The reserve Bank of India on the eve of its mid term last quarterly review of FY 2011-12, brought down the CRR by 75 points which restored Rs 48,000 Cr to the respective Banks. The advance payment of Income-tax which is expected to touch Rs 60,000 Cr has started coming to the public exchequer. With the budget day, tomorrow, expectations are heavy. GDP growth may fall to less than 7% from the 9%, and fiscal deficit is likely to go up beyond 4.2% envisaged in the budget. Even though petrol prices have been hiked and the diesel price is waiting to be hiked, the State government and its Chief Ministers who are part of UPA and outside it, have been demanding restraint in the hikes as anti aam admi. The straying of inflation far beyond Government expectations uprooted the economy and the people are reeling under its direct and indirect impact. Any increase in prices of Public transport system like the railways is resented. Government fiscal deficit continues to outstretch the predicted rate, as the finance ministry is unable to match the Revenue receipts with expenditures. Government failed to take advantage of pricing Spectrum etc high so that the revenue would have added to Government’s income. The disinvestment in ONGC resulted in a flop, because of bad timing, wrong pricing. However, LIC had to jump in to save the day for the Government. The projected disinvestment in the budget 2011-12 was Rs 40,000 Cr.
Life Insurance Corporation of India (LIC) is also a financial institution, having assets around Rs 14 trillion. More than 25% of the Indian public have insured with the LIC. With a huge asset base, the Corporation’s influence on Indian financial markets is very large. Even in the midst of the arrival of new players, both domestic and foreign, LIC continue to hold its sway over a fixed percentage of the Population as a reliable and trustworthy organization. It has been managed well, and its investment returns regularly forms a part of its track record.
That LIC has traditionally been a major participant in most public issues of PSUs. It apparently also funds nearly 25% of government's expenses. Is it wise to deploy its funds to salvage the reputation of debt strapped public utilities, It has been argued on behalf of the government that LIC's investments in PSUs have swelled in market value over the years. Experts opine that most of the investments are government forced and there has been an erosion of nearly 25% of the investments in recent times. Take the recent Oil and Natural Gas Corporation (ONGC) public issue for instance. Buying shares in an overpriced issue that had been skipped by other investors is not prudent economics.
This brings to the fore, the plight of India’s first mutual fund, the US-64. It was looked after by the state sponsored Unit Trust of India, which went ahead with unworthy investments which took a heavy toll on its returns. The funds collapsed. The government would do well to leave the navaratnas to its own management. The disinvestment proposal hinges on selling a part of the share holding to public thro’ secondary market. Like LIC, Coal India seems to be another milching cow.
Public Sector units are badly managed. UTI was bailed out in 2002. Air India continues to be a headache, requiring infusion of funds. BSNL and MTNL are the other utilities awaiting central funds to revive. Public has a stake in these companies, as it is the exchequer which finances government’s spending.
Thursday, March 15, 2012
Political absurdity
The tamasha is getting more and murkier with every passing day. The Great Indian Circus of Indian Political parties have cost the nation dearly yet no lessons have been learned from past experiences.
Today, the regional political parties who vest the UPA government with numerical majority have started to show colours. Other powerful regional straps have become ambitious, and feel, that any encroachment to federal fiefdom would be an encroachment to the Constitution. There was a strong centre and weak states. To boot, you had Sec 356 of the Constitution by which a state can be brought under President’s rule by citing the break down of law and order. Boomai case changed the use or misuse of that Section.
The Prime Minister was talking of coalition dharma. It is coalition adharma that is prevailing. When the elections of 2009 threw in a majority for UPA, DMK blackmailed the UPA into submission. It wanted coveted ministries. It got Telecom. And the Telecom ministry got into such a mess, that the Minister is at Tihar Jail. There were many others over reaching Ministries which are under cloud, held by the other regional parties. Mamata berates her own nominee who is the Railway minister who brings in a balanced budget looking ahead by at least a decade. She wants him thrown out and another to be brought in. We see the prime Minister obliging. Now, in the name of aam admi, you cannot dole out government revenue, but entity should be self driven and balance its expenditure through income. To further aggravate the Government, Mamata does not take part in UPA conclaves or meetings but seems to be showing her inclination towards other front. That is her right. Let her. But on the one hand, she is part of the Government, and on another, she is the worst critic of the Government. Her bull doze approach is get central funding for the state of West Bengal. An impossible outlay as the state requires money. It was the same Mamata who drove the Tatas out; this industrial unit would have provided jobs for many people and the revolving economy around Nandigram would have cascaded wealth in West Bengal. Jayalalitha, the satrap of Tamilnadu is savvy, statesmanlike and polished. She finds all faults, but at least in her case, she is not part of UPA. She does not want any inroads into Federal structure, no anti terrorist acts, etc. She wants electrical power, she wants central investment, but she would not permit the setting up of Koodankulam nuclear Plant. When asked for her fears, she just says that if a nuclear plant in Japan could cause devastation, why not this. What happened at Japan was not that anything was wrong with the Plant, but hurricane with tsunami ran roughshod over the Plant, which saw the radiation fuming into the atmosphere. You want all the good, and take all the bad seems to be Jayalalitha’s refrain. DMK, shattered and blistered, is raking up the right violations- especially killing the 12 year son of LTTE Chief Prabhakaran in cold blood. This seems to be a serious issue and why is the world watching Sri Lankan brutality against innocent Tamilians in silence. I saw Kannimozhi vociferous in presenting the case with passion in the Rajya Sabha. DMK’s bad governance has cost the UPA directly and if they want to leave the coalition, they must be allowed to. Now every state government asks who stole my cheese? They want the benefits, but do not want to carry the burden, like TN as far as Koodankulam nuclear power plant is concerned. Against terrorist activities, if a Central organization is formed, as the state police have been unable to ferret out the terror outfits or other thugs, why should there be a chorus of protests? Where is the attack on autonomy?
