Link domestic fuel prices with global trend: Montek

The government has already formed an Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee on fuel price deregulation. The EGoM is expected to meet on 7th June

The Planning Commission has pitched for linking of domestic fuel prices with those in the international market saying it is necessary for country's global "economic reputation," reports PTI.

"India's international economic reputation requires us to say that fuel prices are going to be linked to global prices.

I think that linkage (of fuel prices with global prices) is unavoidable," Planning Commission's deputy chairman Montek Singh Ahluwalia told PTI.

Asked about the affect of deregulation of fuel prices on poorest of the poor, he replied, "If you want to give (subsidised) kerosene to BPL households, give them."

"I personally think we should explore that possibility (of giving direct subsidy) as elsewhere in the world that is regarded as very positive thing to move to the direct (fuel) subsidy," he said, when asked about leakages and diversion of subsidy on fuel.
The government has already formed an Empowered Group of Ministers (EGoM) headed by finance minister Pranab Mukherjee on fuel prices deregulation. The EGoM is expected to meet on 7th June.

Besides freeing petrol and diesel prices from government control, dealing with the revenue lost on selling domestic LPG and PDS kerosene below cost is also on agenda of the EGoM.

For petrol and diesel prices to be freed from government control, rates would have to be raised by over Rs6 a litre.

Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum lose Rs255 crore a day by selling fuel below cost. They may end the fiscal with a Rs90,000-crore revenue loss.

They currently sell petrol at a loss of Rs6.07 a litre, while the loss is Rs6.38 per litre of diesel, Rs19.74 per litre of PDS kerosene and Rs254.37 per 14.2-kg LPG cylinder.






Are weak commodity prices foretelling something?

Prices of metals and crude have been on a freefall while gold is running higher. This may not be what the bulls wanted to see

Over the past two weeks, all eyes have been focused on the declining equity markets all over the world. But equally battered have been commodities like metals and crude oil. While the International Monetary Fund (IMF) and the European Union’s $1-trillion rescue package to bail out European nations sparked fears of inflation, this is not reflected at all in commodity prices. The fear of lower demand is overwhelming every other factor.

High grade copper has dipped 14% since the start of this month—from $35.9 to $30.9/lb while three-month lead has slipped to $1,792 a tonne from the $2,100 levels from February 2010. 

Aluminium is down from $1.04 per pound (as on 26 April 2010) to $0.80 per pound on 25 May 2010. On the LME, primary three-month nickel has dipped to $21,625 per tonne from $25,500 in March. Crude oil has dipped 20% from $88.36 from 3 May 2010 to $70.73 per barrel as on 26 May 2010.

Since significant price changes lead the economic trends, are softer commodity prices suggesting a weak economy ahead? “There are concerns about the global economy, so the demand for metals will go down. Money is chasing safer assets like gold. The US and Europe are anyway in trouble and China is a new concern. China is in the grip of a bear market. The growth agents of the world are appearing to be fatigued. It will take more time to solve this problem,” said Jagannadham Thunuguntla, equity head, SMC Capitals Ltd.

“Until the uncertainty in the euro persists, commodity prices will continue to be volatile. We have still not seen a recovery in US markets. Demand and prices of base metals may go down,” said Atul Shah, head-commodities, Emkay Global Financial Services.

Non-precious metals’ trading value dipped 26% at Rs9,59,404 crore this year from Rs12,91,761 crore in 2009 on the Multi-Commodity Exchange (MCX) index.

“On the base metal front, we may see 5%-10% downside in the next quarter. Base metals may only see some stability if there are some positive cues from the eurozone. Crude may dip to $62 to $60 (a barrel),” said Pragnesh Jain, research analyst, Anand Rathi.

China’s dip in industrial production growth at 17.8% in April 2010, which was lower than what analysts expected, indicates a lower demand for base metals. Naturally, gold is emerging as a safe heaven for wary investors. The yellow metal rose to an all-time high of Rs18,629 per 10 gram in the Indian markets on 26th May.

According to a report published by the World Gold Council (WGC), India and China will continue to grow, driven by jewellery demand, in spite of high local currency gold prices. In Q1 2010, India was the strongest performing market as total consumer demand surged 698% to 193.5 tonnes. In China, demand proved resilient, rising 11% in Q1 2010 to 105.2 tonnes.

