Petroleum

Abstract

The oil industry is a very important part or sector of the world economy and should be developed and taken care of in an appropriate manner. It is certainly one retail sector that has had considerable changes and development in its core business. The industry has continually gained popularity and attracted a lot of interest, which has consequently contributed greatly to the development of economies of the countries that deal in it. This paper gives the macro-environmental analysis and the market research of the oil industry by utilizing the PESTEL model. However, it is the responsibility of the government to ensure that it creates a favorable environment for the smooth operation of the industry.

Introduction

The petrol retail sector is certainly one retail sector that has had considerable changes and development in its core business. In recent years, the petroleum industry has attracted a lot of interest. This is an industry that contributes greatly to the development of economies of the countries that deal in it (Fleig, 2005, p89). In the past decade, increases in the price of the commodity brought about a big challenge for the retailers of service stations to run lucrative, sustainable and practical businesses, as the increase in the prices resulted to negative impacts on the volume of sales. The industry’s new entrants and new competition presented by some other retail businesses made changes in the industry necessary. The industry of petroleum has seen the introduction of new businesses at the service stations for the purposes of generating income for the business so as to ensure that there is viability and productivity (Sobel 2008, p42). The propagation of service stations, controlled margins of retailer on volume performance and petrol has all brought concern regarding the individual service station’s survival.

The economical effects of the fluctuations in the price crude oil have ultimately affected the retailers as well as motorists. The United Kingdom’s price of petrol depends exclusively on the conditions of the international market. This industry is faced with various challenges and changes. The future uncertainty and unpredictability of the exhaustible resources’ supply, such as crude oil influences the price of the crude oil that the global market experiences (Bushell and Stan 2009, p71). Therefore, the demand for energy puts more pressure on the price as the global economy grows faster. The uncertainty about whether the deregulation of the industry of liquid fuel brings a new dimension to the future of the industry. Some of the giant retailers in the industry include Total, the Royal Dutch Shell, ConocoPhilips and Chevron. This paper is going to look at the risk factors associated with the supply of crude oil derivatives like petrol to the West Dulwich shell filling station in London.

PESTEL Analysis

PESTEL analysis, which stands for Political, Economical, Social, Technological, Environmental and Legal, is a description of a framework of the macro-environmental factors that are used in the component of environmental scanning of the strategic management. It is part of the analysis of the external environment when carrying out a market research or doing a strategic analysis, and offers an insight into the various macro-environmental factors that should be taken into account by the organization or company (Fleig 2005, p44) It is a fundamental strategic tool that helps in the understanding of the decline or growth of the market, the position of business and operations direction. The increasing significance of ecological or environmental factors in the initial or early years of the twenty first century have introduced green businesses and facilitated extensive use of an up-to-date version of the framework of the model. The following is the PESTEL analysis of the supply of crude oil derivatives like petrol to the West Dulwich shell filling station in London:

Political effects

Crude is among the most needed commodities allover the world. Any amount of change in the price of crude oil can lead to both direct and indirect impact on its derivatives, and consequently on the countries’ economy. The OPEC countries are the principal producers of the crude oil that is used worldwide. Therefore, it means that any policy that is made by the organization or some countries within the organization regarding the prices of crude oil will greatly affect the supply of petrol and diesel to the service station (Sobel, 2008, p.34). Any decision taken by the countries within the organization, for instance raising or reducing the prices of crude oil may definitely affect the level of price of the petrol and diesel in the global community markets.

Political stability within the countries that produce crude oil is also essential to its availability and also influences its prices to a great deal. For instance, a lot of the crude oil is produced by the countries in the Middle East, and if there is conflict in the region, the drilling of oil will be affected. Lack of political stability such as war or terrorism in the Greenwich region, and even pirates might make it difficult for the products to reach the petrol station due to fear by the suppliers, or even damage to the tankers.

Economic effects

Demand and supply is balanced by the global oil inventories. If the production of crude oil exceeds its demand, the surplus product can be kept. When the consumption is higher than the demand for the product, then inventories can be tapped so as to be in a position of meeting the rise in demand, and the connection between the prices of oil and the inventories of oil enables correction in both directions (Risk Analysis in Oil Refining Sector, 2008). The supply of crude oil by countries that are not members of OPEC stands at sixty percent of the total oil produced in the world. However, even though their supply is fifty percent more that that of the OPEC community, they do not have adequate reserves to enable them control the prices in the market and can only react to the market fluctuations. On the other hand, the OPEC community has the ability of directly influencing the price of crude oil in the market. This is particularly when the supply of the oil that is produced by the countries that are not members of the community goes down. When the demand for petrol and diesel is high in the Greenwhich region, there will be scramble for available oil thus reducing the supply. This problem can be solved by building adequate reserves for storing the product so that the supply to clients can remain steady when the supply from the source reduces.
The cost of production is also another important factor in determining the price of oil within the global market. If the cost of extracting oil and its eventual refining is too high, it means that the prices will also go high, but if it does not cost much to produce it, the prices will go down significantly. It also requires a lot of finances and resources to discover more oil locations and to develop as well as maintain them. If the funds and resources are available, there would be more discoveries of oil production sites and the quantity produces and supplied to the final consumer will be large (Simmons, 2005, p.23). If there are no funds together with the resources to enable expansion of the production, the supply will go down and the prices will rise, thus making it difficult for the service station to acquire it.

The brokers of oil servers the link between sellers and buyers of the product, and do contract trading for future oil delivery referred to as ‘futures.’ Consumers buy futures for hedging against the increases in the prices of oil that could considerably impact their profitability. Producers of oil sell the contracts of oil futures so as to lock in a price for a particular period and the brokers buy oil futures to give promise of future delivery of the product as a given price. This implies that the oil brokers play a significant role in determining the price of oil in the global market because they are the link between the buyers and the sellers (Anderson and Marhadour, 2007, p.102).

Social effects

Human populations in the region can also affect the supply because the demand will be high. The population in the Greenwich region is too high and the demand for petrol and diesel may raise, hence the supply decreasing (Fleig, 2005, p.65). Frequent strikes by the tanker drives may also affect the supply because there will be no one to bring the products to the service station. The need to observe laws such us the employment of high qualified, and not to employ underage drivers, but who may be qualified may lead to lack of enough drivers to do the work of transportation. The law also sets a minimum wage for the workers and this would affect the supply of petrol and diesel because there might not be enough funds to employ many drivers to transport the products.

Technological effects

The world of today depends almost exclusively on technology, and exercises such as the drilling of oil requires high levels of it. The equipment used for the process is very sophisticated as they are required to dig deep into the ground and fetch the oil. The oil companies also need to ensure that proper equipment are put in place to avoid things such a soil spillage which can be hazardous to the environment and also cause losses (Anderson and Marhadour, 2007, p.108). This equipment are very expensive and the oil companies are forced to use a lot of money to ensure that all the technological requirements are employed so that production can be enhances and risks reduced as much as possible. When all these production costs are factored in the whole process of production, the final price in the market becomes high. The need to have the latest technology at the service stations such as epos automation systems raises the cost of operation.

Environmental effects

In the few past years, the international community has experiences a number of events that have consequently had great influence on the prices of crude oil. Such events include the Hurricane Katrina and some other kinds of tropical cyclone that have struck a significant part of the globe. This resulted in the prices of oil going up by a very huge percentage, which makes it difficult to acquire it in large quantities. Excessive drilling of oil by some oil companies has led to the exhaustion of the sources as well as environmental degradation. This has led to some governments such as that of the United States of America and United Kingdom to prohibiting the exploration in some regions (Black, 2012, p.82). The major aim of these policies is to preserve the resources so as to ensure that there is continuity or sustainability. When these policies are put in place, the quantity of oil produced reduces, thus demand exceeding supply, which consequently forces the prices to go up.

Nonetheless, these policies that are introduced by the governments, which aims at limiting the extraction of oil exerts a lot of pressure on the companies that produce oil to not only finding ways of increasing efficiency, but also finding alternative sources of fuel. These initiatives are very slow and difficult because of the considerable financing required energy and time that go into things like researching and production of such products. More so, when an alternative sources of energy is introduced into the market, there is a substantial time lag in which the designing and production of new products that are compatible is done (Beamish, 2006, p.88). It then can take even more time for the clients to know about the existence or availability of the products and be willing to make investments in them.

Extreme weather conditions also affect the production of the crude oil. For instance, when there is a lot of rain, it becomes very difficult to access the sites of oil drilling. The machines that are used in the process of drilling oil might also be damaged by the unfavorable weather or their operation may just be affected. This makes it difficult for the crude oil to be produced in large quantities, thus forcing the prices to rise (Bushell, and Stan, 2009).

