New Delhi: The government finally acknowledges that rising oil prices and depreciating rupee would severely dent the government resources, putting further pressure on deteriorating deficit position and creating hurdles in the path a faster economic recovery.
As per latest estimates by the oil ministry’s Petroleum Planning and Analysis Cell (PPAC), country’s oil import bill may balloon to $125 billion in FY19, a growth of 42 per cent over $88 billion paid for oil in FY18.
This will make oil import bill for FY19 the highest in the five years of the Narendra Modi government and very close to high import bill during UPA-II when the crude oil prices had breached all records to touch close to $140 a barrel mark.
The Centre has so far maintained that though rising oil prices was a concern, it still remained manageable without upsetting the macro economic fundamentals of the economy. But sources now say murmurs have already started in the corridors of power that oil situation should be taken seriously as inaction could mean sharp cuts in populist government’s expenditure ahead of 2019 general elections.
“The $125 billion import bill for the current financial year is high but it is still not the right estimate. Oil import bill could increase further as high crude price will rise further during the rest of the five months of the year, especially after the US sanctions on Iran becomes a reality. Further, pressure on the rupee could also dent estimates,” said an oil sector analyst asking not to be named as he was still making his calculations on oil imports.
PPAC estimate has also taken average price of the Indian basket crude oil for September 2018 at $77.88 a barrel and average exchange rate for September at Rs 72.22 to a dollar to arrive at its import estimates. The benchmark Brent oil price is already higher at $79 a barrel and is expected to start rising again in November when the US sanctions on Iran comes into effect.
Analysts also expect the rupee to depreciate further, completely changing the oil mathematics for FY19.
If crude price rises by $1 per barrel, the net import bill will increase by Rs 6,158 crore. And if exchange rate increases by Re 1 to a dollar, the net import bill rises by Rs 6,639 crore. This PPAC estimate, is based for period between October 2018 and March 2019.
Its not just higher import bill, but rising crude could also put additional burden of subsidy contribution on state-run upstream companies – ONGC and OIL, and also gas transportation company GAIL. Upstream contribution has been suspended since FY17 giving enough room to these companies to improve profits. Already, oil marketing have been asked to absorb RS 1 increase in retail price of petrol and diesel, an exercise that could severely dent their profits.
While the recent spike in oil prices has alarmed the government, it is worth noting that fall in crude prices has resulted in big savings for the country in FY16 and FY17. India’s import bill nearly halved to $64 billion in FY16 even though the country imported higher 202.1 million tonnes of crude oil in that financial year. This compared with import of 189.4 million tonnes of crude oil for $112.7 billion in FY15.
In FY17, the import bill, however, rose marginally top over $70 billion. The lower import bill came on average crude price of around $46.17 a barrel in FY16. In FY17, the average crude price increased marginally to just over $47.56 a barrel. The Indian basket of crude oil averaged $56.43 a barrel in FY18.
After collapsing in mid-2014 due to a supply glut, crude prices remained low for three years. In fact, it touched $30 a barrel early in 2016. But in the last few months it has gained sharply.
Sanctions on Iran could result in some supply disruptions. This could just be the beginning of further bad news for India. Iran is pumping nearly 4 million barrels a day of oil since the 2015 nuclear deal with six world powers that lifted crippling sanctions on the country.
A major disruption in Iran could send crude prices sharply higher just as the oil market is emerging from a prolonged period of oversupply. Iran was India’s second biggest supplier of crude oil after Saudi Arabia till 2010-11 but western sanctions over its suspected nuclear programme relegated it to the 7th spot in the subsequent years.
In FY17, Iran again became third largest oil supplier to India with its supplies jumping to 27.2 million tonnes.
India second most optimistic globally about executive job market in 2019: Survey
Mumbai: Senior management leaders in India are optimistic about growth of executive jobs in 2019, only second to Brazil. According to the 2019 BlueSteps Executive Career Outlook report, nearly 57 percent of India’s senior executives believe that there will be stellar growth in job market opportunities as compared with 2018 levels.
In Brazil, 72 percent leaders are positive of growth. India is followed by Africa at 54 percent and France at 40 percent. The results are based on a survey of over 1,400 senior executives worldwide.
Globally, optimism levels for executives about senior management jobs market dropped considerably as against their strong outlook at the beginning of 2018. “This indicates that while the decrease in optimism does reflect an overall concern in the marketplace, the change may be more of a reflection of how strong last year’s market was instead,” the report said.
