Tracking India business and economy news

The latest inflation figure has come as a nasty surprise to the economy watchers and has rattled the ruling establishment. In the political season, the authorities now seem too willing to sacrifice the once revered growth story in order to rein on commodity prices.

- Chillibreeze Business Research Team

Government Policy & Infrastructure
Economy
Sector Specific – Telecom
Banking & Finance
Power
Steel
Cement
International
Agriculture

Government policy & Infrastructure

Centre will supply edible oils through ration shops from July

To give respite to common man from bounding inflation, the government will supply edible oil through ration shops. The government said today it would supply edible oils through ration shop at Rs 15 per kg below the imported price from July. The supply of vegetable oils, mainly refined soya and palm oils from ration shops, would begin from next month, a ministry release said.

As many as 15 states have agreed to participate in the scheme which would cost the Centre Rs 1,500 crore. Ration card holders in Andhra Pradesh, Chhattisgarh, Gujarat, Himachal Pradesh, Jammu & Kashmir, Madhya Pradesh, Maharashtra, Meghalaya, Nagaland, Orissa, Rajasthan, Sikkim, Tamil Nadu, Tripura and West Bengal would be able to get edible oils at subsidised rates.

Of the 11 million tonne demand, India’s import dependence for edible oil is 39 per cent. Government- owned MMTC, STC, PEC and Nafed have already contracted import of 1.79 lakh tonne of edible oils, of which, one lakh tonnes have been shipped to Indian ports.

The unprecedented rise in international prices of edible oils in the last two years had affected domestic prices, the release said. The scheme for distribution of edible oils through ration shops would provide relief to the poorer sections, besides ensuring steady availability of oils to these people, it said.

The government also claimed that the increase in the domestic prices of edible oils had been kept low as compared with international prices through a number of steps.

The measures taken include doing away with import duty on crude and slashing it to 7.5 per cent refined palm oils from April 1, 2008.

June 23rd, 2008
Source: Indian Express

RBI to take measures to check inflation: FinMin

Finance Ministry today said it expects RBI to take monetary measures to help tame the inflation, which has soared a 13-year high of 11.05 per cent.

"We expect RBI to take some monetary measures," Finance Secretary D Subba Rao told reporters here.

He said RBI Governor Y V Reddy had detailed discussions with Finance Minister P Chidambaram and later met Prime Minister Manmohan Singh.

However, Rao said that the inflationary pressures are likely to continue for next few months because of base effect.

June 21st, 2008
Source: Business Standard

Govt for social infrastructure in SEZs: Pillai

The government is in the process of framing norms for setting up social infrastructure like hospitals, schools and housing within Special Economic Zones.

The need for social infrastructure within the SEZs is crucial, since it otherwise puts a strain on infrastructure outside the zones, as is happening in Bangalore," Commerce Secretary G K Pillai said at the PHD Chamber seminar.

The SEZ Board of Approval would approve all social infrastructures, he said. "Norms for various types of social infrastructure are being framed," Pillai added.

While the minimum processing area in a zone has been increased to 50 per cent from 35 per cent, the need is being felt for creating adequate social infrastructure like housing for workers, hospitals, recreational facilities and schools within the SEZs.

Pillai further said there is need to set up a representative body of workers living in a SEZ to take care of their civic concerns and rights.

The government is looking into other issues like appointing officials to regulate work in the SEZs and tariff on sale of surplus power from the tax-free enclaves to the Domestic Tariff Area, he added.

There is also provision in the SEZ Act for the government to take over management of the zone where the developer has defaulted in fulfilling the obligations, he said.

Outlining the performance of these zones, he said exports are expected to double to Rs 135,000 crore by end of the current fiscal. In 2007-08, exports from SEZs stood at Rs 66,638 crore, a growth of 92 per cent over 2006-07.

June 21st, 2008
Source: Business Standard

Fertiliser cost welcome nutrient-based pricing policy

The fertiliser industry has welcomed the Centre's approval of nutrient-based pricing regime for all subsidised fertilisers in India to promote balanced use of fertiliser by farmers.

The pricing policy was bound to benefit the industry in a big way as the country was importing sulphur, phosphoric acid, sulphuric acid, ammonia and rock phosphate, the basic raw materials for the industry, fertiliser industry sources said. However, it was a matter of concern that most fertiliser plants were shutting down their operations due to financial crisis, higher cost of production, non-availability of gas to run the plants and delay in subsidy disbursement by the government, the source added.

