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Brent crude oil futures contract, the global benchmark, rose 8.5% over the week, and was at...

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Global prices, not rupee value to have impact on inflation: PMEAC

Chairman of the Prime Minister’s Economic Advisory Council (PMEAC) C Rangarajan said that global commodity prices will have a larger impact on the India, which imports about 80% of its crude oil requirement. A weak Indian currency means paying more rupees against every dollar of imports

Hyderabad: Prime minister’s advisory panel chief C Rangarajan today said movement in global commodity prices, and not the declining value of rupee against dollar, will have bigger implications for the inflation, which is hovering near double-digit for the last 28 months, reports PTI.

“The depreciation of the rupee has an impact on imports, obviously the imported commodities such as oil in rupee terms will cost more. But the ultimate impact to the economy will also depend on what happens to the dollar price of these commodities,” he said on the sidelines of the Foundation day fete of the Institute for Development and Research in Banking Technology here.

The chairman of the Prime Minister’s Economic Advisory Council (PMEAC) said the global commodity prices will have a larger impact on the India, which imports about 80% of its crude oil requirement. A weak Indian currency means paying more rupees against every dollar of imports.

“There is a possibility that if the world economy does not grow strongly, perhaps the international commodity prices will also come down,” Mr Rangarajan said.

The rupee touched a historic low of 52.73 this month against the dollar. However, it has recovered since and was quoting 35 paise up against dollar in early trade today at 51.90.

The growth in the US economy is yet to pick up pace and several Eurozone nations are facing sovereign debt crisis.

Mr Rangarajan further said that the recent moderation in food inflation, which fell to a four-month low of 9.01% for the week ending 12th November, is on account of the good monsoon and exuded optimism that the rate of price rise will fall further over next three months.

He also said that headline inflation will moderate to around 7% by March 2012. Headline inflation has been above the 9% since December last year and stood at 9.73% in October this year.

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RIL sends arbitration notice to oil ministry on KG-D6 cost-recovery

In the arbitration notice, RIL stated that the move to limit the amount of expenditure the company can recoup from its flagging KG-D6 fields is illegal and outside the Production Sharing Contract

New Delhi: Reliance Industries (RIL) has sent an arbitration notice to the oil ministry over the move to disallow some of the expenditure the Mukesh Ambani-led firm has made in the KG-D6 gas fields as punishment for falling output, reports PTI.

In the arbitration notice, RIL stated that the move to limit the amount of expenditure the company can recoup from its flagging KG-D6 fields is illegal and outside the Production Sharing Contract (PSC), sources privy to the development said.

The ministry was moving toward restricting cost-recovery—now at 100%—in proportion to gas output from the KG-D6 fields. Its top officials and the upstream regulator, the Directorate General of Hydrocarbons (DGH), were discussing the amount they should disallow as expenditure and a notice was to be set to RIL soon.

However, before the notice could be sent, RIL has initiated arbitration proceeding, sources said.

The notice asks the oil ministry to appoint arbitrators to decide on the issue.

Reliance has built facilities to handle 80 million metric standard cubic metres per day (mmscmd) of gas production, but the fields are producing just about 41 mmscmd due to a fall in pressure and water ingress.

The PSC allow operators to recover 100% of their exploration and production costs and do not link cost-recovery to output.

Reliance had envisaged a gas output of 80 mmscmd by 2012 from an investment of $8.8 billion. However, current output is about half of the target and RIL has so far invested only $5.8 billion.

The oil ministry wants to “disallow expenditure incurred in constructing production/processing facilities at the Dhirubhai-1 and 3 gas (D1 & D3) fields in the KG-D6 block that are currently under-utilised/have excess capacity because of falling output”.

Sources said three arbitrators are to be appointed to decide on the issue. The oil ministry and RIL would suggest the names of one arbitrator each, while there would also be a third judge appointed.

Falling pressure and water incursion have brought down output from the D-1 and D-3 fields in the Bay of Bengal from 54 mmscmd in March, 2010, to 34.14 mmscmd now, as opposed to the targeted 61.88 mmscmd. A further 6.92 mmscmd comes from the MA oilfield in the same licence area.

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