Mumbai: Clearing air on marketing freedom on natural gas, the government today said companies will continue to have the right to discover the market price of the fuel and government will in no way dictate the rates, reports PTI.
"The decision of Supreme Court in the famous case has not been sufficiently understood. What has been upheld by Supreme Court is the marketing freedom for (exploration firm)," oil secretary S Sundareshan said here.
Under the Production Sharing Contract (PSC), an explorer has the freedom to discover the market price by inviting bids from consumers in an open, transparent arms-length manner.
"The government does not fix price. The contractor has the freedom to discover the price," he said. The government only approves that.
Reliance Industries (RIL) had in 2007 submitted a pricing formula for the natural gas it planned to produce from eastern offshore KG-D6 fields for three years from 2009. The government tweaked the formula and capped the rate at $4.205 per million British thermal unit (mmBtu) for five years ending 31 March 2014.
The government initially approved the $4.205 per mmBtu rate for first 40 million standard cubic meters of gas per day (mmscmd) from Dhirubhai-1 and 3 fields in KG-D6 block but later extended to peak output of 80 mmscmd.
Also, the pricing formula for the two fields was also extended to MA field in the block, for which technically a new price discovery had to be done but the government did not allow.
"The government did not fix price of gas (from KG-D6) and the price ($4.205 per mmBtu) is not fixed in perpetuity," Mr Sundareshan said.
"Marketing freedom has been upheld by Supreme Court and government stands by its committed enshrined in PSC," he said.
Mr Sundareshan however did not mention about the government taking over the job of fixing the users of the gas.
Companies like RIL cannot choose any consumers and the same is decided by the government.
Mr Sundareshan said he saw no impact of absence of the seven-year holiday or exemption from payment of income tax from profits earned from the oil and gas produced from the areas awarded in the ninth round of the New Exploration Licensing Policy (NELP-IX). "The issue with investors is ambiguity.
There is none in this round," he said, referring to confusion over if the tax holiday would apply on gas produced from blocks awarded up to NELP-VII.
The proposed Draft Tax Code (DTC), to be implemented from April 2012, has done away with profit-linked incentives for all sectors. Instead an investment linked incentive will be available, he said.
New Delhi: The government today said it is not considering any proposal to either shift the financial year to January-December or to merge railway budget with the general budget, reports PTI.
"There is no move in the ministry of finance, Government of India for any change of financial year from April-March to January-December or for merger of the railway budget with the union budget", an official statement said.
The clarification comes in wake of media reports that the finance ministry is contemplating to merge the railway and general budgets and change the financial year.
The financial year runs from 1st April to 31st March and the period is used for government's annual accounting and taxation purposes.
As for the budgets, the railway budget is presented traditionally by the railway minister few days before the general budget, which is unveiled by the finance minister in the Lok Sabha on the last working day of February.
MCX-SX, promoted by Financial Technologies, was prevented from launching equities trading in India. But it faced no troubles in launching two new exchanges in six weeks, first in Singapore and then in Mauritius
Three weeks after the Indian regulator Securities and Exchange Board of India (SEBI) decided to throw out the application of MCX-SX to launch equity trading, today on 18th October, the Global Board of Trade (GBOT), the first international multi-asset class exchange based in Mauritius, has gone live. GBOT has been promoted by Financial Technologies, promoter of MCX and MCX-SX.
GBOT will offer a basket of commodity derivative products including metals, energy, soft agricultural products, as well as currency derivatives. The launch of GBOT makes it FT's second exchange launch within a space of six weeks. Its latest success not only consolidates its lead as the leading exchange group from Asia but holds a mirror to the Indian regulatory system which denied MCX-SX an equity trading platform.
GBOT was inaugurated on 16th October by Dr Navinchandra Ramgoolam, prime minister of the Republic of Mauritius. It is instructive to hear what Dr Ramgoolam said during the launch: "GBOT has the advantage of having Financial Technologies India Ltd as (the) parent company. Mr Jignesh Shah is a bold entrepreneur with exceptional business acumen. FT has chosen Mauritius after careful and rigorous analysis for setting up a multi-asset exchange."
Mauritius considered it a privilege to have FT as a partner, which it chose "after careful and rigorous analysis." In sharp contrast, consider how SEBI treated the FT group, which is setting up exchanges in a vast swathe of countries from Africa to Asia and Middle East to South East Asia. After granting it the permission to launch a currency exchange in August 2008, SEBI officials have strung along FT-promoted MCX-SX for two years with the promise of clearing its application for equity trading. During this period, MCX-SX was bleeding, since its key rival, the highly profitable National Stock Exchange, was running its currency exchange for free. Later, SEBI allowed NSE to launch other currency products while refusing MCX-SX the same permission. This prevented MCX-SX to broad-base its shareholders and bring down the promoters' holding. To deal with this, MCX-SX had to reduce its capital to comply with SEBI's shareholding norms for exchange ownership. This move was followed by a deafening silence from SEBI, forcing MCX-SX to approach the High Court for a quicker decision, especially since MCX-SX was living on temporary license for the currency segment. Finally, on 23rd September, SEBI, which was dragging its feet all these years, threw out MCX-SX's application with a 68-page order with selective facts and dubious logic, laced with humiliating language. MCX-SX is now bleeding, running a currency exchange with no permission to expand into even currency options.
To make matters hotter for it, SEBI has cleared the launch of a third currency exchange, the United Stock Exchange, without bothering about the possibility that USX is likely to die an early death, because it has no revenue model. Interestingly, neither SEBI, nor RBI or USE have responded to our queries on how USE hopes to earn revenues, make money and survive. This will leave NSE with a monopoly in the currency segment, with SEBI's help, and without having to compete for its monopoly position. Ironically, while MCX-SX cannot expand any more in India, GBOT will offer currency derivatives products such as USD/MUR, ZAR/USD, EUR/USD, GBP/USD and JPY/USD futures. For the first time worldwide, two African currency futures will be traded.
Given the flow of events, FT and MCX allege, with some justification, that SEBI's approach all along has been to throttle MCX-SX's business itself. The beneficiary of this is the National Stock Exchange, which controls 94% of equity market trading in India. Indeed, the successful launch of exchanges in Singapore and Mauritius raises valid questions about SEBI's motive as far as dealing with MCX-SX is concerned. While Singapore is a far more advanced financial centre than India, given its quality of institutions, governance standards and quality of regulation, Mauritius too is a key financial centre through which billions of dollars flow. The Indian government, SEBI and RBI do not have a problem with such equity fund inflows into India through Mauritius, which have boosted Indian markets to almost their all-time highs and are the cause of huge trading volumes on the NSE.
Having successfully launched two new exchanges in quick succession in two important locations in Asia, FT may well feel victimised in its home base especially since the group operates 10 exchanges and six related ventures which include clearing, depository, information vending, and payment gateway among others.