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The Budget - Is this fair?

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Will the loan waiver relieve farmer distress?
Makarand Gadgil / Mumbai March 12, 2008

Ultimately, it boils down to whether a loan waiver will help without taking action to improve irrigation facilities and to ensure remunerative prices for farmers.
Vijay Jawandhia
Shetkari Sangathana Maharashtra

'Unless the loan waiver is followed up with other measures to ensure the farmer gets remunerative prices, the measure is unlikely to help much'

Just like our colonial masters exploited our farm sector for the benefit of their industries, we did the same in the six decades of our independence. Only the skin colour of the exploiter changed. And unless and until we change our exploitative policies towards the farm sector, nothing is going to change. I am not saying that the loan waiver was not needed. It was a much-needed relief to our farm sector but unless it is followed up with a series of initiatives to ensure the farmer gets remunerative prices for his produce, the loan waiver won't help. The loan waiver in the current format doesn't do justice to dry land farmers. The land holdings in dry land areas are more compared to irrigated areas, and so, large chunk of farmers from dry land areas like Vidarbha, Bundelkhand, north Karnataka, Telangana, and so on, will be left out. Besides, the quantum of loan available to dry land farmers is much lower than to irrigated land farmers. The cotton farmer gets a loan of around Rs 5,000 per acre and the sugarcane farmer gets a loan of Rs 40,000 per acre. Ironically, the agrarian crisis is acute in these dry land areas, where the maximum number of suicides have taken place. So instead of putting the cap in terms of hectares, the government should announce a loan waiver to all and put a cap in terms of money. When the Prime Minister toured the Vidarbha, we had suggested that farm labourers should be included in the ambit of the pay commission. The pay commission should decide the wages for farmers just like it does for government employees, and then, the agriculture price commission should declare the minimum support price (MSP) for various farm products based on these figures. This will ensure dignified living not only to farmers but for the millions of landless labourers also. When India entered the World Trade Organisation (WTO), it had hoped the subsidies of farmers from Europe and the US would come down, which they haven't, so we should also increase the subsidies given to our farmers. The government also gives subsidies for exports like we are doing in the case of sugar. There is a need also to change the mindset of our media, political parties and government officials. Whenever the prices of farm produce start rising, the media starts crying foul about inflation, political parties jump on to the bandwagon and organise protests and then the government immediately reacts and bans the export of that particular product or announces imports of it to check the prices. But we never see the same thing happening when prices of items like steel or cement start rising. Don't they contribute to inflation? This year, by and large, has been a good year for the farm sector, cotton is getting a price of around Rs 2,700 per quintal, soybean around Rs 2,200, and wheat between Rs 1,200 and Rs 1,400. The government should ensure that farmers do not get prices below this level next year.
This is just the sample scale of admitted corruption in Finance Ministry, in the 2008 Budget document. Rest of the iceberg of corruption indulged in by corrupt ministries in UPA government can only be imagined. Hopefully, someone will document this loot from the central exchequer of magnitudes unprecedented in Indian history; colonial loot will pale into insignificance compared to this ongoing loot.

Title: Corruption in guise of exemptions

This refers to the news report, "Rs 278,644 cr foregone in 2007-08 due to exemptions" (March 3). The report reveals that more than Rs 278,000 crore is the total revenue foregone by the Union Government due to exemptions, of which Customs Duty exemptions account for about Rs 148,000 crore and Central Excise exemptions about Rs 88,000 crore during 2007-08.

These are disturbing figures. If one goes through the exemption notifications in the Customs and Central Excise Tariffs, their contents are even more mind-boggling. With so much revenue involved, these exemptions are the biggest source of corruption in the Customs and Central Excise Department. Union Finance Minister P Chidambaram has admitted that there are powerful lobbies behind these exemptions.

At the field level, these exemption notifications give rise to 'misdeclarations' by importers/exporters and assessees who give wrong information to get undue benefits of exemptions. Further, their interpretation is a big source of corruption because importers and exporters are willing to pay huge sums to get their interpretation accepted and the discretion rests primarily with the field staff.

These exemptions are also perhaps the biggest source of litigation in the department. Interpretation of these exemptions forms the bulk of the appeals before the Customs & Excise Appellate Tribunals and in the High Courts and the Supreme Court.

Many experts are of the opinion that instead of granting exemptions, the Government must lower the rates of the duties so that everyone is benefited and the number of exemptions whittled down drastically and granted only when it is necessary. Further, there should be complete transparency and the exemptions should have prior approval of a parliamentary committee after a full hearing and evidence, including the view of the CAG. If an exemption is to be granted in an emergency, post facto approval should be made mandatory.

From time to time, the Finance Ministry has promised to reduce the number of notifications; however, promises are always made to be broken. The benefit of doing away exemptions at the behest of lobbies are obvious: Corruption at all levels will come down drastically, as also will litigation.
Dear Sri Saba!

Surprising remarks!

My piece of advise to you will be that you stand on your own two legs and not on anyone else's.

Can't get you!!!! when did I stand with your legs?

I'm not that detailed in politics ..So I complemented you on your inputs. Does that mean I stand with your legs? If so my apologies.

You speak what you think is right and correct yourself on better advise.

What were you trying to convey? What thing I said wrong and where didn't I corrected or apologised when pointed?

In short, use your sense of discrimination. Chanting Gayathri will enable you to see the real from the unreal.

Too big words, why did you said this?

If you dont want me to interrupt your postings . Just say that.

All I wanted to say is this....

Democracy to India is similar to "Giving Flowergarland to Monkey" .

Dear MMji,

My apologies. Wrong posting at wrong thread or just wrong posting. Everything severs a purpose. However my apologies once again.


P.S: By the way you seem to spell peoples' names wrong such as Saba for Saab and KSR for KRS. I don't take it as an offense.

