PETROL AND OUR NATIONAL DUTY

So many times we just take up part data and draw conclusions that suit  our argument. This is also the reason why the standard of Indian researchers in our colleges/universities is less than satisfactory.
The below table is itself explanatory of this fact.
The compiler has taken lot of trouble in accumulating the data and making the slide.However he has overlooked a certain  fact that that a nation's economic calculations are not based on simple additions and subtraction.
In the year2005-2006 the average Re/ $ average rate was  Rs.44.2735 which as per the table pegs gasoline(petrol) as $0.9224 per litre.
For the year 2015-2016 the official average rate is still not out but let us take it as 64.50. The rate per litre comes to $0.9488 .
Here too I can take whatever $/Re and petrol rates to suit my argument=- that is the beauty of statistics- but that is not our lookout here.
1. What the compiler has overlooked is that during the decade in question Diesel was heavily subsidised and the subsidy component was either being financed by Fixed and elevated Petrol price.
2.Apart from the petrol , government was covering the shortfall by giving cash transfer to OMCs. This shortfall was obviously being funded by the tax payers.
3. The prices that you are seeing between 2007 and 2008 and again between 2008 and 2014 Jan have highly fluctuating. What do you think was the price that the Oil importers were paying to the O(il) P(roducing) C(ountries). This price is the spot price or sometimes the long term contract price.
4.During this time there have been great political turbulence in the middle east .Iran has been a subject of great interest. It could not sell it's oil and US placed embargo on it's oil export. All these had effect on the oil availability as such the country had to do a lot of spot purchases, all this while burdening the tax payer and the Petrol user.
5.Even the Onion buyers know that prices vary with demand. During the above decade the automobile industry has churned out a double digit growth . The farmer in Punjab has used free water  generated by diesel pumpsets running on subsidised diesel.
But during this growth in demand the price of petrol has mostly remained static.
6.All the well-to-do citizens bought 2000cc+ powered SUVs running on subsidised diesel.That included politicians, businessmen,media person, property dealers and crooks who paid no taxes.
At this time no one ever questioned the price of petrol, because they were not using it. It was being used by the poor Scooter, motorcycle and  Maruti 800 and Santro users.
Just for your information, very few luxury cars exist that run on petrol.Most run on diesel.
7.Now when the oil price has inched down only in line with the previous pattern. Should the government not try to eliminate the oil subsidy that has already burnt a hole in it's pocket and cover the shortfall on account of old subsidy..
8. As per government statistics ( which may not be accurate) 8 crores of LPG cylinders have been distributed to people who did not deserve it. This has been extrapolated from the no. of people who have given up their LPG subsidy.

At the end of my poorly managed argument, all I can say is that whatever be the form, it will always be the citizens who will pay the bills of the government. The government has no money, NO GOVERNMENT OF THE WORLD HAS EVEN A SINGLE CENT. It is all citizens money in form of taxes or loan given to the government in form of Bank FDs, Post Office schemes , PPF etc.
What your objection should be not micro issues that the government tries to put forward to you to distract you. should ask and ask for good governance.
File regular RTIs and Public Grievances for the useage of your tax money.
File petitions on downsizing of government machinery.
When most of the work is handled by Infosys and TCS, why is the IT department using almost 45% of it's tax revenues generated.
Why is there a full department of service tax in just 15 years?
Why should the direct taxes not be done away completely and we survive on the GST and expenditure tax?
Why must the government revenue departments not publish a Annual Report like Private and Public companies.
These are the questions that citizens must ask but no-one ever will.
It is much easier to throw vague barbs at no-one in particular and pretend that we have done our national duty... but we haven't.
JAI HIND

DOING WHAT YOU KNOW BEST

DOING WHAT YOU KNOW BEST

At least two to three times a year , the financial world provides an opportunity to the 2 billion literate experts of this world. This opportunity manifests itself in making quite a few armchair economists every time  and also throws up a lot of investment experts and advisors. This is required also, because there are serious shortage of jobs in this world; and what better job can be there than to comment upon the economies of the world , tell the televisions that the doom is near and how this crash is worst ever that the world has seen- ever in most cases meaning since last week .

I have always approached most of the things rather simplistically i.e. from First Principles. Here is how they went:

 What is a Stock/Share? It is part of a business that anyone can own legally, even if someone has limited funds.

