Ministers To Meet As Rising Prices Pinch

NEW DELHI: A panel of leading Indian ministers which tracks prices in Asia's third-largest economy will meet on Monday to debate ways to curb fast rising prices of essential commodities after inflation surged to a 14-month high. A senior government official, who did not wish to be identified, said that the meeting would take place at Prime Minister Manmohan Singh's residence.

"Yes, the meeting is scheduled for 8.00 p.m. (1430G) in the evening," the official said. Data released on Friday showed annual wholesale price inflation -- the most widely watched measure -- at 6.68 percent in the 12 months to March 15, sharply up from the previous week, largely driven by foods and manufactured products.

That put the reading well above 5 percent, near which the central bank wants to contain it in this fiscal year, which ends of Monday. The ruling coalition's communist allies on Sunday set a deadline for the government to initiate steps to bring down prices or face protests, newspapers said. "After April 15, we will launch a nationwide agitation on price rise in consultation with other parties which would want to join us on the issue," Communist Party of India (Marxist) leader Sitaram Yechury was quoted as saying by the Hindustan Times.

The left party said the government must cut excise and customs duties on crude oil and reduce retail prices of petrol and diesel, which were increased by about 4 percent in February. The government -- which must face the electorate in general elections by May 2009 at the latest -- has taken several fiscal steps in recent days to curb price pressures.

They include cuts in import duty on palm and other edible oils, a ban on exports of edible oil, withdrawal of tax refund schemes for steel and cement, allowing duty free imports of rice and an increase in the floor price for exports of non-basmati rice.

Trade Minister Kamal Nath said on Friday the government was trying to boost supplies of key commodities to check prices. Analysts expect inflation to remain above the central bank's comfort level for the next few months, and say with polls due within a year policymakers have fewer options to bring it down.

"From a political perspective, food inflation matters more than non-food inflation to voters and the government is likely to continue resorting to fiscal measures, including increased subsidies to check food inflation," Rajeev Malik, analyst at JP Morgan, wrote in a recent research report.

Finance Minister Palaniappan Chidambaram has said the government was determined to take all measures including fiscal, monetary and supply side moves, to moderate inflation and was ready to accept lower growth to curb prices.

Food Corp Buys 100,000 Tonnes Of New Season Wheat

NEW DELHI: Food Corporation of India, the country's main grain procurement agency, has bought 100,000 tonnes of new season wheat from local farmers, its chairman said on Monday.

"We will have 5.5 million tonnes of wheat and 22 million tonnes of rice on April 1, taking overall grain stocks to 27.5 million tonnes," Alok Sinha said.

Sinha said in an interview last week that his agency had started buying wheat two weeks earlier than usual this year and was confident it would bag 15 million tonnes in 2008, a target which if met could eliminate the need for major imports.

States Spend More On Development As Revenues Rise

The success on the fiscal consolidation front over the past few years has prompted several state governments to now embark on more spending, including on large infrastructure projects, to help keep the growth engine humming.

Many states are now loosening their purse strings to launch development projects, given the comfort of robust revenues fuelled by high economic growth and higher transfers from the Centre.

During the past two years ending FY08, the development expenditure of the state government has expanded at a compounded growth annual rate (CAGR) of 19%.

This is in sharp contrast to the phase in 2003-06, when their aggregate expenditure, including development expenditure, stagnated. States are now investing more in highways, building roads, irrigation, telecommunication, urban development and housing.

States appear to have shed painful memories of a cut back on spending, after their finances were hurt following the implementation of the recommendations of the Fifth Pay Commission. That period coincided with a slowdown, which further compounded the problems of state governments.

In FY08, all state government put together are expected to spend a total of over Rs 4.68 lakh crore on development projects, 42% more than the corresponding amount in FY06. The amount accounted for 61% of their aggregate expenditure up from 52% in FY05, according to data provided by the Reserve Bank of India.

Five years ago, state governments’ deteriorating fiscal conditions were a major cause for concern, with the burden of higher salaries widening their fiscal deficits. Pushed to a corner, states governments were forced to prune their expenditure. The easy way out was to slash development expenses, which was reflected in stagnant expenditure.

The improvement in the finances of states, especially on the revenue account, will provide the fiscal space for an increase in development expenditure. Spending on sectors such as education, irrigation and transport are set to go up.

Education, which accounts for more than one-fifth of total development expenditure, has already recorded a CAGR of 14% during FY05-08. Irrigation, which has the second largest share at 12%, witnessed a rise of 20% during FY05-08. Transport is another sector to receive higher attention as spending has growth at CAGR of 28% during FY05-08.

Apart from these traditional sectors, urban development, social security and welfare of SC/STs have drawn the attention of state governments, having witnessed a substantial increase in last year’s budget. However, there has been hardly any increase in energy sector spending.

Expenditure on energy recorded the lowest CAGR of 10% during FY05-08. It remains to be seen whether the trend will continue. The mounting pressure to follow the Centre in announcing a pay hike to employees, the slowdown in the economy, which could have a knock-on effect on revenues, may threaten to spoil the party.

Market Sentiment Points To Imminent Hike In CRR

MUMBAI: Spiralling prices at the close of the financial year have turned out to be bad news for bond markets. Reacting sharply to the annual inflation figure rising to 6.68% levels, prices of government bonds dipped to three-month lows.

The yield on the benchmark paper, the 7.99% bond maturing in 2017, rose to 7.89% during the day. The yield ended the day at 7.91%, well above Thursday’s 7.78% close, and its highest close since November 30, 2007.

Going forward, yields are expected to breach the 8% mark in the near term given the finance minister indicated that RBI would take measures to curb inflation. This has triggered widespread speculation about a possible hike in the cash reserve ratio (CRR). Yields could also come under pressure in April once the government borrowing programme kicks in.

RBI deputy governor Rakesh Mohan told mediapersons in Ahmedabad the central bank aims to contain inflation at 5%. The statements of the finance minister coupled with the response of RBI deputy governor has led to expectations that RBI may announce tightening of measures ahead of its monetary policy scheduled for April-end.


Standard Chartered Bank head (fixed income trading) Manoj Swain said, “Inflation has zoomed past well ahead of bond traders’ estimates. It is certainly way out of RBI’s comfort zone. This would surely make a case for tightening the monetary stance of the central bank. The rising price levels would prompt RBI to keep cash conditions on a leash till the annual policy review is announced on April 29.”

Volumes in the government bond market were seen dwindling for the past week as traders were wary of a rate action from RBI. The banking system is also reeling under the impact of a severe cash crunch. On Friday, banks borrowed Rs 20,000 crore from the central bank at the daily repo window.

ICICI Bank chief economist Samiran Chakraborty said, “Rising price levels is not an India-specific phenomenon. It has been a global trend, which calls for policy action on the fiscal and trade front in India. The task before the central bank is to prevent the rising price levels from raising inflationary expectations through its monetary policy action.”

In its latest report on market outlook, JP Morgan has forecast the central bank is likely to favour tightening money market liquidity over a rate hike and outsized currency appreciation. Similarly, Goldman Sachs, in its weekly report, brushed aside all hopes of a rate cut.

“The spike in inflation removes nearly all possibilities of a rate cut and, indeed, has increased the probability of a rate hike. However, we think RBI will not hike rates in its next meeting on April 29 as demand is slowing, credit growth moderating and the run-up in inflation is more supply side- and global commodity-driven,” the report added.

Inflation Inferno: We Are The World

NEW DELHI: Consumers in India are not the only ones who have to pay more for essentials such as food, housing and energy. Rather, Indian consumers appear to be relatively protected from the impact of spiralling prices of food, energy and commodities compared with their counterparts in other emerging nations such as China and Russia.

In China, the consumer price index (CPI) rose 8.7% in February 2008 compared with 2.7% a year ago due to higher prices of food. Likewise, in Russia, prices climbed 12.7% from 7.6% in February 2007.

Even consumers in the oil-rich West Asian countries have not been spared the impact of rapidly rising prices, although they are not hurt by the surge in prices of petroleum. For instance, CPI inflation in Saudi Arabia rose to 9.8% in February from 5.7% a year earlier.

The steepest increases in the CPI were experienced in Hong Kong, where prices rose 6.3% in February from 0.8% a year ago, and in Singapore, where inflation was at 6.5% last month against 0.6% a year ago. Prices rose 3.9% in Taiwan after declining 2.2% in February 2007 while in Pakistan, CPI was up 11.3% (7.4% a year ago).

The scenario in Latin America is mixed. Mexico and Argentina reported slower rise in inflation at 3.7% and 8.4%, respectively, compared with 4.1% and 9.6% a year ago. Brazil reported a moderately increasing rate (4.6% from 3% a year ago) while Chile experienced an 8.1% rise in CPI compared with 2.7% a year ago and Venezuela 25.2% against 20.4% last year.

The developed world has also not been spared the rise in prices. Japan on Friday reported that consumer prices rose at the fastest pace in a decade, with core prices, which exclude fruit, fish and vegetables, climbing 1% in February from a year earlier. The Europe area, too, has seen prices rise faster: 3.3% in February 2008 against 1.8% a year ago and in the US, CPI rose 4% against 2.4% in the same period in the previous year.

Status Of IT Refund On The Net

BANGALORE: Come March-April and it is time for the income tax payers to expect the cheque towards the refund of the excess tax collected. But during these two months they would have visited their local income tax offices at least half a dozen times to know the status of their refund.

But thanks to the new initiative of the Income Tax Department, the assessees need not run from pillar to post anymore, as they will be able to track their refund on the Net and expect the cheque to be credited to their bank accounts on a particular date. This system will work only for those tax payers who have opted for the "refund banker pilot scheme."

Sources in the Income Tax Department told The Hindu that "its true use and utility for the taxpayers will be known only at the end of April when the process of refund for 2008-09 would have been completed." The details have been loaded on the website www.tin-nsdl.com. The website has a tab prompt that will ask simple questions like the assessment year and the Permanent Account Number (PAN).

Taxpayers will get the status of refund 10 days after the details have been sent by their respective assessing officers to the refund banker. The status will be available only for those taxpayers whose refunds are through the refund banker pilot scheme, according to the sources.

The Focus Should Be On Agriculture: ESCAP

NEW DELHI: Projecting an economic growth of 9 per cent for India in 2008-09, a United Nations report has said the need of the hour is to address the neglect of agriculture to bring millions out of poverty. The public policy should adopt a two-pronged approach for the purpose, taking in account revitalising of agriculture while facilitating the migration of excess labour from agriculture to industry and the services sector.