Legal effects

Different countries have different requirements for one to be allowed to start and operate a business. The same case applies to the ownership of a service station as well as the oil companies. If the requirements by the government are too strict, there will be a few suppliers in the market, and in turn the price of fuel will rise (Assilzadeh, and Yang, 2010, p.240).

Conclusion

The oil industry is a very important part or sector of the world economy that should be developed and taken care of in an appropriate manner. Problems such as strikes should be avoided by timely payment so that supply can remain steady. The company should invest in the latest technology that is related to the business to ensure fast delivery of petrol and diesel. Proper plans should also be put in place to ensure that the costs of production and operation of oil companies are reduces and the legal requirements made as flexible as possible. To avoid shortages in supply due to political factors, the company should not depend on a single source of supply, specifically from the OPEC countries. This problem can also help by ensuring that the Greenwich region is safe for any kind of business and the petrol station should also consider using oil pipelines as opposed to tankers.

References

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The Ultimate Resource “Human beings are not just more mouths to feed, but are productive and inventive minds that help find creative solutions to man’s problems, thus leaving us better off over the long run” (Simon).While the first part of the quote is what most people think: that humans beings are just mouths to feed, the second part explain what they really are and puts something new in your mind, a new idea, a new way of thinking. I want to explain this theory to you and I’ll try to explain it with my own examples.

The ultimate theory states that if a particular resource is becoming scarce, it price rises and affects the people socially, economically and mentally, which creates an incentive for the people to discover more of the resource, ration it and, eventually, develop a new one or in other words a substitute.But in my words what Julian Simon it’s trying to explain that the theory is based on one thing PROBLEMS that we create and tell me what is behind from every solution, behind every solution there is a problem. The solutions we create will make our way of life better in other words leaving us better off over the long run. The Ultimate Resource theory views population growth as positive and necessary, explains how adaptation reduces our reliance on one particular resource, and claims that environmental pollution is getting better, not worse.Population growth doesn’t affect negative our economy in fact it has a positive effect. Why I am saying this it may look weird or stupid to you, but it’s real. El Salvador is the most populated country on Central America, but it’s also the country that has the most economical growth in Central America.

Now Nicaragua the least populated country in Central America, has the less economical growth in Central America. A simple way of explaining this is you have ten people and those ten people needs jobs. A normal thinker will say that they are just mouths to feed like in the quote.But Julian Simon will say that that three, two or at least one of them will have an idea, like creating a business or becoming a entrepreneur and this person creates ten or more jobs for the other ones. So this explains the idea of why we need population growth. Moreover, we don’t only need it for our economy but also for technological advances. Imagine the world’s population were 100 people.

Do you really think we would have invented the car or the telephone? Now remember also not everyone has the same gift; some people are better at creating jobs other people are better at inventing things and so on.Now imagine that for creating the light bulb Thomas Edison was one from the population world of that time and one man created something from a million. Now you see my point why do we need the population growth to improve our way of life. “The most important benefit of population size and growth is the increase it brings to the stock of useful knowledge. Minds matter economically as much as, or more than, hands or mouths. ” (Simon). Adaptation can be defined as improving the chances of survival or the people.

The Ultimate Resource theory it focuses on adaptation when it comes to resources.The theory holds that the Ultimate resource is not a physical object but rather a theory of the capacity for humans to invent and adapt. What Julian Simon it’s trying to explain is that we humans have the capacity to adapt and create. For example back in time the primary source of energy was carbon. The trains moved with that, and many other things. When the demand for carbon rose, the resource started becoming scarce. This make the resource become expensive and started affecting the population in a social, economic and in a mental way.

When this happens, the problem leads us to a solution or in other words an incentive on people to create a new resource. So now tell me what’s behind every problem, behind every problem there is a solution. Oil this was the solution at that time, when coal became scarce. People discovered oil and started using it, so this decreased the demand for carbon and the demand for oil increased so the prices for carbon became lower and the prices for oil started rising little by little. Practically this is what has happened always.How does this leave us better in the long run? Carbon polluted more than oil and affected people’s health more. Now what is going to replace oil, scientists have discovered many types of new energies renewable energies.

Hydrogen, Solar and wind energy etc. are some of those renewable energies are going to replace oil within the twenty years or more. Like Julian Simon said “Our supplies of natural resources are not finite in any economic sense. Nor does past experience give reason to expect natural resources to become scarcer.Rather, if history is any guide, natural resources will progressively become less costly, hence less scarce, and will constitute a smaller proportion of our expenses in future years. ” How can this be proven? Julian Simon made a bet with Paul Erlich on prices of the resources. Julian told Paul to say 5 resources that its prices will raise in ten years.

Julian Simon won the bet. The prices didn’t rise because of what was explained previously, we created a new source or material to use. Take copper for example. For the bet Paul choose copper which that time was used extensively for making the telephone lines and many other things.When it became too expensive that created an incentive for people to look for something new. So we created cell phones and satellites and we stopped using copper as much. “The main fuel to speed the world’s progress is our stock of knowledge, and the brake is our lack of imagination.

” (Simon) World environmental pollution is not getting worse it’s getting better. As you know people say is getting worse pollution. Well I think we are becoming better because everything new we make is for improving our way of life, not for making it worst.A perfect example is oil; the main source of energy and also one of the worst polluters in the world. As explain previously this problem is making us create something new and more important something better; the renewable energies that don’t create pollution. This is another example of how our ideas leave us better along the long run. Now also see you know that life expectancy has grown almost 50 years from the past 200 years, so this means that our health is becoming better.

Does that give the idea that our health is becoming worst or better with pollution?As Julian Simon say “Human beings create more than they destroy. ” (Simon) “Adding more people causes problems. But people are also the means to solve these problems. The main fuel to speed the world’s progress is our stock of knowledge; the brakes are our lack of imagination and unsound social regulations of these activities. The ultimate resource is people—especially skilled, spirited, and hopeful young people endowed with liberty—who will exert their wills and imaginations for their own benefits, and so inevitably they will benefit the rest of us as well. (Simon). Population growth will increase our economy and way of life.

There is no such thing as finite materials or resources. Environmental pollution will decrease instead of increase, and the Ultimate Resource is the people, we, us, me and YOU. So from where do those solutions come? The solutions come from the problem. Basically all the mains points are based on that idea of the solutions that we create for improvement on the long run (life). If this theory doesn’t change your way of seeing the world well then nothing will.

ABSTRACT:

The concept of human rights have been if not generally but to some degree understood. How it is important for every man to have his own dignity and freedom to move however not everyone understands how closely related environmental right and human rights are related a health environment gives way to a right to live a healthy life which is one of the first and basic human right “right to life”. TNCs are due to the nature of their projects closely related to human right issues as well as environmental issues the in most cases constitute the highest number of human rights abuses by their very presence in a community. If the handle the human rights and environmental rights issue adequately then a lot of bloodshed and pollution can be avoided but if not then a lot of harm than good may be the order of the day. This is where CSR comes in the CSR norms help TNCs to avoid disasters from occurring. But the question is, is the CSR norms enough, the companies will have to incorporate them into their policies and not just that but to also develop a strong report system that would help the company filter any form of abuse. Complicity by the company in the face of human rights abuse is also too good. This paper would highlight on cases of abuse and how it affects the local people and how the TNCs can help avoid both human and environmental abuse and NGOs fit in in all of these.

1. INTRODUCTION

Human rights are fundamental principles which give any individual the right to freedom of a dignified life, freedom from fear and the freedom to express his/her beliefs.The TNCs should be careful with the effects of mining and exploration activities on the human rights of employees and surrounding communities because obtaining a strong social licence to operate in those communities depends on how much the TNCs respect the human rights of the local people. Integrating human rights rules into core business practice in the mining sector is important, it is a corporate responsibility. While the basic need to protect and promote human rights is the immediate responsibility of the national governments, TNCs also has a distinct responsibility to respect human rights as well. Some International Companies especially those who are signed under the UN Global Compact, including mining and resource companies refer to human rights in their annual event reports and incorporate and implement human rights into their regulations and policies.Chapter two of this research looks at the human rights abuses that are commonly found in extractive industries. Chapter three looks at the environmental impacts of extractive industries and how it affects IPs. Chapter four looks at the CSR measures and how companies and directors are held accountable for their actions and the final chapter concludes and gives recommendations on how CSR can be promoted.

2. HUMAN RIGHTS AND CSR

As provided in the OECD Guidelines for TNCs, extractive industries have to respect the human rights of those affected by their activities and practices consistent with both international and national laws of the host government. They also have to contribute to the economic, social and environmental development of the host government with a view to achieving sustainable development.

