NEW DELHI: Budget 2015-16, to be presented in Parliament on Saturday, is likely to be a major positive for upstream oil and gas companies, including Oil and Natural Gas Corporation (ONGC), but might not be a game-changer for downstream firms such as Indian Oil Corporation (IOC).
Analysts expect budgetary measures to be focused on providing clarity on the formula for sharing subsidy burden on downstream companies on account of subsidised sales of cooking gas and kerosene. Upstream firms had to bear up to 60 per cent of the Rs 1,39,000 crore of losses of oil marketing companies (OMCs) in the previous financial year.
The petroleum ministry has proposed a new subsidy-sharing proposal by which upstream companies would not make any contributions towards subsidy burden if crude prices are at or below $60 a barrel. They would bear 85 per cent subsidy burden when the crude oil price exceeds $60 a barrel and is less than or equal to $100 a barrel. In case crude prices exceed $100 a barrel, the upstream firms would bear 90 per cent burden.
“A concrete subsidy-sharing formula would provide visibility over earnings of upstream oil companies and hence, it would be positive for companies like ONGC, Oil India and GAIL (India),” said Rahul Dholam, senior research analyst at Angel Broking.
He added the upstream subsidy burden might be reduced with crude prices expected to remain low and the government looking to divest stake in upstream companies.
ONGC reported a 14 per cent decline in earnings at Rs 20,302 crore in the quarter ended December 2014, while OIL income dropped 20 per cent to Rs 2,400 crore. Income of gas utility GAIL dipped seven per cent in the quarter.
Another major positive expected in the Budget for upstream firms is the likely announcement of introduction of customs duty on crude oil imports. “The government is also likely to reintroduce 2.5-5 per cent customs duty on import of crude oil, which will be positive for Cairn India and negative for private refiners and OMCs,” said Dholam.
Business Standard had reported on February 5 that customs duty on crude oil, scrapped in 2011 amid high global oil prices, could be restored in the coming Budget as crude oil prices have been weakening. The finance ministry is considering re-imposing the duty at a rate of three per cent in a move that might fetch the exchequer around Rs 14,000 crore in the next financial year and help the government meet its fiscal deficit target at 3.6 per cent of the GDP in 2015-16.
According to consultancy firm BMR Advisors, the Budget is expected to have measures related to starting the 10th round of New Exploration Licensing Policy to ensure oil and gas acreages are available round the year and not in a cyclical manner; clarity on whether the licensing framework should shift from cost-sharing to revenue sharing; deregulation of liquid petroleum gas and kerosene; reinstating tax holiday under Section 80-IB for mineral oil including natural gas and clarify that oil wells should be considered as “plant & machinery” and not “building” for claiming income tax depreciation.
(Source: Business Standard, February 26, 2015)
CENTRE WORKING ON SPEEDY ARBITRATION WITH OIL & GAS FIRMS
NEW DELHI: The government is considering a series of measures to speed up resolution of numerous disputes with oil and gas companies, as well as a Rs 44,786 crore plan to expand India’s strategic petroleum reserves by 12.5 million tonnes, Oil Minister Dharmendra Pradhan said on Wednesday.
The minister said the directorate general of hydrocarbons (DGH) has recommended a raft of proposals to improve and speed up resolution of disputes with oil and gas companies, which are locked in an increasing number of arbitration cases.
The cases include issues such as timely appointment of arbitrators and conciliatory proceedings in the sector that has increasingly turned contentious, with the arbitration disputes almost doubling during 2011-15 compared to the preceding five years.
The oil ministry is locked in four arbitration cases with Reliance Industries, which complained that the government was going slow in appointing arbitrators in disputes.
“The said proposals of DGH shall be approved if they are in conformity with the views of the ministry of law and justice as well as in conformity with the provisions of PSCs (production sharing contracts between the government and the explorer),” Pradhan told Parliament.
The proposals include encouraging conciliation proceedings; examination by multi- disciplinary team and executive committee of DGH on potential litigations; timely appointment of arbitrators by the government; appointing arbitrators having domain expertise; and delegating powers to DGH to create its own panel of law firms or advocates.
