Wednesday, March 14, 2012

WEATHER Hailstorm may hit UP, Bihar, West Bengal, Odisha

ENERGY

Industry favours doing away with Customs duty on LNG

BPCL plans JV for LNG terminal

Energy firms to cash in on LNG import needs

FERTILISER J&K govt provides over 1.5 LT fertilisers to farmers

SUBSIDY

Subsidy outgo is nearly double the Budget estimate

Fertiliser subsidy bill for the current fiscal set to cross Rs 70,000 crore

AGRICULTURE

Rice procurement crosses 27 mt, up 14% from last yr

Budget 2012: Booster dose likely for private funds in agriculture

FOREIGN EXCHANGE RATES Foreign exchange rates

10, Shaheed Jit Singh Marg, New Delhi 110067

Current News

Current news on the latest developments in fertiliser, energy, weather, agriculture, agri-business, logistics, economy, and other related areas

(The views expressed in the news items are not necessarily of FAI)

10, Shaheed Jit Singh Marg, New Delhi 110067

Current News

Current news on the latest developments in fertiliser, energy, weather, agriculture, agri-business, logistics, economy, and other related areas

(The views expressed in the news items are not necessarily of FAI)

WEATHER

Hailstorm may hit UP, Bihar, West Bengal, Odisha Hailstorm whipped up by a prevailing western disturbance could work up speeds reaching 55 km in East India

Hailstorm whipped up by a prevailing western disturbance could work up speeds reaching 55 km in East India on Wednesday. Uttar Pradesh, Bihar, Jharkhand, Chhattisgarh, Assam, Meghalaya, Odisha, West Bengal and Sikkim might get affected in the bargain.

NORTH-WEST POUNDED

This follows scorching of the earth in the northwest during the 24 hours ending Tuesday morning, says an India Meteorological Department (IMD) an update. Himachal Pradesh, Uttarakhand, Uttar Pradesh, Bihar and east Madhya Pradesh bore the brunt of the resultant weather during this period.

Rain or snowfall was reported from Jammu and Kashmir, Himachal Pradesh and Uttarakhand. In the plains, east and west Uttar Pradesh, Bihar, Punjab, Haryana, east Madhya Pradesh and sub-Himalayan West Bengal saw varyingly wet weather. On Tuesday afternoon, the weather-maker western disturbance hung over Jammu and Kashmir and neighbourhood.

INDUCED CIRCULATION

The induced cyclonic circulation, a sign of the parent's strength and intensity and lying to its southern flanks, was spotted over west Uttar Pradesh. The front-end with moist and ascending air is what is whipping up the hailstorm as is the norm during transition from winter to spring at this time of the year.

Another upper air cyclonic circulation persisted over east Madhya Pradesh after moving in from west overnight on Tuesday. Meanwhile in the south, an itinerant easterly wave has started affecting south peninsular India.

EASTERLY WAVE

A number of places in Tamil Nadu, north coastal Andhra Pradesh and Kerala have benefited from occasional rains. An outlook valid until Sunday said that rain or thundershowers may continue to break out over extreme south peninsular India.

Kerala, Tamil Nadu, Lakshadweep, Andaman and Nicobar Islands, south Karnataka and Rayalaseema are likely to share the spoils. The outlook also maintained the outlook for an incoming fresh western disturbance to affect the western Himalayan region from Friday.

Source: The Hindu Business Line, Wednesday, March 14, 2012

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ENERGY

Industry favours doing away with Customs duty on LNG

Expectations are running high that this Budget may tweak the import duty on liquefied natural gas (LNG). A move, which will not only benefit the importers, but also consumers from power, sponge iron, and fertiliser sectors.

However, whether the Finance Minister, Mr. Pranab Mukherjee, will actually respond to the oil & gas industry demand will be known on March 16. Making their case stronger the industry has been stating that the shift to natural gas is also happening because of high crude oil and coal prices, coupled with decline in the domestic gas output.

The Government had on June 26 last year withdrawn import duty on crude oil. In line with the benefit given to imported crude oil, the same may be extended to imported gas which is more clean fuel and is used in highly subsidised and priority sectors such as power and fertilisers, the argue.

