Believe it or not: Oil cheaper than packaged water

Back-of-the-envelope calculations show that a litre of petrol costs about Rs 11 and diesel about Rs 13, excluding transportation and sundry other charges etc. In contrast, you pay Rs 12-15 for a one-litre bottle of water. Here's how the arithmetic goes: A barrel of crude oil contains about 190 litres. At $38 a barrel, the current price in the international market, each litre of crude works out to Rs 10, taking the exchange rate at Rs 50 to a dollar. On an average, approximately 28-29 litres of petrol and 85 litres of diesel are refined from each barrel of crude. Admittedly, this figure can vary according to the type of crude being processed and the technology deployed in a refinery. So how much would the price of a litre of motor fuel be after incurring the cost of refining, if there were no other charges? The calculation is so mind-boggling that sometimes even executives of oil marketing companies get confused by the myriad central and state taxes - levied at incremental rates - and complex charges such as "freight equalisation levy'' and dealer margins, etc. Such levies taken together constitute 45-55% of the sale price of petrol or diesel. So if petrol costs a little over Rs 45 a litre in Delhi pumps, taxes and levies make up about Rs 22 and another Rs 12 constitutes the oil-marketing firm's profit. That leaves a basic cost of about Rs 11 per litre. Similarly, at Rs 32 a litre - the Delhi price of diesel - the actual cost can be taken as Rs 13 as the companies are making a profit of almost Rs 3 a litre. These calculations are admittedly simplistic and do not take into account other products such as kerosene, jet fuel, cooking gas, naphtha, etc., that are produced along with petrol and diesel and have a bearing on the final cost of each product. However, there won't be big difference between these figures and the figures worked out by the industry.

Stimulus Plan-II will aid IT sector

The government is set to extend the blanket tax exemption provided to software companies in order to boost the IT industry, which has become one of the biggest casualties of the global financial crisis. The Software Technology Parks of India scheme that grants a ten-year income-tax holiday under Section 10A of the Income-Tax Act is expected to continue beyond its March 2010 deadline in a move that should help smaller players.

Govt to push for easier credit, more duty reliefs

The UPA government’s second and final stimulus package for the current fiscal, would focus on credit availability to industry and trade at affordable rates with some policy rate adjustments by the Reserve Bank of India, sources here familiar with the development, told Business Line. They further noted that since labour-intensive export segments such as leather and leather products, marine products and textiles had suffered severely due to the drop in overseas orders that led to retrenchment of workers, the second stimulus would address these specific sectors in a bid to bolster them. Asked whether there would be any duty cuts particularly at a time when both customs and excise collections have been falling since September 2008, the sources said that there would be a possibility of duty cuts in mass consumption items such as pulses in the second stimulus.

Stimulus package for exports, housing & steel

The package is expected to be fine-tuned at a late evening meeting which is expected to be attended by Mr Nath himself and deputy chairman Planning Commission Montek Singh Ahluwalia and Cabinet Secretary K M Chandrashekhar. Earlier it was reported that exporters who have purchased export credit protection are set to get an additional dole-out from the government over and above the cover they have already bought. The government is expected to come out with a Rs 350-crore additional package for exporters soon. This will be in addition to Rs 5,000-crore refinance package announced earlier in the month by the Reserve Bank of India for Exim Bank to provide liquidity support to troubled exporters. The funds will be used to provide export credit insurance cover to exporters over and above the protection provided by Export Credit Guarantee Corporation, ECGC executive director S Prabhakaran said at a CII seminar. “Exporters who have ECGC cover will get an additional 10% of money depending on the type of cover. It will cover those entities who are covered by the MSMED (Micro Small and Medium Enterprises Development) Act,” Mr Prabhakaran said. While the details of the package are still being worked out, the non-SME beneficiaries from the package are likely to be from sectors such as textiles, gems and jewellery and leather. The list is expected to cover the list of beneficiaries in detail, he added. One of the fall-outs of the financial crisis in most western markets since September this year is that many Indian exporters saw a dip in demand and had to cancel order. For the first time in several years, the country’s exports saw an absolute dip in exports during October this year. Many even faced payment and credit problems, leading them to enforce their claims with the credit insurer. Many have also been facing problems because of a volatile rupee. Mr Prabhakaran said the Corporation has seen the size of claims going up, but added resource-wise it was comfortable and will not increase the premium. “We are having a comfortable claim to premium ratio.” Mr Prabhakaran said ECGC is not shunning new entrants seeking a cover. Instead, it is encouraging exporters to go for turnoverbased policies instead of transaction-based policies and ensuring that exporters go for a long-term protection rather than a selective cover. Unlike in India many commercial entities like COFACE have already indicated their unwillingness to take on exposures in countries like UK, USA, Ireland, Iceland and Italy.

Funds dial IT czars for Satyam deal

Institutional investors led by Aberdeen Asset Management , Fidelity and ICICI Prudential hold a 61% stake in Satyam, several times the 8.3% stake held by the family of the company’s founder and chairman, Ramalinga Raju. This makes the company vulnerable to a hostile takeover, especially since several funds are upset at Satyam’s founders for trying to use the company’s cash pile to buy the two Maytas firms run by Mr Raju’s family members. But given Satyam’s reputation problems and the challenging global environment, getting a buyer may not be easy, analysts say. However, at least two people familiar with the developments told ET that bankers acting on behalf of some funds had approached Satyam’s rivals such as Wipro, Infosys, large overseas IT companies and financial players in the past few days. Infosys and Wipro declined to comment as they are in a “silent period” before quarterly results next month, but informed sources indicated that these companies did not show interest in pursuing a deal. Private equity investors are rumoured as another set of potential buyers, although analysts say Satyam is more likely to attract interest from IT firms as a financial buyer would need to have a top management team in place before moving in to do a deal.

Reliance Industries to start world's biggest refinery

The $6 billion project will make the oil complex in Jamnagar in Gujarat the world's single biggest supplier of fuels to the global market, pumping out 1.24 million bpd of ultra-clean fuels to Europe, Africa and the United States. The project is a triumph for Chief Executive Mukesh Ambani, who helped break India's heavy reliance on imported fuel a decade ago with Reliance's first 660,000 bpd plant, a cash cow for the firm during a profit boom over the past four years.

India- Room for Monetary Policy Easing

India’s government said the country has room to cut interest rates further and pump more money into the economy to sustain growth after the global recession caused industrial output to shrink for the first time in 15 years. “An aggressive monetary policy may be necessary if the global economic depression continues to adversely affect manufacturing,” the finance ministry said in its mid-year review of the economy presented in parliament today. India also needs to increase spending on infrastructure to offset declining private investment, the ministry said. Prime Minister Manmohan Singh, seeking re-election before May next year, wants to sustain consumption as a decline in exports forces companies to cut production and fire workers. The government on Dec. 7 announced a 200 billion-rupee ($4-billion) stimulus package to prop up consumer spending, a day after the central bank cut interest rates for the third time in two months. “The only strong solution to spur consumer spending lies in lowering borrowing costs,” said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor’s. “The decline in inflation gives the central bank enough legroom to ease the policy.”