In the past 15 years, 21 arbitration cases have been initiated with respect to the production sharing contracts, of which 10 cases began in 2011-15, six cases in 2006-10 and the rest in the preceding five years.
Of the nine cases that are pending with arbitrators, four are with RIL and one each with Videocon Industries, Assam Company India, Hindustan Oil & Exploration Company, NIKO Resources and Cairn Energy.
(Source: The Economic Times, February 26, 2015)
OIL REGULATOR FOR LOWER MARKETING MARGIN ON GAS: DHARMENDRA PRADHAN
NEW DELHI: Oil regulator PNGRB has suggested a maximum marketing margin on natural gas sold to fertilizer and LPG plants of about 11.5 cents, less than what state-run GAIL and Reliance Industries currently charge from gas users.
“The Petroleum and Natural Gas Regulatory Board (PNGRB) has recommended a range of Rs 150-200 per thousand cubic meters of gas ($ 0.115 per million British thermal unit) as a marketing margin for domestic gas being supplied to fertilizer and LPG plants,” Oil Minister Dharmendra Pradhan said today.
After grappling with the issue for two years, the Oil Ministry had on November 21, 2013, ordered that the margin to be charged, over and above the gas sale price, should be fixed between the seller and buyers in all sectors other than urea and LPG.
The Ministry had decided that government needs to regulate the marketing margin for supply of domestic gas to urea and LPG producers, as the same has implications on government subsidy outgo. Both urea and LPG are subsidised.
The regulator on January 21 last year called for bids from consultants “to assist it in the task of determination of marketing margin for supply of domestic gas to urea and LPG producers for recommending this to the government.”
“PNGRB has submitted its recommendations to the Ministry on January 20, 2015,” Pradhan said. “The recommendations of PNGRB are under examination in Ministry of Petroleum and Natural Gas.”
User ministries like Department of Fertilizer will be intimated after a decision is taken in the matter, he said.
Presently, marketing margins charged by producers and sellers of gas range from 11 cents to 20 cents per mmBtu.
RIL charges 13.5 cents per mmBtu as marketing margin over and above the government-set price of $ 4.205 for its eastern offshore KG-D6 gas.
State-owned gas utility GAIL India Ltd charges Rs 200 per thousand cubic metres as effort money or marketing margin from consumers like fertiliser plants and power stations. This is for selling natural gas sourced from fields that Oil and Natural Gas Corp (ONGC) had got from the government on nomination basis (called APM gas).
However, a distinction has now been made in the gas produced from fields given to ONGC on nomination basis. Any gas that came into production after 2010 is being treated differently than APM gas for which the government decides the price as well as marketing margin.
But for gas from the fields of ONGC that came into production after 2010, it charges nearly double the marketing margin as it treats them as non-APM gas.
It charges a similar marketing margin for gas from western offshore fields of Panna/Mukta and Tapti.
(Source: The Economic Times, February 26, 2015)
ATF CHEAPER THAN PETROL AND DIESEL DUE TO LOWER EXCISE DUTY: DHARMENDRA PRADHAN
NEW DELHI: Aviation Turbine Fuel (ATF), used in aircraft, costs less than petrol and diesel as the common man auto fuels attract higher excise duty levy, Oil Minister Dharmendra Pradhan said today.
While jet fuel (ATF) in Delhi costs Rs 46,513.03 per kilolitre or Rs 46.51 per litre, petrol is priced at Rs 57.31 a litre. Diesel costs Rs 46.62 a litre.
“Retail selling price of ATF is cheaper than petrol and diesel primarily due to higher excise duty levied by the central government on petrol and diesel in comparison to ATF,” he said in a written reply to a question in Rajya Sabha here.
After four duty hikes totalling Rs 7.98 per litre since November, petrol now attracts the highest ever excise rate of Rs 16.95 per litre. Excise duty on diesel is Rs 9.96 per litre. On the other hand, ATF attracts 8 per cent duty.
“Petrol and diesel are primarily automotive fuels used in vehicles while ATF is used in aircraft turbines. The applications of automotive fuels and aircraft fuel are totally different and hence, comparison with respect to superiority of these fuels over one another cannot be made,” he said.
