Veerappa Moily asks FinMin to cut duties on branded petrol, diesel

 
Oil Minister M Veerappa Moily has asked the Finance Ministry to cut duties on branded petrol and diesel that offer better mileage and help cut fuel consumption.

Currently, the finance ministry levies higher excise duty on premium or branded petrol and diesel, making them costlier than normal or unbranded auto fuel.

Ever since their introduction in 2002, sale of premium or branded fuels have dwindled from a peak of 5.9 million kilolitres of diesel and 3.4 million kl of petrol in 2007-08 to a mere 0.45 kl of diesel and 0.09 kl of petrol in 2012-13.

"To enhance the fuel efficiency of new generation vehicles, specialised products (branded petrol and diesel) were launched by oil marketing companies in line with global trends and in keeping with the technological advancement in the automobile industry," the Oil Ministry said in a statement issued on completion of one-month of fuel conservation drive.

Moily has "requested the Ministry of Finance to review the duties levied on branded fuels to bring down the price differential so that consumers opt for branded fuel and this will help improve the fuel efficiency (by about 2 per cent) resulting in reduction in overall demand for petroleum products," the statement added.

The Finance Ministry had in 2009 Budget introduced new duties on branded fuels, which raised the differential between regular and branded fuel. "Due to this, sales of branded fuels have started sliding," the oil ministry's statement said.

Currently, the government levies an excise duty of Rs 1.20 per litre on normal or unbranded petrol while the same on branded petrol is Rs 7.50. Similarly, unbranded diesel attracts an excise duty of Rs 1.46 per litre while Rs 3.75 duty is levied on branded diesel.

While a litre of regular/normal or unbranded petrol costs Rs 72.45 in Delhi, branded petrol is priced at Rs 81.88. Similarly, normal diesel in Delhi costs Rs 52.54 a litre while branded diesel is priced at Rs 67.93.

Also, in September 2012, the government stopped providing subsidy on branded fuel, resulting in further dip in sales.

The current unbranded or normal diesel price of Rs 52.54 a litre includes a subsidy of Rs 9.20.

Moily says the reduction in excise duty by Rs 6.30 per litre on petrol and Rs 2.29 on diesel would not impact government revenues as current sale of branded fuels was "meager". But it would help in conservation as these fuels provide improved engine performance to yield 2 per cent savings in consumption.

Branded petrol and diesel is priced at a premium to regular fuel as additives put in them remove harmful deposits from engines, prevent corrosion, reduce emissions and lower maintenance costs.

Global central banks unlikely to fight dollar: Poll

London: Global central banks are unlikely to take steps to make their currencies more competitive against the US dollar whose current weakness should prove to be temporary, a Reuters poll found.

The monthly survey of more than 60 foreign exchange analysts and economists showed the euro - which soared above USD 1.38 before shock low inflation data last week - will ease gradually over the next 12 months from here.

That view reflects expectations the US Federal Reserve will start cutting its monthly bond purchase stimulus early next year, probably by March.

After the Fed surprised markets by refraining from doing that this September, major global currencies have strengthened against the dollar. That has caused problems for export-reliant countries, both in Europe and emerging markets.

Still, 28 out of 35 analysts who answered an extra question said the dollar`s weakness would not push world central banks to ease policy to help regain a competitive edge against the greenback.

"(That`s) unlikely, because Fed tapering is inevitable and thus most emerging market currencies will be vulnerable over the medium term," said Barclays analyst Mike Keenan.

But the dollar probably won`t rally soon. The poll showed the dollar index relative to a basket of major currencies closing the year at 81, compared with 80.5 on Wednesday.

Into next year, that should change.

For one thing, the euro`s strength will gradually dissipate next year. That will be at least some relief for the European Central Bank, which meets on Thursday to set policy and is under pressure to act against very weak inflation and boost fragile growth.

The poll`s median outlook showed the euro - which was trading around USD 1.35 on Wednesday - holding around that level in a month`s time, before slipping to USD 1.33 in three months, USD 1.30 in six and USD 1.27 in a year from now.

"We expect a near-term euro appreciation against the dollar given the likely continued U.S. fiscal uncertainties, followed by retrenchment in 2014 as the focus returns to growth and interest rate differentials," said Ric Deverell, head of global foreign exchange at Credit Suisse.

Against sterling, the euro looks set to keep its value for the most part, holding at 84 pence on Wednesday and forecast at 83 pence in a year`s time.

SBI raises lending rates by 0.20%, Axis Bank revises FD rates

New Delhi: Days after RBI hiked policy rate, country's largest lender State Bank of India (SBI) on Wednesday raised its lending rate by 0.20 percent to 10 percent, a move that is likely to be followed by other banks.

