NHAI to launch Rs 10,000-cr tax-free bonds issue on 28th December

The NHAI official said that the interest (coupon) rate of the bonds issue will be between 8% and 8.5%, while refusing to disclose the exact number

Unfazed by uncertainty in the capital markets, the National Highways Authority of India (NHAI) will launch its first ever tax-free bonds issue of Rs 10,000 crore on 28 December 2011. The issue will close on 30 December 2011, a senior Road Transport Ministry official said. The official further said the interest (coupon) rate of the bonds issue will be between 8% and 8.5%, while refusing to disclose the exact number.

"A formal announcement will be made tomorrow by road transport minister CP Joshi and you should wait for that," the official said, adding that the money raised from it will be used to partly finance various National Highways projects under different government schemes. Some money will also be used for viability gap funding for BOT (build-operate-transfer) road contracts, the official added.

As per the prospectus filed by NHAI with the market regulator Sebi, the bonds will have two maturity periods of 10 and 15 years, and would get listed on the Bombay Stock Exchange and the National Stock Exchange.

In this year's Budget, the government had allowed NHAI to raise Rs10,000 crore from the tax-free bonds, an instrument never used by it earlier. Till now, it used to raise funds through issue of 54EC bonds, under which subscribers can claim exemption of capital gains tax.

Citing the provisions of Income Tax rules, the NHAI prospectus has, however, clarified that only the interest earned on the new bonds will be tax-free, not the actual investments. Moreover, investors will be liable to pay capital gains tax as applicable, it further said.

According to the NHAI prospectus, the bonds issue will worsen its debt to capital ratio from 0.11 to 0.29 if it raises Rs10,000 crore from the markets. The debt to capital ratio reflects the financing strengths of a firm, higher the ratio, the more debt company has compared to its equity. As on 30 June 2011, the NHAI's total debt (including secured loans) stood at Rs6,636.21 crore.

The bond issue has got AAA (stable) rating from the three agencies -- Crisil, CARE and Fitch. SBI Caps, ICICI Securities, Kotal Mahindra Capital and AK Capital Services have been appointed as the lead managers by the NHAI for the bonds issue.

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RIL arbitration notice: Oil ministry seeks time till 31st January to reply

The oil ministry reportedly wants to consult the law ministry on the arbitration notice and appointment of arbitrators and accordingly sought an extension of the deadline

New Delhi: The oil ministry has sought an extension of over one month in the deadline to respond to the arbitration notice issued by Reliance Industries (RIL) against proposed penal action for a fall in KG-D6 gas output. Reports PTI.

The oil ministry on Wednesday wrote to RIL seeking time till 31st January to respond to the arbitration notice, sources privy to the development said.

RIL had in the 24th November arbitration notice termed the ministry’s move to limit the amount of expenditure the company can recoup from its flagging KG-D6 fields in proportion to the gas production as illegal and outside the Production Sharing Contract (PSC).

As per the dispute resolution mechanism set out in the PSC, the government had one month’s time to respond to the notice and appoint arbitrators. RIL and the government have the right to appoint one arbitrator each. A third neutral adjudicator was to be appointed by the two arbitrators.

RIL would have got the right to appoint an arbitrator on behalf of the government if no response was made within the one month timeframe.

Sources said the oil ministry wants to consult the law ministry on the arbitration notice and appointment of arbitrators and accordingly sought an extension of the deadline.

The ministry was moving toward restricting cost-recovery—now at 100%—in proportion to gas output from the KG-D6 fields.

RIL has built facilities to handle 80 million metric standard cubic metres per day (mmscmd) of gas production, but the fields are producing less than half of that due to a fall in reservoir pressure and water ingress.

As per the 2006 Field Development Plan, where capital expenditure in Dhirubhai-1 and 3 fields was hiked to $8.8 billion from $2.47 billion previously, RIL was to produce 61.88 mmscmd gas from 22 wells by April this year and 80 mmscmd from 31 wells by 2012.

RIL stopped drilling in D 1&D 3 after the last four of the 22 wells drilled in the fields yielded non-commercially exploitable volumes and decided to do more studies.

However, oil minister S Jaipal Reddy last week insisted in Parliament that all 31 wells outlined in the development plan must be drilled by March, 2012, blaming the production decline on the failure to do so.

At the same time, he also admitted that four wells in D 1&D 3 had stopped producing because of water incursion and sand deposits and one of the six wells in the MA field of the same block has been shut because of water incursion.

Sources said based on the opinion of the Solicitor General of India (SGI), the ministry wants to “disallow expenditure incurred in constructing production/processing facilities at the D 1 & D 3 fields in the KG-D6 block that are currently under-utilised/have excess capacity because of falling output”.

Production Sharing Contracts (PSC) allow operators to recover 100% of their exploration and production costs and do not link cost-recovery to output.

RIL had envisaged a gas output of 80 mmscmd from KG-D6 by 2012 through an investment of $8.8 billion.

However, current output is about half of the target and RIL has so far invested only $5.8 billion.

The latest figures show gas production from the Dhirubhai 1 and 3 fields in the Krishna-Godavari Basin in the Bay of Bengal falling to a fresh low of 32.94 mmscmd, down from the 54 mmscmd peak hit in March 2010, before well pressure dropped and water incursion began.

According to the Reliance development plan approved by the authorities, output should have reached 61.88 mmscmd this month. Associated gas production from the MA oil field in the same licence area was 6.86 mmscmd, for a combined total of 39.8 mmscmd, versus the expected 70.39 mmscmd.

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Govt trying to build consensus on reforms, FDI in retail: FM

“Commitment on FDI, PFRDA all the major legislations, which are part of the new generation reforms, are very much in the mind of the government. We are working hard to build consensus,” finance minister Pranab Mukherjee said

New Delhi: Expressing commitment to push forward economic reforms, finance minister Pranab Mukherjee Friday said the government is making efforts to build a consensus on important economic legislations, including PFRDA and foreign investment in multi-brand retail, reports PTI.

“Commitment on foreign direct investment (FDI), PFRDA (Pension Fund Regulatory and Development Authority) all the major legislations, which are part of the new generation reforms, are very much in the mind of the government. We are working hard to build consensus,” he said while speaking on the annual general meeting of the industry chamber PHDCCI.

The minister said the government wanted to push the PFRDA Bill, but could not do so because the UPA did not have the requisite numbers in the Rajya Sabha.

“We decided to have PFRDA legislated in this session of Parliament but could not do so ...not because of lack of intention or commitment... you have to recognise the very hard fact that legislation requires numbers which unfortunately Indian electorate has not given to us,” Mr Mukherjee said.

The PFRDA Bill, which seeks to increase participation of domestic and foreign players in the pension sector, has been pending with Parliament for past several years. According to reports, UPA ally Trinamool Congress has been opposing the Pension Reforms Bill.

On FDI in multi-brand retail, which has been put on hold, Mr Mukherjee said, “Sometimes we have problems and it creates confusion that even after announcement of a policy, government has to stop ...that does not mean that we have shelved it”.

Referring to growth prospects in the current fiscal, he said that the economy is likely to clock a growth of about 7.5%. "When I am talking of 7.5% I am not disappointed... situation is difficult... at the same time we have the capacity and resilience to overcome the difficulty.”

The economy grew by 8.5% in 2010-11.

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