What Stocks/Shares should I buy? Of a good reputable business which has near monopoly . Preferably a product that is used regularly and cyclically.

But I don’t understand balance sheets, all the financials which are to be considered while buying a share what should I do? Invest in Mutual Funds. Diversified and preferably large cap.

How long should one hold the shares of a good company? Forever! If the business is good and growing , why would you want to sell it and start looking for another good business. It is like closing your own running shop and starting another one instead.

This was as close my mind worked towards investment and all was going well… till something called derivatives came along.

These were very complicated financial concepts which made the people who were regularly buying and selling everyday (and hence called traders)- even more busy. Now they were not buying shares but promising to buy a whole batch of shares of a company by paying a fraction of what you and me were paying by “actually buying shares”. To cut a long story short at various times when the markets fell due to a lot of reasons that they do, a lot of people lost money, homes and even lives.

An even more complicated product wiped out the economy of United States and Europe in 2008 .

During all this time I was quite bewildered (not enough to not continue with my MF investing).I was wondering that what economically productive function was being performed by the FnOs or derivatives and individuals and companies who were dealing in it.

If something is not produced, it is not part of an economic activity. This production can be of something tangible like metal, petroleum, machinery, banking, Pharma OR non tangible like IT, healthcare OR services. Something must be produced to have a value attached to it. We all are part of that economic activity. If we do not work, not only will we not be able to earn for a living but also not add any value to the society and the economy. There is a classic theory of economics called Guns and butter, which you can google .

In short… we must do what we know..exert and assert our skills.

It is very important to read the above and understand before reading what I am about to mention below.

We earn by working and save it in the banks and further invest it in Mutual Funds, stocks, gold, real estate, bonds etc. The companies, the stocks of whom you own are carrying on their business and making a profit because of which your share price goes up. But what happens if that company whose shares you own, instead of using it’s profit to expand it’s business uses the money to invest in the Stock Market or buys MFs for itself? There is nothing wrong with it legally. They are confident that they will make more profit by investing than by carrying on their own business.

Let us further take this example. The government of a country has wealth in form of foreign exchange or surplus taxes in its budget (which rarely a government has). Now instead of using that wealth on development programs the government decides to take that money and invest in the stock market. Is that right, or is that correct? Is the government doing anything wrong? It maybe argued that by doing so the government is trying to bridge the deficit that it is always saddled with because the receipts from taxes are always less than what it has to spend for development. It maybe true ,however to me it looks like a python trying to eat itself tail onwards.

This was what China was trying to do. It was using it’s reserves to make profit from the market that was supposed to be coming up by it’s own developmental and growth policies…and who was supposed to be having a higher growth rate than China.

There is more to this in form of improper or incorrect data that used to be flowing out from China, which I always believed was “doctored” by the government. China is in fact in a unique position to show to the world what it intends to show and how much it has to show. I am personally witness to 2,3 incidents where the government or party workers kicked in to what was supposed to be a private drydock in order to create subterfuge and diversion from accidents that happened due to safety having taken a backseat.

Coming back to our talk… it is important for everyone to do what they are trained to do or supposed to do.

Government is supposed to create policies and a safe atmosphere for it’s citizens and businesses.

Businesses and industries are supposed to carry out their enterprise in earnest.

Citizens are supposed to abide by law like everyone else, work and earn their living and ensure that their dependents are looked after.

This is the ideal world…or utopia as we call it.

What actually happens is …

Government does business or creates confusion by interfering in businesses.

Businesses try to interfere with governance and twist laws to extract unfair amount from the citizens.

Banks mislead the clients and channelize the wealth they are supposed to protect into avenues that are profitable only to themselves.

The professionals who are supposed to heal, build bridges, protect the country and carry on their professions start dabbling with their money and lack of knowledge…

As a result all goes haywire… and we have the entropy and disorder that we have.

