Behold! A new scam has been unearthed...
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» GST can help bring prices down
» Absolutely no chance of another Lehman: Geithner
» Indian Inc turns to Australian mining cos for help
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We are talking about the LNG scam. This scam is related to an agreement that the government owned Petronet LNG had with Qatar based RasGas for the supply of LNG. As per this agreement RasGas had offered to sell LNG to Petronet for US$ 2.53 per mmBtu (million British thermal units) at a crude oil price of US$ 20 per barrel. Further as per the agreement, LNG price would rise/fall by US$ 0.02 per mmBtu for every dollar movement in crude price. Therefore as per this agreement, Petronet would pay US$ 4.13 per mmBtu of gas when oil prices touched US$ 100 per barrel. The deal was valid for 25 years. This was in 1999. But come 2003, things changed.
In 2003, RasGas decided to revise the contract and Petronet agreed. This time it agreed to pay the earlier agreed amount from 2004 to 2009. After that the price of gas would be directly linked to the crude prices. This meant that the price would go up by US$ 1 per mmBtu for 5 years from 2009 and then from 2014, LNG would be priced at US$ 12.66 per mmBtu. If this new contract had not been accepted the price of LNG would have been US$ 3.04 per mmBtu for 25 years.
This revised pricing would mean that the Indian consumers would pay an additional amount of US$ 3.7 bn a year. This translates to a total of US$ 55.5 bn over 15 years. So why did Petronet agree to this? Being fully aware of its impact on the Indian consumers it went ahead and agreed to this price. Now the Parliamentary Standing Committee has woken up to the scam and has stated that state firms like Petronet should be brought under the purview of CAG audit. But the thing is why didn't anyone realize this earlier? After all, the agreement was entered into in 2003. And it is now 2011.
In a democracy, the government is a representative of its people. But when it acts in its own interests, the hopes and faith of the people are shattered. And unfortunately for India, this has now become a recurring incident. It is high time that the government woke up and realized that it is supposed to work in the interest of its people. Otherwise we just might see an Arab spring occurring in India as well.
Do you think India would ever become a scam free nation? Share your comments with us or post your views on our Facebook page
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Chart of the day | |
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* RCOM (Reliance Communications), IOC (Indian Oil Corp.), BPCL (Bharat Petroleum Corp. Ltd.),
NTPC (National Thermal Power Corp.)
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Indian stock markets were on a downtrend for the entire week. However, gains in the last trading session helped Sensex recoup earlier losses. Improved outlook on Indian exports (due to depreciating rupee) and increase in the rating of country's equities by Citigroup excited investors. With losses recorded in the previous trading sessions, the Sensex finally closed down by 1.3% during the week. Among the other world markets, Brazil was down by 2.1% and Singapore by 1.3%. However, France and UK were both up by 3.8% and 3.4% respectively.
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Weekend investing mantra |
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26 Responses to "Behold! A new scam has been unearthed..."
BHARAT BHUSHAN BANSAL
Oct 13, 2011Corruption Free India could be dreamed only and only if few major factors which promote corruption must be curbed .
1. We must reduce luxury from life and honour hard working . Today everybody want easy money without work . We live with double standards where we want all others to be honest but for self all facilities .
2. Learn to honour law . We daily break law for petty reasons either it is red light or railway platform ticket and furthermore if caught want to escape showing our connections and power .
3. Honour hard work and money earned with honesty . Social bycott of curropted person.
4. At the time of education, compulsory military training alongwith other practical social camps .
5. Very Strict Law . Change the theme of law No culprit should escape even though some innocent punished by mistake . ( We have to accept this short terms hardship for long term benefit )
6. All parties must declare their candidates 2 yr. before elections so that we could judge the candidate and get all detailed informations and working style of him / her . Now a days we even don't know properly him and we've to vote .
s.b.rasania
Oct 11, 2011It is horrible. They are looting the nation. Send this article to the P.M.
sethu
Oct 10, 2011Petroleum buying involves scams all over the world.India being as it is the corruption is much more that too in petroleum buying.But it is very difficult to prove that there had been scam since it is a complicated buying and international credit ,specification variations ,etc are involved.
Azad Bharat
Oct 10, 2011At Thane - a suburb of the 'great' Mumbai city... people are lighting candles because there is a power cut twice a day for a total of more than 4 hours each day. People lighting candles in the 'Commercial Capital' of the country and in the 21st century. Must be some kind of a joke. Roads are in such a pathetic condition (before of after the rains...) that it is not a pot-holed road anymore. It is a situation where the potholes have little bit of roads built into it. And then there is a political party which instead of looking into these things is more worried (and furious) about changing the name of Bandra-Worli Link bridge from Rajiv Gandhi to some other name.... even as people travel jam-packed like cattle on those local trains. The Hindustan Times Newspaper (Mumbai Edition) was screaming the other day with the headlines "Rs. 131 CRORE spent on your VANISHING FOOTPATHS" with photographs of the so called footpaths. What are our priorities as a country. Will we ever become corruption/ scam free.? There are no easy answers!
Sanjay Bhatt
Oct 9, 2011Long term contracts are subject to renegotiation and in any case we do not have a choice as we are energy dependent. We cannot have a breakdown in gas supply. May be i did not get your point on the scam.
J. A. Lakhkar
Oct 9, 2011Sir, please stop looking for scam in every commercial transaction! Qatar is the largest producer of LNG in the world. In 2003, when there were no prospects of commercialisation shale gas reserves, Qatar was almost in a monopoly situation to dictate the gas prices. In the original Petronet-Qatar contract, there must be a price renegotiation clause at regular intervals, which must have been enforced by Qatar. Even were such a clause absent from the contract, all that Petronet could have done was to go into arbitration which would have alienated the then most important gas supplier, thereby affecting the gas availability to Indian industry. We expect more investigation and balanced comments from Equitymaster!!
bhamy Shenoy
Oct 8, 2011Dear sir,
on the surface it looks like a scam. However from the brief details the article provides it is not possible to conclude that there is a scam. I am not sure Rasgas would sign a deal like you have suggested by offering to fix LNG price for 25 years. This is a lesson gas industry has learnt. There must have been provisions in the contract to open the contract under some circumstances. Also some of the figures quoted in the article do not make sense. How was $12.66/mmbtu arrived at ?
In this era of scams public is ready to jump to the conclusion that there is a scam. It is possible that there could indeed be a scam in this LNG, but it is not possible to arrive at that based on the information given.
Prakash Jhaveri
Oct 14, 2011it seems it is time for krishna to take new avtar. 100
crimes are over. The krishna has to take birth in every citizen of India to kill Bhrastachar. It is not only takers, givers are equally responsible and panishable.