Picking up right Mutual Fund...............

Picking up right Mutual Fund......

There has been a lot of volatility in the stock markets. This year, there have been many sharp corrections and rallies in the stock markets. Currently, the Sensex is in the 14,000 levels which is over 30 per cent lesser than its peak in January this year. The net asset values (NAV) of equity mutual funds across the board have taken a beating this year - especially the mid-cap and small-cap focused mutual funds which have a higher co-relation with the market.

Investors who entered near the market's peak have lost a significant portion of their principal investments and others have seen a significant dip in their capital appreciation. Investors who invested in the wrong mutual funds are stuck with them.

In the current market conditions, many investors are pulling out investments in equity mutual funds and investing in debt funds and instruments - liquid funds, bank deposits etc. It makes sense for short-term investors as it is difficult to predict the market direction in the short term. Long-term investors should not park funds in debt instruments as the returns in debt-based instruments will be negative after factoring in inflation. Historically, equity-based investments provide positive returns over the long term. Long-term investors should look at investing in good equity funds systematically.

These days, systematic investment plans (SIPs) are being widely advocated by many investment advisors and positioned by mutual funds as an investment option to weather volatile markets. Although it does not guarantee positive returns, SIPs help in averaging the entry cost for investors, and hence reduces the chances of an investor being caught on the wrong foot. Often, investors find it difficult to pick the right category/scheme and end up making the wrong choice.

Here are some basic factors investors should analyse while investing in a mutual fund scheme:

Finance needs:

The first step is to estimate finance needs at different stages in life. This helps in understanding investment objectives.

Risk appetite:

The next step is to understand the risk appetite. It depends on many factors like source of earnings, number of dependents etc. Investors with a low risk appetite should go for blue chip funds or diversified equity funds, while investors with a high risk appetite can go for a mix of blue chip and mid-cap funds.

Timeframe:

Investors should invest in mutual funds with a long-term perspective. This way, your investment gets more time to grow, with the advantage of compounding. Time also creates a cushion to absorb risks, and hence reduces the risk of losses.

Track record:

Investors should look at the track record of mutual funds before taking investment decisions. For evaluation of a mutual fund's performance, investors should look at the fund's total returns - dividends, growth, tax savings etc). This information can be accessed from the mutual fund's periodic reports.

Mutual fund investors should avoid frequent switching from one fund to another. Switching from one fund to another involves transaction costs. Investors should have realistic expectations from investment instruments. Information available/quoted is past performance. Remember, the past performances of the instrument may not be repeatable.

Performance of mutual funds is highly dependent on the fund manager, fund house and their equity research teams. Investors should make a thorough analysis before taking investment decisions.

Prohibiting alterations / corrections on cheques

The RBI Circular - DPSS.CO.CHD.No. 1832/01.07.05/2009-10 dated 22nd February 2010, says:

"Prohibiting alterations / corrections on cheques :

No changes / corrections should be carried out on the cheques (other than for date validation purposes, if required). For any change in the payee’s name, courtesy amount (amount in figures) or legal amount (amount in words), etc., fresh cheque forms should be used by customers. This would help banks to identify and control fraudulent alterations. "

Henceforth, banks can return cheques which have any alteration in the

- Payee Name

- Amount in numbers

- Amount in words

The only alteration which is allowed is the alteration in the date.

First Official Monsoon Prediction – Normal rains –Positive for FMCG

IMD predicts South-West monsoon in 2010 to be “normal”

The first official long range forecast predicts a “normal” South-West monsoon (June- September) for the country as a whole in 2010. Quantitatively, the rainfall is likely to be ~98% of the long period average (LPA) with a model error of ± 5%.

This is the first of the two-stage forecast strategy that IMD releases for long range forecasting of the South-West monsoon. An update to this forecast is issued in June.

International agencies echo view; El Niño likely to weaken

Other international agencies corroborate the prediction suggesting high probability of normal South West monsoon in India for 2010.

According to IMD, the El Niño condition over equatorial Pacific—one of the factors for a poor monsoon during 2009—is likely to prevail till early part of the monsoon season, but will weaken thereafter.

This is positive for most FMCG companies like HUL, ITC, Godrej Consumer, Colgate and Dabur which get 40-50% from sales from rural areas.