Coming back to the Coalition dharma, which the Prime minister eloquently parroted, the Council of Ministers headed by the Prime Minister shall hold office if they enjoyed the majority of the Parliament. There can be coalition parties who can be part of a coalition. But the right to allot portfolios is the prerogative of the Prime minister. This cannot be delegated to the Political parties who form a part of the Coalition. This is not dharma. The King chooses his team. When President describes my government, it means Prime Minister and his team of Ministers who have majority in Parliament. It is high time, the national Political parties change their equation, and follow rudimentary principles, lest they become laughing stock. Country should not be held to ransom because of the writ of one individual!
Today, the regional political parties who vest the UPA government with numerical majority have started to show colours. Other powerful regional straps have become ambitious, and feel, that any encroachment to federal fiefdom would be an encroachment to the Constitution. There was a strong centre and weak states. To boot, you had Sec 356 of the Constitution by which a state can be brought under President’s rule by citing the break down of law and order. Boomai case changed the use or misuse of that Section.
The Prime Minister was talking of coalition dharma. It is coalition adharma that is prevailing. When the elections of 2009 threw in a majority for UPA, DMK blackmailed the UPA into submission. It wanted coveted ministries. It got Telecom. And the Telecom ministry got into such a mess, that the Minister is at Tihar Jail. There were many others over reaching Ministries which are under cloud, held by the other regional parties. Mamata berates her own nominee who is the Railway minister who brings in a balanced budget looking ahead by at least a decade. She wants him thrown out and another to be brought in. We see the prime Minister obliging. Now, in the name of aam admi, you cannot dole out government revenue, but entity should be self driven and balance its expenditure through income. To further aggravate the Government, Mamata does not take part in UPA conclaves or meetings but seems to be showing her inclination towards other front. That is her right. Let her. But on the one hand, she is part of the Government, and on another, she is the worst critic of the Government. Her bull doze approach is get central funding for the state of West Bengal. An impossible outlay as the state requires money. It was the same Mamata who drove the Tatas out; this industrial unit would have provided jobs for many people and the revolving economy around Nandigram would have cascaded wealth in West Bengal. Jayalalitha, the satrap of Tamilnadu is savvy, statesmanlike and polished. She finds all faults, but at least in her case, she is not part of UPA. She does not want any inroads into Federal structure, no anti terrorist acts, etc. She wants electrical power, she wants central investment, but she would not permit the setting up of Koodankulam nuclear Plant. When asked for her fears, she just says that if a nuclear plant in Japan could cause devastation, why not this. What happened at Japan was not that anything was wrong with the Plant, but hurricane with tsunami ran roughshod over the Plant, which saw the radiation fuming into the atmosphere. You want all the good, and take all the bad seems to be Jayalalitha’s refrain. DMK, shattered and blistered, is raking up the right violations- especially killing the 12 year son of LTTE Chief Prabhakaran in cold blood. This seems to be a serious issue and why is the world watching Sri Lankan brutality against innocent Tamilians in silence. I saw Kannimozhi vociferous in presenting the case with passion in the Rajya Sabha. DMK’s bad governance has cost the UPA directly and if they want to leave the coalition, they must be allowed to. Now every state government asks who stole my cheese? They want the benefits, but do not want to carry the burden, like TN as far as Koodankulam nuclear power plant is concerned. Against terrorist activities, if a Central organization is formed, as the state police have been unable to ferret out the terror outfits or other thugs, why should there be a chorus of protests? Where is the attack on autonomy?
Coming back to the Coalition dharma, which the Prime minister eloquently parroted, the Council of Ministers headed by the Prime Minister shall hold office if they enjoyed the majority of the Parliament. There can be coalition parties who can be part of a coalition. But the right to allot portfolios is the prerogative of the Prime minister. This cannot be delegated to the Political parties who form a part of the Coalition. This is not dharma. The King chooses his team. When President describes my government, it means Prime Minister and his team of Ministers who have majority in Parliament. It is high time, the national Political parties change their equation, and follow rudimentary principles, lest they become laughing stock. Country should not be held to ransom because of the writ of one individual!
Monday, March 12, 2012
Kundankulam- fears real or unfounded?
Is Kundankulam Plant fears unfounded and far fetched?
Is the fear about the Kundankulam atomic energy plant unfounded or far fetched? Is it much ado about nothing? Or is it spill over of political activism? Or the big developed nations want India to live in bullock cart age without developing? Is there a conspiracy?
