Indian Railway Budget FY 2013-14: Two surprises!

Last Updated : 26 February 2013 at 17:30 IST

Two things surprised me in the Railway Budget; one positive and the other negative. I will reserve the second surprise for later and would proceed on with the first.

The first surprise was not from the side of Bansal per se, but from the teeming multitude of passengers that he tried to placate by not resorting raising fares: the passenger fares should have been raised, opined a majority of those who talked to Reuters. What has happened to India of aam aadmi!

A decade back or half-a-decade back this would have been unthinkable. Effigies of Pawan Kumar Bansal would have been burned across the nation by people with active participation irrespective of race, creed, caste or sex had he given green signal to fare hike.

(Of course, the economics and politics behind Bansal's action is decipherable. He has hiked freight rates and has also spiked tatkal fares. 'Tax the rich and subsidise the poor' do now have a global resonance and can ring well with national elections just a leap away. Moreover back-to-back hikes are an anathema and frowned by all).

Pawan Kumar Bansal knew that he would be asked why he did not hike the passenger fares in a requisite manner; he himself has admitted this question being asked to him a few months back by the commuter lot and riding on the back of which he dared to hike rates. Then we did not believe him and now we are surprised!

From Kintergarten, we have been trained not to believe politicians, a pardonable offence.

While passenger reaction was a bit of a surprise--many fettered and fumed as how railways could be run as a profitable venture if fare hikes are not effected—the negative surprise came from yet another source.

Despite the incidents of violence against women going up in trains, Bansal has surprisingly not provided for a helpline number to exclusively address grievances from the vulnerable lot. This is despite exhortation or expectations from the highest quarters:

"I generally travel between Chandigarh and Delhi and find the journey safe. I feel the railways should have a women helpline so that female passengers can lodge a complaint in case of any problem," Madhu Bansal, the minister's wife has said to the reporters when she was asked about her budget expectations.

While Pawan Bansal has provided a Centralised Catering Services Monitoring Cell with a Toll free number – 1800 111 321--he has not completely ignored his wife's message:

“Security helpline numbers have been made available on several zonal railways to facilitate passengers in reporting any untoward incidence for immediate intervention.” the budget speech says.

The rest of the budget looks okay. High on aspirations as ever...

As published here:http://www.commodityonline.com/news/indian-railway-budget-fy-2013-14-two-surprises!-53099-3-53100.html

Crude Oil futures and the paradigm shift in economic power

Last Updated : 04 October 2012 at 11:40 IST

The Asian Development Bank (ADB) is significantly scaling back 2012 and 2013 growth forecasts for developing Asia, saying that after years of rapid growth, the region must brace for a prolonged period of moderate expansion amidst an ongoing slump in global demand.

This has not spared the global crude oil markets in terms of price fluctuations and a downward revision in prices. Crude oil futures fluctuated after dipping 4.1% yesterday, the most since June, reported Bloomberg. Brent crude for November delivery too fell $3.40 to $108.17 a barrel.

For India, GDP growth will slow to 5.6% in 2012, down from 6.5% in 2011. The downward revision in India’s prospects, due in significant part to weak investment demand, is expected to slow South Asia‘s growth to 5.6% and 6.4% for 2012 and 2013, respectively, according to ADB.

The People’s Republic of China (PRC) is forecast to grow 7.7% this year and 8.1% in 2013, a dramatic drop from the 9.3% posted in 2011. The slowdown in the PRC is having a knock-on effect elsewhere in East Asia, with diminished demand for intraregional exports, the report read.

India and China are heavy consumers of crude oil. China is the second biggest consumer in a list topped by the US.

The ADB report along with the inventory climbing in US by 11,000 barrels a day to 6.52 million last week, according to EIA, dragged the markets down.

Ironically positive data from US in terms of PMI data and job data have not given fillip to the crude oil markets.

The PMI data from US as well as the job data released by ADP portrayed positive image of US markets which strengthened the USD.

US private-sector employment increased by 162,000 from August to September on a seasonally adjusted basis, according to the latest ADP National Employment Report released Wednesday. The forecast was that US economy would add 150,000 jobs in September.