Beware of ULIPs

The so-called turf-war on ULIPs that SEBI and IRDA have been fighting has now taken on a life of its own. In reality, just about the least important thing is who regulates ULIPs, while the most important thing-or rather, the only important thing-is that investors understand what they are getting into and make the choices that are best for them. I find that there's a great deal of misinformation floating around about ULIPs and why exactly are so investment advisors so critical of them. ULIP proponents generally give a set of reasons which in their opinion invalidate criticism of ULIPs.

Argument: ULIP expenses have been lowered by IRDA. ULIP expenses are now down to just 3 per cent for ULIPs of up to 10 years and 2.25 per cent for longer ones. Mutual funds, by comparison, have a higher fund management charges.
Reality: The way IRDA has framed the rules, 2.25 or 3 per cent is effectively the average over the entire lifetime of a ULIP. The charges are heavily front-loaded. During the first year, these charges are as high as 40 to 70 per cent. If the customer cannot continue with a policy for any reason, then his real expenses are far higher. And as it happens, a huge proportion of policies lapse during the earlier years. The front-loading has no logic, except to enrich insurers and agents. And fund management charges being lower than mutual funds is a not a full comparison. In mutual funds, total expenses are capped at 2.25 per cent for equity funds and less for other funds. These are not comparable to the fund management charges of ULIPs because ULIP customers also pay premium allocation charges, policy administration charges, mortality charges, and for guaranteed ULIPs, guarantee charges. Comparing fund management charges alone is a joke.

Argument: ULIPs have led to a massive rise in insurance penetration in India.
Reality: Insurance means insurance, in the sense when the insured person dies, his family gets money to pay for food, rent and education. In a country with as little social security as ours, the  growth of insurance has to mean the growth in the reach and quantum of risk cover for lives. To call  a non-insurance, market risk-bearing product such as ULIP insurance and then present it as evidence of the growth of insurance is simply dishonest.

Argument: The insurance industry provides a huge amount of employment. 30 lakh people have found work through insurance.
Reality: If ULIPs were a sound financial product than this would be wonderful news. Since they are not (see above reasons), this issue is a complete red herring. It is not the responsibility of ULIP customers to provide agents employment by giving away vast proportion of their premiums as commission. If crores of people's money has to be mis-invested to provide employment for lakhs of people, then it's better for those lakhs to find some other, more productive employment.

Argument: ULIP fund flows are important for the stock market and for infrastructure development.
Reality: The same as the employment argument. It is not the responsibility of ULIP customers to buy expensive and non-transparent investment products so that the stock markets can be boosted. Wouldn't it be possible to create infrastructure if ULIPs could be made more investor friendly.

I find the last two points to be particularly dishonest. They somehow imply that if ULIPs were made more investor-friendly, then lakhs of people would immediately become unemployed and money would stop flowing into development. However, ULIP critics like myself have nothing against the concept of ULIPs. If ULIP cost is brought down and made non-front-loaded; and if transparency is enhanced to the level of other asset classes, then they would be a very good product. The fact that the ULIP's enforce gradual SIP-style investments could actually make them a superior product.

Also, do not forget the ULIP charges that are cut from an investors money so that the Insurance house can run smoothly !

Special Thanks to Value research online for write such a brilliant article !

Petroleum and Natural Gas Regulatory Board approves provisional gas tariff structure

Petroleum and Natural Gas Regulatory Board (PNGRB) has provisionally approved tariff rates for three natural gas pipelines, namely, the East-West Pipeline Project (EWPL) operated by Reliance Gas Transportation Infrastructure Ltd (RGTIL), the existing HVJ-GREP-DVPL network operated by GAIL and the DVPL/GREP Upgradation project operated by GAIL.

The regulator has approved gas transmission tariff of Rs. 52.23 per million Btu (mmbtu) for the EWPL, as against the RGTIL proposal of Rs. 53.64/mmbtu. The tariff rates for the HVJ-GREP-DVPL and DVPL/GREP Upgradation projects have provisionally been approved at Rs. 25.46/mmbtu and Rs. 53.65/mmbtu, respectively. GAIL’s proposal to increase tariff rate for existing HVJ-GREP-DVPL from the existing Rs. 28.48/mmbtu to a single levelized postal based tariff of Rs. 35.39/mmbtu (including DVPL/GREP Upgradation) has not been accepted by the board, as it would result in higher tariff charges for the existing customers.

