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Cabinet approves fuel price hike; petrol likely to be dearer by Rs 3

New Delhi, June 04: The Cabinet Committee on Parliamentary Affairs on Wednesday approved a hike in fuel prices. At an early morning meeting called to discuss the issue, the CCPA is understood to have approved a hike of Rs 3 per litre in petrol prices, while the diesel prices are likely to head north by Rs 2 per litre. However, a formal announcement in this regard will be made sometime around noon.

Reports suggested a proposal was put forward at the meet to hike petrol prices by Rs 3 and diesel prices by Rs 2 per litre. Further, a new distribution scheme for domestic LPG cylinders was also proposed under which a household will get eight cylinders per year at the current price and any cylinder above that will come at double price.

While the CCPA have approved the hike in petrol and diesel prices, the committee’s stance on the new LPG cylinder distribution scheme is not yet known.

Prime Minister Manmohan Singh is due to address the nation later in the day to explain why it has become necessary to raise fuel prices.

The CCPA meet came in the wake of the relentless rise in international crude oil prices, which have touched levels as high as USD 135 per barrel.

On Monday, the Prime Minister had indicated of an imminent fuel price hike when he said consumers cannot be fully insulated from the impact of rising global oil prices.

With the surge in global oil prices leaving a Rs 2,25,040 crore revenue deficit with oil companies, Dr Singh had over the last few days held several rounds of consultations with senior ministers and UPA chairperson Sonia Gandhi on the issue.

Prior to the CCPA meet, Petroleum Minister Murli Deora had been pushing for a Rs 10 a litre hike in petrol, Rs 5 per litre increase in diesel and Rs 50 per cylinder raise in LPG prices.

He had also made it clear that the UPA government will not let the oil subsidy bill to rise any further.

Centre raises retail fuel prices
4 Jun 2008 12:40 pm

New Delhi - India raised the retail prices of gasoline and diesel, and cut import taxes on fuel products Wednesday to help state-run fuel retailers lower mounting losses due to high crude oil prices and subsidies on petroleum products.

From midnight Wednesday, the price of diesel will be increased by Rs 3 a liter, and gasoline by Rs 5 a liter.

The government has also removed the import tax on crude oil from 5 per cent earlier, and lowered the tax on gasoline and diesel to 2.5 per cent from 7.5 per cent. Import tax on other petroleum products has been halved to 5 per cent, Revenue Secretary P V Bhide said at a news conference.

Diesel currently costs Rs 31.8 a liter in New Delhi, and gasoline Rs 45.56 a liter. Every Rs 1 a liter increase in diesel price means about Rs 45 billion a year in additional revenues for the oil marketing companies.

These measures will help state-run fuel retailers reduce some of their losses, as a high refining margin is likely to offset most of the losses arising from selling products at discount.

"The government has addressed issues related to both profitability and liquidity. We couldn't have had it better," said Sarthak Behuria, the chairman of the country's largest refiner Indian Oil Corp.

This is the second time this year that the government has raised the prices of gasoline and diesel. Earlier in February, it increased gasoline prices by Rs 2 a liter and diesel by Rs 1 a liter, when crude oil was around USD100 a barrel.

"(State-run) fuel marketing companies will continue to share a majority of the under-recoveries and the government is estimated to lose Rs 226.60 billion in revenue due to tax cuts," Oil Secretary, S Srinivasan said.

Under-recoveries refer to the revenue losses incurred by state-run oil retailers on the sales of subsidized petroleum products.

India controls fuel prices to check inflation and the government has been reluctant to increase retail prices fearing a backlash from voters ahead of next year's Union elections.

The government also recently increased the compensation it gives to state-run fuel retailers for their revenue losses due to subsidies. The government now bears 50 per cent of the losses of these companies compared with 42.7 per cent earlier.

Without these steps, the oil companies would have lost more than USD40 billion in the current fiscal year that started April 1.

In the last fiscal year, state-run fuel companies lost more than Rs 700 billion (USD17 billion) due to subsidies.