The purchasing managers' index by ISM climbed to 55.1 in September from 53.7 in August. A figure below 50 indicates contraction and above 50 expansion.

The data may have capped further downside in crude oil prices. Nevertheless, it is indicative of a novel geopolitical trend in the making wherein the center of gravity in terms of economic power is shifting to Asia.

ADB projects the region’s gross domestic product (GDP) growth dropping to 6.1% in 2012, and 6.7% in 2013, down significantly from 7.2% in 2011. The markets stressed on this aspect more than the US factor which resulted in a downside in crude oil prices.

As published in: http://www.commodityonline.com/news/crude-oil-futures-and-the-paradigm-shift-in-economic-power-50684-3-50685.html

Kochi had no sellers for Garbled Pepper at 432/kg on spot despite buyers

Last Updated : 02 October 2012 at 10:55 IST

KOCHI (Commodity Online): Kochi witnessed sales to the tune of 30 tons of ungarbled pepper at the rate of Rs.411/kg on Monday. There were buyers for garbled variety at the rate of 432/kg, but no sellers.

As per reports, arrivals from the primary markets have been robust. Brazilian production may get delayed this time around.

Pepper October contract on the NCDEX has been trading in a range without much of volume in last few trading sessions. Technically it is having an immediate support and resistance at 43100 and 43800 respectively. Increased arrivals in spot market may take the commodity to the southern direction in coming sessions. Break out of the level of 43100 can be considered as a good entry level on the selling side.

Cardamom

Cardamom prices have risen by Rs 50 to Rs 100 per kg to Rs 750 per kg as auctions at Bodinayakannur and Vandanmedu have remained suspended since September 24. The growers and even some Spices Board officials are keen to stop the auction process given various factors.

“There is stiff lobbying amongst people who participate in auctions and they do not allow prices to go beyond a point.” said a market player.

Meanwhile, dry weather conditions have impacted cardamom plantations in Idukki. Growers expect a drop of 40% in production this season against a normal production of 12,000 to 13,000 tons annually. If auction remains suspended prices are likely to rise further, sources said.

Prices to hit the roof if climate hostile, Guatemala output low

If the climate continues to maintain a tough patch, it is highly likely that cardamom prices would hit the roof. But it all depends on the Guatemala cardamom production. If Guatemala cardamom production too is low, then one will not have enough of cardamom to sell in the markets, meaning prices would skyrocket, sources said.

Newspaper reports indicate cardamom plantations in Guatemala have not recovered from the damages that have been suffered.

Now, with festive demand in the offing and export demand pending it can be safely assumed that India cardamom does hold a bright future.

Currently the carryover stocks and rupee appreciation is keeping cardamom tethered to a bearish trend.

Cardamom has been maintaining positive sentiment in recent days as export demand is expected in the ensuing weeks, ahead of coming festivities. Cardamom October contract is having a good support at 960. So buying around 985 with stop loss of 960 is a good trading strategy for coming session.

Immediate outlook however is bearish.

Natural Rubber

Natural Rubber has seen trading at the rate of Rs.195/kg in the Kottayam markets. MRF Tyres has been an active buyer except for the last week. “Their stocks have been low and although there are no exports occurring given the relatively weak rupee, imports are happening.” The farmers are also not keen to come out with stocks, a trader said. The world market is a buyer's market now and Thailand has come up with cap on exports to arrest drop in prices.

The overall market trend is bullish. Natural rubber on the TOCOM in Japan also witnessed an uptrend with gains to the tune of 5 Yen yesterday.

Natural rubber is having good support levels at 19100 and 18700 and an immediate resistance at 19600. It may start recovery from the levels near 19100 as the overall trend for medium term remains positive. Outlook is bullish.

As published in: http://www.commodityonline.com/news/kochi-had-no-sellers-for-garbled-pepper-at-432kg-on-spot-despite-buyers-50642-3-50643.html

Three big ironies in the India Sugar sector

Last Updated : 19 September 2012 at 13:20 IST

Total decontrol of India sugar sector could still remain a distant dream as the center and state governments are involved in controlling of the commodity. “I don't expect it so soon.”said a sugar industry official.

