22.04.2008

· World Earth Day

• Today is world earth day. It was first celebrated in 1970 as a means of sensitizing people about the environment.

· Commodity transaction tax likely to be cut

• A partial rollback of the commodities transaction tax (CTT) could be on the cards. The prime minister’s Economic Advisory Council (EAC), headed by Dr C Rangarajan, is understood to have recommended this. The EAC had been asked by prime minister Manmohan Singh to review the proposal moved by the Finance Bill 2008-09, after receiving representations from not just the industry, but also the regulator of the commodities exchange, the Forwards Markets Commission.
• The EAC feels that the tax in its present form would harm the trade, which will shift out of bourses.
• Do you know the name of the world’s largest brewer?
• It is InBev. This ‘largest’ is by volume. It is likely to start operations in India soon. In Bangalore.
• Why do IFRS impact some of our firms negatively?
• Remember the info about adoption of IFRS (International Financial Reporting System – Some refer to it as Standards) that we noted in our blog a couple of days earlier?
• They usher in what is called ‘equity accounting’. What this means is that the firms which have joint ventures with other firms will be allowed to account for only the proportionate profits from the joint venture companies; but not the revenues. So this will adversely affect the revenue figures of the companies.
• Know the names of some of the biggest food grain dealers on a global scale?
• Cargill, Louis Dreyfus, Glencore and Toepher.
• Some of us would have known Cargill, for seeds.
• These companies have offered wheat call options to our government recently. Know what this means? It means that the government will have the option of buying wheat from them at a pre-determined price at a future date. If it doesn’t purchase wheat, then it will have to forgo the option premium paid to them. That option premium is about Rs. 1000 per tonne. This is considered a best bet in the present circumstances. Is the Left listening?
• Is a food crisis not immanent?
• If you read this article today by CSC Sekhar, you will be convinced with his argument that it is not. Read it here.
• But I would beg to differ with him. The impact of the food crisis will be felt for at least a year or two before it gets handled well by the international community. This is because, nobody thought that the bio-fuel revolution would make such a serious dent on food availability in so short a time. But now that it is a reality, the policy makers the world over will need some time to respond to this challenge. By that time some damage would have occurred. We are already seeing part of the damage in the form of rising global prices.
• Secondly, nobody knows for sure whether or not a particular policy is good while it is being implemented. Any policy gets implemented with the hope that it is a good one. But look at what happened with our buffer stock storage system! Every serious student of economics and our polity (me included) thought that holding on to such huge buffer stocks is a sheer waste of resources. How wrong we were, is known only now. Post facto.
• That’s why there will be some damage before the situation gets adequate and (hopefully) coordinated policy response from all over the globe.
• It is in this context that you can’t afford to miss today’s debate on this from three experts. Look at it here.
• What a muted response to the short-selling brouhaha?
• The securities lending and borrowing programme and short-selling mechanism for institutions, which were operationalised yesterday did not get any noticeable response.
• Brokers are attributing this lack of response to the lack of clarity about their functioning in addition to higher execution costs of such trades.
• So is short selling at institutional level a still born initiative? I don’t think so. It is too early to write it off. Let’s wait and watch.