Indigenous production of DAP and SSP has of late seen a declining trend, which is a worrying factor for the industry. Domestic production of DAP had come down substantially from 4.85 million tonnes (m.t.) in 2006-07 to 4.21 m.t. in 2007-08, while urea production was 20.3 m. t. and 19.86 m. t. during the period, the sources said.

June 19th, 2008
Source: The Hindubusinessline

India plans series of investment pacts

India today signed a bilateral investment promotion and protection agreement (BIPA) with Syria, and is in the process of signing similar pacts with a host of countries.

The pact was signed between External Affairs Minister Pranab Mukherjee and Syrian Minister of Economy Amer Housni Lutfi.

While negotiations with some countries have been concluded, talks with some others are at an advanced stage. Sources say India will sign its 72nd BIPA with Myanmar this month.

"Minister of State for Power Jairam Ramesh will visit Myanmar to sign the agreement," said a senior government official. Bilateral trade between the two countries stands at around $1 billion.

Discussions for similar agreements are also going on with the US and Colombia. Two rounds of talks with the US have ended. The latest talks were held on June 11-13.

"The US wants the most favoured nation and pre-establishment status under which if a US investor suffers a loss in the process of establishing his business in India, he will be compensated through a court of law. However, no agreement has been reached on these issues so far," said the official.

BIPA is aimed at assuring investors that their foreign investments will get fair treatment and legal security.

The agreement is initially valid for ten years and thereafter continues indefinitely till either of the country terminates it. In the event of termination, investments made prior to the move continue to enjoy the provisions of the agreement for at least 15 years.

June 19tht, 2008
Source: Business Standard

Economy

Inflation to dent hiring prospects in India

Surging inflation is expected to dent the hiring prospects in India, the country rated as the most optimistic nation for employment globally, industry experts say.

"Due to rising inflation there would be negative impact on financial sector, manufacturing sector and the overall job market," global staffing services firm Manpower India Managing Director Naresh Malhan said.

Moreover, any hike in salaries would not be that much beneficial for employees as the increase would largely be eroded by the rising prices of commonly used items, experts say.

Manpower in its latest employment outlook survey had rated India as the most optimistic nation for hiring in the world.

Industry experts believe high crude oil prices and rising inflation levels would reduce growth rates in the country and therefore would lead to less hiring than would otherwise be the case.

The continuous rise in inflation has forced the banks to increase interest rates which analyst feel could further add to cost factor. Most of the banks have the prime lending rates pegged at around 13 per cent.

After peaking at $139.89 per barrel level, oil prices at the New York Mercantile Exchange eased somewhat and were hovering around $134 a barrel.

The global economic slowdown had also a negative impact on hiring prospects. But experts term it as a lesser evil when compared with crude oil prices and inflation.

Though the US is a significant trading partner of India, much of the growth in the country comes from the home market, and this will continue to grow. Furthermore, during recession, the field of business process outsourcing will be a more compelling for US companies to reduce their costs by exporting work to the sub continent.

Hence, concerns regarding US recession might not be all that bad for India, as economists hold the view that any slowdown in the US economy would reduce India's growth by no more than 1 per cent.

June 23rd, 2008
Source: ndtv.com

Attrition a major risk to cos security

Companies are facing security risks due to high attrition rate fuelled by expanding job opportunities in the country, according to a survey.

The increasing attrition rate is a serious threat to information security in corporate world and there is a lack of awareness among the top executives about it, said a survey by Mahindra Special Services Group (MSSG).

The attitude of the senior executives towards the importance of security risk management is somewhat like that of the general populace to climate change. It is within the 'circle of concern' but not the 'circle of influence' yet, it said.

"IT security in big Indian companies is being taken care of but not the information security. There is little or no infrastructure for information security," Mahindra Special Services Group CEO Raghu Raman told PTI.

Echoing similar sentiments, Hero Honda Motor Chief Information Officer Vijay Sethi said attrition is a major threat to information security.

"While it is difficult to put a figure on percentage of business loss, this is more in terms of tacit knowledge and less in data as tacit knowledge is what most companies do not capture fully — and it does take time and energy to recreate that knowledge and we may not be able to recreate fully many times," Sethi said.

