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Iran-India gas pipeline: IOC calls bids for appointment of financial advisor
New Delhi: The Indian Oil Corporation (IOC), which had been asked by the petroleum ministry to appoint a financial consultant for the US$7bn plus Iran-Pakistan-India gas pipeline project by August 31, has already sent proposal documents to as many as 24 financial advisors around the world. The bids were to be submitted by August 16.

The advisor, as per the ministry's pre-qualification criteria, must have experience in project advisory services for at least one transnational project in oil and gas sector worth more than US$500mn. Legal and technical advisors will be appointed by GAIL (India) Limited.

Former attorney general Soli Sorabji has also been requested to assist in the selection of legal advisor. The financial advisor will be the lead advisor in the consortium of advisors and its report will form the basis for finalisation of the project structure.

"Based on the technical bid, IOC will shortlist the bidders who meet the pre-qualification criteria. They will then be asked to make presentations before the high level committee of the petroleum ministry on August 22-23," sources said.

The selected financial advisor will recommend the preferred project structure for the Indian side by November 15, considering the safety and security of supply as well as affordablility of gas price at the India-Pakistan border. Based on the recommendation of the financial advisor, the ministry will approach the Cabinet on participation of Indian companies in this project.

The financial advisor will also be responsible for advising the Indian companies on raising of finances for transportation of natural gas.
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Inflation down to a two year low of 3.35 per cent
New Delhi: Finance Minister P Chidambaram has said that the government was closely watching the price movement of sugar, steel, cement, rice and wheat, even as the wholesale price index (WPI)-based inflation fell to a two-and-a-half year low of 3.35 per cent, during the week-ended August 6.

The inflation, a measure of the general price level, was 3.84 per cent in the previous week and 8.3 per cent in the corresponding week last year.

The fall in inflation was mainly owing to the high-base effect of last year, when it had crossed 8 per cent in August 2004, and because of a fall in prices of primary articles.

The high-base effect was expected to keep inflation low, till the end of the month. It is also widely expected to go below 3 per cent in end-August, minus a fuel price hike by then. October onwards, inflation could start rising and was expected to go up to 5 per cent by end-December.

"Inflation was down mainly owing to good supply side management and the Reserve Bank of India's adroit management of money supply," Chidambaram told reporters.

A change in interest rates was not expected in the medium term, though high international crude oil prices were affecting the balance sheets of the oil companies and their investment plans, he added.

The inflation rate for the week ended June 11 was revised upwards to 4.5 per cent, against 4.33 per cent reported earlier, based on the provisional estimates.

At a disaggregated level, the index for primary articles fell by 0.8 per cent, due to a 9 per cent fall in vegetable prices and a 6 per cent drop in marine fish prices during the week. Within the primary articles group, index for food articles was down by one per cent due to a fall in prices of vegetables and marine fish. The index for non-food articles declined by 0.2 per cent owing to a 5 per cent fall in the prices of raw rubber and 2 per cent fall in prices of fodder, gingelly seed and raw wool.

The index for the group of "fuel, power, light and lubricants" fell 0.2 per cent during the week, due to a 5 per cent fall in the prices of furnace oil and despite a 1 per cent rise in naptha prices over the week.

Manufactured items index remained unchanged despite a dip in the indices for food products, rubber and plastic products and non-metallic minerals. The indices for chemicals, chemical products, machinery and machine tools rose marginally during the week.
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Checking oil prices: Oil ministry moots combination of price hike, duty cut
New Delhi: The petroleum ministry has mooted a combination of price rise and duty reduction on fuel to tackle the impact of rising crude oil prices. While the price of petrol and diesel may go up by a modest Rs1.50 per litre each, cooking gas prices may be hiked by Rs20 per cylinder.

The hike in auto-fuel prices would be marginal only if it is linked to a reduction in duty rates. The petroleum ministry has proposed reducing the excise levy by Rs1 per litre. While the specific duty on petrol is proposed to be reduced to Rs12 per litre, the specific duty on diesel is proposed to be reduced to Rs2.25 per litre. Both products carry an ad valorem duty of 8%.

A decision on the price hike is, however, likely to be taken only after the ongoing Parliament session ends.

However, cooking gas, which is currently being subsidised by over Rs90 per cylinder, may need to be hiked to reduce the subsidy bill. LPG prices were last revised in June '04 by Rs20 per cylinder. The government has removed all levies, customs and excise, on LPG and kerosene and this leaves the government with very little option but to increase prices.

The petroleum ministry's proposal, however, is aimed at being completely revenue neutral. "The entire exercise will be revenue-neutral. Duty cuts on the excise front would lead to a revenue loss, but this will be more than compensated for on the customs front. Higher crude prices and increased retail fuel prices would generate a significant revenue flow," a senior petroleum ministry official said.

The finance ministry had projected a customs revenue collection of Rs5,873 crore on crude imports, pegged at an average crude price of $38 per barrel. However, the spike in global crude oil prices in the past few months makes the annualised revenue projections, based on current prices, stand at a whopping Rs8,045 crore.
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