Diesel under-recoveries could soon be history, says Nomura

With continued diesel and petrol price hikes, the oil subsidy problem does not look that menacing now, says Nomura Equity Research in its note on Indian oil PSUs

This year, the Government of India (GoI) has surprised with several steps, including monthly diesel price hikes and controls on subsidised product volumes, among others. More importantly, it has shown resolve to maintain the momentum. Consequently diesel under-recoveries could soon be history for oil PSUs (public sector units). This is according to a note prepared by Nomura Equity Research. On related issues, Nomura points out that direct benefit transfers for LPG have commenced, and this should help to curb cooking fuel subsidies. Gas price hikes are also positive.


Assuming a rupee-dollar rate of 60 (vs 55 earlier), Nomura estimates that U/Rs (under-recoveries) are declining by 56% by FY16F. At INR/USD of 58, Nomura expects diesel U/Rs to vanish and total U/Rs to fall to a third of FY13 levels. U/Rs have been a bane of oil PSUs for many years and declines are a long-term positive.


Nomura has made a ‘BUY’ recommendation for the GAIL scrip in the stock market as tariff cuts, volume declines, and gas price hikes are largely over and already priced in by the investors in the stock market. For ONGC and OIL, despite the short-term earnings fillip Nomura sees from lower subsidies and higher gas prices, their production volumes continue to disappoint and growth visibility remains low. Nomura has upgraded ONGC and OIL shares to ‘Neutral’.


With the GoI showing strong resolve to bring reforms, Nomura believes that the oil subsidy problem looks less menacing than before. Nomura forecasts that earnings predictability for OMCs (oil marketing companies) remains low.


The following table gives the stock market recommendations for oil PSUs from Nomura:

Similarly the summary valuations and financials for the oil PSUs are as follows:


Airport construction at Aranmula would be an ecological disaster, warn activists

An international airport project undertaken by Chennai-based KGS Group has the potential to devastate the ecology and livelihood of inhabitants of the sacred town of Aranmula, claim activists. This happens even as the swish Delhi Airport is flooding at every big downpour

Brushing aside the concerns raised by environmentalists, local residents as well as the opposition parties in Kerala and also the Parliamentary Standing Committee, the state government has decided to go ahead with the construction of Aranmula International Airport. Chennai-based KGS group has received an in-principle approval for the Rs2,000 crore project from the Union government. However, according to environmentalists, the construction of an airport at a land that is home to 212 species of plants and 60 species of fishes would devastate the ecology and take away livelihood of several people.

In the Aranmula Airport project, the Kerala government has a 10% stake. The project is to be funded through a debt-equity ratio of 1:1. ICICI Bank, IDBI Bank and State Bank of India (SBI) have funded the debt portion.

The project, spread across 700 acres, met with opposition right from its initial stages from leaders of various streams of society including social worker Kummanam Rajasekharan, poetess-cum-environmentalist Sugathakumari and politician VM Sudheeran. Even, the Legislative Assembly Committee on Environmental Affairs, chaired by CP Mohammed, found the Aranmula Airport Project “highly detrimental to the environment”.

The protesters contend that the KGS Group also intends to construct an airport city or Aerotropolis that requires more than 3,000 acres of land and that such a large project would cause irreparable and devastating damage to the environment and ecosystem at Aranmula.

The Impact

The Salim Ali Foundation, spearheaded by Dr VS Vijayan which focuses on conservation of biodiversity through research, found out that the implications of having an unnecessary airport on one of the ecological regions in Kerala could be large and dangerous. The Foundation sent a team of conservationists to perform a thorough due diligence. Its report, which was released on 29 March 2012, is an eye opener. Here is what the Foundation found out:

