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Wednesday, January 25, 2012

RBI: Recommend's Diesel price deregulation

Mumbai, Jan 24 (IANS) The Reserve Bank of India (RBI) Tuesday suggested that the government deregulate the price of diesel fully to help contain aggregate demand and the trade deficit that has widened to $133.3 billion in the first nine month of the current financial year.
"Particularly as the food subsidy bill is expected to rise, it will be prudent to fully deregulate diesel prices to contain both aggregate demand and trade deficit," the central bank said in the third quarter review of its monetary policy for 2011-12.
Diesel is heavily subsidized by the government. Oil marketing companies incurred under-recovery of Rs.12.95 on sale of each liter of diesel in the first fortnight of January, according to data provided by the ministry of petroleum and natural gas.
Oil marketing companies suffered under-recovery of Rs.37,719 cr. on sale of diesel in the first half of the current financial year, which is more than half of the total Rs.64,900 cr. of under-recovery on all the petroleum products.
The RBI said heavy subsidies on petroleum products have led to widening in fiscal deficit.

"Revision in domestic administered prices will add to inflationary pressures, although such revisions are necessary to maintain the balance between supply and demand," the RBI said.
The RBI pointed out that the fiscal deficit of the government has remained at an elevated level since 2008-09.
"If the increase in government borrowing already announced is an indication, the gross fiscal deficit for 2011-12 will overshoot the budget estimate substantially," it said.
As per the budgetary estimates, the government targets to bring down fiscal deficit to 4.6 percent of the gross domestic product for the fiscal ending Mar 31, 2012.
"At the current juncture when there is a need to boost private investment, the increase in fiscal deficit could potentially crowd out credit to the private sector. Moreover, slippage in the fiscal deficit has been adding to inflationary pressures and it continues to be a risk for inflation," the RBI said. 

Next in line is LPG.(only 4 cylinders at discounted prices rest at 700-800 per cylinder) Watch out for your energy consumption pattern.. Buy Jayant and Tata Communications if you have not yet entered.


Sandeep Gupta said...

It is not easy to deregulate, as there are other large Govt. sector consumers - defence & rail, also road transport another large area to be affected, which in turn can raise inflation...!

What'sUp Prahalad said...

Sandeep Gupta:

The fact is India imports 70%+ of its liquid fuel requirements..

an Internal Combustion engine efficiency is about 30% .70%of energy is wasted..

With Peak Oil already upon us.. energy prices are going to increase dramatically ..

The idea is to reduce demand specially for transportation.. (by increasing prices of fuel.. forcing people into public transportation..)

recently govt has passed a resolution that Company Board meting all the directors need not be physically present..

Annual Reports will be sent electronically no direct post ..

AC Buses as public transportation ..

Now there is talk of special tax on diesel vehicles.

warren buffett bought one of the largest railway networks in US.. as rail transportation is much more fuel efficient..

Inflation is going to be there for sure till international fuel prices rise.. and international fuel prices will remain up only..

that's one reason in the future no food rations just cash to poor..

become energy efficient!! personally and professionally .

Buy Tata Comm and Jayant Agro..
lifetime investments.

=happy investing

Anonymous said...

Dear Sir,

What is your view about EDL( Empee Distrilles). I bought it for TP Tulsin's recamentation around Rs 350/- Now market price is 74. when the market price was 200 level . I asked him through CNBC. But he told me hold. Now I lost almost 1.5 Lakh rupees shares. Sir what is your suggestion hold ? or shift to any other stock? I highly appreciate your response

What'sUp Prahalad said...

Anonymous ji:

its simply amazing.. on 31 dec 2007 empee distilleries touched 350..

so its been a long time .. and investment had been made in a hurry (on 31 dec 2007 to 8th jan 2008)

looks like a value buy but I would advice you to wait till it crosses rs 85 per share when it turns bullish..

you can also buy empee distillery if it falls below 60.. (as deep value buy..)

So buy empee distillery if it rises above 85 (and remains above 85 on closing basis for 7 trading days..) or if it falls below 60

=happy investing