29.05.2008

• Oil economics
• Oil subsidy should be giving sleepless nights to the Finance Minister. Crude oil prices held firm at over $130 a barrel, and prices of petrol and diesel scaled new heights at $138 per barrel and $170 per barrel respectively.
• Oil deficit at Rs 2,30,000 crore (projected for 2008-09) is threatening to upset the fiscal balance.
• If at all the FM wants to do something, he may opt for a reduction in customs duty in the wake of rupee depreciation. The customs duty for crude is 5%.
• Though there is a talk of imposing a cess, it will not be able to provide any cushion as the total collection from it could be just Rs 5000 crore.
• In 2007-08, out of the total excise duty collection (revised estimate) of Rs 1,17,266 crore, close to 49% (Rs 57,460 crore) came from petroleum products. In the case of customs, oil contributed about 15% (Rs 12,270 crore) to the total collection of Rs 81,800 crore.
• Natural gas allocation by EGoM
• THE empowered group of ministers (EGoM) is understood to have finalised gas allocations for 2008-09 giving top priority to the fertiliser sector.
• The allocation formula has finalised 5 MMSCMD (Million metric standard cubic meters per day) gas allocation for CGD (City Gas Distribution) projects that would help to keep cities pollution free as per the direction of the Supreme Court.
• It is learnt that for 2008-09, those fertiliser units that are stranded would get priority with a total allocation close to 50 MMSCMD. This is higher than last year’s allocation when fertiliser units got just about 30 MMSCMD of gas. Similarly, only existing gas-based power plants (read no new power plant) would get priority in gas allocation with expected 30 MMSCMD allocation.
• The power ministry had earlier sought allocation of 77 MMSCMD of gas for meeting the existing and upcoming requirements of the sector. The power sector requires 60 MMSCMD of gas to run 13,334 mw of existing gas-based projects at 90% plant load factor (PLF). It requires additional gas for running 1,285 mw of gas-based projects which are ready but are not being commissioned due to shortage of gas. Another 1,002 mw is running on highcost liquid fuel, naphtha and HSD, and this needs to shift to gas to become economical. The proposed allocation of 30 MMSCMD for 2008-09 is even lower than last year’s allocation of about 36 MMSCMD allocation. The PLF of gas-based power plants is already low at about 50%, this could further get affected this year.
• Vitamin in urine boosts crop yield
• Researchers at the University of Agricultural Sciences, Bangalore say that irrigating crops with a dose of human urine helps to boost yield. A two-year project by the university has shown increased yields of banana and maize after the crops were dosed with the excrement.
• AMMOI
• Ayurvedic Medicine Manufacturers Organisation of India
• Gujjar agitation snippets
• Two committees have been set up by the Rajasthan government to assuage the Gujjars so far.
• One is the Justice Chopra committee. This had recommended that granting ST status on Gujjars is a thing which can be done only by the Centre.
• The other is the Ramdas Agarwal committee. This had recommended a Rs 282 crore economic package for five Gujjar inhabited districts.
• An interesting debate on engaging managers to teach at business institutes
• You might have noticed an interesting piece that appeared on this subject sometime back in ET. It is here.
• TT Ram Mohan, whose articles we follow with a bit of religiosity, has joined the debate with Gopalakrishnan, the author of the above referred piece. Very interesting.
• Pieces like these provide fodder for some excellent interview or opinion sessions. Take a look at his piece here.
• Recommend a strong read of both the pieces.
• Arvind Panagaria's very valuable insight into the inflation issue
• By drawing our attention to this table, he makes sit up and think whether the Government is over-reacting to the inflation issue by wielding every weapon that is there its armoury. The government has gone on to deploy every conceivable weapon in its arsenal — cutting import duties, banning exports, appreciating the rupee in the initial phase, raising the cash reserve ratio, suspending futures trade, cutting excise duties, imposing export taxes and threatening price controls — to tame the monster. His argument does make sense. Look at his argument:
• First, do we really know for a fact that even a slight acceleration in inflation from 4-5% range hurts the poor? After all, we experienced much higher rates of inflation during the 1980s and 1990s and yet poverty fell during those decades: high inflation rates were more than matched by even higher rates of increase in the nominal incomes of the poor. While we cannot be sure that the past experience will repeat this time around, the case that recent acceleration in inflation is hurting the poor remains to be made.