Three Mile Island nuclear accident in 1979 did it not happens? Chernobyl disaster where the reactor burst like abomb carrying the devastation of nearly large areas in its radius reducing them to a pulp in 1986. Fukushima, located in the sea front, and built by the meticulously by Japanese scientists caused destruction of a high order. Fishermen died, large amount of fishes were affected by the radiation from the reactors. Fishermen community fears such stories as repetition of the Minamata tragedy, where fishes took mercury and perished because of the location of a caustic soda factory there. There was fear, and more fear instilled among the local people and ignorant population.
There is another question. Why did the people wait till 2009, even though the plant initially began work in 2002? There are large numbers of nuclear reactors all over the world which provide power. The disaster percentage has been very few. The incident of occurrence of Fukushima tragedy can be related to a unique combination of nature’s fury- earthquake followed by tsunami is indeed a rare natural occurrence. Against the tsunami, no structure can withstand. But does this mean that the risk in a nuclear reactor is unpredictable and inherent? There is an attitude of the engineers and scientists of the atomic energy department. They do not vibe well and decently with the local population. Every one has a right to question the safety of these reactors? What are the inbuilt safety standards? Are our Scientists or technocrats not answerable to the locals who have their doubts lingering in their minds? Fishermen, can’t they have serious doubts about their livelihood options. Was there an attempt to build confidence between the agitators and the establishment except lathi charge on the protestators? Fishermen depend on fishing for their sustain hood, and hence their doubts on safety measures need to be shared with them. You cannot say, atomic energy Act is shrouded in secrecy, we cannot reveal much, but can assure you nothing untoward can happen. If the Indian Scientists were so much above board, why did the Govt of India put an order on top four scientists in the negative list? (Even though the country believes they are great men who have done the country proud). Government can raise their doubts of malfeasance with the top most scientists of impeccable integrity while the local people whose life is centered on Kudaukulam?
Government has characterized the stirs and protests to flow of foreign money into the coffers of a few NGOS who have diverted its money to campaign against the atomic plant. In Tamilnadu, 3218 NGOs received Rs 1663.31 Cr foreign money from America Britain, Germany, Italy and Netherlands. These countries have nuclear plants and depend upon nuclear energy. This allegation needs proof, legal proof which will stand the test of Rule of Law.
Would the Nuclear experts clarify some points? What is the cost of producing one watt of power? With hard water transported from elsewhere, and the cost of maintaining a plant with all its safeguards, what would be the recurring cost? How is one unit of power calculated? What about the safety net. Till what point or the circumference or diameter is considered as high vulnerable area. If there is a radiation leak, what would be the time limit to evacuate all the people to another point where the doses of radiation will not inhibit? What is the disaster management plan that would be put in operation in the eventual case of disaster? Are the plans of evacuation imbecile? The decision to take appropriate action, however cost it might incur, can be taken by the people at the grass root level, or would they need clearance from higher ups, and higher ups need clearances from the top brass in Delhi? These actions need to be documented and explained to the people in detail. Do not give formulas on the black board and make your exit. Convince the people. What about the unsolved problem of disposal of nuclear radioactive waste. It is reported that 30 tonnes of radio active waste is generated in a 1000 MW. Radio active wastes are just hidden in vitrified and sealed and buried. The people who bury the waste are fully conscious of their nature of hazards. Will they share it with the people? There are 3 lakh tonnes of radio active nuclear wastes remain accumulated from nuclear atomic plants. There are fantasy theories giving suggestions of storage of this highly hazardous waste. This need protection, for which a cost is involved. If the safeguarding cost is included in the cost of energy produced, it would be astronomic!
India was producing 1400 MW in 1947. Today its production is around 1, 82,000 MW. Still, we are hungry for power. Hydroelectric power projects have become ecological disasters. Submerging of lands is another issue. Erratic monsoons will cause upheavals in the production control. Coal, lignite, is costly. Rare. From pit head to the power station, transportation is exorbitant. There are alternative sources of energy. But this can produce small lumps and not massive power required for developing the country. Cadicott wrote a book in 1978 titled, Nuclear Madness. If after reading the book, some body provides answers to her questions, we can say that the atomic plant is fail safe.
Is the fear about the Kundankulam atomic energy plant unfounded or far fetched? Is it much ado about nothing? Or is it spill over of political activism? Or the big developed nations want India to live in bullock cart age without developing? Is there a conspiracy?
Three Mile Island nuclear accident in 1979 did it not happens? Chernobyl disaster where the reactor burst like abomb carrying the devastation of nearly large areas in its radius reducing them to a pulp in 1986. Fukushima, located in the sea front, and built by the meticulously by Japanese scientists caused destruction of a high order. Fishermen died, large amount of fishes were affected by the radiation from the reactors. Fishermen community fears such stories as repetition of the Minamata tragedy, where fishes took mercury and perished because of the location of a caustic soda factory there. There was fear, and more fear instilled among the local people and ignorant population.