An expert committee headed by PMEAC(Prime Minister's Economic Advisory Council) is expected to give report on sugar decontrol by September end.

“We have held all the deliberations. We have met with all the representatives of sugarcane growers, various state governments. So, we are in a position to submit the report within the next 10-15 days at the maximum,” Prime Minister’s Economic Advisory Council (PMEAC), chairman, C Rangarajan told reporters on the sidelines of an event in New Delhi.

The sugar industry had been demanding partial decontrol of the commodity; ISMA or Indian Sugar Mills Association and NFCSF (National Federation of Cooperative Sugar Factories Limited) demanded freedom to sell sugar in the open market and levy sugar obligation for PDS be curtailed.

On January 27, the Prime Minister of India. Dr. Manmohan Singh set up an expert committee, under chairmanship of C. Rangarajan, to examine issues related to decontrolling of the sweeter.

The three ironies

The sugar sector in India can be divided into two parts: the sugar cane side and the sugar side. In India, the state government controls the sugarcane side even as the government at the center controls the sugar side of the sector.

The regulation of the sugar side is relatively easy in the sense that it is less controversial and hence susceptible to manipulations. But regulating the cane side is no so easy.

Ironically, the tag of “most organized industry in India” turns out to be the industry's biggest disadvantage.

“Sugar sector is the most organised sector in India. And yes, it is more of a disadvantage as far as the industry is concerned as we can be easily targeted.” lamented an official with a major sugar mill in India. “There could be around 500 mills in India and it is far easier when you want to control the industry.” he said.

One just has to take care of the 500 mills and the rest follows: the logic is evident.

Sugar is the most controlled commodity in India. The mills as per the law of the land is obliged to supply sugar under the levy mechanism. This means the mills set aside 10% of their output, which is a variable, that would be released to the Public Distribution System as per government directives for a price fixed by the government.

This is termed levy sugar and the prices of the levy sugar are way below the production cost of the sugar.

“The mills in effect, subsidise the sugar for the Public Distribution System.”the sugar industry official said.

But when it comes to the cane side, the matter gets complicated as the livelihood of millions of farmers are at stake.

“The farmers are a vote bank. So the political parties generally do not do anything that would estrange the farmers.”

The farmers in Maharashtra are offered a Fair and Remunerative Price or FRP by the government. In Tamil Nadu, the state government has brought in a system of State Administered Price or SAP.

However the sugar industry is also one of the industries that is bearing the brunt of (imprudent) incentives. This is yet another irony.

“ In the State of Uttar Pradesh, way back in 2005-06 the then Mulayam Singh government decided to introduce incentives for sugar cane crushing. That was a time when the sugar mills were functioning 160-180 days a year.” the official recalled.

“The number of mills engaged in crushing, subsequently to the announcement, shot up and the figure suddenly came down to 100-110 days by 2006-07 as the cane availability did not register much of a surge. Meanwhile output from the mills too climbed. In 2003-04 the output hovered around 3 lakh tons even as in 2006-07 output witnessed a surge by around 5 lakh tons to almost 8 lakh tons.” the industry source said.

But this production surge together with other factors like tight regulation took the industry to the brim.

The sugar industry in India is also the most litigant sector despite the numerous acts—like Essential Commodities Act or Sugarcane Control Act--governing it; the third irony.

“With hundreds of acts in place to govern it, sugar mills often engage in spat with each other and with governments--central and states--with regard to levy price, sugar cane price among many other things.” the official said.

Meanwhile, for the quarter ending September sugar mills may garner some profit as the prices have appreciated, the official added. The lack of availability of labour to work in the fields is an issue awaiting the next season, the official concluded.

The sugar industry in India has some uniqueness as well:

New players or mills are not joining the game!

The players who are currently involved in the industry have been here for 3-4 generations spanning 70 years or possibly even more. They know the markets well and have seen their share of ups and downs. The farmers too cherish long drawn relations with the mills.