• Second, much has been written about asymmetrically larger increases in food prices to bolster the case that inflation poses a serious threat to the poor. For one thing, the focus on food prices confuses the change in a relative price with inflation, which is meant to measure the overall level of prices. But even ignoring this fact, the claim is unsupported by the available data. In April 2008, the WPI for food articles rose 5%, which was less than the 7.4% increase in the WPI for all items. Taking January to April 2008 together, increases in the WPI were 4% for food items and 5.9% for all items. While the prices of some specific food items in some specific locations may have risen asymmetrically, nationally, food “inflation” has been trailing rather than leading the WPI for all items.
• Finally, and indeed most importantly, even accepting the assertion that any acceleration in inflation hurts the poor, are we right to invoke all possible instruments to squash it at first sight? Should we not institute a flexible system of transfers to the poor to protect them against food-price increases so that other policy instruments are left free for deployment at targets for which they are best suited?
• In assessing inflation, we must also recognise that the price levels in the poor countries are known to be lower than that in the rich countries. As per-capita incomes in the poor countries rise towards those in the rich countries, their price levels also rises towards the latter. Therefore, increases in per-capita income growth are expected to bring either an increase in the inflation rate or appreciation of the rupee. Since India has generally resisted appreciation of the rupee, some acceleration in inflation is predicted.
• Know anything about the CDR mechanism of the banking industry?
• The CDR mechanism, an initiative by the Reserve Bank of India (RBI), came into effect in 2002 when the economy was facing a slowdown and the level of bad loans in the banking sector was quite high — in the range of 8-15%. Thus, RBI had asked banks to form a forum were all banks would jointly resolve bad loans on a conceptual basis. Through this mechanism, 165 cases amounting to Rs 83,000 crore were resolved by banks. Of this, 41 companies exited while only 31 cases failed.
• Recently, the CDR cell had sought banks’ permission for its closure on account of slowdown in the cases addressed by the forum. BANK CEOs have shot down the proposal to wind up the Corporate Debt Restructuring (CDR) forum.
• ICICI to make a late entry into pvt banking
• So reads a caption today. ICICI Bank is a private after all; isn't it? What is it doing; if not privately banking? Just kidding.
• Private banking refers to the personalised service provided to elite customers as against mass retail banking.
• A host of foreign banks like BNP Paribas, ABN Amro, Deustche Bank, Citi, HSBC, Merrill Lynch, have been in the segment for the past few years. ICICI is making an entry only now.
• A look at RBI's $ purchases
• Once in a way we should look at graphics to get a clear picture. Look at this. It makes the $ purchases by RBI so clear. Can you relate this with something that we have been monitoring for the last couple of years? It makes the point that RBI's intervention in forex markets is never constant; it will vary depending on the need of the hour. Sounds like a child's discovery? Recall the questions you have been asking me in shoutbox et al., on this subject.
• Indonesia quits OPEC?
• Indonesia will quit the Organisation of the Petroleum Exporting Countries (Opec) because as a net oil importer it is not happy with high global crude prices, its energy minister said on Wednesday. Its status as a net importer means it would benefit from lower oil prices, putting it at odds with other Opec members, who favour higher prices.
• The country, an Opec member since 1962, has seen its influence within the cartel wane as its production declined, even as the producer group gains more global clout with the admission of Angola and the rejoining of Ecuador last year.
• US cracks down on LeT finances
• IN AN action targeted at curbing terror finances, the US has frozen the assets of four leaders of the Pakistan-based terror group Lashkar-e-Toiba. The jihadi outfit has been behind all major terror attacks in India. The US treasury department announced that it had frozen the assets of Muhammad Saeed, the group’s leader; Zaki-ur-Rehman Lakhvi, LeT chief of operations; Haji Muhammad Ashraf, the chief of finance; and Mahmoud Mohammad Ahmed Bahaziq, a main LeT financier.
• This basically means that assets of the four leaders which are under US jurisdiction will be frozen, and US nationals prohibited from engaging in any transaction with the four men who have now been identified by name by the US government. The department did not go into any details of where and how much these assets were worth.
• Indian Railways on top in ferrying passengers
• Riding piggyback on a booming economy, the Indian Railways (IR) has emerged as the topmost rail operator in the world by carrying maximum number of reserved passengers over long distances in 2007, beating even Chinese Railways by a few millions. Even in freight loading, Indian Railways has registered the highest growth in the world during 2007, albeit the United States (US) remains the biggest rail freight market.
• IPL semi-finalists
• Jaipur, Delhi, Mohali and Chennai.