This article clearly brings out the hype around subsidy on fuel and the educated class of our society fully understand the hoodwinking our politicans do and make us all a laughing stock worldwide....

And there`s the political problem of austerity. Spending lesser means cutting government employee salaries, cutting farmer subsidies like fertilizers, reducing the wages paid in the NREGA scheme or otherwise spending lesser on infrastructure. All these solutions have political problems, and the government will do all it can to prevent a backlash in these high-voter areas; petrol users are simply those that have enough money to avoid public transport, but not enough to buy a diesel guzzler, a population that is, by and large, not inclined to vote either. Most unrelated expense items have been cut already, even as the fiscal deficit — a measure of how much more the government needs to borrow to match expenses with revenues — ended up over 5% of GDP. Prices also give a signal. If you raise prices, you lower demand. And undoubtedly, we need to reduce our reliance on petrol and diesel, which come from crude oil, our largest import. We import around US$ 150 billion worth of crude oil every year, a figure that only increases as crude oil reaches new heights. This increases our trade deficit, and reduces the value of the rupee in dollar terms, which, in the end, makes our petrol more expensive in rupees. Our consumption hasn`t slowed, mainly because we prefer, as a country, to not pass on market prices to our consumers. Effectively, without a price signal, consumption patterns don`t change. Freeing prices may make them volatile, but we have lived with volatile necessities for years — no one, for instance, calls for potato prices to be regulated. Even the search for alternative fuels or the encouraging of cheaper ones like natural gas will not happen as long as prices for current fuels remain subsidized. On that vein, diesel prices must be increased as well, and LPG. The oil companies lost nearly 140,000 crores (Rs. 1.4 trillion) in diesel, LPG and Kerosene last year, half of which the government must bear. Petrol prices may come down anyhow. The calculations above reflect a crude price of US$ 124 in April, which has since fallen to US$ 105 recently, even as the rupee touches Rs. 56 versus Rs. 53 earlier. Net of the above, petrol prices can fall to nearly Rs. 64 per litre, without any changes in state or central taxes. But that shouldn`t change the view that prices need to stay deregulated. After all, when international prices go down, we won`t like the argument that they can`t cut prices until they make up for past losses http://t.in.com/6n6z ...

That post was for those were looking for the alleged Rs 36,000 crores....

Bank deposits, debt were Reliance Ind`s choice to park money Arvind Jayaram RIL trebled its investments in certificates of deposit with scheduled banks. This was a departure from the previous year, when the company parked most of its money in mutual funds. BL Research Bureau: Just like ordinary investors, Reliance Industries (RIL), the most cash-rich company in the private sector, played it safe with its investments in 2011-12. Its latest annual report shows that it sharply increased its time deposits with banks and invested more in debentures from institutions such as HDFC this year. It also moved money out of fixed maturity plans (close end mutual funds) to park it in short-term debt funds that allow any-time withdrawals. Over the year, RIL trebled its investments in certificates of deposit with scheduled banks. This was a departure from the previous year, when the company parked most of its money in mutual funds. The company invested Rs 15,720 crore in certificates of deposit in 2011-12, compared with Rs 4,632 crore the previous year. Interest rates on certificates of deposit rose steadily from 7.3 per cent to 11.5 per cent last year, as a scramble for deposits prompted banks to raise rates for large corporates. Another Rs 6,247 crore was invested by the company in debentures and bonds. This was up 35 per cent over 2010-11. RIL`s two largest bond buys were of Housing Development Finance Corporation (Rs 1,822 crore) and IDFC (Rs 1,060 crore). RIL`s mutual fund investments fell 0.5 per cent to Rs 5,057 crore during the fiscal. But within mutual funds, RIL trimmed exposure to fixed maturity plans and switched to short-term debt and dynamic bond funds. These are actively managed to capitalise on rising rates on corporate paper. It invested Rs 1,021 crore in bond funds from Birla Sunlife, DWS, ICICI and LIC mutual funds. It made minimal bets on government securities, at Rs 5 crore. As of March 2012, the company`s cash balances and short-term investments totalled Rs 66,627 crore. This was a 60 per cent jump from the same date last year. According to the company`s annual report, its current investments rose by 87 per cent to Rs 27,029 crore. Apart from this, it also chose to hold to plenty of liquid cash. After investments, the company`s cash and bank balance registered healthy growth to Rs 39,598 crore. arvind.jayaram@thehindu.co.in http://t.in.com/5n6K...

