RBI hints that 2nd quarter review may not lower policy rates

The RBI is scheduled to hold its quarterly review of credit policy on 25th October. However, it is unlikely that the central bank will pause its rate hike strategy on account of the slowdown in industrial output growth

Jaipur: Ahead of second quarter review of monetary policy on 25th October, the Reserve Bank of India (RBI) indicated that it may not lower the key interest rates as inflation is still high, reports PTI.

“...We need to bring inflation down in order to bring interest rates down,” RBI governor D Subbarao said here.

He further said that the central bank is conscious of the need to bring down interest rates to boost economy, but it might take time.

RBI is for a low interest-rate regime but that will take time, he said.

The governor expressed concern over the rising inflation, but said it could be controlled by the end of this year.

The RBI is scheduled to hold its quarterly review of credit policy on 25th October. However, it is unlikely that the central bank will pause its rate hike strategy on account of the slowdown in industrial output growth.

The RBI has already hiked rates 12 times since March 2010 to control inflation, which stood at 9.8% in August.

During August, the Index of Industrial Production (IIP) declined to 4.1% against 4.5% recorded in the same month a year ago.

Factory output stood at 5.6% in the April-August period, as against 8.7% in the same period last year, according to official data released on Wednesday.

Addressing members of Rajasthan Chamber of Commerce, Mr Subbarao said the economic growth will remain between 7.5% and 8%.

Earlier during the day at special State Level Bankers’ Committee (SLBC) meeting of Rajasthan, the governor said financial inclusion needs to be meaningful.

Banks in Rajasthan will ensure that all 3,883 identified villages with total population of more than 2,000 are meaningfully covered in the first phase of financial inclusion plan by March 2012, RBI said in a statement.

It said banks will draw up specific strategies to improve the credit-deposit ratio in three districts of Rajasthan, namely, Dungarpur, Rajsamand and Sirohi which have low CD ratio.

The state government of Rajasthan will release its share of Rs39 crore towards recapitalisation of five regional rural banks in Rajasthan, it said.

The governor and other senior officials of RBI are in Jaipur to attend a meeting of the Reserve Bank's Central Board of Directors being held in Jaipur on Thursday.


CAG advises oil ministry of caution on RIL’s KG-D6

“The ministry of petroleum and natural gas may like to take precautions to ensure that the audit of expenditure prior to adjustment to the account of Reliance Industries be effectively done to ensure that only admitted items are approved,” deputy CAG Rekha Gupta wrote to the ministry on 3rd October

New Delhi: The Comptroller and Auditor General of India (CAG) has advised the oil ministry to allow Reliance Industries (RIL) to recover expenditure on its eastern offshore KG-D6 field only after it has been audited, reports PTI.

Stating that the CAG’s letter to the ministry was to “flag the critical issues so as to facilitate adequate precautionary action”, deputy CAG Rekha Gupta said in the 3rd October communiqué summed by the CAG report on KG-D6 that was tabled in Parliament last month.

The letter asked the ministry to review the decision to allow RIL to retain entire 7,645 sq km KG-DWN-98/3 (KG-D6) block in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001 besides seeking review of 10 contracts, including the eight awarded to Aker Group for the MA oilfield in the same block, on a single-bid basis.

But it did not mention of CAG report calling for an audit of increase in expenditure proposed by Cairn on its Mangala Rajasthan oilfields from $1.24 billion to $3.34 billion.

It also did not mention the $201.54 million expenditure that was disallowed for cost recovery by CAG.

“The ministry of petroleum and natural gas may like to take precautions to ensure that the audit of expenditure prior to adjustment to the account of this operator be effectively done to ensure that only admitted items are approved,” Ms Gupta wrote to the ministry on 3rd October.

The CAG had audited expenses RIL incurred during 2006-07 and 2007-08, and spending incurred from 2008-09 onwards is to be covered in future audits.

As practice, operators are allowed to recover from sale of hydrocarbons, only that part of investment which has been audited. Even in case of RIL’s KG-D6 block, $5.26 billion out of $5.69 billion invested till 31st March was allowed to be cost recovered only after audit.

The CAG audit of KG-D6 was the second audit and expenses had previously been audited by a government appointed auditor.

“Permitting inadmissible items may lead to legal complication if recovery has to be undertaken after audit by the CAG,” Ms Gupta wrote.

Ms Gupta said there was considerable scope for improvement in the management of exploration and production. “We also found numerous deficiencies in compliance and control issues with reference to the provisions of the Production Sharing Contract (PSC) by the ministry/Director of Hydrocarbon (DGH).”

“Government representatives should protect Government of India’s financial interests (not just technical perspective) at the time of review and approval of development plans in the Management Committee (MC),” she wrote.

Ms Gupta said a review of the award of 10 specific contracts, of which eight were awarded to Aker Group companies, on the basis of a single financial bid may be undertaken. “The expertise, ownership pattern and experience of the Aker group needs to be ascertained.”

CAG said the entire PSC process is designed to ensure that the private contractors fully explore the contract area within designated timelines, relinquish areas where hydrocarbon prospects appear poor in a phased manner, and retain only those areas where hydrocarbon discoveries are made, relinquishing the remaining area for re-allocation to other potential bidders.

