On Episode 854 of The Core Report, financial journalist Govindraj Ethiraj talks to Manas Majumdar, Partner and Leader Oil & Gas, Fuels & Resources at PwC India as well as Krishnan Sitaraman, Chief Ratings Officer at Crisil Ratings.

SHOW NOTES

(00:00) Stories of the Day

(00:50) Prices are rising now, across the board, what will a fuel price hike look like?

(04:11) The markets dip as peace talks are a no show

(05:31) A status check on India’s energy imports nearing 2 months into the war

(12:43) Heatwave forecasts renewed for India

(15:27) Half of India’s infra push is being driven by unexpected sectors

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Thursday, the 23rd of April and this is Govindraj Ethiraj broadcasting and streaming weekdays, usually from Mumbai, India's financial capital, but in transit right now.

Our top stories and themes…

The stock markets dip as peace talks are a no-show.

Prices are rising across the board and so will fuel in India.

A status check on India's energy imports nearing two months into the war.

Heatwave forecasts are renewed for the country and half of India's infrapush is being driven by sectors you may not have thought about.

Markets, The War, Inputs and Oil

So the question now is to what extent will companies absorb rising costs until when? Internationally, deluxe paint maker Axonobel said the conflict was pushing up supply costs, though higher pricing and cost savings helped it beat market expectations.

Axonobel's CEO told Reuters that their raw material basket is going to go up by something like the high teens in given the disruption of the state of Hormuz and also adding that the full impact would be felt over the next two quarters. And that is something that we should really be taking note of, that the impact is going to play out even if there is a full recovery at this point. So investors and economists world over are watching to see whether companies can continue to absorb the shock or if prolonged uncertainty over energy transport and geopolitics forces more firms to raise prices further or rein in forecasts, according to that Reuters report, which also says, by the way, that Coke is running short of aluminium for its Diet Coke drink in India.

By the way, Diet Coke is only sold in aluminium cans and those obviously are in short supply because of a freeze up in aluminium imports from the Gulf. Now, the point, of course, is that not having a can of Diet Coke may not affect as much, but shortages, in this case, aluminium are now beginning to be felt across the board and can crop up in areas which you may not have thought of or imagined. And then prices will rise too.

India will have an all bets are off the table moment when elections end and petrol and diesel prices are hiked. How much, of course, is not known or clear. Kotak Institutional Equity said in a note that after state elections, the last voting is on the 29th of April and if there is no truce in West Asia, retail prices will be hiked.

According to their analysis based on an Indian basket of $120 per barrel and low fixed margins, that's about $8 to $15 per barrel for petrol and diesel. There is a case to raise prices by 25 rupees to 28 rupees per litre. Now, that will be a punch, though the note does add that political considerations will likely prevail and actual hikes may be more modest.

Meanwhile, there are also calls for more opening up of India's economy to capital investors to build long term buffers and, of course, acknowledging that India's future economic strength lies in being more integrated or better integrated with the global economy and not isolated from it in any way. Nilesh Shah, the managing director of Kotak Mahindra AMC said there was a need for a Digi Yatra for investors. Now, Digi Yatra is the facial recognition app and software that allows seamless terminal access at airports as opposed to the manual check-in process involving showing your ID card and the ticket to a security person at the Now, Shah says that the government must create seamless pathways for foreign direct investors, local entrepreneurs, foreign portfolio investors, and local investors.

In a note shared by Kotak Mutual Fund, there were also other comments, including pointing out the gaps between federal intent and local implementation, once again in the context of doing business. On stocks, Kotak Mutual Fund says there is a case for bottom-up stock selection focussing on resilient sectors amidst geopolitical shocks and energy availability as well as price volatility. The fund reiterated its long-term conviction in India's growth story despite near-term headwinds, which also include a fundamentally weakening corporate outlook.

On the other hand, there are consistent retail investor flows of cost, though for different reasons. Kotak says focus on businesses with resilience or less impact from current geopolitical situations and reasonable valuations. Now, in the markets, on Wednesday, the Nifty 50 and the Sensex snapped a three-day winning streak, even as global equities also declined on those talks failing.

