01.04.2008

• Let’s take a look at some of the measures that the government is considering to tackle inflation. Don’t think that these are the only measures or that they are final. There may be more additional measures and further they can also be deepened. Depends on the evolving situation.
• Ban on non-basmati rice exports.
• Curbs on pulses export for one more year.
• Duty on all crude edible oils scrapped.
• Duty on refined oil cut to 7.5%.
• Empowering states to impose stock limits on edible oils under the Essential Commodities Act. Interstate movements to be restricted.
• Customs duty cut on butter and maize.
• While the above measures are the fiscal measures, it is also contemplating a hike in CRR and repo rate to tame inflation. Though this part would have to be done by the RBI.
• Derivative debts and cleaning the corporate books
• You might remember the issue of cross-currency deals of corporates that are making news for the wrong reasons. As such deals have backfired, corporates have been finding fault with banks that the latter have sold complicated products to them throwing caution and RBI directions to the wind. Now that the corporates are sure to find huge losses from these deals, let’s look at how they are going to account for them to reduce their losses.
• The contracts are being altered so as to enable a corporate to defer payouts to the bank with which it has struck the derivatives deal. So, if the payouts were earlier agreed in April, July and October, there can now be a new arrangement where these take place in June, September and December. In banking parlance, this is “cash-flow restructuring”.
• Existing rules laid down by the Reserve Bank bar a bank from “restructuring a derivative”. A corporate can cancel a contract and enter into a new one. But it cannot strike a new derivatives deal to hedge the risk arising from the earlier deal. This is a hedge on hedge position which is prohibited by RBI. However, the deals that corporates are now doing with banks is not being interpreted as restructuring of a derivative, even though the terms of contracts are being changed. It’s simply called restructuring the cash flow — an arrangement that suits corporates as well as banks. What it achieves is postponing the problem by pushing back the payout dates.
• ICNIRP
• International Commission on Non Ionising Radiation Protection
• This is an independent organization that provides guidance and advice on the health hazards of non-ionizing radiation exposure.
• Pakistan’s national animal
• Markhor, the mountain goat.
• The J&K government is creating Qazinag National Park in Uri. Part of this national park would be on the LoC (Line of Control). The park is expected to be home to the mountain goat and also musk deer.
• India’s broadband penetration
• Currently at 3.4 mn connections.
• BSNL plans to make 25,000 villages broadband enabled shortly.
• About derivatives
• Today’s ET carried an excellent primer on derivatives.
• It appeared on page 12 of the Hyderabad edition. See it in epaper. I am not able to get the link to give it here.
• There is a very good debate on sixth pay commission award.
• Though not many points worth our noting, it is nevertheless a good read. Do so here.