A recent Assocham study had revealed that services sector in India is witnessing an attrition rate of 40 per cent annually, while another survey found out an attrition rate of 30-35 per cent in the pharma industry. Attrition rate in manufacturing sector has crossed 20 per cent mark.

There is a reasonable amount of confusion in terms of who is ultimately responsible for 'overall corporate security' — the CEO, CIO or the board, the survey said.

June 22nd, 2008
Source: Business Standard

Inflation hits 13-yr high; loans to get costlier

As feared, inflation has surged to double digits, and a reversal is unlikely to happen soon.

Interest rates are set to go up again and a further slowing of the economy looks imminent, as will be some tough measures from the government and the country’s central bank.

Experts said the inflation rate could remain in double digits for several months, as higher oil prices cascade through other such sectors as transportation. According to data released on Friday, the wholesale price-based inflation rate touched a 13-year high of 11.05 per cent in the week ended June 7, driven by a steep hike in oil prices ordered by the government earlier this month.

Experts said the inflation rate could remain in double digits for several months, as higher oil prices cascade through other such sectors as transportation.

“These are indeed very difficult times,” Finance Minister P Chidambaram said. “The government is aware of the difficulties… we need to look at measures on both demand and supply sides.”

Shortly thereafter, the government announced subsidised sale of edible oil through ration stores across at least 15 states.

Still, household budgets will be under pressure, and for millions of home loan borrowers, the pinch will only get worse as their loans get costlier to service.

Most bankers expect the Reserve Bank India to increase its key lending rate ahead of the July 29 review of the credit policy, and some said the hike would be more than expected. Earlier this month the RBI announced a surprise hike, from 7.75 per cent to 8 per cent, in the rate at which it lends to commercial banks in the short term.

June 20th, 2008
Source: Hindustan Times

Higher TDS mop-up lifts direct tax receipts 71% in April-May

Aided by higher tax deduction at source (TDS) collections arising from better tax administration and widening tax payer base, the Centre’s net direct tax collections recorded a 71.28 per cent increase during the first two months of the current fiscal to Rs 22,840 crore against Rs 13,335 crore in the same period last year.

Personal income-tax (including fringe benefit tax, securities transaction tax and banking cash transaction tax) grew 73.05 per cent in April-May 2008 to Rs 14,690 crore (Rs 8,489 crore). Corporate tax collections during the first two months of the current fiscal grew 68.05 per cent to Rs 8,126 crore (Rs 4,835 crore).

The UPA Government’s strategy of moderate and stable direct tax rates has paid rich dividends in the last four years, especially in terms of better compliance.

The tax payer base has increased from 3.08 crore in 2004-05 to 3.27 crore in 2007-08. The high rates of economic growth have also helped and the revenue department is looking to raise about Rs 4 lakh crore from direct taxes this fiscal.

The robust collection performance in April-May 2008 has come in the backdrop of Budget 2008-09 announcements on personal income-tax, when the threshold limit of exemption was hiked to Rs 1.5 lakh for all assessees. The 71.28 per cent increase in net direct tax collections has been achieved despite larger refund payouts at Rs 9,014 crore in the first two months of the current fiscal, a CBDT official said.

June 19th, 2008
Source: The Hindubusinessline

Pvt banks workforce up by 40%, public banks by 2%

Average employee strength of Indian private sector banks has increased by 40 per cent compared to the minimal 2.75 per cent by public sector banks, in the last fiscal, according to an Assocham study.

The Assocham study on 'Workforce Expansion in Banking Sector' also said in FY 2007-08 the employee cost of private banks has sharply gone up by 50 per cent, while public sector banks witnessed only meagre rise of 2 per cent in their staff expenses.

"Consistent increase in the workforce of private banks is a very positive development, in both respects of employment generation and branch expansion," Assocham President Sajjan Jindal said in a statement. The workforce is growing fast owing to rapid branch expansion, he said.

Axis Bank has recorded the highest growth of 52 per cent in its workforce, followed by Kotak Mahindra (51 per cent), HDFC Bank (44.35 per cent) and ICICI Bank (31.27 per cent), the study said.

Axis Bank also topped the chart by registering a growth of 76 per cent in its employee cost in the last fiscal, against 59 per cent in the corresponding period of the previous year, it said.