By the way 'Everything serves a purpose' is a loose translation of our saying "எல்லாம் நல்லதுக்குத்தான்." This is based on the belief that the ultimate doer is the 'Perfect One' and there can be no fault in His doings.
Sensex tumbles over 800 pts, Nifty crashes over 250 pts
Thursday March 13 2008 15:04 IST
NEW DELHI: Sensex tumbles over 800 points while Nifty crashes over 250 points at 3.15 pm on Thursday.

Indian shares had fallen 3 per cent in early deals on Thursday, spooked by falls in Asian markets and signs of a slowdown in the local economy, with banks under pressure as investors worried about global credit markets.

Shares in ICICI Bank, India's leading private bank, fell 3.1 per cent to 852.30 rupees and State Bank of India fell 3.3 per cent to 1,747.90 rupees.

The banking sector index fell 3.2 per cent.

"We cannot get away from the fact that the back of the market has been broken," said Deepak Singh, an independent analyst from Bangalore.

"Now, there is a new worry, the slowing Indian economy. I see a distinct possibility that market may start discounting a slower GDP growth," he said.

At 10:11 am or (0441 GMT), the benchmark BSE 30-share index was down 2.59 per cent or 417.93 points at 15,710.05, with 27 components in the red. It fell as much as 3.05 per cent in the first few minutes of trade.
Dr.Subramanian Swamy says: " Farm loan waiver will lead to heavy inflation".

Janata Party today said the farmers loan waiver announced in the union budget would lead to heavy inflation.

The Centre could be able to reimburse the money due for banks for the waiver only by printing additional currency, which would lead to heavy inflation, party president Dr Subramanian Swamy told reporters today.

He asked how the government would provide funds for the waiver of farm loans from tax receipts, when the total tax receipt was only Rs one lakh crore.

Even If the government would waive farm loans in instalments, it would not be possible to provide huge funds.

He also said the proposal for loan waiver was only adhoc and did not aim to remove the root cause of farmers problems.

On the Sethu Samudram Project, Swamy said if explosives were used for digging the cannal, it would destroy the environment there.

Can India afford to waste Rs.60,000 crores to bail out a sinking (and stinking) political party headed by an unpad foreigner in the name of aiding the peasants?

There are bad omens that the international banking system is under very severe strain. Only yesterday Bear Stearns Bank that had its share valued at $30.00 on Friday collapsed to $2.00 and was bought over by JP Morgan Chase approved at lightning speed by the Federals.

The effects of this sent shock wave throughout the world with leading exchanges losing a lot of points. India is no exception.

Sensex down over 1000 points on weak global cues

Monday March 17 2008 16:01 IST PTI
MUMBAI: The Sensex fell sharply by 1020 points on Monday following extremely weak global cues, Closing at 14740.12.

Investors were cautious and preferred to lighten their commitments anticipating continued negative trend in global markets because of troubled growth in the US economy which almost is heading for recession.

Asian markets were sharply lower by about 2.0 to 4.0 per cent.

Similarly, the National Stock Exchange's broad-based S&P CNX Nifty dipped by 242.70 points to close at 4503.10.
Everybody knows that it was Andrapradesh which elected the Congressmen instead of Telegudesam men in the last federal election that brought the Congress to power in New Delhi. Sonia therefore is doing everything to preserve this booty by the age old appeasement and bribing of sections of people at the cost of the citizens at large.

It�s raining sops in Andhra Pradesh
Tuesday March 18 2008 01:34 IST PTI
HYDERABAD: In yet another major sop ahead of elections, the Congress Government in Andhra Pradesh on Monday announced loan waiver for weaker sections, physically challenged persons, minorities and women amounting to Rs 1,690.60 crore and covering 43.84 lakh beneficiaries.

The waiver, up to a maximum ceiling of Rs 1 lakh, will be applicable to loans obtained by Scheduled Castes, Scheduled Tribes, backward classes, physically handicapped persons, minorities and women from various state-run corporations, Chief Minister Y S Rajasekhar Reddy said in the Assembly.

"Ours is a compassionate government, deeply committed to the welfare of weaker sections. The loan waiver is aimed at providing some relief to those who had taken loans from the corporations. This apart, we are also planning to increase lending to the poor," Reddy said.
Now, Sonia talks of the bigger loan waiver
18 Mar, 2008, 0350 hrs IST, TNN

NEW DELHI: Signaling the UPA government’s move to enhance the scope of the massive loan waiver announced in the Union Budget, Congress president Sonia Gandhi on Monday told in Maharashtra’s Osmanabad that the land ceiling cap for beneficiaries of the loan write-off package ought to be increased to allow more farmers to benefit from the measure.

Ms Gandhi, who was echoing her son Rahul Gandhi’s suggestions, said regions such as Vidarbha and Marathwada (of which Osmanabad is a part) had larger land holdings along with poor rainfall and noted that “benefits” of the waiver which is capped at 2 hactares for small farmers now ought to be “extended” to those in this farm distress zone.

“This issue (of extending the benefits) was raised in Parliament by some MPs, including Rahul Gandhi, and I hope that Prime Minister Manmohan Singh and minister P Chidambaram will take the appropriate steps,” Ms Gandhi said.

Mr Rahul Gandhi, talking on the Union in the Lok Sabha, had said that the land ceiling of 2 hactares did not “account for land productivity” and “excluded deserving farmers in poorly-irrigated areas”. Mentioning Vidarbha specifically, he had suggested that the government could consider making the land ceiling “variable” based on productivity.

He also asked for the “single cut-off date” of March 31, 2007 for to be changed to “localised cut off dates” so that farmers whose cropping cycles necessitated them to take loans after that date were not “unfairly penalised”. These suggestions were subsequently echoed by several Congress leaders in their speeches in Parliament on the Union Budget.