  1. The most significant loss will be the disappearance of a large extent of wetlands and paddy fields and paddy farming, in a state that produces hardly 11% of the total requirement of rice. The other benefit is fishing;
  2. If paddy farming is cultivated, it is estimated that the benefits would be Rs335 crore to Rs440 crore per year;
  3. The deteriorating ecological condition of Kozhithodu adversely affected the water flow as well as soil quality. The same is likely to happen to the Aranmula area if the airport is built. This will affect groundwater as well, which is source for water for several regions in and around Aranmula;
  4. Kerala has reportedly lost 5.66 lakh hectares (ha) of paddy lands from 1975 till 2012; it was 8 lakh ha in 1975 and now it is just 2.34 lakh ha. Besides food scarcity, the ramifications are enormous. Wetlands help retain water for farming and maintain balance in nature (the same way mangroves of Mumbai helps absorb excess rainwater). Removing part of the fields would affect the surrounding areas. It is believed that the 400 acres of paddy land that is to be used for the airport will affect the remaining 3500 acres because of loss of wetlands;
  5. Apart from paddy, loss of fish production is estimated to be worth Rs11.34 crore annually;
  6. Over 212 species of plants and 60 species of fishes is likely to be affected, with some of them endangered;
  7. It is estimated that 3,000 members of families would need to be evacuated; how these people would be compensated is not clear;
  8. The famous Aranmula temple, about 1,500 years old, is just within 200 meters of the proposed airport site, and is deemed an endogenous tourism area according to United Nations Development Project (UNDP);
  9. The opportunities of various services spawned by the various activities like paddy cultivation and fishery will not only be lost but it is estimated that over Rs400 crore of revenues will be lost because of missed opportunities;
  10. Farmers will be unable to afford new land as cost of land has shot up astronomically since airport project was announced. What cost Rs5,000 per cent (1 cent of land equals 435.6 square feet) a year ago in this famous temple town currently demands Rs50,000 per cent to Rs1 lakh per cent.

There are many more findings and what has been described above is just a small part of the exhaustive Salim Ali Foundation report.

Even, a report submitted by Kerala State Biodiversity Board to the state government in March this year, has expresses reservations over “the land use changes and ecological imbalance that the project will entail”. The Board observed that 80% of the 500 acres earmarked for the project were paddy fields. Conversion of a portion of the 3,500-acre paddy field would “impact the remaining wetlands, disturb the food chain, and accelerate the depletion of fish resources as well as other flora and fauna in the Pamba river basin”, the Board report says.

Incompetency in Environment Impact Assessment

The Environmental Impact Assessment (EIA) required for environmental clearance (EC) is also drawing ire from activities because of the sheer incompetency of Enviro Care India Pvt Ltd (Enviro), one of the consultants hired to undertake the EIA assessment. KGS Aranmula Airport Ltd got its EIA done through a private agency, namely Enviro, based in Madurai.
According to the EIA, Enviro seem to have missed the ecological scenario completely.
“When it comes to the biological scenario, the report is appallingly bereft of facts and figures. And it appears the EIA team has not taken even the minimum required efforts to document the biodiversity. Still worse is when it talks of the ecology, nothing is given on the ecological impact,” lambasted the Salim Ali Foundation Report. The EIA is silent on the major impacts of reclaiming wetlands and paddy fields that extends approximately 400 acres. Worst still, according to the Foundation, the report does not even acknowledge that Aranmula is a wetland!

Does Kerala need another international airport?

This is one of the more pertinent questions that policy makers need to answer and the answer is clearly a no as per the activists are concerned.

Kerala already has two international airports, at Trivandrum and Cochin. Aranmula is in between these cities, near Sabarimala, the second largest pilgrim centre in India with annual pilgrims of around 60 million. One of the excuses given by the promoters of the airport project is ease of access to this holy site for non-resident Indians (NRIs). However, as per government guidelines for obtaining clearance, an airport should not be closer to 150 km from another airport. According to Salim Ali Foundation report, the proposed Aranmula airport is 122 km from Trivandrum and closer to Cochin (104 km). Moreover, competition is bound to drive down prices and make all three airports economically unviable. The aviation industry in India is already going through difficult times.

Earlier, the ministry of defence disallowed issuing a no-objection certificate (NOC) for construction of the greenfield airport but surprisingly changed its stance. On 12 November 2010, AK Anthony, the minister of defence wrote, “Since the establishment of greenfield airport at Aranmula would result in imposing severe restrictions on the availability of military flying at Naval Air Station INS Garuda at Kochi, it is not possible to agree for NOC from Ministry of Defence.’’

Strangely, several months later, there was a U-turn. Vide Ministry of Defence letter No.19(79)/11/(DN-II/Ops)(669), dated 24.08.2011, site clearance was given. However, they claim that it is under certain specific mandatory conditions required for all clearances.

According to media reports, on 12 February 2013, CPI leader Atul Anjan, besides CPI (M) leader MM Mani alleged that defence minister Antony was favouring the project owing to the involvement of Robert Vadra, the son-in-law of Congress president Sonia Gandhi.

The project has been controversial from the beginning when around 350 acres of fertile land was bought by an educational trust, Mount Zion Educational Trust, under the pretence of building an aircraft institute and fish farming. However, the locals later found out that they were fleeced and it was to build a full-fledged greenfield international airport. The Kerala State Legislative Committee had even unanimously opposed the airport project.


Here are the various photos taken by the Salim Ali Foundation team when they did their due diligence:




Shadi Katyal

3 years ago

When one reads such articles one wonder if we will ever develop anything. Everywhere there is some kind of excuses either environmental or Ecological and we have seen so many objections to development that one wonders if the nation wants to move ahead.
Without economic development and jobs we cannot move ahead.


