RCF to look for potash in Rajasthan: Ties up with NMDC

July 2: RCF is looking for potash in Rajasthan. The company has tied up with National Mineral Development Corporation (NMDC) to this effect.
 8RCF believes that there are potash deposits underground in Rajasthan.
 8NMDC will study the available geological and other test reports available in identified areas of Rajasthan and advise on further course of action, including the need for hiring a reputed agency to carry out the exploration work.
 Click on Details for more information.   Details

Economic Survey 2008-09-I: Feeling the effects of the meltdown

July 2: 8In the backdrop of the global recessionary trend, India posted a GDP growth of 6.7% in 2008-09. While lower than projections made by the Department of Economic Affairs and the Central Statistical Office, and much lower than the 9.0% seen the previous year, this figure was much better than that of the OECD countries. Even as the Indian economy, to some extent, was insulated from the global economic crisis because of the regulatory framework that restricted exposure of banks and financial institutions to risky financial products, inadequate infrastructure growth and a languid central government, which has a huge role in the Indian economy, continue to constrain the nation`s economic potential. The performance of six core industries related to infrastructure, comprising crude oil, petroleum refinery products, coal, electricity, cement and finished steel, grew at 2.7%, as compared to 5.9% in 2007-08. The index for crude oil declined by 1.8%, against an increase of 0.4% in 2007-08. There was a deceleration in the growth of cement and finished steel reflecting the negative sentiments in the construction and manufacturing sectors.
8All sectors, save mining and quarrying, and community, social and personal services, felt the effects of the slowdown. The electricity sector continued to be hampered by capacity constraints and the availability of coal, particularly during the first half of the year. This sector grew only by 3.4% over the fiscal, against the growth of 5.3% seen in 2007-08. As long as the coal sector remains a public sector monopoly, it would act as a bottleneck towards the accelerated development of the power sector. In addition, growth rates in the manufacturing and construction sectors decelerated to 2.4% and 7.2% respectively during 2008-09, from the corresponding figures of 8.2% and 10.1% in 2007-08. The slowdown in manufacturing can be attributed to lower exports, due to lower global demand, followed by a decline in domestic demand in the second half of the fiscal. Double digit inflation in the first half of the year, which contributed to extremely high input prices, and, consequently, the tight monetary policy followed by the Reserve Bank, which contributed to increased costs for credit, also adversely affected the sector. The construction industry, after going through a boom phase, with growth as high as 16.2% in 2005-06, has been, in more recent years, been impacted by increased construction costs due to a rise in the price of inputs, such as cement and steel, due to heightened demand from China. The rise in interest rates and the resulting slowdown in loans has also dented the industry.
8On the macroeconomic front, the growth in per capita GDP decelerated from 8.1% in 2006-07 to 4.6% in 2008-09, while the per capita consumption growth declined from 6.9% to 1.4% over the same period. The per capita income of the country, at constant 1999-2000 price levels, stood at Rs 31,278. More worryingly, the contribution of the more-efficient, private consumption to aggregate growth declined dramatically from 53.8% in 2007-08 to 27% in 2008-09. This decrease was cushioned by an increased contribution of government consumption. Consequently the overall contribution of consumption demand to growth was only marginally lower than that in 2007-08. In addition, for the year as a whole, the nominal value of the rupee declined from Rs 40.36 per US dollar in March 2008 to Rs 51.23 per US dollar in March 2009, reflecting a 21.2 per cent depreciation during the fiscal. Due to the increase in government spending, and not enough growth in taxable income in the private sector, the gross fiscal deficit of the Union Government increased from a reasonable 2.7% in 2007-08 to 6.2%, an unsustainable level in the long run. This would, in the medium to long run, crowd out private investments in the economy. On the brighter side, Gross Domestic Savings, and, consequently, Gross Capital Formation, have, as a proportion of GDP, have been increasing steadily since 2002-03, leading to better long term growth prospects.
8The good: Growth was not as low as in some other similar countries and OECD
The bad: The infrastructure sector, which contributes to long term GDP growth rates, has slowed down considerably. Interest rates still among the highest in the world.
The ugly: Increased influence of the government in aggregate consumption will distort markets and lead to lower growth in the future. The substantial decline of the Rupee can cause further erosion in balance of trade and inflationary pressures. Fiscal deficit can lead to higher real interest rates, depressing investments.
Click on our Reports section to download the Economic Survey 2008-09. By Abir Mandal