Significantly, Ms Gandhi’s comments on the subject come about 10 days after NCP chief and Union minister Sharad Pawar made similar demands at a farmer’s rally in Beed district. Ms Gandhi, however, did not refer to Mr Pawar in her speech.

A clear competition on between the Congress and NCP to claim for the loan waiver in Maharashtra but it is being played out at the level of state units of the respective parties.

“We felt the farmers are sad and a worried lot due to which the decision to waive the loans was taken so that four crore farmers benefit,” Ms Gandhi said. She also said Congress has always been in the forefront of doing justice to backward sections of society and listed the new initiatives in the budget for uplift of minorities, SC/STs, unorganised sector workers, anganwadi workers, senior citizens and women.

The Congress’ bid to reach out to farmers which began in full earnest before the budget is set to continue over the next two months as the party organises meetings and rallies at the district and the state level to spread the word about government’s policies for the ‘aam aadmi’, especially the farmer. As part of these efforts, Mr Rahul Gandhi on Monday attended a meeting of 200 elected Panchayati Raj members and farmers in the Capital to discuss ‘Panchayati Raj and the National Farmers Policy’.

Along with raising farmers’ issues, Ms Gandhi in her Osmanabad speech also made observations pertaining to Maharashtra politics. On the Vilasrao Deshmukh government in the state, she said it was adhering to the party’s principles of growth and development. The remarks assume significance amidst reports of leadership change in the state.


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123 will de-nuke; this will nuke

Friday March 28 2008 00:00 IST


IN the tumult over the farm loan waiver, a dangerous move in Finance Minister’s budget oration — that has the potential to nuke the Indian financial market — has gone totally unnoticed. It’s a month after the budget. Still there is not a word in the media about this dirty nuke. So ignorant those who count seem to be that the peril may be celebrated as a towering financial sector reform! The paradox is this: the subject drives away those who are not concerned with it; but the concerned are the ones who are getting the dirty bombs to target Indian economy!

Is it that serious? Yes, it is. Read on, but seriously. In para 97 of his speech the finance minister says, “I propose to take measures to develop the bond, currency and derivative markets that will include launching an exchangetraded currency and interest rate futures and developing a transparent derivative market with appropriate safeguards.” Shorn off all ornaments, the minister intends to allow trade in ‘currency and interest futures’ and ‘derivatives’.

For easier understanding here it is better to use one complex word — the ‘derivative’ —which includes futures, options, forwards and so on. Even one among the millions who listened to the minister would not know what are the new beasts, the derivatives, that would soon populate the Indian financial market, if the minister is not stopped. Why, even ‘experts’ have no great idea about derivatives. An expert global website on finance says that ‘politicians, senior executives, regulators, even portfolio managers have limited knowledge’ about derivatives. If this were so in the US, the birth place of derivatives, one can imagine the level of enlightenment here. A brief journey into the exotic world of derivatives is necessary at this stage. This will help drive home what the finance minister is proposing to get the country into.

Derivatives are the most dangerous instruments in global finance which is today more virtual than real. It is almost a drama in real life, a theatre. Derivatives are shadow financial instruments. As the story unfolds, the shadow has not only replaced the actual, but, has grown several times the actual. This is how the derivative works as compared to the actual. If one buys or sells stocks of Tata Motors, it is actual trade. But if one buys the option to buy or not to buy Tata Motors stocks, then it is a derivative trade. But the seller of the option to the buyer need not own the Tata Motors stocks and the buyer need not have full money. Is it anything other than wager? This transaction is linked to asset values. Derivatives need not be linked to asset values only. It may be linked to loans, like that a bank may turn into a single rated security its multiple loan transactions and sell the rated Asset Backed Security (ABS} in the market. This is a credit derivative. Likewise, betting whether stock prices or stock market indexes will go up or come down or whether interest rates will go up or come down or whether the rainfall will be normal or above or below are all integral to derivative trade.

To understand this new animal called derivative that has all, but, crippled the global economy, take the credit derivative. The sub-prime housing loan crisis in the US has shaken the world. For the benefit of those who entered the debate late here is some basic info. Sub-prime loan means loan given at less than prime interest rates. Normally creditworthy borrowers would get loans at less interest. In US, however, from around the year 2000, even those who would not deserve loans at more than normal rates, were given housing loans at sub-prime rates. Households were given loans without income check, without margin money for the loan. This led to huge home demands and that pushed up the value of the existing houses. Those whose home values went up were given loans on the appreciation. This was to make Americans to go the shopping malls and buy up cars, jewellery, and other luxuries. These loans were given by design, not by mistake, to revive the American economy that was falling into depression in 2000- 2001 as a result of the dot.com collapse and the terror attack on the US. The US Federal Reserve cut the lending rates to one per cent to facilitate sub-prime borrowing. The sub-prime loans by local banks were later bundled into large bonds of millions of dollars —some times even billions — as ABS, which is a credit derivative. Rated by rating agencies ABS were sold in global market. A more sophisticated form of ABS is known as Collateralised Debt Obligations (CDOs). Like ABS, CDOs are also credit derivatives. Thus the local loans of US were turned into global loans. Result? When sub-prime borrowers in US failed to pay up, the European, Middle Eastern and Asian banks which had bought the CDOs lost the money. So it became American loan mela at global cost! The European Central Bank had to lend something like $560 billions to banks in Europe to save them from insolvency. This is one example of derivatives and also what it can do.

The total of all derivative positions of banks as measured by the Bank of International Settlements (BIS) as of December 2007 is — believe it — $516 trillions or as converted into rupees 20,640 lakh crores! The derivative beasts have grown from $100 trillion in 2002 by five times in five years. This is the shadow or virtual economy, or the mirage. The actual economy is lilliputian as compared to the shadow. The shadow economy is worth more than ten times the actual global GDP ($50 trillion); some seven times the world’s actual real estate ($75 trillions); more than five times the world’s actual stock ($100 trillions). It is not the actual that controls the virtual economy. It is the other way round —the virtual, or the speculative economy controls, even overawes, the actual.

