Stocks
Nifty, Sensex precariously poised – Tuesday closing report
Nifty will be headed lower if it closes below 8,080
 
We had mentioned in Monday’s closing report that Nifty, Sensex are turning weak and that Nifty will be in a downward stretch if it closes below 8,115. The major indices in the Indian stock markets performed listlessly in Tuesday’s trading and closed marginally lower than Monday’s close by less than 0.25%. The trends of the indices in Tuesday’s trading are summarised in the table below:
 
 
Caution over the ongoing results season and weak global cues coupled with reduced chances of a future lending rate cuts dampened investor sentiment and led the major indices in the Indian stock markets to close marginally lower than Monday’s close. The indices had opened lower due to negative import-export data coming out of China. Even the healthy domestic macro data points released on Monday were not able to arrest the slide in Tuesday's trade.
 
The top gainers and top losers of select indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 
 
The European indices were trading 1%-1.2% lower and the US premarket futures were down 0.5%.
 

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Ghost savings: Petroleum Ministry offers an explanation that generates more questions
The Petroleum Ministry now claims a saving of Rs14,672 crore by making assumptions that have nothing to do with subsidy benefits for LPG
 
The Ministry of Petroleum & Natural Gas (MoPNG) while clarifying on 'news items'  has in fact inflated the amount it claims to be saving due to its direct benefit transfer (DBTL or PAHAL) scheme. An analysis done by International Institute for Sustainable Development (IISD),  using publicly available data, revealed maximum potential savings of Rs143.4 crore or just above 1% for FY2015 as against claims of Rs12.557 crore. IISD had calculated the subsidy component of reduced connections due to DBTL. However, the clarification issued by the Ministry says the claimed benefit for FY2014-15 work out to Rs14,672 crore based on its estimates of sales to fake connections, without offering any calculation of subsidy component on such connections.
 
"This is in connection with the news items on subsidies on LPG Cylinders pertaining to inflated claim of the Government about subsidy savings as a result of Pahal. In this connection, it may be mentioned that the subsidy outgo, and consequent subsidy savings, is a result of multiplicity of factors namely (a) Prevailing Crude Price; (b) Prevailing Exchange Rate; and (c) Tax Structure in various States," the Ministry says in its official press release issued on 12 October 2015. 
 
It says, "As on 1 April 2015, there were 18.19 crore registered LPG Consumers and 14.85 crore active consumers implying a gap of 3.34 crore consumers which are duplicate / fake / inactive accounts blocked under PAHAL Scheme and related initiatives. If we take into account the quota of 12 cylinders per consumer and the average LPG subsidy of Rs.336 per cylinder for the year 2014-15, estimated savings in LPG subsidy due to the blocking of 3.34 crore accounts work out to Rs14,672 crore, during that year."
 
Number of Active Consumers in Pahal
 
The above statement from the Ministry says, as on 1 April there were 14.85 active consumers. On 4 March 2015, the Ministry in a release stated that as on 2 March 2015, 81% active consumers (11.74 crore) had joined the Pahal scheme. 
 
In a written reply in Rajya Sabha on 18 March 2015, Dharmendra Pradhan, the Minister of State for MoPNG stated that as on 11 March 2015, 11.94 crore LPG consumers had joined the Pahal and out of this 9.81 crore had received permanent advance or subsidy in their bank accounts.
 
The next release on 13 August 2015, states that as on 13 August 2015, 13.9 crore LPG consumers have joined the Pahal scheme. So let us assume that as on 1 April 2015, there would be about 12 crore active consumers (between 2nd March and 11th March, the figure have gone up by 20 lakh but may have fizzled out, else with this speed it would have cross the total number of LPG consumers by 31st March). However, this does not mean that the 2.85 crore balance active consumers (14.85 crore less 12 crore) were without any subsidy. In fact, every active consumer continued to get subsidy either through Pahal or buying refill at subsidized price. 
 
LPG consumers, who joined the PAHAL scheme, bought LPG cylinders at market price and received LPG subsidy (as per their entitlement) directly into their bank accounts. Those who had not joined the scheme at that time were given a grace period of three months and during this period continue to receive LPG refill at subsidized price. So, no real saving on this count. 
 
Number of Cylinders Consumed By Households in a Year
 
The government provides 12 refill cylinders per year at subsidised rates. However, in several cases not every consumers buys 12 LPG refills. The national average, as per IISD, is 6-7 cylinders per household per year. So during FY2014-15, all LPG consumers, except those 'blocked' as per claims from the government, were receiving subsidy, which in other term means no saving on subsidy as claimed by the MoPNG's latest statement.
 
