The additional compensation sanctioned on 11th November is over and above the Rs15,000 crore sanctioned for meeting losses of first quarter ending 30th June, a top official of the oil ministry said
New Delhi: The finance ministry has sanctioned an additional Rs15,000 crore to partially compensate state-owned oil firms for losses they incur on selling fuel below cost, reports PTI.
“The ministry of finance has sanctioned an additional compensation of Rs15,000 crore on 11th November,” a top oil ministry official said, adding this compensation is over and above the Rs15,000 crore sanctioned for meeting losses of first quarter ending 30th June.
Oil marketing companies (OMCs) have reported an under-recovery (revenue loss) of Rs21,374 crore in the July-September quarter. Of this, one-third or Rs7,124 crore would be made good by upstream firms like Oil and Natural Gas Corporation (ONGC) and Oil India (OIL).
The finance ministry was asked to make good the rest Rs14,250 crore.
“The finance ministry has issued the sanction letter and the actual cash would be given the oil companies after the Parliament approves supplementary demands for grants in the Winter session of Parliament beginning 22nd November,” he said.
Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) had lost Rs43,526 crore in April-June quarter on selling diesel, domestic LPG and kerosene at government controlled rates which are way below cost.
The oil ministry had asked for Rs29,000 crore cash subsidy for Q1 but got only Rs15,000 crore.
In the April-September period, the three firms lost Rs64,900 crore on selling the three fuels below cost.
The three firms are currently losing Rs11.44 per litre on diesel, Rs26.94 per litre on kerosene sold through the public distribution system (PDS) and Rs260.50 per 14.2-kg LPG cylinder supplied to domestic households for cooking purposes.
“The oil marketing companies are currently incurring a daily under-recovery (revenue loss) of about Rs360 crore on sales of diesel, PDS kerosene and domestic LPG,” he said.
If the prices are not revised, the oil firms will end the fiscal with a total revenue loss of about Rs130,000 crore.
“Financial condition of oil companies is very fragile...
We have been pleading for higher government compensation to the oil marketing companies,” he said.
The oil ministry, he said, wanted the upstream share be limited to historic one-third or 33.33% of the total under-recovery or revenue loss. The finance ministry, however, wants the contribution by ONGC, OIL and GAIL India to increase to at least 50%.
“If we can confine the burden (of upstream firms) to 33.33%, we will be lucky,” he said.
In first two quarters, ONGC, OIL and GAIL bore roughly one-third of the Rs64,900 crore under-recovery. With the latest sanction, the government has agreed to give Rs30,000 crore and the rest was absorbed by retailers.
The official said fuel retailers lost Rs37,719 crore on selling diesel in the April-September period, Rs13,361 crore on PDS kerosene and Rs13,820 crore on domestic LPG.
The cost of the basket of crude oil that India buys averaged $110 per barrel in the current fiscal, as against an average $85.09 a barrel in the first fortnight.
The rupee has depreciated from Rs44.37 to a US dollar in April to around Rs50 this month. “The under-recoveries of oil marketing companies on sale of diesel, PDS-kerosene and domestic LPG increase by about Rs8,000 crore annually on account of every Re1 depreciation,” the official said.
The fall in the value of rupee against the dollar increases the cost of imported crude oil. India is dependent on imports to meet 79% of its oil needs.
Without a price revision, the three firms are projected to lose Rs130,000 crore in revenues on the three products in the full fiscal year, the official said adding oil PSUs were borrowing heavily to meet the shortfall in revenue.
“Borrowings have reached an unprecedented level of Rs131,177 crore necessitated by the need of working capital for payment of imported crude,” he added.
The maximum commissions being paid by a mutual fund company is to banks, often of the same group, for pushing their schemes. And SEBI wants fund companies to control distributors!
What are the best mutual funds to invest in? There are various easy ways of finding this out. But one of the worst ways is asking your bank relationship manager. Sample this data. Of the Rs21 crore commission paid out to major distributors by Axis Mutual Fund, Rs 14.19 crore or 68% has gone to Axis Bank. Of the Rs288 crore commission paid out by HDFC Mutual Fund one of the largest chunks (14%) has gone to HDFC Bank, which is 35% of the commission earned by HDFC Bank. It is the same with other groups which are into both banking and mutual funds businesses. And when the money is not going so much to the bank of the same group, it is going to another bank.
Clearly, for each bank, the best mutual schemes are none other than the schemes belonging to their own group or the ones that offers the maximum commission. This makes a nonsense of the Securities and Exchange Board of India’s (SEBI) efforts to ensure that distributors do sell fund schemes in an unbiased manner in the interest of customers. To this end, SEBI had issued a direction to asset management companies in 22nd August. As per the SEBI circular, mutual funds are supposed to ensure that customer relationship and transactions shall be categorised either as ‘advisory’ or ‘execution only’. For the advisory function, the distributor will sell “only that product categorisation that is identified as best suited for investors within a defined upper ceiling of risk appetite. No exception shall be made.” For the ‘execution-only’ relationship, if “the distributor has information to believe that the transaction is not appropriate for the customer, a written communication be made to the investor regarding the unsuitability of the product. The communication shall have to be duly acknowledged and accepted by (the) investor.”We had pointed out that this circular was meaningless. “AMCs are really at the mercy of large distributors and SEBI’s move to regulate the latter through AMCs only means looking at the problem of mis-selling from the opposite end! Unless SEBI regulates large distributors directly, the 22nd August circular will have far less meaning than what is intended. http://www.moneylife.in/article/sebi-circular-on-mutual-fund-due-diligence-given-the-go-by/20386.html
The data showing that banks push hard schemes belonging to the group which may or may not be in customer interest proves our point once again. Here are some facts based on thousands of customers we interact with. Mis-selling by banks is pervasive. Bankers command enormous reach and trust among their customers. All banking processes are geared to maximise sales and profits and this leads to hard selling of products by the so-called ‘relationship managers (RMs)’. RMs at banks have to meet stiff sales targets month after month. They often don’t have sufficient knowledge of the products and learn quickly on the job that the only thing that matters is the sales target. So they just learn to make money from gullible investors.
