Department of Economic Affairs secretary Arvind Mayaram too hinted that the government could take more steps to reduce gold imports, which may include banning sale of the yellow metal by banks
With a staggering gold imports at $15 billion in the last two months, the government Monday said there will be corrective measures including a possible ban on sale of gold coins by banks to check the alarming trend that has put huge pressure on current account deficit (CAD).
The Financial Stability Development Council (FSDC), chaired by finance minister P Chidambaram, met and discussed the issue.
For May, the import of gold was 162 tonnes, Chidambaram said after the meeting.
“The Council noted with concern the significant increase in gold imports in recent months and deliberated on the issues involved in this regard,” the finance ministry said in a statement after the meeting.
Department of Economic Affairs secretary Arvind Mayaram too hinted that the government could take more steps to reduce gold imports, which may include banning sale of the yellow metal by banks.
“More steps will have to be taken to reduce gold imports. Export import policy on gold will have to be reviewed. May consider banning gold coin sale by banks,” he said.
The government and the Reserve Bank of India (RBI) have been taking steps to reduce gold import. High import has widened the current account deficit (CAD), which hit a record high of 6.7% of GDP in October-December quarter of 2012-13.
Commerce and industry minister Anand Sharma also expressed serious concern over the issue.
“Yes, I met the FM and discussed it. We have serious concerns. We cannot allow a situation where gold (imports) in the last two months have reached a stage where it is causing huge stress,” Sharma said after the meeting.
“There will be corrective (measures), banks have taken corrective measures. And I am going to review it. And we will ensure that only for actual users gold is imported not for trading purposes. Except gems and jewellery and the gold refinery..., I don't think it should be allowed for trading,” he said.
Gold imports from India, the world’s largest consumer, stood at 860 tonnes in 2012.
Later speaking at a function, Sharma said, “Indians have an insatiable appetite for gold. Import of gold is our shared concern. Last two months, we have imported gold worth $15 billion. Can we afford it? Are people losing confidence in household savings in banks?”
“That 4% (savings rate) has not been a healthy drop. In my understanding our investment must go up to 38%-39%, savings at 35%-36%. We have to make an effort. The only way to manage CAD is to ease pressure on trade account deficit,” he said.
The government and or urea manufacturers must seriously consider setting up overseas units in the Gulf so as to get the best advantage in the present circumstances. Such a move would bring in bilateral benefit whereby India can assure these overseas partners that their foodgrain supply will be guaranteed
Bold advertisements speak of the record production of foodgrain made in the last nine years of UPA (United Progressive Alliance) rule. Production rose from 198.36 million tonnes to a robust 259 million tonnes in 2012-13. Such announcements will not say anything about the million of tonnes lost to rodents, rotting in open warehouses and other forms of damage making them unusable.
In the meantime, the UPA wishes to process and get the Food Security Bill passed, which is expected to assure some 80 crore Indians supply of rice at Rs3 per kg and wheat at Rs4 per kg, thanks to the record production.
Monsoon prediction is good, but it is too early to say how the wind blows.
It is entirely a different matter that in order to achieve this, urea subsidy alone is Rs9,000 per tonne, given to the gas-based fertilizer units. According to information available, the cost of production of urea is Rs15,000 per tonne and the manufacturer is permitted to sell the same at Rs5,360 (MRP) to the farmer, and the government subsidizes by giving Rs9,000. This enables the manufacturer to get a return of 12% while making the urea available to farmer at a uniform price. As against this, imported urea costs anything between Rs22,000 to Rs24,000 per tonne. In addition to which costs of shipping freight, domestic handling and transportation costs to the point of consumption and the intermediary margins will only increase the total burden. The government subsidy will also increase accordingly.
The farmer is assured of a minimum sales price when selling the produce to the government and he is free to sell in the open market to fetch a higher return.
The supply of fertilizers helps the farmer to ensure that his produce is of good quality and marketable. To achieve this, he depends upon the uninterrupted supply of urea at the uniform price.
The installed urea capacity in the country is 200 million tonnes, but the actual production is around 225 MT, against the annual requirement which varies between 305 MT and 310 MT, necessitating the import of some 75/80 million tonnes. Poor rainfall would mean lower consumption of urea.
A reference to the demand for natural gas is necessary to understand the present status of fertilizer units. Because of the dwindling supply of gas, no new fertilizer units have come up (or licensed). In fact, the existing units have shed their ambition to expand simply because of non-guarantee in gas supplies and the continuing need to depend upon imported LNG, of which 10-12 mmscmd are imported.
Led by the agricultural minister Sharad Pawar, a Group of Ministers (GoM) is scheduled to meet next week to consider a revision in the pricing policy of urea which may be kept valid for a period of three years. Such a move will probably give adequate time for the prospective increase in the indigenous gas supplies duly supported by supply pipelines.
What is to be noted is that if the MRP is not fixed and the manufacturer is permitted to fix a remunerative price, urea cost will skyrocket to the farmer and the cost of production will go haywire. The government, obviously, cannot subsidize manufacturers’ profits, but can help to a certain extent. At the same time, it cannot carry on this programme of indefinitely subsidizing the urea cost.
It therefore remains to be seen the kind of reception that Food Security Bill will get in the Parliament, though, the opposition led by BJP has outwardly, at least, claimed that it has no objection in taking up this issue.
In the meantime, the government and or urea manufacturers must seriously consider setting up overseas units in UAE, Kuwait, Saudi Arabia, Qatar and Iran so as to get the best advantage in the present circumstances. Such a move would bring in bilateral benefit whereby India can assure these overseas partners that their foodgrain supply will be guaranteed, and, in the process, cost of production of urea will be considerably cheaper than in India!
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
The questioning of Bansal will revolve around his role in the appointment of suspended Railway Board member (staff) Mahesh Kumar involving his nephew Vijay Singla who was allegedly caught accepting a bribe of Rs90 lakh
The Central Bureau of Investigation (CBI) has summoned former Railway Minister Pawan Kumar Bansal for questioning today in connection with the railway bribery case.
Agency sources said that Bansal has been called in the afternoon for questioning in the case.
The questioning of Bansal will revolve around his role in the appointment of suspended Railway Board member (staff) Mahesh Kumar involving his nephew Vijay Singla who was allegedly caught accepting a bribe of Rs90 lakh, the sources said.
Bansal, who had to resign from the Union Cabinet in the aftermath of the case involving his nephew who is alleged to have been operating from his official residence, has been maintaining that he had done no wrong in the appointment of Kumar as member of the Railway Board, a post equivalent to secretary in the government.
While the CBI has managed to secure all files pertaining to the appointment and also recorded the statement of Kumar, his nephew and private secretary Rahul Bhandari, Bansal will be confronted with the evidence collected by the probe agency about his meeting with the suspended Railway Board member in Mumbai on 16th April this year.
Bansal is alleged to have met Kumar in Mumbai on 16th April and the agency claimed that during this meeting the appointment of Kumar, who was general manager (West), was confirmed.
CBI sources said questioning Singla and his associates had led the agency to understand “the role of authority which was supposed to change Kumar's discipline from member (staff) to member (electrical) and allow him to continue with additional charge of GM (West).”
Lateral shifting of the Board members is done in the same manner as the appointment of a new member, which is finalised after vigilance clearance and the nod of the Appointments Committee of the Cabinet.
There are some telephonic intercepts which may come up during the questioning of Bansal, the sources said.
Over 1,000 phone calls were intercepted during the two-month surveillance on Mahesh Kumar and Singla. CBI has so far arrested nine persons in the case.