Economic Survey 2008-09-II: "Decontrol prices, target subsidies"

July 2: The Economic Survey 2008-09 released by the government today made the following recommendations connected to the fertilizer sector:
 8Reform of petroleum (LPG, kerosene), fertilizer and food subsidies to reduce leakages and ensure targeting, so that only the needy get the intended benefit. Limit LPG subsidy to a maximum of 6-8 cylinders per annum per household. Phase out kerosene supply-subsidy by ensuring that every rural household (without electricity and LPG connection) has a solar cooker and solar lantern.
 8Convert fertilizer subsidy from a part-producer subsidy to a wholly farmer-user nutrient related subsidy, with freedom to producers to set prices of formulations with different mix of nutrients.
 8Issue National ID card to everyone based on unique identification number. Rapid operationalization of the UID Authority (deadline:3 months), issue of UID to all residents (6 months) and creation of an integrated database of information on all actual and potential beneficiaries of government programmes, subsidies and transfers (one year). A Household ID (HHID) could be created simultaneously or in parallel by linking it to a set of UIDs of individuals constituting the household. These IDs will form the base of a multi-application smart cards (MASC) system that can be used to empower the poor and insure that they get the full benefits of all programmes such as NREGA, PDS, publicly provided education, skill development, health services, social security (to persons at special risk), fertilizer subsidy, solar lanterns, solar cookers, etc.
 Click on our Reports section to download the Economic Survey 2008-09.

NPS-III related proposals before CCEA: Details

July 1: The website carries here details of two proposals, other than the one related to the ceiling on reduction of fixed cost, now before the Cabinet Committee on Economic Affairs for a decision:
8The capacity utilisation for post 1992 naphtha group be kept at 95% for calculation of notional retention price
Need for the Proposal: It is found that for all the companies the capacity utilisation norms have been increased by 3% from NPS-II stage to NPS-III. However, for post-92 Naphtha based group it has been increased by 8% on the pretext that the units have converted to gas. But since the cost of conversion is not borne by GOI, an indiscriminate increase by 8% for this group has put the units under this group at a disadvantage. The proposals attempts to partially rectify the anomaly.
Inter-Ministerial Consultations: The agriculture and petroleum ministries have no issues with the proposals. The Department of Expenditure has also supported the proposal provided cost of conversion is not recognised under NPS-III. The same has been clarified in the final proposals. The Planning Commission has not concurred with the proposals. They have not forwarded any reasons for the same. It is clarified here that the amendments are proposed in light of the commitment made under NPS-III for examining the grievances of the companies on merit and taking appropriate decisions in the matter.
Financial Implications : Rs.17 crore per annum.
8The buffer stocking scheme for urea
Need for the Proposal: Bufferstocking scheme for urea is already committed under NPS-III. The current proposal is to approve the details of the scheme under which payments have to be made for the buffer stocking being done by the companies under NPS-III as per the directions of the Department.
Inter-Ministerial Consultations: The agriculture and petroleum ministries have no issues with the proposals. The Department of Expenditure has also supported the proposal with the condition that it should have same parameters for interest rates, warehousing and insurance charges, and additional handling charges, as applicable in the buffer stocking scheme of P&K fertilizers. Moreover, the reimbursement of freight charges should be in accordance with the approved uniform freight policy, which provides for reimbursement of actual rail freight expenditure and normative road freight expenditure. The above observations of DOE are concurred to by the DOF and the same are incorporated in the proposals. The Planning Commission has not concurred with the proposals. They have not forwarded any reasons for the same. It is clarified here that the amendments are proposed in light of the commitment made under NPS-III for examining the grievances of the companies on merit and taking appropriate decisions in the matter
Financial Implications: Rs.80.36 crore per annum.   Details