The government has freed pricing of all three – petrol, diesel and ATF– from its control and rates are indexed to international markets.
Pradhan said deregulation of petrol and diesel has led to substantial reduction in prices.
“The retail selling price of petrol which was Rs 73.60 per litre at Delhi on July 1, 2014 is now Rs 57.31 per litre. Similarly, the retail selling price of diesel has been reduced from Rs 58.97 per litre at Delhi on August 31, 2014 to Rs 46.62 a litre.”
While price of petrol and diesel has been reduced by Rs 16.29 a litre and Rs 12.35 per litre respectively, the increase in excise duty was Rs 7.98 a litre and Rs 6.70 per litre respectively, “indicating that a major component of the benefit of reducing international crude oil prices has been passed on to the consumers,” he said.
(Source: The Economic Times, February 26, 2015)
CONSUMERS WERE BENEFITTED FIRST; EXCISE DUTY CAME LATER: OIL MINISTER DHARMENDRA PRADHAN
NEW DELHI: Under attack for hiking excise duty on petrol and diesel, government today said the step was taken to save money for developmental works after “substantial” benefits of reducing global crude prices were passed on to consumers by effecting price cuts.
“The benefits of lower crude prices were first passed on to consumers…We had to raise excise duty to save some money for the national exchaquer to carry out development works,” Petroleum Minister Dharmendra Pradhan said in Rajya Sabha.
Noting that the international crude prices came down to below USD 50/barrel recently from USD 111 per barrel during the Iraq crisis, Pradhan said consumers of the country have “substantially” gained as a result of the reduction in retail selling prices of petrol and diesel.
Petrol prices have come down from Rs 73.60 per litre in Delhi in July last year to stand at Rs 57.31 per litre now. At the same time, the reatil selling price of diesel fell to Rs 46.62 per litre now from Rs 58.97 a litre in August, 2014.
“While the price of petrol and diesel in Delhi has been reduced by Rs 16.29 per litre and Rs 12.35/litre respectively, the increase in excise duty on petrol and diesel is Rs 7.98 per litre and Rs 6.70 per litre only indicating that a major component of the benefit of reducing internatiobnal crude prices have been passed on to the consumers,” he said.
Replying to a supplementary, he said one of the primary objectives behind the increase in excise duty was to fund the infrastructure development programme of the government, particularly for buidling roads.
“Allocation of these resources to road sector will also spur economic activity and employment generation arising out from the road construction,” Pradhan said.
Replying to another question, he said the difference in the price of petrol in Maharashtra and Delhi was mainly due to the fact that the western state levies local body tax.
(Source: The Economic Times, February 26, 2015)
OIL MINISTRY RELEASES KELKAR REPORT ON GAS PRICES
Given the government’s reluctance to implement the Rangarajan committee’s recommendation of doubling the gas prices to $8.4 per mmBtu, the petroleum ministry making the September 2014 Kelkar panel’s report on the oil sector reform public just ahead of the Budget session of Parliament is interesting since one of the key Kelkar recommendations is that gas prices be completely freed up by 2017. In which case, the most likely interpretation is that, with the Delhi assembly elections out of the way, the government realises it is now time to get down to business. As Kelkar has pointed out, if investors are to come up with long-term investment plans, they need to know what prices are—the kind of uncertainty seen over the last couple of years has more or less resulted in gas exploration coming to a halt. Indeed, since crude oil is internationally priced anyway, it was never clear why gas prices were curbed. The recommendations have other implications as well since you cannot have free-market pricing if markets are constrained—hence a key Kelkar panel suggestion is that the current gas allocation policy be scrapped. Were that to be done, for instance, prices of city gas would also go up. At some point, the same logic of market pricing, and the damage not following this will cause, will have to be extended to other fuels like coal as well—it is difficult to envisage vibrant commercial mining of coal if prices are not freed up.