Worse, derivatives are off balance sheet businesses of banks. Result, the true liabilities of bank in which a depositor puts in his hard earned savings, or the true position of a corporate in which corporate in whose shares someone invests money, are not known at all.

Warren Buffet, the most celebrated US investor, said recently that derivatives are financial Weapons of Mass Destruction (WMD)! The man is no socialist. He is a free market capitalist. And identified as the richest man on this plant less than a month ago. He is a huge player in global finance that is dominated by derivatives and yet keeps away from derivatives. No one, including Chidambaram, can claim to know more about these derivative beasts better than Warren Buffet. Again, these beasts are not just financial WMDs. They are equally financial ICBMs which can hit from one continent at another just as the local subprime loans of US transformed into CDOs and nearly bankrupted many banks in far away continents.

Chidambaram welcomes these financial WMDs and ICBMs into Indian financial market with red carpet. The pink media will vouch this disastrous move as financial sector reform, liberalisation and globalisation! But the truth is: India is about to embrace the beast that Warren Buffet is terrified about. Yet, the whole nation is in the dark about this financial dirty bomb. QED: The 123 agreement will de-nuke India. The derivatives will nuke India’s economy. And that completes the square. Is a Karat or a Jaswant listening?
Loan waiver and agricultural investment

Public investments in agriculture are declining, and the annual increment to gross capital formation is now lower than in the early 1980s. This trend is the same across all States in India, not just the poorer ones. Unfortunately, the agricultural loan waiver can hardly be used to create these investments.

With the farmer having to repay his debt immediately after the harvest, he is trapped in a regressive market mechanism. Arindam Banik
Pradip K. Bhaumik

The Rs 60,000-crore agricultural loan waiver by the Finance Minister has generated widespread debate. The reason goes back to farmers’ debt-related distress and even suicides. If the issue is debt-related distress, one must ask why it is so. There is no guarantee that the farmers will not borrow the ensuing year. More specifically, long-term prospects are sacrificed at the cost of short-term gains.

It is established now that the farmer is generally required to repay his/her debt immediately after the harvest. This means the farmer is trapped in a regressive market mechanism in two ways. First, with no other means of repaying the debt, he/she is forced to sell the produce immediately after the harvest — quite often to the creditor or to his agent — probably at a pre-arranged price or in pre-decided quantities.

Second, the sale of crops immediately after the harvest means that the farmer probably receives less for his/her produce than what he/she could have obtained when the market prices stabilise. As more and more farmer-debtors wish to convert their harvest into cash, crop prices tend to get further depressed.

Act of commerce While all this is true of farmers, in general, the case of cash-crop farmers deserves special attention. Interestingly, those who go for cash crops such as tobacco, sugarcane or cotton are not typical small farmers. They are the ones with relatively large land holdings and risk appetite, for whom farming is a commercial operation. The anticipated incentives in the output market are the motivating factors for hard work as well as for high input costs. The results are, however, not always as expected.
During harvest time, the supply of crops often overshadows demand and, thus, prices go down. This is due to the pressure created by both formal and informal lenders for loan repayment, post-harvest. As a consequence, average input costs are sometimes higher, or just marginally lower, than the average revenue, leaving little or no cash surplus for loan servicing.

Small farms It is hard to generalise a small farm as one with not more than two hectares of land across the whole of India. Physical land under assured irrigation is much more productive than the area with no assured irrigation.

Thus, a small farmer with less land but assured irrigation may be financially better off than another farmer with much larger land holding but no assured irrigation.

Take the case of eastern India and some parts of the south. The basic unit for organising production in the rural areas is either the farm or the village, depending on how rural society is structured.

In this region, agriculture is characterised by small farms in alluvial lowlands; too many people on too little land; production largely for subsistence; and a heavy dependence on cereals and other food staples. Farming with simple handheld tools or ploughs pulled by animals is common. Many farmers are owner-tenants and tenants.

Rice, usually grown under wet conditions, is the staple food crop in these regions. Controlled irrigation facilities are poorly developed, yields are often low, and double-cropping (planting and harvesting two crops in one calendar year) is not universally practised. Although high-yield varieties of wet rice have been introduced since the 1960s, this has not increased production as predicted.

In northern India, irrigation schemes have helped stabilise annual yields and increase overall production, but the average rice yield per hectare in the mid-1990s was only about half that of Japan.
Nevertheless, Asian countries produce about 90 per cent of the world’s rice. China and India alone account for nearly 60 per cent of the world total.

Low productivity and water management The average rice yield is 2.9 tonnes per hectare in India. In comparison, the average rice yield (in tonnes per hectare) is 6.8 in the Republic of Korea; 6.2 in Japan; 6.3 in China; 4.3 in Indonesia; and 3.8 in DPR Korea.

The key issue is: Why has productivity remained so low in India, particularly in the eastern region, despite availability of modern rice technology? Experts argue that the above differences in yield are a result of poor water management. Irrigation, drainage and flood control investments can alter the water regime and, in the process, the plight of millions of small farmers. Together, they constitute the concept of water management. The high magnitude of poverty in this region is partly explained by poor water management.

Admittedly, achieving food security has been the overriding goal of agricultural policy in India. The introduction and rapid spread of high-yielding rice and wheat varieties in the late 1960s and early 1970s resulted in steady output growth for foodgrains.

Public investment in irrigation and other rural infrastructure and research, together with improved crop production practices, has helped significantly increase foodgrains production .

Declining investments However, the benefits of the Green Revolution are waning now. Public investment in agriculture is declining, and the annual increment to gross capital formation is now lower than in the early 1980s.
This trend is the same across all the States, not just the poorer ones. More interestingly, the increasing shares of total public expenditure on agriculture are allocated to input subsidies (on fertilisers, electricity, irrigation, and credit, for example), rather than to productivity-enhancing investments such as research and public investment in irrigation. The share of input subsidies in public expenditure rose from 44 per cent in the early 1980s to 83 per cent by 1990.