Bhusbhac, Reliance is only making good use of the opportunities presently in the global markets. In the process what it is doing is only in the national interest of capital building, GDP growth, improving our competitiveness, conserving forex etc. etc - and all this without putting any strain over the forex resources or straining our capital markets. The opportunities in global business are being intelligently leveraged. The global business is passing through lean phase. Therefore, the tech and capital imports from Russia, Europe and US are being actively encouraged by these economies, because it supports employment there. Therefore, with Reliance`s eminent creditworthiness, the financiers in these economies are too keen to give 5-10 years funding for procuring these technologies from their countries. Therefore, we have seen the butyl rubber being funded through equity participation, European procurements being funded by $ 1.5 billionlines of credit from Italian consortia and another $ 2 bn line of credit from the German consortia. and now this latest about the US sourced imports of tech from Philips 66. Likewise, Reliance has funded its overseas investment into shale gas assets in US with Bond issues of $ 1.5. So far, this brings total to over $ 6 bn. There may be more in the pipeline. And the oxymorons - the wise men of the markets - will keep making nagative noises protecting the interests of their favored CASINO. And the casino operators will continue to employ the bouncers to ward of anyone taking away their valuable chips from their casino. Hence the broken record stuck up at the same track. The company is also doing its buyback program. The CASINO owners would like their CASINO`s punting chips to be protected and would rather have RIL buying from the public`s holdings. Therefore they need to employ the rough talking bouncers, who can only speak abusive and derogatory language. ...

Firstly your posts were with regards pricing and so was my reply, if at all the narrow view was posted by me it was reflection of the narrow post from which i did not divert. I am nto for Radical treatment on either side, but i am all against blackmail when it comes to Natural Resources especially ones as important as Natural Gas... I would suggest you to re-read posts made by you and then read mine again...

And what many knowledgeable Boarders seem to be missing out is that country has to pay more on Imports not because local price is low but because local production is low and if you want to suggest that both are co-related or directly proportional then it only adds substance to the BLACKMAIL Theory as proposed by some others.. Why can not production be hiked at prevalent prices, there is no contractual obligation which says until price is hiked production can not be hiked.. IT is only the ill-intent of the Corporate which does not wish to address the issues of production levels until the Government bows down to its demands. And even if the Government does it will be a victory of blackmail tactics and not Righteousness or on Moral Grounds. IT will only be looked upon by people as another example of mi-use of Natural Resources and soon CAG will come out with another report on Loss incurred by the GoI as a result of Production Loss right now and subsequent price hike. So why is this thought process being adopted or promoted on this board that price hike is essential before production can be moved up ? It is only looking at one side of the coin and provides a semi-biased / biased view favoring 1 Party in the Contract....

IF the motive is to let GoI earn and then give subsidy, it will be another case of Financial Engineering. IT is similar to the Koutons theory of Pricing products 3x Price and then giving 66% Discount or Buy 1 Get 2 Free. I dont know how that is a gr8 achievement. Price Increase can happen only if the eventual price hike is moved to end customers . I dont know how hard that is to understand....

Of course the loss of US$ 8 bn includes the price for air (gas not produced at present). Also it suggests that GoI could make as much and subsidise where is wants to directly in form of caqsh from its share of profits. Also the figure demonstrates that by importing costly LNG then that is the figure the nation is burdened with by way of trade deficit. Hence interpret such statements the way you like it. I still maintain that the request of price revision by RIL hints at a middle course for some quantity and a marketing freedom for quantity above that as per the correspondence exchange in toto since the matter has come in dispute....

sorry that waqs in reply to the post of Mr Kiss!...

This article clearly brings out the hype around subsidy on fuel and the educated class of our society fully understand the hoodwinking our politicans do and make us all a laughing stock worldwide....

