Rupee at near 5-month high against US Dollar

Mumbai: The rupee gained 36 paise to trade at nearly five-month high of 52.66 against the dollar in early trade today on continued selling of the American currency by exporters and banks.
Forex dealers said besides persistent dollar selling by exporters and banks, dollar's weakness against the euro amid a strong opening in the domestic equity market kept rupee strong.
Meanwhile, the BSE benchmark index Sensex recovered sharply by 181.41 points, or 0.98 per cent, to 18,760.91.
Euro rose against the dollar overseas as worries about the euro-zone eased after Spain unveiled economic reforms and budget plans that are expected to pave the way for a bailout.
The rupee had gained 49 paise yesterday to close at over 4-1/2-month high of 53.02 against the dollar on heavy selling of the American currency by exporters and some banks.

Hike fuel, food prices: Kelkar panel

Hike fuel, food prices: Kelkar panel 

Already battling opposition to its reforms measures, the government has been asked by the Kelkar committee to eliminate various subsidies in phases by hiking prices of LPG, kerosene, diesel and foodgrains in ration shops to deal with the deteriorating fiscal situation.

The Committee headed by former Finance Secretary Vijay Kelkar has also suggested a slew of bold measures to cut the subsidy bill, which did not find favour with the government.

Government, which had only recently hiked diesel price and capped subsidised LPG cylinders, said the suggestions were contrary to its established policy of protecting the poor.

The final view on the recommendations of the committee, set up by Finance Minister P Chidambaram to suggest fiscal consolidation road map, will be taken by the government after receiving feedback from stake holders.

Observing that Indian economy may be encountering a "perfect storm" on account of various domestic and global problems, the Committee suggested tough measures to bring down fiscal deficit to 3.9 per cent of the Gross Domestic Product (GDP) in 2014-15 from 5.2 per cent expected in the current financial year.

Its recommendations include selling of surplus PSU land, fast tracking disinvestment and expanding the service tax net to raise revenue.

It suggested phased implementation of the much-touted Food Security Bill to provide cheap foodgrains to families below poverty line (BPL) in view of the current fiscal situation and pitched for hiking urea prices.

Reacting to the committee's suggestion of eliminating major subsidies, Arvind Mayaram, Secretary in the Department of Economic Affairs said, "the government is of the view that in a developing country where a significant proportion of the population is poor, a certain level of subsidies is necessary and unavoidable, and measures must be taken to protect the poor and vulnerable sections of the society".

"Indian economy is presently poised on the edge of a fiscal precipice, making corrective measures aimed at speedy fiscal consolidation an imperative necessity," said the Committee, which besides Kelkar included Indira Rajaraman and Sanjeev Mishra.

The Committee has suggested phased elimination of subsidy on diesel and LPG in the next four years and reduction in kerosene subsidy by one-third by 2014-15.

On disinvestment side, the Committee said that in absence of adequate steps the government will be able to raise around Rs 10,000 crore, as against the target of Rs 30,000 crore.

The budget target of Rs 30,000 crore, the panel said, could be met by the government by selling minority stakes in companies like SUUTI, Hindustan Zinc and Balco.

It further said that the funds from the monetisation of surplus government land could be made available to fund infrastructure needs of the country.

On the possibility of monetisation of land, Mayaram said, "it is not something where decision has not been taken. But we are certainly not putting sale of land as part of our fiscal consolidation as of today".

The Committee also wants the government to pursue reforms in other sector, like infrastructure, finance, taxation and regulation to improve business climate and spur investment.

It cautioned that in absence of these measures, the fiscal deficit of the government could shoot up to 6.1 per cent of the GDP in the current financial year. It can be contained to 5.2 per cent with the proposed reforms.

The government had on September 13, raised the price of diesel by over Rs 5 per litre and capped the number of subsidised LPG cylinders at 6 per family per year.

He further said the fertiliser and food subsidies are expected to exceed the budget estimates by Rs 10,000 crore each. In the 2012-13 Budget, the fertiliser subsidy was pegged at Rs 60,974 crore and the food subsidy at Rs 75,000 crore.

"We feel that if no steps are taken the subsidy expenditure would go up from budgeted 1.9 per cent to 2.6 per cent of the re-assessed GDP," it said.

