Consumer Issues
BP writes off $790 million of its investment in KG-D6 block

BP said it wrote off $790 million from its investment in eastern offshore KG-D6 block and another $830 million in impairment charges without explaining the reasons

 

BP Plc said it has written down $790 million from its investment in eastern offshore KG-D6 block and another $830 million in impairment charges, following lower-than-expected gas price hike.
 
Announcing its fourth quarter and full 2014 results, BP said, “Third quarter, fourth quarter and full year 2014 include write-offs of $375 million, $20 million and $395 million respectively relating to block KG D6 in India.”
 
“In addition, impairment charges of $395 million, $20 million and $415 million for the same periods were also recorded in relation to this block,” it added.
 
The company did not explain the reasons for the write-off and impairment charges.
 
BP in 2011 bought 30% interest in Reliance Industries Ltd (RIL)’s eastern offshore KG-D6 as well as 20 other oil and gas exploration blocks for $7.2 billion. Bulk of this was for the producing block of KG-D6 and gas discovery area of NEC-25.
 
The government had on 18th October last year approved a new formula for pricing of all domestic gas. The rate, when the formula comes into effect from 1st November, would be $5.61 per million British thermal unit as against current $4.2.
 
The price is lower than $8.4 approved by the previous UPA government and general expectation of a rate around $6.5 after some deductions from that price.
 
Both BP and RIL have been advocating market—linked gas pricing and had initiated arbitration against the government for not revising rates from the due date of 1 April 2014.
 
The $4.2 per mmBtu rate, fixed in 2007, was for the first five years of production from KG-D6 fields. KG-D6 fields started gas output from April 1, 2009.
 
RIL is the operator of KG-D6 block with 60% stake while the balance 10% is with Canada’s Niko Resources.
 

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COMMENTS

R Balakrishnan

2 years ago

Given that the present spot price is under $4 per mmbtu, the scale of manipulation seems to be mind boggling.

NHRC notices to Home Ministry, Delhi govt over Church attack

Taking suo motu cognisance of some media reports regarding the incident of breaking open the doors of St Alphonsa's Church, the NHRC had issued notices

 

The National Human Rights Commission (NHRC) on Tuesday issued notices to the Ministry of Home Affairs, Delhi government and police, seeking detailed reports on the status of investigation into the alleged vandalisation of a church in south Delhi.
 
In a release, NHRC said it issued notices to the Chief Secretaries of Union Home Ministry and Delhi government and the Commissioner of Police calling for a report on the incident within 10 days.
 
In the fifth such incident since November, St Alphonsa's Church in south Delhi's Vasant Kunj area was vandalised by some unidentified persons on Monday, sparking outrage among the Christian community which alleged that it is part of a "hate campaign".
 
The commission has sought the report taking suo motu cognisance of some media reports regarding the incident of breaking open the doors of St Alphonsa's Church and defiling of the place of worship and the objects held sacred, the statement said.
 
NHRC also received telephonic information from advocate Manoj V George alleging that in spite of a formal written complaint by the church priest Vincent Salvatore, police was not taking necessary and appropriate action by registering a proper FIR and commencing effective investigation, it said.
 
Yesterday, a member of the commission, Justice Cyriac Joseph, had visited the church site to take an account of the situation.
 
Incidents of vandalisation and suspected arson at Christian religious institutions have happened in Dilshad Garden, Rohini and Jasola areas of Delhi.
 
NHRC had issued a notice to the Chief Secretary of Delhi last month as well seeking a report on attacks targeting churches in the national capital.
 

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Three Cheers to Three Policies

The government gets going on tax treatment, disinvestment and spectrum sales

 
On 28th January, immediately after bidding goodbye to US president Barak Obama, the government got down to business and announced three big decisions. Of these, the most sensible was the decision not to appeal against a verdict by the Bombay High Court, which ruled that the British telecom company Vodafone was not liable to pay tax of Rs3,200 crore in a transfer pricing case. Finance minister Arun Jaitley had recently said that contentious cases like Vodafone had only given India a bad image while the government had not earned much money from them.
 
In fact, the government spends large chunks of public money on pointless and expensive litigation, not only in major cases like Vodafone, but hundreds of others. Large chunks of funds, legitimately belonging to small and medium companies, have remained blocked in litigation as the tax authorities would not admit that they were wrong even after they lost in appeals. If the government is serious about its ‘ease of doing business’ promise, it will have to follow up the decision not to contest the Vodafone verdict by closing all similar litigation and unblocking corporate funds without specious excuses about meeting Budget targets. 
 
We don’t know what prime minister Modi and president Obama discussed in their highly public-but-private chai-pe-charcha, but the need to end tax-terrorism unleashed by the United Progressive Alliance (UPA) government may have been one item of discussion, given how many US companies were caught in the dragnet. 
 
