Mumbai, June 25
Public sector oil marketing companies are expected to be major beneficiaries from the government’s decision to free petrol prices, according to analysts. The companies were expected to lose a whopping Rs 1,10,000 crore this year, according to a statement made by Minister for Petroleum and Natural Gas Murli Deora in Parliament.

Deora had told the Lok Sabha that the ‘under-recoveries’ were calculated estimating international crude prices at $85 per barrel and the rupee-dollar exchange rate at Rs 45/dollar.

Stock market investment advisory firm, Equitymaster, in its analysis said ‘under-recoveries’ in petrol to the tune of Rs 3.70 per litre would be done away with following the hike of an equivalent amount which comes into effect immediately.

Equitymaster also noted that public sector oil marketing companies were losing Rs 3.80 on every litre of diesel, Rs 18.80 on every litre of kerosene and Rs 261.90 on every LPG cylinder before today’s hike. Total losses per day were estimated at Rs 220 crore.

The losses are expected to fall by half following today’s price hikes. From Rs 90,000 crore losses on lower than estimated crude prices, under-recoveries are expected to drop to Rs 53,000 crore.

According to Deven Choksey of K R Choksey Securities, today’s hike will boost the bottom line of major public sector oil companies. ONGC would save Rs 4,000 crore, Oil India Rs 700 crore while GAIL would benefit by Rs 600 crore, Choksey told a television channel. He further added that public sector refining companies like BPCL would add 23 per cent to its bottomline while Hindustan Petroleum and Indian Oil would benefit by 15 per cent and 7 per cent, respectively.

The government’s decision to hike fuel prices follows a recommendation to that effect by the Kirit Parekh committee appointed by the government earlier this year. The committee had recommended linking the prices of petrol and diesel to market rates. It had also recommended a partial increase in the price of kerosene to Rs 6 and Rs 100 per LPG cylinder.

Analysts are, however, skeptical of the government fully linking diesel prices with market rates. “…chances of deregulation of diesel prices are fairly slim on account of its impact on inflation given that 15 per cent of the total diesel consumption is for agricultural purposes,” Deepak Pareek, an analyst with Angel Securities said in his report on the Kirit Parekh committee recommendations.

The analyst also pointed out that the freeing of auto fuel prices would result bring in private sector players like Reliance Industries and Essar Oil. RIL, which had set up petrol pumps in different parts of the country early last decade, exited the business as the government did not extend fuel subsidy to petrol sold by private companies.

However, the company is expected to re-open the pumps following the government measures. Despite unfavourable pricing, RIL managed to garner a 14 per cent market share in auto-fuels, Pareek pointed out.

Mumbai, June 25
An Anil Ambani group firm today announced that it signed an agreement for availing of gas from Mukesh Ambani-led RIL in accordance with a Supreme Court direction, but supply will be subject to government policy. The announcement of the deal comes within weeks of the warring brothers signing a truce agreement for creating a "harmonious environment of cooperation and collaboration" between their respective groups.

Shortly after the deal was signed today between RIL and RNRL, the agreement was submitted to the government for necessary action, Oil Ministry sources said but clarified that neither any quantity, duration of gas supply, specific project nor price was mentioned.

Although neither sides gave details of the revised gas supply agreement, sources in Reliance Natural Resources Ltd said it was for a period of 17 years for projects totalling 8,400 MW at a government-determined price of $4.2 per mmBtu.

When contacted, RIL spokesperson declined to give details saying that the contract was as per the direction of the Supreme Court and in accordance with government's policies. The government has fixed a price of $4.2 per mmBtu for five years for gas from RIL's KG D-6 fields.

The government sources further clarified that it was the master agreement about the intent to supply gas and any specific details ranging from pricing to tenure and projects could be contained only in GSPA. It may be recalled that only last week the Oil Ministry officials were reported to have said that any gas supply to Anil's group firm could be only closer to commissioning of any project.

They, however, said today that it was for the Empowered Group of Ministers to see if an exception can be made for Anil Ambani group and gas could be reserved for his project.

RNRL had gone to court against RIL in 2006, seeking 28 mmscmd of gas for its proposed Dadri plant at a rate of USD 2.34 per mmBtu - a demand which was rejected by the Supreme Court citing that government had the last word on utilisation and pricing of gas.

The two brothers reconciled their differences on May 23, when they scrapped a non-compete agreement that allowed flexibility to expand into areas hitherto reserved for each of them and aimed at "creating overall environment of harmony, cooperation and collaboration between the two groups." Propelled by the news of a revised gas pact with RIL, RNRL shares immediately surged 8 per cent intra-day but settled 3.29 per cent up at Rs 65.95 a piece.

RIL shares were 1.14 per cent up at Rs 1,063.25 a share on the Bombay Stock Exchange.— PTI

New Delhi, June 25
Describing the UPA government’s decision to deregulate petrol and diesel prices as one of the major economic reforms of recent times, the government’s chief economic adviser Kaushik Basu today said this move will result in lowering prices in six to nine months.