Nearly a third of the respondents cite strong economic growth and business environment as a reason for their optimism. India topped the list with respect to economy forecast for 2019, where 57 percent respondents believed in the pace of the country’s growth.
Brazil trailed with 56 percent leaders expecting growth. Leaders of the eastern European countries, the UK and Ireland were pessimistic about their economy.
The technology sector is expected to have the strongest growth at the executive level in 2019, with 70 percent of all survey respondents believing there will be robust growth in the industry.
Traders’ body slams Rahul’s statement on abolishing GST
New Delhi: Traders’ body CAIT criticised Congress President Rahul Gandhi’s statement of abolishing GST if voted to power, saying he does not have a blueprint of any alternative tax structure.
The attempt of Gandhi for seeking political mileage making traders a scapegoat is deeply regretted and vehemently opposed by CAIT, the Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal said.
He said Rahul Gandhi should not do any politics using shoulders of the traders else traders are capable to give a fitting reply in forthcoming elections.
CAIT secretary general said Gandhi is opposing the GST “whereas he does not have a blueprint of any alternate tax structure”.
Khandelwal demanded Gandhi should speak out the plans and programmes thought by the Congress party for traders and added that there must be a blueprint of alternative tax structure before abolishing GST.
While addressing a traders’ conference in New Delhi, he said the Congress has ruled the country for a long time and in such a long tenure, the trading community was never on a priority of the government or for the Congress party.
In reference to forthcoming elections, Khandelwal claimed almost 7 crore traders across the country have now converted into a vote bank due to a two-month national campaign of the CAIT under the slogan “One Nation-One Trader-Ten Votes”.
The CAIT would shortly release a National Charter of Traders carrying core issues of the trading community and whoever political party gives a logical road map of solutions, the traders will vote for that party as one unit across the country, Khandelwal said.
NSE eyes 350-375 tonnes of domestically refined gold market for derivatives
Mumbai: With over 350-375 tonnes of the domestically refined gold market still away from the organised trading platforms in India, the National Stock Exchange of India (NSE) has decided to accept it as good delivery on its derivatives platform. So far, only London Bullion Market Association recognised bullion is accepted as good delivery on the exchange platform.
NSE has initiated a move to decide India good delivery norms for gold including sourcing norms for gold refined and unrefined (dore). The process of finalizing new norms and implementing is expected to take two months.
These are significant as in last few years Indian bullion refineries’ business has increased and in 2018 domestically refined gold contributed from dore and recycled gold to half (350-375 tonnes) of the domestic gold demand. However, on gold futures exchanges this gold cannot be delivered. This means domestic refineries have limited access to hedge their future production on exchange platform as they can’t deliver gold the refine on exchange platform.
India’s domestic physical gold demand is 600 tonnes for jewellery and 160-175 tonnes of investment demand, according to the World Gold Council 2018 data. 275 tonnes of gold was supplied by Indian gold refineries and 87 tonnes of gold was derived from scrap or recycled gold. Indian metal companies also derive gold from ores of other metals during the process of refining them. This was 8.6 tonnes. All these can now be deliverable on the futures market once India goods delivery norms are in place.
At present, only MMTC-Pamps refines gold, which is LBMA standard and eligible to be delivered on Indian exchanges.
NSE’s move will help this domestically refined gold deliverable on its futures exchange where gold is already traded. At present, MCX and BSE accept gold to be delivered in futures, which is as per LBMA good gold delivery standards. NSE spokesperson said that “we are developing India good delivery standards and they will be largely in sync with LBMA and BIS norms.” 20 plus Indian bullion refineries that are registered with Bureau of India Standards have applied to NSE and six have been approved. International agency Alex Stewart, which provides inspection and analytical laboratory services, is studying the processes of these refineries and giving their score.
Even a domestic laboratory is also looking at the same and expected to give its report on processes of refineries that it has studied.
Sourcing of dore or unrefined gold is a big controversy globally and there was always a question on mines which are producing it whether the mine is using the funds for illegitimate activities or not. Globally OECD has developed norms to avoid such gold and Indian industry has been working for the same. However, NSE spokesperson said that “the exchange’s India good delivery norms for gold will accommodate norms to verify legitimate sourcing of gold dore by Indian refineries.”
The sourcing norms will also include norms for sourcing domestic gold for recycling where the gold provider will have to give an undertaking that no money laundering etc involved for the gold he is giving for recycling.