2.1. HUMAN RIGHTS WHICH ARE PARAMOUNT IN EXTRACTIVE INDUSTRIES

There are distinct human right issues peculiar to extractive industries which concerns all TNC companies. The following are some of the more reoccurring cases of human right abuse:

Labour practices with respect to human rights

Extractive companies, have a responsibility and duty to make sure that employees enjoy basic labour rights such as, a safe workplace, reasonable living wage, non-discriminatory against sex, HIV and so on collective bargaining and child-labour.

Environmental issues with respect to human rights

Environmental activities of extractive companies have the tendency to affect a variety of basic rights including the rights to life, good health and an adequate standard of living; which includes access to basic food, clothing, water, housing and sanitation. Governments should also ensure that both multinational and national enterprises provide sufficient safety and health standards for their employees. The government has a duty to ensure the welfare of its citizens.

Rights of Indigenous peoples and other community

Extractive industries need land or the rights to use it. In most cases, land is already in use by others (IPs), and other times it is part of a community’s ethnic or traditional resources. In most cases land involves the resettlement of communities. Failure to address resettlement, native title and customary land use issues or forced eviction of the IPs, will cause animosity and conflict towards a project.

Security issues with respect to human rights

Extractive companies often find themselves in conflict-prone countries. This often means that an industry will employ its own security, or rely on law enforcement of the host government to protect assets and employees. In most unfortunate cases they company’s security become involved in local violence. A mining company could be complicit in human rights abuses committed by a security provider.

2.2. THE ROLE OF NGOs

Within the NGO world, there are many different methods or techniques of dealing with TNCs: some try to draw corporations into dialogue or conference sessions where TNCs can express their views, more like a communication link, in order to persuade and convince them to accept voluntary codes of conduct, while others believe that corporations will take action only when their financial interests are ‘on the line’, and therefore take a more adverse stance toward them. The latter view is more in line with labour union strategies and approaches. Confrontational NGOs tend to employ moral stigmatization, or “naming and shaming,” as their primary tactic, while NGOs that favor engagement offer or propose dialogue and a limited form of cooperation with willing TNCs.

There are different reasons why NGOs’ are interest in the business sector, however the most common and the most important reason is the perception or belief that political and economic power has shifted away from governments and toward TNCs.

The traditional roles NGOs normal play in cases of human right abuses is to gather information, analysis and dissemination of human rights concerns, the help in advocating for better HRs observance and accountability. The also develop and lobby for human rights laws and standards. They give legal aid and humanitarian relief to victims of human right abuses. They punish TNCs by moral shaming and praise.

NGOs promote CSR by research, reporting and media exposure, by dialogue with TNCs, by holding TNCs socially responsible and accountable for their actions.

“In the 1 9 8 0s the corporate social responsibility (CSR) agenda was significantly broadened when, in the wake of Bhopal, Exxon Valdez, and other highly publicized environmental disasters, the NGO environmental movement pressed home the idea that TNCs must also protect the environment, thus further expanding the notion that corporations have social responsibilities. From the early 1990s on, human rights NGOs and other voices within civil society have been calling upon corporations to accept responsibility for promoting labor rights, human rights, environmental quality, and sustainable development. The contemporary CSR movement aims to persuade MNCs to adopt voluntary codes of conduct and implement business practices that incorporate commitments to respect and protect labor rights and human rights as well as the environment.

The voluntary CSR approach is not the only NGO strategy. Another influential school of thought within the NGO world views MNCs as constitutionally unredeemable and incapable of voluntarily acting in a socially responsible fashion; companies can only be made to be socially and environmentally accountable by means of economic coercion or through binding legal obligations. Those who take this view look toward the development of a mass social movement that will compel governments to enact enforceable international legal standards that will make TNCs legally accountable to global society. Private voluntary CSR initiatives are viewed as exercises in corporate public relations and as poor substitutes for strict legal regulation. Of ten allied philosophically and strategically with unions, NGO activists who take this view m ay seek to support traditional union organizing efforts to win rights and fair compensation for workers worldwide through collective bargaining agreements with free labour unions.”

2.3. THE ROLE OF THE GOVERNMENT

It is the responsibility of the government to protect as well as ensure that the rights of the members of the community are not abused. Recommendations for measures to be taken by the government to avoid further human rights violations in mining communities:

1. Ensure that IPs that get their livelihood from the land receive adequate compensation and access to alternative land for farming and if possible fishing according to Section 74 of the Minerals and Mining Act of 2006; for example the Ghanaian government ensures that the support the Regulation on Compensation for IPs according to the Act as provided as a matter of urgency.

2. Establish and strengthen the mandate and the capacity of a Governmental Environmental body so that it can effectively prevent the contamination and destruction of water sources.

3. Enable and establish laws and courts for the Human Rights cases national and locally to play a decisive role in investigating alleged human rights violations in mining communities, in revising legislation and to educate the people of their human rights

4. to look into cases of alleged human rights violations committed by military and police in this context

5. Ensure that local police is able and trained to act independent of the interests of multinational mining companies.

3. ENVIROMENTAL IMPACT OF EXTRACTIVE INDUSTRIES

Corporate environmental and social responsibility has been seen in recent times to overlap each other. It is a known fact that some business activities have negative environmental implications. Mining, oil drilling, chemical production and waste disposal projects all have possibilities of disrupting or harm ecosystems and the environment, such activities and practices may also compromise the rights of people who are affected. Certain groups may be geographically more vulnerable to environmental pollution because of their way of life, the nature of their economy and socio-economic status. Although international human rights laws contain few clean-cut provisions relating to the environment rights, many fundamental human rights – to life, to health, to privacy, non-discrimination and self-determination, for example – can have significant environmental dimensions.

“In 1972, an international meeting formulated, for the first time, the issue of environmental protection specifically in terms of a “right to environment” commencing the process of explicitly linking environmental law with human rights. Since then, there has been an increasing recognition international, that “human rights, an economically sound environment, sustainable development and peace are interdependent and indivisible.” In April 2001, the UN Commission on Human Rights, for the first time concluded that everyone has the right to live in a world free from toxic pollution and environmental degradation”.

3.1. RELATIONSHIP BETWEEN HUMAN AND ENVIROMENTAL RIGHTS

The right to a safe environment has been emphasized as a vital component of fundamental human rights. In most cases, environmental deterioration leads to human rights iniquities and quite often, human rights abuse involves serious ecological interruptions.

In the United States, for example, the transformation and fusion of civil rights and environmental justice movements have been especially instrumental in dealing with the problems of inequitable distribution of environmental pollution and associated health effects caused by the activities of powerful corporations and the host government. Strong environmental movements and effective legislative responses to hazardous waste disposal have drastically increased the costs of hazardous waste management, making exporting of industrial wastes quite attractive.

Toxic waste dumping represents one of several activities that involve serious human rights abuse, ecological disruptions, and environmental injustice. Other activities such as natural resource exploitation by the state and Multinational Corporations (MNCs), land acquisition, and large-scale economic development projects are also involved with human rights abuse.

Over the past years, the world has witnessed a high number of cases which had involved and is still involving ecological and human rights abuses ranging from the military government extermination of indigenous population in Irian Jaya, Indonesia, to ecological assaults and human rights violations in Africa and other developing countries and the all suggest the need to include environmental rights as a significant component of human rights issues. Most recently, increased global awareness of environmental and human rights problems has broadened the civil, political, and socioeconomic rights to encompass environmental dimension.

3.2. WHO ARE THE MAJOR STAKEHOLDERS

There are several stakeholders in the CSR effort. These include: government, mining Companies, institutions especially the UNO and its agencies like ILO, the local community, consumers of mineral products, non-governmental organisations (NGOs) suppliers, managers, under-represented stakeholders;

The State (Government):

Many mineral-rich developing countries generate enormous revenues from mining. Unfortunately, many of them do not have in place, policies that can ensure effective management of such revenues for the well-being of their citizens. The state has a very important role to play in ensuring responsible behaviour by all the other stakeholders, especially the MNCs that operate within their jurisdiction. Indeed, some analysts are of the opinion that governments are the only stakeholders that can have the most impact in creating incentives and disincentives for responsible action. The government can use both regulatory and economic instruments to enhance CSR in the operations of MNCs.

The Mining Companies

Suffice to emphasise that private investment in mining, as in other commercial undertakings is for the purpose of making profit. In this regard, it is necessary to appreciate the limits of what MNCs can do and what the government can ask them to do. This legitimate aspiration, however, should be without prejudice to the fact that MNCs should pay attention to their conduct as it affects other stakeholders especially with regards to upholding human rights norms.

Investors

Investors can be warned or informed of potential environmental risks and liabilities and to the benefits for them, from good practice in mining.