However, public sector banks exhibited moderate growth in its staff expenses. In the last financial year, growth in employee cost has been quite low. PSU banks have recorded a rise of 1.89 per cent against 2.08 per cent in 2006-07, it added.

State Bank of India, Dena Bank and Union Bank of India reported a decline of 1.85 per cent, 3.44 per cent and 3.25 per cent respectively in their employee expenses the last fiscal. The study is based on the data collected from 16 public sector banks and eight private sector banks.

June 19th, 2008
Source: Business Standard

Natural gas production to jump two-fold by 2011-12

India's natural gas production will more than double to 170 million standard cubic meters per day by 2011-12 after fields such as Reliance Industries' eastern offshore KG-D6 reach peak output.

In 2007-08, domestic production at 79.40 mmscmd and 31.50 mmscmd from import LNG met some 60 per cent of the demand, according to latest projections made by the Petroleum Ministry.

State-run Oil and Natural Gas Corp (ONGC) will produce 47.06 mmscmd of gas this fiscal, almost unchanged from 47.19 mmscmd of 2007-08. This output will rise to 51.65 mmscmd by 2011-12, while Oil India Ltd will contribute 10 mmscmd.

Reliance Industries' KG-D6 will start producing this year at an initial rate of 40 mmscmd, rising to 60 mmscmd in 2009-10 and to 80 mmscmd in 2011-12. When KG-D6 hits peak, the share of fuel produced by fields operated by private sector firms would touch 102.57 mmscmd (in 2011-12).

The projections anticipate an additional 2 mmscmd output from Mahanadi basin NEC-25 field of Reliance in 2011-12 and 4.5 mmscmd from Gujarat State Petroleum Corp's Krishna Godavari basin field.

India's import of liquefied natural gas (LNG) is also slated to more than double to 23.25 million tons by 2011-12 from 9 million tons in 2007-08 after Dabhol, Kochi and Mangalore terminals become operational.

Petronet LNG's Dahej terminal will see capacity doubling to almost 12 million tons and Shell's Hazira terminal is seen operating at 2.5 million tons, unchanged from present times. Dabhol may import 5 million tons, Kochi 2.5 and Mangalore 1.25 million tons, the projections stated.

Together with 81.38 mmscmd of LNG, the country's total gas availability will touch 252.09 mmscmd in 2011-12 from 110.9 mmscmd now.

June 19th, 2008
Source: Economic Times

India to see largest growth in foreign investment

India is likely to register the largest growth in attracting foreign investment worldwide, and is poised to become the global leader for investment in manufacturing, according to a report by international consultancy KPMG released on Thursday.

“Respondents expect India to do particularly well in industrial products, where it will displace the US to take second place behind China, and in manufacturing, where it is expected to lead the world in terms of investment, with 25 per cent of corporates expecting to invest five years from now,” the report said.

“India will move from seventh to fourth in the investment league table, overtaking the UK, Germany and France,” it said.

In terms of influence, India is expected to achieve the remarkable feat of overtaking Japan, France, Russia and Brazil in the ranks of the most influential countries, with rising influence in all sectors, particularly business and consumer services, IT, telecom and manufacturing.

The report paints an optimistic outlook for India, saying its share of international corporate investment is expected to rise by 8 percent to 18 percent over the next five years, the largest increase recorded in this survey.

“By contrast with the other BRIC countries, in the next year 64 percent of the investment into India is expected to come from new entrants to the country,” the report said.

According to the survey, the US currently leads by a long way, with 27 percent of investors planning a significant investment in the country in the next 12 months.

China comes next, with 17 per cent, followed by the UK with 14 percent, Germany with 13 per cent, Russia with 12 per cent and India at seventh place with a 10 per cent share.

Indian business expects the bulk of its investment in year 2008-09 to go to the US (35 percent) with 15 percent expecting to invest in West Asian countries and 10 percent in Singapore and Hong Kong.

“It is clear that India has the potential to play an even more influencing role in the flow of capital and it's a great opportunity to further improve the economic and fiscal climate," Sudhir Kapadia, head of KPMG's tax and regulatory services in India said

June 19th, 2008
Source: ndtv.com

Sector Specific

Telecom

RCom, MTN may clinch deal in 1st week of July

Anil Ambani-led Reliance Communications and South Africa's MTN are likely to finalise a deal by the first week of July, with the former expected to hold about 40 per cent stake in the estimated $70 billion merged entity.