However, he admitted that the move to increase prices of LPG and kerosene will have an immediate positive impact on inflation and predicted an increase of 0.9 percentage points in the monthly wholsesale price index (WPI). “But, since these changes will cause the fiscal and revenue deficits to decline, they will exert a downward pressure on prices”, he said in a statement today.

According to Basu, though the immediate impact of this policy will be to increase inflation, in six to nine months “we will have lower prices than what would have happened in the absence of this much-needed reform.”

He said it will be completely wrong to describe the government’s decision to deregulate petrol and diesel as an act of raising prices. “It is one of the most major reforms of recent times and should have beneficial effects on the entire economy,” he added.

Basu explained that what the government had done is to put both diesel and petrol prices on a float. Prices will rise and fall in step with the international prices. For diesel, he said, there will still be a per-litre subsidy from the government, to keep the domestic retail price below market level. “But what is important is that it will no longer be a fixed price,” he underlined.

Basu said if there is a global shortage and the international price of crude rises from now on, this signal will be transmitted to the Indian consumer. “It will rationalise the way we spend money, the kinds and amount of energy we use, and the cars we manufacture. It is an important step in making India a more efficient, global player,” he said.

Washington, June 25
The US economy grew just 2.7 per cent in the first three months of 2010, much less than earlier projected, indicating a slower recovery.

The lower growth, as compared to last month's official projection of three per cent expansion in the first quarter, was mainly on account of smaller gains in consumer spending.

"Real gross domestic product - the output of goods and services produced by labour and property located in the United States - increased at an annual rate of 2.7 per cent in the first quarter of 2010," according to the final estimates released today by the US Bureau of Economic Analysis (BEA). Analysts were expecting first-quarter economic growth of three per cent or more.

The latest growth figure of 2.7 per cent, based on more complete source data, comes close on the heels of the US Federal Reserve cautioning that the economic recovery is being impacted by overseas problems.

In the first quarter, real personal consumption expenditures (PCE) increased three per cent against last month's estimate of 3.5 per cent, official data showed.

PCE went up 1.6 per cent in the quarter ended December, 2009.

In the last three months of 2009, the world's largest economy witnessed a growth of 5.6 per cent.

"The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports and non-residential fixed investment...," BEA noted.

Even though the US has been on the recovery path since late last year, the country's economic activities have been adversely hit by global developments, especially the spiralling debt turmoil in Europe.

After leaving key rates unchanged at near-zero levels on Wednesday, the Fed said that overseas problems have resulted in less conducive financial conditions for the country's economic growth. — PTI

New Delhi, June 25
The government today said it would allot 3G spectrum to successful bidders on September 1, and rejected the criticism of faulty auction process leading to high prices by leading operators.

The government also said that the Broadband Wireless Access (BWA) spectrum would be allocated to all the players, including Infotel Broadband, which has been acquired by Mukesh Ambani-led Reliance Industries (RIL), next week.

"While the overall proceeds from the auction for 3G and BWA spectrum at over Rs 1,06,000 crore have exceeded all expectations, an equally important aspect is that the true market value of the spectrum was determined through an efficient and transparent process," Telecom Secretary PJ Thomas told reporters here.

Country's largest mobile operator Bharti Airtel, which had won 13 out of 22 3G circles, had criticised the auction process and had said, "We would like to point out that the auction format and severe spectrum shortage, along with ensuing policy uncertainty, drove the prices beyond reasonable levels. As a result, we could not achieve our objective of pan-India 3G footprint in this round."

Similarly, in case of BWA spectrum auction, the company had pointed out, "A combination of scarcity of slots and the auction format, once again, resulted in extremely high price levels." Other operators, including Vodafone, had also echoed views and had pulled out of the auction mid way citing irrational bidding. — PTI

New Delhi, June 25
The Ministry of Human Resources Development has finalised new central scheme for full interest subsidy during moratorium on educational loans for students of economically weaker sections (with family income under Rs 4.5 lakh annually).

The scheme offers loans at 4 per cent interest rate for pay back of 6 to 12 years to students from EWS background. Other students can procure the loan at 7 per cent interest for the same period.

These loans would be available from scheduled banks under the Educational Loan Scheme of the Indian Banks’ Association (IBA) for pursuing courses of studies in professional/technical streams from recognised institutions in India.

The modalities have been finalised in consultation with the Indian Banks’ Association.

Under the scheme, a proof of income is required to be certified by the authorities to be designated by the state governments. Accordingly, the ministry has written to all Chief Secretaries to intimate the designated authority to the District Level Consultative Committee so that banking authorities at the branch level, where students would be approaching for availing the benefit of the scheme, would be aware of the same.

All scheduled member banks of the IBA have also been advised to take necessary action to adopt and implement the scheme so that the benefits of the scheme accrue to the eligible students. Canara Bank is the nodal bank for the member banks of the IBA for claiming reimbursement of interests credited to student accounts.

The details of the scheme are also available on the website of the ministry at www.education.nic.in.