Non-Governmental Organisations (NGOs)

Increased national and international NGO activity and assistance have improved people’s awareness of their rights, bringing with such awareness a greater articulation of their demands and grievances. Their cases have also been brought forward to the international forum thereby bringing pressure to bear on both states and mining companies for a rectification of some of the worst practices. The role of some NGOs lack transparency and accountability.

Development Assistance Agencies/multinational institutions

Development assistance institutions such as the World Bank are increasingly coming under pressure to implement environmental and human rights standards within their lending and assistance programmes. There is, however, a lot more to do in the area of implementation of human as well as environmental rights initiatives. The World Trade Organisation with its strong judicial system can go a long way in helping to incorporate human and environmental rights in TNCs policies, simply by demanding for it before have any form of dealings with the said company or host government. Others may include the UN Global contact and ILO.

3.3. PARTICULAR IMPACT ON IPs

Some of the recent cases of environmental injustice and human rights violations are: the murder of Francisco Mendes and Wilson Pinheiro in the Amazon rain forest, the public hanging of Ken Saro-Wiwa and eight other members of the Movement for the Survival of the Ogoni People (MOSOP) in Nigeria and the massacre of Father Nery Lito Satur and several others in the Philippines,. There have been several other cases of government agents especially in other developing countries, where the host government does nothing to stop human right abuse against members of minority groups and local communities so as to take over their lands and natural resources. The oppression of indigenous minority groups extends to ecological and environmental degradation.

Exploitation and pollution of natural resources, including energy production, timber harvesting, mineral extraction, oil exploration and other industrial projects by MNCs, has caused significant damages. These damages include dislocation and displacement of numerous indigenous and local communities and their entire ways of life. In many developing countries, indigenous peoples, minority groups and other vulnerable and impoverished communities, including subsistence peasants, fishing communities and hunters in some cases traders are generally the victims of environmental pollution mostly caused by resource extractive operations of MNCs in the name of global development.

“Over the past years, there have been about documented cases of hazardous wastes dumping in Eastern Europe, in Asia, in Latin America, and in Africa. Specific cases include dioxin-laden industrial wastes exported from Philadelphia to Guinea and Haiti in 1987; radioactive milk exported to Jamaica by EC in 1978; and other toxic elements exported by Italian firms to the town of Koko in Nigeria; and several other similar cases involving a systematic dumping of hazardous wastes to these regions. Within the past decade, several Third World nations including Argentina, Bangladesh, Brazil, Colombia, Guinea, Haiti, Lebanon, Mexico, Nigeria, Sierra Leone, Somalia, Syria, Venezuela, and Zimbabwe have been targeted for toxic waste dumping. Increased toxic waste dumping and CO2 emissions are directly related to poor quality of life and adverse health conditions in these countries”.

4. CSR MEASURES

CSR measures vary depending on varying factors and geographical location of the TNC. The Australian Parliamentary Joint Committee on Corporations and Financial Services in 2006 in its report: Corporate Responsibility: Managing Risk and Creating Value, stated: That the committee strongly supports further successful involvement in the voluntary CSR measures and wide adoption of corporate responsibility. The committee has formed the view that obligatory methods to regulating director’s actions and to sustainability reporting are not suitable. However some people argue that the government should be more in CSR related issues. They argue that the host government needs both to improve civil and market regulation of corporations, and also to strengthen corporate law. They agree that the threat of litigation against TNCs is more effective.

“Kolk and van Tulder (2002) critically examine the effectiveness of voluntary corporate codes of conduct by a study of child labour codes developed by six international garment companies. Overall, the research shows that corporate codes are important, though not the only, instruments for addressing child labour. Sandra Polaski reports on an innovative policy experiment in Cambodia that links improvement of workers’ rights with increased orders and market access for the products of the country’s garment factories. The policy originated with the US-Cambodia Textile Agreement, which awarded Cambodia higher garment export quotas into the US market in return for improved working conditions and labor regulations. She concludes that the agreement’s effectiveness has depended on a regulatory role for the ILO, ‘acting as a compliance monitor and government intervention, preventing some apparel producers from free riding on others’”.

4.1. RESPONSIBILITY OF CORPORATE DIRECTOR

While some people are of the view that the sole responsibility of the directors are to the shareholders and other financial issues as has been stated in common law others are of the view that directors have the duty to incorporate human rights into the company policies and rules, inform the stakeholders as well as the shareholders any potential human and environmental abuses that may occur in the life of the operation. The should take into account the labour issues, while setting employing rules and any environmental pollution that is inevitable and best to compensate the people involved.

4.2. CORPORATE ACCOUNTABILITY

Corporate accountability is all about the TNCs being held accountable for the actions the take especial subsidiaries of International companies abroad in developing countries. For example, KAIROS is concerned about the growing pattern of Canadian extractive companies, whose international activities are having a negative impact on the environment and human rights, including the rights of Indigenous peoples. KAIROS advocates for binding legislation to hold corporations accountable in Canada for abuses committed internationally.

5. RECOMMENDATION AND CONCLUSION

TNCs should, within the framework of both national and international laws, in the communities in which they operate, take a proper account of the need to protect the environment and public health and generally to carry out their practices in a manner contributing to sustainable development. Most importantly, enterprises should:

1. Inaugurate and maintain a system or a scheme of environmental administrative body appropriate to the company.

2. Determine, the foreseeable environmental, health, and safety-related impacts related with the projects of the company over their full life cycle. Where these proposed activities and practices could have noticeable environmental, health, or safety impacts, the company should prepare a proper environmental impact assessment.

3. Support plans for preventing and mitigating environmental and health problems from their operations and to maintain systems for immediate reporting to the competent authorities.

4. To incorporate human right into the company policy and have a strong system for reporting abuses.

5. The company should not take part in local violence and neither should they keep silent when such violence occurs in their area of operation or because of their operation.

6. The company should contribute to the development of environmentally meaningful and economically efficient public policy.

BIBLIOGRAPHY

SECONDARY SOURCE

BOOKS

Boeger, N., Perspectives on Corporate Social Responsibility(Edward Elgar Publishing Limited, United Kingdom, 2008).

Mullerat, R., International Corporate Social Responsibility: The Role of Corporations in the Economic Order of the 21st Century (Kluwer Law International, BV, the Netherlands, 2010).

Sullivan, R., Business and Human Rights: Delimmas and Solutions (Greenleaf Publishing Limited, United Kingdom, 2003).

ARTICLES

Adeola,O.F., Environmental Injustice and Human Rights Abuse: The State MNCs and Repression of Amnesty Groups in the World System. Human Ecology Review, Vol.8, No.1, 2009.

International Council on Human Rights Policy, Beyond Voluntarism Human Rights and the Developing International Legal Obligations of Concern (February 2002)

Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy-International Labour Organisation. November 2000

OTHERS

INTERNET

Australian Human Rights Commission, Good Practice, Good Business 2009, at http://www.human rights .gov.au/human_rights/corporate_social_responsibility (last visited on July 9, 2011)

Corporate accountability news, at http://www.kairoscanada.org/en/sustainability/corporate-accountability/

OECD Guidelines for Multinational Enterprises 2008, at http://www.oecd.org/publishing /corrigenda (last visited on July 9, 2011).

Abstract

The Gulf of Mexico incident is an occurrence that many people in the United Kingdom and Mexico, who were affected, would like to forget as it had immense environmental and economic impact to them. This paper is going to describe the extent to which the Deepwater Horizon disaster in the Gulf of Mexico is considered to have led to a meaningful reform of the regulation of the offshore oil and gas industry on the UK continental shelf. These include well planning and control, environmental protection, emergency response, authority for stopping operations off, catastrophic BOP’s failure, the significance of simple checks, protection of the whistle-blowers, and a summary or conclusion of the described measures.

Introduction

An explosion took place on the Deepwater Horizon drilling rig on 20 April 2010 leading to the death of 11 workers. The region is in the Gulf of Mexico and was under contract to the British petroleum. It is still not yet known the extent of the damage that took place both on the environment and the communities around. Among the errors that led to the incident is the fact that the two pods of control on the BOP of the Deepwater Horizon showed that there was an error in a vital valve in one of the pods of control, and that the other pod of control did not have adequate charge on the batteries; it is believed that these faults were there during the time that the accident happened. There was at least a single working control pod needed to run the automatic mode function that would have helped in closing up the BOP. The automatic mode function should have taken place in an automatic manner, without being aided, when the hydraulic line together with the electric cables were destroyed in the explosion. The automatic mode function is a very important system of backup. This paper is going to describe extent to which the Deepwater Horizon disaster in the Gulf of Mexico is considered to have led to a meaningful reform of the regulation of the offshore oil and gas industry on the UK continental shelf.

