Indian Current Affairs: 05.11.2007

According to the family dispute settlement, RIL (Mukesh Ambani group) has to supply 28 MMSCMD (40 MMSCMD if the NTPC contract does not materialize) of gas from the KG Basin discovery to RNRL (Anil Ambani group) at $2.34 per mmBtu for 17 years. RNRL also had the right to over 40% of future gas reserves of RIL at market prices.
With soaring gas prices and the government fixing a price of $4.2 per mmBtu, RIL may be unwilling to sell it at the concessional rate.
RNRL has gone to court contesting that RIL was not implementing the demerger scheme between the two groups approved by the court. The demerger scheme was based on the family settlement between the two brothers in June 2005.
Now with the court directing both the groups to thrash out the deal within a time frame of 4 months, both the groups are about to sit for discussions.

Many of our workers working abroad – especially in Gulf countries are likely to be employed back home by big realtors like DLF in view of the looming labour shortage.
Our companies are on a hiring spree of foreign workers to meet the skills shortage. A case in point is the employment of workers from China for laying a gas pipeline by Reliance Industries Limited.
As companies are finding that obtaining visas for them is proving to be difficult, they are now setting sights on our own workers working abroad in Gulf countries.
DLF, the country’s biggest realtor is planning to bring about 20,000 workers from Gulf countries at competitive salaries.
Manpower makes up less than 7% of building cost of residential projects. It is much lower for commercial projects.

Government is planning to usher in new guidelines that would double the mandatory capacity deployment on category-IIA routes to 2%. Existing guidelines require all scheduled carriers to deploy 10% of the total capacity on trunk routes (category-I routes) on category-II sectors such as Guwahati and Srinagar. Besides, 1% of the capacity deployed on category-I routes has to be deployed on category-IIA routes such as Lakshadweep and Andamans.
See what we noted earlier on the same subject on 28.05.2007 and 13.02.2007.

These are laid down by the Codex Alimentarius Commission, which was created in 1963 by FAO (Food and Agricultural Organization) and WHO (World Health Organization). The purpose of this programme includes protecting the health of consumers, ensuring fair trade practices in the food trade, and promoting coordination of all food standards work undertaken by international governmental and non-governmental organizations.
Recently the Commission has emphasized that there is an urgent need to follow Codex standards with regard to infant foods.

The RBI has appointed a committee to examine the differences between its norms and the ICAI’s norms on financial instruments, called the AS 30-31, which allows investments to be valued at the fair market value as against the existing practice of reporting the historical cost of acquisition. This is based on the international financial reporting standards (IFRS39).

Estimates suggest that under-recoveries in domestic sale of oil products could add up to Rs. 70,000 crores in the current year.
Government’s refusal to increase the cost of fuel products is resulting in fiscal imbalances. Latest figures suggest that the government has breached the half-yearly targets on both the revenue and fiscal deficit. The revenue deficit has risen to over Rs. 61,000 crores or 85.5% of the budget estimates in the first six months of the fiscal. The fiscal deficit stood at 53.8% in the same period adding up to more than Rs. 81,000 crores.
Some excellent editorial comments on why politically mandated oil prices are regressive:

Such a price regime provides a perverse incentive to recklessly boost consumption subsidies. It implies stubborn disinclination to levy proper user charges and account for international scarcity value.
And it means persistent lack of transparency in the oil economy, high taxes and much scope for cost-plus pricing. To insist on the extant, subsidy-heavy policy — targeted essentially at the non-poor — and voice apprehension over high poverty ratios and increasing income inequality is patently disingenuous. It needs to be junked.

In a very good article written in today’s ET, World Bank’s Vice President for South Asia Region Mr. Praful Patel makes some forceful arguments. Read the full article here. Some excerpts:
A discussion about the amount of resources needed (Planning Commission estimates that close to $500 bn is needed for financing infrastructure needs of the country during the ensuing plan) to close the infrastructure deficit detracts from the real problem with India’s infrastructure, which is the under-pricing of utilities. Unless this problem is addressed, even $500 bn may not be enough.
An example illustrates the under-pricing issue. Three Indian cities have 8 hours a day of water, but their supply of water ranges from 106 litres per capita per day to 341 litres per capita per day. Compare this with that of Paris where there is 24 hour supply with 150 litres per capital daily, which is close to the median of Indian cities. So while the per capita supply is the same, Paris supplies 24 hours while Indian cities see an 8 hour supply.
The subsidized rates of supply of infrastructure services leads to:

He is the Chairman of Morgan Stanley Asia.
US consumers have been asset dependent over the last 5-6 years, leveraging ever-rising housing values and extracting equity from those assets to fund current consumption. This has taken the US consumption to a record 72% of the GDP. In the wake of the subprime crisis, such high levels cannot be sustained the result is a definite downward trend in the US consumption. This is what is going to push US into recession.
Impact on Asian economies: The idea that Asian economies have decoupled from the US and that whatever happens in the US doesn’t matter for Asia, is wrong and will be tested. So far the US slow down has not had an impact on Asia largely because it has been concentrated in home-building activity, which is not a global sector. But as the weakness there moves from home-building to consumption, then we will have a more legitimate test of the decoupling notion. The export led Asian economies will be certainly hit by the slowing US consumption. India is far less exposed to that given its relatively lower linkages with US and market demand.

It is a classic novel from Margaret Mitchell.
“Rhett Butler’s People” by Donald McCaig is both a prequel and a sequel.
In 1991 Alexandra Ripley published the first sequel called “Scarlett” which was excoriated by critics, but sold 6 mn copies and was turned into television mini-series.

Swami Gahanananda, the 14^th President of the Math and Mission passed away due to ageing related complications. He was 91.
The Mission will announce the next chief after a month.

Indian Current Affairs