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Govt may allocate gas to RCF from ONGC instead of RIL

New Delhi: The government may give Rashtriya Chemicals and Fertilizers (RCF) natural gas from Oil and Natural Gas Corporation’s (ONGC) western offshore C-Series fields in place of cheaper KG-D6 gas it currently gets from Reliance Industries (RIL).

RCF currently buys 0.95 million standard cubic meters per day (mmscmd) of KG-D6 gas at $4.205 per million British thermal unit (mmBtu) for use as feedstock at its Trombay plant and another 2.1 mmscmd for its Thal unit.

The government plans to replace KG-D6 gas at these plants with the fuel being produced by ONGC from its C-Series fields, which is priced at $5.25 per mmBtu, official sources said.

This follows government allocations far exceeding the supplies from KG-D6. While the government has allocated users for about 64 mmscmd of KG-D6 gas, Reliance says it can currently produce only 60 mmscmd on sustained basis.

The mismatch between the allocation and actual production forced the government to switch users like RCF to ONGC, they said, adding ONGC is to produce between 2.1 and 3 mmscmd from the C-Series fields.

The delivered price of KG-D6 gas in the Trombay region is $6.52 per mmBtu ($4.205 per mmBtu plus $0.135 for marketing margin, $0.87 towards central sales tax of 2%, $1.45 for transportation through East-West pipeline and $0.64 per mmBtu tariff of GAIL's pipeline).

On the other hand, the ONGC gas would cost RCF $6.76 per mmBtu ($5.25 plus $0.12 for marketing margin, $0.64 in transportation tariff through GAIL pipeline and $0.75 per mmBtu in local sales tax of 12.5%).

Sources said while KG-D6 was an inter-state sales attracting a central sales tax of 2%, ONGC gas sales would attract Maharashtra government sales tax.

The gas vacated by RCF would go to companies like Essar Oil's Vadinar oil refinery in Gujarat, which has so far not been able to sign contract with Reliance for the 0.6 mmscmd that was allocated to it.

Sources said Reliance has told the oil ministry that it can at present sustain output of only 53-54 mmscmd from the Dhirubhai-1 and 3 fields in the KG-D6 block and 7-8 mmscmd from the MA field in the same area.

The company had in December last year tested facilities at KG-D6 for a peak production rate of 80 mmscmd, but it estimates this level of production can only be achieved in 2012.

Of the current production, about 14 mmscmd is sold to fertilizer plants, 28 mmscmd to power plants and 10 mmscmd to petrochemical plants and refineries. The remaining seven mmscmd of gas was consumed by other sectors such as sponge iron plants, LPG, city gas distribution and the East-West pipeline.

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HSBC to go slow on retail banking, credit cards: Kidwai

Mumbai: The country's oldest foreign bank HSBC India has said it will go slow on retail and credit cards businesses as it wants to focus on global banking, investment banking, wealth management, insurance and mortgages as the key growth drivers in the country, reports PTI.

"We will not chase retail customers till we turnaround our loss-making retail lending and credit cards businesses. We hope to do so by the end of the year," HSBC India Group general manager and country head Naina Lal Kidwai told PTI in an exclusive interview here today.

Only last month, HSBC clinched a deal to acquire the retail and commercial banking business of Royal Bank of Scotland in India. RBS' 31 branches with a network of 1.1 million customers are expected to give HSBC greater exposure in the Indian market.

"HSBC won't go after customers to sell our retail banking or credit card products as that will impact the quality of our services, besides increasing our risk portfolio," Ms Kidwai, who was earlier this month appointed to the group's global board, added.

On whether the bank is planning to exit credit card business, Ms Kidwai quipped, "There is no such plan, but we will not be running after customers to sell a credit card or a personal loan. There is no plan whatsoever to discontinue this business, as we've a customer base of 1.5 million even today."

The RBS acquisition was the third major deal for HSBC in India.

In June 2008, HSBC entered into joint venture with Canara Bank and Oriental Bank of Commerce for insurance business, gaining access to a distribution network of 5,000 branches and 50 million customers.