There is another question. Why did the people wait till 2009, even though the plant initially began work in 2002? There are large numbers of nuclear reactors all over the world which provide power. The disaster percentage has been very few. The incident of occurrence of Fukushima tragedy can be related to a unique combination of nature’s fury- earthquake followed by tsunami is indeed a rare natural occurrence. Against the tsunami, no structure can withstand. But does this mean that the risk in a nuclear reactor is unpredictable and inherent? There is an attitude of the engineers and scientists of the atomic energy department. They do not vibe well and decently with the local population. Every one has a right to question the safety of these reactors? What are the inbuilt safety standards? Are our Scientists or technocrats not answerable to the locals who have their doubts lingering in their minds? Fishermen, can’t they have serious doubts about their livelihood options. Was there an attempt to build confidence between the agitators and the establishment except lathi charge on the protestators? Fishermen depend on fishing for their sustain hood, and hence their doubts on safety measures need to be shared with them. You cannot say, atomic energy Act is shrouded in secrecy, we cannot reveal much, but can assure you nothing untoward can happen. If the Indian Scientists were so much above board, why did the Govt of India put an order on top four scientists in the negative list? (Even though the country believes they are great men who have done the country proud). Government can raise their doubts of malfeasance with the top most scientists of impeccable integrity while the local people whose life is centered on Kudaukulam?
Government has characterized the stirs and protests to flow of foreign money into the coffers of a few NGOS who have diverted its money to campaign against the atomic plant. In Tamilnadu, 3218 NGOs received Rs 1663.31 Cr foreign money from America Britain, Germany, Italy and Netherlands. These countries have nuclear plants and depend upon nuclear energy. This allegation needs proof, legal proof which will stand the test of Rule of Law.
Would the Nuclear experts clarify some points? What is the cost of producing one watt of power? With hard water transported from elsewhere, and the cost of maintaining a plant with all its safeguards, what would be the recurring cost? How is one unit of power calculated? What about the safety net. Till what point or the circumference or diameter is considered as high vulnerable area. If there is a radiation leak, what would be the time limit to evacuate all the people to another point where the doses of radiation will not inhibit? What is the disaster management plan that would be put in operation in the eventual case of disaster? Are the plans of evacuation imbecile? The decision to take appropriate action, however cost it might incur, can be taken by the people at the grass root level, or would they need clearance from higher ups, and higher ups need clearances from the top brass in Delhi? These actions need to be documented and explained to the people in detail. Do not give formulas on the black board and make your exit. Convince the people. What about the unsolved problem of disposal of nuclear radioactive waste. It is reported that 30 tonnes of radio active waste is generated in a 1000 MW. Radio active wastes are just hidden in vitrified and sealed and buried. The people who bury the waste are fully conscious of their nature of hazards. Will they share it with the people? There are 3 lakh tonnes of radio active nuclear wastes remain accumulated from nuclear atomic plants. There are fantasy theories giving suggestions of storage of this highly hazardous waste. This need protection, for which a cost is involved. If the safeguarding cost is included in the cost of energy produced, it would be astronomic!
India was producing 1400 MW in 1947. Today its production is around 1, 82,000 MW. Still, we are hungry for power. Hydroelectric power projects have become ecological disasters. Submerging of lands is another issue. Erratic monsoons will cause upheavals in the production control. Coal, lignite, is costly. Rare. From pit head to the power station, transportation is exorbitant. There are alternative sources of energy. But this can produce small lumps and not massive power required for developing the country. Cadicott wrote a book in 1978 titled, Nuclear Madness. If after reading the book, some body provides answers to her questions, we can say that the atomic plant is fail safe.
Sunday, March 11, 2012
India's economy past its balmy days
Over riding downside risks to Growth: economic Story
Politics and Contagion are the drivers of the underperforming world markets, not balance sheet nor earnings. Shaky Europe, political gridlocks, volatile markets, dysfunction in United States, have been a major cause to create disorder to world trade’s orderly growth. India has plentiful problems, short term, medium term, long term, combination of domestic factors and deteriorating global economy, stampedes in the elections to the state assemblies, has created a governance paralysis.
RBI gave a shock treatment, albeit a proactive stance by reducing the Cash Reserve Ratio (CRR) by 75 points to 4.75 from 5.50 effective March 10, 2012. The timing was perfect. On 15th March, advance taxation to the extent of Rs 60,000 Cr would be required which under the present liquidity deficit, it is difficult for the Banks to manage. The release of Rs 48,000 Cr into the liquidity inflow would help Banks to frontload cash balances.
The macro economic picture will be assessed by the RBI on 15th March 2012, when it has to do revelations to enable the government to bring forward a favourable budget, which is the last straw on the UPA’s back. With food inflation in the stable for now and the tamed general inflation may not cause any upheavals at least for the present. The winds are favourable and the sky is clear, which makes it incumbent for the RBI to educe the interest rates which were hiked 13 times during the last 20 months or so, to give respite to the manufacturing sector to beget a better index of industrial production. The REPO rate announcement is long overdue. The industrial growth in the last quarter was 0.4% due to a combination of factors.