India''s economy has entered into a ''new phase of high growth'' buoyed by investment and savings amid increasing productive capacity, according to the UN-Economic and Social Commission for Asia and the Pacific (ESCAP) report released here by ESCAP Under Secretary General Noeleen Heyzer and Union Commerce Minister Kamal Nath.

The report - Economic and Social Survey of Asia and the Pacific, 2008 - that focuses on ''Sustaining growth and sharing prosperity,'' says India could achieve and sustain a 10 per cent growth rate by further improving the country''s business environment by developing its physical infrastructure and human capital. Expecting inflation at 5 per cent in 2008, ESCAP warns that pressures could persist as international commodity prices, especially oil and food prices, would remain high.

Chronic neglect of the agriculture sector in Asia and the Pacific is condemning 218 million people to continuing extreme poverty, and widening the gap between the region''s rich and the poor. The Government must show greater political will to address decades of policy neglect and failure in the agriculture sector while the report calls for a comprehensive liberalisation of global trade in agriculture that would take a further 48 million people out of poverty in the region.

The survey goes on to note that growth and productivity in the agriculture sector have slowed and the green revolution appears to have by-passed millions. A consequence has been increasing rural debt among the farming communities, leading to a crisis of debt and rising numbers of suicides by farmers.

While appreciating the recent step of loan waivers for small and marginal farmers, Ms. Heyzer said agriculture needed a second revolution. Though she said no provision for those having borrowed from the private lenders was a matter of concern.

Pointing out that the main drivers of the growth lay in the industrial and services sector which compensated for a slowdown in agriculture, the report also expresses concern over sustaining the high level of growth and whether India was ''growing beyond its growth potential'' with strains on labour force capacity and capital stock as well as creating inflationary ''instabilities.''

Corporate India Sluggish On Dollar Borrowings

Mumbai: Corporate India is going slow on dollar borrowings owing to tightening of borrowing norms . External commercial borrowings (ECB) by India Inc have slightly slowed down, in spite of rates in the international market coming down with successive rate cuts by the US Federal Reserve.

Corporates are reluctant to raise foreign currency convertible bonds (FCCB) largely due to the turmoil in the global stock markets. Data indicates that many infrastructure companies have raised overseas money in the recent past. According to the latest figures released by the Reserve Bank of India (RBI), corporates mobilized $5.9 billion through ECBs and FCCBs in the three months, from November 2007 to January 2008. Though the amount is higher than $5.2 billion raised by them in the same period a year ago, it ends up being significantly lower than the $7.4 billion raised in the preceding three months (August-October 2007). The number of companies that have tapped the overseas market too have come down, from an average of 70 to 40-45 in the latest period.

Particularly, infrastructure companies have been big time borrowers this time round. In January this year NTPC was the largest borrower in raising $380 million followed by Delhi International Airport Pvt Ltd which raised $350 million through ECBs. While in December, Reliance Telecom and Shipping Corporation of India were the biggest borrowers brining in $500 million and $340 million respectively through ECBs while GTL Infrastructure raised $300 million through ECBs. In November, two Vodafone-Essar companies raised $359 million. After the imposition of end-use restrictions limiting the rupee expenditure of the borrowing proceeds, most of the companies have borrowed funds only to fund imports of capital goods and equipment or in some cases to fund their overseas acquisitions.

Rupee Closed At 40.14

Mumbai: The rupee was tad against the dollar. According to the source, dollar buying by oil companies caused the rupee to close lower. The rupee opened at 40.17 and closed at 40.14, against the previous close of 40.12. It traded in the range of 40.09 and 40.17 during the day. In the overseas market, the dollar depreciated against all currencies except the sterling. The euro saw a huge rally against the dollar because the confidence numbers were better than expected and due to statements that there would be no rate cut. The six-month premia closed at 1.74 per cent (1.61 per cent) and the 12-month premia ended at 1.29 per cent (1.23 per cent).

India, Brazil Set $10 B Trade Target In Three Years

New Delhi: Looking at over three-fold increase in bilateral trade to $10 billion in three years, India and Brazil on March 26 discussed ways to help developed world cope with the economic slowdown. At a meeting between the Commerce and Industry Minister, Mr Kamal Nath, and the Brazilian Minister of Development, Industry and Foreign Trade, Mr Miguel Jorge, the two BRIC (Brazil, Russia, India, China) countries discussed measures to treble bilateral trade from the present level of $3.12 billion. Moreover, the two ministers reviewed the global economic slowdown and how the two emerging market economies can maintain their growth to avert deeper crisis in the world economy.

Govt Staff To Get Effective Salary Hike Of 28%

New Delhi: The Sixth Pay Commission may have recommended an average 40 per cent hike in the salaries of government employees, but the effective increase will be much less at 28 per cent on account of merger of 50 per cent DA in basic pay way back in 2004.

After submitting the report, the Commission Chairman justice B N Srikrishna had said the average increase in salaries would work out to be 40 per cent over the Fifth Pay Commission award.

The government had merged 50 per cent of the Dearness Allowance (DA) with the basic pay with effect from January 1, 2004.This accordingly puts the basic pay at much higher level than that was provided in the Fifth Pay Commission and the effective increase over that level is 28 per cent, a top Commission official said.

The government increase the DA of its employees every six months to compensate them for rising cost of living. Among other things, the Sixth Pay Commission has also suggested that the government should revise the base year of the Consumer Price Index (CPI) for computation of DA "as frequently as feasible". It further recommended that a separate CPI should be prepared by the National Statistical Commission for computation of DA for government employees

Govt To Sell 5-Pc Stake In Mini-Ratna Cos

New Delhi: The government is looking at offloading its stake in about half-a-dozen listed mini-ratna companies including MMTC, STC, ConCOR and Shipping Corporation of India (SCI). The government has decided to sell 5 per cent in these companies through follow-on public offers.

A stake sale in MMTC alone is likely to bring in about Rs 5,000 crore. At present, MMTC is trading at around Rs 19,452 on the Bombay Stock Exchange (BSE). MMTC''s market capitalisation is hovering at around Rs 1 lakh crore, the maximum among all listed mini-ratnas. The proposed stake sale in the mini-ratnas would fetch the government about Rs 7,000 crore. The money raised would be used to fund the government''s social sector programmes. Mini-ratnas have been identified for raising funds as allied Left parties are against dilution of the government''s stakes in navratnas.

According to an official estimate, a 5% equity divestment in Bharat Electronics (BEL), Container Corporation (ConCOR) and Shipping Corporation of India (SCI) would fetch Rs 500 crore, Rs 500 crore and Rs 300 crore respectively. ConCOR is trading at Rs 1,636 per share, STC at around Rs 360, SCI at Rs 195 and BEL at around Rs 1,194 on the BSE. Proceeds from the stake sale in State Trading Corporation (STC) are expected to fetch not more than Rs 54 crore at the current market value. The government is also considering stake sale in the Neyvelli Lignite Corporation (NLC). The stake sale in these companies is expected to help the government fund the proposed Rs 60,000-crore farm loan-waiver, said the source.

Rupee Appreciates Further Tracking Equities

Mumbai: The rupee appreciated further against the dollar tracking the upswing in the domestic stock market. The rupee opened at 40.20 and touched an intra-day high of 40.03. It then fell to end at 40.12, against the previous close at 40.26/27. Nevertheless, the RBI intervened to buy dollars when the rupee touched the intra-day high of 40.03. Market participants expect the rupee to remain rangebound and continue tracking the movement in the stock market. There was a fall in forward premia as exporters were selling and booking profits.

M.P. Annual Plan Set At Rs 14,182.61 Cr

New Delhi: The annual Plan of Madhya Pradesh for 2008-09 has been set at Rs 14,182.61 crore, inclusive of one-time additional Central Assistance of Rs 150 crore for projects of special interest to the State. This was agreed on March 25 at a meeting between the Deputy Chairman, Planning Commission, Mr Montek Singh Ahluwalia, and the Madhya Pradesh Chief Minister, Mr Shivraj Singh Chouhan.

Mr Ahluwalia said the State needs to devote more attention on human development. Social sector needs priority and efforts should be aimed at improving human development index with policy initiatives for creating investor-friendly environment. He said the State Government should avail itself of benefits available under various social sector schemes. Mr Chouhan informed the Commission that thrust areas of development policy would be eliminating hunger, malnutrition and poverty. Livelihood opportunity would be created through generating economic activities based on natural resources. A number of new initiatives have been taken to improve social protection. These include Mukhya Mantri Mazdoor Suraksha Yojana, integrated livelihood programme and Din Dayal Antodya Upchar Yojana.

India Inc Hails 6th Pay Commission Report

New Delhi: India Inc has welcomed the Sixth Pay Commission report that suggested an average increase of 40 per cent in salaries of central government employees and said the move will not lead to a rise in inflation and revenue deficit of the government.

Industry body Ficci said the pay hike would not add to inflationary conditions and revenue deficit due to buoyant revenue collections.

"The revenue collections and the overall economy is growing. If these trends are kept intact, then this additional expenditure should not be too much of a problem," Ficci Secretary General Amit Mitra said.Echoing similar sentiments, Assocham said increase in salaries would not fuel inflation and increase revenue deficit as the country is witnessing increased direct and indirect tax collections as a result of higher tax compliance.

"The government is going to witness substantial hike in its revenue collections, benefits of which ought to be given to its employees and there should be no grudge against such pay commissions recommendations," Assocham President Venugopal Dhoot said.

Assocham said the move would make the central government employees more accountable, productive and responsive as the exchequer would shed Rs 12,561 crore in 2008-09 itself on account of higher package.

Also, Ficci said the hike would reduce the problem of governance and attract talented personnel, besides making the employees more responsible.

The Sixth Pay Commission submitted its report to Finance Minister P Chidambaram recommending implementation of the revised pay from January 1, 2006, which would impose an arrear payout burden of Rs 18,060 crore on the government.

Rupee Up 16 Paise Against Dollar

Mumbai: The rupee appreciated 16 paise against the dollar tracking the movement in the domestic stock market. The rupee opened the day at 40.42 and went on appreciating gradually thereafter to close at 40.26/27 on March 24, up from the previous close of 40.42/43. According to the source, there was good dollar selling by banks and exporters which also helped the rupee to appreciate. Foreign exchange dealers said that the rupee would weaken and trade in the 40.30- 40.50 range this week.