Sources said the industry expects the Government to abolish the import duty on LNG. A five per cent customs duty is charged on import of LNG and no credit is allowed for the customs duty. Thus, this goes into cost, which is ultimately passed on to the customers.

According to guesstimates, the two existing terminals and soon to be commissioned Dabhol terminal (March end) will receive around 250 LNG cargoes and the customs duty at the existing rate will be around Rs 2,500 crore. The customs duty is on the value of the product, and the price of LNG has been fluctuating.

At present, the two operating LNG terminals in the country Petronet LNG's Dahej terminal and Shell's Hazira terminal are importing about 13 million tonne (mt) annually. While Petronet's terminal is running at excess capacity of around 11 mt (terminal capacity is 10 mt), Shell is running at full capacity (of 3.6 mt) and is also in the process of increasing it to 5 mt.

Also new terminals are coming up Petronet's Kochi terminal (5 mt) and Dabhol LNG terminal (5 mt) which will lead to further rise in imports. Domestic gas output has been on a decline with the production from the country's largest gas fields Reliance Industries-operated steadily falling after hitting a peak of 60 mscmd in end 2009. The gas availability in 2012-13 is expected to be 180-190 mscmd up from 166 mscmd, at present.

Out of this, 166 mscmd 120 mscmd is from domestic sources and 46 mscmd is imported gas. However, the imported gas quantity in the energy mix is expected to hit 64 mscmd in 2012-13. Sources say that besides demand, the availability of imported also depends on price and tie-up with the suppliers. With no significant increase expected in the next two-three years, the existing the companies are depending on imported gas. Besides, the long, medium term contracts, the importers are also looking at the spot market.

Source: The Hindu Business Line, Wednesday, March 14, 2012

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BPCL plans JV for LNG terminal Company in talks with ONGC for 5 mtpa facility

Bharat Petroleum Corporation (BPCL) is exploring a possibility to set up a liquefied natural gas (LNG) terminal in India with a joint venture partner to meet the growing demand for imported natural gas as domestic gas production declines. The company is in talks with few oil and gas companies including ONGC, and is looking at setting up a 5 million tonnes per annum (mtpa) terminal to cater to the rising demand for gas from the power, fertiliser and city gas distribution companies.

A senior company official told Financial Chronicle that the discussion is at a nascent stage and the company is looking at all possibilities on the east as well as the West coast. In the long run, the exploration and production arm of BPCL also plans to bring the gas from the latest discovery in Mozambique to India, where the terminals can be of great help to the company, besides helping the country to meet the growing demand efficiently.

The output from RIL held KG D6 basin has fallen to less than 40 mmscmd from its peak of 60 mmscmd in 2010. Since then, all the major power and fertiliser companies have been paying an average of $14 per mmbtu for the imported LNG compared with RILs $4.2 per mmbtu.

We would look at a terminal of 5 mtpa at a cost of around Rs 4,500 crore for the re-gasification plant. The formalisation of the plan and locations and others will be done in six months time. One location that is under consideration is Mangalore, but we have not yet finalised that, the BPCL official said.

BPCL is importing crude oil for its refineries. Its move to set up a LNG terminal is also necessitated by its gas finds in Mozambique oil block billed as three times bigger than KG-D6 basin with in-place reserves of 50 plus mtpa. The company also plans to bring some portion of the gas post-production to India.

Other than BPCL some other oil and gas majors are also initiating the process to set up LNG terminals to meet the growing demand within the country. Indian Oil Corporation is in talks with Ennore Port to set up a terminal at an investment of Rs 4,300 crore for importing LNG. GAIL India is starting its LNG terminal at Dabhol by the end of this month or early next month, Financial Chronicle reported on Tuesday, while Petronet LNG has zeroed in on Gangavaram Port in Andhra Pradesh for their third LNG terminal with a 5 mtpa capacity.

Source: Financial Chronicle, Wednesday, March 14, 2012

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Energy firms to cash in on LNG import needs

The absence of new gas finds and declining production from Reliance Industries flagship Krishna-Godavari-D6 field is making the business of gas import attractive. In the past year, Petronet LNG and Shell's Hazira have talked of plans to expand capacity at their terminals. The Reliance Industries-BP combine and British Gas India have decided to import natural gas.

