Citizens' Issues
No diesel, LPG price hike as of now; CCPA meeting postponed

Although the increase in diesel, LPG and kerosene prices was not listed on CCPA agenda, the Committee's meeting had been postponed without assigning any reason or fixing a new date


New Delhi: A meeting of the Cabinet Committee on Political Affairs in India (CCPA), which could have decided on raising diesel and cooking fuel prices, was on Tuesday postponed even as Oil Minister S Jaipal Reddy said the price increase was 'unavoidable', reports PTI.

The CCPA, headed by Prime Minister Manmohan Singh and includes ministers from allies of the UPA alliance, was scheduled to meet this evening but it was postponed without assigning any reason or fixing a new date.

Reddy said although the increase in diesel, cooking gas (LPG) and kerosene prices was not listed on the agenda, CCPA could have discussed the issue based on the revised note on the subject that his ministry had circulated to its members on Monday.

"As I said before, however painful and difficult the increase in price of oil product may be, increase is unavoidable. (To) what extent can consumer take (it) is another matter," he told reporters after meeting Finance Minister P Chidambaram before the announcement of CCPA meeting being postponed was made.

The double whammy of rising input cost (crude oil prices) and fall in value of rupee, which has made imports costlier, would mean that oil PSUs would end the fiscal with a huge Rs1.88 lakh crore revenue loss on selling fuel below cost, he said.

"If it (price hike) is not taken up today, decisions may have to postpone by few days. However I would like to tell the people (that) the increase in price is unavoidable. We will have to perform our unpleasant duty," Reddy said.

Diesel and cooking fuel rates have not been revised since June last year even as oil companies also sell deregulated petrol at a price which is almost Rs6 a litre less than its cost.

"I can't say to what extent price rise will be. If I had the power it would had been done yesterday. I don't know if it will happen today or tomorrow or a week later," he said.

While diesel prices have not been revised since June last year, petrol rates were last hiked in July.

Reddy said he had on Monday circulated an updated version of a note detailing the crisis created by the rise in crude oil prices and fall in value of rupee against the US dollar to members of the CCPA.

Besides the Prime Minister and Chidambaram, the CCPA includes Home Minister Sushilkumar Shinde, Defence Minister AK Antony, NCP leader and Agriculture Minister Sharad Pawar, Telecom Minister Kabil Sibal and Railway Minister Mukum Roy.

"We had circulated a note to all members of CCPA about the problem of increasing under-recoveries (revenue loss on fuel sales)... the under-recoveries will exceed Rs 1.88 lakh crore (this fiscal)," he said. "And prices (are) going up further at the global level; rupee is not softening."

On his meeting with Chidambaram, Reddy said he had "routine interactions" on various proposals but declined to elaborate. "We discussed the figures relating to under-recoveries," he added.

PSU oil firms are losing a record Rs560 crore per day on the sale of regulated diesel and cooking fuels, and another Rs 16 crore a day on petrol.

They are losing about Rs 6 per litre on sale of petrol, a commodity which was freed from government control in June 2010 but whose rates haven't moved in tandem with the cost.

They sell diesel at a loss of Rs19.26 a litre, kerosene at Rs34.34 per litre and domestic LPG at Rs347 per 14.2-kg cylinder.

"I can't take decision (on raising prices) only on the basis of economic facts. We are operating in a political economy. We will have to take a balanced view," he said.


Mobile tariff war may end in next three years: TRAI Chairman

According to the TRAI Chairman, issues like squeezed margin and low profitability for industry will continue for next two to three years and things will improve after that

New Delhi: The cut-throat predatory pricing of mobile call rates, which has weighed on the profitability of telecom companies, may end in 3-5 years, sector regulator Telecom Regulatory Authority of India (TRAI) Chairman has said.
"Next three to five years, we are going to see industry margins are under pressure, companies going looking around for cash to tide them over liquidity crisis and there you are going to see consolidation,"  Chairman Rahul Khullar told PTI.
"As we start seeing consolidation, you will come to a stage when all these trends of predatory pricing will stop," he said.
Rather than cutting call charges - which was the theme about two years ago at the height of the price war - telecom operators are now wooing customers with freebies like same amount of talk time for a lower price or more talk time for the same price.
TRAI Chairman attributed predatory price as one of the key reason for deteriorating condition of telecom industry.
"The other thing which has very adversely effected them is this predatory pricing. Normally predatory prices refers to increase of price that troubles customers but here it is opposite. If one reduced tariff to 10 paisa other slashes it to 5 paisa. Another will reduce it to 1 paisa," he said.
Khullar said that these kind of practice is spoiling business in the industry. "When in competition you spoil whole business of the industry then it is not competition, it is competitive destruction. If you murder each other then is anyone going to gain?"
TRAI Chairman said that the issue like squeezed margin and low profitability for industry will continue for 2 to 3 years and things will improve after that.
"The point which I am trying to make is that rest of the world also sees competition. There are many industry where presence of four to five players increase competition, at some places 7. But view that 12 to 15 (players) are required for competition is nonsense," he said.
Khullar said four to five players amount to fair deal of competition and added that consolidation in the telecom sector is now inevitable.
"Our prediction is that problems will continue for two to three years. From 2014-15, the situation will improve but issue is how will you pass these 2.5 years and there will be constant pressure on industry," he said.
Khullar said that he sees in coming years that industry will start experiencing benefit of 3G and price of 3G devices will fall that will enhance usage of data services.
"When this happens, the composition of revenue shifts from voice to non-voice and as non-voice revenues are more.
That will change fortunes for the better for the telecom companies," Khullar said.


Canara Bank conducting forensic audit of Deccan Chronicle accounts

The government will also study the risk of systemic failure in the case of Deccan Chronicle Holdings as banks exposure to the company stands at around Rs5,000 crore

New Delhi: The government on Tuesday said Canara Bank is conducting forensic audit of the accounts of troubled Deccan Chronicle Holdings Ltd (DCH), which runs a media group and owns an Indian Premier League (IPL) cricket team, reports PTI.
"Canara Bank is the lead banker of lenders' consortium to DCH and the bank is conducting forensic audit of DCH," Financial Services Secretary DK Mittal told reporters.
He said the bank will "see if there are any faults and discrepancies" in DCH.
Mittal said the government will also study the risk of systemic failure in the case of DCH as banks exposure to the company stands at around Rs5,000 crore.
"Government is aware of the Deccan Chronicle Holdings Ltd (DCH) situation. Government wants to study systemic failure in case of DCH," he said.
Mittal said the total exposure of banks to DCHL stands at around Rs5,000 crore of which exposure of public sector banks alone is around Rs3,800 crore.
DCH, the owner of IPL franchisee Deccan Chargers, has not been able to pay the salaries to the players forcing the BCCI to look out for a prospective buyer.
Shares of Deccan Chronicle Holdings closed at Rs12.25, down 7.62% over previous close on the BSE.
Meanwhile, Registrar of Companies (RoC) has initiated a preliminary scrutiny of the books of media group Deccan Chronicle Holdings, which is grappling with financial problems.
"The case is being looked at a very preliminary stage by the RoC," Secretary at Ministry of Corporate Affairs Naved Massod said.


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