And there`s the political problem of austerity. Spending lesser means cutting government employee salaries, cutting farmer subsidies like fertilizers, reducing the wages paid in the NREGA scheme or otherwise spending lesser on infrastructure. All these solutions have political problems, and the government will do all it can to prevent a backlash in these high-voter areas; petrol users are simply those that have enough money to avoid public transport, but not enough to buy a diesel guzzler, a population that is, by and large, not inclined to vote either. Most unrelated expense items have been cut already, even as the fiscal deficit — a measure of how much more the government needs to borrow to match expenses with revenues — ended up over 5% of GDP.
Prices also give a signal. If you raise prices, you lower demand. And undoubtedly, we need to reduce our reliance on petrol and diesel, which come from crude oil, our largest import. We import around US$ 150 billion worth of crude oil every year, a figure that only increases as crude oil reaches new heights. This increases our trade deficit, and reduces the value of the rupee in dollar terms, which, in the end, makes our petrol more expensive in rupees. Our consumption hasn`t slowed, mainly because we prefer, as a country, to not pass on market prices to our consumers. Effectively, without a price signal, consumption patterns don`t change. Freeing prices may make them volatile, but we have lived with volatile necessities for years — no one, for instance, calls for potato prices to be regulated. Even the search for alternative fuels or the encouraging of cheaper ones like natural gas will not happen as long as prices for current fuels remain subsidized.
On that vein, diesel prices must be increased as well, and LPG. The oil companies lost nearly 140,000 crores (Rs. 1.4 trillion) in diesel, LPG and Kerosene last year, half of which the government must bear.
Petrol prices may come down anyhow. The calculations above reflect a crude price of US$ 124 in April, which has since fallen to US$ 105 recently, even as the rupee touches Rs. 56 versus Rs. 53 earlier. Net of the above, petrol prices can fall to nearly Rs. 64 per litre, without any changes in state or central taxes. But that shouldn`t change the view that prices need to stay deregulated. After all, when international prices go down, we won`t like the argument that they can`t cut prices until they make up for past losses
http://t.in.com/6n6z
...

Why the petrol price hike is a good thing
Petrol prices were raised again recently, by Rs. 7.5 and the hike leaves the country seething, except those that drive diesel cars. And to make the diesel owners wince a little, the government will decide the fate of that fuel too, in a meeting soon. While there is outrage about this ‘‘unprecedented’‘ price hike, let me play devil`s advocate and temper down some of the most vehement arguments against this increase.
With a tax of Rs. 26 per litre, can they not reduce taxes? Goa, for instance, has cut state taxes to zero; this gives the Goan petrol pump the ability to sell petrol at Rs. 61, a good Rs. 12 less than the Delhi price of Rs. 73. How, though did the brand new Chief Minister, Mr. Manohar Parrikar do it?
He replaced the lost revenue on petrol by increasing taxes and fees everywhere else. After the monsoon session, you will have pay a toll tax just to enter Goa. Alcohol will be more expensive. A power of attorney that used to cost Rs. 25 will now cost Rs. 500. A 10% luxury tax now applies to beauty parlours. Cars get more expensive with entry taxes, VAT increases and higher road taxes.
So do you really want that, fellow Indians? That the government cuts taxes on petrol and diesel, and instead makes it more expensive for you to do anything else? Goa made the grade, and has not yet seen the impact — of lower consumption due to the higher taxes. Other states, which are more dependent on the fuel revenue than Goa, might not be able to comply. Regardless, it is highly unlikely that we`ll stay wedded to a low petrol price if it means higher taxes and prices elsewhere.
State VAT is only one part of the tax problem — a larger chunk is the centre`s ‘‘excise duty’‘ which adds Rs. 14.78 to the petrol price, and which if brought down could make life a little easier for those of us that travel in petrol vehicles. So why can`t the states and centre cut taxes together?
The central government isn`t earning much more than it did, and if you take away some tax revenue, the gap between income and expenditure — a wide one already — will widen further.
The second argument then is: the government needs to spend less. That it does. It spends a lot of money just paying the oil companies for their taking losses on diesel and kerosene. In effect, a portion of what it collects as tax on that fuel goes back into paying for the losses incurred on these fuels. Yes, the government could cancel them out — reducing the subsidy while at the same time cutting taxes on diesel. But that won`t touch the petrol price — which isn`t subsidized, and the losses due to a cut in taxes won`t be nullified in any other way.
Why can`t the government cut taxes anyhow? Cutting government revenues is a problem of optics. Imagine being told that you must take a cut in salary, because the government just cut your income tax rate by 20% and inflation is only 10%. This is not acceptable to most people, although they might universally agree that a tax cut puts more in their pocket than earlier. A drop in revenue, for the government, is unthinkable, even if they did manage to cut expenses.
...