Apart from leaving natural gas pricing to markets, the panel has made other important suggestions to fix the sector. For one, to improve India’s attractiveness, it recommends enough funds be provided to get independent studies done to map India’s hydrocarbon reserves—this will be helpful for firms deciding whether or not to bid. On-tap licensing instead of the once-a-year bid rounds is another sound suggestion, along with allowing contracts to be extended till the end of their natural life, as is the global practice – many large producers like Cairn are suffering on this account. And, finally, the government simply has to start trusting firms on their costing instead of fighting as it is right now—while Kelkar is opposed to revenue-sharing in place of current profit-sharing model, FE has long argued India is unlikely to accept company costs as long as there is a CAG process, and so revenue sharing is a good way out. The panel estimates that if its recommendations are implemented, annual savings of $70-80 billion can be made, with the import dependence on oil and gas going down from 62% in 2012 to 39% by 2030—in a business-as-usual scenario, it will rise to 77%. The choice seems an obvious one.
(Source: The Financial Express, February 26, 2015)
USE CHEAP CRUDE TO FIX FISCAL, TRADE DEFICITS: RBI
Three days ahead of the Budget, the Reserve Bank of India (RBI) has told the government that the fall in international crude price is too valuable an opportunity to miss in terms of getting fiscal deficit and trade deficit in place. Listing all previous crises -including the Asian financial crisis, the dotcom bust, the subprime crisis, the Greek sovereign default and the US Fed taper -RBI deputy governor H R Khan said that India was hurt not because history repeated itself but because we have not learnt from history. Quoting former governor D Subbarao on India’s failure to learn from history , Khan said, “It is imperative for EMDEs like India to internalize past crises and take effective steps to safeguard against future shocks.”
Speaking at a conference organized by Symbiosis Centre for Management Studies, Pune, Khan said that current account deficit (CAD) for FY15 was expected to be lower than last year’s 1.7% because of the steep fall in crude prices. “India has witnessed a net inflow of about $25 billion in the form of foreign direct investment and about $36 billion as portfolio flows, as against about $21 billion and outflows of $1 billion respectively in the corresponding period of the last year. During 2014-15, capital flows would be more than adequate to finance CAD,“ he said.
He, however, warned that the good times may not last. “As economic slack diminishes with recovery in the domestic economy , the upturn in the investment cycle will require higher non-oil, non-gold imports. Easing of norms for gold imports could lead to a widening of CAD in 2014-15. Even though crude prices are pro jected to stay low, the re-emergence of geopolitical risks, particularly in Middle East and Ukraine, may keep oil prices relatively firm and, thus, may have implications for India’s oil import bill. This may pose upward risks to India’s CAD.”
Khan said that transmission of impact of global crisis is accentuated with domestic vulnerabilities. “The impact of May 2013 announcement of the Fed Reserve was more pronounced due to domestic vulnerabilities. The CAD had increased from about 1% of GDP in ’06 to nearly 5% in ’13, real exchange rate had appreciated, fiscal deficit and inflation had gone up. The economy had slowed down although the level of foreign reserves was considered comfortable,“ he said.
(Source: The Times of India February 26, 2015)
GOVT LINKS ONGC SELLOFF TO OIL AT $70
The government would wait till crude prices stabilize at around $70 a barrel before selling 5% in ONGC, moving disinvestment in the country’s most profitable company to the 2015-16 fiscal. Government sources on Wednesday said the “time was not ripe“ for offloading stake in refiner-marketer IndianOil, though the matter was “in discussion“ within the government. The ONGC selloff was initially supposed to have happened in November 2014 and was estimated to fetch some Rs 140 billion. But falling crude prices changed the valuation template and took a toll on the company’s financial health.
ONGC reported a 50% decline in net profit for the December quarter as low oil prices pulled down its income and forced exploration costs to be written off. Net profit for the quarter stood at Rs 35.71 billion against Rs 71.26 billion during the same period of the previous year. Total income for the quarter declined 14% to Rs 187.15 billion. The company wrote off Rs 24.75 billion towards exploration costs, compared to a write-off of Rs 18.10 billion during the same period in the previous year.