Well planning and control

The reforms that were recommended by the panel included making sure that the Well Life Cycle Practices Forum remained in place permanently. It is also required that the professional, influential representatives from the HSE and the industry meet on a regular basis to decide, review and always improve values and standards for good practice in the well integrity as well as management of application in the UKCS. The Macondo blowout is taken into consideration by the standards and consists of operating practices, sufficiency and consistency of the safety vital equipment (particularly BOPs), testing and maintenance of hardware; proficiency and training of personnel; organizational and human features. They share these standards with the partners in the industry and international regulators and the organizations that set the standards.
In consideration of the Macando, it was also required that the following are considered;
Whether a change in the control of well standards it essential to necessitate at least two barricades to be in place (besides the BOP) during the moving of a well to a situation that is not balanced with the zone of production, and;
Whether there is any change required to make the operators provide notice warning about each time a situation is arrived at where the BOP together with one other barricade to a release is attained.

Protecting the Environment

The DECC and the industry are required to work hand in hand for the purposes of developing and adopting improvements like:
The concept of Environmental Assurance plan that possibly uses the Environmental Management System or the Environmental Statement as living equipment for engendering a concept of goal-setting to environmental policies intended to continuously improving, especially in relation to the low-frequency incidents that have high impact.
The identification and cohesive treatment of the generic features of documents of environmental assurance to enable the devotion of more effort to some other more localized or particular areas of possible risk and impact, via more rigorous use of internet systems.
The industry has also been challenged to take greater ownership of the available regulatory requirements of the environment, which include appraisal of the contractual arrangements for the preparation and keeping up-to-date the required documents making them into tools for driving improvements in the environmental evaluation and protection. The regulator is also required to continue working with the industry so as to make identifications of the ways in which the available requirements of reporting, particularly about compliance to the environmental requirements, may be rationalized or even simplified. Additionally, there might be more that should be done to show the need for, and resultant value of the comprehensive environmental evaluations that is required of them, with a need and aim of offering increases scope for approaches that are innovative to the improvement of the standards of the environment.
It has also been recommended that the documents of guidance that relate to the offshore environmental effect evaluation, regulatory activities and enforcement should be revised and reviewed on a regular basis, initially following the changes in the procedures that came up from the Macando and consequently taking into consideration any other applicable or relevant occurrences, for the reinforcement of the continuous culture improvement of the UKCS and ensuring that operators are well acquainted with the present requirements and expectations of environmental best practice.
In addition, since the incident of the Deepwater Horizon, some other interim environmental regulation and inspection steps that have been taken by the United Kingdom include the increasing of the number of yearly environmental inspections to the drilling rigs, besides hiring three more inspectors. This consequently increased the total number of the inspectors of the drilling rigs to ten, and this includes one inspector who is senior. Considering the less widespread areas of responsibility of the DECC in comparison to the HSE, it together with its prototype agencies have all worked with fewer inspectors as compared with the HSE. The HSE has 114 professional inspectors, whereas the DECC has about ten inspectors. The onshore offices and offshore installations are visited by DECC inspectors for the inspection of the management systems and records. They also go there to interview individuals and appraise the conditions of the site, practices and standards.
The increased number of the site inspectors is expected to enable the DECC raise the number of inspections on the environment done on the mobile drilling rigs across the country from an average of seven to at least 16 on yearly basis immediately. The Cabinet Secretary referred to the inspectors’ movement between the private and public sectors. This might render it very difficult for the recruitment and maintaining of inspectors that are highly qualified in the future. The offshore inspectorate of the DECC describe their strategy of environmental inspection as one that is risk-based. This means that of the rigs that are presently carrying out activities of drilling, nearly twenty four of them, which translates to about twenty percent are on gas reservoirs; however, the DECC argue that this inherently does not pose much risk to the environment in comparison with those that operate on oil reservoirs. Hence, this is taken into consideration, together with the site of the rig and the well’s nature, the DECC aims to inspect the rigs that carryout drilling activity on particular oil reservoirs.

Responding to Emergencies

Arrangements for giving response to the incidents of oil spilling that pose potential danger to the marine environment were established by the Oil Pollution Emergency Plans. The plans intend to prevent pollutions as such and minimize or decrease the effect that might come with it. The Oil Pollution Emergency Plans are risk evaluations that are applicable to a particular installation or field. Their focus is on the worse-case instance; as a result of the incident at the Gulf of Mexico, the United Kingdom operators are not expected to do extra modeling for the installations of deepwater, which include a more appraisal of the predictions of oil spill beaching. These plans are also appraised by the Maritime Coastguard Department and some other related consulters like the Maritime Management Agency and the related inshore statutory agency.
Witnesses were asked about the way they had changed their ways of operation in the United Kingdom deepwaters since the occurrence in the Mexican Gulf. Some of them said that they do not believe they had basically changed in any manner. This was due to the strong regulatory era that was the Cullen’s legacy of inquiry into the incident of Piper Alpha. However, with regard to establishing any changes in regulation in reaction to the tragedy of the Deepwater Horizon, they were wary of making universal and global changes that might not be proper for them from incident to incident, the kernel of what is in the safety case era.
There is a feeling that the industry appears to be reacting to incidences after they have occurred instead of having anticipations and making proper planning for the high-consequence events that are low in probability. It is beyond reasonable doubt that the industry and BP’s inability to respond because it was not prepared in a proper manner was not acceptable. The black swans’ occurrence appears to be more frequent nowadays. The United Kingdom has high regulatory standards of offshore, as shown by the Safety Case Regime, which was established in reaction to the 1998 Piper Alpha incident. The regulatory framework of the United Kingdom is on the basis of flexible and goal-getting approaches that are stronger than those that the Deepwater Horizon operated under. Despite the high standards of regulation in the United Kingdom, they are concerned that the industry of offshore gas and oil is giving a response to disasters instead of anticipation worst-instance cases and making proper planning for the high-aftermath, low-probability occurrences.

Role of the Offshore Installations Manager

We are informed from both the industry and the regulator that there were individual offshore installations that always have the power to shut down the well. Bridging documents were created between the systems of the owner of the rig and the operator systems of the well to ensure that issues like who has the final word or say are properly agreed before any operation is commenced. The HSE stated that there will normally be one individual who is actually responsible for matters safety on the rig, which is the Offshore Installations Manager, the contractor of drilling. There are huge financial implications of delaying the operations of drilling even just for very short periods. In the instance of the Deepwater Horizon, we find that the BP had the aim of drilling the Macondo well for a period of 51 days only, at about 96 million dollars. It was expected that the platform of drilling would be taking off as early as 8 March 2012; however, the Macando well unexpectedly took a longer period. By the 20th April, the day that there was the blowout, which killed eleven individuals, the rig was already late by 43 days, and this would have led to an extra cost of 21 million dollars in lease fees only. There is a danger that those who are responsible for making decisions to stop operations could feel economic pressure not to do so if was possible.

Catastrophic BOP’s failure

The last defense line against the Macondo incident was a device known as the ‘blind shear ram’, which is part of the BOP found on top of the wellhead, and more than a mile below the ocean floors’ surface. If the oil’s upward pressure and the gas that is in the reservoir became more than the heavy drilling fluid’s downward pressure, and all the other resources for controlling the well failed to operate, the two blades of the blind shear ram, were expected to slice through the pipe of the drill and then help in sealing the well. If the BOP had worded as expected, the whole incident would not have occurred and all the lives would not have been lost. Taking into account the single blind-shear ram’s failure to run the blowout preventer of the Deepwater Horizon, which appeared to be one of the major causes of the blowout of the well of Macondo, it was recommended that the Safety and Health Executive particularly review the case for prescription that the United Kingdom Continental Shelf’s blowout preventers are well equipped with the two blind shear ram.
Whereas the flexibility of the safety regulation regime of the United Kingdom seemed to have performed properly, it was also been seen that for fail-safe devices like blowout preventer, the administration or the government has adopted minimum, strict standards of safety or show that these would not actually be an economical, last-resort against catastrophes.