India Targets To Encourage Trade Tamil Nadu Budget Focusses On Farmers, Womenvolumes

CHENNAI: The Tamil Nadu budget for 2008-09 has proposed several measures for small farmers and women, including sanction of new crop loans of Rs.1,500 crore and formation of 4 lakh new self-help groups for women. Also, 10,000 SHGs of farmers will be formed and the groups will be provided a total of Rs.10 crore as revolving fund.

Interlinking of rivers in the State, making Women''s Commission a statutory body, broadband internet for police stations, setting up of emergency trauma care centres, abolishing of special fees in schools, providing computers for the remaining government high schools and higher secondary schools, establishment of separate welfare boards for persons in the publishing industry, powerloom weavers and Narikoravas, setting up five new engineering and two new medical colleges, provision of Rs.2,000 crore for the rural employment guarantee scheme, addition of 3,500 new buses to the state transport corporation''s fleet and establishment of four more special economic zones are some of the schemes announced in the budget.

Government employees stand to gain considerably since they have been promised that the "government will examine the order of the [Sixth Pay Commission] and take expeditious action to issue orders." There is also a hike in reimbursement of their medical expenses.

India Targets To Encourage Trade Volumes

Kolkata: India has set an aim to boost trade volumes with the ASEAN countries to $50 billion, up from the present $20 billion. The proposed free-trade agreement with the ASEAN countries will help this process by opening up market for many Indian products, especially auto-components. Many ASEAN countries such as Malaysia are interested sourcing auto components from India.

Punjab Villages Sanctioned Rs 55.86 Cr Under Rajiv Gandhi Grameen Yojna

New Delhi/ Chandigarh: The Rural Electrification Corporation (REC) has approved a sum of Rs 55.86 crore to accomplish diverse developmental activities including release of new domestic connections to people living below the poverty line, erection of 11 KV lines and aerial bunched cable, installation of new distribution transformers and distribution transformer meters in the villages of Panchkula, Ambala, Yamuna Nagar, Kurukshetra, Kaithal, Jind and Jhajjar under the Rajiv Gandhi Grameen Vidyutikaran Yojna.

The Uttar Haryana Bijli Vitran Nigam said almost 30 per cent of the sanctioned amount will be released shortly. The Nigam will embark on implementation of the work and apprise the activities and achievements to the quarters concerned. 90 percent of the total sanctioned amount will be financial assistance in the shape of grant to the Nigam as per salient features of the scheme. As many as 60,961 new domestic connections will be released to BPL and 1282 km. long 11 kv lines will be erected. The spokesman further stated that the REC had already sanctioned Rs. 48.48 crore for district Rohtak, Karnal, Panipat and Sonipat to implement the RGGVY.

Turkey Looks To Ink FTA With India

Mumbai: Turkey is looking at a free trade agreement with India as it plans to enhance the bilateral trade to $10 billion annually by 2012, Turkish Minister for Foreign Trade Kursad Tuzmen has said. Tuzmen also wanted more flights between India and Turkey in the face of growing bilateral economic cooperation. The two-way trade of Turkey was around $800 billion as against India''s $600 billion annually. While Turkey''s trade deficit was around $80 billion, India''s was around $60 billion. Indian companies are committed to invest in Turkey as it is among the 11 countries listed by investment bankers for growth potential.

Turkish businessmen are looking at alliances with their Indian counterparts in the areas of energy, mining, biotechnology, medicine, IT and railways, the source said at an Indo-Turkish Business Association meet. The country is also keen to broaden their activities in the Indian market by investing in different potential sectors like food and food processing, textile, plastics, chemicals, machinery, construction material as well as infrastructure projects.

Long-Term Solution To Rising Prices Not In Sight

New Delhi: Soaring prices of vegetables and fruits are increasing the heat for the common man in the midst of the summers largely due to constrained supply, and the experts feel that a long-term solution is still elusive.

More than half the fruits and vegetables in the wholesale markets in Delhi have recorded rise of up to 100 per cent and the effect could be more when it comes to retail prices. According to data compiled by Delhi Agricultural and Marketing Board for 48 fruits and vegetables, coriander prices have more than doubled to Rs 800 per quintal during the month ended March 20, while sweet pumpkin was being sold at Rs 850 a quintal compared to Rs 325 a month ago. However, there was some respite for the common man with prices of potato dropping to Rs 250 from Rs 413 a quintal, while Tomato was being sold at Rs 560, down from Rs 720, at the Azadpur market.

Marketmen said the retail prices of vegetables are usually more than double the rate being charged in the wholesale market, but added that arrival of vegetables is sure to improve in the next few weeks and ease the pressure. The rates of milk and dairy products, pulses, cereals, foodgrain and edible oil have shown an upward trend, prompting the government policy makers to take some immediate decisions like cutting down import duty on edible oil and rice to increase the domestic availability.

"The recent measures announced by the government to augment food supply would bring an immediate relief. But the pressure would still remain," Mumbai-based rating agency Crisil Principal Economist D K Joshi said. The rate of inflation has reached a whopping 5.92 per cent, mainly due to rise in the prices of food articles. With the inflation racing to nearly a year''s high at about six per cent, the supply side management would hold the key to check prices, Joshi said, adding that the consumers may have to pay more for food items because prices would continue to rise, with global food stocks coming to a 20-year low. Commenting on the global situation, Agriculture Minister Sharad Pawar recently said that India imported wheat at about $100-110 a tonne last year but the international prices have now nearly quadrupled.

Rice, Edible Oil Duties Cut To Tame Inflation

NEW DELHI: Call it operation attack inflation. With the inflation inching towards 6% mark, the government on Thursday slashed Customs duty on edible oils and rice to contain their prices in the domestic market. While the Customs duty on rice has been slashed to nil from 70%, duty on all crude and refined edible oil imports has been substantially reduced from the current level of 52-75% to 20% and 27.5% respectively.

The steps follow finance minister P Chidambaram’s assurance to Parliament on Monday that the government will take every step, including fiscal measures, to contain inflation.

“The government has been keeping a close watch on the domestic and international prices of essential commodities, particularly food items such as wheat, rice, pulses and edible oils to keep inflation under check. It has also taken appropriate fiscal measures from time to time to achieve the objective,” an official statement said here.

With the duty rejig, semi-milled or wholly-milled rice imports would attract nil Customs duty instead of 70%. The duty exemption would be available till March 31, 2009. It may be pointed out that the international prices of rice have increased sharply from $430 in August 2007 to $590 in February 2008. Moreover, domestic retail price in Delhi markets increased from Rs 15 to Rs 18 per kg over the period.

The duty reduction will help in cushioning the domestic prices of the commodities from the rise in prices internationally. Scrapping the import duty would not make an impact unless the government allows private traders to import rice directly. As of now, imports are canalised through state trading agencies like MMTC. For prices to come down, rice should be shifted to the free list of imports, industry sources said. Vietnam and Myanmar could be sources of cheaper rice (25% brokens) for the domestic market as freight would also be cheap for those importing rice through ports like Kolkata, they added.

The Customs duty on crude palm oil including crude palmolein has been reduced from 45% to 20%, refined palm oil including RBD palmolein from 52.5% to 27.5%, crude mustard/rapeseed/colza/canola oils from 75% to 20% and crude sunflower oil from 40% to 20%. Import duty on refined mustard/rapeseed/colza/ canola oils has been brought down from 75% to 27.5% and refined sunflower oil from 50% to 27.5%.

Besides, tariff values of crude palm oil ($447 PMT), RBD palm oil ($476 PMT), crude palmolein ($481 PMT) and RBD Palmolein ($484 PMT) have been frozen at July 2006 levels.

Owing to a surge in demand, international prices of edible oils have continued to exhibit a sharp and steady upward trend in recent months. For instance, the international price of crude palm oil (fob Malaysia) has increased from $770 PMT in the last week of August 2007 to $1,220 PMT in the last week of February 2008.

During the period, the international price of sunflower oil (cif Rotterdam) has increased from $947 to $1695 PMT, an increase of 79%.

The domestic prices also have been feeling the heat and, despite two rounds of reductions in Customs duties on palm oil in April 2007 by 10 percentage points and again in July 2007 (by 5 percentage points), wholesale prices of RBD palmolein (Mumbai) increased from Rs 4,500 per quintal in August 2007 to Rs 5,820 per quintal in February 2008.
Over the same period, the price of sunflower oil (Mumbai) has increased from Rs 4,900 per quintal to Rs 8,250 per quintal, and of mustard oil (Delhi) from Rs 4,960 per quintal to Rs 6,330 per quintal.

Full exemption from Customs duty is available for wheat. The exemption had been extended beyond the expiry date of December 31,2007, and wheat flour has also been fully exempted from Customs duty.

Govt To Set Up 6,000 Schools With Private Participation

NEW DELHI: The government has fast-tracked its plan to invite private money into schools and hospitals through public-private partnerships (PPP). It has set a target of opening 6,000 well-equipped schools across the country by the beginning of next fiscal.

There would be one school in every block offering classes up to XIIth standard, informed sources told ET.

The proposed schools are expected to change the way education is imparted in the country, particularly in rural areas. “We would want the schools to be a model for others to emulate. We would do everything to provide the best faculty and facilities in the schools. While schools would be set up across the country, there would be an emphasis on rural areas,” a source said.

The ministries of higher education and finance are working on the norms to bring together private sector’s efficiency and the government’s commitment to society. “The corporate sector could contribute in many ways. Under the proposed norms, the corporate sector could partner the government either in offering select facilities in a school or in running it on their own. They may also participate by providing just the physical assets,”a source said.

The norms would promise a decent return on investment for the private players. The scheme would also allow the private partner to leverage the idle assets in government facilities to raise additional revenues and provide better services to students. They would also be entitled to government grants.

To give a boost to the social sector, the government intends spending Rs 34,400 crore in the next fiscal, 20% more that the funds earmarked for the current fiscal. It had also announced in this year’s Union Budget a plan to set up several thousands of high-quality model schools with Rs 650 crore. The government plan is to increase enrolment at the primary level and enhance access to secondary and higher secondary levels.

Central Govt Staff All Set To Get 52% Raise

NEW DELHI: Central government staff and officers, along with their counterparts in defence and paramilitary forces, have a reason to paint the town red on Holi — the Sixth Central Pay Commission is set to hand them a hike of up to 52%, if read along with their house rent allowance (HRA).

