheme (CTS) — a flagship scheme of Ministry of Labour and Employment, the auditor noted: “The Directorate of Employment and Training failed in its objective to train more youths under CTS despite initiating new ITIs and increasing intake capacity in existing ITIs.” It pointed out that the “high drop-out rate (of about 40 percent) may be attributable to non-availability of adequate machinery, manpower, etc in ITIs, which also adversely affected the quality of training.” According to CAG, the Gujarat government was not taking adequate steps to protect its wetlands and other natural tourism sites. The watchdog came down heavily on the state government for uncontrolled poaching at Nal Sarovar bird sanctuary near Ahmedabad and others parts of the state.
Shell India offers diesel at market price
Shell India, a diversified international oil company, has now introduced its ‘Shell Diesel’ in the domestic market. The announcement by the company comes against the backdrop of diesel price deregulation. The Shell Diesel with fuel economy formula is available at market price at Shell fuel stations across six states of Maharashtra, Tamil Nadu, Karnataka, Gujarat, Andhra Pradesh and Assam. Shell currently has 82 operational fuel stations in India with 27 outlets in Bengaluru. “The Shell Diesel has been designed to ignite and burn more effectively than standard diesel thereby giving extra miles at no extra cost,” a company release said. Shell prides itself in offering international quality fuel, exact quantity and friendly customer service like free windshield cleaning and under bonnet checks at each of its outlets, it added.
Cabinet okays giving powers to oil PSUs to develop crude import policy
The Union Cabinet has approved giving powers to public sector oil companies to develop their own crude oil import policy. “The Cabinet has approved that oil PSUs shall be empowered to evolve their own policies for import of crude oil consistent with the guidelines of the Central Vigilance Commission and get them approved by their respective boards,” an official statement said. Ravi Shankar Prasad, Minister for Communications and Information Technology, said after the Cabinet meeting, “The crude import policy needs to be modified to bring it in tune with current needs. The current market practices for purchase of crude oil on spot basis also need to be adopted to compete effectively in the market. The current policy has certain limitations and restrictions in this regard which has now been done away with.” Prasad added that the measure will increase the operation and commercial flexibility of oil companies and enable them to adopt the most effective procurement practices for import of crude oil.
Oil PSUs get a free hand, can choose companies for crude buy
n a bid to improve operational efficiency, the government today gave freedom to public sector oil firms to have their own independent crude import policy based on their commercial requirements. State-owned firms like Indian Oil Corporation( IOC) have traditionally been allowed to source crude only from national companies of oil-producing nations. On May 21, 2001, the government permitted state refiners to buy oil from top 10 foreign firms. It was long felt that the list of companies from whom the PSUs can buy crude on term contracts needs to be expanded to include global giants like Italy’s Eni and Russian companies. The Union Cabinet chaired by Prime Minister Narendra Modi at his meeting today gave its approval to replace the existing policy by vesting the oil PSUs with the power to evolve their own policies, Union Minister Ravi Shankar Prasad said at a news briefing. “This will provide a more efficient, flexible and dynamic policy for crude procurement, eventually benefiting consumers,” he added, but did not elaborate. Oil PSUs “shall be empowered to evolve their own policies for import of crude oil, consistent with CVC guidelines and get them approved by the respective boards,” an official statement issued after the Cabinet meeting said. This will increase operational and commercial flexibility of oil companies and enable them to adopt the most effective procurement practices for import of crude oil, it explained. The existing policy for import of crude oil was approved by the Cabinet in 1979. In 2001, the Cabinet cleared amendments to permit state refiners to buy crude oil from top 10 foreign firms. “While the current policy has ensured that collective energy needs of oil PSUs are consistently met over the years, the policy needs to evolve with the changing times,” the statement said. “With the changing geo-political environment, the crude oil import policy needs to be modified to bring it in tune with current needs.” The current policy for purchase of crude oil from the spot or current market has “certain limitations and restrictions” that limit the potential sources and methods of procurement, it said without elaborating. Till now, refiners were allowed to buy crude oil from 10 MNCs — Exxon (which has merged with Mobil), Shell, BP, Elf (merged with Total Fina), texaco (merged with Chevron), South Korea’s SK, Chevron, USX of USA, Spain’s Repsol and Nippon Mitsubishi of Japan. In 2014, it was proposed to include suppliers from South Korea, Spain and Japan as well as Eni, Valero Energy, Russia’s Lukoil, Conoco Phillips, Occidental and Marathon on the list. But now, they can buy as per their own plan without any restrictions.