Private investment in agriculture has increased modestly in recent years, but is nowhere near enough to fill the gap caused by the decrease in public spending. Unfortunately, the agricultural loan waiver can hardly be used to create these investments.

(The authors are professors at International Management Institute, New Delhi.)
Few points to ponder:

1. In developed economies also, agriculture is heavily subsidized. In France, Switzerland and many other western coutries, mountains of butter are 'destroyed' to ensure that market prices do not plummet. So, in our country also, if inputs to agruculture is somewhat subsidized by the state, we should not begrudge the farmers.

2. 60 + % of our population is dependant on agriculture/rural economy. Productivity in rural economy can not increase unless mechanisation takes place in lieu of manual labour. This warrants the absorption of rural working population to get alternate employment in urban/indutrial sector. This can happen only if manufacturing sector grows at very fast rate. Right now, only the service sector is growing at a fast pace. But this does not create adequate job opportunities for unskilled/semi-skilled labour. For enticing dvveloped economies to invest in mfg. sector in India, what is immediately needed is lowering of 'entry' and 'exit' barriers. Point is - is anybody serious about LABOUR Reforms , the biggest stumbling block ?

3. Increase in agriculture output requires higher landholding sizes. In our country, land holdings are as such quite small and further inheritance laws do not help in land consolidation. In UK, the land goes to the eldest son of the farmer and thus , holding size remains unchanged. Is anything similar practicable here ?

4. Migration of rural labour to urban and industrial sectors - We are yet to mature into a tolerant society. With so much of noise being made about 'son of the soil' concept and hate campaign against migrant labour, are we expecting miracles to happen ?
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Loan waiver and Minority politics

Its heartening to see the emotional speeches being made by FM on loan waivers. And every political party is claiming responsibility for it and the opposition is asking for more.Approx 4 crore people are going to benefit from it.As far as I understand this is just an reimbursement to the banks against their current and future NPAs (some innocents would have paid the money if its not announced).Are all farmers in debt not able to repay? (Poor chaps if someone by mistake repaid it already.He has to sit in a corner and cry for days.)With the prices given outside , I dont think any major fall in most of the commodities.Leave that aside, what was the eligibility criteria to get those loans? What was the quality of people getting such loans?We have farmers like Amir Khans and Amitabh bachans . A one incident I would recall my friend saying one guy got 96lak loan waiver recently .He got that loan in the names of his labours working in his farm.
Just go to a PSU and ask 1 lak loan.You will come to know how hard its for tax payer to get the loan.Given this kind of waivers getting loans as a farmer would become a thriving business that encourages corruption.Its assured that in TN there would be a loan waiver every five years.So they give the money freely.To get that money you should have political links.Thats all.

What about other sectors? Ofcourse behind each NPA there would be a sad story.How are they going to respond to it?

Money is just money.I dont think in the market economy we cannot distinguish between money of a farmer and the money of an actor.Everybody has to make their choice.So its Govts duty to make this more profitable or bring alternatives to farmer.We need food.But we are not ready to pay 100Rs for a kg rice.Everything has its price.

When we address the poverty problem its fine. Assume if a labourer a farmer is buying a soap he is charged a service tax.You are using to give a waiver.If the issue is genuine its fine.Otherwise something wrong in the system.

Similarly the Sachar committee issue. I want to know how many UPA politicians living in Muslim area to get rid of discrimination. Our politicians dont have a self thought and want to imitate what the western world do.
Can the congress party or any party bring a budget saying 'We are addressing the problems of poor Hindus working in the temple'?If we start schools for providing lessons on Hindu philosophies will the Govt fund such institutions?If madarassa education is poor , why dont the Govt replace it with its own institutions and make the madarassa give their teaching only on the weekends?

A fundamental doubt in mind is , I suspect the Govt thinks some sections of the society may want to go apart from their party/India or cause troubles if they dont give more and more concessions year after year.
Who is Ruling us ?

Posted on April 17, 2008 by Venkat
Who is ruling India ?
Well, you will say, people. I will call that rather naïve and uninformed. For sometime, we have been reading that we are ruled by corrupt politicians. I disagree even here. So who’s ruling us ?

To answer this question, we should go to the time when we had elections. Did you see even one newspaper analyzing the polls not mentioning caste ? About a decade and a half back, I was stunned to see a newspaper like ‘The Hindu’ publishing caste wise population details of every single constituency in Tamilnadu and ‘analysing’ the possibilities.

If all the political parties know one thing in common, it is this. Caste-wise breakup of each constituency and the state and the country.

So you may ask, “Is casteism ruling us ?” No . You may again ask , “ Is the maority caste ruling us ?” . Again No. Then who ?

It is the so called backward castes comprising 30 to 35 % of our population is ruling us. For nearly twenty years, since V P Singh ascended the throne of Prime Minister, the backward communities sensed an opportunity. From then on, a coterie of small time parties, ably assisted by the self serving minorities, played one of the worst, most divisive politics that will put to shame even the British !

Indian population break up in block wise is thus;

Muslims- 14 %
Christians- 3.5%
Tribes - 20%
Forward castes(brahmins, Vysyas, some kshatriyas)- 30%
Other backward
Castes - 32.5 %

The OBCs can never contest an election and win on their own. So they devised a strategy. The golden rule was that the minorities should always be on their side. This makes up their block nearly 50 %. For a crumb, the harijan outfits always responded to these parties with their votes.

But there is a question. How did the OBCs across India united ? Simple. In different states they have different parties born specifically for them under the disguise of some sundry policy. In Tamilnadu, there are the Dravida parties, Karnataka has JD (s), Andhra has Telugu Desam, elsewhere the JD (U), the left parties and most importantly the Congress. They play different tunes in many states that one will be confused.