The report is likely to be submitted to Finance Minister P Chidambaram by panel chairman Justice B N Srikrishna any day after the festival of colours, possibly as early as Tuesday.

Higher housing and transport allowances may be the icing on the cake, though there could be only a modest hike in city compensatory allowance.

Indications are that a secretary to the government will have a basic salary of Rs 80,000 a month (up from Rs 26,000 with 50% merged dearness pay and 47% DA).

The Cabinet Secretary, the country's seniormost officer, is likely to have a basic of Rs 90,000 (up from Rs 30,000 with 50% merged dearness pay and 47% DA).

As is the practice, the new scales would be effective from January 1, 2006.

The across-the-board hike could be paler compared to the pay commission's fifth edition (1997), the best bounty so far, as the proposed quantum of hike now is a few percentage points (just around 0.40) lower. But the good news is that a government employee could, sources said, now look forward to higher annual increments, besides the regular addition of DA, which is now an annual average of 12%.

There is, however, the possibility of a fresh rationalisation of DA rates (decided on the basis of consumer price index) because of the upward scaling of salaries.

The increase in city compensatory allowance (maximum Rs 300 at present) may also not be substantial. The bounty for senior officers, sources said, could have been more attractive had the President's monthly salary not been fixed at Rs 1 lakh recently.

As expected, the commission may slash the number of scales to 18 from the present 33, to facilitate accounting and uniformity across various employees and officers.

A likely implication for senior officers in A1 cities (Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad) could be that government accommodation might not seem as attractive as before because their HRA may rise substantially.

At the minimum entry level (Group 'D'), a government employee is likely to get Rs 8,000 now while the highest starting pay in non-gazetted grade (Group 'C') could be Rs 20,000.

The expected starting pay for gazetted Group 'A' and Group 'B' officers could be Rs 26,000 and Rs 22,000 respectively.

Pay at the highest government (secretary) level is likely to be Rs 80,000. At present, a Group 'A' officer gets around Rs 18,000 at entry (12% HRA in A1 cities is extra). These scales would have higher annual increments.

WPI Breaches RBI’s Tolerance Level Of 5%

NEW DELHI: Wholesale price-based inflation breached the RBI’s tolerance level of 5% for the third week in a row, recording an eleven-month high of 5.92% for the week ended March 5, compared with 5.11% in the previous week. The government, in turn, slashed import duties on edible oil and rice.

Inflation surged by 0.81% over the previous week, as essential items like fruits, vegetables and pulses, as well as some manufactured items like imported oil, mustard oil and steel, became dearer. Inflation had been at 6.51% during the corresponding week in the year-ago period. The government, which is in a bind over rising prices, is working on a warfooting to contain the price line. Apart from the cut in customs duties on crude and refined edible oils (to 20% and 27.5% respectively) effected today, and the existing ban on export of edible oil, the government is also contemplating an export duty on steel, to increase domestic supplies.

Experts say that there is an urgent need to achieve self-sufficiency in products like food and cooking oil in order to bridge the demand-supply mismatch and contain inflation. Global prices of foodgrains like rice and wheat are at record levels and even resorting to imports could put pressure on the price lines.

Beefing up supplies could be a difficult task in the short term and the government will have to fall back on fiscal measures to discourage exports while making imports of essential goods cheaper. Says HDFC bank chief economist Abheek Barua: ‘‘Higher food and oil prices are playing a crucial role in pushing inflation up. There is urgent need to increase the food supply. However, in the short term, as raising productivity is a difficult task, the government may resort to measures such as banning exports of some commodities, and cut the import duty.’‘

The numbers came just a day after the prime minister’s economic advisory council chairman, Mr C Rangarajan, described the inflation rate as a little above comfort level, and said the council does not favour an interest rate cut policy.
Experts feel that as inflation has breached the RBI’s comfort level by a wide margin, it would be more difficult for the central bank to reduce interest rates to bolster the slowing economic growth.

‘‘ The whopping rise in the inflation rate, despite the high base effect, would not allow RBI to go for a rate cut in the near future as it is way above the central bank’s tolerance level of 5%,’’ Crisil principal economist D K Joshi said.
During the week under review, prices rose across all categories. The index of primary articles went up by 0.3%. The prices of arhar, gram and moong went up by 3%. At the same time, fruits, vegetables, maize, condiments and spices were expensive by 1%.

The index of manufactured products too rose by 0.2%. Among manufactured products, prices of imported edible oil went up by 4%, while that of groundnut oil went up by 1%. Coconut and mustard oils were dearer by 3%.

The index of fuel, power and lubricants too went up by 0.1%, as prices of furnace oil rose by 2%. Basic metal, alloys and metal products rose 20%. Prices of blooms and billets and slabs went up by a steep 30%, wire of all kinds by 25%, steel and tensile plates by 20%, and bars and roods by 3%.

Centre Clears 20 Sezs In Bengal

KOLKATA: West Bengal commerce and industry minister Nirupam Sen told the state Assembly on Wednesday that the Centre had cleared 20 SEZs in the state and also agreed in principle to give the go-ahead to 17 other SEZs.

Replying to questions, the minister added that during the current fiscal, the Union government had given the green signal to 86 other industrial projects with an investment of Rs 2,28,039 crore.

Mr Sen said 50% of the total land area in a particular SEZ would be used for processing units and 25% for creating related infrastructure facilities.

The balance 25% would be used for other purposes. He informed that the state government would not follow any model rehabilitation package while acquiring land for various industrial projects.

“We will try our best to compensate and rehabilitate those whose lands would be acquired for any project. Attempts will also be made to ensure jobs for at least one person from each families whose land would be taken over by our government,” Mr Sen said.

PSU Department Faults Directive On Bank Deposits

NEW DELHI: The department of public enterprises (DPE) has sought a clarification from the finance ministry on its recent directive asking all central public sector enterprises (CPSEs) to invest 60% of their surplus fund in public sector banks.

“This is like infringement on the financial autonomy of CPSEs. On one hand the government is talking about a level-playing field for all companies by taking away the support under the purchase preference policy from the PSUs, whereas on the other hand, it is trying to regulate the financial decisions. We have asked for a proper clarification on why is it necessary for CPSEs to park their money in PSBs,” a senior official in DPE said.

The finance ministry had recently sent a directive to all ministries, including DPE, asking the companies under them to deploy 60% of their funds with PSBs. As the finance ministry cannot ask CPSEs directly about their financial management, it has asked DPE, the nodal department, to issue a directive in this regard.

CPSEs have a total reserves and surplus of around Rs 4 lakh crore. The proposal, if implemented, would result in PSBs getting nearly Rs 2 lakh crore of that. At present, CPSEs have invested around Rs 1 lakh crore with PSBs while the rest has been invested in other debt instruments.

So, the recent move would result in the diversion of about Rs 1 lakh crore from private banks and other debt funds to PSBs. Funds invested in private banks and other debt instruments get them relatively higher returns of 2-3%.

This is for the first time that the government has directed PSUs on the amount of their investment. The earlier guidelines have specified the nature of investments to make it risk-free. However, no necessary obligation of investment had been put on CPSEs ever.

Oil Slides Another $1 As US Recession Fears Mount

SINGAPORE: Crude oil prices extended their overnight slide by another dollar on Thursday, as fears that global energy consumption could contract if the United States slips into a recession gathered pace.

US crude fell $1.01 cents to $101.53 a barrel at 0212 GMT, about 9 per cent off the record $111.80 hit on Monday. London Brent crude fell $1.07 to $99.65.

"I suspect that it was a reassessment and a rationalization of ongoing concerns over the US economy that's triggered some selling," said David Moore, an analyst at Commonwealth Bank of Australia in Sydney.

The heavy losses came during a week which saw equity and commodity markets swing wildly as traders balanced out aggressive interest rate cuts by the US Federal Reserve against signs of a recession in the world's largest energy consumer.

US demand for gasoline over the past four weeks was 0.1 per cent below last year, while demand for distillate fuels like diesel, jet fuel and heating oil fell by about 5.4 percent, data from the US Energy Information Adminstration showed on Wednesday.

US distillate inventories dipped to their lowest level since June 2005 while gasoline stocks eased slightly below their 15-year high, according to the EIA report. Crude inventories, meanwhile, rose a modest 200,000 barrels, leaving them 3.7 percent below last year. The bigger-than-expected decline in refined fuel inventories last week and a smaller-than-expected build in crude stockpiles overshadowed the soft demand figures.

"In terms of commodities, we are still consuming and using daily...it's still a bullish undertone," said fund manager Justin Wilks of Global Commodities. Recent price strength across the commodities complex has been boosted by a slumping U.S. dollar, which briefly rebounded on Wednesday, and interest rate cuts by the Federal Reserve. But investors who had viewed dollar-denominated commodities as the best place to put their cash are growing worried that recession could erode demand for raw materials, analysts said.

Rupee Ends At 40.43 Against Dollar

Mumbai: The rupee ended higher against the US dollar on March 19, as it tracked the movement of the Sensex. As the equity markets opened higher following the rate cut by the US Federal Reserve, the rupee also opened higher at 40.40 and even reached 40.36. As the Sensex shed the gains, the rupee moved lower to 40.53/54. Following this, some bunched-up dollar sales by exchange companies helped the rupee gain to end the day''s trade at 40.42/43, against the previous close of 40.50/52. In the forwards market, the 6-month premia closed at 1.69 per cent (1.76 per cent) and the 12-month premia at 1.25 per cent (1.27 per cent).

Infrastructure Industries Growth Declines To 4.2pc In Jan

New Delhi: On the heels of the slowing in industrial production in January 2008, the six core infrastructure industries grew by 4.2 per cent in that month, almost half the 8.3 per cent growth seen in such industries in the same month last year. The cumulative growth rate in these sectors during April-January 2008 fell to 5.5 per cent as against 8.9 per cent in the same period last fiscal. Crude oil production registered a negative growth of 0.2 per cent in January 2008 as compared to 4.7 per cent growth in same month last year. Electricity sector saw 3.3 per cent growth in January 2008 as against 8.3 per cent growth in same month last year.

The six core infrastructure industries are crude petroleum, petroleum refinery products, coal, electricity, cement and finished carbon steel. They cumulatively account for 26.7 per cent of the weightage in overall index of industrial production (IIP). The performance of the six core infrastructure industries in January 2008 does not come as a surprise. In January, overall industrial growth had declined to 5.3 per cent as compared to 11.6 per cent in the same month in the previous year.