The provisional tariffs will be applicable from the date of commission for the EWPL (i.e. 1-April-2009); and retrospectively from 20-Nov-2008 for existing HVJ-GREP-DVPL; and from the date of commissioning for the DVPL/GREP Upgradation. It may be noted that the tariff rates are provisional only and may be finalized on later date by the PNGRB on receipt of actual data by the operator.

“The board’s decision is a step forward and likely to provide more regulatory clarity to the gas transmission business” commented Ms. Revati Kasture, Head of Research, CARE Ltd. The provisional tariff structure is very positive for GAIL, as the 10.6% decline in its existing HVJ-GREP-DVPL pipelines would be outwitted by an increase of 88.4% in the DVPL/GREP Up-gradation, implying significant upside in future tariff revenues. CARE Research estimates that the proposed tariffs charges would imply tariff revenue of about Rs 19 billion from existing network and Rs 36 billion from up -gradation, totaling to Rs 55 billion for GAIL in 2010-11, as against Rs 49 billion proposed by GAIL under levelized postal based tariff of Rs. 35.39/mmbtu.

However, the tariff charges are applicable retrospectively from 20-Nov-2008 for existing HVJ-GREP-DVPL network. This would result in one-time pre-tax charges of Rs 3.1 billion for GAIL due to higher tariff charged to existing customers. Whereas, RGTIL is likely to show tariff revenues of about Rs 54 billion in 2010-11 as a result of the tariff structure. The one-time pre-tax charges due to retrospective implementation would be Rs 0.8 billion in case of RGTIL. The government has shown inclination towards approving an overall capital expenditure in range of Rs 1.5 million-per-km-per-mmscmd, and we expect this to remain as benchmark for future pipeline projects. On the other hand, the board has adhered to its volume provisions specified under the “Determination of Natural Gas Pipeline Tariff” by not accepting RGTIL’s higher volume assumptions and GAIL’s unaccounted gas volume assumptions
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Glimpse of RBI Annual Policy -2010-11

 Following are the highlights of the Reserve Bank of India's Annual Policy Statement for 2010-11

MAJOR HIGHLIGHTS

· Hikes reverse repo, repo rate, CRR by 25bps each

· Reverse repo, repo rate hikes with immediate effect

· CRR hike effective from Apr 24

· CRR hike to impound 125 bln rupees from banks

· FY11 GDP growth projection at 8.0% with upside bias

· March end inflation projection at 5.5%

· FY11 banks' credit growth projection at 20.0%

· FY11 banks' deposit growth projection at 18.0%

· FY11 money supply growth projection at 17.0%

STANCE


· Hike in policy rates, CRR to help contain inflation

· Hike in policy rates, CRR to anchor inflationary expectations

· Measures to sustain recovery process

· Govt borrow needs, private credit demand will be met

· Hikes to align policy tools with evolving state of econ

· To closely monitor macro events, prices; take warranted steps

· Econ firmly on recovery path, industrial growth broad based

· India economy resilient, recovery consolidating

· FY11 econ growth to be higher, more broad-based vs FY10

· Lower policy rates can complicate inflation outlook

· Lower policy rates also impair inflationary expectations

· Despite 25bps hike in rates, real policy rates still negative

· Need to normalise policy rates in calibrated manner

· Inflationary pressures "accentuated" in recent period

· Inflation getting increasingly generalised

· Capacity constraints to re-emerge as econ growth rises

· Must ensure demand-side inflation does not become entrenched

· FY11 fresh govt bond issuances 36.3% higher vs FY10

· FY11 fresh govt bond issuances "a dilemma"