“Therefore, the stipulated timelines and processes in the PSC for relinquishment of contract area should, under no circumstances, be relaxed,” it said.

“The discovery and development areas should be rigorously delineated, keeping strictly to the discoveries made through exploratory and appraisal well drilling and proper delineation of reservoir boundaries,” she wrote.



Nagesh Kini FCA

5 years ago

Either a JPC and/or PAC should constitute a special committee to immediately go into each of the contracts and compliance. This loot of nation's natural resources needs to be nipped in the bud without further delay. There is more than meets the eye.
If any big business group believes that it can get away with blue murder must be put in place.
What is Salman Khursid talking of judicial activism affecting FDI. Union Carbide and Bhopal are bad enough.
A lot of Annagiri is called for!

Share prices rally against odds: Wednesday Closing Report

Nifty will target 5,130 and above. Support is at 5,060

The market closed 2.50% higher on support from IT and technology stocks following better-than-expected second quarter earnings from Infosys. Weak industrial data for August was ignored by investors as the market kept the momentum going, barring minor hiccups in noon trade. The Nifty made a huge move today to reach a zone which may see the index moving upwards. However, for this to be sustained, the index will have to keep itself above 5,060 and should try to close above 5,130. The National Stock Exchange (NSE) saw a volume of 56.17 crore shares, which was above its 10-day moving average.

The market opened higher on better-than-expected second quarter earnings report from IT bellwether Infosys, which was announced this morning. The Nifty opened above its psychological level of 5,000 at 5,020, a gain of 46 points, and the Sensex rose 124 points to resume trade at 16,660. IT, technology, metal and banking stocks supported early gains.

The market continued to accrue additional gains in the morning session, brushing aside a fall in the industrial output numbers for August. However, profit-booking at higher levels and a weak opening of the European markets following the Slovak parliament’s failure to approve the expansion of the European Financial Stability Facility resulted in the market paring some of its gains. The market fell to its lows at around 1.00pm with the Nifty retracing itself to 4,998 and the Sensex falling to 16,608.

All was not lost as buying in select stocks and the European indices recovering from the early hiccups pushed the market to a higher trajectory once more. The market hit its intraday high towards the end of trade with the Nifty scaling 5,110 and the Sensex touching 16,977. The market closed near those levels with the Nifty closing with a gain of 125 points at 5,099 and the Sensex surging 422 points to settle at 16,958.

The advance-decline ratio on the NSE was 1195:484.

Among the broader indices, the BSE Mid-cap index gained 1.40% and the BSE Small-cap index rose 1.18%.

All sectoral indices settled in the positive. The top gainers were BSE IT (up 5.21%), BSE TECk (up 3.83%), BSE Bankex (up 3.38%), BSE Realty (up 2.97%) and BSE Capital Goods (up 2.44%).

Infosys (up 6.83%) topped the Sensex list on posting better-than-expected second quarter results. It was followed by Jindal Steel (up 6.08%), State Bank of India (up 6.07%), TCS (up 3.66%) and Sterlite Industries (up 3.63%). Coal India (down 1.71%), Tata Power (down 1.56%) and Bharti Airtel (down 0.20%) were the losers on the index.

The Nifty gainers were led by Infosys (up 7.05%), SBI (up 6.54%), Tata Motors (up 5.23%), Jindal Steel (up 4.62%) and Kotak Bank (up 4.50%). The major losers were Coal India (down 2.53%), Tata Power (down 1.41%), BPCL (down 0.96%), Bharti Airtel (down 0.76%) and Ranbaxy (down 0.45%).

The Asian pack ended mostly higher led by China, following reports that the country’s sovereign wealth fund has been supporting banking shares, which have seen a sharp fall in their values.

The Shanghai Composite jumped 3.04%; the Hang Seng rose 1.04%; the Jakarta Composite climbed 2.95%; the KLSE Composite gained 1.19%; the Straits Times advanced 1.66% and the Seoul Composite inched up 0.81%. Bucking the trend, the Nikkei 225 lost 0.40% and the Taiwan Weighted shed 0.22%.

Back home, foreign institutional investors were net buyers of stocks worth Rs114.15 crore on Tuesday. Similarly, domestic institutional investors pumped in Rs108.17 crore into equities.

Hinduja flagship company Ashok Leyland is set to increase the prices of its commercial vehicles across models by 1% within a month. While the company did not specify the reasons for the proposed price hike, automobile companies have in the recent past been faced with high raw material and input costs. Ashok Leyland gained 1.02% to close at Rs24.85 on the NSE.

Private sector shipbuilder Pipavav Defence & Offshore Engineering (formerly Pipavav Shipyard) is betting big on exports to geographies like Latin America, Indonesia and Africa. Out of the total order book of around $1.5 billion, $710 million comprise exports as of now for the company. The stock fell 1.13% to close at Rs83.20 on the NSE.

Kale Consultants, a leading solutions provider to the airline and travel industry has unveiled a unique SIS Compliance Package for airlines. The package is a first-of-its-kind with standalone solutions; REVERA Interline billing solutions for passenger interline billing and FINESSE MBS for miscellaneous billing. This package will help airlines migrate to the SIS enabled world with ease. The stock settled 2.77% higher at Rs79.90 on the NSE.




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