India Calls Turkish Cos To Infuse In Infrastructure

New Delhi: India on March 18, called the Turkish companies to explore the Indian markets and make investments, especially in the infrastructure sector.At the bilateral meeting with the visiting Turkish State Minister for Foreign Trade, Mr Kursad Tuzmen, the Union Commerce and Industry Minister, Mr Kamal Nath, said that Indian companies were also dedicated to make investments in Turkey. The meeting was attended by Mr Ajay Shanker, Secretary (Industrial Policy & Promotion); Mr G.K. Pillai, Commerce Secretary, senior officials from the Ministry of Commerce and Industry, and representatives from the industry. Indian investments in Turkey are in diverse sectors viz., railway construction, electricity transmission, pipelines, consultancy services for earthquake emergency, hydro-carbon, CNG conversion and IT services.

Goa's Annual Plan Pegged At Rs 1,737 Cr

New Delhi: The annual Plan of Goa for 2008-09 has been estimated at Rs 1,737.65 crore, inclusive of additional Central assistance of Rs 35 crore for projects of special interests to the State. This was decided at a meeting between the Deputy Chairman, Planning Commission, Mr Montek Singh Ahluwalia, and the Chief Minister of Goa, Mr Digambar Kamat. In his opening remarks, Mr Ahluwalia said the State had impressive achievements both in the social sector and economy with a growth rate of over 10 per cent per annum, which shows that the State was ready to leap forward to the next stage of development by targeting at attaining higher standards of development and social justice during the 11th Plan period. Agro-tourism, agro-processing and organic farming need more focused attention. Mr Ahluwalia said the social indicators of the State like literacy, birth rate, death rate, infant mortality rate are impressive. The State Government was also complimented for setting up one of the best health care infrastructure including network of hospitals both in urban and rural areas.

Rupee Ends At 40.52 Against Dollar

Mumbai: The rupee increased against the greenback on March 18, as traders were selling dollars and unwinding their positions ahead of the US Federal Open Market Committee (FOMC) meeting on March 18. The home currency opened stronger at 40.64/66 and strengthened through the day to finally end at 40.50/ 52, against the previous close at 40.72/73. In the forward premia market, the 6 month closed at 1.76 per cent (1.54) and the 12 month ended at 1.27 per cent (1.14).

AP Cabinet Approves Sales Tax Slash On ATF

Hyderabad: The Andhra Pradesh Cabinet on March 17 permitted the lowering of sales tax (ST) from 33 per cent to 4 per cent on aviation turbine fuel (ATF) along with bringing down professional tax from 14 to 4 per cent. The professional tax cut is set to gain about 10 lakh employees. According to Government sources, the Cabinet also permitted the dissolution of Hyderabad Urban Development Authority and creation of Hyderabad Metro Development Authority to govern the urban area in and around Hyderabad.

Gold Surges To Rs 13,560 On Strong Global Cues

Gold prices on March 17 reached its new peak of Rs 13,560 in the bullion market in New Delhi on brisk buying by stockists, sparked by strong global cues. A turmoil in all financial markets after all dollar-denominated commodities turned volatile by setting high and low record levels, diverted investors to park their funds in gold, considering it to be a safe investment during such crisis, traders said. The precious metal set record high peaks in all local as well as world bullion markets.

A remarkable rise in crude oil prices, weakening dollar, restricted inflow of foreign investors in emerging Asian stock markets left with no other option but to invest in gold, which surged to an all-time high of $1033 an ounce in overseas markets. Standard gold and ornaments registered hefty gains of Rs 360 each to Rs 13,560 and Rs 13,410 per ten grams respectively. Sovereign joined the rally and set an all-time high level of Rs 10,350 per piece of eight gram by adding Rs 200. In a similar fashion, silver ready attracted heavy stockists and industrial units buying after reports that it touched a 28-year high level in overseas markets. Silver ready rallied by Rs 1,050 to Rs 25,800 per kg and weekly-based delivery by Rs 620 to Rs 27,360 per kg. Silver coins too remained in keen demand and advanced by Rs 400 to Rs 27,300 for buying and Rs 27,400 for selling of 100 coins.

Indian Cos Asked To Infuse In South Australia

Chennai: The economy of South Australia is in a major transformation, and its premier Mr Mike Rann asked Indian companies to infuse more in the region. Like India, South Australia''s economy is gaining pace with more than $45-billion worth projects underway or in the pipeline, with mining and defence leading the way. The Olympic Dam mine will be the world''s biggest uranium mine and the fourth biggest copper mine, he said at a meeting organised by the Southern India Chamber of Commerce and Industry. Reliance Industries has joined hands with a local company for oil and gas. It has also inked a uranium exploration farm-in and heads of joint venture agreement with Uranium Exploration Australia Ltd. Mr Rann is leading a 10-day trade mission to India promoting investment, education and migration. The delegation of more than 25 business, education and Government representatives visited New Delhi, Bangalore and Hyderabad, and will also be in Mumbai.

Rupee Ends At 40.73 Against Dollar

Mumbai: The rupee fell by around 30 paise against the dollar on March 17 following the meltdown in the domestic stock market. The currency opened at 40.70/72 and touched an intra day low of 40.83. It, however, recovered during the day to end at 40.72/73, against the previous close at 40.44/45. The domestic currency opened lower, reacting to the 0.25 percentage point cut in the discount rate by the US Federal Reserve. In the forward premia market, the 6-month closed at 1.59 per cent (1.37) and the 12 month ended at 1.17 per cent (1.07).

Bengal FM Proposes Rs 75cr Tax

Kolkata: The West Bengal Finance Minister, Dr Asim Dasgupta, delivering the State Budget for 2008-09 here on March 17 at the Assembly, anticipated a total expenditure of Rs 52,092.73 crore, against total receipts of Rs 52,015.73 crore, leaving an initial deficit of Rs 77 crore. The Finance Minister has also projected a string of measures, by way of revenue-raising effort, to raise Rs 75 crore as additional resources in the next financial year, thus leaving an uncovered deficit of Rs 2 crore. Dr Dasgupta has combined both tax reliefs and other facilities such as attractive medical benefit schemes for State Government employees and their families involving claim reimbursement for treatment in recognised private hospitals in addition to State Government hospitals. The tax on road rollers and shoes with MRP not exceeding Rs 750 has been decreased from 12.5 per cent to four per cent. The tax on tailoring items, kerosene stoves and biscuits not manufactured in factories defined under the Factories Act has been brought down from 12.5 per cent to four cent.

Rupee At 40.43 Against US Dollar

Mumbai: The Indian rupee on March 14 ended almost flat at 40.4350/4450 against the greenback on alternate bouts of buying and selling in the foreign exchange market. At the Interbank Foreign Exchange (Forex) market, the domestic unit opened lower at 40.50/52 a dollar from previous close of 40.43/44. It later fell to a low of 40.58.Forex dealers said the rupee sentiments were bolstered later in the day after a surge in the stock market. They added that dollar buying by oil refiners to meet their import requirements aided the local unit. Weak Asian stock markets and recovery in dollar against the Yen also partly weighed on rupee sentiments. Meanwhile, the benchmark Sensex posted a gain of 403 points after yesterday''s fall of 770 points. Dealers said heavy dollar sales at the higher levels also pushed the rupee upwards and it touched a high of 40.38 a dollar before concluding the day at Rs 40.4350/4450 a dollar.

Maharashtra To Get 24 Sezs

New Delhi: As many as 101 formal approvals have been cleared for Special Economic Zones in Maharashtra, Madhya Pradesh and Chhattisgarh under the Special Economic Zones Act, 2005. Of the 101 approvals, 24 SEZs will come up in Maharashtra, while three in Madhya Pradesh have been advised and are in various stages of implementation. In Chhattisgarh only one formal approval has been given for setting up an SEZ. In MP, formal approvals have been given for 12 SEZs, of which seven are by Madhya Pradesh State Electronic Development Corporation and Madhya Pradesh Industrial Development Corporation.

Centre On Route To Touch Indirect Tax Mop-Up Target

New Delhi: The Centre''s indirect tax collections have reached Rs 2,21,376 crore upto end-January this fiscal. This represents almost 80 per cent of the Budget estimate of Rs 2,78,013 crore for indirect taxes in 2007-08. Service tax collections up to end-January this fiscal witnessed at Rs 39,559 crore, which is also about 80 per cent of the Budget estimate of Rs 50,200 crore. In April-January 2008, the Centre''s excise duty collections witnessed at Rs 97,559 crore (Budget estimate of Rs 1,29,043 crore) and customs duty collections were Rs 84,258 crore (Budget estimate of Rs 98,770 crore). Meanwhile, in direct taxes, personal income tax collections have reached Rs 93,112 crore during April-February 2008, which is almost 95 per cent of the Budget estimate of Rs 98,774 crore for the current fiscal.

Inflation Rate Soars To Nine-Month High

New Delhi: The rate of inflation soared to 5.11 per cent for the week ended March 1, the highest in over nine months, mainly owing to a rise in the prices of some food articles, certain manufactured products and aviation turbine fuel. With this, the prospects of a cut in interest rates by the Reserve Bank of India to revitalise the sluggish trend in industrial growth appear bleak.
With the inflation rate based on the wholesale price index (WPI) inching up from 5.02 per cent in the previous week, this is for the second consecutive week that it has remained above the tolerance level of five per cent set by the RBI for the current fiscal.
Expressing concern over the price spiral in the Lok Sabha, Finance Minister P. Chidambaram on Friday attributed the rise to high prices of imported food commodities while noting that the Government was ready for any fiscal measures to rein in inflation even as efforts would be made towards self-sufficiency in these essential items. Inflation is on the rise. It is a matter that causes worry to any Government. When inflation is on the rise, all of us should be concerned, Mr. Chidambaram told members in reply to a question while stressing the point that both global and domestic factors were responsible for the rise in the inflation rate from a low of 3.11 per cent.
Mr. Chidambaram pointed out that contributing to the price spiral were the soaring global prices of certain items which India has to import such as crude oil, palm oil and rice. Since inflation was driven mainly by the prices of four commodities - wheat, rice, edible oil and pulses - the only way of insulating the country from the rise in global rates was to become self-sufficient in these commodities. The Government, he said, had taken certain fiscal steps such as reduction in customs and excise duties to check the prices of such items and noted that it was willing to take monetary and other measures also.