Fuel price hike: Sensex down 448 pts, closes at 15,515

Mumbai, June 04: The stock markets fell like ninepins on Wednesday after the government increased the fuel prices with the benchmark Sensex shedding over 440 points, the biggest fall in two months, on heavy selling pressure across counters which was aided by weak European bourses as well.

The 30-share index of the Bombay Stock Exchange ended the day at 15,514.79, lower by 447.77 points, or 2.81 per cent, from its previous close. The biggest fall of the BSE barometer before this was on April 4 when it registered a loss of 489.43 points.

The 50-share S&P CNX Nifty of the National Stock Exchange slumped by 130.30 points or 2.76 per cent to close at 4,585.60 from its last close.

The government today announced a hike petrol and diesel prices by Rs 5 and Rs 3 a litre respectively and initiated a slew of measures in a bid to offset any negative impact of soaring global crude prices on national oil companies.

Marketmen said the hike were higher than expected and the investors feared that the increase would may lead to further inflationary pressures.

The markets were resilient for a while after the announcement of hike in fuel prices but later tumbled as investors resorted to frantic selling pressure as European markets fell sharply in their early trade.

Bourses in Germany, France and London were down by 1.30 per cent to 1.89 per cent.

Foreign institutional investors (FIIs) too were sustained net sellers in equity.

As per provisional figures, FIIs sold shares worth Rs 1,020.70 crore in equity on June 3.

Indian exports to non-US mkts rising`

Mumbai, June 04: The trend of India`s exports is shifting from the traditional US market to the UAE, a Dun & Bradstreet report said.

The US has traditionally been India`s leading export destination and in FY 07 too, it accounted for as much as 14.9 per cent of the total merchandise exports worth an estimated USD 18.9-billion, the report said.

Even though the US share in India`s merchandise exports dwindled from 20.7 per cent in FY 03 to 14.9 per cent in FY 07, in value terms it increased from USD 10.9-billion to USD 18.9-billion.

"This was also an indication of India`s growing preference for trading with other emerging markets by diversifying its product group and improving its quality, etc," the report said.

The UAE which is the second-largest export market, accounted for 9.5 per cent of the country`s total exports in FY 07, while in FY 03 it accounted for 6.3 per cent only, the report said.

The spurt in exports to the UAE can be largely attributed to a rise in exports of mineral fuels, mineral oils and products, which constituted almost 30.4 per cent of total exports to the UAE, the report said.

UAE is also an important market for re-export in the entire Middle East region and in 2005, its total re-export was as high as USD 26.4-billion, it said.

India`s exports to China have also seen a rapid growth from just 3.7 per cent in FY 03 to 6.6 per cent in FY 07.

India`s export share to Singapore has gone up from around 2 per cent in FY 01 to 4.8 per cent in FY 07.

RComm, MTN to create a global top-10 telecom firm
4 Jun, 2008, 1628 hrs IST,


MUMBAI: Reliance Communications Ltd and South Africa's MTN have begun due diligence as they inch closer to creating a global top-10 telecoms firm, a source close to the development said. The two firms began due diligence over the weekend aimed at a reverse takeover, the source said on Wednesday.

Media reports last week suggested the two were discussing a cash and stock swap deal where MTN would take a stake of up to 74 per cent in India's No. 2 mobile operator, and Reliance chairman Anil Ambani become the biggest shareholder in MTN.

The Financial Times on Wednesday said Ambani may link up with private equity groups for the deal, but the source said Reliance may not need assistance in funding as the discussions were aimed at a reverse takeover. Still, industry sources said if MTN were to insist on a large sum of cash as part of any deal, the private equity option could be tapped.

"It certainly is an interesting and plausible option if MTN were to ask for a large cash component," said a manager at a private equity firm that is not involved in discussions. Ambani could be open to selling a part of his 66 percent stake in Reliance Communications to private equity firms, he said.

"They have already done a deal with private equity firms before, and these firms may well have told Ambani that they are willing to be a part of this deal," he said. Reliance Communications last year raised Rs 1400 crore ($330 million) from a private placement of 5 percent of its tower unit company, Reliance Infratel, with seven investors: Fortress Capital, HSBC Principal Investments, Galleon Group, New Silk Route, GLG Partners, Quantum Fund and DA Capital.