The second decision, to sell a 10% stake in Coal India Limited (CIL) despite employee protests, is not as easy as it seems. The government owns 90% of CIL, and a 10% dilution will double the publicly available shareholding. On 30th January, the government raised Rs22,400 crore by hurriedly selling CIL to  a clutch of public sector insurers  and banks in what can hardly be termed a disinvestment exercise. This dragged down the entire market and CIL shares tumbled to Rs360.80 on 30th January. After all, there is no move to provide more autonomy to the CIL management and the recent, union-led, protest against this tiny equity dilution is only a negative. 
 
And, although investors know that they are no longer dealing with a highly corrupt UPA government, they are unlikely to forget how a disillusioned Children’s Investment Fund, which owned 1% of CIL equity, finally exited at a loss after trying to get the company to act in the best interest of investors and even threatening to sue the board members. 
 
Finance minister Arun Jaitley’s effort at disinvestment has also been rather poor so far. He provided a Rs60,000-crore disinvestment target in the Budget last year, but managed a pathetic 5% sale in Steel Authority of India Limited (raising Rs1,715 crore) that too to Life Insurance Corporation, another government entity. 
 
The third decision is the announcement of a base price for the sale of 3G spectrum in addition to the earlier announced sale of 2G spectrum. Here, again, the government is expected to raise a substantial chunk of revenue that would go towards bridging down the fiscal deficit, amidst worries that the high price of spectrum will eventually have to be borne by consumers by way of higher telecom charges.

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COMMENTS

vishal

2 years ago

Disinvestment means getting liberty from unions controlling workers in an organisation. Should the Government sell these set ups for this reason or for making money to cover their expenses or loss? A larger fight is on the card between labour force, unions and Government in the future. The road to capitalism in a country like India will see many upheavals.

Dr Anantha K Ramdas

2 years ago

We must remember that we are a sovereign, socialistic democratic republic, which is why, in the beginning, Pandit Nehru got away with a lot government spending in huge projects. In a way, at that time, he was right, and a lot of things have happened in the last six decades.

It is time for government to govern and withdraw active involvement in business. By all means, in certain areas like defence and nuclear related matters, if the government wants to hold control, they should, but rest should be in public hands like in most other democratic countries.

Take the case of Coal India disinvestment. Who bought the major lot? LIC, which is another govt organization. NDA must set out a time frame and start getting out of biz in the next 4 years; hand over the reins of biz to enterprising Indian companies and let the public enjoy the benefit.

They should also do the same with other indirectly controlled organizations like the Banking sector. In any case, what we have been doing in the last 60 years cannot be undone in 4 or 10 years, assuming BJP (NDA) comes to power for a second term.

Given the time frame, they are likely to succeed and deliver the goods to the Indian masses.

Suketu Shah

2 years ago

A Basic fact that cannot be overlooked is that BJP has inherited deep rooted mess of the economy from the Congress.I wonder what Chidambaram did for disinvestment.

Suketu Shah

2 years ago

Coal India is full of corruption.Best to get out of such organisations and sell to private as no way you can get corruption out.Mr Jaitly has only got started although a little late.Let us see what he achieves in terms of disinvestment before 31 March 2015.

REPLY

Gupta

In Reply to Suketu Shah 2 years ago

You are absolutely right. Government should not be running mining businesses. Mining companies specialising in this would do a far better job with much lower cost if the corruption and labour lobbies of CIL were broken down. The challenge is how do you break the labour lobbies, who gang up to strike for anything and everything. Remember how many years it took to corporatize BSNL in the Vajpayee era for the same labour issues. By the time, they cajoled everyone and set it up for sale, the govt had changed and since then, everyone knows how BSNL has performed. VSNL was a smaller organisation and hence they got rid of the dead wood. But how do you deal with something as critical as CIL, whose employees can hold the 125 crore people to ransom by threatening to switch off the power unless all their demands are met!

Suketu Shah

In Reply to Gupta 2 years ago

Even in Coal India where govt got Rs 22500 crores more than 50% of the disinvestment was from non LIC investors which shows the confidence people have in disinvestment.

People forget how much harm, Congress did in the last 10 yrs.Chidambaram was most hated when he went to fool the Americans in June 2013.How Modi and Co have changed things around in 9 months is amazing and they have only got started.Wait and watch how much govt wl eran on 3/4 March auctioing spectrum deals.Modi govt is 100% on the right track and no criticism against them is worth reading.

vishal

In Reply to Gupta 2 years ago

You can not blame employees as they are concerned with their daily bread and they can not antagonize unions. This I have seen in Banks, Insurance etc. In Chennai, in Neyveli, I have seen contract workers beaten mercilessly when they tried go and work in office during strike period.

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