RBI Likely To Widen Repo, Reverse Repo Margin

MUMBAI: The Reserve Bank of India (RBI) has hinted at measures to widen the spread between the rates at which it borrows from and lends to banks. This is aimed at giving the regulator more headroom to move either way, given the uncertainties in global markets.

Currently, RBI borrows from banks at 6% through the reverse repo auction and it lends to banks at the rate of 7.75%. The margin can be widened by either increasing the repo rate or reducing the reverse repo rate. Speaking to reporters on Friday, RBI governor YV Reddy pointed out, “By and large, uncertainties would continue. And as of now, it is not clear when things will get normal or a little less abnormal.

In situations where there are lesser uncertainties, it helps to have a smaller corridor between the repo and reverse repo rates and vice versa.” The governor was speaking on the sidelines of a function, where Bank of Mauritius governor Rundheersing Bheenick was delivering an address.

Mr Reddy said that it’s sometimes difficult to guess the magnitude of the uncertainties arising out of the subprime crisis in the US. The central bank governor said that policy makers, across the globe, are cooperating to ensure that the uncertainties meet an early end, but the ultimate source of comfort can come only from the US.

Mr Reddy emphasised that monetary policy management becomes difficult in India, given the fiscal deficit and a large current account deficit. He reiterated that it has been stressed in the recent policy review that rising oil and food prices would exert pressure on price levels.

Speaking on forex derivatives issues, Mr Reddy pointed out that the central bank had been flagging the risks involved in these products. He added that the regulator had been involved in an interactive supervisory role. However, the sensitivity towards these risks is growing more rapidly in recent times, he said.

Incidentally, Standard and Poor’s (S&P) on Friday, estimated that write-downs on account of the subprime crisis could reach $285 billion. According to S&P, the total market value of write-downs of subprime asset-backed securities (ABS) write-downs disclosed so far by financial institutions — banks, brokers, and insurers — well exceeds $150 billion, globally. S&P has estimated that the valuation write-downs of subprime affected ABS could reach $285 billion for the global financial sector.

The governor of Bank of Mauritius highlighted the challenges faced by Mauritius due to unprecedented foreign fund inflows. He pointed out that monetary authorities in Mauritius are currently revisiting their policy framework. Bank of Mauritius is considering the option of increasing the tenure of its special deposit facility and may increase the differential to 200 basis points (from 145 bps) below the key repo rate (9% currently).

Mr Bheenick said that the bank is in talks with other central banks to develop a liquid and deeper market for forex swaps. “We are encouraging investors to take away the focus from the local market and look for opportunities outside Mauritius to boost fund outflows. It is becoming increasingly difficult to distinguish hot money flows from those of a more permanent nature,” he said.

Banks To Get Rs 25K Cr By July To Fund Loan Waiver

NEW DELHI: The Opposition may not have budgeted for this. The UPA government, which has decided to kickstart the waiver programme in 2007-08 itself (zero year), will be releasing Rs 25,000 crore in cash to banks by July 2008. Put simply, it will have to provide two-thirds of the total Rs 60,000-crore farm-waiver package in cash within 14 months.

The government will need to tap tax revenues, non-tax revenues such as dividends, interests, royalties and fees, non-debt capital receipts such as recovery of loans and advances, premium on the sale of sequestered assets, and the initial listing of state-run companies for finding resources for the farm package. Replying to the debate on Budget 2008-09, finance minister P Chidambaram said: “The government would make additional allocations if necessary.”

The process of identifying beneficiary farmers would be completed by June 30, 2008. “RBI and Nabard have asked scheduled commercial banks, regional rural banks (RRBs) and co-operative institutions to give branch-wise data on the overdue accounts by March 14, 2008. RBI and Nabard will submit the data to the government by March 20,” Mr Chidambaram said.

The money would provide banks liquidity equivalent to the debt waiver. They would wipe out farmers’ loans by June 30 to make them eligible for institutional credit, the FM added.

In the disbursement plan, which would be spread over the next three years, Rs 15,000 crore would be provided in 2009-10, Rs 12,000 crore in 2010-11 and Rs 8,000 crore in 2011-12. In 2008-09, it would be 0.25% of the GDP and it will go down in the subsequent years. The minister pointed out that the government had already found Rs 10,000 crore in the current fiscal for the debt-relief fund.

The FM said the buoyancy in tax receipts and the government’s fiscal prudence have given it the “fiscal space” to announce the Rs 60,000 crore loan-waiver package for the debt-laden farmer. He said direct tax collections, which had far exceeded Budget targets in the last four years and indirect tax collections, which also surpassed Budget targets, provided the government enough headroom. Besides, the reduction in fiscal deficit would be 2.5% of the GDP instead of 3% as mandated in the FRBM Act.

Inflation Rises To 9-Month High Of 5.11% On Rising Import Prices

NEW DELHI: Wholesale price-based inflation rose to a nine-month high at 5.11% for the week ended March 1, compared with the previous week’s level of 5.02%. This was on account of rise in prices of non-food articles such as raw rubber, cotton, mustard seed and certain manufactured products such as edible oil, ghee, groundnut oil and aviation turbine fuel (ATF).

Attributing the rise to high imported commodities prices, Finance Minister P Chidambaram said the government was ready to take fiscal measures to control it while trying to make the country self-sufficient in key items. Speaking in the Lok Sabha, the FM also expressed hope that the new comprehensive WPI index, which is in the process of formulation, will take into account the current baskets of goods and services to reflect inflation more accurately.

This is the second week in a row that the inflation rate has crossed 5%, the target set by RBI for this fiscal. Inflation was at 6.51% in the corresponding period last year. Experts feel inflation has become a cost-push rather than a demand-pull phenomenon. There is need to reduce dependence on imports and augment domestic production, they said.

“Pressure on domestic prices is coming primarily from higher global prices of commodities such as energy, edible oil, for which we heavily depend on imports. If the upside pressure on global food and energy fuel prices continues, inflation would touch the 5.5% level by June,” said HDFC Bank chief economist Abheek Barua.

“Demand-side pressure has significantly eased, reflecting lower demand for leveraged financing. In such a situation, monetary measures would play a minor role,” he said. “There is a need to augment the supply of food by taking measures such as ban on export of some products, and boost agri-productivity,” Mr Barua added.

“The dynamics of growth and inflation are gradually becoming more complex with regard to the monetary policy,” said Kotak Mahindra chief economist Indranil Pan. We expect the central bank to keep rates unchanged at its April policy meeting, he added.

During the week under review, the index of manufactured products, accounting for 64% in the inflation basket, rose by 0.2%, while the index for primary articles rose by 0.3% due to higher prices of non-food articles group.

The index of fuel, power and lubricants rose by 0.1%, due to high ATF prices by 6%. The inflation figure for the week ended January 5, 2008, has been revised to 4.26% from the provisional estimate of 3.79% as WPI finally stood at 217.6 points compared with the earlier calculation of 216.6. Among manufactured products, prices of rapeseed oil, mustard oil and imported oil went up by 8% and 6% while khandsari and rice bran oil moved up by 2% each.

Prices of raw rubber, raw tobacco, rapeseed & mustard seed went up by 5% each while raw cotton and groundnut seed prices increased by 1% each. The index of the food article group declined by 0.1% as a result of lower prices of marine fish and eggs. However, gram, mutton and Barley prices surged 2% each.

Rupee Ends 10 Paise Lower Against US Dollar

Mumbai: After tumbling by 24 paise in morning trade, the Indian rupee recovered smartly but still ended lower by 10 paise at 40.43/44 against a dollar amidst a collapse in domestic as well as Asian stock markets, and softening of US currency worldwide. In see-saw trade at the Interbank Foreign Exchange (Forex)market, the local unit opened weak at 40.45/47 against last close of 40.33/34.

The domestic currency dipped further in late morning session to 40.59 a dollar on distinctly weak equity markets across the globe. Forex dealers said dollar buying by banks on behalf of oil refiners to their import requirements aided the weakness in rupee. The world crude oil prices yesterday set a record of 110.20 dollar a barrel in New York.

India imports nearly 70 per cent of its oil, which might further impact negatively on the economy which has already showed a sign of cooling down as industrial growth in January has fallen to 5.3 per cent against 11.6 per cent in the same month last year. Forex dealers said heavy dollar selling by exporters amidst the softening of US currency pulled the rupee upwards in later part of the day. The local unit even touched a high of 40.38 a dollar.

Recovery in rupee was also partly attributed to weak dollar overseas. Dollar touched a record 12-year lower against Yen while all-time low against euro yesterday in New York. However, the collapse of stock markets was so strong that rupee moved downward again to close the day at 40.43/44. Meanwhile, the benchmark Sensex ended sharply lower by 771 points, its sixth lowest fall, while most of the Asian markets also showed bearish trend at end today.

Industrial Sector To Grow By 10.4% In FY 09, Says CMIE

Mumbai: Centre for Monitoring Indian Economy (CMIE) has estimated the expansion at 10.4 per cent for fiscal 2009. CMIE expectS the industrial production to grow by 10.4 per cent in FY 09. The current investment boom is expected to correct the slowdown problem. The reason for the current slowdown in industrial production was the supply problem faced by sectors like cement, aluminium, electricity and steel.

India''s industrial growth slipped to 5.3 per cent in January as compared to 11.6 per cent in the same month last year as growth in all major sectors comprising manufacturing, electricity and mining declined. It expected the country''s gross capital formation to increase by 15.5 per cent in FY 09 and continue to drive growth in its GDP.

CMIE said India''s GDP was expected to grow by 8.9 per cent in FY 08 and 9.1 per cent in FY 09. The real GDP grew by 7.5 per cent in FY 05, nine per cent in FY 06 and 9.6 per cent in FY 07. CMIE''s prediction of a 9.1 per cent growth in real GDP in FY 09 is based on the assumption of an adequate precipitation during the monsoon. Besides, the Union Budget would help fuel growth as the finance minister has proposed a sharp cut in tax rates. For a large section of urban Indian households, this translates into significant additional spending power, CMIE said, adding this is bound to lead to a substantial increase in the demand for consumer durables and other goods and services that have taken a hit in the recent past.

