Petrol, diesel prices to be cut if crude fall to USD 61 a bbl

India's crude oil import price has dropped to the year's lowest but a cut in petrol anddiesel price may happen only if crude falls to USD 61 per barrel as rupee depreciation has partly offset the gains.


Oil firms were supposed to break-even on sale of petrol, diesel, LPG and kerosene if the price of the basket of crude India buys were to come down to USD 67 per barrel.



However, with 20 per cent depreciation in value of rupee against the US dollar, the break-even point is now at USD 61 a barrel.



"The benefit of softening of the international oil prices has been partly offset by the recent depreciation of the rupee," a Petroleum Ministry official said.



Indian Oil, Hindustan Petroleum and Bharat Petroleum are losing about Rs 350 crore per day on fuel sales.



"The domestic retail prices at the time of revision in prices in June were equivalent to Indian basket of crude oil of USD 66 per barrel. With the recent depreciation of rupee against US dollar, the current retail prices now correspond to USD 61 per barrel of Indian basket of crude oil," he said.



The Indian basket of crude oil fell to USD 72.20 per barrel on Monday, the lowest level this year.



It has averaged USD 79.70 a barrel in October.



The three firms are losing Rs 4.68 per litre on sales of petrol, Rs 11.48 on diesel, Rs 28.07 on kerosene and Rs 322.14 per LPG cylinder and are projected to lose Rs 1,62,158 crore

on fuel sales this fiscal.



"International prices of crude oil and petroleum products are still higher than the prices at which current retail

prices are fixed and so there is no valid reason for downward revision in retail prices," he said.



The official said the three fuel retailers were borrowing heavily for financing their working capital and capital expenditure requirements.



"The combined borrowings of the three, which stood at Rs 48,400 crore in March 2007 and Rs 66,900 crore in March 2008, has increased to Rs 93,500 crore as of August, 2008," he said.



The oil firms' credit limits have recently been enhanced by Rs 14,000 crore to enable them to meet their fund requirements till the end of October.



"The interest burden of the three companies during 2008-09 is expected to go up by Rs 4,200 crore compared to previous year due to increase in borrowings and higher rate of interest," he said.

US economist Paul Krugman wins Nobel Economics Prize

US economist Paul Krugman, a prolific New York Times columnist and fierce critic of Washington's economic policies, won the Nobel Economics Prize on Monday.


The Princeton University professor was rewarded for his "analysis of trade patterns," the Nobel jury said.

Krugman, 55, has formulated a new theory that determines the effects of free trade and globalisation, as well as the driving forces behind worldwide urbanisation, the citation said.


"I'm a great believer of continuing to do work. I hope it doesn't change things too much," Krugman told Swedish television immediately after the prize announcement.



"Krugman's approach is based on the premise that many goods and services can be produced more cheaply in long series, a concept generally known as economies of scale," the jury wrote.



Unlike traditional trade theory, which assumes that differences between countries explains why some nations export agricultural products while others export industrial goods, Krugman's "theory clarifies why worldwide trade is in fact dominated by countries which not only have similar conditions, but also trade in similar products," it added.



Krugman has formalised a new global trade policy which helps to explain that globalisation tends towards concentration, both in terms of what a manufacturing base makes, and where it is located.



His theory shows that globalisation tends to increase the pressures on urban living, sucking people into these centres of concentration.



"Krugman's theories have shown that the outcome of these processes can well be that regions become divided into a high-technology urbanised core and a less developed 'periphery,'" the jury said.

US set to outline bank rescue plan

The US government is expected to announce a $250bn (£143bn) bank rescue plan later, echoing steps taken by the UK and other European countries.

In return for injecting cash, the US will hold stakes in banks including Goldman Sachs and Morgan Stanley.

President George W. Bush and Treasury Secretary Henry Paulson are due to make statements before US markets open.

The money will come from the $700bn bail-out package approved by US lawmakers earlier this month.

'Universal plan'

Unlike the UK plan, all US banks will be expected to take part in the scheme, Ralph Silva, a banking analyst at Tower Group, told BBC News.


Reports say the plan may also include increasing deposit insurance for certain bank accounts and guaranteeing certain types of bank lending.

On Monday, the UK said it would inject up to £37bn of taxpayers cash into Royal Bank of Scotland, Lloyds TSB and HBOS.

Governments in the eurozone have said they are putting aside more than 1 trillion euros to protect banks through guarantees and other emergency measures.

The bulk of the money will be used to guarantee lending between banks - part of a plan agreed at the weekend by the 15 nations that use the euro.

The cash will also be used to take stakes in ailing banks.

