28.08.2010

Politics & the Nation

• Babri Masjid issue will be in the forefront again
• Babri Masjid-Ram Janmabhoomi dispute is set to be in the forefront again as Lucknow bench of the Allahabad HC is likely to pronounce verdict on the Ayodhya title suit in the second week of September.
• The Lucknow bench of the Allahabad high court is expected to pronounce its verdict on the Ayodhya title suit in the second week of September. The government foresees a crisis of sorts whichever way the judgement tilts. It will have major political consequences as votebank politics will take centrestage and could possibly lead to law and order disturbances not just in Uttar Pradesh but across the country.
• The court will be addressing three issues. One, whether there was a temple at the disputed site, prior to 1538. Two, whether the suit filed by the Babri committee in 1961 is barred by limitation. And third, whether Muslims perfected their title through adverse possession.
• Mukesh Ambani on World Economic Forum board
• Mukesh Ambani, on Friday, joined the foundation board of the World Economic Forum (WEF). Others joining the foundation board include French telecom major Alcatel-Lucent’s CEO J Verwaayen and Zhu Min, IMF special adviser and former deputy governor at People’s Bank of China.

Finance & Economy

• While Cairn makes profits, how come ONGC is incurring losses on the Rajasthan oil fields?
• Have patience and read this entire lead story to understand the intricacies.  But for the impatient...
• The root cause of it lies in the production sharing contracts that were drawn up with the then new private sector explorers.  
• As per a 1993 government regulation, PSU companies were meant to undertake the entire royalty burden to woo private companies in India’s oil blocks. For a long time, this did not pinch the Indian companies as the oil blocks had not commenced full operations.  But following the successful operationalisation of the Cairn oil blocks, its royalty obligation from this block alone has shot up to $500 million a year.
• ONGC pays royalty on the revenue earned on crude oil sold from the block. Assuming a global crude oil price of $70 a barrel and an average selling price of $60 a barrel for Cairn crude, the annual royalty payment by ONGC works out to $500 million a year or $40 per barrel with a production of 40 million barrels a year. The cost of producing oil (opex, cess and capex) from this block works out to around $18 a barrel. Add to that the royalty burden which ONGC has to pay of $40 a barrel. It is left with just $2 per barrel as returns as opposed to Cairn’s $42 per barrel.
• That is how while Cairn keeps making profit, ONGC keeps incurring losses.
• Petrol price hike likely
• Petrol may become costlier by 50 to 70 paise next week as state-owned oil companies get ready to exercise their pricing freedom for the first time after the government decontrolled petrol prices on June 26.
• Petrol prices went up by 3.50 a litre with the decontrol, but for further increases oil companies were to devise a transparent and market-linked pricing system.
• Petrol price may go up by 50 paise if oil PSUs take a 15-day average of international prices and up to 70 paise if a one month average is taken.
• The three public sector oil marketing companies (OMCs)—Indian Oil, Bharat Petroleum, and Hindustan Petroleum—will meet to work out a mechanism to peg pump prices of petrol to international prices.
• The pricing mechanism of the three PSUs, which control over 90% of the fuel retail market, will also impact private oil companies—Reliance Industries (RIL), Shell India and Essar Oil.  Private retailers are unhappy with the government’s reluctance to free diesel prices. Petrol pricing freedom alone makes no sense as real business volume comes from diesel sale, pricing for that is still restricted.  Diesel constitutes 40.8% of the total sales of petroleum products in the country.
• Since 2002 private oil companies are free to charge market rates for petrol and diesel but are unable to compete with their public sector counterparts who sell fuel often below cost under government dictate.
• On June 26 the government had announced freeing both petrol and diesel pricing from its control but allowed state-owned oil companies to fix petrol prices only.
• The government continues to control diesel prices sold through pumps of public sector oil companies. As a result, state-owned oil companies are losing about 2.50 on every litre of diesel sold from their pumps.
• Core sector grows 3.9% in July
• Core sector refers to the six infrastructure industries in the IIP figures.  They are: crude oil, petroleum refining, coal, electricity, cement and finished steel.  They have a combined 26.7% weight in the index of industrial production, or IIP, and are considered an advance indicator of industrial activity.
• About India’s gold trading
• Take a look at this graphic that gives us a peek into how the country trades in gold.  Good one.

International

• At 1.6%, US growth loses steam in Q2
• The US economy grew at a 1.6% annual rate in the second quarter, less than previously calculated, as companies reined in inventories and the trade deficit widened.
• Experts said the likelihood of the economy slipping back into a recession is now 33%, up from a 20% chance 12 weeks ago. New York University economist and forecaster Nouriel Roubini, who predicted the financial crisis, said the odds of a return to recession at 40%.
• The trade gap in the second quarter widened to $445 billion, compared with an initial estimate of $425.9 billion, subtracting 3.37 percentage points from growth, the biggest reduction since record-keeping began in 1947. Imports grew at a 32.4% pace, the most since 1984.

Language Lessons

• coy: Adjective
• Affectedly modest or shy especially in a playful or provocative way; Showing marked and often playful or irritating evasiveness or reluctance to make a definite or committing statement; Modestly or warily rejecting approaches or overtures
• imprimatur: Noun
• Formal and explicit approval
• eg: On Thursday, Rahul Gandhi added the Gandhi family’s formidable imprimatur on Mr Ramesh’s move as the Congress party seeks to win back its core constituency of dalits and tribals.
• pilaster: Noun
• A rectangular column that usually projects about a third of its width from the wall to which it is attached
• schist: Noun
• Any metamorphic rock that can be split into thin layers
• scrimp: Verb
• Subsist on a meagre allowance