Pension Scheme: UFBU To Decide On Actuarial Firms Likely Next Week

New Delhi: Bank unions under the aegis of the United Forum of Bank Unions (UFBU) and the Indian Banks'' Association (IBA) are likely to, on March 18, decide on the names of the actuarial firms that would compute the additional cost involved in providing one more round of option for bank employees to join the pension scheme. Indications are that both sides may agree on appointing two separate actuarial firms to go into the issue. As of now, there is a wide discrepancy in the cost estimates of the IBA and that of the bank unions. While IBA contends that another round of pension option would imply an additional cost of Rs 26,000 crore, the bank unions are pegging it at about Rs 4,700 crore. In February this year, both IBA and the UFBU signed a memorandum of understanding to discuss the unions'' demands on pension, outsourcing and compassionate appointments. Later, on March 4, both sides fixed a time schedule for discussing the demands.

Capital Goods Production Growth Rate Falls

New Delhi: Government released data on March 12 on industrial growth. Up to now, it was the consumer goods segment which was the slacker as far as growth in 2007-08 was concerned, but the latest data on Index of Industrial Production (IIP) have shown a sharp fall in the growth rate of the capital goods sector, which basically means that fresh investments are not keeping pace with the expected growth projections. The capital goods sector growth fell to just 2.1 per cent.

The IIP data for January 2008 indicated that the overall index grew by 5.3 per cent against a 11.6 per cent growth in January 2007, brought down by the decline in all the major segments like mining (1.8 per cent growth against 7.7 per cent), manufacturing (5.9 per cent against 12.3 per cent) and electricity generation (3.3 per cent against 8.3 per cent). Cumulative April-January 2007-08 data are slightly better, with the mining sector growth at 4.6 per cent (against 4.8 per cent), manufacturing at 9.2 per cent (12.1 per cent) and electricity generation growing at 6.3 per cent (7.6 per cent). Overall IIP for April-January 2007-08 was 8.7 per cent against 11.2 per cent in the comparable period of the preceding year.

Rupee Appreciated On Dollar Sales

Mumbai: The rupee appreciated 13 paise against the greenback on March 12 backed by selling of dollars by exporters. The rupee opened at 40.31/32 and saw an intra-day low of 40.43 before ending the day at 40.32/33, up from the previous close of 40.45/46. The rupee touched a low of 40.43 on dollar buying. It, however, recovered later during the day due to selling by exporters. Foreign exchange dealers expect the rupee to trade in the range of 40.31/32. In forwards, the six-month premia closed at 0.97 per cent (0.79 per cent) and the 12-month closed at 0.86 per cent (0.78 per cent).

Govt Notifies Increase In FDI Limits

New Delhi: Giving effect to the Cabinet decision on relaxing FDI policy, the government on Wednesday issued six notifications raising foreign investment limits in sectors including civil aviation, petroleum refinery and commodity exchanges. The other sectors for which the FDI norms have been relaxed are industrial parks, credit information companies and titanium mining.

The press notes have been issued by the Department of Industrial Policy and Promotion following the decision of the Union Cabinet in January to remove restrictions on foreign investment in various sectors. The government has raised FDI limit in public sector refineries and commodity exchanges to 49 per cent. FDI up to 100 per cent would also be allowed in mineral separation of titanium-bearing minerals and ores, its value- addition and integrated activities subject to prior government approval.

In the civil aviation sector, the press note said 100 per cent FDI would be allowed under the automatic route for greenfield projects, while in existing projects, FDI up to 100 per cent would be allowed with prior government approval. As regards commodity exchanges, the foreign institutional investors (FII) would be allowed to attain a stake of up to 3 per cent while foreign investors can take up to 26 per cent.

Indian Exporters May Get Additional Concessions

New Delhi: Indian exporters likely to get additional concessions in this year''s annual supplement to the foreign trade policy 2004-09 so as to offset the impact of the rising rupee. The supplement is scheduled to be released in the first half of April this year.

Exporters were disappointed with Budget 2008-09 as it does not propose any specific measures to help them tide over the situation. In the April-January period of 2007-08, exports stood at $124.19 billion, an increase of 21.62 per cent from $102.12 billion during the year-ago period.

Net Direct Tax Mop Up Rise

New Delhi: The Centre''s direct tax mop up have witnessed 41.70 per cent rise till February this fiscal to touch Rs 2,32,676 crore, according to the Minister of State for Finance, Mr S.S. Palanimanickam. The recent Union Budget had estimated the revised estimates for direct taxes at Rs 3,04,445 crore for fiscal 2007-08 as against the Budget estimate of Rs 2,67,175 crore for the current fiscal.

Rupee At 40.45 Against US Dollar

In sync with the recovery in stock markets, the Indian rupee on March 11 gained by 3.50 paise to close at 40.45/46 against the greenback. At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed sharply lower at 40.58/59 a dollar against Monday''s close of 40.4850/4950 per dollar.

Forex dealers said the initial weakness in rupee was mainly due to early fall in the benchmark Sensex which fell by nearly 185 points on sluggishness in Asian indices. The rupee premiums on forward dollar ended slightly well on stray paying pressure from banks and corporates. The benchmark six-month forward dollar premiums payable in August ended at 14 - 16 paise, slightly better from 13-1/2 - 15-1/2 paise on Monday and Far-forward maturing in February also edged up at 30 - 32 paise from 29-1/2 - 31-1/2 paise.

Japan Approves Rs 7k Crore For Core Sector

Japan approved a Rs 7,074-crore long-tenure loan at low-interest to fund India''s infrastructure investments, its second batch of assistance for the fiscal. Now, the Japan''s total assistance stands at Rs 8,582 crore, 21% more than last year''s, the government said in a statement issued here quoting finance minister P Chidambaram.

This is the biggest development loan commitment from Japan to India, the highest recipient of such assistance from Japan. The release also said this year''s package includes projects that are important to India, such as Delhi Metro, Kolkata east-west link, Hyderabad outer ring road and Tamil Nadu urban infrastructure development projects. The inclusion of Hogenakkal Water Supply and Flurosis Mitigation Project in the package fulfils a long-standing demand of the people of Tamil Nadu. The statement also said that in the last few years, relations between India and Japan have steadily progressed. India is now negotiating a comprehensive economic partnership agreement (Cepa) with Japan which is expected to further boost ties between the countries.

Rupee Ends Slightly Stronger Against Dollar

Mumbai: The rupee ended the day slightly stronger than Friday''s close. The domestic currency opened at 40.52/54 and strengthened to touch an intra-day low of 40.72. It ended the day at 40.4850/4950, against the previous close at 40.51/52. Dealers said that the rupee slipped during the day, tracking the slump in the domestic stock market. However, the revival in the stock market also buoyed the local currency. In the forward market, the 6-month closed at 0.77 per cent (0.33 per cent) and the 12-month ended at 0.78 per cent (0.48 per cent).

Industry Body Welcomes Karnataka Budget

Chennai/ Bangalore: The Bangalore Chamber of Industry and Commerce (BCIC) has appreciated the emphasis on the development of human capital by further enhancing investment in education, health and social welfare.

This, along with the measures to improve productivity of the agricultural sector, which is the need of the hour along with farm growth, is critical to maintain economic growth, the industry body noted. The move to increase the outlay to the state''s annual plan by 22 per cent and continued support to B-Trac as well as the creation of SPV on connectivity to BIAL was also well received.

India Inc Not In Favor Of 25% Minimum Public Shareholding Norm

New Delhi: Corporate India has expressed it opposition for a uniform 25 per cent minimum public shareholding for all listed companies as proposed by a recent finance ministry discussion paper. Some large companies said the measure would broaden and deepen the equity cult in the country, but feel that a blanket 25 per cent minimum public shareholding norm should not be applied indiscriminately to all companies.

The ministry had floated the paper on February 1 and asked for public comments by the month-end. The minimum public shareholding limit now is 10 per cent. The finance ministry and The Institute of Company Secretaries of India (ICSI) will hold discussions with company representatives on March 29 to evolve a consensus on the proposal.

Inflation Rises To 5.02%

Reserve Bank of India (RBI) Governor YV Reddy''s decision to keep interest rates unchanged has once again been vindicated, with inflation rising to a 10-month high. Rising global prices of food and oil have pushed inflation levels back above the 5 per cent mark for the first time since May of last year. Inflation for the week ended February 23 came in at 5.02 per cent compared to 4.89 per cent, the week before. A bulk of the increase came from the primary articles index, which rose to 6.28 per cent versus 4.89 per cent in the previous week. The food index rose 4.8 per cent versus 2.98 per cent the week before.

The unexpected rise in inflation levels above 5 per cent comes due to soaring global food prices. This factor is likely to continue putting pressure on prices over the next weeks. Analysts now expect inflation levels to remain above 5 per cent over the next few months. The rise in inflation came at a time when signs of slowing GDP growth are also intensifying. The government estimates that GDP growth will slip below 9 per cent in the current financial year. Slowing growth in industrial production and weakness in consumer driven sectors drive it. This weakness has led to calls from policy makers and industrialists to lower interest rates to help support the economy''s growth momentum. But with inflation now back up above the RBI''s target of 5 per cent, it seems increasingly unlikely that the RBI would be willing to cut rates anytime soon. Currently, there are acute policy dilemmas arising from global food and energy prices that need to be factored-in in evolving appropriate policy responses, said YV REDDY, Governor, RBI.Even the government accepts that inflation will remain above 5% in the short term. This indicates that high interest rates will continue to be a reality for months to come.

Total Forex Reserves Touched $300bn

Mumbai: The total foreign exchange reserves touched the $300 billion mark for the first time, with an accumulation for the third week in a row. For the week ended February 29, the reserves increased by $6.625 billion to reach $301.235 billion, according to the Reserve Bank of India. In the previous week, the foreign currency assets had increased by $1.754 billion to reach $294.610 billion. As per the RBI''s weekly statistical supplement, foreign currency assets raised by $6.261 billion to touch $291.250 billion.

Foreign currency assets, as expressed in dollars, include the effect of appreciation or depreciation in non-US currencies held in reserves. The total FII inflows into the equity market for the week under consideration were Rs 1,322.6 crore. Though the rupee was flat against the dollar, the euro had reached a record high of $1.5238 during the week, which also may be reflected in the value of the forex reserves. After remaining unchanged for three weeks, the gold reserves increased by $359 million to reach $9.558 billion. SDRs remained unchanged and the reserve position in the IMF increased by $5 million to touch $427 million.

