Nation
Daily pan-India fuel pricing from Friday, dealers won't strike
The hurdles have been cleared for India to switch over from Friday to the daily pricing mode for transport fuels in line with global rates as petroleum dealers have withdrawn their call for closure of vends on June 16. The government agreed to their demand that the price announcement would be daily made at 6 a.m. instead of midnight.
 
Petroleum Minister Dharmendra Pradhan told reporters here on Wednesday that the dealers were agreeable to the new timing and the countrywide daily revision of petrol and diesel prices from June 16 as decided.
 
At present, the state-run oil marketing companies (OMCs) review and revise retail fuel prices every fortnight on the basis of global crude oil prices, while the revision takes effect from midnight. Dealers had represented for a change in timing as under the new regime they would have to deploy manpower everyday to change rates at mid-night.
 
"There were some practical difficulties which we have addressed in our meeting with leadership of all the three petroleum dealers association today (Wednesday). Daily prices will change from 6 a.m.," Pradhan said.
 
Federation of All India Petroleum Traders (FAIPT) President Ashok Badhwar said they were withdrawing their call for the protest closure of vends on Friday because the government had taken the decision of daily price revision in public interest.
 
"And in public interest, we are also withdrawing 'No Sale No Purchase' agitation planned for June 16," he said.
 
Daily revision of retail selling prices (RSP) has already been implemented on a pilot basis in Udaipur, Jamshedpur, Visakhapatnam, Chandigarh and Puducherry from May 1.
 
After the success of the five cities pilot, Indian Oil Corp (IOC), Hindustan Petroleum Corporation and Bharat Petroleum Corporation have now decided to implement it across the country.
 
"This move will ensure that the benefit of even the smallest change in international oil prices can be passed down the line to the dealers and the end-users," Indian Oil said in a statement here. 
 
The FAIPT had earlier voiced concern about the impact of dynamic pricing on dealers' margins.
 
"Dealers of five cities where it was launched have already burnt their fingers. They are crying at the inventory loss that they have already suffered due to the fluctuations in the daily changing prices," FAIPT said in a statement.
 
On Tuesday, IOC sought to reassure dealers on their concerns about inventory loss due to the daily revision of fuel prices, even as the Delhi Petrol Dealers Association said it will join the protest closure of pumps on Friday.
 
"The fear of dealers about inventory loss is unwarranted as the change of prices will happen both upwards as well as downwards, and thus both gain and loss would compensate each other," IOC said in a release here.
 
All 26,000-plus, Indian Oil dealers will be given timely information on the effective prices for the day.
 
"At a large number of Indian Oil's 10,000 automated fuel stations, daily price can be automatically updated centrally. Besides, technology also provides for scheduling the price change at midnight," it said. 
 
The Delhi Petrol Dealers Association said on Tuesday that the automation system installed by oil companies at most of the pumps in the capital are "not supporting the automatic price change in the dispensing machine".
 
"Unless the price is pushed automatically through the automation system, the petrol dealers are not ready to do it manually or fetch the price on a daily basis as being advised by the oil marketing companies."
 
"This manual intervention can lead to errors and delays in operation of the petrol pump," it said.
 
India has opted for dynamic pricing, which is practised in many developed countries, owing to the recent volatility in global crude oil prices.
 
Though oil prices had earlier fallen by more than 50 per cent in less than two years, from levels of over $120 a barrel, output cuts implemented by OPEC and non-OPEC producers this year have brought volatility in crude prices. These continued on their downward spiral following the OPEC cartel's decision last month to extend output cuts. 
 
The Indian basket of crude oils closed below the psychologically important $50-a-barrel mark last week as geopolitical tensions in the Middle East raised market concerns.
 
According to official data, the Indian basket, comprising 73 per cent sour-grade Dubai and Oman crudes and the balance in sweet-grade Brent, closed trade on Tuesday at $47.23 for a barrel of 159 litres.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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Despite progress, farmer-centric pricing still to be implemented: Swaminathan
Eminent agriculture scientist and National Commission on Farmers (NCF) Chairman M.S. Swaminathan on Wednesday said that despite some progress, issues like farmer-centric pricing, procurement, and public distribution are still to implemented.
 
"Despite progress, farmer-centric pricing, procurement, public distribution still to implement," Swaminathan said in a tweet.
 
Swaminthan, who is the founder of M.S. Swaminathan Research Foundation, also felt that the answers to the agrarian crisis lie in enhancing the productivity of small farms and ensuring adequate public procurement at remunerative prices. 
 
"The agrarian crisis, now affecting small and marginal farmers in several states, arises largely from the unfavourable cost-risk and return structure of farming," Swaminathan said on Tuesday.
 
He also termed farm loan waivers as a temporary, short-term solution to the agrarian crisis and said it is "time that the recommendations contained in the Reports of the National Commission on Farmers, particularly the chapter on farmers of the 21st century, are implemented".
 
Noting that his recommendations were formulated after discussion with farmers in all parts of the country, Swaminathan said: "Therefore, there is widespread demand among farmers that they be implemented without further delay." 
 
He said that long-term solutions are important to ensure that farming remains an occupation of choice among the majority of the rural population in the country. 
 