And, France's GDF Suez, a euro 90-billion European energy major, has decided to cash on India's growing need for natural gas. "GDF Suez considers Asia and especially India a core development region for its LNG (liquefied natural gas) business, with strong growth prospects and new supply potential, said executive vice -president Jean Marie Dauger, after the French major signed a contract in November 2011 with Petronet LNG for 0.6 million tonnes (mt) of LNG by next year. The group has also bid for a 65.12 per cent stake in British Gas India's subsidiary, Gujarat Gas.

Petronet's Dahej terminal can import up to 11.5 mt a year of LNG. Petronet is owned by state-controlled Oil and Natural Gas Corporation, Indian Oil Corporation, Bharat Petroleum Corporation and Gail India, each with 12.5 per cent stake, in addition to GDF Suez with a 10 per cent interest; the Asian Development Bank with 5.2 per cent and public shareholders with the remaining 34.8 per cent.

India Gas Solutions, the equal joint venture between Reliance Industries and BP, set up for sourcing and marketing of natural gas in India, has said it will be setting up multiple terminals. It is presently searching for a location and quantifying the demand scenario in various regions.

British Gas India has also realigned focus on upstream and LNG businesses in India. It is rationalising its global portfolio, as it needs money to invest in exploration and production businesses in other parts of the world.

The company said the outlook for global gas and LNG demand was strong and it was well set to capitalise on these opportunities. It recently signed a heads of agreement (HoA) with Gujarat State Petroleum Corporation (GSPC) for long-term supply of up to 2.5 mt per annum of LNG. The HoA sets out the basis on which the BG Group will sell LNG to GSPC for a 20-year period, beginning 2014. The LNG will be sourced from the Groups current and future global supply portfolio.

The LNG terminal at Hazira in Gujarat, a joint venture between Shell, the Anglo-Dutch energy company, and Frances Total, would take the annual capacity there to 10 mt yearly. The terminal now operates at a capacity of 3.6 mt. By 2013, this would be expanded to five mt. With an increase in LNG consumption and new pipelines being laid, more gas would be required. To meet the future market requirement, we intend to increase the terminal's capacity to 10 mtpa, a senior company executive told Business Standard.

The interest of these companies in LNG import is evident from the fact that India had, till January 2012, registered an 89.5 per cent increase in LNG import over a year. January LNG imports, term and spot, were 1.45 mt, of which 16 cargoes representing just over one mt of LNG were delivered to Petronet LNGs terminal at Dahej. Hazira LNGs terminal at Hazira received a total of five cargoes with around 446,000 mt of LNG in January, according to Platts.

ON THE LNG BANDWAGON Company & status of project

India Gas Solutions

Will set up multiple LNG terminals

BG India

Signed 20-year agreement with GSPC

Petronet LNG (Dahej terminal)

Expanding to 15 mt

Shell & Total (Hazira terminal) Will expand to 10 mt

from 3.6 mt

Source: Companies; MT: Million tonnes

LNG costs much more than domestic gas but is cheaper in comparison with other liquid fuels. Platts International Gas Report of December 2011 said the energy ministry had worked out tentative gas output and import for the five-year development plan period starting April next year.

Petroleum ministry data suggests LNG imports in 2012-13 at 69 mscmd (million standard cubic metres per day), well over twice the quantity last year. From there on, the imports will increase over two and half times, to 184 mscmd, in 2016-17, with total gas availability estimated at 197 mscmd and 394 mscmd, respectively. This will increase the LNG share in five years from 37 per cent to 46 per cent, it said.