“Concerns over Greece’s public finances and debt contagion fears in Europe have led to strong buying, particularly for gold coins, bars and gold exchange-traded funds (ETFs) during May, which may show up in the Q2 2010 figures. While momentum in ETF tonnage paused during Q1 2010, gold ETF flows started to rise strongly again in April and May as investors sought less volatile investments to protect their funds against economic turmoil. On 20th May, SPDR Gold Shares (GLD) held a record 1,200 tonnes, with a value of $46.88 billion,” stated the WGC report.

"Commodities were a bull-market phenomenon and the new normal is going to be a lower range of pricing,” said Tim Schuler, investment strategist with The Permal Group, the hedge fund arm of large US investment manager Legg Mason. Speaking at the Legg Mason Investment Symposium in Sydney, Permal said, “Commodity prices will not see the heights of the pre-crisis years again.”

But not all commodities will see a fall in prices. Gold will remain high, said Mr Schuler. “Gold does not behave like other commodities in the market. Gold is a store of value.” Permal is a $20-billion multi-manager of hedge funds and has been around for more than 30 years.

The question is, does a combination of strong gold prices and weak commodity prices mean that business recovery is really weak and inflation expectations are high? That would be a recipe for stalled growth.


Now, misleading insurance ‘schemes’ try to dupe train commuters

Unscrupulous ‘agents’ are trying new ways to sell insurance products by peddling unauthorised schemes which have no approval from insurers

It looks like peddlers of snake oil are now focussing on insurance products. Local trains in Mumbai are plastered with advertisements of an ‘incredible’ deal being offered for selling life insurance products of a leading insurance company.

According to the advertisements, an agent who goes in for this scheme will have to work for two hours a day at two appointments a day, sell five policies a month—which would lead to 60 policies being sold in a year. For doing all this, the agent will get a commission of Rs6,000 per policy, amounting to Rs 3.6 lakh a year, claims the advertisement. What’s more, the ad also offers you a club membership and bonuses. All these advertisements are purported to be policies from Birla Sun Life Insurance.

Moneylife called up the number listed in the advertisement. Kishore Kamale answered our call and said that he could offer this correspondent the post of a ‘financial consultant’.

According to Mr Kamale, anyone seeking employment would have to undergo two days of training and then give an Insurance Regulatory and Development Authority (IRDA) certification exam, in order to get the license. Added to that, the potential ‘financial consultant’ would have to pay Rs800 to register for the exam and get the license.

Mr Kamale invited Moneylife to his office in Thane, (on the outskirts of Mumbai), and told us to bring along documents like 12th standard mark sheets, PAN card, a cancelled cheque, address proof and six passport size photographs.

Mr Kamale told us that he is offering 35% commission on premium for any insurance product sold (mainly traditional plans and Unit-linked Insurance Plans). ”From any of the insurance products you sell, you will get a commission of 35% on premiums,” Mr Kamale said. No mention was made of the club membership or bonuses.

A Birla Sun Life Insurance spokesperson we spoke to said that these schemes were not according to the company’s rules and regulations. When we told them about our conversation with Mr Kamale, the spokesperson said, “Our legal and compliance officer is already in action. He (Mr Kamale) is just misguiding somebody. We will be taking appropriate action against the person involved.” 

This is just one such example of how unscrupulous agents are going to town with fancy schemes which are expressly illegal and are openly duping the public.

Such schemes are proliferating. A few days back, an ‘agent’ started sending SMS messages to the public offering high returns on insurance schemes. The message (not corrected for grammar) said: “SBI Life: Just Pay Monthly Rs1,500 for 5 years, 20th year take Rs10 lakh Child Saving Pension Plan." 

When will these rackets stop?



Knowledgeable Investor

6 years ago

Sorry It is Birla Sunlife Insurance (not Birla Sunlife Mutual Fund) it is typographical error.

Knowledgeable Investor

6 years ago

Why IRDA is Sleeping?

Even a poor old lady was mis-sold, an ULIP policy, by an agent of Birla Sunlife Mutual Fund (22 Years Plan) when that lady had insisted for a single premium policy for 5 years. Finally that policy had been cancelled in cooling off period two days back.

Since IRDA Sleeping will Finance Ministry open its eyes and do the needful.

Kudos to Moneylife team for bringing awareness on this issue with the investing public.

Pintu Das

6 years ago

Will the Railway authority will take any action for pasting such adv. ?

Hemant Beniwal

6 years ago

TERM Insurance. Not many agents would like to talk about and no insurance company would advertise..........

Dillip kumar swain

6 years ago


Dillip kumar swain

6 years ago


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