Importance of simple checks

An appraisal of the two pods of control on the BOP of the Deep-water Horizon as a result of the incident showed that there was an error in a vital valve in one of the pods of control, and that the other pod of control did not have adequate charge on the batteries; it is believed that these faults were there during the time that the accident happened. There was at least a single working control pod needed to run the automatic mode function that would have helped in closing up the BOP. The automatic mode function should have taken place in an automatic manner, without being aided, when the hydraulic line together with the electric cables were destroyed in the explosion. The automatic mode function is a very important system of backup.
It is of great concern that the simple failures of various systems were not identified during the process of inspection. As a consequence, a programme has been implemented across the global drilling operation to make sure that the equipment operates the way it is designed to do. Another thing that has been done to ensure that such preventable incidences do not repeat include fundamentally improving the testing procedures of the blowout preventers, which consists of making sure that the systems of backup work and are properly tested in the process of drilling a well. This is another instance of the industry giving a response to an accident instead of anticipating a possible problem, even though the new regime is highly welcome. It is believed that the authorities have to make sure that the offshore inspection regime of the United Kingdom could not be susceptible to simple faults like having a battery that does not have sufficient charge, to go without being noticed.

Need to protect the whistle-blowers

Owing to the immense economic pressure of keeping a drilling rig functional, it is of great concern to various stakeholders that the workers who attempt to talk about safety matters might be or even feel like they are intimidated by their seniors. The whistle-blowers are not in a position of calling a halt or bringing to a stop some things and the managers and clearly attempting to make money for the organization. Their primary responsibility is not protecting the environment. Some contradicting reports were found from the HSE regarding harassment and aggravation on the rigs as well as the industry’s assurances that honest whistleblowers will be given a hearing and protection. The government has also ensured that there are discussions with the unions and industry about the further actions that are required for the prevention of representatives of safety from feeling or being intimidated by their seniors such that they do not report a danger.

Conclusion

Following the fatal incidence that occurred in the Mexican Gulf, it is important that there is clarity on the hierarchy and identity of the liable stakeholders to make sure that the government, and thus the taxpayers, doe not need to pay for the outcomes of the offshore accidents. Any lack of hierarchy and clarity on the liability will hamper the compensation payment to those that are affected by the incident of the offshore. It is recommended that it needs to be a requirement of the process of licensing that it proves their capability to pay for the outcomes of any incident that could happen. It is recognized that these measures could actually be added to the cost of investment in the new United Kingdom gas and oil production and encourage the Treasury to consider this during incentives to investments as such.

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By Subhankar Das THE recent economic crisis, which originates in the USA, is being transmitted to almost every corner of the world like an epidemic, although economist thought that this dreaded financial turmoil will be a pandemic pertaining to only the USA. This financial tsunami has primarily three fangs which eventually engulf investment of investors’ worldwide.

The first & foremost reason is the direct impact on the balance sheets of many FIs which invested in the mortgage backed securities & their derivatives that turned toxic following large scale defaults in the US housing market.Second, the crisis has created a liquidity crunch. The USA firms seeking liquidity resources massively withdrew their investments in stocks also led local investors to pull back from the market. Both factors contributed to the tightening of credit. Reinforcing these factors was the return of the local firms, which had previously borrowed in foreign markets, to the domestic market. These firms saw the foreign markets suddenly dry up. The final source of transmission of the crisis has been the real sector now frequently referred to as the ‘Main Street’ in the USA.

The financial crisis coincided with the creeping recession in the USA & made it worse. That has meant a cut in the US demand for imports from other countries. According to a recent report by IMF, the world’s GDP growth estimates have been cut to 3. 7% for 2008 & 2. 2% for 2009, which is significantly lower as compared to 5% achieved in 2007. Likewise, export volume forecast for the developing & emerging economies has been cut to 5. 6% for 2008 against the 9.

5% achieved in 2007. Even for 2009, the numbers are not impressive at 5. 3%.To large extent, the slowdown will be consequent to the sharp deceleration in imports by advanced economies such as the US, Europe & Japan among others. The picture in India although not as gloomy as in the case of advanced economies is nowhere exciting. The global slowdown is likely to impact Indian companies, which export or have their business units in international markets. To give some numbers almost 13% of the total Indian exports go to the US followed by the countries like UAE, China, Singapore, and the UK & Hong Kong.

Meanwhile Indian export which grew at about 30. % during April- September 2008 is already showing signs of a slow-down; the growth rate was down to 10. 4% in September 2008. And, while official numbers released by the Director General of Foreign Trade says that exports are already down by 15% year-by-year in October marking the first such occasion in five years. It is really a hard time to boost exports in the next few months as the global crisis has deepened hurting demand around the world. The weak rupee may help to improve the appeal of Indian products among other Asian exports but subdued demand means that there will be little realized benefit for Indian exporters.The moderation in external orders will hurt Indian business, which in turn reduce labor demand & weigh on consumption.

Therefore, although India is relatively less trade dependent compared to its Asian neighbors, it is still exposed to external shocks. In this light expect tough times for some of them, which have a visible exposure to global markets. The hit will be an account of lesser volume, but could also mean lower realization. Companies which are dependent on the export markets or outsourcing will have a bleak future going ahead, the volume growth anyway is likely to decline on top of that the dollar rate will come down.Thus, companies will have to keep on reinventing themselves. The effect of this financial turmoil on various industries is described as follows. ? Apparel & Textiles: – The woes of the textile industry just don’t seem to end.

While last year it was the rupee appreciation that affected textile exports, this year the weakening of demand in recession struck US, Europe & Japan is expected to impact export growth significantly. The case is similar for apparel exporters. The cracks have already started showing. Apparel Export Promotion Council (AEPC) has estimated that exports may drop to $8. 8 billion in this fiscal, 24 % below the target set by APEC for FY09. (Last fiscal , India had exported garments worth $9. 69 billion).

This despite the fact that rupee has deprecated by more than 20% against the dollar in the current fiscal is worrisome. ? Auto: – The global meltdown has also pierced its teeth into the auto sector with a significant exposure to developed markets. Auto sales across categories in the world’s 2 largest markets, the US & Europe were down 16 % & 19% respectively for the quarter ended in September.Notably for companies like Tata Motors which derive a significant chunk of their consolidated revenues from outside the country, the slowdown will lead to a dip in revenues in the short to medium term. Bajaj Auto & TVS Motors are much less impacted as emerging markets continue to show healthy growth due to low 2 wheeler penetration. In the passenger car segment, Maruti Suzuki is trying to take a leaf out of Hyundai i10’s success in the export market & is pinning its hopes on the recently launched A-Star, which it expects will deliver in a phased manner, annual exports of 2 lakh units by FY2011.Tata Motors has seen a 20% dip in exports in the current fiscal (till October) due to global economy slowdown.

Even for its subsidiary JLR retail volumes dropped 5% for the first 9 months of the calendar year despite of increase in sales of the Jaguar cars on the back of the launch of XF model. Tata is also planning to cut around 5000 jobs in JLR. So for the short term JLR would have to increase its focus on its high growth markets of Russia, China & Brazil on the face of drastic decline in sales from its two largest markets the USA & Europe.For now, the slowdown of demand in domestic & overseas markets of Tata Motors has downgraded & the company believes that the outlook will continue to be negative for India’s largest auto company. While the demand in developed markets continues to be weak, lower commodity prices (steel, crude oil), lower interest rates & a depreciating rupee could improve the outlook for players in the sector. Overall, the outlook is positive for 2 wheelers but neutral to negative for others. ? FMCG: – The FMCG sector is largely a domestic consumption story with exports contributing around 4-5% of total sales.

However for companies like Tata Tea, Dabur & Godrej Consumer, the contribution of their overseas subsidiaries is significant (>20% of sales). These companies haven’t observed any slowdown from their international operations. According to the sales report of these companies, the international business is in fact the fastest growing business division within the domestic growth rate. The companies would grow in these markets with continuously introducing newer products & entering newer Geographic. Dabur’s main importers are the Western Asia & Africa, thus relatively immune to any major recessionary fears in the developed orld. Even Godrej is also doing a relatively good show in this time of recession. ? OIL & Gas: – Only 2 companies Reliance Industries & Essar Oil export a good chunk of their production.

Essar’s share of exports was around 28% of the total sales in Q2 of FY09, while for reliance (55% of sales), Europe contributes around 20% of the total exports. The slowdown in global demand as well as the recent additions in the refining capacity has resulted into margin pressure for the refining business. The deep analysis of RIL speaks that it will face margin pressure, but volume growth in the exports market is still intact.For Reliance overall: volume growth in FY10 in the form of commissioning of Reliance Petroleum’s refinery & gas production from its Krushna- Godavari basin would provide cushion, which is also a reason why analysis have put a buy on the stock. ? Metals: – Many metal companies have spread their presence in international markets by way of exports & through acquisition in the past few years. In fact, Hindalco & Tata Steel has acquired companies that are significantly bigger in size as compared to their own size.Although, these companies (TISCO, Hindalco & Sterlite Industries) are among the low cost metal producers, the global slowdown is already hurting.