The burnt of petroleum hike read petrol hike had a destabilizing effect on the inflation figures. As the demand for petrol goes up in proportion to the manufacture of more and more motor cars for the middle-class, and with favourable bank interest to buy cars, the automobile population has become weird. Now, any dent of pressure would slow down the automobile sector growth which would mar a better IIP. We need to choose between growth, or hiking the petrol prices to produce better figures for oil companies in the balance sheet, which is preferred? Government needs to think aloud.
The Financial accountants see everything from the prism held by them on seeing green figures. They look forward to ways by which they can reduce the red figures. In doing so, they have distraction that some red colour entries cannot be touched- being pet projects of the UPA Chairperson, Greenfield project for the giant development of a state where sympathy for the party in power is almost hundred percent, etc. Rural ministry has pumped money into the rural sector, where the retailers have made a fast buck because of enhanced purchasing power. Through a slew of government interventions, it is not enough if we increase the capacity of BPL to spend more; they must essentially earn higher and better with support initially and without support, further down the road. Does any government scheme evaluate the incidence of income capacity of any beneficiaries? No.
We see a BoP in the current account ( $ 166.8 billion) which is a glaring and high trade deficit. Exports between April-February 2011-12 showed a jump of 21.4% and is about $ 267.4 billion, with the export of the terminal month of the year to fetch $ 33 billion, to round off the exports to $ 300 billion. This seems incredible given the glut in India’s foster as well as traditional markets. There was risk as we moved over to new and emerging markets. Imports grew by 29.4% during the same period to touch $ 434.2 billion, posting a straight trade deficit of $ 166.8 billion. This is not sound strategy even though we have a comfortable Foreign Exchange Reserves around $ 300 billion.
While petroleum products occupy a significant value of imports, government should contain import considerably or recklessly. The annual import of sizable quantity of edible oil from various countries, more than the required demand at 0% customs duties, is hurting the domestic industry. There are also anti dumping charges against these importers, but the Indian Agricultural Ministry which has neither figures nor reasons to justify imports has been depending upon indiscriminate import. Domestic oil seeds industry, Coconut oil industry has gone red because of cheap import. Government should take a call whether it is wise to export Cotton in its raw form or give value addition and get 6 times its price especially since the export is directed at our direct competitators like Bangladesh and China? Gold imports need a rethink. Gold belongs to a class of investments that will never produce anything but whose growing value depends upon the belief that someone else may pay more for it. Rupee’s down trend against the Dollar for a period is not a good aspect considering exporters bag of problems. Our cardinal import policy through FTP needs revision.
In our anxiety to post higher economic growth, we had privatized certain sectors. Aviation sector was one that underwent a major transformation. Air India, Indian government airlines is cash strapped. Kingfisher has plethora of problems. When the going was bad, Kingfisher’s accounts were blocked by Income-Tax and Service Tax. Banks announced simultaneously, that Kingfisher account has become Non Performing Asset, hence any bail-out would depend upon cleansing the account. The Oil companies have stopped giving jet oil to the airlines. Airports are demanding their dues. Government is keeping a silence. If the Company fails, what about employees? Flight schedules? Alternative? Complete disorder can be expected in the aviation sector. Banks will lose their credits. What about goods and services which catered to the airlines on a daily basis. The vacuum cannot be created by a foreign airliner undertaking flights in the domestic routes. Jet Airways has also been served a notice. What government is contemplating is not clear. Already damage has been done, and the government would be doing greater damage if they do not act. Indian balmy economics is in the sorrow days trap!
Politics and Contagion are the drivers of the underperforming world markets, not balance sheet nor earnings. Shaky Europe, political gridlocks, volatile markets, dysfunction in United States, have been a major cause to create disorder to world trade’s orderly growth. India has plentiful problems, short term, medium term, long term, combination of domestic factors and deteriorating global economy, stampedes in the elections to the state assemblies, has created a governance paralysis.
RBI gave a shock treatment, albeit a proactive stance by reducing the Cash Reserve Ratio (CRR) by 75 points to 4.75 from 5.50 effective March 10, 2012. The timing was perfect. On 15th March, advance taxation to the extent of Rs 60,000 Cr would be required which under the present liquidity deficit, it is difficult for the Banks to manage. The release of Rs 48,000 Cr into the liquidity inflow would help Banks to frontload cash balances.
The macro economic picture will be assessed by the RBI on 15th March 2012, when it has to do revelations to enable the government to bring forward a favourable budget, which is the last straw on the UPA’s back. With food inflation in the stable for now and the tamed general inflation may not cause any upheavals at least for the present. The winds are favourable and the sky is clear, which makes it incumbent for the RBI to educe the interest rates which were hiked 13 times during the last 20 months or so, to give respite to the manufacturing sector to beget a better index of industrial production. The REPO rate announcement is long overdue. The industrial growth in the last quarter was 0.4% due to a combination of factors.
The burnt of petroleum hike read petrol hike had a destabilizing effect on the inflation figures. As the demand for petrol goes up in proportion to the manufacture of more and more motor cars for the middle-class, and with favourable bank interest to buy cars, the automobile population has become weird. Now, any dent of pressure would slow down the automobile sector growth which would mar a better IIP. We need to choose between growth, or hiking the petrol prices to produce better figures for oil companies in the balance sheet, which is preferred? Government needs to think aloud.