"Liquidity is tight now, and markets are volatile, so private equity may be an easier option for Ambani now," the manager said. But the credit squeeze is also hurting private equity firms, and they may be averse to doing large deals now -- or push for lower valuations, said a manager at another private equity firm.

The Economic Times last week said a potential deal could see Ambani emerge as the largest single shareholder in MTN, with the Indian firm becoming a subsidiary of sub-Saharan Africa's biggest mobile phone operator. Based on foreigners holding 11 percent of Reliance Communication shares, Ambani could swap between 43 and 63 percent of his holding in the company for a stake of 28 to 34 percent in MTN, it had said. India allows up to a 74 percent foreign holding in telecoms firms by foreign companies, with a purchase of 15 percent triggering a mandatory open offer for 20 percent more.

Ambani's large holding in his flagship company and low foreign ownership makes a deal with MTN more plausible than the one that Bharti Airtel walked away from, Citigroup analysts said in a note this week. Analysts and media estimate foreigners own 10 to 13 percent of Reliance Communications.

Morgan Stanley has estimated an open offer for Reliance Communications shareholders could be at 613 rupees a share, a 7 percent premium to the stock's closing price on May 23, the last day they traded before the firms said they were in talks. Shares in Reliance Communications fell 2.3 percent on Wednesday to 540.15 rupees in a broader market down 2.8 percent.

They have lost 5.6 percent in the eight sessions since the talks were announced. Reliance is being advised by Lazard, while Merrill Lynch are advising MTN.

International situation forced us to hike petro prices: PM

New Delhi, June 04: In an address to the nation on Wednesday evening, Prime Minister Manmohan Singh said that in view of the continually rising crude prices globally, the government has been forced to raise petro prices. Even though, he said, the government has done everything throughout its tenure to shield the common man from the global oil price hike, there is no escape from the situation.

"There are limits to which we can keep consumer prices unaffected by rising import costs. Our oil companies cannot go on incurring losses. This way they will have no money to import crude oil from abroad," the Prime Minister added.

"I know that the price increases we have had to announce today will not be popular, even though they are only modest," Singh said his address explaining the circumstances which forced the UPA coalition government for a hefty fuel price revision.

With the Centre having taken a revenue hit of Rs 22,660 crore by cutting duties, the Prime Minister asked the states governments to reduce their taxes and levies as well.

"The Central government, oil companies and consumers are bearing a part of this immense burden. It is, therefore, incumbent on state governments, many of whom tax petroleum products substantially, to also contribute to this national effort by suitably reducing state taxes and levies," he said.

Within hours of the decision taken by the Union cabinet, the Left-ruled West Bengal government slashed sales tax on petrol and diesel by up to five per cent giving a relief of Rs 2.12 and Rs 1.38 a litre on the two fuels.

With the Indo-US nuclear deal in limbo because of opposition by the Left parties, the Prime Minister sought to garner support for the country going for nuclear energy.

"We cannot remain captive to uncertain markets and unsure sources of supply. We have to develop renewable sources of energy, including nuclear energy," he said.

AMD launches Puma notebook chips

San Francisco, June 04: Advanced Micro Devices Inc is rolling out a much-awaited line-up of chips for laptops, as Intel Corp's main rival seeks to regain a competitive footing against the world's biggest chip maker.

AMD, which in April posted its sixth consecutive quarterly loss amid missteps and market-share losses to Intel, said the launch of the processors and related parts, code-named Puma, is its largest-ever launch for notebook personal computers.

AMD counts more than 100 different notebook PCs designed to use versions of the Puma platform. "This is double the design wins over any previous mobile launches," Leslie Sobon, director of product marketing at AMD, said in a phone interview.

PC makers using Puma chips include Acer Inc, Asus, Dell Inc, Fujitsu Siemens Computers BV and Hewlett-Packard Co, she said.

Prices for the mobile PCs will be mid-range for laptops, from about USD 700 up to USD 2,000. Most will be available in time for the back-to-school shopping season, and some will be available this week.

Growth in desktop PCs has been slowing for years, and the mobile segment is where the fastest growth is in the PC industry. Market research firm IDC predicts that consumers will buy more mobile PCs than desktop PCs by the end of this year.