For now, the Nifty 50 was down 198 points to 24,378. The Sensex was down 756 points to 78,516. Broader markets did better.

The Nifty mid-cap and Nifty small-cap were down 0.19% and 1.1% each. So the latest on the war is this. The U.S. has extended the ceasefire with Iran until the latter produces a unified resolution proposal.

President Donald Trump called the Iranian government seriously fractured while announcing the extension in a post on Truth Social. Oil prices rose on Wednesday after reports of gunfire attacks on at least three container ships in the state of Hormuz reported Reuters. And of course, the fact that there was a no-show at the peace talks.

Brent crude futures were up about $1.70 to $100, 19 cents a barrel. So it's over $100 once again. Iran has also seized two ships in the state of Hormuz on Wednesday, with Reuters quoting Iran's semi-official Tasnim news agency saying the Revolutionary Guards had seized two vessels for maritime violations and escorted them to Iranian shores.

Now this is the first time that Iran has apparently seized ships since the war began in the end of February. The U.S. blockade in the state also continues. So where does India stand in terms of current stock of oil and gas and how have we been coping so far as we now approach a full two-month or rather a forever war situation or at least one that feels like a forever war situation? I reached out to Manas Majumdar, partner and leader oil and gas fuels and resources at PwC India and I began by asking him for a status check.

INTERVIEW TRANSCRIPT

Manas Majumdar: The first note I would say is probably a commendatory note. I think the government has done a fairly laudable job, right? I mean, we've swung into crisis management.

One could obviously be a little negative and say, why didn't we have a backup plan for this already? But you really can't have much of a backup plan for a black swan. But having said that, there are points, and I had highlighted before, having our own gas storage, enhanced crude storage.

But the steps that were taken, knowing that the crisis has happened, India has diversified sources on the crude front. There are more options. We've looked at South America, we've looked at Africa, we've looked at a lot of in-transit and spot cargos, which has significantly showed up our crude availability, and hence the processing of our refineries, which means that there really hasn't been that much of a petrol-diesel shortage to that extent, right?

And I know you said affordability later, but to ease some of the impact on the oil marketing companies, because the input price has gone up, but the retail price for they reduced the excise, the central duty that has happened. On the gas front, what has happened is LNG, again, you have more sources, LPG, lesser so, like last time we had discussed, right? LPG, we are significantly, the whole world is more focused on Middle East, because again, there are only a few countries which use LPG, their crude or gas.

LPG is a petroleum derivative, which mostly India uses. There is some usage of propane in the US, mostly for camping and external cooking, etc., and in African markets. So therefore, our dependence in Middle East is more.

We've got some LPG tankers from there. Even there, while there are lesser sources, India has tried to source from US, it has tried to source from Norway to get some of that, right? So if I were to summarise to say what has happened, India has swung into significant diversification of sources, picking up cargos, significant spots that have been brought into play.

And on the LPG side, they've enhanced the throughput from the domestic refinery. So if you're getting the crude, and LPG is still maybe not as great, get the crude, process more LPG out of it to the extent, again, you can only swing the production slate a little bit and kind of address it. So I think what has happened is whatever stocks we have, we've not significantly depleted them to that extent.

We've kind of maintained the status quo. We have used up the inventories that are there. We probably have the same runway as what we had going forward.

So the hope, if I were to end with that positive note, is that if the crisis, as we are here in the ceasefire, and there's a permanent solution, things slowly inch back to normal, and then we build up our stocks further.

Govindraj Ethiraj: Right. We had done some demand management, raising prices, particularly commercial LPG, diverting LNG from industrial use. So I'm assuming that continues and which is why we've reached some equilibrium.

Manas Majumdar: That is correct. I would say it's not an equilibrium because you're not back to status quo. What you've done is, as you rightly highlighted, LPG prices have gone up. PNG prices, they have now allowed for more PNG connections, first of all, right, which is much more difficult.

There is a diversion, as you said, from commercial and industrial customers. They, by the way, from a commercial and industrial perspective on the gas side, were anyway getting supplied by LNG. So the significant impact, therefore, is less on availability and more on affordability.

