Pranab Mukherjee rules out possibility of rollback of hike in petrol prices
Saturday, 21 May 2011
21 May 2011;economictimes.indiatimes.com:MUMBAI: Finance Minister Pranab Mukherjee today ruled out the possibility of rolling back the petrol price hike announced by oil marketing companies last week. The minister said there was no question of rolling back the petrol price hike, as the government was already burdened with the subsidy given to oil companies, with Rs 16 per litre on diesel, Rs 26 per litre on kerosene and Rs 320 for every 14 kg of LPG cylinder. "Till today, I am giving subsidies...Therefore, there is no question (of rollback), because huge subsidies have been provided. Last year, it was close to one lakh crore of rupees, this year I do not know what will be the international price of crude," Mukherjee told reporters here. "Everyday, the price of crude oil is increasing. The prices were adjusted last time in June 2006. At that point of time, the average price of Indian crude was USD 89 and now it is at USD 107," he added. Last Saturday, oil companies hiked the petrol prices by Rs 5 per litre, which was less than half of the Rs 10.50 per litre hike required to cover the imported crude oil cost, which had touched a two-and-half year high of USD 110 per barrel.
Crude may affect growth, inflation to be below 8% by Aug, says Anant
Saturday, 21 May 2011
21 May 2011;dailypioneer.com:New Delhi; High crude prices could impact India’s growth story, a view held by policymakers alike. And a consensus seems to have emerged that 9 per cent GDP growth seems unlikely. Chief Statistician TCA Anant on Friday said high global crude prices could impact India’s economic growth in 2011-12 and projected that the GDP is likely to grow by around 8.5 per cent during the fiscal. He also said that headline inflation will fall below the 8 per cent mark by August-September if the country receives a normal monsoon. “Oil situation is a matter of worry and it is likely that oil prices internationally will harden significantly... Crude is also a major input. So it may be a factor which will dampen some of our growth expectations,” Anant told reporters here on the sidelines of a FICCI event. Asked how much the country’s economic growth could be in 2011-12, he said: “The expectation now is that probably it will be now 8.5 per cent. This is subject to the assumption on how effectively do we manage the oil price situation.” In its pre-Budget economic survey, the Government had projected that the country’s GDP would grow by 9 per cent this fiscal.
21 May 2011;business-standard.com:New Delhi: Riding on higher refining margins, Mangalore Refinery and Petrochemical Ltd (MRPL) today reported net profit more than doubled in the fourth quarter ended March 2011. “Net profit was up 119 per cent to Rs 553 crore in the January-March quarter as opposed to Rs 253 crore in the same period a year ago,” Chairman A K Hazarika said. Reacting to the high profit numbers, the company’s share price gained 4.59 per cent to close at Rs 74 at the Bombay Stock Exchange. MRPL, a subsidiary of Oil and Natural Gas Corporation earned $9.09 as refining margins on every barrel of crude oil in Q4, up 87 per cent from corresponding quarter of the last financial year. Net sales for the quarter rose over 42 per cent to Rs 12,413 crore. The company’s net profit for the whole of 2010-11 rose marginally to Rs 1,176 crore, while net sales for the year grew 22 per cent to Rs 38,956 crore.
Govt hikes upstream oil firms' subsidy on fuel to 38.8%
Friday, 20 May 2011
20 May 2011;business-standard.com:New Delhi: In a move that may spook Oil and Natural Gas Corp's (ONGC) planned public offering, the government has hiked the contribution of upstream oil companies toward fuel subsidies to 38.8% for FY11. Of the Rs 78,159 crore revenue that retailers lost on selling diesel, domestic LPG and kerosene below cost in FY11 fiscal, upstream firms ONGC, Oil India and GAIL India have been ordered to contribute Rs 30,296.7 crore, or 38.8%, sources in-the-know of the development said. Traditionally, upstream companies made up roughly one-third (33%) of the revenues lost on fuel sales through discounts on crude oil and products they sold to Indian Oil, Hindustan Petroleum and Bharat Petroleum. But the oil ministry yesterday issued orders raising the upstream contribution to 38.5%, they said, adding that ONGC has been ordered to chip in Rs 24,892.43 crore, while OIL will provide Rs 3,293 crore and GAIL Rs 2,111.24 crore. ONGC, which had in the first three quarters of FY11 fiscal provided Rs 12,757 crore in subsidy, has seen its stock price plummet by 11% in anticipation of an increase in its share of subsidy. It was down 2.6% at Rs 271.60 on the Bombay Stock Exchange at 12:15 pm today. The government had planned to sell 5% of its shares in ONGC in a follow-on public offering (FPO) in July to raise Rs 12,000 crore, but at the current price, it may get just over Rs 10,000 crore. The government has paid a total of Rs 40,912 crore, or just over half of the revenue loss, in cash subsidy to the retailers. Of the upstream subsidy, IOC will get Rs 16,703.73 crore, BPCL Rs 6,960.04 crore and HPCL Rs 6,632.98 crore. The three firms will absorb the remaining revenue loss. Sources said the share of the upstream firms was increased as the Finance Ministry provided only Rs 20,001 crore in the second installment of the cash subsidy as against the demand of Rs 26,000 crore. While petrol prices were freed from the government control in June, state oil firms continue to sell diesel, domestic LPG and kerosene at government-ruled prices, which are substantially lower than the cost of production. IOC, BPCL and HPCL currently lose Rs 16.49 per litre on diesel, Rs 29.69 per litre on kerosene and Rs 329.73 per 14.2-kg LPG cylinder. In FY11, the three firms lost Rs 78,202 crore, but the government provided only Rs 40,912 crore in compensation. The oil marketing firms lost Rs 2,227 crore on selling petrol below imported cost during April and June before its price was freed from government control. They lost Rs 34,384 crore on the sale of diesel, Rs 19,566 crore on PDS kerosene and Rs 22,025 crore on the sale of domestic LPG.