Crude prices dropped to $46 a barrel early last month from a level of $111-115 in June 2014, after Opec swing producer Saudi Arabia initiated a price war to guard its market share against rising supplies from new players such as the US shale industry and Russia. The prices have shown a mild uptick recently , climbing past $59 a barrel on Wednesday after Chinese manufacturing expanded and the Saudi oil minister said demand was growing. Analysts generally expect oil prices to stabilize at $70-80 by end of the year. At a price level of $60 or below, ONGC is left with very little after bearing its share of fuel subsidy. The company does this by giving discount on crude to state-run refiners. Then it has to pay royalty and cess, besides tax and dividend.
(Source: The Times of India February 26, 2015)
EFFORTS MADE FOR FUTURE NATURAL GAS REQUIREMENTS
Petroleum Minister, Dharmendra Pradhan, informed the Rajya Sabha in a written reply that Government has taken several steps to improve the availability of gas in order to meet the country’s future natural gas requirements. These include revision in the price of domestic natural gas, intensification of domestic exploration and production activities through New Exploration Licensing Policy (NELP) rounds, development of shale gas policy framework, research and development of gas hydrate resources in the country, import of Liquefied Natural Gas (LNG), exploring possibility of transnational gas pipelines, clearance for exploration and development of some NELP blocks, exploration in the Mining Lease Area with certain conditions and acquisition of overseas oil and gas assets.
India is currently pursuing the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project to receive natural gas supply from Yolotan Osman (Galkynysh) fields in Turkmenistan. The length of the proposed pipeline is 1814 kms with a capacity of 90 Million Standard Cubic Meters per Day (MMSCMD) of natural gas in which India and Pakistan’s proposed share is 38 MMSCMD each and that of Afghanistan is 14 MMSCMD.
Two Government level agreements, viz., Gas Pipeline Framework Agreement (GPFA) and Inter-Governmental Agreement (IGA) were signed amongst the participating countries in December 2010. The Gas Sales and Purchase Agreement (GSPA) was signed between the buyers and the seller on 23.5.2012 and the Operations Agreement which deals with the issues of gas nomination, metering and allocation at delivery point was also signed on 8.7.2014. During the 20th Steering Committee Meeting held in February 2015, timelines were discussed for identification and selection of Consortium Leader and gas is expected to flow in pipeline within 3 years from the date of induction of Consortium Leader. Natural Gas procured through TAPI transnational pipeline project is envisaged to bridge the gap between demand and supply of natural gas to consumers in various sectors.
(Source: Indian Oil & Gas February 26, 2015)
PSU OMCs, OIL E&P STOCKS IN DEMAND
After an initial rally, key benchmark indices trimmed gains in morning trade. The barometer index, the S&P BSE Sensex, was currently up 163.92 points or 0.57% at 29,168.58. The market breadth indicating the overall health of the market was strong. Asian stocks edged higher, helped by better than expected Chinese factory activity data, the Federal Reserve’s flexible stance on US interest rates and the eurozone’s approval of reforms proposed by Greece.
Shares of PSU OMCs and oil exploration and production (E&P) companies edged higher.
Meanwhile, the finance ministry yesterday, 24 February 2015, said that the central government has accepted the recommendation of the 14th Finance Commission (FFC) to keep the States’ share of Union Tax proceeds (net) at 42%.
Foreign portfolio investors (FPIs) bought shares worth a net Rs 697.28 crore yesterday, 24 February 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) sold shares worth a net Rs 146.98 crore yesterday, 24 February 2015, as per provisional data.
The market may remain volatile in the near future as traders roll over positions in the futures & options (F&O) segment from the near month February 2015 series to March 2015 series. The near month February 2015 derivatives contracts expire tomorrow, 26 February 2015.
In the foreign exchange market, the rupee edged higher against the dollar on global risk-on sentiment.
Brent crude oil futures edged higher, helped by better than expected Chinese factory activity data, the Federal Reserve’s flexible stance on US interest rates and the eurozone’s approval of reforms proposed by Greece.
In overseas markets, Asian stocks edged higher taking their cues from Wall Street’s gains overnight triggered by Federal Reserve Chair Janet Yellen’s testimony to the Congress which was perceived as dovish by investors. US stocks edged higher yesterday, 24 February 2015, with the S&P 500 and Dow industrials closing at records, as the market read Federal Reserve Chairwoman Janet Yellen’s testimony before Congress as a reassurance that a rate hike might not occur until the second half of the year.