The Financial accountants see everything from the prism held by them on seeing green figures. They look forward to ways by which they can reduce the red figures. In doing so, they have distraction that some red colour entries cannot be touched- being pet projects of the UPA Chairperson, Greenfield project for the giant development of a state where sympathy for the party in power is almost hundred percent, etc. Rural ministry has pumped money into the rural sector, where the retailers have made a fast buck because of enhanced purchasing power. Through a slew of government interventions, it is not enough if we increase the capacity of BPL to spend more; they must essentially earn higher and better with support initially and without support, further down the road. Does any government scheme evaluate the incidence of income capacity of any beneficiaries? No.
We see a BoP in the current account ( $ 166.8 billion) which is a glaring and high trade deficit. Exports between April-February 2011-12 showed a jump of 21.4% and is about $ 267.4 billion, with the export of the terminal month of the year to fetch $ 33 billion, to round off the exports to $ 300 billion. This seems incredible given the glut in India’s foster as well as traditional markets. There was risk as we moved over to new and emerging markets. Imports grew by 29.4% during the same period to touch $ 434.2 billion, posting a straight trade deficit of $ 166.8 billion. This is not sound strategy even though we have a comfortable Foreign Exchange Reserves around $ 300 billion.
While petroleum products occupy a significant value of imports, government should contain import considerably or recklessly. The annual import of sizable quantity of edible oil from various countries, more than the required demand at 0% customs duties, is hurting the domestic industry. There are also anti dumping charges against these importers, but the Indian Agricultural Ministry which has neither figures nor reasons to justify imports has been depending upon indiscriminate import. Domestic oil seeds industry, Coconut oil industry has gone red because of cheap import. Government should take a call whether it is wise to export Cotton in its raw form or give value addition and get 6 times its price especially since the export is directed at our direct competitators like Bangladesh and China? Gold imports need a rethink. Gold belongs to a class of investments that will never produce anything but whose growing value depends upon the belief that someone else may pay more for it. Rupee’s down trend against the Dollar for a period is not a good aspect considering exporters bag of problems. Our cardinal import policy through FTP needs revision.
In our anxiety to post higher economic growth, we had privatized certain sectors. Aviation sector was one that underwent a major transformation. Air India, Indian government airlines is cash strapped. Kingfisher has plethora of problems. When the going was bad, Kingfisher’s accounts were blocked by Income-Tax and Service Tax. Banks announced simultaneously, that Kingfisher account has become Non Performing Asset, hence any bail-out would depend upon cleansing the account. The Oil companies have stopped giving jet oil to the airlines. Airports are demanding their dues. Government is keeping a silence. If the Company fails, what about employees? Flight schedules? Alternative? Complete disorder can be expected in the aviation sector. Banks will lose their credits. What about goods and services which catered to the airlines on a daily basis. The vacuum cannot be created by a foreign airliner undertaking flights in the domestic routes. Jet Airways has also been served a notice. What government is contemplating is not clear. Already damage has been done, and the government would be doing greater damage if they do not act. Indian balmy economics is in the sorrow days trap!
Thursday, March 1, 2012
Helping Coconut farmers from the tyranny of Options
Coconut industry
There is broad feeling, accentuated by low price, enough is not done to put in a mechanism to bring up the price of Coconuts artificially, as the industry is predicted to be in the doldrums. During the beginning of last year, the price of a nut was less than the cost of an egg! But consistent and sustained efforts of the Coconut board resulted in the farm gate price going up to Rs 13/- and retail price touching around Rs 18/-.
With the onset of Coconut season, farm gate prices which were around Rs 10/- has dropped to Rs 5-Rs5.50. February-March of every year see a good harvest season. Government of India has already Minimum support price or “support price” for milling Copra at Rs 5100/quintal and Ball copra at Rs 5350 per quintal. In Kerala, Copra is procured by KeraFed. Since procurement of nuts has not begun, most of the Coconut growers depend upon the big buyers at Pollachi. It is this stream of businessmen who determine the price of farm gate price. The Coconut from Palaghat and nearby areas is purchased by the TN lobby, and Coconut (Copra) Oil is extracted and sends back to Kerala in packs to be sold here. It is also said, the cheap imported palm oil is used to adulterate with the Coconut Oil.
There is also widespread lament by the Kerala coconut grower that enough support is not extended to the Coconut grower to stabilize the price, with the result that many Coconut growers have left Coconut cultivation and have moved to cash crops like Rubber. With the cost involved in maintaining the coconut farms in small land holdings, the productivity in the Sector is abysmally low. Average productivity of Coconut in India is 8,303 nuts/hectare (48nuts per farm) while in Kerala it produces 7365 per hectre (42 nuts per farm). Plans are on the anvil to enhance the productivity to 85 nuts per tree so as to produce 17,500 nts/hectre per annum. Kerala’s production of Copra has also dwindled making its quantitative growth equivalent to 46% of India’s use. Rs 245 Cr Replantation and Rejuvenation was implemented in the XI Plan in select districts of Kerala like Thiruvanathapuram, Kollam, and Trichur and made operational from the year 2008, has seen a large number of Coconut trees being felled and new plant saplings grown so as to increase the productivity by way of return of seeds. The felled Coconut stumps were to be converted as Particle Boards where huge demands exist according to American Particle Board Association. A joint venture is under contemplation between Coconut Development Board, and Kera Fed, which has the technology to produce high class Particle Board which could be a substitute for depleting wood supply for furniture manufacture and house building activities due to ban on wood felling. It will open up new vistas, provide mass employment, and create a new economic opening.