Oil prices jumps above USD 83 as financial panic eases

Oil prices rose above USD 83 a barrel on Tuesday in Asia as panic selling over a global financial crisis eased after the US and Europe pledged to pump capital into ailing banks.


Light, sweet crude for November delivery was up USD 2.38 to USD 83.57 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.



The contract rose overnight USD 3.49 to settle at USD 81.19.



Investors have cheered signs that the US and European governments plan to inject capital into major banks.



Tokyo's benchmark Nikkei 225 index jumped 13 per cent on Tuesday after the Dow Jones industrial average yesterday gained more than 11 per cent, its biggest one-day rally since 1933.



"There's some confidence from Western governments buying stakes in banks, and the financial panic seems to have subsided a little," said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore.



"Crude oil certainly overshot on the downside." Oil fell to a 13-month low on Friday, settling at USD 77.70.



Crude is down 44 per cent since reaching a peak in mid-July.



The US plans to spend an initial USD 250 billion of a USD 700 billion bailout buying stock in private banks, industry and government officials said on Monday night.



President George W Bush planned to announce the details later in the day on Tuesday.



That followed signals that European governments were putting up about USD 2 trillion to safeguard their own banks.



Although the massive rescue plans boosted short-term sentiment, the scale of the bailout underscores the current weakness of the global financial system and the likelihood of a prolonged economic downturn, Kornafel said

Shares gain as confidence returns

Stocks markets in Europe and Asia have forged higher, as investors bet that state action to strengthen the banking system will ease the credit crisis.

London's FTSE 100 index rose almost 4% in early trade, while Japan's Nikkei stock index posted a record 14% gain.

The US is set to unveil details of a plan to take stakes in banks, following steps by the UK and European leaders.

President George W Bush will make a statement about the bank plan shortly before US markets open later.

The FTSE 100 was up 3.93%, or 167.29 points, at 4,424.19 points. In France the Cac 40 was up 4.04%, or 142.53 points at 3,674.03.

Bank shares led gains in London.

In Japan, the Nikkei 225 ended up 14.2% at 9,447.57 points - its biggest ever one-day gain as it caught up with gains elsewhere after a public holiday on Monday.

Fresh moves

The gains came after the US Dow Jones index jumped 11% on Monday as investors welcomed fresh moves to deal with the worldwide financial crisis.

In Hong Kong, the Hang Seng index was up 715.67 points, or 4.4%, at 17,027.83 by the mid-session break. South Korea's index finished the day 6.14% higher.

Australia's main share index ended the day up 3.7% after Australian Prime Minister Kevin Rudd announced a 10.4bn Australian dollar ($7.3bn) economic stimulus package.

It will allow for one-off payments to the country's low-wage earners and pensioners and follows earlier announcements of guarantees of bank deposits for three years.

According to Mr Rudd, the strategy "will strengthen the national economy and support Australian households".

Jet and Kingfisher join hands to beat downturn

India's two largest private airlines Jet Airways and Kingfisher Airlines joined hands and announced an alliance for sharing of their network and resources to meet the challenge of aviation downturn.


Announcing the alliance, both Naresh Goyal of Jet and Vijay Mallya of Kingfisher said the coming together was in tune with the global practice of reducing killing costs and clarified that there was no equity involvement.



"This is a long-term alliance on a sustainable basis and not a matter of convenience," Goyal, emerging after a two-hour long meeting with Mallya told waiting newspersons but declined to take any queries saying they would answer when the two visit Hyderabad Airshow on Wednesday.



"Both the parties recognise economic realities and benefits of the alliance... it is a meeting of both mind and heart," Mallya, who earlier received Goyal, his wife Anita rpt Anita and entourage of top officials at his office at his Ville Parle office said.



The Alliance would bring the two airlines, which account for nearly 60 per cent of market share, to work together on seven fronts, including route and code sharing as also sharing of crew, a move that would help them cut exorbitant cost that had been putting enormous pressures for the last 4-6 years.



Asked if the alliance could lead to a merger or equity participation, Goyal said, "there is no equity involved... we will give details when we meet at Hyderabad Airshow tomorrow."



In a joint statement issued after the meeting, the two corporate honchos said, "While maintaining their legal entities and brand entities, both Jet and Kingfisher will examine co-branding opportunities and have formed core committee of senior management personnel from both companies who will drive the various identified initiatives forward with immediate effect."



Goyal, accompanied by wife Anita who is also Director, Marketing, of Jet, Executive Director Saroj Dutta, CEO, COO and other top officials, walked into Mallya's office for working out the details. Mallya is believed to have met Goyal at his office earlier in the day.



"Both Jet and Kingfisher fully realise that better understanding of supply and demand in this capital and labour intensive industry is the key to profitability and enhancement of shareholder value."



