Companies & Sectors
Progress in Sugar industry - OMC's must use more ethanol

 What the new government can do is to make ethanol blended fuel to be mandatorily used by all state transport vehicles in all the states in India

Six months ago, during the 79th AGM of the Indian Sugar Mills Association (ISMA), Chairman Srinivasan pleaded to the UPA Government to increase the import duty of sugar from 15% to 40%. At the same time, he suggested that the government should also procure at least 20 lakh tonnes of sugar to create a strategic reserve to stabilise the market price through PDS - public distribution system.


At that point of time, sugar mills had also faced serious problems relating to the pending payments (arrears) to farmers for the sugar cane procured from them. Though soft credits were made available, as on 5th June, sugar mills in UP, for instance, have paid only Rs10,939.84 crore out of the total of Rs19,390.57 crore worth of cane obtained from farmers, based on the State Advised Price of Rs280 per quintal, for the 2013-14 season. Thus the outstanding arrears amounted to over Rs8,450 crore.


Anyway, soon after becoming the Food Minister, Ram Vilas Paswan has had serious meetings on the sugar industry's woes with all concerned. It appears the meeting was attended by others like Radha Mohan Singh (Agriculture Minister) and Nitin Gadkari (Transport), among others who evinced keen interest to create conditions that would facilitate settlement of dues to farmers and also induce sugar mills to increase production of ethanol.


It may be recalled that the export incentive of Rs3,300 per tonne was fixed by the previous government which was later reduced to Rs2,277 for shipments during April-May. The current sugar season ends in September and the erstwhile food minister, KV Thomas had decided to do away with this incentive, which was designed to cover the cost of marketing and promotion by mills.


After these deliberations, it seems the new government has decided to revert back to Rs3,300 (as against Rs2,277 fixed for April-May shipments) and continue this till 40 lakh tonnes are shipped between February 2014 and September 2015.


The second major step is likely to be the increase in import duty on sugar from 15% to 40% to curb cheap imports. This would give enable the mills to reduce their stocks and make way for the new ones to come in.


Also, during the meeting a proposal has been made, it appears "to extend loans given equivalent to the excise duty paid by millls in the past 3 years to 5 years".Such a move may also give some relief to the industry.


In a separate move, government has revised the formula for fixing the benchmark price for ethanol to make it more attractive for the mills and to drive benefit from this additional revenue. It is reported in the press that an inter ministerial group, of officials from various ministries, principally from Petroleum, have worked out a formula based on average of the refinery transfer price (RTP) or cost of petrol to the OMC (Oil Marketing Companies) for the previous financial year instead of lowest RTP.


It may be recalled that government had made it mandatory for a 5% blending ethanol which they plan to push it upto 10% OMCs have so far finalised offers for 65 crore litres of ethanol for the current season and 35 crore litres have been already lifted.


Karnataka's public transport system (BMTC) has been championing the cause of use ethanol blended fuel for their use successfully.


What the new government can do is to make ethanol blended fuel to be mandatorily used by ALL State transport vehicles in all the States in India. This would make a big difference and OMCs should be encouraged to put pumping stations in all the State Transport Depots where 10% blended fuel be made available.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)