Source: Business Standard, Wednesday, March 14, 2012

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FERTILISER

J&K govt provides over 1.5 LT fertilisers to farmers

Jammu, Mar 13 (PTI) The Jammu and Kashmir government today said it has provided over 1.50 lakh tonnes (LT) of chemical fertilisers against the demand of over 1.42 LT to farmers during last kharif and current rabi season. Against the demand of 1,42,454.75 tonnes of various chemical fertilisers, 1,50,276.45 tonnes of chemical fertilisers has been provided to farmers during last kharif season and current rabi season, state Agriculture Minister G H Mir said in a reply in the Assembly. In addition to it, 18,133 tonnes of urea and 3,050.80 tonnes of DAP (Diammonium phosphate) has been received in the state during February-March, which is in transit for onward distribution, he said. He said the assessed requirement of the fertilisers in the state is projected well in advance of the cropping season to the centre. The company wise allocation of fertilisers is made on monthly basis to the state, he said adding that the companies supply the fertilisers to state as per the demand generated by the state through institutional agencies viz JAKFED, AGROs, Cooperative Marketing Societies, central level cooperatives from their respective retail outlets in the district. He said the farmers procure the fertilisers as per the demand from the retail outlets located in their areas. The Minister said there has been adequate supply of fertilisers during current years. However, due to delay in import of DAP in the country, supply of the said fertiliser was delayed during May. He said in case of less supply of any additional requirement at particular period of time, the matter is taken up with the supply companies as well as with the department of fertiliser, government of India for appropriate remedial action. Giving details of the availability and distribution of chemical fertilisers in Jammu district, the minister said that 141784 quintals Urea and DAP have been supplied to the farmers of Jammu district during Kharif 2011. He said 111685 quintals of Urea and DAP besides 1170 quintals of MOP fertilisers have been also provided to the farmers of the district during Rabi 2011-12.

Source: PTI, Tuesday, March 13, 2012

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SUBSIDY

Subsidy outgo is nearly double the Budget estimate Fertiliser, petro products account for major chunk

Rising crude prices and populist schemes have seen the Government's subsidy bill balloon this year. The Government may end up spending almost 90 per cent more than its Budget estimates as subsidy on fertiliser and petroleum products during 2011-12 rose, sources said. A highly-placed source told Business Line, The fertiliser sector is likely to get nearly Rs 7,200 crore more for the current year while the additional demand for petroleum sector is around Rs 15,000 crore. The Finance Ministry is expected to make provisions for these amounts in the third set of demands for supplementary grants to be tabled along with the Budget, he added.

This is happening at a time when the Government is finding it extremely difficult to contain the fiscal deficit. It is yet to be seen whether additional subsidy outgo will be made from savings in other ministries or it will be fresh cash outgo, the source added. In the second set of supplementary grants, the fertiliser sector has already been given over Rs 13,000 crore while the Finance Ministry provided Rs 30,000 crore as compensation towards estimated under recoveries to oil marketing companies on account of sale of petroleum products below cost. These are in addition to the provisions made in the Budget last year.

It may be noted that a sum of Rs 5,700 crore was re-appropriated for imported and indigenous urea by way of saving from imported P&K (phosphatic and potassic) fertiliser. This saving was possible due to lower price of nutrients for P&K fertiliser. However, this will not change the total number as payment was made from to one sub-head to another, the source explained. Subsidy under the petroleum sector includes subsidies for domestic LPG & PDS Kerosene, freight subsidy for far flung areas, under recoveries of oil marketing companies and other related compensation. According to the Petroleum Ministry, for the fortnight beginning March 1, 2012, under recovery (difference between the cost and selling price) on a cylinder of domestic LPG is estimated at Rs 439. On diesel, under recovery is Rs 12.04 per litre and on kerosene, Rs 28.54 per litre. Part of the under recovery is borne by the Government and some by the upstream companies such as ONGC, Oil India and GAIL. This is in addition to a subsidy of Rs 0.82 per litre on PDS Kerosene and Rs 22.58 per cylinder on domestic LPG, provided by the Government.

Source: The Hindu Business Line, Wednesday, March 14, 2012

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Fertiliser subsidy bill for the current fiscal set to cross Rs 70,000 crore

The government is likely to peg fertiliser subsidy for next financial year at Rs 66,000 crore, lower than the actual outgo in 2011-12. "A moderate increase is likely," said a government official. The actual subsidy bill for the fiscal is likely to come at over Rs 70,000 crore though the government had budgeted for just Rs 49,997 crore in the budget 2011-12.

