Govt paves the way for Rs 15,000 cr ONGC sell-off

In a move that will help the government kick start another big-ticket disinvestment, that of 5% in Oil and Natural Gas Corp (ONGC) and rake in close to Rs 15,000 crore, the petroleum ministry has finalised the new oil subsidy-sharing formula after hectic consultations with the finance ministry and the chief economic adviser.

This comes close on the heels of the success of the recent round of 10% divestment in Coal India Ltd (CIL) that fetched the government a massive Rs 24,557 crore, or nearly half of the budgeted sell-off proceeds of Rs 43,425 crore for 2014-15.

The ONGC stake sale will bring the government closer to achieving its disinvestment targets for the first time in many years.

Under the new subsidy-sharing formula, ONGC will have to pay only Rs 3,252 crore to state-owned fuel marketing companies (Indian Oil, BPCL and HPCL) for the third quarter (October-December 2014) and virtually nothing for the fourth quarter (January-March 2015), top government sources said.

“After consideration of suggestions received from the chief economic adviser, the formula for burden sharing as approved by the oil ministry calls for no contribution towards subsidy for crude oil price less than and equal to $60 a barrel and 85% contribution for crude oil prices exceeding $60 a barrel and less than or equal to $100 a barrel,” sources said. “The contribution will be 90% for crude oil price exceeding $100 per barrel.”

With the average price of Indian basket crude during October-December at $75.17 per barrel and the average rupee-dollar exchange rate at Rs 62 to a dollar, the total contribution of ONGC and OIL during the third quarter of 2014-15 stands at Rs 3,746 crore — Rs 3,252 crore for ONGC and Rs 494 crore for OIL.

And with the average price of the Indian crude basket at $46 a barrel in January 2015, it is unlikely to exceed $60 a barrel, thereby zeroing the subsidy burden on ONGC and OIL.

Public sector oil marketing companies have incurred an under-recovery of Rs 15,981.28 crore on the sale of diesel, PDS kerosene and subsidised domestic LPG during the third quarter.

The oil ministry has asked the finance ministry to release its share of Rs 2,184 crore towards the subsidy-sharing formula to oil marketing companies.

For the April-September period of 2014, out of the total cash assistance requirement of Rs 19,183.33 crore, cash compensation of Rs 17,000 crore was sanctioned, leaving a gap of Rs 2,183.33 crore.

The time of a stake sale in ONGC is yet to be announced but oil minister Dharmendra Pradhan said that it “was very much on the list of disinvestment candidates for 2014-15” but the government will “factor in market conditions” for the timing of the sale.

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Punj Lloyd to acquire shares of Indonesian Coal Company

Punj Lloyd is a renowned name in coal industry as it specializes in providing EPC services for the complete civil construction and holds expertise in balance of power plant packages. Perhaps the company also offers other ancillary services in terms of developing optimum design for auxiliary packages like coal and ash handling, HVAC, water systems, fire systems, electrical and C&I. 

By route of its subsidiary Sembawang Engineers and Constructors that are based out of Singapore, Punj Lloyd endeavors to acquire 50 per cent stake in a thermal coal mine company in Indonesia. Punj Lloyd coal mine agreement with Indonesian company though has created sensation in the industry yet besides the location i.e. Central Kalimantan, nothing could be ascertained in terms of the deal. However after various attempts, no comment could also be arranged from any official of the company. Nevertheless, Punj Lloyd reviews for a mining firm, based in Barito Utara District of Indonesia was observed where resources of 134 million tonnes and its potential in situ reserves at 57 million tonnes were estimated.

With construction of Jindal plant, Punj Lloyd could have excelled among the leading BOP Solution Providers in India as it was the largest single coal — based power plant in India that was concluded in 10 months. Although as per industry standards, it was proclaimed that such construction was carried on at a five month faster speed. Other landmark project for the 4 X 250MW plant includes civil, structural and architectural work, supply, fabrication, erection of complete steel structures, power house, auxiliary buildings, cooling towers, drainage and roads.