Lower global prices have already forced many companies to cut production & prices. From this the stock prices have suffered, but most of worries are already factored in already. Among ferrous companies, Tata Steel on a standalone basis (5. 6mn tone capacity a year) generates about 20% revenues from exports, but factoring its global operations such as its UK- based subsidiary, Corus (21. 1mn tone a year), the revenue from foreign operation will be about 80% of the consolidated turnover.In line with the slowdown in the European markets, steel majors such as Arcelor Mittal & BaoSteel have already cut production. Corus too is cutting production by 30%.

According to estimates, steel consumption in Europe alone will decline by 20% & 15% in 2009 & 2010 respectively. The picture of Tata Steel is changing from stable to negative, reflecting the challenging operating conditions in the UK on the back of likely deterioration in demand in Europe & the UK over the next few months. ? IT: – The spending on IT in developed economies is likely to decline by 5% in 2009 according to Goldman Sachs report.This does not sound good for IT industry in India, which get more than 80% of their revenues from these markets. It is not surprising then that the Indian IT poster-boy, Infosys has reduced its FY09 dollar guidance to 13. 1- 15. 2 % (as compared to 19-21% at the start of FY09), which is an early indication of things to come.

Apart from the sluggish growth in the BFI sector, which accounts for close to 30% of the top line of many Indian IT players & delayed budgets, they now have to grapple with the issue of cross- country headwinds.This is a challenge for Infosys & Satyam in the form of depreciating value of USD as compared to Euro. While TCS & Infosys are on track on their hiring process, others are trying to downsizing. Also the changing political scenario in the USA & the coronation of Mr. Barak Obama as its 44th President gives speculation about the stoppage of outsourcing to Indian IT service providers, which will eventually hamper the IT Cos. So, broadly we can say that India is slowly coming out from the tentacles of global financial medusa.Thanks to the former RBI governor, Dr.

Y. V. Reddy, India almost entirely escaped the devastation of the financial sector wrought by the crisis in countries such as Korea. On the positive side, we can take some comfort in the thought that the current crisis is not about to turn into the Great depression of the 1930s. Also the Finance Ministry has also brought out 2 stimulus packages for the Indian Inc. This coordinated effort of all the players concerned will definitely help the Indian industries to withstand this global financial turmoil. Thank You

However, issues associated with the environment, and increased seismic activities have slowed down the growth of this market. The growth of hireling market is directly proportional to the on-going drilling and completion activities around the world. On the basis of various factors such as geological condition, type of reservoir, and others, different types of hireling services are required to assist the drilling and completion activities. The growth in drilling and completion activities is attributed to the continuous increase in world energy demand.

These activities are expected to grow further as the world energy demand from oil would reach around 4 GATE by 2020. This rise in energy demand has resulted in increased drilling and completion activities in all parts of the world. This has also put pressure to extract more from each well and thus, further deep exploration is done. This increase in drilling and completion activity increases the requirement of hireling services. Complete report available@ http://www. Aromatherapies. Mom/hireling-services- market-by-type-logging-well-intervention-completion-geography-Asia-pacific-Europe- idle-east-Africa- north-a America-south-name Rica- global I-tree nods-forecast-to-2019- market-report. HTML We have used various secondary sources such as encyclopedia, directories, and databases to identify and collect information useful for this extensive commercial study of the global hireling services market. The primary sources-experts from industry and suppliers have been interviewed to obtain and verify critical information as well as to assess the future prospects of the hireling services market.

We have also profiled leading players of this industry with their recent developments ND other strategic industry activities. These include Baker Hughes (U. S. ), Superior Energy Services (U. S. ), Hallucination (U. S. ), Sulzberger (U. S. ), and Weatherboard 2019 Hireling Services Market Trends & Forecast By glossaries The North American market share is about 45% of the global hireling services revenue. In North America, The U. S. Is the largest market and is led by Hallucination, Sulzberger, Baker Hughes, and Superior Energy Services.

Chinese players and few Asian players are expected to grow in the near future. The hireling services market is segmented in six regions, namely North America, South America, Europe, Africa, Asia-Pacific, and Middle East.

“Like, every coin has two sides, even this concept of GST has its own benefits and limitations, I leave on the reader to decide for them the impact of GST on economy whether on micro or macro level.”

GST is great step of transformation of independent India “as one nation one tax”. GST is simply the process in order to increase its efficiency of various indirect taxes in order to avoid the cascading effect so that the final cost to customer will go down. Cascading effect is where you pay tax over and over on the same commodity at different stages of its production.

The main objective of GST is to remove the cascading effect and converting multiple taxes into one tax on supply chain of goods and services. GST with multiple tax rates will not lead to any Inflationary effect due to its implementation. The aim of multiple tax rates structure is not regressive on the common man. GST is a simple tax system now the tax payer won’t be confused about what type of taxes he should pay.

GST is introduced as “one nation one tax”. Therefore, the paper will argue on how does this tax reform affect the Indian economy. Further it will argue on the reaction of the Indian business community. Further it will argue on is GST good or bad for India and what are the benefits and drawbacks of GST. Further this paper will cover why petroleum products were kept out of GST and what will happen if we bring it under the purview of GST.

Introduction

“Like, every coin has two sides, even this concept of GST has its own benefits and limitations, we leave on the reader to decide for them the impact of GST whether on micro or macro level.”

GST regime was not an overnight concept as in the pre-GST regime there was a cascading effect which was the main reason of inflation and by that reason every market player, customer needs this type of tax regime and it is expected to major effect to Indian economy. In India for the first time the seed of GST was sown in the year 1999-2000 by the Atal bihari Vajpayee Government.

After the dissolution of Vajpayee Government then in the year of 2005 the finance minister P. Chidambaram in his parliament budget session announced that there was the requirement of changes in the indirect tax system to curb the inflation. Then the first time in the year 2010 the finance minister Pranab Mukherjee addressed the GST, then in the year of 2011 by the 115th constitutional amendment bill was introduced in Lok Sabha for levy the GST on all goods and services but finally in the year 2014 the GST bill was passed in 122nd constitutional amendment and in the year 2016 the GST bill was passed in Rajya Sabha.

According to Hon’ble Prime Minister of India, Shri Narendra Damodardas Modi, GST is great step of transformation of independent India “as one nation one tax”. GST is simply the process in order to increase its efficiency of various indirect taxes in order to avoid the cascading effect so that the final cost to customer will go down. Cascading effect is where you pay tax over and over on the same commodity at different stages of its production.

The main objective of GST is to remove the cascading effect and converting multiple taxes into one tax on supply chain of goods and services. India has proposed to adopt concurrent Dual GST model for implementing GST. Concurrent dual GST means Tax levied by centre & state on both goods and services adopted by Brazil, Canada, India.

The Finance Minister in the budget speech 2015 had emphasized the intent of the government to implement GST in India. In the Budget Speech of 2015, the Finance Minister highlighted that a very important dimension to our tax administration is the fight against the scourge of black money. No one had anticipated demonetization at that time which became a reality in 2016.

While the Government was criticized, it was a great step for the country and tax collection of 206-17 increased by approximately 18%. He added that taxation is an instrument of social and economic engineering and that tax collections help the Government to provide education, healthcare, housing and other basic facilities to the people to improve their quality of life and to address the problems of poverty, unemployment and slow development.

To achieve these objectives, the endeavor was to foster a stable taxation policy and non-adversarial tax administration. Further Mr. Jaitley emphasized that GST would play a transformative role in the way the economy function.

All other GST countries have one or two tax rates but India have 5 multiple tax rates. India has the highest tax rate among all the countries where GST has been implemented. France was the first country who had introduced and implemented GST in 1954 at the rate of 20%, Canada had introduced GST in 1991 at the rate of 15%. GST with multiple tax rates will not lead to any Inflationary effect due to its implementation, said Finance Minister Arun Jaitley. The aim of multiple tax rates structure is not regressive on the common man.

GST is a simple tax system now the tax payer won’t be confused about what type of taxes he should pay. GST is introduced as “one nation one tax” but it is not true because GST “one nation one tax” means there should be one rate on all items which are coming under the ambit of GST. As GST rates are 0%, 5%, 12%, 18%, 28%. Apart from there are some products like Petroleum, diesel, electricity, alcohol for human consumption etc. They have been kept outside the purview of GST, it should not be like it.

But on the other hand multiple rates of taxes structure must be required for a country like India in which larger population belongs to lower-middle class. If the tax rates on goods and services are increased to 18% or 28% on all daily consumable items such as floor, rice, fruits, vegetables etc. there would be sharp increase in the inflation, then the major effect on GST has been on the lower-middle income class group.

It is necessary to maintain equality in the society. The daily consumable items are covered under the nil rate of tax i.e. 0% and on the other side luxury items are covered under 28%.This formation of GST rates are formed to maintain equality in the society. Therefore, single rate under GST would have totally neglect the social structure of a wide country like ours.