NFL wants GAIL to restore APM, PMT gas shortfall

July 1: NFL has lodged a complaint with the DOF over GAIL's reduction in the nomination of gas from APM and Panna-Mukta-Tapti sources from 1.91 MMSCMD and 0.51 MMSCMD to 1.83 MMSCMD and 0.41 MMSCMD respectively. NFL states that GAIL has also informed that supply of PMT gas may go down further to 0.39 MMSCMD.
 8NFL claims that supplies of RLNG from IOC and BPCL as well as D-6 gas from RIL are at 100% of nominated levels.
 8This leaves a shortfall of 0.2 MMSCMD of gas to the company's Vijaipur complex. Of a total requirement of 3.7 MMSCMD of gas, availability is 3.5 MMSCMD.
 8NFL has sought the DOF's help in ensuring full supply of gas the company.   Details

Naphtha sales slump in May as RIL gas comes on stream

July 1: 8Sales of naphtha and natural gas liquid (NGL) slumped by 1.5% in May, 2009, according to a detailed oil industry performance review for the month available with this website. But overall, sales of the product have demonstrated a 12.8% increase during the first two months of the 2009-10 financial year. The sharp decline in sales in May appears to be a result of limited offtake by major customers like Mangalore Chemicals and Fertilizers Ltd, Haldia Petrochemicals and GMR Energy. Offtake of naphtha by fertilizer, petrochemicals, processors, power, steel and other miscellaneous companies during May, 2009, was 698.6 TMT in May, 2009, as compared to 709.2 TMT in the corresponding period of the previous year. During the April-May, 2009, period, a total of 1,559.9 TMT of naphtha + NGL was uplifted by these companies as compared to 1,382.8 TMT in April-May, 2008.
 8During May, 2009, offtake of naphtha by fertilizer companies was lower -- at 47 TMT -- than 129 TMT of naphtha upliftment by these companies during the corresponding month of the previous year. This appears to be a result of gas production coming onstream from the D-6 block in the Krishna-Godavari Basin. Petrochemicals companies, on the other hand, uplifted 537 TMT of naphtha during the same month, which was slightly higher than the quantity they lifted in May, 2008, which totaled 463 TMT, while power companies bought 111 TMT of naphtha during May, 2009, as compared to 113 TMT in May, 2008. Steel companies purchased just 1 TMT of naphtha in May, 2009, as compared to 3 TMT in May, 2008. RIL gas hasn`t been allocated to petrochemical companies as of now, whereas power companies haven`t started getting the full complement of gas due to various constraints.
 8During the April-May, 2009, period, fertilizer companies uplifted a total of 104 TMT as compared to 243 TMT in FY2008-09, while petrochemical companies bought 1,156 TMT (as compared to 913 TMT, power companies purchased 294 TMT of naphtha (as compared to 220 TMT in April-May, 2008-09) and steel companies purchased 2 TMT as compared to 5 TMT.
 8In total, upliftment of naphtha during May, 2009, showed a decrease 11 TMT vis-à-vis the quantity of naphtha uplifted in May, 2008, period. But 177 TMT more napthha was sold during the April-May, 2009, period, as compared to the April-May, 2008, period, indicating positive growth for the first two months of the 2009-10 financial year. (Click on our Reports section to download a complete oil industry performance review report for May, 2009)
 (Click on Details for more information)     Details

Potash tender: Much suspense and drama

June 30: There was much drama today when IPL refused to make public the six bids received for an estimated 5.5 million tonnes of Potash. IPL said that there would be no public opening of the tender.
8The bids are to be discussed with the DOF before any action is taken on them. The six bidders are Kali Und Salz, Byelorussia Potash Company, International Potash Company, Campotex, Israel Potash Company and Arab Potash. It is learnt that all six producers have formed a cartel and and they are refusing to bring down the price from last year`s contract price of $625 cfr.
8DOF sources said that they were anticipating a cut in price of around $200 to $250 per tonne of potash.   Details