· Policy considerations demands liquidity be curbed

· Govt borrow needs supportive liquidity conditions

· Need to absorb liquidity without hurting govt borrow plan

· To respond swiftly, effectively to inflationary expectation

· To actively manage liquidity, ensure private credit demand is met


INFLATION

· Significant changes in drivers of inflation in recent months

· Overall food inflation high despite seasonal ease

· Rise in global commodity prices upside risk to inflation

· Household inflation expectations remain at elevated level

· Demand pressures may rise as recovery gains momentum

· Monsoon prospects unclear, blur FY11 inflation outlook

· Volatile crude prices cloud FY11 inflation outlook

· To ensure price stability, anchor inflationary expectations

· To monitor overall, disaggregated components of inflation

· keeps medium-term inflation objective of 3.0%

· An unfavourable monsoon may exacerbate food inflation

· Unfavourable 2010 monsoon may add to fiscal burden


GROWTH

· GDP projection assumes normal monsoons

· GDP projection also assumes good industrial, services growth

· Industrial growth to take firmer hold going forward

FISC

· Fiscal prudence to avoid crowding out private credit demand

· Fiscal prudence must shift to structural improvements

· Govt borrow "very large", can pressure interest rates .
GLOBAL

· Pace of global econ recovery remains uncertain

· Uncertain global econ recovery downside risk to India GDP

· Trade, financial linkages to other economies may impact India GDP

· Commodity price seen up more if global recovery gain momentum

· Rise in global commodity prices may up inflation pressure

· Expansionary fiscal policy may not be unwound in advanced economies

· Expansionary policies may trigger large FX flows to India

· Excessive flows challenge to FX rate, monetary mgmt

· FX rate policy not guided by pre-announced target

· Keep flexibility to intervene in FX market to manage volatility

· Need to be vigilant volatile FX rate movements


MARKET


· RBI panel to mull single point reporting for OTC FX derivatives

· To launch reporting platform for secondary deals of CDs, CPs

· Asked FIMMDA to develop CD, CP reporting platform

· To allow banks to purchase non-SLR bonds by infra companies in HTM

· OKs bourses to launch plain vanilla dollar/rupee options

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Goldman Sachs charged with fraud by SEC...

Goldman Sachs Group Inc was charged with fraud by the US Securities and Exchange Commission (SEC) over its marketing of a debt product tied to subprime mortgages that were designed to fail.

The lawsuit is the biggest crisis in years for Goldman, which emerged from the global financial crisis as Wall Street's most influential bank.

It is also a huge test for Chief Executive Lloyd Blankfein, who has faced a firestorm of criticism over the bank's pay and business practices. It comes as lawmakers in Washington debate sweeping reform of financial industry regulation.

The SEC alleged that Paulson & Co, a major hedge fund run by billionaire John Paulson, worked with Goldman in creating a collateralised debt obligation, and stood to benefit as its value fell, costing investors more than USD 1 billion. That is roughly the amount that Paulson is estimated to have made by betting against the CDO.

Fabrice Tourre, a Goldman vice president who the SEC said was principally responsible for creating the product, was also charged with fraud. Paulson was not charged.

Inflation in Single digit...

Inflation touched a 17-month high of 9.9% in March spurred by an all-round increase in prices, mounting pressure on the central bank to raise key policy rates in the monetary policy review next week.

A spurt in global demand due to a remarkable recovery by China and positive signals from the US will allow the Reserve Bank of India to target inflation aggressively without worrying about derailing growth momentum. The central bank is widely expected to raise policy rates by 25-50 basis points on Tuesday.

Annual year-on-year inflation based on the wholesale price index stayed above the central bank’s year-end projection for the third straight month. In January the Reserve Bank raised its wholesale price inflation forecast to 8.5 % from 6.5 %.

Policymakers expect high inflation to persist in coming months on account of inflationary expectations that are building up. They are concerned about rising commodity prices and a rapid increase in core inflation, or inflation stripped of fuel and food prices.

The food price inflation eased in March as winter crops started entering the market. Asia’s third largest economy is expected to expand 8.5% in the current fiscal. It grew by 7.2% last year, after recording 6.7% growth in year ended March 2009. It had posted 9%-plus growth rates in the three preceding years.

India’s official weather forecaster will come out with the first forecast of monsoon rains next week. The rains are crucial for the summer crops that account for 40% of India’s farm output. Agriculture contributes only 17.5% to the country’s gross domestic product, but it provides livelihood to majority of India’s 120 crore population.

Last year India experienced the worst monsoon rain in more than 37 years, sending the food price inflation to a 12-year high of 21% in October last year.

Non-food manufacturing inflation rose to 4.7% in March from 4.3% in February. Inflation in this segment is expected to harden further, financial services firm Morgan Stanley said in a research note.

The world’s largest economies are showing faster-than expected recovery from the global economic downturn. Chinese economy expanded 11.9% in the three months to March, the highest rate in more than 3 years. The US economy is expected to recover at a moderate pace in the coming quarters, bolstered by a return of business confidence and increased consumer spending.

Banking Sector - Expected to give good results in Q4.

