RBI calls for immediate hike in prices of petro products

“The outlook for crude oil prices in the near future is uncertain, given the geopolitical situation in the Middle East and North Africa. In any case, the likelihood of oil prices moderating significantly is low,” RBI governor D Subbarao said

Mumbai: With rising crude oil prices widening the gap between the retail fuel price and their cost of production, the Reserve Bank of India (RBI) today called for an immediate hike in petrol and diesel prices, even if it adds to inflationary pressure and moderates economic growth, reports PTI.

“The critical assumption that petroleum and fertiliser subsidies would be capped is bound to be seriously tested at prevailing crude oil prices. Even though an adjustment of domestic retail prices may add to the inflation rate in the short run, the RBI believes that this needs to be done as soon as possible,” RBI governor D Subbarao said.

Releasing the Monetary Policy Statement for 2011-12, he added that the failure to increase retail prices would increase the government’s fiscal deficit.

The government has not allowed state-owned oil marketing companies to revise diesel prices since June last year when crude oil was ruling at $72-$73 per barrel. Crude oil is today trading at over $110 a barrel in international markets.

Diesel prices will need to be hiked by over Rs18 per litre if retail prices are to be brought at international parity and the June 2010 decision of freeing its prices from government control is to be implemented.

Also, the government has not allowed oil firms to hike the price of petrol, a commodity which was freed from control in June last year. Petrol is currently being undersold by Rs8.50 per litre.

In addition, domestic LPG and kerosene, too, are sold at an artificially lower price. Unchanged prices of diesel, domestic LPG and kerosene would mean that the government will have to find ways to meet the over Rs1,80,000 crore revenue loss projected for the current fiscal.

Mr Subbarao said the currently prevailing high crude and commodity prices have been taken into account while projecting the 8% gross domestic product (GDP) growth for this fiscal.

“Going forward, high oil and other commodity prices and the impact of the RBI’s anti-inflationary monetary stance will moderate growth,” he said.

The RBI said that it has arrived at an 8% projection for GDP growth by factoring in international crude prices at an average of $110 per barrel for the full 2011-12 fiscal.

Mr Subbarao said the rising commodity prices are going to affect all the emerging economies.

In its report, the central bank admitted that global crude prices remain volatile.

“The outlook for crude oil prices in the near future is uncertain, given the geopolitical situation in the Middle East and North Africa (MENA). In any case, the likelihood of oil prices moderating significantly is low,” Mr Subbarao said.

The recent conflict in Egypt and Tunisia, followed by the ongoing civil war in Libya, has taken global crude prices to a high of over two-and-a-half years.

The RBI said that prices of oil, along with some other commodities like minerals, fibres, rubber and coal, will shape the inflation outlook.

“To the extent the increase in input prices translates to output prices, it will have an influence on the inflation path,” Mr Subbarao said.

Inflation has stood above 8% since January 2010, and the RBI said that it is likely to average 9% during the first half of the current fiscal, before moderating to around 6% in March 2012.

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Steel demand in India to grow faster by over 13% this year: World Steel Association

The global body expects strong growth in the use of steel in the country due to its strong domestic economy, massive infrastructure requirements and industrial expansion. Demand in developed economies slowing

Steel demand in India is estimated to grow by an impressive 13.3% to 68.7 million tonnes in 2011 and still higher by 14.3% next year on strong domestic growth, massive infrastructure needs and expansion of industrial production, according to the World Steel Association (WSA). Steel demand in the country grew by about 10% last year.

 In its 'short range outlook' for the steel business published recently, WSA estimated global apparent steel consumption to increase by 5.9% to 1,359 million tonnes in 2011, and in 2012 this could grow by 6% to a record 1,441 million tonnes. Last year, steel demand grew by 13.2%.

"This year is the final year of the 11th Five-Year Plan and the government will emphasise on completing infrastructure projects. Taking this into consideration, steel demand would get momentum this year," Ravindra Deshpande, analyst, Elara Securities, told Moneylife.

Developing economies will be the frontrunners in steel consumption going forward as steel use in these economies is expected to be 38% more than in 2007, whereas in the western world steel use will be 14% below the 2007 level.

"2010 saw a steady recovery of steel demand, which began in the second half of 2009 driven by stimulus packages globally, the resilience of emerging economies and an overall market recovery. In 2011, we expect to see a further 5.9% growth in world steel demand," said Daniel Novegil, chairman, WSA.

The association said that its forecast is based on a stable and steady recovery of the world economy, and it warned that recent events such as unrest in the MENA region, financial fragility in Europe, and the massive earthquake and tsunami in Japan would have a negative impact on economic recovery and thereby affect steel demand.

China, the world's largest steel producer, should maintain consumption growth of 5% at 605 million tonnes in 2011, following a 5.1% growth in 2010. WSA also said that given the pace of steel production in China, in the January-March quarter this year, the country's steel use could be even higher. However, the Chinese government's steps to cool down the real estate sector would impact steel demand by the end of this year.
 
Japanese steel consumption is also likely to slip by 1.2% to 63 million tonnes in 2011 as stimulus packages expire. However, WSA said that it was too early to predict the impact of the earthquake and tsunami. The US market will also see a growth by 13% to 90.5 million tonnes this year, due to the second round of quantitative easing and new fiscal policy initiatives that boost economic activities and sentiment in industrial and energy markets.  However, the construction market is expected to remain depressed in the US.

The European Union's steel consumption would increase by 4.9% to 152 million tonnes in 2011 on the back of an export-driven industrial rebound. Germany and France will see considerable growth in steel consumption due to growing demand from the countries' auto and machine-building sectors.

A major factor that could upset demand projections is the increasing prices of steel due to surging input costs. For example, April-June coking coal contract prices were sealed at $330 a tonne compared to $225 a tonne in the fourth quarter of 2010. However, analysts suggest that companies would rather absorb the increased input costs than pass on the higher costs to consumers and this would put pressure of margins.

Higher inflation, too, should not have much effect on demand, experts feel. "The growing concerns over inflation would affect pricing trends in steel, but it won't affect demand so much," an analyst with a Mumbai-based research firm said.

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Investing tips: A few dos and don’ts

A few points you should keep in mind before completing your collection

•     Collectibles must have a market for purchase and sale. When it comes to investment and returns, items which are popular and have an easily accessible market will prove more profitable.

•    They should be of manageable size for easy transferability and preservation. Obviously, it will be difficult to transfer a giant mural or a life-size statue. The larger the object, the more difficult it is to preserve.

•    The collection must have a semblance of completion. It is better to have a narrow focus and have a specialised and near-complete collection, rather than a haphazard one.

•    Your collectibles must be authenticated by a recognised authority, if possible. Otherwise, it may be deemed a fake. Worse, the collector himself can be declared a forger and face legal action.

•    The collector must have the infrastructure to preserve the collectibles in the best possible condition. Any item, which is in bad shape, is rejected in the market.

•    A collector must have a thorough knowledge about the collectible and the market. Otherwise, he can be cheated by dealers or buyers. Up-to-date knowledge about your collection is a must.

•    A collector must know the provisions of the Antiquities and Art Treasures Act, 1972. The collector must know the items that are covered by this Act and the definition of ‘art treasures’ and ‘antiquities’. He should know all about the restrictions placed on exporting, importing, trading or exhibiting collectibles.

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COMMENTS

Todd Burkhalter

6 years ago

I would also encourage that a collection should be insured for it's full replacement value. This is often overlooked, yet when planning properly one should always insure assets.

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