Private analysts had soon after the presentation of the last budget raised the issue of underestimation of subsidy outgo and have pitched for a credible fiscal consolidation roadmap in the upcoming budget. The government had budgeted a mere 3.6% increase in its overall expenditure in 2011-12.

"Subsidy pricing and visibility on project execution should also make the agenda. But, we believe it is the credibility - of the budget estimates, and reform measures - that will carry more weight than the announcements themselves," said Rohini Malkani, chief economist, Citi Group India.

The difference between retail price and cost of production of urea, which account for more than half of country's total fertiliser consumption of 52 million tonne, is paid to producing companies as subsidy.

The government has notified a nutrient-based subsidy regime for fertilizers but politically sensitive urea is out of its ambit. Under the nutrient-based subsidy regime, the quantum of subsidy for each of the nutrients phosphates (P) and potassium (K) is provided to the producer or importers at a fixed rate by the government.

Manufacturers are free to price these decontrolled fertilizers in line with the price trends trend in the international market as India relies on imports to the extent of 90% for phosphatic and 100% for potassic fertilsers . North Block has already given Rs 13,778 crore in the second supplementary demand for grants and has agreed to Rs 7,200 crore in the third supplementary to be presented in the budget session.

The fertiliser ministry had projected a revised subsidy estimate of about Rs 71,000 crore, following the spike in international prices of inputs and fertiliser prices. Moreover, the ministry has also not been able to move forward on urea decontrol.

The government had projected the fiscal deficit -- gap between expenditure and receipts -- at 4.6% of the GDP in the budget. But, the deficit is expected to be much higher due to lower tax mop-up, ballooning subsidy bill and lower divestment proceeds.

Subsidy bill itself is expected to be at least Rs 1 lakh crore over and above the original projection. The finance ministry is under pressure to rein in expenditure with every important stakeholder including the central bank and industry calling for fiscal consolidation. The RBI, which is under increasing pressure to cut rates to revive growth, has already said it will not be able to start monetary easing till the time there is meaningful fiscal consolidation.

Source: The Economic Times, Wednesday, March 14, 2012

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AGRICULTURE

Rice procurement crosses 27 mt, up 14% from last yr

The governments rice procurement for 2011-12 has crossed 27 million tonne (mt), official data released on Tuesday said. This is an increase of about 14% over the same period last year. The government is aiming to procure a record 35.3 mt by the end of the financial year. The over all increase in rice procurement has been achieved despite a decline in the share of Punjab, the biggest contributor to the central pool.

Food Corporation of India (FCI) and state-owned agencies have bought around 7.7 mt of rice from farmers in Punjab in the current year against 8.6 mt the previous year. However, Chhattisgarh, Haryana, Uttar Pradesh, Orissa and Madhya Pradesh have contributed more rice to the central pool compared to the last year, giving a big boost to the drive.

According to the second advance estimate released last month, production for the current year is estimated at 102.75 mt, which is an all time record. This has also pushed up procurement this year. More than 4mt has been procured from Chhattisgarh, which is higher than the last year. Agencies lifted close to 2mt of rice in Haryana as well, much higher than the 1.6 mt of the last year.

Andhra Pradesh has contributed more than 4.1 mt of rice against 3.5 mt last year. Even in UP, the rice purchase has exceeded 2.7 mt, against 1.8 mt reported during the same period last year. The contributions of Orissa (1.6 mt), Bihar (8 lakh tonne) and Madhya Pradesh (6 lakh tonne) are much higher than the last year. We dont have any fears about rice purchase this year. Sufficient number of procurement centres were set up by state governments before the onset of the procurement season, keeping in view the geographical spread of the respective states, said food minister KV Thomason Tuesday.

Source: The Financial Express, Wednesday, March 14, 2012

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Budget 2012: Booster dose likely for private funds in agriculture

The path drawn up by the government's first-ever official agriculture survey in suggesting more private investment in farming is likely to find resonance in this year's Budget. Officials said apart from infrastructure and skill development, agriculture could be the next big focus area.