Unfortunately, savers don’t know this and tend to trust their bankers. After all, that is the place where they keep their savings.
Banks have a readymade database of their clients’ personal details and their financial situation. Armed with such information it is easy for them to cross-sell financial products such as mutual funds and insurance. But this selling usually does not take the customer’s interest into account. It is purely driven by commission. Moneylife has covered many such cases in the past, the most glaring one which the wealth management arm of Kotak Mahindra Bank misled a customer into investing in its India Growth Fund at a steep premium, based on bogus claims and duped him of Rs2.27 crore. (Read: http://www.moneylife.in/article/12944.html)
Now that it is proven that banks are pushing hard fund schemes fund companies of the same group, how does SEBI plan to address this issue? And where does SEBI’s recent concept paper to deal with conflict of interest by separating advisory and sales stand now? A few months back Moneylife pointed out various flaws in the concept paper over a four-part article. One such flaw, as we had pointed out it did not take into account how would banks operate. They can have one desk which ‘advises’ and another desk that ‘executes sales’. It would be the same organisation—and the same mis-selling.
Movie on paid news organised by Moneylife Foundation leaves the audience shocked
“Control over media is a dangerous proposition, but there needs to be an independent authority which can force corrective action on publishers without interfering with their freedom,” said veteran journalist and former Press Council member Mr Paranjoy Guha Thakurta. His comment summed up the lively interactive panel discussion that followed a screening of the movie ‘Brokering News’ by Moneylife Foundation and vCitizens Action Network and MxM India.
‘Brokering News’ is a documentary movie by award winning filmmaker Umesh Agarwal; which deals with four aspects of paid news: election coverage, business and finance, movies and sports. The movie was followed by a panel discussion with the director and eminent journalists like Sucheta Dalal, trustee of Moneylife Foundation, film journalist Bhawna Somaaya, sports journalist Ayaz Memon and Paranjoy Guha Thakurta.
While all the journalists emphasised on the electronic and print media’s need for introspection, they also said that enquiries must be launched against publishers who come up with suspicious-looking content or articles that engage in adulation for an organisation or persons.
Ms Dalal said, “Sebi has written to the Press Council about the menace of paid news, which shows how much this menace has spread.” When asked by an audience member about what implications paid news on business houses may have, she said, “When some news about some fake deal is ‘leaked out’; the share prices of that company moves up. It may not look serious to some, but it has vast ramifications on the stock market and the economy. It is particularly damaging to investors who invest after reading bogus reports.”
Mr Agarwal was asked about including healthcare in the ‘paid news’ ambit. Mr Agarwal replied, “It is a very serious issue. Although we could not include it in this movie, my earlier film, ‘Incurable India’ is precisely about paid news on healthcare services, medicines and doctors. Unfortunately, even when people witness wrong doings, they are helpless. And people from the medicine fraternity rarely act as whistleblowers.”
Ms Somaaya also agreed with him, and talked about a person who acts as a PRO for some doctors in the media. While talking about movies, she said, “The moment critics agree to participate in private screenings by movie makers, they fall into a trap. When the movie gets over, the director/producer would discuss all about ratings and review content and would often not compromise. The review is filed almost immediately after; without any introspection or thought preceding it; and even bad movies get good ratings.” She talked about how she was asked to repeat discussions on Aishwarya Rai’s newborn because bookies had placed huge bets on the event.
Mr Ayaz Memon said that paid news about sports; especially cricket, started when matches were telecasted on television. “Suddenly, some journalists could earn more from one coverage than what they were getting annually. Everyone jumped in, and in order to earn more than their rivals, they started to go for paid news,” he said. He gave the example of IPL, which had many media houses as stakeholders of franchises. “The media went gaga over the IPL, and started to promote it like it was the best thing in cricket. The moment the scam surfaced, they all started to throw muck. The audience should ask that what they were doing for three years, and why they had promoted IPL if they now say that everything was bad about it.”
Mr Guha Thakurta pointed out how for the first time, an Uttar Pradesh MLA’s candidature was cancelled because the Election Commission came to know that she had paid for news coverage. When asked about what is to be done with erring publications, he said that media, apart from self-regulation, must have an independent regulatory authority with teeth. “The PCI and Editors Guild must be empowered. In other countries, they can direct media houses to issue apologies or even fine them in case they cross their limits or publish paid content. Efforts are being made to strengthen the PCI,” he said.
He also said that if someone is convinced that his newspaper is duping him, he should change his subscription. “And if you are repelled by your news channel, use the remote control,” he said.