At 10:16 IST, the S&P BSE Sensex was up 163.92 points or 0.57% at 29,168.58. The index jumped 265.17 points at the day’s high of 29,269.83 in early trade, its highest level since 23 February 2015. The index rose 110.66 points at the day’s low of 29,115.32 in opening trade.
The CNX Nifty was up 53.75 points or 0.61% at 8,815.85. The index hit a high of 8,840.65 in intraday trade, its highest level since 23 February 2015. The index hit a low of 8,798 in intraday trade.
The market breadth indicating the overall health of the market was strong. On BSE, 1,247 shares gained and 689 shares fell. A total of 83 shares were unchanged.
The BSE Mid-Cap index was up 44.77 points or 0.42% at 10,769.47, underperforming the Sensex. The BSE Small-Cap index was up 66.95 points or 0.59% at 11,367.06, outperforming the Sensex.
The total turnover on BSE amounted to Rs 1835 crore by 10:15 IST, compared with turnover of Rs 175 crore by 09:25 IST.
Shares of PSU OMCs edged higher. Indian Oil Corporation (up 0.41%), HPCL (up 1.91%) and BPCL (up 1.6%) rose.
Shares of oil exploration and production (E&P) companies edged higher. Cairn India (up 2%), Reliance Industries (up 1.57%) and Oil India (up 1.88%) edged higher.
Oil & Natural Gas Corporation (ONGC) advanced 2.11% to Rs 321.90. ONGC after trading hours yesterday, 24 February 2015, said that a meeting of the Board of Directors of the company will be held on 20 March 2015, inter alia, to consider payment of 2nd interim dividend, if any, for the Financial Year 2014-15.
Meanwhile, the Ministry of Petroleum & Natural Gas after trading hours yesterday, 24 February 2015, said that Mr. Shashi Shankar, Director (T&FS), ONGC has committed gross misconduct while dealing with a tender for Procurement of Twenty One Blowout Preventers (BOP) and taking strong note of the lapses the government on 23 February 2015 ordered suspension of Shankar with immediate effect to ensure fair and transparent inquiry. The Ministry of Petroleum & Natural Gas said that he has been associated with this tender as GGM and OSD to Director (T&FS) and from 1 January 2012 as Director (T&FS). Earlier, ONGC had at the fag end of the trading session yesterday, 24 February 2015, announced the suspension of Shankar by the Ministry of Petroleum & Natural Gas with immediate effect.
Shares of state-run gas transmission and distribution firm GAIL (India) were up 0.08%.
Glenmark Pharmaceuticals shed 0.12%. Glenmark Generic Inc, USA, the subsidiary of Glemark Generic today, 25 February 2015, announced the US market approval and introduction of AshlynaTM Extended-Cycle Oral Contraceptive Tablets, the generic equivalent of Seasonique from Teva Woman’s Health. According to IMS Health sales data for the 12 month period ending December 2014, the Seasonique market achieved annual sales of approximately $159.1 million in the US. Glenmark Pharmaceuticals made the announcement before market hours today, 25 February 2015.
In the foreign exchange market, the rupee edged higher against the dollar on global risk-on sentiment. The partially convertible rupee was hovering at 62.07, compared with its close of 62.20 during the previous trading session.
Brent crude oil futures edged higher, helped by better than expected Chinese factory activity data, the Federal Reserve’s flexible stance on US interest rates and the eurozone’s approval of reforms proposed by Greece. Brent for April settlement was up 23 cents at $58.89 a barrel. The contract had declined 24 cents or 0.4% to settle at $58.66 a barrel during the previous trading session.