The banking sector is expected to return to normalcy in this result season if the analyst estimates are anything to go by. The top seven Indian banks are expected to grow their net profit by an average estimated 13% year-on-year (y-o-y) in March 2010 quarter. However, excluding Bank of India (BoI), the remaining six banks may record a net profit growth of 22%. It comes as a breather for bankers, who struggled to keep their growth rates afloat in December 2009 quarter.


One of the main reasons behind the turnaround is the revival in credit growth. As per the latest data released by the Reserve Bank of India (RBI), credit growth improved to 17% after plunging to 11% in December 2009. In the last quarter, experts were apprehensive of the banking sector’s ability to press the lending accelerators. The revival in credit growth puts to rest those apprehensions for the time being. What’s even better is that the gap between deposit and credit growths has narrowed down. The deposit growth stands at 17% as of now and is on par with credit growth. However, deposit growth was more than credit growth by roughly 8%, when the credit growth touched its low in December 2009. A higher growth in advances and a lesser growth in deposit will give a boost to net interest income (NII), which is the difference between interest earned and interest expense.


Backed by improved credit demand, the analysts expect even net interest margin (NIM) to improve, which is a measure of spread. Throughout the March quarter, bond yields remained marginally higher than the previous quarter. It was expected that banks with a higher share of available-for-sale securities in their investment portfolios would report mark-to-market (MTM) losses. However, bond yields cooled down at the end of the quarter.


Better scheduling of the government borrowing programme saved the day for public sector banks, as the 10-year yields on the reporting day stood at 7.83% compared to a consensus of over 8%, wrote ICICIdirect.com in its report. The only negative from the results is that a few banks may have to provide more for non-performing loans (NPLs), as the moratorium for restructured loan comes to an end. However, banks have stepped up provisions over the past few quarters and, therefore, the impact is likely to be marginal, if at all.


HDFC Bank is expected to lead the pack with an estimated 31% growth. Among state-owned banks, Punjab National Bank (PNB) with an expected 26% growth seems to be the lead runner. There seems to be no solace for BoI investors. Rising NPLs had crippled its performance in the past two quarters. The March 2010 quarter is expected to be no different as BoI (Bank of India) is expected to report a 39% drop in its profits.

Source: Economictimes.

SEBI out with new order on ULIP ban Advertisement

An apparent truce with insurance regulator IRDA notwithstanding, the SEBI today said that its Friday ban on new ULIP schemes by some insurance companies will continue, creating fresh uncertainty in the market.

The SEBI, which was party to the truce brokered by the Finance Ministry yesterday under which status quo ante as of April 09 would be maintained, today came out with a new order that new ULIP schemes and products would be governed by its Friday order.

"This is to bring to the notice of the investors that SEBI has decided to keep in abeyance, till further notice, the enforcement of the April 09 directions with respect to the ULIP schemes/products existing on the date of the order 09.04.10.

"However, with respect to any new ULIP schemes/products launched after 09.04.

Govt to look into Ulip ban issue

The Finance Ministry  said it will look into the orders of the two regulators -- SEBI and IRDA-- on equity linked products sold  by 14 companies.

ULIPs--a common insurance plan sold by life insurers, where the money collected from consumers is invested into equity and debt markets-- have become a bone of contention between the two financial regulators, with both claiming regulatory authority over the scheme.

Taking SEBI head on, insurance regulator IRDA had asked insurance firms to continue selling ULIPs, a day after the capital market watchdog barred 14 insurers from selling these products without its approval.

The companies, which come under the ban include Reliance Life, SBI Life, ICICI Prudential, Tata AIG and HDFC Standard Life.

Source: Economics Times

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Yamini

Bidding for 3G Spectrum aggressively....

On day one the 3G spectrum auctions witnessed huge response from bidders with the

bid price escalating to Rs 3,913.81 crore from the base price of Rs 3,500 crore.

Five round of auctions were completed during the closing of the first day. The auctions would resume on Saturday.

One of the most sought after service areas, Delhi got bids from three players for the three available slots. Among all the service areas Delhi attracted the highest price Rs 373 crore, followed by Mumbai and Maharashtra at Rs 362.66 crore.. The reserve price for Delhi was set at Rs 320 crore.

Altogether nine applicants participated in the bidding process. These players include Aircel, Bharti Airtel, Idea, Reliance, Tata Teleservices Vodafone, S Tel, Videocon and Etisalat DB Telecom.

The Department of Telecom (DoT) on its website stated that Category A circles such as Gujarat, Andhra Pradesh, Karnataka saw aggressive bidding on par with top metros at Rs of Rs 362.66 crore each.