20 May 2011;business-standard.com:Mumbai:After posting profits for three successive quarters, India's largest airline by market share, Jet Airways, reported a net loss of Rs 124.5 crore for the 2010-11 fourth quarter. A 50 per cent increase in fuel costs led to a fall in margins and resulted in the loss. small profit of Rs 9.6 crore on a standalone basis compared to a loss Rs 467 crore in 2009-10, but the results were a dampener as analysts expected the airline to post better figures. Revenues were up 14 per cent at Rs 3,288 crore, while passenger figures grew 15 per cent. However, this was subdued by 51 per cent increase in fuel costs in the fourth quarter over the same period last year. In the backdrop of spiralling crude oil prices, Jet Airways spent Rs 1,279 crore on fuel which was Rs 443 crore higher than same period last year. As a consequence the airline's operating margins took a hit and halved to Rs 343 crore. Jet Airways and its low cost arm JetLite command 25 per cent of market share in passenger traffic. JetLite's losses widened to Rs 166 crore from Rs 75 crore in the fourth quarter in 2009-10 and operating margins, too, declined. Its Ebitda (earnings before interest, taxes, depreciation, and amortisation) was Rs 26 crore as against Rs 119 crore for the same period last year. In its results analysis Jet Airways said that it carried out cost control measures and route rationalising exercise, which resulted in substantial cost saving. "During the period, there was an unprecedented increase in prices of fuel which airlines were not able to pass on to the customer fully. Though airlines did increase fuel surcharges, the full impact will come only in the next quarter. As such, the operating performance for the quarter has been significantly impacted by such fuel price increases, '' the airline said. Fuel costs were 39 per cent of total costs last quarter compared to 32 per cent of the total costs in 2010. Certain one time/exceptional items like service tax demands amounting to Rs 58 crore also impacted the results. Senior Vice-President M Shivakumar said the hardening of interest rates and fuel costs were cause of concern. The airline has a total of Rs 3,500 crore working capital loan out of a total debt of Rs 13,000 crore. A rise in interest rates will increase the outgo. The airline expects that crude prices and higher fares could impact traffic growth in short term, though the medium term growth outlook remains intact. Kapil Kaul of Centre for Asia Pacific Aviation said a combination of high fuel prices, lean season and negative pricing by Air India has affected revenues of Jet Airways and other airlines. He said Jet could have made profits for the full year and was on course to achieve it till December 31. "The result is on expected lines,'' he stated. Jet Airway's stock closed at Rs 458.15 on Thursday which is 0.4 percent lower than previous close.
Oil, commodities set to plunge between 25% and 40%
Friday, 20 May 2011
19 May 2011;timesofindia.indiatimes.com:Sunil Kewalramani: Commodity prices have a major bearing on inflation, global monetary policy and GDP growth; hence, it is essential to understand important turning points and trend reversals. Some blame the current correction in commodities on algorithmic trading and others on Chinese monetary tightening. A narrow focus on every tweak in China's monetary policy risks missing the bigger picture. Demand has indeed weakened in China to the point where its imports of key commodities are dwindling. It is further evidence of demand destruction globally resulting from an earlier surge in commodity prices, led by commodity-in-chief , oil. As the chart shows, there is a relationship between the change in commodity prices and indicators of global economic activity, such as the OECD global leading indicator (GLI). However , the recent rise in commodity prices has been much more than it 'should' have been, based on the strength of the GLI, suggesting that easy money could have influenced prices. There was a notion that commodities were a one-way bet. This tied substances which had little to do with one another - industrial commodities like oil and copper, renewable ones such as wheat and corn, and those with largely intrinsic value such as silver and gold - to the same fate. Some commodities were in blatant speculative bubbles. Silver's price relative to gold doubled during first three months of 2011 to reach a 30-year high and then fell 30% in two weeks. But silver is still as expensive as on March 18. Gold remains above its 50-day moving average, a short-term trend measure. Brent crude, in spite of its sharp selloff , has dropped below its 50-day moving average, for the first time since last September, an abnormally long upward streak. The run-up in oil went further last time, but the end looked similar to first week of May - right down to the weekly fall of 13.8%, against May first week's 13.3%. Demand is slowing down from the torrid pace of a year ago. The International Energy Agency forecasts a growth of just 1.3 million barrels per day (mb/d) in 2011, down from a near record 2.8 mb/d last year, showing a fall in demand driven by high prices. Eurozone debt problems and the arrest of IMF's chief have amplified concerns. The flash crash in oil prices still leaves Brent crude well above the first quarter average. It will need to come down much further before global growth comes to above-trend levels. "Dr Copper" lived up to its reputation as the only metal with an economics PhD in 2008, as its daily close peaked three months before the wider commodity crash. This year, it peaked in February. From high to low in the two weeks after oil plunged in July 2008, copper fell 9.62 %.
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