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GAIL in exclusive marketing pact with ONGC for natural gas

Under the agreement, GAIL will hold the exclusive marketing right of all gas produced by ONGC for three-years, which can be extended on mutual consent

New Delhi: State-run gas utility GAIL India Ltd said it signed an agreement to buy all natural gas produced by Oil and Natural Gas Corp (ONGC) from its existing and new fields, reports PTI.


GAIL will hold the exclusive marketing right of all gas produced by ONGC for a three-year period, which can be extended on mutual consent, the company said in a statement.


The gas utility would also market some of the chemicals to be produced from the Dahej petrochemical complex being set up by ONGC Petro-additions Ltd, a subsidiary of ONGC.


Also, GAIL, which owns 9,500 km of gas transmission pipeline network in the country, signed a Shareholders Agreement (SHA) for taking about 17% stake in ONGC Petro-additions Ltd (OPaL) which is building a petrochemical plant at Dahej in Gujarat.


GAIL and ONGC "signed a gas cooperation agreement for sale and purchase of gas from existing and new finds of ONGC initially for a period of three years with a provision of extending it further," the statement said.


Under the agreement, the two companies have agreed to enhance the availability and effective utilisation of natural gas from new and upcoming fields of ONGC for supply of gas to customers through GAIL's infrastructure.


The two firms also signed a complex swap agreement wherein GAIL would supply imported LNG to ONGC's C2+ extraction plant at Dahej. In return, ONGC will supply an equivalent quantity of domestic gas.


"This will pave the way for commissioning of C2+ extraction plant by ONGC. Pursuant to extraction, the C2+ components shall be supplied to OPaL for manufacturing petrochemicals at Dahej SEZ," the statement said.


GAIL has around 19% equity in OPaL and has around 38% marketing rights of petrochemicals produced from OPaL.


In addition, a polymer marketing pact was signed among GAIL, ONGC and OPaL under which GAIL has the right to market part of polymers produced by OPaL both in domestic as well as export markets. This arrangement is expected to enhance GAIL's marketing share for polymers in the country.


GAIL would also have the right to off-take butadiene produced in OPaL plant to produce value added products through a Special Purpose Vehicle (SPV).


Under the agreement signed today, GAIL will get the first right on all gas that ONGC will produce from any of its fields in future. But in case GAIL is unable to get a 'good' price within 30 days, ONGC will take back the marketing right.


GAIL will be a co-promoter of the 1.1 million tons ethylene cracker petrochemical complex that OPaL is setting up at Dahej SEZ at a capital cost of over Rs21,000 crore.


Dr Reddy's Lab say sales may be hit as countries attempt to cut costs

Dr Reddy's Lab said the existence of government-imposed price controls and mandatory discounts and rebates can limit the revenues we earn from our products

Hyderabad: Country's second largest drug maker Dr Reddy's Laboratories (DRL) said it may see some pressure on revenues as governments around the globe, including the US and India, attempt to cut healthcare costs, reports PTI.


In to a filing to the US Securities and Exchange Commission, DRL, which is listed on NYSE, said these pressures are particularly strong given the lingering effects of the recent global economic and financial crisis, including the ongoing debt crisis in certain countries in Europe.


"The existence of government-imposed price controls and mandatory discounts and rebates can limit the revenues we earn from our products."


"We expect these efforts to continue in the year ended March 2013 as healthcare payers around the globe - in particular government-controlled health authorities, insurance companies and managed care organisations - step up initiatives to reduce the overall cost of healthcare," DRL said.


Increasing expenditures for healthcare has been the subject of considerable public attention in almost every jurisdiction where we conduct business, it said.


Patient Protection and Affordable Care Act (PPACA) of USA is one of the most significant healthcare reform measures in the United States in decades, and is expected to significantly impact the US pharmaceutical industry, it said.


The PPACA changed the computations used to determine Medicaid rebates owed by manufacturers by redefining the average manufacturer's price (AMP).


AMP for most branded drugs has been increased to 23.1% from 15% of and 13% instead of 11% of AMP for generic drugs, DRL said in the filing.


The company, however, said it may see an increase in revenues by virtue of the PPACA's anticipated extension of health insurance to "tens of millions of previously uninsured Americans".


On the Indian market, DRL said during FY2011-12, the Department of Pharmaceuticals under the Ministry of Chemicals and Fertilisers proposed a revised national Pharmaceutical Pricing policy.


The draft policy, proposed to apply price controls to 348 drugs listed in the National List of Essential Medicines (as opposed to the 74 drugs currently subject to price control in India). It could also revise the price control mechanism by benchmarking the prices based on market dynamics and eliminating the current cost-based model.


Pending finalisation of the policy, its impact on our business cannot be ascertained, DRL said in the filing.


Commenting on German market, it said the German government has introduced several healthcare reforms in order to control healthcare spending and promote the prescribing of generic drugs.


On the Russian market, DRL said during FY2011-12, the country introduced a Federal Law titled -- 'On the Foundations of Healthcare for Russian Citizens'.


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