Manu Mohan

In Reply to Shadi Katyal 1 year ago

Economic developments are welcome,but not at the expense of environment

Ragesh Shanavas

In Reply to Shadi Katyal 3 years ago

Do you no how many illegal and many of the rules are overcome illegally
by the government please read following links.

RTI Judgement Series: Deemed PIO gave false and misleading information to aid an illegal building

Instead of stating no building plan was sanctioned, the deemed PIO said information was not available. The CIC, then issued a show-cause notice to the deemed PIO for providing the false and misleading information. This is the 139th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

The Central Information Commission (CIC), while allowing an appeal, directed the Public Information Officer (PIO) at the office of Superintending Engineer (B)-II at Rohini Zone of Municipal Corporation of Delhi (MCD) to provide specific information sought by the appellant. The CIC also issued a show-cause notice to the deemed PIO who was found guilty of furnishing false and misleading information.


While giving this judgement on 21 March 2011, Shailesh Gandhi, the then Central Information Commissioner said, “It appears that this is a collusion with people who construct illegal buildings and misleading information has been given to prolong the matter so that illegal building could be completed before the matter comes to the Commission.”


New Delhi resident RH Bansal, on 1 July 2010, sought information about an illegal building from the PIO of MCD. Here is the information he sought and reply provided by the PIO under the Right to Information (RTI) Act...


1. Whether the map of above said building was approved.       

PIO's reply: The information is not available in the office of the Executive Engineer.


2. Whether the above said building was made as per map.      

PIO's reply: As above


3. Certified copy of the approved map. 

PIO's reply: As above


4. What was the duty of engineers of concerned area?    

PIO's reply: Information sought is not under the preview of RTI Act, 2005.


Not satisfied with the PIO's reply, Bansal filed his first appeal. In his order the First Appellate Authority (FAA) stated that he had gone through the appeal memo and reply furnished by the PIO. “The grievance of the appellant is that he has not received the reply. However the PIO stated that the reply has already been furnished to the applicant. A copy of the same was handed over to the appellant during the proceedings. The appellant is now satisfied,” the FAA said in his order.


Bansal then approached the CIC with his second appeal stating unsatisfactory reply provided by the PIO.


During the hearing before Mr Gandhi, the then CIC, the PIO admitted that the plan of the said building would have to be sanctioned by his office and it appeared that an illegal building had been constructed.


Bansal, however pointed out that the illegal building was completed and he was informed that a sanctioned building plan was not available in the office of the Superintending Engineer (B)-II, Rohini Zone, in Delhi. He also told the Bench that a building was being constructed when he filed the RTI application.


Mr Gandhi noted that since the PIO agreed that the building plan would have to be sanctioned by his office only, the information, which should have been provided was that no building plan had been sanctioned. “It is apparent that clear information was not given. If the plan could have been sanctioned by some other office, then the RTI application should have been transferred under Section-6(3) or assistance could have been sought under Section-5(4) of the RTI Act,” the CIC noted.


The PIO MP Gupta pointed out that the person responsible for giving this irrelevant information was KR Meena, assistant engineer (B). Meena, the deemed PIO, was also present during the hearing, but did not give any explanation for providing the false and misleading information.


Mr Gandhi, the CIC, asked the deemed PIO Meena to explain the reasons for giving such misleading and false information. Meena stated that in future he would correct this mistake.


While allowing the appeal, the Bench said, “The information that should have been provided was that no building plan had been sanctioned. Instead, information was provided stating that the information was not available in this office. It appears that this is collusion with people who construct illegal buildings and misleading information has been given to prolong the matter so that illegal building could be completed before the matter comes to the Commission.”


Mr Gandhi then directed the PIO to give specific information to Bansal before 30 March 2011.


From the facts, the Bench said, it found the deemed PIO guilty of furnishing false and misleading information. Mr Gandhi then issued a show-cause notice to Meena, the deemed PIO, directing him to give his reasons to the CIC as to why penalty should not be imposed upon him for furnishing false and misleading information.




Decision No. CIC/SG/A/2011/000123/11564

Appeal No. CIC/SG/A/2011/000123


Appellant                                        : RH Bansal

                                                            Phase-II, New Delhi     


Respondent                                    : MP Gupta

                                                            Public Information Officer & SE-II

                                                            Municipal Corporation of Delhi

                                                            O/o Superintending Engineer (B)-II, Rohini Zone,

                                                            Sector-5, Delhi-110085



ashwin bahl

3 years ago

speechless but that is what goes on under the garb of some section of the law, or no law !

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