The bank has revised the base rate or the minimum lending rate to 10 percent from 9.80 percent effective Thursday, SBI said in a statement.

With the revision in base rate, EMI for home, auto and consumer durable loans will go up. However, the bank is offering new loans at concessional rates for a limited period ending January 31, 2014.

At the same time, the Benchmark Prime Lending Rate (BPLR) was also raised by 0.20 percent from 14.55 percent to 14.75 percent.

Private sector lender, Axis Bank has also revised the interest rates on select maturities for fixed deposits amount less than Rs 1 crore. In two buckets there has been upward revision of 0.25 percent while there is downward revision of 0.25 percent in 9 buckets.

Term deposit between 13 to less than 15 months now attracts 8.75 percent, up by 0.25 percent.

At the same time, there has been 0.25 percent decrease in various buckets between 61 days to less than six months to 8.25 percent.

Similarly, various buckets between 6 months to less than 11 months the decrease is by similar percentage points to 8.5 percent.

In case of term deposit between 46-60 days, rates have been revised downward by 0.5 percent from 8.5 percent earlier.

The new rates are effective from November 1, according to Axis Bank website.

SBI's decision came a day after HDFC Bank raised the base rate by 0.20 percent to 10 percent.

Commenting on the base rate increase, SBI Chairperson Arundhati Bhattacharya said it is on account of the rise in cost of funds.

Repo rate has gone up by 0.50 percent since SBI had last raised it, she said, adding, the bank has not raised rates to that extent but by only 0.20 percent.

It is in line with the market and the bank base rate still remains one of the lowest, she added.
Earlier this month, SBI raised fixed deposit rate by 0.2 percent on select maturity.

With the revision, term deposit between 180-210 days less than Rs 1 crore now earn 7 percent against 6.80 percent earlier.

Soon after RBI policy announcement on October 29, Bhattacharya had said: "This is something which the ALCO (asset liability committee) will come to a view on. But yes, some rate change is expected...Which way and what, you need to wait till the ALCO meets and takes a view on it."

RBI raised short-term lending (repo) rate by 0.25 percent to 7.75 percent, making cost of fund expensive for the banks.

At the same time, the RBI lowered marginal standing facility (MSF) rate by a similar margin to 8.75 percent.

Accordingly, the bank rate was reduced to 8.75 percent with immediate effect. Consequently, the reverse repo rate is adjusted upward to 6.75 percent.

The RBI has left unchanged other rates such as the cash reserve ratio at 4 percent and the mandatory holdings in government securities and other liquid assets as a solvency measure - Statutory Liquidity Ratio (SLR) - at 23 percent.

SBI had last raised base rate by 0.10 percent to 9.80 percent in September this year.

RBI permits foreign banks' subsidiary to acquire pvt banks

Mumbai: In a bid to regulate and avoid 2008- type crisis, RBI on Wednesday said foreign banks with complex structures and which do not provide adequate disclosure would have to operate in India only through wholly-owned subsidiaries (WOS).

However, it permitted WOS of overseas banks to acquire private sector banks.

The framework for setting up of WOS by foreign banks in India, released by the Reserve Bank Wednesday night, also allowed foreign banks' subsidiaries to list on local stock exchanges. The initial minimum paid-up equity capital or net worth for a WOS would be Rs 500 crore.

"Banks with complex structures, banks which do not provide adequate disclosure in their home jurisdiction, banks which are not widely held, banks from jurisdictions having legislation giving a preferential claim to depositors of home country in a winding up proceedings, etc, would be mandated entry into India only in the WOS mode," it said.

Foreign banks operating in India before August 2010 have the option to continue their operations in branch model.

The RBI further said foreign bank subsidiary will not be allowed to hold more than 74 percent, the sectoral cap for overall foreign investment, in private banks they may acquire.

"As a locally incorporated bank, the WOSs will be given near national treatment which will enable them to open branches anywhere in the country at par with Indian banks," the RBI guidelines said.

There were 43 foreign banks in India with a network of 333 branches as of March 2013. At present, foreign banks have presence in India only through branches.

The guidelines come against the backdrop of the 2008 global financial crisis, which the RBI said has shown that growing complexity and inter-connectedness of financial institutions have compromised the ability of home and host authorities to cope with the failure of big banks.

"The lessons learn during the crisis lean in favour of domestic incorporation of foreign banks," it said.

Spelling out reasons for subsidiarisation, it said this will create separete legal entities having their own capital base and local board of directors, which will help in better regulatory control.

Also, it would ensure that there is a clear delineation between the assets and liabilities of the domestic bank and those of its foreign parent and clearly provides for ring fenced capital and assets within the host country, RBI said.