The finance ministry yesterday, 24 February 2015, said that the central government has accepted the recommendation of the 14th Finance Commission (FFC) to keep the States’ share of Union Tax proceeds (net) at 42%. FFC has recommended by majority decision that the States’ share in the net proceeds of the Union tax revenues be 42%. The recommendation of tax devolution at 42% is a huge jump from the 32% recommended by the 13th Finance Commission. The transfers to the States will see a quantum jump, the finance ministry said. This is the largest ever change in the percentage of devolution. The government tabled the 14th Finance Commission (FFC) Report in parliament yesterday, 24 February 2015. Article 280 of the Constitution of India requires the Constitution of a Finance Commission every five years, or earlier. For the period from 1 April 2015 to 31 March 2020, the 14th Finance Commission (FFC) was constituted by the orders of President on 2 January 2013 and submitted its report on 15 December 2014.
The consequence of this much greater devolution to the States is that the fiscal space for the Centre will reduce in the same proportion, the finance ministry said. The finance ministry also said that the central government has accepted the recommendations of the 14th Finance Commission with regard to grants to local bodies. FFC has recommended that out a total grant of Rs 2.87 lakh crore for five year period from 1 April 2015 to 31 March 2020. Of this, the grant recommended to Panchayatas is Rs 2 lakh crore and that to municipalities is Rs 87143.80 crore.
Meanwhile, the stock exchanges have decided to keep the stock market open on Saturday, 28 February 2015, just like any other normal trading session when the Finance Minister Arun Jaitley presents the first full-fledged Budget of the Narendra Modi government. Trading will start at 9:15 IST and conclude at 15:30 IST. Jaitley will begin his speech at 11:00 IST in Lok Sabha on 28 February 2015 as he tables the Union Budget 2015-16 in the parliament.
The Railway Budget 2015-16 will be tabled in the parliament by rail minister Suresh Prabhu tomorrow, 26 February 2015. The Economic Survey will be tabled on Friday, 27 February 2015.
The next major event for the financial markets is Union Budget for 2015-16. Finance Minister Arun Jaitley will present Union Budget 2015-16 in Parliament on Saturday, 28 February 2015. Analysts will scrutinize measures in the Budget for financing infrastructure projects as well as the government’s own capital expenditure on infrastructure for the year ahead. This is the first full fledged Budget of the Narendra Modi government and analysts will look for a roadmap for economic growth for the next few years.
Changes in rates of dividend distribution tax, capital gains tax on sale of shares, Securities Transaction Tax (STT) and Minimum Alternate Tax (MAT), if any, will be closely watched. The dividend distribution tax is currently at 15%. The minimum alternate tax is currently at 18.5% of book profits. Short term capital gains tax on sale of shares is currently at 15% while there is zero long capital gains tax on sale of shares held for a period of more than one year.
Analysts are awaiting further progress on the Goods and Services Tax (GST) during the ongoing Budget session of Parliament after the Constitution Amendment Bill for the introduction of GST was tabled in the Lok Sabha during the winter session of parliament. GST, touted as the single biggest indirect taxation reforms since independence, will simplify and harmonise the indirect tax regime in the country. Central taxes like Central Excise Duty, Additional Excise Duties, Service Tax, Additional Customs Duty (CVD) and Special Additional Duty of Customs (SAD), etc. will be subsumed in GST. At the state level, taxes like VAT/Sales Tax, Central Sales Tax, Entertainment Tax, Octroi and Entry Tax, Purchase Tax and Luxury Tax, etc. would be subsumed in GST.
Asian stocks edged higher today, 25 February 2015, taking their cues from Wall Street’s gains after Federal Reserve Chair Janet Yellen suggested the Fed would not rush into raising interest rates. Key benchmark indices in Singapore, Taiwan, Japan, Indonesia, South Korea and Hong Kong rose by 0.08% to 0.75%. China’s Shanghai Composite index was unchanged.
The preliminary HSBC China Manufacturing Purchasing Managers’ Index, a gauge of nationwide manufacturing activity, rose to 50.1 in February compared with a final reading of 49.7 in January, HSBC Holdings PLC said today, 25 February 2015. A reading below 50 indicates a contraction in manufacturing activity from the previous month, whereas a reading above indicates expansion. HSBC will release its final PMI data on Monday, 2 March 2015.