According to sources close to the development, both companies have been engaged in exclusive talks since the last week of May. A final shape to the deal may surface at the end of the 45-day exclusivity agreement that ends on July 8.

Asked about the details of the merged entity, sources said final details are still being worked out, but hinted that Anil Ambani would end up holding between 34 to 40 per cent stake in the merged entity in which Reliance Communications would become MTN's subsidiary.

MTN is also understood to have taken a legal opinion on the issue raised by elder Ambani sibling Mukesh, who had claimed right of first refusal in case Reliance Communications sells majority stake in favour of MTN.

The respective teams from MTN and Reliance Communications have travelled to India and South Africa for carrying out due diligence of the companies, sources said, adding that the negotiations so far have been progressing well.

Earlier in a letter to MTN, RIL had warned that it would take legal recourse and claim damages if MTN became party to violation of the right of first refusal.

Sources said a team comprising over six executives of MTN had visited Reliance Communications headquarter in Mumbai about 10 days ago as part of the due diligence.

Reliance Communications shares is ruling around Rs 587.90, down by Rs 3.40 today.

The MTN Group had posted a 42 per cent increase in revenues to 73.1 billion rand for the 12-month period ended December 31, 2007 from 51.6 billion rand a year-ago.

The Group had also declared a dividend of 136 cents per share, which was the highest dividend ever by the Group.

June 23rd, 2008
Source: Economic Times

10,000 mobile phones sold in India every hour

Every hour as many as 10,000 mobile phones are sold in India, thanks to the ever-increasing mobile services market and availability of entry level handsets that has brought phones well within everyone's reach, an IDC India report said.

India has shipped close to 85 million mobile handsets between April 2007 and March 2008, compared to fewer than 66 million units shipped in the previous fiscal, registering a year-on-year growth of around 29 per cent.

In the last quarter of the financial year FY 2008, country's shipment has touched 22.3 million which amounts to around 10,000 phones every hour, stated IDC which tracks the Indian telecom industry.

It is up 24.4 per cent from 17.9 million units in the corresponding period of the previous year.

IDC India Country Manager Kapil Dev Singh said, "This growth comes on the back of a burgeoning mobile services market and lower entry barriers across various customer categories, as average selling values (ASVs) of handsets continue to fall in the wake of a highly competitive landscape populated by close to 25 vendors."

The year also saw growing number of high-end phones being shipped to India as EDGE and WCDMA-enabled mobile phones contributed 15.4 per cent and 3.1 per cent of the total mobile phone shipments in FY 2008 compared to 7.4 per cent and 1.2 per cent respectively, in 2006-07.

In India, overall, Finnish handset manufacturer Nokia has the largest market share, of 52.8 per cent, followed by LG at 10.2 per cent and Samsung at 8.3 per cent in terms of units shipped during the quarter ended March 31, 2008, IDC said.

June 19th, 2008
Source: ndtv.com

Power

Maharashtra power situation may improve with Ratnagiri Gas supply

Power supply in Maharashtra has improved and it is expected to get even get better with the additional 500 MW being supplied from Ratnagiri Gas and Power Pvt Ltd, Dabhol, by September, said Dr A.B. Pandey, Managing Director of Maharashtra State Electricity Distribution Company Ltd.

Since restarting operations in May 2006, the plant has never reached its full capacity of 2,150 MW due to inadequate supply of natural gas and technical problems with its turbines.

In the last two years, the plant has only been able to scale its power from 100 MW to 900 MW. It sells power to the State utility at Rs 3.10 a unit.

It led to reduced load shedding, especially during summer months.

Out of 30,000 villages in the State, 16,000 are covered under feeder separation program.

In many areas, load shedding hours has reduced by 50 per cent due to better load management, he said.

Additional 500 MW from Paras and Parli thermal power plant and adherence to grid discipline by northern States has also reduced blackouts and load shedding.

According to figures available with the utility, the power demand in May had reached its peak at 14,192 MW and a shortfall of 3,895 MW, while the average power demand in May 2007 was 14,819 MW with a shortfall of 4,642 MW. Due to better demand side management, shortfall has been reduced by 747 MW.

However, with the power demand increasing on an average by 10 per cent, the current gains could soon be wiped off. Dr Pandey added, “What will happen next summer is still an open ended question,”

June 22nd, 2008
Source: The Hindubusinessline

Steel

Fuel price hike drives up steel

Though there was an upward trend visible in the main spot markets across the country since the beginning of this month, the increase became steeper after fuel price hike was announced on June 5.

