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Gas find, inflation & more...

Jul 18, 2008

India's gas story keeps getting better
The Gujarat government-owned Gujarat State Petroleum Corporation (GSPC) has discovered yet another gas reserve in the hydrocarbon rich KG basin. Although, the company has not disclosed the size of the discovery, the flow rates indicate that the discovery might be of a substantial quantity. Infact, even as per the upstream regulator, the Directorate General of Hydrocarbons, the reservoir's quality seems to be good. The importance of the discovery can be gauged from the fact that Gujarat chief minister Narendra Modi is likely to inspect the project site in Andhra Pradesh and then make an announcement.Interestingly, the company is contemplating an initial public offering (IPO) of 20% equity in December this year to raise funds for developing its gas fields. However, the Gujarat Energy Minister, Mr Saurabh Patel, has said no decision has been taken so far on the IPO and the timing and quantum of stake sold (likely to be restricted to 20%) is likely to vary depending on the funds required and market condition. It may be noted that GSPC is planning to invest Rs 40 bn in developing its KG basin gas fields.

We consider this development as a confirmation of our view that the Indian natural gas story is here to stay and that several players from the upstream, midstream and downstream segments are likely enjoy the benefits.

  • Also read - Oil & gas: Same industry, different fates

    Inflation finally stabilising
    The inflation measured in terms of wholesale price index (WPI rose to 11.9% for the week ended July 5, up from the 11.8% reported in the previous week. As for the break up, fuel products like naphtha, light diesel oil, furnace oil and aviation turbine fuel along with manufactured products like chemicals and iron and steel witnessed a rise in prices.

    This comes as a relief for the policy makers as the steep uptrend in the WPI has stalled after nearly two months. In fact, the finance ministry indicated that inflation rate for the group of 30 essential commodities such as food grain, pulses, edible oils, vegetables, dairy products and some other commodities, including kerosene, soap and safety matches, have more or less stabilised. It may be noted that inflation is now at a 13-year high and it is believed that double-digit inflation is likely to persist for a while. As a result, the Reserve Bank of India (RBI) is likely to tighten monetary policy again in its review of monetary policy on July 29.

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