Kalmadi likely to be arrested by CBI today

The CBI had gathered fresh leads after the trip of its two-member team to London in connection with cases related to alleged irregularities in hiring of AM Films and AM Car and Van Hire Limited during QBR held in 2009 at exorbitant rates

New Delhi: Suresh Kalmadi is likely to be arrested today by the Central Bureau of Investigation (CBI) which questioned him over alleged irregularities in the conduct of Queen's Baton Relay (QBR) held in London in 2009, reports PTI.

The agency is expected to arrest him later today and come out with a statement, CBI sources said.

The agency had asked Mr Kalmadi, sacked as chairman of the Commonwealth Games (CWG) organising committee, to appear before it in order to clarify some new issues which surfaced during the visit of the agency's officials to London in connection with QBR scam.

Mr Kalmadi had earlier expressed his inability to appear before the CBI citing his foreign visit, saying he would return home only after 19th April. But even after returning from his visit abroad, he did not turn up before the agency saying he was still not in Delhi.

The CBI had gathered fresh leads after the trip of its two-member team to London in connection with cases related to alleged irregularities in hiring of AM Films and AM Car and Van Hire Limited during QBR held in 2009 at exorbitant rates, sources in the agency said.

The team has spoken to the London-based owner of both the companies-Ashish Patel-who has provided information and documents with regard to the allegedly overvalued deal, the sources said.

AM Car and Van Hire company in London was engaged during QBR in 2009 to provide services like taxis for the guests and OC members. AM Films was hired to provide display monitors during the event.

The CBI team during its visit to London had also questioned other companies which were in the fray for the contract.

The agency had sent a two-member team comprising additional director VK Gupta and DIG SK Palsania to London to probe the payments made to the two companies allegedly with Mr Kalmadi's tacit approval, they said.

CBI now wants Mr Kalmadi to respond to the fresh information on the monetary transactions with the two companies.

This is the third time that Mr Kalmadi has appeared before the investigating agency for facing questions relating to the CWG scam.

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Why blame speculators?

Whether it is cotton or copper, oil or food, politicians are in the habit of blaming the spiraling prices on speculators. But the reality is that loose monetary policies create an environment that encourages cheap loans which speculators are happy to put to use, raising the prices of commodities

They are bad. They are evil. They are no good. Who has this awful reputation? Speculators, of course. They are greedy, self-indulgent with an insatiable lust for money. At least that is what politicians want us to think. As gasoline prices in the United States head toward $6 a gallon ($1.60 a litre), president Barack Obama has promised to do something about these wicked, wicked people. He said that he was setting up the team "to root out any cases of fraud or manipulation in the oil markets that might affect gas prices-and that includes the role of traders and speculators." There is one problem. He has to start with himself, the US government, and governments around the world.

In the past few years, the world has been subjected to politicians castigating markets for high prices. Sometimes it is food. Other times it is energy. Whatever the commodity, and whatever the price, they seem to believe that the reason has something to do with the market. The reality is that it always gets back to the government and its policies. It is also not just one government. It is all of them. In recent years, governments around the world have followed policies to stimulate growth in their economies that have had unintended consequences for others.

The high price of oil is generally ascribed to several factors. The first is the unrest in the Middle East, specifically the lack of shipments from Libya. Another factor is the dollar. Since oil is quoted in dollars, its devaluation has caused oil to become less expensive. Third, economists like to point to demand from emerging markets whose red-hot economies require ever more oil. All of these are good points, but how did they happen?

The lack of supply from Libya is certainly a valid reason, but I cannot remember a time when the Middle East wasn't volatile. At the beginning of the Iraq war the price of oil "spiked" to $37 a barrel. Although Iraqi oil had already been subject to an embargo, a substantial amount was leaking onto the world markets. This ceased after the war started, but the price of oil was soon down to $30 a barrel.

The low dollar is an excellent cause for the high price of oil; but who exactly is responsible for that? The central bank of the United States government; the Federal Reserve in order to stimulate the economy has embarked on a programme of ultra-low interest rates and since last summer, quantitative easing. The programme has had the intended effect. US interest rates are very low, but so is the value of the dollar.

The monetary easing has leaked out of the US and into emerging markets. Capital flows into the Asian and Latin American blocs have exceeded the last peak in 2006-07 and Asian inflows are 60% above that level. According to IMF research, monetary easing by the US, Japan and the EU has in the past transferred itself completely to emerging markets. This has pushed up the demand for subsidised oil as well as inflation in those markets to dangerous levels.

It is not only the G4. The Chinese bank lending programmes, over the past two years, have pumped close to $3 trillion into their economy. This not only stimulated a housing bubble, but additional demand. China's currency manipulation has resulted in a foreign reserves pile which has helped keep US interest rates low.