The more LNG you bring into the mix, it is more expensive than domestic gas. And hence, gas is available, but it's more expensive. Same holds for LPG.

So LPG, to the extent that it's available for commercial and industrial, is expensive because it's more market linked. And this is leaving aside the black market part of it where people are hoarding, which again, a government has done a great job of monitoring the supplies to that extent, so it gets to that. So there has been demand management, but I think that is more to the question of prioritising which demand to meet rather than trying to meet all of it.

And then trying to say that, you know, we remain, as I said, at the status quo level so that once things improve, which hopefully they will now, you know, we can get back to a better position.

Govindraj Ethiraj: Right. And which brings me to price. So price, domestic retail is somewhat suppressed right now.

And on the commercial side, we've seen, obviously, prices being increased. I'm talking about gas now. And fuel, of course, is subsidised or suppressed, a combination of both.

So how do you see that changing in the context of how prices have been moving in the international market? So I think the bigger shock obviously happened on the crude side.

Manas Majumdar: If you look Brent touching $120, even now it is in that $100, $97, $98. It had gone down below $95. But, you know, while I'm saying positive, there is ceasefire.

Now there is no line of sight to when the ceasefire will become permanent. So that little bit of uncertainty is again in that $95 to $100 range. Gas, on the other hand, has not seen as much of a shock.

If you remember post-Ukraine, which is where Europe is a bigger consumer, we had seen $30, $40, even at some spots of $50 per MMVTU. We've seen spots going up to $20, $22 here. They've again settled below.

We are now below $20, right? So LNG is higher than what it was when it was, say, $11, $12. So what was almost a 90% increase is probably now a 50%, 60% increase on gas, not as much as has happened on the crude side.

Having said that, what has happened is India's gas, as you rightly mentioned, half of it is domestic, half of it is import. The domestic is capped, right? Again, based on not capped exactly, it's a formula linked from the Pari Committee, which for this period is about $7 per MMVTU.

Domestic new gas or what we call new oil gas or HPHT gas is again market linked. Slightly different formula to the market link, I think it's 12% to Brent. That has also grown up by 60% to 70%.

Same holds for LNG, as I said, it's grown up by 60%. So our contract, for example, with Qatar, not that that is happening, because Qatar has taken force majeure, so they're literally not supplying, forget supply chain, they're literally not supplying. That gas as per that contract would have also gone up by 70% because it's linked up.

So it's again, I think a 12% Brent link plus there is a premium on that, I think of 60 cents or I forget that. So the basic impact on gas is it has gone up, which means the input to many of these players, right? Leave aside fertiliser, because again, you have to understand where the input price goes up, fertiliser is subsidised, same as fuel, right?

But for cement, for steel, many steel players, I think you have heard Jindal has again, passed on that force majeure, saying that I cannot honour my steel contract rates because my gas prices have gone up. So wherever it is private to private, there is the pass through that is happening. So the impact is happening to that.

And we know that for a fact that GDP will contract by anywhere from 0.5 to 1%, not just in India, globally, right? Because prices will go up and as prices go up, demand will shrink. And that is literally the GDK and consumption will get affected.

Govindraj Ethiraj: Manas, thank you so much for joining me.

Manas Majumdar: Thank you.

Heatwaves in India this Year

The Indian meteorological department has warned that the country will see higher than normal number of heatwave days this year, particularly across the Indo-Gangetic plains, eastern coastal regions and parts of western India. And they also said that several regions may record temperatures exceeding 40 degrees Celsius even if they do not meet the formal heatwave criteria. It's already about 40 degrees in many parts of the country including 44 degrees plus in Uttar Pradesh.

The IMD has been issuing alerts through multiple channels including whatsapp groups targeting outdoor workers such as street vendors and agricultural labourers. A new report by the United Nations food and weather agencies has said that extreme heat is pushing global agri-food systems to the brink threatening the livelihoods and health of more than a billion people. The United Nations Food and Agriculture Organisation and the World Meteorological Organisation said heat waves are becoming more frequent, intense and prolonged damaging crops, livestock, fisheries and forests according to a Reuters report.