Prices of various products went up in the range of Rs 2,000 per tonne to Rs 5,000 per tonne. In percentage terms, the price hike has been in the range of 5 to 11 per cent.

According to industry sources, during the first few days of the month, the market was almost flat.

After the diesel price hike on June 5, prices started moving up.

Prices rose marginally in the first three days and on June 9, pig iron was Rs 34,500 per tonne (Rs 34,000 on June 2), rounds were quoted at Rs 44,500 per tonne (Rs 43,500), tor steel sold at Rs 48,300 (Rs 47,300), while hot rolled coil (HRC) was at Rs 47,200 per tonne (Rs 46,000).

But then the price spurted during the second week and hot rolled coil prices surged ahead to cross the Rs 50,000-mark for the first time in 2008 with basic 2 mm hot rolled coil being quoted at Rs 51,000 per tonne on June 16 in Delhi, industry sources pointed out.

June 24th, 2008
Source: The Hindubusinessline

Cement

Burning waste to make cement

ACC uses cow dung, old shampoo, soap, paint sludge and even municipal waste in five plants.

Cow dung, old shampoo, soap, paint sludge and even municipal waste are fed into furnaces that burn lime into cement at the plants of India's leading cement manufacturer, ACC.

ACC ,which recently won the Golden Peacock award set up by the UK-based World Environment Foundation, for eco-innovation has procured more than 200,000 tonnes of waste including some hazardous ones to make cement.

The company, which released its sustainability report recently, has used waste as a substitute for hydrocarbon fuels at five of its 11 cement plants in the country.

"We have a retinue of 100 environmental and chemical engineers to handle the waste that we have been using as a substitute for the traditional fuels," says Nand Kumar, who heads the corporate social responsibility division of ACC.

The company, which manufactures about 22.4 million tonnes of cement every year, has been using biomass waste as alternative fuel. However, three years back, the company realised the potential of the waste and launched a full-fledged business division for it.

Companies pay ACC for lifting their waste, as disposing of these through incinerators or at the landfills would be a costlier proposition. At the cement plant, the waste gets consumed in a complex process.

Although India produces nearly 8 to 9 million tonnes of hazardous and close to 100 million tonnes of non-hazardous waste each year, there are only a handful of business ventures that have cashed in on this resource so far.

June 23rd, 2008
Source: Business Standard

Money and banking

Small savings collections take a dip

The overall collection in various small savings schemes (SSS) has declined for the financial year ended March 31, 2008. This fall is despite reintroduction of 5% bonus with effect from December 8, 2007 for maintaining their accounts with post offices under the monthly income scheme (MIS).

According to an official of the National Savings Institute, Nagpur, total collection in various SSS stood at Rs 1,26,741.99 crore as of March 31, 2008 against Rs 1,54,417.29 crore in 2006-07 reporting a short of Rs 27,675.30 crore. Even states like Gujarat, Maharashtra and West Bengal, which used to top the list in mobilising small saving collections through post offices, too remarkably lagged in mobilisation of funds under various saving schemes.

While Gujarat could mobilise total of Rs 11,275.94 crore during 2007-08 against total collection of Rs 14,156.87 crore during 2006-07, Maharashtra collected a total of Rs 12,436.13 crore during the period under review compared to Rs 16,034.39 crore in 2006-07 and West Bengal could mobilise only Rs 15,582.01 crore during the period under review against Rs 19,390.28 crore in 2006-07.

However, army jawans and officers did not bother about withdrawal or reintroduction of bonus under MIS as the total mobilisation under the army post offices rose to Rs 297.58 crore during the period under review against Rs 264.11 crore in 2006-07.

Similarly, Union territory of Diu and Daman too brightened their prospects by reporting a little higher amount of Rs 413.91 crore during the period under review as against Rs 407.43 crore in 2006-07. Arunachal Pradesh a north eastern state too reported a higher collection as the state mobilised a total of Rs 88.74 crore during 2007-08 as against Rs 88.61 crore.

The officials in Gujarat postal circle said the decline was expected as the rate of interest on deposits offered by banks in both public sector and private sector and also co-operative banks was higher than that prevailing on small saving scheme. At the same time, small investors preferred to invest their fund in stock market to get higher return on their investment.