"I look forward to this alliance delivering superior quality, cost savings, flexibility and enhance consumer value, which is the hallmark of all successful alliances," Mallya said. While Jet had earlier acquired ailing Air Sahara, Kingfisher had taken over the crisis-ridden Deccan to emerge stronger till the rising costs and global meltdown hit them hard with each of the entity losing about Rs 10 crore a day.



The two corporate leader had met Aviation Minister Praful Patel last week, presumably to get his approval, for the alliance. Both Mallya and Goyal said had the alliance not come through, the two could have suffered and paved way for going back to monopoly days in the Indian sky where state owned entities alone operated.



As per the agreement reached between Jet Airways and Kingfisher Airlines, the two carriers would cooperate in eight areas.



They are:
--Code-sharing on both domestic and international flights, subject to DGCA approval.



--Interline/Special Prorate agreements to leverage the joint network deploying 189 aircraft, offering 927 domestic and 82 international flights daily.



--Joint fuel management to reduce fuel expenses.



--Common ground handling of the highest quality.



--Cross-selling of flight inventories using the common Global Distribution System Platform.



--Joint network rationalisation and synergies.



--Cross-utilisation of crew on similar aircraft types and commonality of training as also of the technical resources, subject to DGCA approval.



--Reciprocity in Jet Privilege and King Club frequent flier programmes.

Sensex climbs 542 points in early trade

The benchmark Sensex jumped by 542 points in early trade on Tuesday on massive buying by funds as well as retail investors, following a strong rally in global markets.


The 30-share index, which had gained 781.24 points on Monday, shot up by another 542.06 points, or 4.79 per cent, at 11,851.15 in the first five minutes of trading on Tuesday.

The wide-based National Stock Exchange's Nifty rose by 157.55 points, or 4.51 per cent, at 3,648.25.

Stock brokers said sentiments were bolstered on expectations that the government might take more steps torestore investors' confidence.

They said overnight gains of up to 40 per cent in Indian companies ADRs values at the US markets also buoyed the trading sentiments in Mumbai.



Asian markets opened on a strong note today with Japanese shares gaining as much as 13 per cent on hopes that new measures announced by governments worldwide will ease the global credit crisis.



Wall Street staged its biggest rally in 75 years with the Dow Jones Industrial Average skyrocketing by 936.42 points, or 11.08 per cent on Monday night.



On the domestic front, banking stocks continued to remain front-runners on the bourses, giving major support to the Sensex.



ICICI Bank surged by 6.96 per cent at Rs 454.70, while largest state-run State Bank of India stocks rose by 3.60 per cent at Rs 1,555.85.



Other gainers were Reliance Industries, Reliance Infra, Rcom, HDFC Bank, Larsen and Toubro, BHEL, Infosys Technologies, Wipro Ltd, Tata Consultancy Services and Satyam Computers.

Iceland stock market to stay shut

The Icelandic stock exchange has said that share trading will remain suspended until Tuesday because of continuing "unusual market conditions".

Trading was suspended last Thursday after days of market turmoil and the government's decision to nationalise Iceland's three major banks.

UK councils and other public bodies have about £1bn invested and it is not known if their deposits are safe.

Icelandic and UK authorities are trying to establish a single claims procedure.

Government talks

A Treasury delegation spent the weekend in talks with their Icelandic counterparts.

Private customers with Landsbanki's closed internet bank Icesave are protected by the UK's Financial Services Compensation Scheme.

And arrangements have been agreed "in principle" for a quick payout to retail depositors in Icesave.

But the Icelandic government has not extended protection to the £1bn of taxpayers' money invested by councils, police forces, fire services and charities.

Insolvency fears

So far, more than 100 local authorities in England, Wales and Scotland have revealed they have deposits worth £842.5m in total.

Fears are growing that some local government workers may not be paid this month because councils have payroll tied up in the banks.

And at least 60 UK charities fear they may have lost up to £120m of funds invested in failed Icelandic banks.

The Christie NHS Foundation Trust, based in Withington, Manchester, has revealed it could lose £7.5m.

Representatives from the board of the cancer hospital met with the Financial Services Authority and its lawyers over the weekend.

Iceland is crippled with debt and giving UK depositors their funds may depend on the country securing emergency loans from other countries or the International Monetary Fund (IMF).

Its debt is an estimated about £50bn, which is five times the total annual income of the country.

Oil higher after world leaders pledge to tackle global crisis

Oil prices are higher in Asia on Monday after world leaders united to tackle a global financial crisis engulfing Europe and the US, analysts said.