The head of FAO's climate change office said that extreme heat is rewriting the script on what farmers, fishers and foresters can grow and when they can grow. In some cases it's even dictating if they can still work. The report also said higher temperatures are shrinking the safety margin that plants, animals and humans rely on to function with yields for most major crops falling once temperatures exceed about 30 degrees celsius.

The report cited Morocco where six years of drought were followed by record heat waves which led to a fall in cereal yields by over 40 percent and decimating the olive and citrus harvests. Marine heat waves are also becoming more frequent depleting oxygen levels in water and threatening fish stocks. The report said that every one degree rise in average global temperatures cuts yields of the world's four major crops that's maize, rice, soya and wheat by about six percent.

The Great Infra Push

Crisil Ratings has said that the key infrastructure sectors renewables, roads, real estate and the new age ones account for around half of India's total infrastructure investments and thus provide strong support to India's GDP growth trajectory. The push is now extending from clean energy diversification that's renewables and logistical de-bottlenecking that is roads to a unique blend of digitalisation that's data centres and smart metres and decarbonisation that's green hydrogen and battery according to that report.

Which also says that this set of investments will continue to support real estate growth resulting in healthy absorption of commercial office spaces and steady residential demand. There will be challenges, delayed offtake, lagging transmission capacity in renewables, slowdown in road project awarding and elevated capital values in residential real estate and slowing demand for commercial spaces by the IT sector. But on the other hand continued government support that's policy support and strong balance sheets will keep the infra players well positioned to sustain the growth trajectory says the report.

Overall investment growth is likely to remain strong at 45 to 50 percent over the current and next fiscals similar to the growth seen in the previous two years. I reached out to Krishnan Sitaraman, Chief Ratings Officer at Crisil Ratings and I began by asking him how this slate of investments would drive overall economic growth versus others.

INTERVIEW TRANSCRIPT

Krishnan Sitaraman: A very interesting question. I'll just try to set a context to that. In the last few years, we have been focussing more about the three Rs, that is roads, renewables, and real estate as a key driver of India's infra growth story.

This year, what we have done is try to focus on a few new sectors where there is a lot of excitement among industry players and we see commitment towards investments in the days ahead. And these are sectors like battery manufacturing, data centres, green hydrogen, and smart metres. And these are also sectors where we see a government trust also building up in the form of a policy push, like the PLI production link incentive scheme, which are focussing on some of these sectors.

And within these sectors, also there seem to be nuances. So if you look at sectors like smart metres and data centres, there's somewhat more track record and maturity into the business models here. Whereas other sectors like green hydrogen and battery manufacturing, while there is a lot of interest here, things still seem to be at an early stage, but we are excited about these sectors as well.

And what is a common thread among these sectors that I talked about are what I call as the four Bs, that's decarbonisation, digitalisation, de-bottlenecking, and diversification into clean energy. And these are together taking the journey of the three Rs that I talked about and these new age sectors as triple R plus. And this is a space that we're all incredibly excited about, and we'll need to see how things track forward.

And put together, we believe that the CAPEX capital expenditure for these focus infra segments should grow at around 1.5x in the next couple of years as compared to the last two years.

Govindraj Ethiraj: Okay. Data centres and smart metres, I mean, yes, they will grow, but would they contribute to, let's say, the growth of other industries the way you would think of traditional infrastructure? I mean, infrastructure, one would definitionally think is at the bottom and upon which other things get built.

Whereas these are industry and represent industrial growth, but would they represent infrastructure in the manner that we traditionally think of infrastructure? Two parts to that.

Krishnan Sitaraman: One is the overall base of these sectors, which would be quite slow. These four new sectors that I talked about, data centres, smart metres, battery manufacturing, and green hydrogen. But we do classify them into the infraspace as they do contribute in some way or the other to energy growth in the days ahead.

There are other sectors also which are new and there is a lot of excitement and investment commitment in the days ahead. And these are sectors like semiconductors, drone manufacturing, and so on. Those two are related sectors where also there is a PLI focus are classified by us in the manufacturing or the corporate space.