Trading in US index futures indicated that the Dow could fall 5 points at the opening bell today, 25 February 2015. US stocks moved higher yesterday, 24 February 2015 with the S&P 500 and Dow industrials closing at records, as the market read Federal Reserve Chairwoman Janet Yellen’s testimony before Congress as a reassurance that a rate hike might not occur until the second half of the year.
Federal Reserve Chairwoman Janet Yellen yesterday, 24 February 2015 took another step closer to the first rate hike since 2006. In testimony to the Senate, Yellen signaled to financial markets the Fed would soon drop the word patient from its forward guidance. She softened the blow with several dovish comments that suggest no hurry about actually moving. Yellen signaled the outlook of inflation will be the deciding factor of when the Fed will hike rates for the first time since 2006.
In Europe, Eurozone finance ministers yesterday, 24 February 2015, backed new reforms proposed by Greece in exchange for a four-month financial lifeline that will keep the country afloat and in the single currency for the time being. Several parliaments, including Germany’s, must now approve the extension before the current bailout expires on Saturday, 28 February 2015.
(Source: Business Standard February 26, 2015)
ESSAR OIL EMPLOYEE ARRESTED IN DOCUMENT LEAK CASE
New Delhi: Essar Oil said on Wednesday that one of the company’s employees has been arrested by the investigative authorities in connection with the Ministry for Petroleum and Natural Gas’ document leak case.
“We will also launch an internal probe to investigate the matter and in the meanwhile, are extending full co-operation to the authorities,” a statement from the company said.
“The company reiterates that neither it has directly nor has it authorised anybody to conduct any acts not in compliance with law,” the statement added.
(Source: Business Line February 26, 2015)
OIL RISES TO $59 AS SAUDIS SAY DEMAND GROWING
London: Brent crude oil rose to around $59 a barrel on Wednesday after data showed Chinese factories were producing more than expected and Saudi Arabia’s oil minister said oil demand was growing.
China’s factory sector has expanded slightly this month, according to the flash HSBC/Markit Purchasing Managers’ Index.
The index reached a four-month high of 50.1 in February, just above the 50 level that separates growth in activity from contraction. A Reuters poll had forecast a reading of 49.5.
China is the world’s biggest energy consumer and second largest user of oil behind the United States, and even small changes in Chinese demand can move oil prices.
The market also got a small lift from comment by Saudi oil minister Ali al-Naimi, who spoke to reporters in the port city of Jizan, southwest Saudi Arabia.
“Markets are calm now … demand is growing,” said Naimi, who was behind a change in the strategy of the Organization of the Petroleum Exporting Countries last year, when it decided not to adjust production despite a sharp fall in oil prices.
Oil prices collapsed by 60 per cent between June and January to almost $45 a barrel, but have since recovered some ground.
Brent was up 40 cents at $59.06 a barrel by 1200 GMT, while US crude futures were up by 30 cents at $49.58 a barrel.
Simon Wardell, oil analyst at Global Insight, said Naimi’s comments reflected a desire for stability in the market.
“They want to find out where the floor price is. I think they are indicating that we are not that far off the floor in the current price,” he said.
Yusuke Seta, commodity sales manager at Newedge Japan, said the China data was also a plus for oil.
“That’s good news (as it means) potential oil demand, but I think the market needs to see more stable and concrete demand from China,” he said.
Oil fell on Tuesday after a bigger-than-anticipated rise in US crude oil stocks, which have risen steadily over the last few months as domestic production has outstripped demand.
(Source: Business Standard February 26, 2015)
GLOBAL CRUDE OIL PRICE OF INDIAN BASKET WAS US$ 56.76 PER BBL ON 24TH FEBRUARY, 2015
The international crude oil price of Indian Basket as computed/published by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 56.76 per barrel (bbl) on 24th February, 2015. This was lower than the price of US$ 57.39 per bbl on previous publishing day of 23rd February, 2015. In rupee terms, the price of Indian Basket decreased to Rs 3535.01 per bbl on 24th February, 2015 as compared to Rs 3568.51 per bbl on 23rd February, 2015. Rupee closed weaker at Rs 62.28 per US$ on 24th February, 2015 as against Rs 62.18 per US$ on 23rd February, 2015.
(Source: Indian Oil & Gas February 26, 2015)