Kelkar panel suggests comprehensive review of DTC Bill

The government appointed panel to suggest a roadmap for fiscal consolidation has recommended a comprehensive review of the Direct Taxes Code Bill and bringing in more services in the tax net.

The Kelkar Committee also recommended amendment to the law to make quoting PAN or the UID mandatory in all electronic transactions including bank accounts, fixed deposits with banks, salary payments and immovable property transactions, irrespective of the the amount or level of transaction.

Online verification of PAN could be made mandatory for high value transactions to reduce use of black money, it said.

Highlighting that non-issue of refunds is a constant source of grievance for taxpayers, the panel said "all pending refunds should be issued at the earliest. This will also improve liquidity of taxpayers and reduce their dependence on market borrowings at a relatively high interest rate".

Besides, the Income Tax Department should create a national portal to enable taxpayers to file applications seeking rectifications and appeal effect, it said.

Referring to the Direct Taxes Code Bill introduced in Parliament, it said the proposed legislation which intends to revamp the law relating to direct taxes is likely to result in considerable unacceptable losses on a continuing basis.

"Given the low tax-GDP ratio and the existing fiscal crisis, there is absolutely no fiscal space for such large revenue loss. Therefore, the Direct Taxes Code Bill, 2010 should be comprehensively reviewed before it is enacted into law for implementation," the Kelkar committee report said.

Standing Committee for Finance has already given its report on the Bill.

On the indirect taxes, it suggested that the negative list of services should be reviewed for "further pruning".

"For example, there is no case for exempting non profit organizations from the Service Tax levy," it argued.

It also pitched for expediting implementation of the Goods and Services Tax (GST) regime. This will enhance output, exports and tax revenues, it said.

The Kelkar report said that even though the roll-out of GST from April 1, 2013 does not appear to be feasible, the passage of the Constitutional Amendment Bill in the Winter Session would send out very strong signal about the government's serious intent to move forward on this issue.

It further suggested that Central Board of Excise and Customs (CBEC), responsible for indirect tax collection, should put in place a robust information system to increase the deterrence level and the cost of evasion.

CBEC should also develop a similar model for comprehensive cross verification of claims for input tax credit, it said adding this should be implemented immediately and need to wait till the introduction of the GST.

The Union Excise Duties (UED) and Service Tax (ST) must be reformed so as to be in a state of preparedness for smooth integration of these levies into the GST, it said.

"The standard rate of 12 per cent should be progressively reduced to align with the GST rate of 8 per cent proposed for the Central GST," the report said.

The panel has also suggested to the Income Tax Department to establish a data-warehousing and data-mining infrastructure within the tax administration and build capacity for undertaking data mining and taxpayer profiling.

It further suggested to amend the provisions of all tax laws to charge interest at rates which reflects the market rate of interest to the defaulters and a penalty for such default.

The Income Tax Department, it suggested, should set-up a separate Directorate of Risk Management for designing a robust risk management system which will improve the efficiency of the tax administration and enhance transparency.

The panel is also for a 360 degree profile of all taxpaying individuals and institutions to help decrease tax evasion and tax fraud.

This profile should also draw information from the AIR, TDS and other databases of the department, it said.

Talking about disinvestment, the Kelkar panel proposed a 'Call Option Model' under which the government may offer for sale, simultaneously, multiple securities over a period of time until the divestment targets are achieved.

It said the salient features of this proposal include an opportunity to sell regularly as against a large stake sale on a single day.

"This is to address the issue of wide fluctuation in market prices arising out of additional flow of liquidity in to the market and to avoid market price volatility, if any," the report added.

KELKAR-HIGHLIGHTS

Following are the highlights of the Kelkar Committee report on Roadmap for Fiscal Consolidation:

* Recommends immediate increase in petroleum prices and deregulation of diesel prices by 2014-15

* Prices of kerosene and LPG should be revised regularly

* On fertiliser subsidies, efforts should be to continuously revise urea prices

* Direct Taxes Code Bill, 2010 should be comprehensively reviewed before it is enacted into law for implementation

* Effort should be made to expedite the implementation of the Goods and Services Tax

* 'Do-nothing' approach likely to result in a fiscal deficit of 6.1 per cent of GDP in 2012-13

* Suggests to bring down fiscal deficit to 3.9 pc in FY15

* About Rs 60,000 crore shortfall likely gross tax revenues

* Subsidy estimates likely to shoot up by Rs 70,000 crore

* Current account deficit may touch 4.3 per cent of GDP

* If no policy interventions are made, disinvestment receipts would stand at around Rs 10,000 crore

* Suggests to remove the system of levy (subsidised) sugar and the controls on the flow of non-levy sugar

* Direct transfer of cash subsidies may be more efficient way of reaching the beneficiaries.