It may be recalled that the Centre had earlier discontinued 10% bonus payable on maturity on MIS and reintroduced 50% incentive after a long gap which, had its own impact on mobilisation of small saving schemes.

June 19th, 2008
Source: Economic Times

International

Jeddah meet: India calls for oil price band

Battling oil-induced runaway inflation, India today mooted a "price band mechanism" to calm soaring crude prices as the world's top oil producer Saudi Arabia joined it in blasting oil speculators for the surge.

As Finance Minister P Chidambaram told oil producing countries not to remain a "passive spectator of speculation", Saudi King Abdullah launched an offensive against oil "speculators" saying the "abhorrent acts" by a group of elements were responsible for the quick and unjustified increase in petroleum prices in the recent times.

Chidambaram, accompanying Petroleum Minister Murli Deora as part of the Indian delegation to an emergency meeting of the world's energy ministers, said the only way forward for both the producers and consumers is to find a common ground.

"We have a proposal that will instill mutual confidence. We propose that we adopt a price band mechanism," Chidambaram said.

Referring to questions being raised about the fundamentals of the oil industry, he said there is a need for the industry to reassert its leadership in price formation and not remain a passive spectator of speculation and paper trading in oil.

Rejecting suggestions that rising demand was leading to a spurt in crude prices, the finance minister said "the causes for the current pandemonium in oil prices lie elsewhere: in unregulated over-the-counter markets and future trading in oil".

Chidambaram urged the oil producing and consuming nations to wrest control over oil trading from the hands of the speculators.

"The global hydrocarbon community must address this situation through appropriate supply side responses and calm the oil markets," he said

June 23rd, 2008
Source: Business Standard

Agriculture

Sugar output seen below 265 lakh tonnes

The country’s sugar production is likely to end up a shade below 265 lakh tonnes (lt) in current 2007-08 crushing season (October-September).

Mills closed

According to official estimates, total output in the season up to May 31 amounted to 254.02 lt, down from the 271.09 lt for the corresponding period of 2006-07. Mills have closed down for the season in virtually all States, barring Tamil Nadu (TN), Maharashtra and Karnataka.

Industry sources say that Maharashtra’s final production will be about 91 lt (against 88.5 lt till May 31), while these would be 30 lt for Karnataka and 21 lt for TN. “At the most, there will be an extra 10 lt produced during the four remaining months of the season, which would take overall output in 2007-08 to just below 265 lt,” they pointed out.

The current season began with stocks of 110 lt, based on the Excise Department’s assessment of sugar lying with mills (though the trade puts this number lower by at least 10 lt). Taking production at 265 lt, officially estimated domestic consumption of 210 lt (which is again 10 lt below what the trade believes it would be) and exports of 40 lt, the season will end with stocks of 125 lt. The trade’s figure would be 105 lt or less.

The real problem, however, is in estimating the likely output in the ensuing 2008-09 season from October 1. There is unanimity over production being lower, but not on how much lower. Mr. Sanjay Tapriya, Director (Finance) at Simbhaoli Sugars Ltd, feels that production in Uttar Pradesh alone will be 10 lt or more lower than the current season’s 73 lt.

The Managing Director of the Maharashtra State Cooperative Sugar Factories’ Federation, Mr. Prakash Naiknavare, projects sugar output in his State for 2008-09 at 70 lt – a drop of over 20 lt. “We would be able to crush only 610 lt of cane, which at 11.5 per cent recovery, gives slightly above 70 lt”, he noted.

With the two leading States producing 30 lt less and others put together registering another 10 lt drop, there is likelihood of sugar output in the coming season falling to 220-230 lt, which is around the level of anticipated domestic consumption. “Even after accounting for the opening stocks, there would not be much surplus left for exports. The country could even turn importer in 2009-10”, the sources said.

But all these projections are always liable to change. For example, Maharashtra was initially expected to produce only around 85 lt in the current season because of less cane crushed by mills. “We have crushed only 762 lt, compared to last season’s 798.23 lt. However, the average sugar recovery, at 11.93 per cent, has turned out to be way above the 11.39 per cent. So, we will e end up producing more or less the same quantity of sugar as in 2006-07”, Mr. Naiknavare said.

June 19th, 2008
Source: The Hindubusinessline