RIL gas supply: Teething problems

June 30: Fertilizer companies seem to be adversely impacted by what has been termed as a "complete lack of cooperation" between three principal transporters of gas -- RGTIL, GAIL and GSPL -- from RIL`s D-6 discovery. The following issues have cropped up: 
Different timings of nominations of gas quantities: Fertilizer units have to give nomination for RIL gas by 1200 hrs daily whereas GAIL/GSPL informs the scheduling of different types of gas by 1900 hrs for the next day. At the time of nominating RIL gas it is not known how much quantity of APM and PMT/RAVVA JV gas would be scheduled by GAIL/GSPL for the next day. It sometimes results in an underdrawl of either RIL gas or JV gas or RLNG. This in turn results in penalties as `take or pay` in NG/RLNG contracts.
Problems in gas transfer from RGTIL to GAIL: There is a mismatch between the GCV as reported by RGTIL at the exit point of their pipeline and GCV as reported by GAIL/GSPL at their entry point. Due to this the exact total custody transfer of gas is not taking place from RGTIL to GAIL/GSPL and thus the quantities cannot be reconciled
Different conversion factors: The Gas Transportation Agreement (GTA) with GAIL/GSPL is based on GCV while GTA with RIL/RGTIL is based on NCV. GCV to NCV conversion has to be used while nominating gas to RGTIL and GAIL on daily basis. This again creates imbalances for which the shipper, that is the fertiliser company, is held responsible and have to pay imbalance charges.
Lack of timely information: The penalties for imbalances created in the system by overdrawl or underdrawl are payable on daily basis. The information on imbalance is not given on the daily basis by RGTIL, GAIL and GSPL. There are situations where the scheduled quantities are changed by RGTIL during the day and the fertilizer companies are informed only after they have already drawn and consumed the gas according to original schedule. At time, even the allocated quantity at entry and exit points of RGTIL network varies widely leading to imbalances without the knowledge of shippers. There are cases where one unit has negative imbalance with RGTIL and positive imbalance with GAIL and vice-versa for the same day. This happens quite a lot as RGTIL does not adhere to the scheduled quantity and also do not inform the shipper in time. In such cases fertilizer companies become liable for payment of imbalance charges.
Plant Shutdown: When a plant takes a shutdown for maintenance purpose, there may be variation in withdrawal of gas quantity from the nominated quantity on the day of shutdown, thus creating an imbalance. In such a case the unit has to pay imbalance charges on dally basis for the entire period of shutdown which is an unfair practice. The unit should be liable to pay imbalance charges only for the day of shutdown and not the entire shutdown period.
Commissioning Period: The contracts with RIL and RGTIL provide for commissioning period of six months. During this period RIL will not impose any `take or pay` charges. RGTIL will also not impose any `ship or pay` and imbalance charges. The contracts with GAIL provides for commissioning period of three months where no `ship or pay` charges are to be paid. It also provides for additional three month period where 50% of `ship or pay` charges have to be paid. However, GAIL is imposing imbalance charges right from the beginning.
Change in NCV of existing GAIL supplies: In one case, NCV of existing gas supplies have been reduced owing to the mix of RIL gas. Though the scheduled volume is being delivered, due to reduction in NCV, the energy available has come down considerably. It is worthwhile to note that though GAIL is providing rebate for the reduction in NCV, it is not equivalent to the non-APM or RIL gas energy cost.
Automatic balancing not evident: During the discussion on the GTA, the shippers were assured that the imbalances cannot exceed 5% as that would threaten the integrity of the pipeline and hence the transporters on their own would take actions to correct the imbalance, in case the shipper does not react. In fact, this was the reason being quoted by GAIL for not allowing Take or Pay at 100%. But there are instances now where imbalances of upto 15% are being charged, without any prior intimation to the shipper to enable any corrective action.   Details

FACT MOU with DOF for 2009-10: Details

June 30: The website carries here the MOU signed by FACT CMD George Sleeba with fertilizer secretary Atul Chaturvedi on the company's performance for the year 2009-10: Following details are carried:
 8Mission objective of FACT
 8Performance parameters for 2009-10
 8Commitments and assistance expected from the DOF
 8Action for implementation and monitoring of the MOU
 8Basis of performance
 8Performance indicators for the last five years
 Click on Details for a copy of the MOU   Details