Swaminathan's remarks came against the backdrop of the ongoing protest of farmers in Madhya Pradesh, who have asked the government to write off their loans and to give a good price for their produce.
 
On June 6, five protesting farmers were killed in a police firing in Madhya Pradesh's Mandsaur town.
 
The farmers in Maharashtra had also staged protests but called it off after the state government promised a loan waiver.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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Farm loan waiver to hit banks more; No impact on MFIs and NBFCs, says Morgan Stanley report
The recent announcement by two state governments on farm loan waiver will affect banks more compared with micro-finance institutions (MFIs) and non-banking finance companies (NBFCs), says a research report. The state governments of Uttar Pradesh announced a farm loan waiver in April and Maharashtra announced one in June. 
 
In a note, Morgan Stanley says, "These loan waivers apply only to loans by banks which in due course will get compensated by the respective state governments. However, the concern is risk of 'moral hazard' or wilful defaults by borrowers. We agree with the moral hazard risk from rural lending for lenders and will need to wait and see how it affects second order non-performing loan (NPL) formation. However, in our view, the impact is likely to be greater for banks with large unsecured farm loans and less for secured loans or joint liability group (JLG) lending."
 
 
According to the report, investors are concerned about the risk of higher loan defaults at MFIs and NBFCs with rural exposure owing to recent farm loan waivers and demand for waivers in more states. There are news reports of demands for loan waivers by farmers in more states – some of them being Tamil Nadu, Haryana, Punjab, Madhya Pradesh, Gujarat and Karnataka.
 
"We will know the exact impact of farm loan waivers on these businesses only with a lag," Morgan Stanley says, adding, "management commentary and initial data points suggest no material impact till now."
 
Feedback from these companies suggests that while farm loan waivers are bad for credit culture and may 'intuitively' appear bad for business; historically there has been little negative impact. "Their experience suggests that what hurts collections is disruption of operations (from events like demonetisation) rather than farm loan waiver. As Per Bharat Financial Inclusion, earlier known as SKS Microfinance (BHAFIN), its collections continued to improve even following the Uttar Pradesh loan waiver announcement in April. The management of Mahindra and Mahindra Financial Services Ltd (MMFS) also saw no meaningful impact from the previous farm loan waiver in 2009. Management attributes this to awareness among borrowers regarding applicability of farm loan waivers and the option with MMFS to repossess the vehicle in the event of default," the report added.
 
Morgan Stanley, while explaining why it had remained over weight on BHAFIN, says, its numbers screen much better than rest of the industry. Rural microfinance has also done much better than urban microfinance during demonetisation, as credit bureau data suggest. 
 
As of March 2017, BHAFIN’s 30-day overdue ratio was 7.4% compared with 14.1% for the MFI industry; its 90-day overdue ratio was 4.0% as against 8.2%. As per the company management, the difference stems from the company's weekly collection model and focus on rural microfinance against urban microfinance, which is more crowded. For BHAFIN 79% is rural and 21% is urban; while for the MFI industry, 53% was urban vs. 33% about four years ago. 
 
   
 
According to Morgan Stanley, rural economic indicators in India are looking good. It says, "...rural government spending was up about 24% in FY2017 and is budgeted to increase another 10% in FY2018. Also, monsoon is expected to be near normal for a second consecutive year after two years of drought. Rural wage growth has been rising and tractor and two-wheeler sales have rebounded sharply from demonetisation lows."
 
Expressing concern over the demand for farm loan waiver from more states, the report feel it is still premature to build in higher loan losses for BHAFIN than its current assumptions. "BHAFIN management has mentioned that collections have been improving across states. We are working with the assumption that borrowers who did not default amid demonetisation and political instigation are unlikely to break credit discipline because of farm loan waivers. Having said that, BHAFIN's loan exposures to states where there is a demand for farm loan waivers are – Tamil Nadu (0%), Madhya Pradesh (3.8%), Punjab (1.5%), Haryana (1.8%), Gujarat (0%) and Karnataka
(12.4%). We note per management commentary, that parts of Karnataka that were affected have been showing improvement in collections," Morgan Stanley added.

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COMMENTS

B. Yerram Raju

2 weeks ago

Private loans of farmers are the real cause of distress as several farmers, particularly the small and marginal farmers and tenant farmers did not get the full institutional credit. When credit and farmer go together for achieving high production, in the context of bumper production, how can farmers say that they are short of credit and therefore hit? It is not credit that is issue so much as prices and marketing. Farmer never deceived the nation. But the nation deceived the farmer. Is waiver of loans a solution? The waiver when implemented would benefit more the private money lenders as the waiver amount would be used for repaying the costly debt of the farmer that is incurred more for social and family needs and also for production purposes through the fertiliser and input dealers. Farmers need better aggregators at the village level for the farm production to command the market as the kutcha adthiyars under whose control the agricultural market yards are functioning in the country currently. Farmers unite for agitations and not for gaining the benefits of aggregation and getting to better markets. It is robust insurance mechanisms that would hold the key. Present agricultural insurance PMFBY is no deal at all. South Korea has better model for us to follow.

GLN Prasad

2 weeks ago

Still neither Banks nor RBI ever do these types of exercises and some outside agency should work for them to provide this data.

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