Example of GST Calculation Let us assume that the GST is set at 5% Suppose that the manufacturing cost of a Product A is 100 and assuming a GST of 5% the total amount is Rs. 105 The next step of taxation would be when the Product is sold to consumers, let’s say at a price of 150. So the GST will charge another 5% on just the difference of Rs. 150 and Rs. 105 i.e. only 5% on Rs. 45 which is equal to Rs. 2.25.

So the final price is Rs. 150 + Rs. 2.25. Unlike the case of petrol pricing there is no tax on a tax now. This eliminates the cascading effect of taxes which is very prevalent in our economy and has been simplified to an elemental level in the example. Since the GST will be applied at every step of value creation it will be very difficult for black money owners to participate anywhere in the value chain with the GST without accounting for all other transactions.

Research Methodology

This paper is based on experienced study. It is a type of detailed research paper.

Objective of the paper

• To study about the concept of GST.
• To emphasize the impact to Indian economy.
• To provide suggestions and recommendation regarding GST.

Benefits of GST to Indian Economy

• The multiple tax rates were to ensure that there would be no inflationary effect due to its implementation.
• It is necessary to filling the gap between higher class community and middle -lower class community.
• Multiple tax rates structure is not regressive on the common man.
• Removal of bundled indirect taxes such as VAT, CST, Service tax, CAD, SAD, and Excise.
• Less tax compliance and a simplified tax policy compared to current tax structure.
• Elimination of cascading effect of taxes i.e. removes tax on tax.
• Manufacturing costs reduced due to lower burden of taxes on the manufacturing sector. Hence prices of goods will be likely to go down.
• Tax reform lift to the Indian economy growth rate.

Drawbacks of GST to Indian Economy

• Accounting more get difficult due to multiple tax rate.
• Increase complexity in filing of GST return.
• The multiple tax rate structure is against the idea of a levying GST at a single rate on all the goods and services.
• Multiple tax rate structure creates more complexity in the administration.
• It could lead to disputes on classification of goods and services.

Criticisms

• Rahul Gandhi calls GST is “Gabar Singh Tax”.
• Mamta Banerjee calls GST is “The Great Selfish Tax”.
• Bibek Debroy (well known economists) calls GST as “desire to tax items”.
• P. Chidambaram calls GST is “Presenting VAT in new shape”.

How will GST Impact to the Indian Economy

Reduction of tax burden on producers or manufactures will lead the growth of Indian economy through more production. The pre- GST regime where so many different types of indirect taxes prevents the manufacturer from producing their optimum utilization of resources and delay growth but by the implementation of GST the problem of growth of production has been resolved by providing tax credit to the manufactures.

Positive Impact of GST on Indian Economy

From the implementation of GST there is so many positive impact on Indian Economy. Some of the ways GST will benefit are:

Ease of starting business-A business having so many operation across different states. In pre-GST they need VAT registration and have to follow different tax rules of different states this only lead to make complications in the doing of business but post-GST eliminated all the barriers to follow different tax rules of different states. Further GST enables a single registration that make ease of starting new business.

Eliminating of confusion between goods and services- Before GST there were lots of confusion regarding bundle products in which there was a mix of goods as well as services like Restaurant, Works contract, etc. GST brings clarity on this issue and removes the confusion between goods and services as now works contract and restaurant both come under services.

Increase in collection of tax- After the implementation of GST the tax collection of government has boosted up. Now government will use the funds for the development of the country which will results in better infrastructure of the country and development.

Tax burden reduced on new business-In pre-GST businesses whose annual turnover more than rupees 5 lacs requires VAT registration but in post-GST the government of India extends the exemption limit to 20 lacs, this gives relief to over 60% of small dealers and traders.

Improved logistics and faster delivery of services- In pre-GST there was an entry tax which was imposed on movement of goods from one state to another state by the state government. But under GST there is no entry tax on movement of goods, this will get reduced the cost price of manufacturing and is expected to boost the ecommerce across the nation.

Elimination of web of rates and name of taxes- Earlier in Service tax there were lots of tax rates with cesses like Krishi Kalian Cess, Swatch Bharat Cess, etc. with lot of abatements in the rates which leads to confusion regarding applicable tax rates and their credit availability but under GST regime there are only 5 predefined tax rates and brings clarity regarding credit availability.

Negative impact of GST on Indian Economy

Burden of Tax Compliances- In pre GST regime in VAT assessee had to file only single monthly return and one annual return of sales in totality there were only thirteen returns in whole year but under GST an assessee has to file three monthly returns and one annual return in totality there are thirty seven return in a year. This will create a lot of problems for small and uneducated assesses.

Textile industry under tax- It happens first time in the history of tax that any tax brings the textile industry under tax regime. Now even textile traders have to register under GST. In pre-GST regime textile industry was exempted from tax.

Costly luxury products & services – Earlier there were Excise duty/ service tax and VAT and luxury tax but now under GST there is the highest tax rate of 28% with compensation Cess of 15% in aggregate the GST is much more than that of earlier taxes.

Removal of petroleum products from GST- As we all know the commerce is depends on the transportation and in current regime customer pays different kinds of taxes on petroleum products such as Excise duty, VAT, dealer commission etc. I will show you with the help of chart as it given below-

1. Simplified Calculation Chart for Petrol & Diesel Prices in New Delhi – (3rd June 2018)
   Petrol Price * Diesel Price Calculation *
2. International Price of Crude Oil with Ocean Freight (as on 3rd June 2018) 78.3 $ or Rs 5245 per Barrel 78.3 $ or Rs 5245 per Barrel
   1 Barrel of Crude Oil 159 Litre 159 Litre
3. Crude Oil  – Cost per Litre Rs 32.98 per Litre Rs 32.98 per Litre
   Basic OMC Cost Calculation *
4. Entry Tax, Refinery Processing, Landing Cost & Other Operational Costs along with Margins Rs 2.1 per Litre Rs 5.23 per Litre
   OMC Margin, Transportation, Freight cost Rs 3.31 per Litre Rs 2.87 per Litre
   Basic Cost of Fuel after Refining Cost Rs 38.39 per Litre  Rs 41.08 per Litre
5. Additional: Excise Duty + Road Cess as Charged by Central Government Rs 19.48 / Litre on Petrol Rs 15.33 / Lit on Diesel
   Pricing Charged to Dealers before VAT Rs 57.87 per Litre Rs 56.41 per Litre

Calculating Dealer Retail Price – Base Location Delhi

1. Commission to Petrol Pump Dealers Rs 3.63 per Litre Rs 2.53 per Litre
   Fuel Cost Before VAT (rounded off for approximation) Rs 61.50 per Litre Rs 58.94 per Litre
2. Additional:VAT (Varies from State to State – 27% on Petrol& 16.75% on Diesel + 25p as Pollution Cess with Surcharge) Rs 16.61 / Lit on Petrol Rs 10.17 / Litre on Diesel
   Final Retail Price as on 3rd June 2018 -(calculation) Rs 78.11 per Litre Rs 69.11 per Litre

Why petroleum products were kept out of GST?

As repeatedly requested by Mr. Dharmendra pradhan that petroleum products should come under the preview of GST regime. Petroleum products is the biggest sources of tax collection of the government that’s why neither central government nor state government is willing to petroleum products should come under the ambit of GST. Also finance ministry believes that it will complicate the tax structure if petroleum products come under the purview of GST.

What will happen if petroleum products come under the ambit of GST?

The main reason of inflation is cost of petroleum products that affect the Indian economy, GDP growth in so many ways. In case if GST applies on petroleum products then firstly all the current indirect taxes such as VAT, Excise duty etc would subsume under GST. If we assume that petroleum product come under highest GST slab rate i.e. 28%, so, petroleum products price will fall down sharply which means cost price of daily products and other products will go down sharply and ultimately it will beneficial to the consumer.

Conclusion

GST concept is very good but the implementation of GST as of today is not satisfactory and appears that it has been lounged without proper preparation moreover it appears that GST Act is in acted without understanding the business problems as it is required day to day amendment in the meeting of GST council. If it is really a one nation, one tax system I would like to say that the attempt from the government was very good but the result was not so far effective as they completely forgotten to look into the problem and shackles GST has created for the people in India.

This in itself shows that the business community was not contacted before enacting the laws and the rate of taxes under the act. Further the impact of GST on Indian economy is going to be biggest boon in the medium and small enterprises. As inflation gets reduced by elimination of cascading effect and the revenue of government gets increased from new tax regime i.e. GST. It is going to be biggest boon if it gets implemented perfectly.