Many of the farmers, since the time of their parents and grandparents have been supplying sugar cane to these mills, may be for four generations or more. So there is an organic and often emotional relationship between the mills and the farmers.

“Multinationals like Cargill are eyeing an entry into the field. But most of them are hesitant given the complexity of reality on ground. The family owned business houses are at an advantage as they have weathered the storms many a time and hence are adaptable.” the official said. 

As published in: http://www.commodityonline.com/news/three-big-ironies-in-the-india-sugar-sector-50418-3-50419.html

'China will continue to excel India; Emerging markets to limp through'

Last Updated : 10 August 2012 at 11:00 IST
Continuous growth is a fanciful dream, continual growth farce and impression of growth the truth--Anonymous

Mooody's Analytics downgrading India's growth projections for the year at 5.5% attributed to turbulent global conditions, policy mis-steps and poor monsoons; investors could see a pall of gloom.

But the growth as registered by India in itself is a cause of cheer. It may not be party time yet; still something to be hopeful of. In Europe recession has set in and Britain and France have been officially in recession. Economic activity has almost come to a stand still in Greece and Southern Europe. Germany is on the brink and there are wide-spread fears that the leviathan anchor that is the crisis, would drag the Euro ship down to the fathoms.

“I believe a 6% growth figure for India would in itself be difficult to achieve...”, said Martin Patrick a Kochi based economist reacting to the Moody's report.

“And for next year, the maximum possible growth rate would be to the tune of 7%” he conveyed.

“But prediction is very difficult as unexpected and unanticipated things are happening in the global markets. It will be 2014 until some assessments could be made and confident conclusions derived.” he hastened to add.

Other emerging markets like Brazil, Russia and South Africa would also continue with limping growth.

“However, China would continue to excel India. They have good dollar reserves, a strong domestic economy and versatile exports. The economy is pretty much diversified with agriculture and manufacturing faring on a robust note.” Martin Patrick added.

But there are contrary views.

China's July exports have picked up just 1%. from a year earlier.

"China will not escape from the global slowdown," Banny Lam, China economist at CCB International in Hong Kong was quoted by Reuters as saying. He is expecting Chinese government to free the cash reserves that banks should hold, so that additional boost would be provided to the economy.

Yesterday, there had been reports that China had pumped up investments in the railway sector.

Chinese government has quietly pumped up its investments in railway sector outlaying funds to the tune of CNY470 billion for July. This is when compared to CNY406 billion stated in a June prospectus of Chinabond, official website of China's debt issues.

The news created positive sentiments in the copper market.

As published in: http://www.commodityonline.com/news/china-will-continue-to-excel-india;-emerging-markets-to-limp-through-49662-3-49663.html

India’s role in Sri Lanka’s Dostoyevskian moment: A reading of UNHRC vote after settling down of dust

After Fyodor Mikhaylovich Dostoyevsky was sentenced to death by the Tsar of Russia for alleged royal subversion, some intuitive conviction in the great writer bordering Extra Sensory Perception told him for sure that he will not be hanged.

On the morning of execution, promulgation came out from the palace sparing Dostoevsky and fellow convicts from the rope and deporting them to cold prisons in Siberia. The whole thing was a drama (mock execution) and on the night before the same, it was noted by the author that the hair of his prison inmate, a fellow-convict, turned grey out of excessive anxiety. The palace circle which staged the drama even deliberated at length whether or not to dig graves in advance just to add a realistic punch to the whole episode.

The outcome: Dostoyevsky and his inmates thanked King profusely and remained indebted to the King for the rest of their lives even as they labored hard in Siberia. (Dostoyevsky even wrote a poem in praise of His Highness while he was in prison.)

While India’s vote at the UNHRC was against Sri Lanka, and marked a paradigm shift in its stand pertaining to country-specific resolutions, the vote against Sri Lanka has been interpreted as:

1. Feet-dragging until the last minute by Indian government
2. Buckling to American pressure on the issue
3. Allowing Foreign Policy to be dictated by Tamil Nadu politics
4. Estranging Sri Lanka
5. Pushing Sri Lanka into the strategic embrace of China

Read more on my policy blog