V P Singh- The first Divisive Politician at the Central Level:

It was the elitist Congress oustee and Lok Dal founder V P Singh who started the first act of dividing people on caste lines by introducing the Mandal Commission report. The report sought to give 50% reservation to the backward castes. It fanned casteist flames across India and was the start of the unmaking of the Indian Union.

Since then, slowly but steadily, OBCs consolidated their position with the help of fractured mandates in general and state elections. They were assisted greatly by Communists, the Chameleons.

There was another side to this. The so called forward castes, were totally alienated. They were so cleverly divided by these forces that they were simply accommodated in pockets of their strength by the OBC combine.

Can you see the chaos prevalent in Bharat today ? Pity, even the only nationalist party, the BJP is often on the wrong side of the casteist policy. Reason ? The OBC has penetrated BJP top echelons.

The extent of alienation of the other castes and the design of the OBC s was evidently displayed in a statement by the union minister of Railways , Mr Lalu Prasad yadav recently. He said , “ If I lost power in Bihar, only Nitish can come or people of our ilk. We will not allow any upper caste person to occupy these posts”.

As to their unholy alliance with the minority community they say that they are under threat. But when a party such as BJP was formed to protect Hindu interests, they were branded ‘communal’. On the other hand, since independence, the Congress or the communists always has electoral tie ups and even power sharing with Muslim and Christian outfits. But they never accepted nor given the title ‘communal’.

The situation in the seven north eastern states is very grim. You will notice that either the Congress or the Communists will be in power in those states. The Congress President, Sonia declared during an election rally there that if elected, the congress will rule by the tenets of the bible ! (apt words from a Christian lady)

This came to be called famously as “ Pseudo Secularism”. The role of the media in all this is very dubious. A report says that 75 % of English media in the country is controlled by Christian Church groups operating from America or Europe.

So you see the position. We are ruled by a section of the people who are against their own nationals, who are not afraid to betray the nation by aligning with terrorist friendly minority parties. They have ensured that there is no Indian left. Only sections with rigid casteist outlook rule the roost.

The result has been that many of the well intentioned people have been sidelined, some great brains have left the country and many were forced into complete oblivion. The classic example is the Brahmin sect. These patriotic and nationalistic people are one of the most oppressed in the country to such an extent that, they have completely disappeared from the public domain.

For many millennia they were teachers and priests for the entire population. You can see the downslide in education especially in the last three decades in spheres like Science. Even China has overtaken us in Scientific research which was once thought as impossible especially in the 1950s. Such has been the notoriety with which we drove every aspiring Brahmin out of the country.

Personally I see that the Congress and the other so called national parties have absolutely no strength to unite our people. The only uniting factor is our religion. We may see a turnaround in the mindset of Hindus and people will start uniting. But all this will be possible only by towering , selfless individuals.

Jai Bharat
Dear Sirs,

If this kind of fiscal management goes on, wouldn't the value of Indian Rupee goes down further. May be it will become like on of the african countries like Zimbabwe, or Indonesia where you have to give thousands of rupees to buy a loaf of bread.

[FONT=Arial,Helvetica,sans-serif]Mystery Indian analyst at Goldman spooks world economy
10 May 2008, 0104 hrs IST
Chidanand Rajghatta

WASHINGTON: They are calling him Arjun ‘‘Spike'' Murti, but his real middle name is Narayana, the supreme manifestation of the Hindu god Vishnu. Supreme he is, in the oil world. The little known Indian analyst at Goldman Sachs has become a cause cilhbre — a doomsday prophet — for his forecasts about oil prices, based on what he calls the ‘‘super-spike'' theory, predicated on rising demand for crude and limitations in refining capacity.

Murti, 38, now a managing director at Goldman Sachs, first came to the fore as far back as 2003-2004 when he predicted that oil prices would breach $80 a barrel when it was still in the 30s. He was sneered at. He was mocked again when he predicted in 2005 that it would double from $50 to $100 before the end of the decade. Last month, when he forecast that a barrel of oil could even touch $200, no one was laughing as it surged to $125 on Friday.

So little is known about Murti that it is driving the info-hungry media batty. Unlike many analysts, he does not appear on business television; he does not give interviews (he did not respond to emails for this story), and there are no pictures of him in the public domain.

Database searches do not provide much information (other than his dire forecasts) except that he lives in New Jersey with his wife Rita and sold a million dollar home couple of years back. And oh, he ran a 5km race in Summit, NJ in 2006, timing 24:49m.

He's the phantom analyst who's got the world market spooked. Some of what he is — a blunt-speaking, candid analyst — can be gleaned from his one appearance before the US House Committee on Energy and Commerce in July 2004, where he is introduced as a ‘‘managing director and senior equity investment analyst'' covering the oil sector at Goldman Sachs, his lair for nearly a decade.

In a trenchant testimony that clearly spoke to the crisis developing today, Murti basically tells US lawmakers that the country is up schitt creek, to use that euphonious euphemism, unless it weans itself away from gas-guzzling SUVs, particularly since it has not build any new refineries for the past 30 years and the administration offers few incentives to energy companies to do so.

‘'The lack of fuel switching options for transportation fuels and consumer preferences for large, powerful, and comfortable vehicles are the key reasons oil demand...Very simply, most Americans would rather own a large, gas-guzzling SUV and pay more for gasoline than an embarrassingly cramped but fuel-efficient Mini,'' he tells the Congressional panel.

‘'In our view,'' he continues, ‘'it would be logical for the US government to proactively implement policies that encourage a reduction in the growth rate of oil demand. We note that the cost of waiting will likely result in much greater economic damage over the long term than the short-term inconvenience of no longer being able to buy an inexpensive SUV as an example.''