Why the petrol price hike is a good thing
Petrol prices were raised again recently, by Rs. 7.5 and the hike leaves the country seething, except those that drive diesel cars. And to make the diesel owners wince a little, the government will decide the fate of that fuel too, in a meeting soon. While there is outrage about this ‘‘unprecedented’‘ price hike, let me play devil`s advocate and temper down some of the most vehement arguments against this increase.
With a tax of Rs. 26 per litre, can they not reduce taxes? Goa, for instance, has cut state taxes to zero; this gives the Goan petrol pump the ability to sell petrol at Rs. 61, a good Rs. 12 less than the Delhi price of Rs. 73. How, though did the brand new Chief Minister, Mr. Manohar Parrikar do it?
He replaced the lost revenue on petrol by increasing taxes and fees everywhere else. After the monsoon session, you will have pay a toll tax just to enter Goa. Alcohol will be more expensive. A power of attorney that used to cost Rs. 25 will now cost Rs. 500. A 10% luxury tax now applies to beauty parlours. Cars get more expensive with entry taxes, VAT increases and higher road taxes.
So do you really want that, fellow Indians? That the government cuts taxes on petrol and diesel, and instead makes it more expensive for you to do anything else? Goa made the grade, and has not yet seen the impact — of lower consumption due to the higher taxes. Other states, which are more dependent on the fuel revenue than Goa, might not be able to comply. Regardless, it is highly unlikely that we`ll stay wedded to a low petrol price if it means higher taxes and prices elsewhere.
State VAT is only one part of the tax problem — a larger chunk is the centre`s ‘‘excise duty’‘ which adds Rs. 14.78 to the petrol price, and which if brought down could make life a little easier for those of us that travel in petrol vehicles. So why can`t the states and centre cut taxes together?
The central government isn`t earning much more than it did, and if you take away some tax revenue, the gap between income and expenditure — a wide one already — will widen further.
The second argument then is: the government needs to spend less. That it does. It spends a lot of money just paying the oil companies for their taking losses on diesel and kerosene. In effect, a portion of what it collects as tax on that fuel goes back into paying for the losses incurred on these fuels. Yes, the government could cancel them out — reducing the subsidy while at the same time cutting taxes on diesel. But that won`t touch the petrol price — which isn`t subsidized, and the losses due to a cut in taxes won`t be nullified in any other way.
Why can`t the government cut taxes anyhow? Cutting government revenues is a problem of optics. Imagine being told that you must take a cut in salary, because the government just cut your income tax rate by 20% and inflation is only 10%. This is not acceptable to most people, although they might universally agree that a tax cut puts more in their pocket than earlier. A drop in revenue, for the government, is unthinkable, even if they did manage to cut expenses.
...

That post was for those were looking for the alleged Rs 36,000 crores....

Dragonbhat

I think you are looking at the situation with a narrow lens. Apart from price there are issues relating to delay in capex approval and how it will be viewed in future. How is it linked with production is not laid down at all so if tomorrow something adverse happens in the reservoir belonging to GoI then how can RIL idemnify?

ONGC is starting its project in KG Bason alongwith Cairn ona completley different profit sharing formula with the private enterprise.

Actually because of the stance of GoI and the delays even the roadmap beyond 2014 is not clear.

ONGC will start the project after asseing two more drills but has indicated that the price cannot be less than US$ 5.25 per mmBtu.

Actually the current rate of the US$ should make the price of US$ 4.24 per mmBtu attractive enough however I think it is not just the pricing issue involved here. Also RIL needs some marketing freedom maybe beyond some quantity at least from 2014 onwards.

Else RIL I suppose has no option but to bide its time until 2014....