Whereas these sectors, because they're contributing to these four contributing energy as such, they're classifying in the infraspace. That said, the base of these is on the lower side. And if you look at the contribution of these two sectors, it will not be very significant.

But in terms of growth, these four put together, we believe the capex in the next two years will be 3x of what it was the last two years. Whereas overall, these four put together would rise about 50% to around 24 lakh crores. These four together would be sub 2 lakh crores.

So that is the kind of relativity, roads, real estate, and renewables will still continue to do the heavy lifting in this specific space that I talked about. But as you talked about, core infra would be roads, renewables, and these sectors. Because there is investment and growth in these sectors, that will also support the real estate growth story where we do have two sectors, specifically the residential and the commercial real estate sector.

Commercial directly gets impacted, residential in an indirect manner. There again, there are nuances with flattish demand growth in the residential side, where the commercial side, you do office leasing still should grow at around 6% to 7%. Residential side should be flattish in terms of unit sales.

But because realisation or the price per unit has gone up, there's still in the sales value group, you'll still see some growth in the residential segment as well.

Govindraj Ethiraj: Right. And how are you seeing overall traditional infrastructure pan out or grow in the next couple of quarters, including in the light of the problems in West Asia?

Krishnan Sitaraman: Very difficult to take a call in the next couple of quarters or so, quarter to quarter, difficult to take a call. Our call is slightly more long term, and we're talking about say two years. Now, in the short term, we did a separate analysis about the impact of the West Asia crisis, where the scenario that we have built is the scenario continuing for around four to five months in terms of both the conflict and the stabilisation or restoration after that.

So, which is essentially starting from Feb 28th of 26. So, that is essentially continuing till the end of August, if you may say end of July. But if it continues beyond that, that's the situation that we'll need to take a call on.

But that's the situation as of now. But assuming that within the next say till four months by end of July, things get reasonably back on track. This is the scenario that we are looking at when I talked about the growth in the sector.

And if I look at the nuances, there are different nuances for each of these sectors. If I look at number one, say the renewable sector, that will continue to benefit from the strong government focus on capacity growth. We are expecting a capacity addition of 105 to 110 gigawatts over the current and next fiscals.

And again, led by utility project pipeline and the conducive policy push for CNI, that's commercial and industrial, and rooftop installations. You look at the road sector, while awarding has remained muted in the last couple of years, the government's focus towards expanding the highway network, especially the four lanes and above ones, that is expected to revive shortly. And it's also a kind of indicative of the increased allocation which the ministry has put out.

And it will also be supported by adequate funding availability for both NHI and developers on the back of healthy asset monetization pipeline, which we are seeing today. And on the real estate sector, as I talked about, the residential sector will largely benefit from the move towards premiumization, even as the demand growth will remain flattish. Commercial real estate growth, on the other hand, will be driven by the interplay between strong leasing demand and the calibrated supply, which will lead to lower vacancy of around 92 to 93%.

The occupancy should be around 92 to 93%. And UH sectors, strong focus on digitalisation, decarbonisation to meet the country's net zero targets, which will enable lower carbon infrastructure while supporting sustainable economic expansion, as well as improving financial viability of the projects to drive these investments. That said, there will still be some challenges in this particular growth journey, which will need to monitor risk factors are there.

Renewables, we see the timely closure of PPS, power purchase agreements to reduce offtake risks, as well as timely ramp up in transmission capacity to support evacuation. That is monitorable. And like this, there are risk factors in the other sectors as well.

Govindraj Ethiraj: Right. Krishnan, thank you for that comprehensive take on where things are going or will go. Thank you very much.

Krishnan Sitaraman: Thank you so much.

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Developers have acquired over 3,000 acres across 149 deals worth about 54,000 crore rupees in 2025 making it a 32 percent year-on-year jump and obviously suggesting that there is a strong pipeline of developments ahead.

This is according to real estate consulting firm JLL quoted in a report in Business Standard. The land acquired in 2025 has the potential to generate about 229 million square feet of development across 20 cities.