The by-line article by S Sananda Kumar of ET Bureau, Alleppey, feels that the Board’s priority seems to be on corporatisation of Coconut industry, by pushing the product to the global market, and transporting tender Coconut water to Greater Kailash, Delhi where it nets Rs 35-Rs 40 per nut instead of looking at the grass root problem of the industry at the farm gate level. The entire Coconut nut industry is in the hands of hand picked middlemen, who could easily tamper the price of Coconut after the “support price” is announced. Historically, the market prices come down immediately after the announcement of the support price. The
Small Coconut farm holder has to depend upon the middleman, who will buy the Coconuts en masse for negligible amount, and these nuts go to a warehouse and always not to the market. Once the market price falls less than the “support price”, the trade petitions for tinkering of the Minimum Support price which is increased, and the benefit of this seldom goes to the farmer. It is the cat and mouse game that is played out well. The market price is the price created by artificial scarcity. At no point of time, the Coconut Copra Oil’s demand has suffered. It means it is not in short supply. At no point of time, there is inventory of Coconut Copra Oil. That means demand and supply pair. Under the circumstances, the artificial shortage and resultant scarcity are man made. Unfortunately, you cannot use gale force to moderate the market. If demand-supply is manipulated, Economic theory cannot work.
Coconut industry can be compared to the Stone age which did not end because we ran out of stones! When copra is crushed, it produces 65% Coconut Oil, 28% oil meal, 7% moisture. The oil meal’s global as well as domestic demand is growing because of the increase in livestock population. If marketed properly, this product can account for a plum recovery through pricing.
In my view, the Tender Coconut accounts for around 12-15% of the present Coconut production. But, the drink which has been value added through nice packing having a storage life of 90 days in 330 mls., has built a huge demand of around nearly 750 million dollars in America. The Board has planned setting up 5,000 green stalls, all will be franchisees, and the demand driven Coconut water to quench thirst would be sold in London Olympics, Wimbledon, Lords, Flaming Meadows, and other Sports centres, in aircrafts, hospitals, shopping malls, etc as this drink branded tender Coconut water will have an all India presence and overstretch to reach global markets. The entire supply chain will benefit, and the use of other value added Coconut products like Coconut milk, Coconut powder, coconut chips also would become visible. None of the Kerala based products have visibility in the upper India markets. If Rubber which is 93% produced in Kerala can go across India to the various production units and return to Kerala as an end product with an enhanced price, whom do we blame? For rubber market should pick up, the manufacturing industry should buy. They are mostly beyond Vindhyas.
Coconut shell is exported. Coconut shell charcoal has fetched Rs 40 Cr by way of Foreign Exchange. Activated Carbon from Coconut shell charcoal accounts for more than 50% of Coconuts’ exports. We need to facilitate more industries in the Small and Medium sector, if Coconut industry has to grow. Already, value added products are produced by our competitive countries like Philippines, Indonesia, and even Sri Lanka is ahead of us.
Research and development labs like the one Spices Board or Rubber Board has needed to be set up for the Coconut industry. One should remember that the Coconut industry is in the concurrent list, which indeed is a Central as well as State subject. We need refrigerated Warehouses, Vans, and container to maintain the temperature and beget more shelf life for our Coconut products. In order to restrict pollution control like release of coconut water while making desiccated Coconuts, Common Effluent Treatment Plants need to be set up at Coconut production centers. In order to grapple with power failures, captive power plants need to be established. Sanitation, Phyto sanitary certificate issuance, quality checks, etc must be available at production centres. An ambitious plan has been chalked out, with funding required for setting up the above facilities, which will drive value added Coconut industry into its upward path of glory. It cannot be big boom, bubble and… burst.
There is broad feeling, accentuated by low price, enough is not done to put in a mechanism to bring up the price of Coconuts artificially, as the industry is predicted to be in the doldrums. During the beginning of last year, the price of a nut was less than the cost of an egg! But consistent and sustained efforts of the Coconut board resulted in the farm gate price going up to Rs 13/- and retail price touching around Rs 18/-.
With the onset of Coconut season, farm gate prices which were around Rs 10/- has dropped to Rs 5-Rs5.50. February-March of every year see a good harvest season. Government of India has already Minimum support price or “support price” for milling Copra at Rs 5100/quintal and Ball copra at Rs 5350 per quintal. In Kerala, Copra is procured by KeraFed. Since procurement of nuts has not begun, most of the Coconut growers depend upon the big buyers at Pollachi. It is this stream of businessmen who determine the price of farm gate price. The Coconut from Palaghat and nearby areas is purchased by the TN lobby, and Coconut (Copra) Oil is extracted and sends back to Kerala in packs to be sold here. It is also said, the cheap imported palm oil is used to adulterate with the Coconut Oil.