What is actual amount of subsidy?
 
The Ministry, now claims an estimated saving of Rs14,672 crore for LPG subsidy for 2014-15 just due to blocking of 3.34 crore accounts out of 18.19 crore registered LPG Consumers and 14.85 crore active consumers. This claim is made in a statement on 12 October 2015.
 
Now let us go back. In a statement on 4 March 2015, the Ministry press release stated that "An amount of Rs6,745.41 crore has been transferred since 15 November 2014 through 18.9 crore transactions." Note the date on which the scheme started.
 
Pradhan, the Minister, in a written reply told the Rajya Sabha that "The budgetary allocation [Revised Estimates (RE)] for the year 2014-15 for DBTL subsidy scheme is Rs2,500 crore, which has been transferred to OMCs. As on 5 March 2015, 11.89 crore active LPG consumers have joined the scheme and an amount of Rs7,256 crore has been transferred to the customers by oil marketing companies (OMCs)." 
 
Based on the Minister's reply in the upper house of the Parliament, let us assume the government transferred about Rs8,500 crore to all active consumers, who had joined the Pahal scheme as on 31 March 2015. The number of active consumers as on FY2014-15 was 14.85 crore, as per the Ministry's latest statement.
 
So if 14.85 crore consumers received Rs8,500 crore as subsidy, then by what logic the government has saved Rs14,672 crore by blocking of 3.34 crore accounts? 
 
Is there any real increase in commercial connections?
 
One of the main reasons for misuse of domestic LPG refill was consumption by commercial establishments like hotels. Due to price difference between domestic and commercial LPG refill, almost every commercial entity was (may be still) using domestic cylinders, either bought from black market, using dummy connections or by bribing the suppliers. 
 
If as per the government's claim, 3.34 crore accounts were blocked, then there should be humongous growth in commercial connections. The number of non-domestic connections indeed grew, recording a growth in consumption of 28.2% in March from 26.9% in February 2015, as per data from Indian Oil Corp. At the same time, the consumption of domestic LPG refill fell to 3.1% in March 2015 from 5.8% in a month earlier. During April 2014 to February 2015, the number of domestic LPG consumers increased by 1.4 crore.
 
As IISD stated in its analysis, there is a need to have an informed discussion about the impact of DBTL or Pahal, both as a program itself and as a proposed model for the reform of kerosene and food subsidies, it is crucial that the government provides detailed and accurate data on the way that subsidy savings are calculated.

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Jayakumar takes over as Bank of Baroda CEO
P.S. Jayakumar took charge here on Tuesday as managing director and chief executive officer of the state-run Bank of Baroda (BoB) following a weekend of raids on its Delhi branch by the CBI over a forex fraud case.
 
The chief executive's post at BoB had been vacant for the last 14 months. Jayakumar was named to it by the government on August 14.
 
Jayakumar, who was earlier with Citibank, is the second private sector executive to head a state-run bank following Rakesh Sharma, who joined Canara Bank in September.
 
In August, the government announced the setting up of a Banks Board Bureau (BBB) that will recommend appointment of directors in PSBs and advise on ways to raise funds and deal with issues of stressed assets.
 
Jayakumar will be required to deal immediately with the weekend raids by the Central Bureau of Investigation (CBI) at 50 locations in Delhi in its ongoing probe in connection with a Bank of Baroda branch transferring over Rs.6,172 crore in foreign exchange to Hong Kong.
 
The CBI conducted the raids at the addresses given by the BoB branch in Ashok Vihar area of north Delhi, which transferred the money.
 
"Most of the addresses given by the firms involved were found to be false. But raids continued at 50 locations in the city," a CBI official said.
 
Saturday's raids were conducted a day after the Congress hit out at the Narendra Modi government over the transactions at the BoB branch, saying they were in contravention of rules.
 
More than 30 public and private sector banks may get involved in the investigation on transfer of money by 59 companies through newly opened current accounts at Bank of Baroda.
 
A case has been registered by the CBI under various sections related to criminal conspiracy, cheating and corruption.
 
"It was alleged that 59 current account holders and unknown bank officials conspired to send overseas remittances, mostly to Hong Kong, of foreign exchange worth approximately Rs.6,000 crore in illegal and irregular manner in violation of established banking norms under the garb of payments towards suspected non-existent imports," a CBI statement said on Saturday.
 
A senior official in Delhi told IANS that the case is under investigation and the finance ministry will ask banks to identify any existing black money trail.
 
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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