Energy Economics Syllabus:THEORIES OF ENERGY ECONOMICS,OIL ECONOMICS By Dr.A.Hidayatullah & Mohammad Rafee

Paper I

THEORIES OF ENERGY ECONOMICS

CREDITS : 4                                     MARKS: 100                         Code:PHDAHMR01

UNIT –I       Introduction to Energy Economics

Meaning and Concepts of Energy - Significance Energy- Definition, Nature, Scope and Importance of Energy Economics- Different Sources of Energy- Renewable & Non Renewable Sources-Economic Importance of Non-Renewable Energy

UNIT –II      International Trade Theories on Natural Resources

Theory of Dutch Disease- Hotelling Theory of Exhaustible resources – Austrian Theory of Mineral Resources

UNIT –III    Theories of Energy Economics

Olduvai Theory – Hubbert Peak oil theory- Theory of Energy Use- Rosenfeld Curve of Energy intensities- Rebound Effect- Demand and Supply Theory of oil

UNIT-IV     Economics of Choice among Alternative Energy Sources

Economic Criteria for Evaluating power technologies in less developed countries - Energy cost comparison- Techniques for appraising the energy Economy and outlook in less developed countries

UNIT –V     Energy and Economic Growth

Energy and Economic growth,development – Relationship between Energy Consumption, Energy prices and Economic growth.

Reference:                                                   

·         Natural resources Energy, Water & river basin development- Richard A.Tybout,Perry D.Teitelbaum, Nothniel B.Guyol.

·         The Structural Manifestation of the `Dutch Disease’: The Case of Oil Exporting Countries; Kareem Ismail WP/10/103.

·         The Economics of Exhaustible Resources Harold Hotelling The Journal of Political Economy, Vol. 39, No. 2. (Apr., 1931), pp. 137-175.

·         Resourceship: An Austrian theory of mineral resources Robert L. Bradley Jr. Published online: 19 January 2007 Springer Science + Business Media, LLC 2007

·         The Olduvai theory and catastrophic consequences: Pg.No 8-21; Beyond oil Bust by James Leigh, Predrag Vukovic, 2011.

·         How does economic theory explain the Hubbert peak oil model  by Frédéric Reynès ,Samuel Okullo , Marjan Hofkes IVM Working Paper: IVM 10/01,  January 2010

·         A Theory of Energy Use_Raouf Boucekkine, Antonia D  and Luis A. Puch February 2011

·         Deconstructing the ‘Rosenfeld Curve’: Why is Per Capita Residential Energy Consumption in California so Low? Anant Sudarshan, Stanford University USAEE-IAEE WP 10-063 December 2010

·         Heterogeneity in the Rebound Effect: Further Evidence for Germany Manuel Frondel, Nolan Ritter and Colin Vance, RWI USAEE-IAEE WP 10-059 November 2010

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·         mohammadrafee.tk               ©2012-mohammadrafee,Ph.DJMC.,All Rights Reserved

·          

Paper II- OIL ECONOMICS

CREDITS: 4                                     MARKS: 100                          Code: PHDAHMR02           

UNIT –I      Demand for Non-Renewable Energy Sources

Crude oil demand – price fixation- World Energy Scenario - India’s Energy Scenario- Spike in oil prices- American Policy & Iran – Gulf. Nuclear proliferation on clash of civilizations- other political considerations on Demand and Supply of crude oil

UNIT –II    Dynamics of Oil Economy

History of crude oil - About oil Economics – Cartelization of petroleum selling companies  

(7 sisters’ agreement) - formation of OPEC (Organization of Petroleum Exporting Countries)

UNIT-III     Geo-political Crisis of Crude Oil till date

Yomkippur War- Israel-Arab Conflict- Gulf War I & II - Brettenwoods system- Fall of Brettenwoods- Recent war of America in Afghan & Iraq- Iran Oil Embargo- Jasmine Revolution