There is also widespread lament by the Kerala coconut grower that enough support is not extended to the Coconut grower to stabilize the price, with the result that many Coconut growers have left Coconut cultivation and have moved to cash crops like Rubber. With the cost involved in maintaining the coconut farms in small land holdings, the productivity in the Sector is abysmally low. Average productivity of Coconut in India is 8,303 nuts/hectare (48nuts per farm) while in Kerala it produces 7365 per hectre (42 nuts per farm). Plans are on the anvil to enhance the productivity to 85 nuts per tree so as to produce 17,500 nts/hectre per annum. Kerala’s production of Copra has also dwindled making its quantitative growth equivalent to 46% of India’s use. Rs 245 Cr Replantation and Rejuvenation was implemented in the XI Plan in select districts of Kerala like Thiruvanathapuram, Kollam, and Trichur and made operational from the year 2008, has seen a large number of Coconut trees being felled and new plant saplings grown so as to increase the productivity by way of return of seeds. The felled Coconut stumps were to be converted as Particle Boards where huge demands exist according to American Particle Board Association. A joint venture is under contemplation between Coconut Development Board, and Kera Fed, which has the technology to produce high class Particle Board which could be a substitute for depleting wood supply for furniture manufacture and house building activities due to ban on wood felling. It will open up new vistas, provide mass employment, and create a new economic opening.
The by-line article by S Sananda Kumar of ET Bureau, Alleppey, feels that the Board’s priority seems to be on corporatisation of Coconut industry, by pushing the product to the global market, and transporting tender Coconut water to Greater Kailash, Delhi where it nets Rs 35-Rs 40 per nut instead of looking at the grass root problem of the industry at the farm gate level. The entire Coconut nut industry is in the hands of hand picked middlemen, who could easily tamper the price of Coconut after the “support price” is announced. Historically, the market prices come down immediately after the announcement of the support price. The
Small Coconut farm holder has to depend upon the middleman, who will buy the Coconuts en masse for negligible amount, and these nuts go to a warehouse and always not to the market. Once the market price falls less than the “support price”, the trade petitions for tinkering of the Minimum Support price which is increased, and the benefit of this seldom goes to the farmer. It is the cat and mouse game that is played out well. The market price is the price created by artificial scarcity. At no point of time, the Coconut Copra Oil’s demand has suffered. It means it is not in short supply. At no point of time, there is inventory of Coconut Copra Oil. That means demand and supply pair. Under the circumstances, the artificial shortage and resultant scarcity are man made. Unfortunately, you cannot use gale force to moderate the market. If demand-supply is manipulated, Economic theory cannot work.
Coconut industry can be compared to the Stone age which did not end because we ran out of stones! When copra is crushed, it produces 65% Coconut Oil, 28% oil meal, 7% moisture. The oil meal’s global as well as domestic demand is growing because of the increase in livestock population. If marketed properly, this product can account for a plum recovery through pricing.
In my view, the Tender Coconut accounts for around 12-15% of the present Coconut production. But, the drink which has been value added through nice packing having a storage life of 90 days in 330 mls., has built a huge demand of around nearly 750 million dollars in America. The Board has planned setting up 5,000 green stalls, all will be franchisees, and the demand driven Coconut water to quench thirst would be sold in London Olympics, Wimbledon, Lords, Flaming Meadows, and other Sports centres, in aircrafts, hospitals, shopping malls, etc as this drink branded tender Coconut water will have an all India presence and overstretch to reach global markets. The entire supply chain will benefit, and the use of other value added Coconut products like Coconut milk, Coconut powder, coconut chips also would become visible. None of the Kerala based products have visibility in the upper India markets. If Rubber which is 93% produced in Kerala can go across India to the various production units and return to Kerala as an end product with an enhanced price, whom do we blame? For rubber market should pick up, the manufacturing industry should buy. They are mostly beyond Vindhyas.
Coconut shell is exported. Coconut shell charcoal has fetched Rs 40 Cr by way of Foreign Exchange. Activated Carbon from Coconut shell charcoal accounts for more than 50% of Coconuts’ exports. We need to facilitate more industries in the Small and Medium sector, if Coconut industry has to grow. Already, value added products are produced by our competitive countries like Philippines, Indonesia, and even Sri Lanka is ahead of us.
Research and development labs like the one Spices Board or Rubber Board has needed to be set up for the Coconut industry. One should remember that the Coconut industry is in the concurrent list, which indeed is a Central as well as State subject. We need refrigerated Warehouses, Vans, and container to maintain the temperature and beget more shelf life for our Coconut products. In order to restrict pollution control like release of coconut water while making desiccated Coconuts, Common Effluent Treatment Plants need to be set up at Coconut production centers. In order to grapple with power failures, captive power plants need to be established. Sanitation, Phyto sanitary certificate issuance, quality checks, etc must be available at production centres. An ambitious plan has been chalked out, with funding required for setting up the above facilities, which will drive value added Coconut industry into its upward path of glory. It cannot be big boom, bubble and… burst.
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