Examples of logical demand reduction choices he suggests include *Disincentivize the use of SUVs for mass markets *Encourage market adoption of hybrid vehicles *Introduce incentives to use mass transportation in major population centres (e.g. tax city driving during certain hours of the day) etc.

Obviously, few one paid any heed in the US — and in India for that matter, which has blindly followed American fossil fuel-based auto culture. ‘'Maybe he's a big Buffy fan or something,'' one blogger sneered, referring to the vampire slayer in the film and TV series, when he first forecast the sharp spike in oil prices. Some conspiracy theorists suggested darkly that his predictions were aimed at helping energy majors rake in windfall profits.

But many in financial media backed him. ‘'Murti's report is a 30-page piece of logical analysis that was oversimplified,'' noted Fortune, dismissing the notion of insider trading as ‘'idiotic.'' Newsweek 's Fareed Zakaria noted as far back as 2006 that given the consumption patterns in US, which he called “gorilla of globas gas,'' Murti's forecast did not look bubbly anymore. Murti himself never once attributed the demand from India, which consumes 2.5 million barrels of oil a day (one third of China and one eighth of US) for the spike.

Today, most doubters of Murti's spike theory stand punctured as price for a barrel of crude moves up from looking like a basketball score to a Twenty20 total. As they moan about paying $3.65 a gallon at the pump, Americans could well be muttering Narayana, Narayana...[/FONT]
Janata party demands Chidambaram's resignation
Monday June 2 2008 14:31 IST PTI
CHENNAI: Janata Party on Monday called for resignation of Finance Minister P Chidambaram, alleging that he had not come out with "any solid measures" to tackle inflation.

Party president Subramanian Swamy told reporters here "Chidambaram has not come out with any solid measures to tackle inflation and therefore he must quit the Union Cabinet" on fuel price hike, he opposed any such move and called for cut on customs and excise duty on petrol to manage the situation as the oil companies are struggling with under-recoveries.

"After duty cuts, a litre of petrol can even be sold at Rs 25 per litre and the government can still make profits on every litre," he claimed.

When pointed out that the finance ministry was against duty cuts since that would affect revenue, Swamy asked the government to "cut down on its expenditure."

"Sick and loss-making public sector units can be sold off as that would help the government cut on its expenditure," he added.

Reacting to the appeal made by Chief Minister M Karunanidhi, calling for cooperation from the opponents of the Sethusamudram project for its implementation, he said that the project was "dead".
Did Chidambaram foresee the fuel price rise and its impact? Definitely Not!

UPA Govt fuels a big fire

http://newstodaynet.com/newsindex.php?id=8036 & section=5

Wed, 04 Jun, 2008,03:17 PM​
. The government on Wednesday hiked petrol and diesel prices by Rs 5 and 3 a litre and that of LPG by Rs 50 a cylinder, while sparing poor man’s cooking medium kerosene from any increase.

The Union Cabinet chaired by Prime Minister Manmohan Singh took a slew of measures to offset the surging global oil prices that had put the national oil companies under acute pressure.

. The increase in prices would be effective from midnight tonight, Petroleum Minister Murli Deora said. The price hike would help oil companies to earn Rs 21,123 crore more.

As part of measures, the government decided to take a burden of Rs 94,601 crore for which it will issue oil bonds to state-run BPCL, HPCL and IOC which were reporting a daily loss of over Rs 720 crore.

In addition, the oil producing PSUs like ONGC would shell out Rs 60,000 crore through discounts to state-owned oil refiners and marketing companies. Despite all the measures, there would still be a gap of Rs 29,000 crore, Revenue Secretary P V Bhide told reporters briefing about the decisions taken at the Cabinet.

The government also announced customs and excise duty cuts on petroleum products with immediate effect. These cuts would entail a revenue implication of Rs 22,660 crore for the remaining 10 months of this fiscal. Bhide said customs duty on crude, which was 5 per cent hitherto, has been abolished.

He also said petrol and high speed diesel (HSD) will attract customs duty of 2.5 per cent against the existing 7.5 per cent. Excise duty on these two petroleum products is reduced by Re 1 per litre. At present, petrol attracts excise duty of Rs 14.35 a litre and HSD Rs 4.6 a litre.

Customs duty on other petroleum products like ATF and Naphtha has been cut from 10 per cent to 5 per cent.
When asked whether States will also be told to cap sales tax on petrol and diesel, the Revenue Secretary said there is no move from the Finance Ministry side on this issue.

Petrol and diesel prices were last raised in February when the Indian basket of crude oil was at 67 dollars per barrel. Today, it is at 124 dollars per barrel - the same level as international crude prices which were trading at 124.01 a barrel in New York, down over $ 11 a barrel since its 22 May peak amid concerns of inflation in the US. Today’s decision followed week long meetings the Prime Minister had, including four where UPA chairperson Sonia Gandhi was also present.

PM’s take

Prime Minister Manmohan Singh will address the nation tonight to explain the rationale behind hiking petrol and diesel prices by Rs 5 and Rs 3 a litre, respectively, in addition to an increase of Rs 50 per cylinder of cooking gas.

The address would be telecast at 8.30 pm and follows a slew of measures decided by the Union Cabinet to tackle the crisis created by surging global oil prices that had peaked to over $ 135 a barrel.

BJP inflamed

BJP lashed out at the Government for hiking the prices of petroleum products saying a ‘directionless’ UPA has unleashed ‘economic terror’ on the nation.

‘This action is disastrous for the economy and all the claims made by the Prime Minister so far on the front on inflation has been proved to be a hoax,’ BJP spokesperson Rajiv Pratap Rudy told PTI.

He said the Government which has run out of ideas has now unleashed this economic terror on the nation by increasing the prices of petrol, diesel and cooking gas. ‘This decision is the last straw for the UPA government and the last nail on the coffin of the common man, whose interests it claim to champion,’ he added.