There will be multiple, round-the-clock auction simultaneously for 22 circles. There are three and four slots of 3G spectrum. The government has set a target of raising up to Rs 35,000 crore from the auction of spectrum for 3G and BWA sepctrum.

The department has fixed the reserve price for broadband wireless access (BWA) spectrum at Rs 1,750 crore. There are three slots for BWA. The auction for BWA spectrum is scheduled two days after the 3G auctions are concluded.

Hotline rings between India & China

India and China signed an agreement for establishing a hotline between New Delhi and Beijing to enhance the quality of communication and evolve better relationship, Nirupama Rao, foreign secretary, told reporters on Wednesday evening. This is an important confidence building measure, she said. Krishna, who met Chinese premier Wen Jiabao and foreign minister Yang Jiechi, raised a wide range of issues including the problem of stapled visas given by China to certain Indian citizens including Kashmiris. Rao seemed to suggest there was no clear assurance from the Chinese side when she told reporters that the matter was a subject of ongoing discussions. In his 45-minute talk with premier Wen, Krishna sought Beijing’s support for a seat in the United Nations Security Council. China reiterated its known stand without committing itself on the issue. In the 2008 joint statement, China had said: “The Chinese side understands and supports India’s aspirations to play a greater role in the United Nations, including in the Security Council”. Rao said the issue of hacking Indian military websites from a location in China was not discussed at the meetings with Chinese leaders. Indian government has taken steps to safegaurd its important internet resources, she said. The two sides reiterated their desire to settle the boundary dispute. The Indian minister also raised the issue of the detention of 21 diamond merchants from Gujarat by China on charges of smuggling. He emphasized that the legal process concerning the detainees should be conducted in a transparent manner. Chinese leaders made no effort to deny reports that construction companies from the country were involved in developing infrastructure projects in PoK. The only assurance they gave Krishna is that Chinese work in the area is without prejudice to the fact that it is a disputed area. China also told India that it has not built any dam projects in the upper reaches of Brahmaputra, which starts from China and feeds India’s northeast region. China’s plans were limited to small hydro electricity projects in the region.

Greece problem drags market..

The Greece sovereign debt problem led to a sharp fall in Euro and European equities yesterday which affected the global market sentiments. UK and ECB kept the interest rates unchanged and also continued to give stimulus support indicating weak economic fundamentals of Euro Zone.

In domestic market fear of liquidity crunch due to 3 G auctions and launch of large FPO’s like SAIL affected the market sentiments and led to a sharp fall in the market.

The government today approved hiking Himachal Pradesh's stake in Satluj Jal Vidyut Nigam by 0.5 per cent to maintain the state's equity in the PSU's 412-MW Rampur project at 30 per cent.

Suzlon Energy its subsidiary REpower Systems AG has bagged a contract from an Italian company for supplying 18 wind turbines.

Essar Energy Ltd plans to raise about $2.5 billion (over Rs 11,250 crore) through an initial public offering of shares, the largest overseas IPO by an Indian firm, in the UK.

Elecon Engineering Company has bagged an order worth Rs 49.90 crore from Sical Logistics for material handling equipment.

GVK Power and Infrastructure Ltd is ready to acquire a majority stake in Mumbai and Bangalore international airports.

Gujarat State Petroleum Corporation (GSPC) has inked an agreement with government of Egypt for oil and gas exploration in the African nation where the Indian firm has been alloted blocks.

The government today approved a 20 per cent disinvestment in Steel Authority of India Ltd that would fetch a total of Rs 16,000 crore.

Aban Offshore today said it has bagged a contract valued at $159 million (about Rs 716 crore) from Brunel Shell Petroleum Sendirian Berhad for the deployment of the jack-up rigs.

Higher prices of milk, fruits and pulses pushed food inflation to 17.70 per cent for the week ended March 27.

India closed the doors on new foreign direct investment in cigarettes. ITC may gain.

Oil companies continues to bleed

The surge in crude oil prices is projected to more than double the losses of oil marketing companies to Rs 98,000 crore and force the government to seriously consider a hike in petrol and diesel prices.

Upstream companies such as ONGC will also take a hit due to the strengthening of the rupee, besides sharing the burden of rising oil subsidies.

International crude oil prices are around $87 a barrel, an 18-month high. However, this is still a long way from the record high of $147 in July 2008. The Indian basket of crude oil is at over $83.

