DGH for disallowing RIL’s $1.2 billion investment in KG-D6

Since most of the $5.7 billion investment RIL has made on D1 and D3 fields has already been recovered, the DGH has suggested that the investment disallowed should be deducted from its profit share for the current and the next fiscal

New Delhi: Upstream regulator Directorate General of Hydrocarbons (DGH) has suggested the $1.235 billion investment of Reliance Industries (RIL) be disallowed over the Mukesh Ambani-run firm’s failure to adhere to prestated drilling and gas production targets, but the oil ministry is yet to agree on the numbers, reports PTI.

The DGH in its recommendation to the oil ministry has suggested $457 million of the ‘profit petroleum’ accruing to RIL in 2011-12 should be disallowed and another $778 million in 2012-13.

Sources privy to the development said top officials of the ministry and DGH discussed the numbers at a meeting on Monday but there was no unanimity.

As per the 2006 field development plan (FDP), where capital expenditure in Dhirubhai-1 and 3 fields was hiked to $8.8 billion from $2.47 billion previously, RIL was to produce 61.88 million metric standard cubic meters per day (mmscmd) of gas from 22 wells by April this year and 80 mmscmd from 31 wells by 2012.

But the Mukesh Ambani-run firm drilled only 20 wells till now, of which it has not put two of the wells on production yet. D1 and D3 fields are currently producing just over 40 mmscmd.

Sources said the Solicitor General of India (SGI) had opined that Section 3.2 of the Production Sharing Contract (PSC) that states, “... amounts paid with respect to non-fulfilment of contractual obligations” can be disallowed for cost recovery.

“...the expenditure incurred which has resulted in excess capacity/underutilisation of asset created on account of failure of the contractor (RIL) to adhere to the field development plan would fall within the provisions of Section 3.2,” the SGI had said.

RIL has built facilities at KG-D6 to handle 80 mmscmd of output.

Sources said based on the SGI opinion the DGH was asked to carry out an exercise to calculate the amount of investment which should be disallowed for cost recovery.

Since most of the $5.7 billion investment RIL has made on D1 and D3 fields has already been recovered, the DGH has suggested that the investment disallowed should be deducted from its profit share for the current and the next fiscal.

Anticipating such a move, RIL had on 24th November slapped an arbitration notice challenging the proposal.

PSC for KG-D6, where drop in pressure in the wells and an increased water ingress lead to lower per-well gas output and halt in drilling pending more studies, allows operators to recover 100% of expenditure on exploration and production before sharing profits from the field with the government. It does not link cost-recovery to output.

RIL and its new partner BP Plc of UK say new wells in KG-D6 can come up not before 2014.

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MFIs to be allowed to raise fund through ECB: RBI

“All MFIs of all hues will now be permitted to take ECB of (up to) $10 million,” RBI deputy governor HR Khan said at the Microfinance India Summit being held in Delhi. He added that the notification in this regard will come soon and it is to be subject to hedging

New Delhi: The Reserve Bank of India (RBI) on Tuesday said it will soon allow microfinance institutions (MFIs) to raise funds up to $10 million through external commercial borrowings (ECB), reports PTI.

“All MFIs of all hues will now be permitted to take ECB of (up to) $10 million,” RBI deputy governor HR Khan said at the Microfinance India Summit here.

He said the notification in this regard will come soon and it is to be subject to hedging.

“Of course, they have to be hedged. If you don’t hedge you get into difficulties,” Mr Khan said.

Acknowledging that the MFI sector is facing liquidity issue, Mr Khan said that in the last credit policy the RBI had announced a working group on restructuring of loans.

“In case there is a problem I would request MFIs to make submissions through the (microfinance) association to the working group for special dispensation,” he said.

The summit examined the challenges of the time and the need to look at the entire scope of microfinance models to meet the needs of the client.

The participants arrived at a consensus on the importance of financial inclusion and its inter-connectedness with economic growth for the client.

“(The) poor are largely unbanked and to change things for these people, we are trying to implement a financial inclusion plan as it is cost effective and the need of the hour,” Punjab National Bank executive director Usha Ananthasubramaniam said.

The delegates, including international and national experts, also discussed the regulatory environment and the implications for the sector.

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It is not right time for listing of PSUs: DPE secretary

Due to the volatility in the stock market triggered by global and domestic factors the government has managed to mop up only Rs1,145 crore through disinvestment of PSUs against the target of Rs40,000 crore for the current fiscal

New Delhi: The government, which has ambitious disinvestment as well listing plans for profit making PSUs, on Tuesday said it is not the right time to hit the market, reports PTI.

Due to the volatility in the stock market triggered by global and domestic factors the government has managed to mop up only Rs1,145 crore through disinvestment of PSUs against the target of Rs40,000 crore for the current fiscal.

“Probably today is a bad time, but tomorrow might be a good day,” Department of Public Enterprises secretary DRS Chaudhary said when asked if it is the right time to list public sector enterprises.

He was talking to reporters on the sidelines of a CII function here.

As per the government disinvestment policy, all unlisted CPSEs with no accumulated losses and having earned net profit in the three preceding years are to be listed.

Mr Chaudhary, however, said that PSUs have a great potential and if more such firms are listed, their total market capitalisation could account for over 50% of total m-cap of all listed companies on the BSE.

“With (listing of) another 50 central public sector enterprises and state-level public sector enterprises (SLPEs) listed on stock exchange, their market capitalisation could go up to 50% which would be similar to PSUs share in China and Malaysia” he said.

At present, about 50 PSUs, including SAIL and CIL, account for 26.23% of the total market capitalisation of listed companies on the BSE.

Mr Chaudhary said the share of investments by PSUs in the country’s gross domestic product (GDP) stood at 8.4% in 2009-10, whereas private firms’ investments stood at 22.3%.

During the 12th Five Year Plan (2012-17), the PSUs are expected to increase their share of investments in India's GDP to 9.1%, while it may be 24% for private companies, Mr Chaudhary said.

Total net profit of all CPSEs went up from Rs5.87 lakh crore in 2008-09 to Rs6.6 lakh crore in 2009-10, registering a growth of 12.42%, according to the government data.

There are 249 CPSEs with a total investment Rs5.8 lakh crore the end of 31 March 2010.

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