UNIT –IV     Fianacialization of Oil Prices

Futures and Options- Derivatives- Origin of Oil futures trading (PEMEX, NYMEX, WTI)- Hedging of Crude oil options

UNIT –V    Economical and Political Aspects of oil

Economics and politics of oil- A geo-political Tsunami: Beyond oil in World Civilization Clash-New Tourism in a New Society arises from “Peak Oil”- Persian Gulf and Maritime chokepoints: Implications for World Geopolitics

Reference:

·          A Geopolitical Tsunami, Peak oil, Persian gulf chokepoints, Implications for world politics Pg No: 47-66, 67-95,124-139 Beyond oil Bust by James Leigh, Predrag Vukovic, 2011.

·         World Energy and Population: Trends to 2100 October, 2007

·         Why World oil monopolization lowers oil prices:  A Theory of Involuntary cartelization by Earl A.Thompson, University of California, Los Angeles: Dept. of Economics, Nov 1995.

·         A Restrospective on the  Brettenwoods system: Lessons for International Monetary reform, University of Chicago Press: ISBN 0-226-0687-1, January 1993

·         EEDP Programme Paper: 2012/01 An Embargo on Iranian Crude Oil Exports: How Likely and with What Impact? Paul Stevens Chatham House January 2012

·         Effects Based Operations: A Yom Kippur War Case Study Steven M. Beres Shannon M. Corey Jonathan E. Tarter Evidence Based Research, Inc

·         Jasmine Revolution Evidence Based Research, Inc Mahmoud El-May, Turkish policy quarterly Vol.9 No.4 , 2011

·         Risk Minimising Hedging of Crude-oil options:  Theory and Empirical performance: Roy Nawar, University of Sydney, Christican oliver Ewald, University of Glasglow, Tak kuen siu Macquarie University, NSW 2009, Australia

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·         mohammadrafee.tk               ©2012-mohammadrafee,Ph.DJMC.,All Rights Reserved

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Inflation may rise on diesel price: PMEAC

The hike in diesel price may push up inflation in the short run but the government's move is expected to help contain fiscal deficit, leading to gains in the long run, Prime Minister's Economic Advisory Council Chairman C Rangarajan said here today.
He also sought to allay apprehensions over the government move to allow FDI in multi-brand retail, saying that kirana stores can become part of modern retail by organising themselves and getting assimilated into the organised sector.
"The immediate impact of increase in any administered price like this will push the price index up. But we need to look at from long term point of view.
"We also need to look at from the angle that in the absence of such a measure fiscal deficit would have been higher," Rangarajan said in a press conference.
The government had recently increased the price of diesel by Rs 5 a litre and capped the use of subsidised LPG cylinder to six in a year per family, evoking sharp protests all over the country.
"Immediately, it can produce raise in the price index but over the year I think over the medium term it is the best thing to do," Rangarajan added.
On the government decision to allow FDI into multi-brand retail, he said it will create an opportunity to improve infrastructural facilities in the agricultural marketing field which may ultimately lead to price reduction.
"The present marketing arrangements are not on sound lines. Therefore, induction of organised retail, more particularly foreign investments in to retail, can lead to an improvement of the marketing system and therefore will lead into some sense of softening of prices," he added.
To a query, Rangarajan said that some of the foreign entities which are currently invested in the wholesale business may show interest in investing retail also.
He added, however, that it will take some months before they take decision on investing in the retail business.
Allying fears that FDI in retail will have negative effect on small retailers, Rangarajan said the international experience shows that even in advanced countries where there are large scales department stores operating, the 'Mom and Pop stores' (neighbourhood retailer) continue to exist.
Earlier, in an address to the Centre for Economic and Social Studies, he said that once the share of overall modern retail in food reaches about 25 to 30 per cent, it is bound to affect the kirana traders first and then the small and marginal traders.
"These kirana stores and street hawkers can also become part of the modern retail change story if they can be assimilated into organised retail, organise themselves under their banner through franchisees, upgrade through infusion of capital, better training etc.," Rangarajan advised.
The traditional system and modern retail chains are complementary to each other and their co-existence is important for each other's functioning while providing options to producers and consumers, he added.