Gold Resumes At An All-Time High Of Rs 12,885

Gold prices resumed at an all-time high of Rs 12,885 in the bullion market here on March 7 on fresh stockists buying in view of rising trend in the global markets. Silver also crossed Rs 25,000-mark on good industrial demand. Some of the investors shifted their funds in bullion due to fall in equity market, traders said. Standard gold (99.5 purity) rose by Rs 300 per ten grams to Rs 12,885 from the Wednesday''s closing level of Rs 12,585. Pure gold (99.9 purity) also rose to Rs 12,940 from Rs 12,635 previously.

Silver ready (.999 fineness) shot up by Rs 1,000 per kilo to Rs 25,100 from Rs 24,100. In New York, gold futures roared to record highs and silver to a 27-year peak on Wednesday as crude skyrocketed following a decline in the US oil inventories, leaving the metals market focused on the possibility of hitting the long-talked-about level of $1,000 in gold.

Most-active April gold hit a life-of-contract high of $995.20 an ounce on the Comex division of the New York Mercantile Exchange, while May silver hit a contract high of $20.97 an ounce.

LA Trade Delegation To Tap Opportunities In Kolkata

Kolkata: Technology assistance and other forms of economic cooperation via an alliance arrangement is being sought from the Los Angeles County Economic Development Corporation (LAEDC) and the World Trade Center Association (WTCA), Los Angeles Long Beach, for developing an integrated primary healthcare system in Kolkata. A 25-member trade delegation accompanying the WTCA-LAEDC team members, and consisting business and civic leaders from Southern California, is in the city to forge ties between Eastern India and the County of Los Angeles in public and private industries such as logistics, healthcare, tourism, technology and transportation. Already enjoying twin cities status, both sides have also agreed to strengthen existing ties. Supported by the US Consulate, Kolkata and the Bengal Chamber of Commerce and Industry, the trade delegation also comprises representatives of the City of Los Angeles Mayor''s International Trade Office and the Los Angeles Board of Airport Commissioners.

Rupee Hits Nearly Six-Month Low

Continuing its weakness after a brief pause, the Indian rupee hit a nearly six-month low of 40.52/53 against the greenback on March 7 on good dollar demand from banks and oil companies amidst the softening of US currency and sluggish stock markets. The Indian unit has not seen this level since September 17, 2007 after resuming weak at 40.37/39 a dollar compared to its last close of 40.29/30 a dollar. Earlier last month, the rupee had breached the 40-mark level against the dollar for the first time in five months.

The domestic currency has depreciated after gaining by about eight paise in the last two sessions. Forex dealers said banks and oil refiners bought dollars even as Asian stocks fell to their recent lows after global oil prices held near record highs keeping overall pressure on dollar. Meanwhile, the Indian benchmark Sensex tumbled by more than 560 points, or 3.42 per cent while Asian indices dipped by about 1.0 to 3.0 per cent in early trade.

The Reserve Bank also fixed the reference rate for dollar at Rs 40.53 and for the single European unit at Rs 62.40 per euro. The rupee premiums on forward dollar ended sharply higher due to paying pressure from banks and corporates. The benchmark six-month forward dollar premiums payable in August ended at 5-1/2 - 7-1/2 paise, up from 2-1/2 - one paisa discount on Wednesday and Far-forward maturing in February closed remarkably higher at 17-1/2 - 19-1/2 paise from 8 - 10 paise previously. In cross-currency trades, the rupee also weakened against the British sterling, the euro and the yen.

The rupee tumbled against the sterling and ended the day at Rs 81.57/59 per euro from its last close of Rs 79.74/76 per pound and also fell sharply against the Single European currency to Rs 62.42/44 per euro from its previous close of Rs 61.17/19 per euro. The local currency dipped against the Japanese Yen to close at Rs 39.76/78 per 100 yen from Wednesday''s close of Rs 38.88/90 per 100 yen.

India, Japan Trade To Touch $15 Bn By 2010

New Delhi: Trade between India and Japan is poised to double by 2010 from the current $7.5 billion, according to the Confederation of Indian Industry (CII).

This could be achieved if both the countries look at raising the number of items that India exports to Japan under the Comprehensive Economic Partnership Agreement (CEPA), which is currently under negotiation, CII said in its study. India mainly exports gems and jewellery, marine products, minerals and textile products to Japan. Exports could be increased substantially as Japan has very low import duties on most goods.India imports machinery, transport equipment, electronic goods, chemicals and metal products from Japan.

Centre Not To Retain HAL, Begumpet Airports

The Centre is opposed to keeping the existing airports in Bangalore and Hyderabad open after the international airports in these two cities become operational later this month.

Two days ago, the Parliamentary Standing Committee on Transport and Tourism had recommended that HAL airport in Bangalore and Begumpet airport in Hyderabad be kept open.

Union Civil Aviation Secretary Ashok Chawla today said it was not possible for the government to retain both these airports as the Centre’s agreements with the promoters of the new airports granted them exclusive rights over the airspace of these cities.

According to the agreement, HAL airport has to be closed down once the new airport near Devanahalli is operational.

A petition filed by a Bangalore-based advocate seeking continuation of the operation of HAL airport has been adjourned till March 10 by the high court. A similar petition has been filed in the Andhra Pradesh High Court.

“We will respond to the petitions as per the agreement and policy. We cannot retain both the existing airports,” said Chawla, who is on a visit to Bangalore international airport to witness flight trials.

On the recommendation by the Parliamentary Standing Committee, Chawla said, “The government will examine the recommendations of the committee and respond accordingly.”

Earlier in the day, Kingfisher Airlines, Air Deccan and the Indian Air Force participated in trials at the new Bangalore airport.

The trial started with the landing of a Kingfisher flight from Mumbai at 10 am. It was followed by a Deccan flight at 11:06 am. The Kingfisher flight tested the international arrival process while Deccan used the remote parking bay and tested the domestic arrival process. Close to 400 people participated in the trial run.

An aircraft of Air India will be the first to fly out of the new airport on March 30.

Petro Price Hike Impact Negated

Record crude oil prices take losses of oil marketing companies to pre-hike levels.

The positive impact of the February 14 hike in petrol and diesal prices on oil marketing companies has been negated in just a fortnight with daily retail losses of these companies going back to over Rs 410 crore for the fortnight ended February 29. This is due to the steep rise in global crude prices in recent days.

The retail prices were hiked by Rs 2 per litre for petrol and Re 1per litre for diesel.

Indian Oil Corporation (IOC), the country’s largest crude oil refiner and marketer of petroleum products, is losing over Rs 200 crore per day as it sells petrol, diesel, LPG and kerosene at subsidised prices.

It is losing Rs 9.70 on every litre of petrol that it sells and Rs 12.20 on every litre of diesel. It is losing Rs 21 per litre of kerosene sold and Rs 304 per 14.2-kg LPG cylinder.

“The record high crude oil prices have resulted in soaring prices of petroleum products in global markets. Our under-recoveries have proportionately gone up,” said a senior IOC official.

The basket of crude oil that Indian refiners buy touched a fresh high of $98.99 per barrel on Thursday, the latest day for which data are available. The price of the basket has been hitting new highs every day this week, following a record high of $106 per barrel on New York Mercantile Exchange.

The average price of the basket so far this month is $97.66 per barrel, compared with $92.37 per barrel in February and $89.52 per barrel in January.

Just before the prices were raised, IOC was losing around Rs 9 for every litre of petrol sold and Rs 11 per litre of diesel.

“This proves that the price hike in February was very insignificant. There is no way that such a small hike is sustainable,” said a senior official with BPCL, the country’s second largest oil marketing company.

Analysts and industry officials say the worrying part is that the price of crude oil is rising despite a slowdown in the US, the world’s largest consumer. “If the prices keep rising, it will not be long before oil marketing companies become loss-making,” said a Mumbai-based analyst.

It is not just oil marketing companies that suffer as a result of high crude oil prices and price control on petroleum products. Upstream oil companies like Oil and Natural Gas Corporation (ongc) and GAIL India also bear up to a third of the total retail losses of the marketing companies.

ONGC’s subsidy share in this financial year is expected to go up to Rs 24,000 crore compared with Rs 20,000 crore last year. The company recorded lower net profits in the quarter ended December 2007 as a result of this higher subsidy burden.

The government has attempted to control the tax liabilities of the oil marketing companies by withdrawing the ad valorem component of excise duty on petroleum products in the Budget. The tax liabilities of the companies will now not rise even if crude oil prices go up.

Govt Slashes Exporters Subsidy By Rs 600cr

New Delhi: The government has cut allocations to its key export promotions and overseas market development programmes for 2008-09 by a vast Rs 600 crore, at a time when exporters are distressed on account of global slowdown and margin erosion due to rupee appreciation. The Budget has slashed export subsidy by Rs 300 crore while abolishing interest subsidy under the programme ''Assistance for Export Promotion and Market Development''. As against the revised estimates of Rs 1,594 crore for 2007-08, the export subsidy has been reduced to Rs 1,294 crore for 2008-09. The government had given Rs 300 crore as interest subsidy to banks for the current year. Upset with the Budget proposals relating to the export sector, Commerce and Industry Minister Kamal Nath had met Prime Minister Manmohan Singh earlier this week asking fiscal and other measures for the distressed exporters. Finance Minister P Chidambaram had said in the Budget that the interest cost of sterilisation via market stabilisation bonds, estimated at Rs 8,351 crore for the whole year, was in a sense subsidy to the export sector.

Trade And Industry Bodies Hail Kerala Budget

Kochi: The trade and industry here have hailed the State Budget, saying that it is in the right direction by giving several welfare schemes for various sections of the society. Mr Umang Patodia, Chairman, CII, Kerala State Council, said that efforts to promote public-private partnership in infrastructure development, restructuring of PSUs, financial support for KSRTC, and BIFR model institutional set up for SME sector will go a long way in improving and promoting an efficient administration.

Mr Jose Dominic, President of the Cochin Chamber of Commerce and Industry, said that though the government''s purpose to promote infrastructure development is a welcome measure, much more needed to be done in the State to keep pace with the times. Mr R. Mohandas, President of the Indian Chamber of Commerce and Industry, said that the Finance Minister has positively reacted to the Chamber''s suggestion to introduce an amnesty scheme for disposing of arrears of all taxes to be collected by the Commercial Taxes Department under the KGST Act up to the assessment years right from 1991-92 to 2004-05; to conduct this setting up of a fast track adalat on the Ernakulam model; and to extent the decreased rate of 4 per cent tax for cashew kernels to roasted and salted cashew nuts etc.