Bank deposits, debt were Reliance Ind`s choice to park money
Arvind Jayaram
RIL trebled its investments in certificates of deposit with scheduled banks. This was a departure from the previous year, when the company parked most of its money in mutual funds.
BL Research Bureau:
Just like ordinary investors, Reliance Industries (RIL), the most cash-rich company in the private sector, played it safe with its investments in 2011-12.
Its latest annual report shows that it sharply increased its time deposits with banks and invested more in debentures from institutions such as HDFC this year. It also moved money out of fixed maturity plans (close end mutual funds) to park it in short-term debt funds that allow any-time withdrawals.
Over the year, RIL trebled its investments in certificates of deposit with scheduled banks. This was a departure from the previous year, when the company parked most of its money in mutual funds. The company invested Rs 15,720 crore in certificates of deposit in 2011-12, compared with Rs 4,632 crore the previous year. Interest rates on certificates of deposit rose steadily from 7.3 per cent to 11.5 per cent last year, as a scramble for deposits prompted banks to raise rates for large corporates.
Another Rs 6,247 crore was invested by the company in debentures and bonds. This was up 35 per cent over 2010-11. RIL`s two largest bond buys were of Housing Development Finance Corporation (Rs 1,822 crore) and IDFC (Rs 1,060 crore).
RIL`s mutual fund investments fell 0.5 per cent to Rs 5,057 crore during the fiscal. But within mutual funds, RIL trimmed exposure to fixed maturity plans and switched to short-term debt and dynamic bond funds. These are actively managed to capitalise on rising rates on corporate paper. It invested Rs 1,021 crore in bond funds from Birla Sunlife, DWS, ICICI and LIC mutual funds.
It made minimal bets on government securities, at Rs 5 crore.
As of March 2012, the company`s cash balances and short-term investments totalled Rs 66,627 crore. This was a 60 per cent jump from the same date last year. According to the company`s annual report, its current investments rose by 87 per cent to Rs 27,029 crore. Apart from this, it also chose to hold to plenty of liquid cash. After investments, the company`s cash and bank balance registered healthy growth to Rs 39,598 crore.
arvind.jayaram@thehindu.co.in

http://t.in.com/5n6K...

Scratched gramaphone record!...

avin57

The scratched gramaphone is ranting. Anyway he gave a target of 850 abd is still boasing and dancing round and round in circles.

Anyway I am NOT a buyer in this market including RIL however on the way up whenever the time is ripe I will once again pick a portfolio of stocks including banks which I sold off anf they have come to my price to book valuations.

Also if RIL collapses even further it is nothing great in the global collapse being witnessed. Even if you look at the currency markets US Dollars is 250 to 750 pips stronger than ALL global currencies for NO fundamental reason.

Once again Indian Rupees will be well under pressure on Monday and Indian investors are out of liquidity to support the market at ANY price.

I might take a shorterm call around the time of the RIL AGM.

It is not RIL but the policies of this GoI I am betting against not that it would have made much difference with the kind of global uncertainty at this point of time where a paper currency like the US$ is gaining strenght and crating huge volatility.

If QE3 in USA is announced it may be a time to take a call in the market and this time I may try out with banking stocks for a longer term outlook and faster recovery....

babboo-q

It is YOU who raised the issue that CAIRN pays royalty whereas RIL doesn`t. In fact ONGC has been footing the ENTIRE royalty whereas CAIRN was royalt free. When GoI overturned this CAIRN initiated arbitration proceedings which was compromised as the CAIRN VEDANTA deal was blocked.

So YOU are quite simply the moron hurtling false allegations....

TondonA

I wonder why so many issues being raised here? Even above any court of law is the mutual agreement to the signatory of the parties under the PSC and between the various agreements between the end users.

The way the currency markets are movong today we could be staring at Rs 55 to a US$ even at a lower crude price. Is it better to pay more money overseas or is it better to pay in Indian Rupees for domestically produced energy.

ONGC and ESSAR get a price of US$ 5.25 per mmscmd and have stated in the past that a production similar to KG D6 Basin cannot be less than US$ 6 to US$ 7. DGCH and ONGC are quite conversant about the COST so trying to enforce an agreement outside the PSC has a thin line to legal and illegality. The contractor may well have deliberately not taken steps to ramp up gas production due to the capex issues, discoveries made no discoveries and revised FDPs being struck down and sticking to the guns of frilling four wells without capex approval which was under dispute.

Even regarding CAG reports it only proves that a private enterprise which puts its own monies on stake would work differently to a PSU.

Now I think the time for delaying tactics by GoI is over and even if it has to buckle in a little it should do everything to restore the growth of this nation, give up dependence on foreign oil and gas as much as possible and let there be free trade.

At the end of the day competition (with the overseas players) should be left for the market to determine.

Time to decide whether wealth should flow out of this nation or remain here even if it is with underperfoming RIL for sometime. Afterall ONGC is with CONOCOPHILIPS so it is upto GoI to measure up with RIL.

...

hkre

Banks also do the same. RIL invests in first glass GoI bonds, FDs and Mutual Funds. Through mutual funds I suppose RIL can control the rest of the market when the time comes.

RIL cannot LEND money to anyone since it does not have license for banking as yet although it has interest in a subsidiary which does lend. Hence the other income component might be considered core if the income becomes regular in nature for two years....