About MNCs and competition

There is a certain mindset doing rounds in the psyche of the nation, which is denouncing the competition in business vis a vis the foreign companies and FDI.
Various twisted theories are being touted to prove how the nation is being robbed off ( or of) its riches and how very soon we shall be poorer.
It may have been alright if these theories came from the general population, unfortunately they emanate from various professionals of the business community or who support the business community like MBAs.
Here is why I think that such theories are outdated:
1. In modern business world , capital in form of currency is not restricted within boundaries of any countries. A plain load of wealthy tourists can easily spend more money on a 2 week holiday than the bottom line of a small cap company balance sheet. In turn they need not even get any durable or non durable product back into their country.
2. Whether it is a foreign or a domestic company they have to pay customs, excise , corporate and Income tax alike. There is no discrimination.
3. Competition does not mean loss of jobs- as with competition various latent demands of products is created.
4. Most of the swadeshi brands like Neem toothpaste that we think are  Indian are already owned by MNCs and various brands like Burnol which belonged to British company are owned by Indian companies.
5. With the onset of liberalization of 1991, the Indian companies have no doubt expanded , but they have also siphoned out the profits by way of under and over invoicing. This money that is coming by way of P-notes into the economy is actually and factually not FII but the Indian money routed back.
6. In keeping with the above it is better to have the foreign funds come in as FDI rather than FII; since the latter vanishes with the season.
7. If we are so fixated about promoting Indian companies , then why do these Indian companies not introduce some cutting edge technologies or develop greenfield factories with entire Indian input in terms of material resource and Indian capital.
8. Why should these Indian companies be allowed to set up by importing finished and semi finished machinery. At the end of the day IF anyone is going to set up a company in India- they will use Indian human capital- so why the fuss.
9. Last but not the least quite a few large Indian conglomerates have started appointing their CEOs from foreign countries. Well if they can't find someone to head from India then why the patriotic cry.

It's been 10 months since the last post...
Lot of eventful events have happened in these 300 days..few of them that have actually changed my life... some of them that have changed that of the whole nation's.
With the suggestions of a few colleagues at sea I have started writing a book so as to assist them with planning their future finances.
Will like to put up the book on this blog instead of putting it up for sale.

MY REPUBLIC

What is the idea of wishing each other Republic day if we don’t even know the importance of every year.

If we don’t even know how far away or how close to historical destination we are.

Very few of my countrymen recognise that in the last 3 years they have passed so close to what would have been civil war in any country.

The discontent with the establishment did not result in any leader being slain, it has resulted in the country rallying their support behind to simple 2 ordinary men. The third movement even a larger one in support of a girl whose name they never knew. Brave people of the republic – braved the chill and cold water cannons at the hands of their own country police . For this even the police must be lauded who have learnt to do their job- however despicable it may be. In any other country like the members of the ARAB SPRING – the police may have very much killed the leaders.

We have to congratulate the republic where the ordinary people have forced the government to set up a law reform committee- First Time in the History of the Republic.

We have to congratulate the republic where the Chief Justice has the courage to rebuke it’s prime minister and lament that he was not able to participate in the anti rape protests at india Gate.

We have to congratulate the republic where a retired Chief Justice can rebuke the government for its’s inaction.

...WHERE the law reccomendations are based on the input of 90000 ordinary Indians.

…WHERE the government brings out a law on RTI which in effect creates heroes out of ordinary people.

…WHERE an ordinary citizen can stand up with few supporters and bring down the greatest of politicians.

Indians and countrymen lend me your ears for I come here to commemorate the republic and it’s predecessors and not bury it.

What Gandhi stood for 70 years back- is still there and you can feel it inside you.

It is here  that power can pass through the hands of the mightiest without a drop of blood.

Celebrate that.

Celebrate your maturity which has happened on the back of 150 years of independence struggle and not 600 years of slavery.

We are THE REPUBLIC.

WE ARE INDIA.

When you can fee lit inside you- get up and wish others- HAPPY REPUBLIC DAY.

What is the idea of wishing each other Republic day if we don’t even know the importance of every year.

If we don’t even know how far away or how close to historical destination we are.

Very few of my countrymen recognise that in the last 3 years they have passed so close to what would have been civil war in any country.

The discontent with the establishent did not result in any leader being slain, it has resulted in the country rallying their support behind to simple 2 ordinary men. The third movement even a larger one in support of a girl whose name they never knew. Brave people of the republic – braved the chill and cold water cannons at the hands of their own country police . For this even the police must be lauded who have learnt to do their job- however dispecable it may be. In any other country like the members of the ARAB SPRING – the police may have very much killed the leaders.