In 2009-10, private sector investment in agriculture stood at Rs 1.09 lakh crore (Rs 1.09 trillion), constituting 82 per cent of the total investment in the farm sector. Total investment in agriculture was as low as 2.7 per cent of gross domestic product, when the total investment rate was 36.6 per cent. Of that 2.7 per cent, as much as 2.3 per cent came from the private sector.

The rest was from the public sector and this proportion has been stagnant since 2005-06."This clearly shows public investment in agriculture is not the way to achieve faster farm growth, but private investment is," officials said.

They said the Budget would try to encourage private investment in seed research and production, capacity building, storage, allied activity like dairying, fisheries and, most important, in farm marketing, with the help of business chambers such as Federation of Indian Chambers of Commerce and Industry and Confederation of Indian Industry.

Officials said the Budget could also lay down the framework for enabling public-private partnership in the United Progressive Alliance [ Images ] government's flagship programme for the farm sector, the Rashtriya Krishi Vikas Yojana.

The draft framework for such a proposal involves corporate help in developing integrated agricultural development projects, comprising a minimum of 5,000 farmers."The average investment per farmer will have to be a minimum of Rs 1,00,000, of which half will be provided by the government and the rest has to be mobilised by private companies," officials said.

He said corporate and big companies would be free to have projects encompassing all activities of farming from production to marketing, but the project span would have to be three to five years.

Research, credit

Another area in which the Budget could lay some emphasis is involvement of the private sector in seed development and research, mainly transgenic. Officials said a Rs 150-200 crore (Rs 1.5-2 billion) nationwide programme to develop India's [ Images ] own transgenic cotton crop, with the active involvement of the private sector, was likely.

"The Budget could sanction some amount for agriculture research and also lay down the road map for the private sector's active role in that," the official said. The Indian Council of Agricultural Research has already placed a proposal for genetic research on developing indigenous biotech crops, with more properties than the current versions of, for instance, genetically modified cotton.

"There are many other fields like horticulture, storage and warehouses, where the private sector can play an active role and the Budget could show the door for that," one of the officials said. Credit penetration is also expected to find a mention in the finance minister's Budget speech on Friday.

Officials said the document could give a bigger focus to farm credit, with expanded Kisan Credit Cards, more interest subvention on timely repayment of loans and a focus on improving the institutional credit penetration. The target for farm credit disbursal could be enhanced from the Rs 4,75,000 crore (Rs 4,750 billion) in 2011-2012 to Rs 540,000 crore (Rs 5,400 billion) in 2012-2013.

The scope of KCCs, which provide easy access to loans for purchase of seeds and other farming activities to small and marginal growers, could be expanded from the current 58 million farming families to the entire farming population of 120 million. The agriculture survey, tabled on Monday, also highlighted the need for improving credit penetration among small and marginal farmers.

"Small farmers continue to resort to informal lenders (despite KCCs), as the current system of institutional credit to farmers suffers from non-farmer friendly practices, delays in credit delivery and collateral problems," the survey said.

The agriculture ministry is also in favour of raising the interest subvention from three per cent to four per cent for timely repayment of short-term crop loans. This would put the interest rate on such loans at three per cent.

Agricultural production in India has been volatile over the years, particularly because only 40 per cent of arable land is irrigated and the rest depends on monsoon vagaries. In the ongoing five-year plan (2007-08 to 2011-12), agricultural output was targeted to grow by a yearly four per cent.

Actual growth would be somewhere close to 3.5 per cent, but the period also saw huge ups and down. Agriculture and allied sectors grew 5.8 per cent in the first year of the plan, remained almost flat by rising only 0.1 per cent the following year, then rose to just one per cent in 2009-10. In 2010-11, farm output grew a whopping seven per cent. This financial year, advance estimates peg the growth at 2.5 per cent.

Source: Rediff Business, Wednesday, March 14, 2012

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FOREIGN EXCHANGE RATES Tuesday, March 13, 2012

Currency Name Buy (````) Sell (````)

TT Bill TT Bill Dollar 49.93 49.96 49.84 49.83 Euro 65.52 65.56 65.42 65.40 Pound Sterling 78.14 78.19 78.02 78.00 100 Yen 60.47 60.51 60.30 60.29

Source: The Hindu Business Line, Wednesday, March 14, 2012

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