In September of the same year, HSBC acquired IL&FS Investsmart, now HSBC InvestDirect, a major retail brokerage with more than 130,000 customers and outlets across 52 cities.

Explaining the reason for this go-slow approach, Ms Kidwai said, "Our rapid expansion in the past has led to the growth of some riskier assets and we don't want to grow that way. In fact, we have been going slow on retail banking since the past four years or so, and by the end of 2010, we will have more good numbers to share on this front.

To a query on what would then be the focus growth areas of the country's oldest multinational bank, she said, in the time to come the bank will be focusing more and more on global banking (corporate lending business), insurance, investment banking, mutual fund distribution, wealth management and mortgages as the key growth drivers in the country.

Apart from that NRI business and retail broking will also be other thrust areas for the global lender, which has an asset base of $2450 billion as on 30th June.

The retail business of the London-headquartered HSBC, which is the largest European lender, in the country has been making losses for the past four years and in the first half of 2010, it had reported a $50 million loss, even as it posted $340 million profit during the period-its best-ever numbers from the country so far, and thus becoming the third biggest profit centre for the group.

"This ($50 million) was not a loss in fact as this was our provisioning for bad debt being carried over since the past four years," Ms Kidwai said, adding "the losses you see are from when we scaled back" on credit cards and unsecured lending.

Established in Bombay as the Mercantile Bank of India way bank in 1853, HSBC is the oldest foreign bank in the country as also the largest in terms of market share (with a 35% share of the custody business) and in terms of people employed-35,000 as on 30th June, Ms Kidwai informed.

With 10% market share, HSBC is the largest MF distributor in the country and the largest bancassurance player. Its two-year-old insurance arm, Canara HSBC Oriental Bank of Commerce Life Insurance, has already become one of the top ten insurers in the country.

On whether the bank will be opening more branches, Ms Kidwai said they are only happy to do so provided the Reserve Bank of India (RBI) allows them. Currently HSBC has only 50 branches spanning 29 cities but is keen to open more as and when the RBI gives them the go ahead.
The banking industry is keenly watching the Reserve Bank move on new private sector bank licences, which is expected by the later part of this fiscal and a lot of domestic corporate biggies are keen on entering the space.

The government in the 2010-11 budget had said to speed up financial inclusion process, the Reserve Bank would be issuing more licences to private banks. Following this, the RBI is slated to come out with a discussion paper on the topic by the end of next month.

However, the central bank is not keen on allowing foreign banks to open more branches, but rather it wants them to open domestic subsidiaries as a means to expand.

When asked whether the bank will be open to go the subsidiary way, she said, "If the Reserve Bank wants us to go the subsidiary route, we are only happy to become a wholly-owned subsidiary like we do in other countries. Having said that let me add that when it comes to reporting financial numbers we have for long been reporting separate balance sheets, exactly as a subsidiary does."

Stating that HSBC has a high capital adequacy ratio (CAR) at 60%, on top of a negligible non-performing assets (NPA) level, which was primarily due to the personal loan and credit card businesses, Ms Kidwai said, the bank's current advance-deposit ratio is only 50%. But it wants to jack up to 75%, as part of increasing its balance sheet.

"The focus on mortgage business will help us achieve that target," Ms Kidwai, who joined HSBC in 2002, after her starting off with ANZ Grindlays Bank and then Morgan Stanley, which she helped set up in the country.

"We weren't lending in a huge way because we were managing liquidity across the group," Ms Kidwai, said, adding, "This year we have resumed lending and the impairments are really down."

Overall, India is the bank's third-largest contributor to profits in Asia Pacific, after Hong Kong and China, she said.

"India is actually much more profitable," Ms Kidwai said, adding "we make more money here than we make in China from the business."

To a query on whether the bank has any plan to do a StanChart, its rival from England that launched the country's first IDR issue in May this year and a subsequent listing, she said they have no plans as of now as such a step will require lot of regulatory and policy issues. Also the group's priority is the forthcoming Shanghai listing, she said.

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