New York's main contract, light sweet crude for delivery in November was USD 2.45 higher at USD 80.15 a barrel, recovering from one-year lows reached on Friday.



The contract had plunged USD 8.89 to USD 77.70 at the end of last week, in tandem with a global equities meltdown on fears of recession that would crimp demand for energy.



Brent North Sea crude for November delivery traded USD 2.18 higher at USD 76.27.



On Friday in London, Brent fell by USD 8.57 to settle at USD 74.09.



Oil prices have already plunged from record highs above USD 147, reached in July, because of demand worries, dealers said.



But today's recovery followed weekend signals by US and European leaders that they have a growing commitment to take joint action to end the turmoil after the Wall Street collapse of investment bank Lehman Brothers unleashed a worldwide crash on stock markets.

UK banks receive £37bn bail-out

The government is to pump billions of pounds of taxpayers money into three UK banks in one of the UK's biggest nationalisations.

Royal Bank of Scotland (RBS), Lloyds TSB and HBOS will have a total of £37bn injected into them.

In return for the investment, the government will get a say in how the banks are run, including controls over the bonuses paid to management.

BBC business editor Robert Peston said the banks faced "absolute humiliation".

It would "count as perhaps the most extraordinary day in British banking history", he added.

'Extraordinary times'

RBS is to raise £20bn with a further £17bn to be put into HBOS and Lloyds TSB. Barclays intends to raise £6.5bn without government help.

Taxpayers will own about 60% of RBS and 40% of the merged Lloyds TSB and HBOS.

Prime Minister Gordon Brown said the bail-out was: "unprecedented but essential for all of us", and would thaw frozen money markets.

"In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about," he added.

Mr Brown insisted the investments were assets and, "not just money being pumped in", adding the government was "not a permanent investor in UK banks".

"Its intention, over time, is to dispose of all the investments it is making as part of this scheme in an orderly way," he said.

The Treasury cash forms part of the government rescue plan announced last week.

Management shake-up

As part of the banks' announcements:

Lloyds and HBOS said they had renegotiated their merger, reducing the number of Lloyds TSB shares that HBOS shareholders will receive.
RBS said chief executive Fred Goodwin was quitting with immediate effect - without a severance pay-off. He will be replaced by British Land boss Stephen Hester. RBS chairman Tom McKillop is to retire.
HBOS chief executive Andy Hornby and chairman Lord Dennis Stevenson said they would stand down from their posts.
RBS and Lloyds TSB/HBOS will return mortgage and small-business lending to 2007 levels, which is much more than they are currently lending.

Other developments included:

Major central banks saying they would offer financial institutions an unlimited amount of short-term dollar loans to help stem the crisis.
London's FTSE 100 index rising by about 5% as investors reacted to the news, though banking shares were mixed.

Europe acts to strengthen banks

Germany, France and Spain have announced multi-billion euro rescue schemes to shore up their banks.

Germany has approved a package worth up to 500bn euros (£393bn; $683bn), France will spend about 350bn euros and Spain has set aside 100bn euros.

The bulk of this money will be used to guarantee lending between banks - part of a plan agreed to this weekend by the 15 nations that use the euro.

France and Germany will also use the cash to take stakes in ailing banks.

The moves helped to lift investor confidence, with stock markets rising worldwide.

Two-fold plan

The two-fold plan involves guaranteeing lending between banks and taking stakes in financial institutions - similar to the bank rescue in the UK announced last week.

The US is also getting ready follow in Europe's footsteps and purchase stakes in financial institutions.

"We are designing a standardised programme to purchase equity in a broad array of financial institutions," said Neel Kashkari, the treasury official in charge of the US government's $700bn bail-out package.

French President Nicolas Sarkozy said France would offer up to 40bn euros to provide banks with the financing they needed via a public company in which the state would the only shareholder.

"This is a massive engagement," he said.

He added that no financial institution would be allowed to collapse.

German Chancellor Angela Merkel said that the measures being taken would only work if they were accompanied by more robust regulation that will curb "market excesses."

"The package passed by the German government will serve the financial system and ought to serve to protect the citizens and not just serve to protect the banking system," she said.

Fund

Unlike France, Germany and Britain, Spain's Prime Minister Jose Luis Rodriguez Zapatero said that Spain did not need to take stakes in any banks because its banks were solvent.

However, last week the Spanish government announced the creation of a 30bn euro fund to buy assets from Spanish banks to help stabilise the lending industry and unfreeze credit.

At present banks are reluctant or unable to loan cash to fellow financial institutions due to fears about whether the money will be paid back.

It is this lending between banks that traditionally lubricates the banking system, freeing up cash for lending to private individuals and other firms.

Italy is also working on its own bank rescue plan.