We have to congratulate the republic where the ordinary people have forced the government to set up a law reform committee- First Time in the History of the Republic.

We have to congratulate the republic where the Chief Justice has the courage to rebuke it’s prime minister and lament that he was not able to participate in the anti rape protests at india Gate.

We have to congratulate the republic where a retired Chief Justice can rebuke the government for its’s inaction.

...WHERE the law reccomendations are based on the input of 90000 ordinary Indians.

…WHERE the government brings out a law on RTI which in effect creates heroes out of ordinary people.

…WHERE an ordinary citizen can stand up with few supporters and bring down the greatest of politicians.

Indians and countrymen lend me your ears for I come here to commemorate the republic and it’s predecessors and not bury it.

What Gandhi stood for 70 years back- is still there and you can feel it inside you.

It is here  that power can pass through the hands of the mightiest without a drop of blood.

Celebrate that.

Celebrate your maturity which has happened on the back of 150 years of independence struggle and not 600 years of slavery.

We are THE REPUBLIC.

WE ARE INDIA.

When you can fee lit inside you- get up and wish others- HAPPY REPUBLIC DAY.

Govt agrees to infuse Rs 12,517 cr into PSU banks by March

…and not a whimper from any quarters.

Right under our nose, government is using our money for some sinister reasons and not one person from the media is standing up and asking a question, why?

Why in a potentially inflationary environment is government putting money into the system?

Why is the money required to be infused into the banks?

Why are the very banks whose NPAs are rising and have bad loans being incentivised by the government with our money?

When we have the RBI that looks over the banks , why does the government find it necessary to intervene?

Has the RBI become incompetent?

The question can even be extended to include why the deputy governor of RBI has been retired without finding his successor?

All these questions lead to a certain angling in the government quarters.

No one is telling the public that for 8 years now the PSU banks have been subsidising the big ticket real estate companies, all the time allowing them to keep up the prices of their real estate assets.

Do you know that if the banks were not financing and refinancing the same projects of realtors, we would be able to get the same flats for nearly half the prices.

However in the deal that is going around, if the banks allow the prices of the projects to be lowered/slashed, their own loans extended become more than the value of the assets.

In some cases the realtors had approached the banks for taking over their projects, since they did not have any buyers. In such cases the bank forwarded even more funds to the realtors to continue their projects.

How the NPAs(non performing assets of the banks rise):

A developer approaches a bank with a plan of building on a land that is not effectively his. Bank finances the loan for buying the land and the project at much higher value than the actual cost of the land (naturally because it is not developed).

When the project is launched , the buyer is encouraged to go for loan from the bank that has approved (financed) the project. Now effectively the builder shows that he has sold so much of the project (in terms of loan value and not the no. of flats or shops).

As a result now the bank has financed the project with 2 loans (1 to the builder and 1 to the buyer).

With time the builder effectively hikes his prices and has less and less buyers.

He approaches the bank (which is effectively hand in glove with the builder) to forward some more loan either to show extension of the project or a new project on the same land.

Now the bank has given a lot more loan than the asset value – these assets being illiquid cannot be realised.

The loans are not being serviced by the creditors and the builder is not interested in paying back anything , because he has recovered his margin by selling a few flats.

…and the process goes on.

In this entire tangle the only person losing out is the Indian public.

Which is either paying a lot more for it’s home – than it is worth it- as in Mumbai.

Or being made to pay indirectly by such “infusions” into the banking system by the government.

If you do not believe or understand the above.

Just imagine you receive 1 crore from your uncle in lieu of the financial hardship that you are undergoing because of some money you lent out to a friend or money that someone has taken from you and not returned to you.

How is this money going to look factually on your books?

You are going to receive it and say Ok now I don’t have to worry whether that guys pays me back or not.

That is how the bank are going to behave- and the system will go on and defer the problem.

This is exactly what happened with the subprime crisis in the US.

Same thing is going to happen here whether we have subprime rate or not.

What we should raise our voice in the parliament is not against FDI and other things.

We should raise our voice against financial impropriety being conducted by the government because we have a strong and a worthy RBI and a unflinching governor.

How I wish our primeminister would have been like that.

Alas! To think that he was a RBI governor once too.