"It is a good platform and I think the design wins are a testament to that fact," IDC analyst Bob O'Donnell said. "Everybody wants a serious competitor to Intel, you can't ignore that. But people aren't going to randomly take an alternative if it's not any good."

Sunnyvale, California-based AMD is offering three versions of the Puma platform -- a collection of the microprocessor, wireless chips to connect to WiFi, and related chips.

Puma uses AMD's Turion X2 Ultra Dual-Core processor as its brain. At the cheaper end, AMD's new platform will use graphics technology integrated in the chipset, allowing video-gaming and also good enough to play back digital media seamlessly.

A chipset is a collection of semiconductors and components surrounding the microprocessor, a computer's electronic brain.

For those who want better graphics, AMD will sell another platform to PC makers for about USD 50 more. That will use both a graphics processing unit, from AMD's ATI graphics unit, as well as the integrated graphics functions of the chipset.

Typically, Sobon said, when a PC has a discrete, or separate, graphics chip, the built-in integrated graphics functions of the chipset are disabled. At the pricier end, AMD will include a high-end discrete ATI graphics chip for more intense gaming as well as working with high-definition home movies and the like, Sobon said.

"What we've heard clearly from our customers is that consumers have enough productivity power. They don't need to open Excel or Microsoft Word any faster," Sobon said. "What people need more performance on is ripping CDs, watching high-definition movies, editing and creating home movies."

The initial focus of the launch is on consumers, but AMD will also target small and medium-size businesses, which is a high-volume market and profitable for big PC makers, AMD said.

Puma's processing engine will not be the Barcelona core, which is in AMD's latest chip used to power servers, but had a small design flaw that delayed volume shipments. AMD has since fixed the problem and aims to ramp up production of Barcelona.

"Barcelona is another bet they have," said Roger Kay, president of market researcher Endpoint Technologies Associates. "I had initially thought that Puma would not do that much for them simply because (Intel's mobile chip) Centrino has so much momentum."

"But as it's unfolded it looks like Puma might be quite successful for AMD," Kay said. "In mainstream notebook computing, this is a very viable alternative to Intel."

Truckers jack up rates within hrs of new fuel prices

New Delhi, Jun 04: Within hours of the government announcing a hike in fuel prices, truckers on Wednesday jacked up freight charges by nearly 15%, a move which will further cascade into the price rise.

All India Motor Transport Congress, representative body of truckers and transporters is meeting here tomorrow to work out the impact of the rise in fuel prices and announce the new freight charges.

"The freight rate could be hike between 15 to 20 per cent," All India Motor Transport Congress Managing Committee member Deepak Sachdeva told agencies.

He said all major transport associations, affiliated with the Congress, would also meet on Saturday to take stock of the situation.

However, the transporters within Delhi and NCR region have increased the freight rates by 10 per cent.

"It has become difficult for us to absorb the increase in fuel charges and we have left with no choice but pass on the burden to consumers," said Bajrang Gupta of Deepak Transports.

The government has raised the petrol and diesel prices by Rs 5 and Rs 3 per litre respectively.

Airlines fear `bankruptcy` despite ATF price cut

New Delhi, June 05: Airline insolvencies are no longer a distant nightmare for the Indian aviation industry, weighed down by rising operating costs despite jet fuel prices slashed by 4.3 per cent on Thursday.

Although it stomached a loss of Rs 4,000 crore in the last fiscal, the industry's health does not permit it to lose more, increasing the fear that bankruptcies among airlines abroad may soon spread to the Indian skies.

"We have seen an increasing number of bankruptcies of airlines the world over and this can happen in India also," Jet Airways CEO Wolfgang Prock-Schauer said here.

Quoting IATA figures, he said in the last couple of months 24 global carriers have gone bankrupt unable to bear rising ATF prices. ATF costs in India account for an average 40 per cent of the total operating costs annually.

Maintaining that "50 per cent of the running cost is fuel and its rising price has become a big problem," he pointed out that ATF prices in India was much higher than most of the other countries, primarily due to high taxes.