Sensex, Nifty record further losses – Monday closing report
Nifty is trying to form a short-term bottom around 7,490
As we mentioned in our last week's closing report, the Indian indices suffered further losses, with only few minutes of trading in the green on Monday. The market sentiments were worsened by the rising crude oil price and consequent effect of it on the current account deficit (CAD) of the country. Even the positive comments coming from the prime minister couldn’t revive the market strength.
The S&P BSE 30-share Sensex opened at 25,240 while the NSE 50-share Nifty opened at 7,535. Sensex moved in the range of 25,064 and 25,268 and closed at 25,190 (down 38 points or 0.15%) while the Nifty moved between 7,488 and 7,549 and closed at 7,534 (down 9 points or 0.11%).  The NSE recorded a volume of 111.42 crore shares. India VIX rose 1.24% to close at 17.9825.
Among the other indices on the NSE the top five gainers were IT (1.39%), CPSE (1.32%), Realty (1.26%), PSE (0.97%) and Nifty Midcap 50 (0.74%); while the top five losers were Auto (1.04%), PSU Bank (0.69%), Finance (0.67%), Bank Nifty (0.51%) and Infra (0.47%).
Of the 50 stocks on the Nifty, 23 ended in the green. The top five gainers were Gail (4.77%), BPCL (3.29%), TCS (2.55%), Sun Pharma (2.43%) and DLF (2.42%). The top five losers were M&M (2.94%), Axis Bank (2.54%), LT (2.32%), HDFC (2.01%) and Tata Motors (1.97%).
Of the 1,579 companies on the NSE, 675 closed in the green, 840 closed in the red while 64 closed flat.
Prime Minister Narendra Modi on Saturday said the government would lay targeted focus on the areas of infrastructure, entrepreneurship and skill development.
The annual rate of inflation based on the monthly wholesale price index (WPI) accelerated to 6.01% (provisional) for May 2014, from 5.2% in April, data released by the government said on Monday. The WPI inflation for March 2014 was revised upwards to 6%, from 5.7% reported earlier.
Gail India (3.95%), the top gainer in the Sensex 30 pack, will cut its equity stake in ONGC's mega petrochem sproject at Dahej to 11.6% as the project faces major cost overruns.
With news making round that Mahindra & Mahindra is planning to acquire a stake in Swedish premium car maker Saab, the stock was among the top two losers (2.34%) in the Sensex.
Strides Arcolab (4.97%) was among the top three gainers in the ‘A’ group on the BSE. The stock hit its 52-week high today at Rs 647.60 on the BSE.
Of the PSU Banks, Oriental Bank (3.25%) and Dena Bank (2.99%), were among the top five losers in the ‘A’ group on the BSE.
US indices closed Friday in the green.
The University of Michigan/Thomson Reuters sentiment gauge fell in June to 81.2 — the lowest level in three months. Separately, government data ahead of the open showed wholesale prices for May fell unexpectedly. The Federal Open Market Committee undertakes monetary policy review at a two-day meeting that is to be held on Tuesday.
Except for NZSE 50 (0.16%), Seoul Composite (0.14%) and Taiwan Weighted (0.07%) all the other Asian indices closed in the red. Nikkei 225 (1.09%) was the top loser.
European indices were trading in the red. US Futures were trading lower.


Indian govt hikes gold import tariff value to $411 per 10gms
Over the past two weeks, gold prices across the globe have increased due to rising violence in Iraq that spurred demand for the yellow metal
The Indian government on Monday hiked the import tariff value on gold and silver to $411 per 10 grams and $632 per kg, respectively. Global prices have increased in the wake of escalating violence in Iraq.
In the first fortnight of this month, the tariff value on imported gold stood at $408 per 10grams and silver at $617 per kg.
The import tariff value — base price at which customs duty is determined to prevent under-invoicing — is revised on a fortnightly basis, taking into account the volatility in global prices.
The hike in tariff value on imported gold and silver has been notified by the Central Board of Excise and Customs (CBEC), an official statement said.
In the last two weeks, global gold prices have increased due to rising violence in Iraq that has spurred the demand for the precious metal.
In Singapore, gold prices were ruling firm at $1,283.90 per ounce, while silver stood at $19.79 per ounce at 12.20 p.m. today.
Taking global cues, domestic gold and silver prices remained firm at Rs27,790 per 10 grams and Rs42,500 per kg, respectively.
India’s gold imports have declined over 74% to $1.75 billion in April this year due to restrictions imposed by the government on inbound shipments of the precious metal to narrow the current account deficit.
Gold is the second largest import item for India after petroleum. Due to several curbs, the country’s total gold and silver imports dropped 40% to $33.46 billion in 2013-14 against $55.79 billion in the previous year.
These curbs include raising the import duty on the metal to 10% and also making it mandatory for traders to export 20% of the imported gold. 


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