A guestimate would put the dollar-rupee conversion rate to be around Rs63. What will happen if the crude oil or gas price goes up dramatically due to unforeseen circumstances, including war-like situation in the Middle-East or elsewhere? Once this price is gazetted, it would actually become due for revision only in April 2015
Practically six months after it was due to have been put into effect on 1st April, gazetted and yet not made applicable due to ensuing elections, and subject to debates and discussions, the National Democratic Alliance (NDA) government at last has settled the score to set the domestic gas price to $5.6 per unit, not $8.4 as indicated earlier by the former government. Is this a concessional, discounted rate?
Anyway, this works out to be roughly 33% higher than the price in operation at $4.2 but becomes effective from 1st November. This price of $5.6 would be reviewed every six months so as to "ensure stability in the market". This move may have been caused by the fall in the international market price and the glut situation in the crude oil business.
A guestimate would put the dollar-rupee conversion rate to be around Rs63. What will happen if the crude oil or gas price goes up dramatically due to unforeseen circumstances, including war-like situation in the middle-east or elsewhere? Once this price is gazetted, it would actually become due for "revision" only in April 2015.
According to the press reports available, the new price of $5.6 per mmBtu is based on gross calorific value, which includes "impurities". However, the effective price for net calorific value would work out to be $6.17 per unit, as stated by the Finance Minister, Arun Jaitley. The fuel retail price, from now onwards, would be "linked" to the global oil prices.
The press reports further indicate that the critical part of the announcement is the decision to allow a premium on this price to gas produced in ultra-deep waters, deep waters and technologically "challenging" areas. This new price, it is stated, does not apply to D1 and D3 fields of Reliance Industries Ltd and that the differential amount would be deposited in Gas Pool Account till the outcome of the arbitration process.
These two fields are located in the deep water fields of Kaveri-Godavari basin. It remains to be seen whether the gas produced from these fields would attract a premium over $5.6 per mmBtu, because of their location?
On the whole, prima facie, it would appear that this long over due revision would benefit ONGC, Oil India, Cairn and Gujarat State Petroleum Corporation besides Reliance when applicable. At the same time, this will also give much needed reassurance to international investors that the government wants to encourage them to participate in such exploratory programmes.
It may also be remembered that Reliance inability to supply the contracted quantity earlier, due to "geographical surprises", which is under arbitration, needs to be kept in abeyance because they were supposed to make the loss of the quantity not supplied earlier.
In announcing this price, the government also deregulated the diesel prices and it was reported in the media that IOC chairman confirmed the system of revising prices every month, based on the international price fluctuation. The revision of price would have a rippling effect on freight rates thus helping to moderate inflation while the subsidy burden on fertiliser may increase but which could be offset by the higher income obtained due to higher price for the government. Would the government consider a reduction or withdrawal of fertiliser subsidy or even permit the manufacturers to decide the price issue?
This price fixation will be considered a Diwali gift for the promotion of business and industry and one may expect it to be welcomed in Dalal Street.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
Premium pet food company says its products may have contained by-products because of a supplier mistake
This is one cat fight that isn’t ending anytime soon. In a huge oops, Blue Buffalo, the Conn.-based natural pet food manufacturer being sued by Purina for claims that its kibble was better for pets because it didn’t contain by-products admitted Tuesday that, well, some of its pet food may contain by-products and it was its supplier’s fault.
Blue Buffalo said this week in a statement on its website that it had recently learned from its supplier, Wilbur-Ellis, that its Texas pet food ingredient processing plant had shipped poultry by-products to customers who had ordered 100 percent chicken meal and thus Blue Buffalo may have received the by-products. The company called it a “mislabeling issue.”
Purina said in its lawsuit that it had Blue Buffalo’s kibble tested and found that some of its products contain poultry by-product meal and/or corn. It contended, “Blue Buffalo’s brand is built . . . on a platform of dishonesty and deception.” Blue Buffalo countered with a complaint of its own that Purina’s lawsuit is a “malicious attempt to undermine the trust of our pet parents.”
Blue Buffalo congratulated itself in its Oct. 14 statement that it was being upfront with customers by revealing the Wilbur-Ellis mislabeling issue. “Although pet food companies are not required to inform consumers of an incident such as this, where no safety or nutritional issues exist, the Blue Buffalo way is to be transparent with you.” The company said it has stopped doing business with the Wilbur-Ellis plant at the center of the mislabeling issue and the by-product problem was corrected months ago.
But Purina quickly hit back saying it had unearthed the truth about the by-products through testing and legal documents it obtained. In a statement to TINA.org, Purina said:
Blue Buffalo owes consumers an apology for all the false statements, false labels and false advertising … A half admission that Blue Buffalo products ‘may’ contain undeclared by-products is simply not acceptable. Pet owners deserve to know what’s truly in Blue Buffalo pet food.
No word yet if Blue Buffalo is giving “pet parents” their money back for the premium-priced food that may have had by-products in it.