As to the speculators themselves, we have to ask where did they get all the money from to fuel their rampant speculation? Well, the loose monetary policies have created an environment that has encouraged cheap loans either directly or through the carry trade. US banks are flush with money, but with the economy still weak, the demand for loans is low. In contrast, speculators are happy to put this cheap cash to work raising the price of cotton, metals, coking coal, sugar, oil, coffee, copper, rice, corn, heating oil and gold to new highs. Free money always finds an outlet. Since the cost of capital does not reflect its true value, its allocation ceases to be efficient.

The Federal Reserve's job, according to the former chairman William Martin, was "to take away the punch bowl just as the party gets going". The present central bankers gave the punch bowl to the worst alcoholics and are then surprised when they trash the place.

According to a US senate committee, the 2008 crash was caused by low policy interest rates in rich countries and recycled trade deficit dollars out of poor export financing foreign countries and exacerbated by not understanding that markets need fair and enforced rules to thrive. Sound familiar? So world leaders shouldn't blame the speculators, if they want the culprit they only need to look in a mirror.

(The writer is president of Emerging Market Strategies and can be contacted at [email protected] or [email protected])

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COMMENTS

citizenindia

6 years ago

starting with the developed world.......the fed , ecb ......

Oil ministry orders RIL to stop KG-D6 gas supply to non-core users

The government pointed out that Reliance, in its gas supply and pricing dispute with Anil Ambani Group's Reliance Natural Resources (RNRL), had submitted to the Supreme Court that it is a mere contractor and the government alone has the right to fix price as well as users of the gas

New Delhi: Admonishing the defiant Reliance Industries (RIL), the oil ministry has ordered the Mukesh Ambani-run firm to immediately stop natural gas sales to non-core users like Essar Steel to meet the full demand of fertiliser and power plants, reports PTI.

Citing the May 2010 Supreme Court ruling that upheld the government's right to frame the gas utilisation policy, the ministry last week wrote to Reliance directing it to first supply natural gas from its KG-D6 fields to priority sectors like fertiliser and power, official sources said.

Reliance is currently producing around 50 million cubic metres a day of gas from its eastern offshore KG-D6 gas block, just enough to meet contracted demand of priority sectors-urea manufacturing units, power plants, LPG extraction plants and city gas distribution companies.

It had refused to abide by the ministry's previous order that wanted the fuel to go to sectors like steel, refineries and petrochemical only if there was any gas left after meeting demand of core sectors.

Non-core sponge iron plants, petrochemicals units and oil refineries have cornered 13.13 million metric standard cubic metres per day (mmscmd) out of the 60.76 mmscmd of KG-D6 gas that the government had allocated in 2008 and 2009.

With production dipping to around 50 mmscmd, a worried oil ministry wanted the fuel to first go to core sectors.

But Reliance has refused to follow the dictat and has continued to follow the July 2010 policy of pro rata allocation, translating into proportionate cuts in supplies to all consumers, including urea-making plants and electricity generation units, they said.

A Reliance spokesperson could not be immediately reached for comment.

With production just a tad above the 47.59 mmscmd quota allocated to core sectors, Reliance says it cannot stop supplies to any customer unless the government indemnifies it against any legal and financial damages arising from such action.

Sources said the ministry was not impressed by the firm's reasoning and cited the Supreme Court's ruling to buttress its point.

Reliance had in its gas supply and pricing dispute with Anil Ambani Group's Reliance Natural Resources (RNRL) submitted to the Supreme Court that it is a mere contractor and the government alone has the right to fix price as well as users of the gas.

The same stand was taken by the government, which the Supreme Court upheld in its 7th May judgement.

Sources said Reliance itself had contended that it has no ownership over gas and it is bound by government orders and its gas utilisation policy (GUP).

The logic behind the ministry's order is that it does not want fertiliser production or generation of electricity during peak summer months to suffer because of a fall in KG-D6 gas output.

Reliance has so far signed up customers for 60.76 mmscmd of gas, while production from its eastern offshore KG-D6 fields in the week ending 3rd April was about 49 mmscmd. Output is lower than the 61.5 mmscmd output achieved in March 2010.

The government had accorded highest priority to urea plants followed by LPG extraction units, power plants and city gas distribution projects while allocating KG-D6 gas.

Sixteen fertiliser plants have been allocated 15.35 mmscmd of KG-D6 gas on a firm or permanent basis, while 27 power plants in the public and private sector have got 29 mmscmd.

A sizeable 7.79 mmscmd of gas has been signed up by steel producers, while LPG plants have been allotted 2.59 mmscmd.

Refineries, including that of Reliance, have been given 3.46 mmscmd, city gas projects 0.65 mmscmd and petrochemical plants the balance 1.92 mmscmd.

The priority sector allocation totals 47.59 mmscmd, leaving almost very little for steel plants, refineries and petrochemical units from current production, they said.

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