The under-recoveries of oil marketing companies will be to the tune of Rs 98,000 crore, given that the average crude oil price is $80 per barrel. A part of this burden will be absorbed by upstream oil companies. However, it will not be possible for the government to absorb the balance. Therefore, an increase in petrol and diesel prices has to be seriously considered,” S Sundareshan, petroleum and natural gas secretary.

Considering an exchange rate of Rs 45.70 per dollar while calculating the losses. The rupee closed at Rs 44.45 to a dollar today.

Oil marketing companies are estimated to have closed 2009-10 with gross under-recoveries of Rs 45,000 crore (with Indian crude oil basket averaging $69.76 a barrel).

Every dollar increase in crude oil price meant an additional burden of Rs 3,000 crore annually for oil marketing companies

Appreciation of Re 1 against the dollar meant an annual saving of Rs 7,000 crore for the industry. For the current fortnight, oil marketing companies are estimated to be losing Rs 6.45 on every litre of petrol, Rs 5.50 a litre on diesel and Rs 19 on kerosene. They also lose Rs 260 per LPG cylinder.

Initial Glimpse :Chennai Metro Rail by 2013

Trains with four coaches may start zipping across the much-awaited Chennai Metro Rail line from Koyambedu to St Thomas Mount by the end of 2013. The Metro Rail project, Chennai’s hope of a super-fast transport network, “is going as per schedule” and work on the 13-km stretch between Koyambedu and St Thomas Mount is likely to be completed by end of 2013, according to a senior government official. “We should start operating services on the 13 km stretch in another two-and-half years,” the official said. Piers are being erected for the 4-km stretch from Koyambedu to Ashok Nagar and the 9-km line between Ashok Nagar and SIDCO Industrial estate now. Tenders for constructing stations on the stretch have been floated. The Tamil Nadu government has promised to launch the Rs 14,600-crore Metro Rail project which promises to take 13 lakh passengers every day from Washermanpet to the Meenambakkam airport within 45 minutes by 2015. With a frequency of every five to six minutes, trains will be operated on the Metro Rail. And in just one hour, 30,000 passengers are expected to be transported from Washermanpet to the airport. The Metro Rail project will operate trains on two corridors. The first corridor stretches from Washermanpet to Chennai airport via Mannadi, High Court, new Secretariat complex, Mount Road (LIC), Thousand Lights, Saidapet, Little Mount and Guindy, Alandur, OTA, Meenambakkam. While the stretch from Washermanpet to Saidapet would be an underground service, from Saidapet to Chennai airport, the trains would ply on an elevated track. The government is studying extending the project up to Thiruvottiyur in north Chennai. The second corridor traverses from Chennai Central up to Chennai airport, with halts at Egmore, Nehru Park, Kilpauk Medical College, Pachaiyappas College, Shenoy Nagar, Anna Nagar East, Anna Nagar tower, Thirumangalam, Koyambedu, CMBT, Arumbakkam, Vadapalani, Ashok Nagar, SIDCO and St Thomas Mount. From Chennai Central to Thirumangalam, the trains will speed on underground tracks and from Koyambedu to Chennai airport it would be an elevated stretch. However, with the 13-km stretch of the project between Koyambedu and St Thomas Mount now “going on schedule”, it may become partially operational by 2013, the official said. Besides financial assistance from the Central and the state government, the project is also being funded by the Japan International Cooperation Agency (JICA). The stretch from Officer’s Training Academy to airport is caught is a tangle because the Airports Authority of India (AAI) has objected to Chennai Metro Rail from constructing an elevated corridor. AAI has informed metro rail that the viaduct will obstruct the flight path of the aircraft using secondary runway. Discussions are on with the airport to settle the issue. Different options are being studied, to reduce the overall height of the viaduct, because underground tunnel is expensive and can escalate cost of the project. Contracts for design and construction of the elevated viaduct from Koyambedu to Ashok Nagar at a cost of Rs 194.20 crore have been awarded to the Hyderabad-based firm Soma Enterprise Ltd. And the Rs. 141.13 crore contract for construction of elevated viaducts, including the viaduct at stations from Ashok Nagar to St Thomas Mount, have been awarded to Larsen and Toubro. The same company has bagged the contract for the Rs 173.30 crore elevated viaducts from Saidapet to Officers Training Academy.

Prawling Indian companies

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