10% ceiling on reduction of fixed cost: Proposal to cost Rs 286 crore in 2009-10

June 29: The DOF has calculated the financial impact of the proposal for providing a ceiling of 10% on reduction in fixed cost of a unit due to group averaging under NPS-III, with effect from April 1, 2009, to cost Rs 286 crore in 2009-10.
The following are the details:
Need for the Proposal:
8It is found that some of the companies are losing upto 85% of their fixed cost due to the group averaging principle followed under NPS-III, making their operations unsustainable from day one. Thus, there is a need to limit the reduction due to averaging procedure for various units so as to ensure sustainability of production while encouraging efficiency.
Inter-Ministerial Consultations:
8The agriculture and petroleum ministries have no issues with the proposals. Even the Department of Expenditure has supported the proposal but it is opposed to implement it from retrospective effect and suggested its implementation from April 1, 2009. This has been agreed to by the DOF.
8The Planning Commission, surprisingly, not concurred with the proposals but has given no reason for doing so.
8The DOF is going ahead with seeking cabinet sanction for the proposal on the ground that the amendment has been proposed in light of the commitment made under NPS-III for examining the grievances of the companies on merit and taking appropriate decisions in the matter.   Details

GAIL's Jagdishpur-Haldia pipeline project-I: Likely tariffs for consumers

June 29: The applicable transportation tariff for consumers enroute GAIL's Jagdishpur-Haldia pipeline has been projected to be between Rs 83.15 to Rs 177.34 per MMBTU to elicit a 12% post tax return on investment, subject to approval of the Petroleum and Natural Gas Regulatory Board (PNGRB). The following tentative tariff rates have been worked out for consumers at different locations:
8CSES Haldia, FCI Sindri, SAIL Bokaro, CGS Varanasi and Allahabad: Rs 83.15 per MMBTU
8CGS Kolkata: Rs 93.59 per MMBTU
8HFC Barauni, Petrochemical plant, Barauni, Barh power plant: Rs 94.05 per MMBTU
8WBPDC Bandel: Rs 97.64 per MMBTU
8HFC, SAIL and DPL, Durgapur, WBPDC Sagardighi: Rs 99.52 per MMBTU
8WBPDC Katwa: Rs 103.65 per MMBTU
8CGS Jamshedpur: Rs 107.25 per MMBTU
8FCI Gorakhpur: Rs 114.03 per MMBTU
8CGS at Patna, Chapra, Siwan, Gopalganj, Bettiah, power plant Bettiah: Rs 151.16 per MMBTU
8CGS Ranchi: Rs 177.34 per MMBTU
(Click on Details for more information)   Details

GAIL's Jagdishpur-Haldia pipeline project: Capacity build-up

June 29: 8In line with the guidelines of the Petroleum & Natural Gas Regulatory Board (PNGRB), the capacity utilisation of the Jagdishpur-Haldia pipeline will increase from 60% in the first year of commissioning to 100% in the fifth year. The design capacity of the Haldia-Jagdishpur section of the pipeline will initially be 16 MMSCMD -- of which GAIL will have the right of first use for 12 MMSCMD, while 4 MMSCMD would be available for use on common-carrier principle -- which will be increased to 32 MMSCMD during the second phase of the project through the installation of a compressor at Haldia. After excluding a common carrier capacity of 8 MMSCMD set aside for the entire project, the actual flow gas requirement works out to be 8.15 MMSCMD in the first year, 15.78 MMSCMD in the second year, 18.18 MMSCMD in the third year, 20.58 MMSCMD in the fourth year, 22.99 MMSCMD in the fifth year and 24.03 MMSCMD in the sixth year.
8The gas for the project will be sourced from RIL's KG-D6 basin and ONGC's Mahanadi basin. A Memorandum of Understanding (MoU) for the same has already been signed with the respective companies. Pertinently, around 9 MMSCMD of gas from the prolific KG D-6 basin is expected to reach Haldia after the completion of the Kakinada-Basudevpur-Howrah pipeline. This gas will be utilised to cater to the gas demand of consumers enroute the Haldia-Phulpur section of the pipeline. The gas major is also expected to source 20 MMSCMD of natural gas from ONGC's Mahanadi basin from 2011-12 onwards. (Click on Details for more information)   Details