Standard Chartered, the largest foreign bank by branch presence in India, has its depository shares trading on the domestic bourses, although it hasn't adopted a subsidiary route here.

Only multinational banks Standard Chartered, HSBC and Citi have more than 30 branches in the country. Although the Royal Bank of Scotland has 31 branches, it is winding down local retail operations.

The RBI's framework, aimed at safe guarding the Indian banking system, comes in the backdrop of collapse of several banks in advanced countries during 2008 global financial crisis.

"The issue of permitting WOS to enter into merger and acquisition transactions with any private sector bank in India subject to the overall investment limit of 74 percent would be considered after a review is made with regard to the extent of penetration of foreign investment in Indian banks and functioning of foreign banks (branch mode and WOS)," it said.

To provide safeguards against the possibility of the Indian banking system being dominated by foreign banks, it said, the framework has certain measures to contain their expansion if the share of foreign banks exceeds a critical size.

RBI will put a stop on further entry of new WOSs of foreign banks or capital infusion, when the capital and reserves of all foreign banks in India exceed 20 percent of the capital and reserves of the entire banking system.

Rupee down 27 paise at 61.89 against dollar in early trade

Mumbai: The rupee lost 27 paise to 61.89 against the US dollar in early trade today at the Interbank Foreign Exchange due to appreciation of the American currency against euro overseas.

Increased demand for the US dollar from importers also put pressure on the rupee.

Dealers attributed the rupee's fall to the American currency's gains against the euro overseas but a higher opening in the domestic stock market capped the fall.

The rupee had closed 12 paise higher at 61.62 a dollar in yesterday's trade on selling of the American currency by banks and exporters.

Meanwhile, the BSE benchmark Sensex rose by 48.46 points, or 0.23 per cent, at 21,023.25 in early trade today.

Goldman raises Nifty target to 6,900

Mumbai: Goldman Sachs upgrades its view on India to "marketweight", with a target for the Nifty of 6,900 points.

Goldman notes optimism over political change is trumping economic concerns, given what the bank says are expectations that the opposition Bharatiya Janata Party, led by prime minister candidate Narendra Modi, could prevail in parliamentary elections due by May 2014.

Goldman also notes that external capital account pressures have moderated for now, and cites signs of a cyclical pick-up and structural improvements in the economy.

The investment bank likely notes the earnings outlook is stabilising, while noting that retail redemption pressures could moderate, among the factors behind its upgrade.

Goldman says technology, healthcare, and energy are its top sectors.

Goldman says it likes technology stocks including HCL Technologies and Tech Mahindra , oil and energy scripts such as Reliance Industries , Bharat Petroleum Corp Ltd and Coal India Ltd , banks including Yes Bank and IndusInd Bank and select auto and cement stocks.

The U.S. bank also included some mid-cap infrastructure stocks which are trading at inexpensive valuations such as Adani Power , NHPC Ltd , Materials stocks like Grasim Industries , and industrials stocks like Container Corp of India and Adani Ports and Special Economic Zone

Mutual funds' exposure to bank stocks rises to Rs 26,800 cr

New Delhi: Cashing in on the good equity market conditions, fund managers' raised their exposure to bank stocks to more than Rs 26,800 crore in September over the preceding month.

According to the latest data available with Sebi, the mutual fund (MF) industry's investment in banking stocks stood at Rs 26,838 crore as on September 30, accounting for 15.75 percent of their total equity assets under management (AUM) of Rs 1.70 lakh crore.

In August, mutual funds' exposure to banking stocks had touched the lowest level in four years to Rs 22,744 crore. However, the investment had risen to as high as Rs 43,659 crore in December 2012.

Market participants attributed the increase in investment in banking shares to measures announced by the new Reserve Bank of India (RBI) chief Raghuram Rajan coupled with overall surge in the stock market.

Banking stocks climbed in September, after falling for four consecutive months, on value buying and a slew of measures announced by the RBI.

During September, the banking index (bankex) surged by 6.4 percent, while the 30-scrip sensitive index (Sensex) rose four percent.

Rajan, in September, had announced steps to stabilise the Indian currency and liberalise the banking system, including higher overseas borrowing limits for lenders and simpler processes for opening branches.

Mutual funds are an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

In 2012, there was consistent investment growth in banking stocks by the industry's equity fund managers and their exposure had risen from 17.23 percent of total AUM in January 2012 to 21.15 percent in December.

The increase in allocation of funds to banking stocks in 2012 was largely attributed to declining interest rates.

In September this year, banking was followed by software space where the mutual funds' investment stood at Rs 23,797 crore. While the consumer non durables accounted for Rs 13,921 crore, pharma stood at Rs 14,444 crore and petroleum products at Rs 9,933 crore.