The Indian basket of crude on Tuesday touched $105.05 per barrel, necessitating a hike in fuel prices. The three OMCs are currently losing Rs430 crore per day and at current rates are projected to end the fiscal with Rs76,559 crore revenue loss
New Delhi: As crude oil prices climbed to a two-and-half year high of $108 per barrel, the petroleum ministry is pinning hopes on customs and excise duty cut in the Union budget to avoid hiking petrol and diesel prices, reports PTI.
"The spurt in international oil prices following crisis in Libya has meant that the difference between domestic retail selling price and the imported cost widens. This situation is not sustainable," an oil ministry official said.
The Indian basket of crude yesterday touched $105.05 per barrel, necessitating a hike in fuel prices.
"With Parliament in session, I don't see it will be possible to even raise price of petrol, which had been freed from government control in June last year," the official said.
"Also, there are concerns of the inflationary impact of the hike in prices particularly of diesel on food prices", the official said.
Petrol, whose prices were last raised by Rs2.50 a litre in January, is being sold at a discount of Rs2.50-Rs2.75 a litre to its imported cost.
On diesel, state-owned Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation lose Rs10.74 a litre. Besides, they lose Rs21.60 per litre on kerosene and Rs356.07 per 14.2-kg domestic LPG cylinder.
The three oil marketing companies (OMCs) are currently losing Rs430 crore per day and at current rates are projected to end the fiscal with Rs76,559 crore revenue loss.
"If prices cannot be raised, the next best option to limit the impact of rising international oil prices is to reduce duties," the official said.
The ministry is hoping finance minister Pranab Mukherjee in his budget for 2010-11, to be presented on Monday, will abolish customs duty on crude oil and cut excise on petrol and diesel to avoid a further increase in retail prices.
It wants customs or import duty on crude oil to be reduced to zero from 5% at present. Also it wants the customs duty on diesel slashed to 2.5% from 7.5% at present, along with a reduction in the specific excise duty imposed on the most-consumed fuel in the country.
"Eliminating customs duty on crude and correspondingly bringing down duty on finished products would reduce the under-recoveries (revenue loss on selling fuel below cost) that are compensated by the government," he said.
"Instead of collecting customs duty on crude and later refunding the same as under-recovery compensation, the government may eliminate the duty on crude as was done earlier," he said.
The average price of crude oil during 2008-09 was around $82 per barrel, when the duty on crude oil was reduced to zero. The average price of crude oil during 2010-11 has already crossed $82 per barrel and may increase further.
The January report of the Intelligence Bureau, available with Moneylife, attributes rising prices of gold and silver to higher demand, oblivious of the raging global speculation
If the Intelligence Bureau (IB) has to be really useful in the quality of information it sends to various top officials it will have to drastically improve its knowledge of financial markets. In the January report sent to the offices of the prime minister, the home minister, finance ministry, etc, the IB writes that "Gold as well as silver prices are likely to further appreciate this year on the account of an increase in demand, especially from India and China."
The fact is that gold has been more of a global speculative asset for the last several years. As ace speculator George Soros has said: "Gold is the ultimate asset bubble." According to the IB, however, "Gold prices have increased as a result of sustained global demand for gold investment, together with growth in jewellery and industrial demand. Increasing demand by the world's two largest markets, India and China, on account of rising income levels and strong economic growth continue to push up consumption. Other factors that are expected to keep gold prices bullish are concerns over fiscal imbalances; currency tensions; a weakening US dollar; associated fears of global inflation; and increasing availability and accessibility of gold investment products to retail investors." These are tired and catch-all explanations. Gold has been around for 4,000 years. There has never been a shortage of gold. Higher demand is a remote factor in the rise in gold prices. This is because gold is in continuous supply from hundreds of different sources. Being chemically inert, gold suffers no decomposition and so can be used and reused.
The IB's report on the reasons for the rise in silver prices is even more hackneyed. "Apart from its ornamental value, silver is also used for several industrial and commercial purposes such as batteries, mirrors, catalysts, solar energy, photography, x-rays and in many modern electronic items such as coating of DVDs, CDs, circuit boards and television. On account of these varied uses and the rising growth momentum, the demand for silver is rising." It's laughable if one focused on the demand side as the reason for the prices of this age-old metal having jumped by nearly 60% from August last year. Anybody with some idea of global markets knows why silver prices are shooting up. It's not demand from "industrial and commercial" uses. The reason is speculative and technical. The IB officials should start with some Google search.
As we had pointed out yesterday, the silver market is agog with rumours about the possibility that two large banks, JP Morgan and HSBC, are short in the silver market and they would need to cover up their short sales as the price rises. Comex, where silver futures are traded, increased the margin for long positions on Friday. Normally a rise in the margin leads to a decline in speculation and a fall in prices. However, silver actually shot up past its all-time high on Monday and Tuesday, despite the higher margin, leaving observers wondering whether the rising prices were caused by desperate short-sellers covering up and what is the reality of silver positions. The IB, of course is completely oblivious to all this and sending important-sounding analysis to the highest levels in the government.
SBI chairman OP Bhatt said both the mergers which have been done till now-State Bank of Indore and State Bank of Saurashtra-have been done with prior permission on a case-to-case basis from all concerned bodies
Mumbai: State Bank of India, the country's largest lender, today said it has not sought a blanket approval from the government for merging the remaining five subsidiaries with itself, reports PTI.
Bank chairman OP Bhatt said both the mergers which have been done till now-State Bank of Indore and State Bank of Saurashtra-have been done with prior permission on a case-to-case basis from all the concerned bodies like the respective boards, the government and the Reserve Bank of India (RBI).
"We have not sought any blanket permission for the mergers," Mr Bhatt told reporters here when asked about a media report today which said SBI is mulling to merge all the remaining subsidiaries in the next 12-18-months.
He further said that SBI did not meet the Parliamentary Standing Committee on Finance yesterday.
State Bank of Hyderabad, State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Travancore and State Bank of Mysore are the subsidiaries which are yet to be merged with the bank and it is argued that merging them will usher economies of scale and reduce administrative costs.
On SBI's bond issue, he said that the bank has received subscriptions of around Rs6,000-crore for its Rs2,000-crore retail tax saving bond issue (with the green-shoe option) and expects total subscriptions to touch Rs10,000-crore by 28th February when the issue closes.
Mr Bhatt added he 'regrets' the fact that a majority of investors are unable to access the issue as the branches selling the issue need to have demat facility.
"We have decided to come out with one such issue every quarter. We will increase the branches from next quarter onwards," he said.
Meanwhile, Mr Bhatt, who also heads the industry body Indian Banks' Association, came out in strong support for liberalising the entry of foreign banks into the country, saying this will make the market more competitive which in turn strengthens Indian banks and the processes they follow.
The RBI had invited suggestions on the issue recently and is expected to come out with some possible guidelines soon based on the representations it had received.