However, Indian carriers are expected to benefit from a decision of state-run oil firms to cut aviation turbine fuel (ATF) prices by 4.3 per cent, after the government halved customs duty on the fuel from ten to five per cent.

"We must get substantial relief from the fuel burden in order to close the gap partially and come back to viability," he said, adding that since March this year "we have had four increases and this fuel increase amounts to additional 100 million dollars monthly for the industry here." But the 4.3 per cent cut is hardly any relief when compared to the 100 per cent increase in jet fuel rates in the past year, says an official of another carrier.

Infosys eyes new clients, acquisitions

San Francisco, June 05: Infosys Technologies Ltd is stepping up sales to new customers and will consider acquisitions in continental Europe as it seeks to reaccelerate growth in the midst of an ongoing economic slump, chief executive Kris Gopalakrishnan said on Wednesday.

In April, Infosys warned growth would slow to between 19 percent and 21 percent in 2008, or USD 4.97 billion to USD 5.05 billion, half the growth rate it enjoyed in 2007 over 2006.

Gopalakrishnan said during a trip to Silicon Valley this week that he expected growth of 20 percent to 21 percent -- the higher end of this range.

Infosys, India's second largest software services company -- an icon of the global outsourcing trend -- develops software, designs global supply chains and offers back-office services for more than 500 corporate customers. US clients account for 60 percent of revenue while Europe is 30 percent.

Gopalakrishnan, one of seven co-founders of the 27-year-old company, said he expects sales growth to pick up quickly once economic uncertainty abates later in 2008 or early 2009, paralleling Infosys' reacceleration after a downturn in 2002.

"We feel that once the dust settles ... they (clients) will be increasing their spending," Gopalakrishnan said.

2002 revenue growth slowed to 32 percent from above 100 percent in 2001 but sprang back over 40 percent from 2003 onward. "We see that possibility again," he said.

But he declined to predict when a recovery might occur. For more than a year, Infosys shares have been battered by a strong rupee, rising wages and pessimism about the global economy.

"There was delay, and there still is delay," Gopalakrishnan said. "I think there is still uncertainty about when we will see the bottom. People are still worried about when the turnaround will happen," he said.

Outsourcing's great selling point is the flexibility it gives corporate customers to pick up or slow down spending in response to business conditions. "Where there is a slowdown, new (customer) projects don't get started," Gopalakrishnan said, "In the worst case scenario, projects get cancelled."

Infosys targets four big industry sectors: finance, high-tech, manufacturing and retail. The only US sector to take an immediate business hit was retail, he said: "The rest kind of slowed down but we didn't see abrupt cancellations."

German, French buys

Infosys is stepping up sales to new customers instead of relying on its existing base of more than 500 customers globally. Ninety-five percent of revenue is repeat business.

"We have become more active in recruiting new customers," Gopalakrishnan said. He declined to give a target for how this would like alter the mix of new versus repeat business.

Outright acquisitions, as well business process outsourcing deals in which Infosys acquires the technical employees of customers in exchange for taking responsibility for projects formerly handled in-house, are other ways to grow. As an example of this approach, Infosys last year acquired 1,400 Philips employees and rebadged them as its own staff.

Infosys has been loathe to expand through mergers, growing as it was at rates north of 30 percent a year. An Australian company was its sole acquisition, five years ago. "We have been growing, so there is no pressure to do it," he said.

But it is reconsidering this strategy, Gopalakrishnan said, as Infosys seeks to expand beyond its existing English-language customer base to capitalize on rapid growth in Europe, where revenue grew 65-70 percent last year, double its overall rate.

Gopalakrishnan would consider acquisitions that bolster its consulting, sales and language skills to help it reach beyond its English-speaking base of more than 500 customers globally: "Maybe a company in France or Germany to get language skills."

While ruling out a "big" transaction, he said "it could be an acquisition of a 1,000 person company". Infosys' reluctance to do deals stems the difficulty integrating services firms.

Britain and Germany have embraced outsourcing over the past five years, along with smaller markets Switzerland, Belgium and the Netherlands, Gopalakrishnan said.

But France, Italy and Spain remain "blank spots", he said, adding that: "We are starting to look at those countries."