15.05.2008

· Non-NSG nations on fuel radar

o Energy-hungry India is now tapping non-NSG (nuclear suppliers’ group) members, including Namibia and Niger, to explore possibilities of importing fuel for its nuclear plants. This comes even as the government tries to bring on board its Left allies on the Indo-US nuclear deal. At least two units, expected to be commissioned within the next few months, may have to wait for fuel linkages if fresh supplies for uranium are not struck soon.

o The country’s existing units are running on a low plant load factor (PLF) of around 50%. With India having resources to feed only about 10,000 MW of nuclear capacity, new sources of fuel have become important.

· Postal department’s land donated; can’t be put to other uses

o THE government’s plan to commercially exploit postal department’s real estate has hit a roadblock as several interest groups have raised objections to commercial utilisation of the land. Much of the land in possession of India Post was donated to the postal department and such land cannot be utilised for purposes other than the organisation’s core business of postal services, they have argued.

o Optimum commercial utilisation of the land is expected to turn India Post into a financially strong organisation. The department is running into huge losses due to subsidised mails as user charges cover only 78% of its cash costs.

· Vizhinjam deep water project finally awarded

o Kondapalli Power has bagged the project. The Rs 5340 crore project would be taken up in three phases.

o The project will have a capacity of 6.5 million twenty-foot equivalent units (TEUs). The first phase of the project with a capacity of 1.8 million TEUs annually, is expected to be over in about five years and will require an investment of Rs 2,400 crore.

o The Vizhinjam port is projected to be able to cater to container vessels up to 8,000 TEU size in the first phase and 10,000-12,000 TEU sizes in the second and third phases respectively.

· Alternative to LIBOR

o Wasn’t it just yesterday that we noted about LIBOR being inaccurate and there being calls for its revamp?

o New York based ICAP, the biggest broker of transactions between lenders, is trying to come out with an alternative to LIBOR. But its success seems to be doubtful because so many securities and loans are tied to LIBOR.

o ICAP calls its alternative to LIBOR as NYFR – New York Funding Rate. This will be based on an anonymous daily survey of at least 24 banks. ICAP will ask participants each morning to estimate the cost of funding for one and three month loans to a ‘representative’ bank. NYFR would be calculated using the quotes of the middle half of that group.

o In the light of the fact that international banks have so far reported $323 bn losses and write-downs on account of the credit turmoil, banks which were participants in the LIBOR determination have reportedly been submitting incorrect information to BBA, the entity which calculates LIBOR everyday. Banks have resorted to submitting incorrect information with a view to prevent their borrowing costs from escalating.

· Why is that rising oil prices will not be able to derail or slow down the growth of the Indian economy?

o Writing perhaps after a long time, TT Ram Mohan comes up with some cogent reasoning for this.

o We need to understand first why oil prices are rising when global economy is slowing down, before we can think about the question.

o For one, 95% of the growth in demand for oil since 2003 has come from parts of the global economy, such as China and India, that are far less efficient in the use of oil than the developed economies.

o Two, there is a huge increase in oil consumption on account of an explosion in the use of private transport in developing economies.

o Three, oil is priced in US dollars. The dollar is depreciated by 25% in real effective terms since 2002. This renders oil cheaper in non-dollar regions and pushes up demand, which causes oil prices to rise.

o Four, a falling dollar reduces returns in dollar-denominated financial assets. This causes a switch to commodities as an investment class. Speculation reinforces the effects of supply-demand factors.

o So, will all these factors result in oil prices zooming to $200 per barrel as predicted by some doomsayers? Hardly likely, he avers. This is because the imbalance between global supply and demand remains modest – excess demand was a mere 0.2 mn barrels a day in 2007 or 0.2% of total supply. In commodities even small imbalances can cause huge price swings. And that is what is happening in oil. These will remain mere temporary spikes. (Is it really? I have my fingers crossed on this. I suspect that the oil cartel will not; or cannot help easing of the oil prices by increasing production now or in future. The feeling is that there is an increase in demand from all quarters for oil. Till the time this is perceived as not so huge or incorrect, oil prices will keep soaring.)

o The dynamics underlying Indian growth are qualitatively different from what they were in the 1990s. While in the nineties it was investment driven by anticipated demand; today, it is a response to pent-up demand. Savings and investment rates are very high and many segments of the Indian economy are globally competitive.

· Have I become indifferent to terrorism?

o Looks like so; isn’t it? Even a couple of days after the Jaipur blasts, which killed more than 90 people, why is that we are not talking about them in our blog? Not because we have any less concern for the safety and security of the people or our country. The only way we can teach a lesson to the mad people called terrorists is to get on with our job as usual. Whatever they do or don’t, can’t deter us from getting on with our lives. Once this message is strongly sent across to them, they will realize that their antics are futile and a waste of effort.

· Global piracy rates

o Are reportedly up by 3% to 38%.

· China growing giant vegetables!

o Football-sized tomatoes, carrot-sized chillies and pumpkins that look like huge round rocks are what Chinese are growing to feed them and the hungry around the world.

o The massive crops are growing from the seeds which were fired into the space in China’s rockets, where they orbited the Earth for two weeks. Once they returned they were cultivated in hothouses in Guandong Academy of Agricultural Sciences, producing really monstrous specimens.

o The 21 lb (10 kg) tomatoes, nine-inch chillies, 15-stone pumpkins and enormous watermelons can feed many more than their smaller cousins and may have more nutrients, scientists were quoted as saying.

o The communist country has been experimenting with space plants since the 1980s. Desperate to find new ways of feeding its 1.3 billion people, China launched 2,000 seeds in the most recent batch in 2006 on the Shijian 8 satellite.