The Prime Minister’s ‘shallow’ claims of controlling prices have proved to be a hoax and the ‘Aam Aadmi’ (common man) is its first casualty, he said.

Rudy also ridiculed the Left parties opposition to the petrol price hike, saying the remarks of the Communists are ‘hypocritical’ as they are part and parcel of this decision.

Left parties to protest

Accusing the UPA government of burdening the common man by increasing fuel prices, the Left parties today announced a week-long agitation across the country against the hike.

Senior Left party leaders termed the fuel price hike as a ‘slap on the face’ of the common man and said it revealed the ‘anti-people’ policies of the Congress-led coalition.
'Soaring oil prices could trigger a global recession'
Sunday June 8 2008 11:16 IST AP
AOMORI (Japan): Japan's energy chief launched a meeting of ministers from the world's top industrialized nations on Sunday by warning that soaring oil prices could trigger a global recession if they're not checked.

The Group of Eight rich nations met in northern Japan with representatives from China, India and South Korea to discuss oil and gas markets, energy investment, energy security and climate change amid deepening concerns about the world economy.

Oil prices made their biggest single-day surge on Friday, soaring US$11 to US$138.54 on the New York Mercantile Exchange, an 8 percent increase. On the same day, the United States announced a rise in unemployment.

"The situation regarding energy prices is becoming extremely challenging," Akira Amari, Japan's trade and energy minister, warned his colleagues on Sunday. "If left unaddressed, it may well cause a recession in the global economy."

Five top energy consumers the United States, China, Japan, South Korea and India urged oil producers on Saturday to boost output to meet growing demand, while pledging to develop clean energy alternatives and increase efficiency.

World oil production has stalled at about 85 million barrels a day since 2005, while global economic growth boosted by spectacular surges in China and India has pushed demand to unprecedented levels.

Amari called for a strong message ahead of the G-8 leaders summit in Toyako, Japan, in July. The 11 nations gathered in Aomori account for 65 percent of the world's energy consumption and emissions of greenhouse gases.

"What actions we take to address the challenges that we face will have an extremely important effect in solving the global energy issue," he said.

It was unclear, however, what impact consumers will have without action by producers. The current president of the Organization of Petroleum Exporting Countries, Chakib Khelil, has said that the cartel will make no new decision on production levels until its September 9 meeting in Vienna.

The five nations meeting in Japan on Saturday agreed that the sharp surge in oil prices was a menace to the world economy and more petroleum should be produced to meet rising demand. They argued that the unprecedented prices were against the interests of both producers and consumers, and imposed a 'heavy burden' on developing countries.

The ministers also vowed to diversify their sources of energy, invest in alternative and renewable fuels, ramp up cooperation in strategic oil stocks in case of a supply shortage, and improve the quality of data on production and inventories available to markets.

The group, however, diverged over oil subsidies. The International Energy Agency has estimated that oil subsidies in China, India and the Middle East totaled about US$55 billion in 2007.

The United States, which has its own energy subsidies, urged countries such as China to lower its oil supports, which enable domestic consumers to enjoy cheaper gasoline. Subsidies shield consumers from higher prices, meaning consumption does not decline despite rising expenses.

But China and India, while signing on to a statement recognizing the need to eventually phase out such subsidies, argued that removing such supports quickly could trigger political and economic instability.

India is already facing such effects. The government on Wednesday hiked gasoline and diesel prices, triggering protests by angry consumers who blocked rail tracks and roads and shut down businesses.
When I read the above news item I was reminded of our friend from Canada and my thoughts went back to the last oil crisis when the opec was born.

Canada is a huge oil exporter and it supplies, believe me, 50% of the oil needs of the U.S. When the OPEC began to dictate the oil prices by restricting the supply all western countries that are wedded to the international price of oil began to feel the pinch. Canada the largest producer of oil in the western hemisphere was/is also wedded to the international price and so the Canadians began to see 'oil, oil everywhere but not a drop is cheap!' At that time Canada had a socialist Prime Minister Trudeau and he decreed that the oil consumed within the country would be less than the international price of oil. But there was a problem. The 'oil production' was a state subject though the price fixing was a prerogative of the centre. There were only two or three out of 10 or so states in Canada that were oil producers and those states didn't like their revenue slashed. So the war of nerves started. The State Chief Ministers of these oil producing states decided to stop the production! The Trudeau govt. had to import oil from Saudi Arabia at international price and sell within the country at subsidized prices. The oil producing states called it foul practice. I think the Americans intervened and brought peace.

kunjuppu can expand on this for he has lived through that era.

My point is that during the second world war the conflict between the U.S. and Japan were over the acquisition of oil fields in south east asia.

The Iraq war is primarily to take over the rich oil fields of Iraq. (As the state of affairs stand now the U.S. can no way afford to withdraw from Iraq and Barrack Hussain Obama is promising to withdraw if elected. I have the feeling he would be defeated.)

The American citizens can be easily manipulated by the rising oil prices and they will vote for McCain who would promise the return of sane oil prices. The democrats have no clue as to how they will tackle this huge problem because they are peaceniks and environmentalists. That is not going to fetch oil for the giant economy dependent on oil. Therefore I wouldn't be surprised if Israel, receiving blessing from Bush, bombs Iranian Nuke facility and precipitate a huge war again in the middle east.

China and Japan and India - the three giants of Asia are dependent on imported oil and so is the U.S. and many European nations. China particularly has an aggressive armed forces.

All of these point to seizing of oil wells world over by these strong nations. There are war clouds everywhere.

in the 1980s, with oil prices going skywards, trudeau established a national oil company similar to our indianoil, and try to subsidize domestic retail price. trudeau was pandering to his vote bank in quebec and ontario, at the expense of alberta, a western province.

oil in canada comes from oil tar sands. this is a pretty messy affair to extract the oil. with an artificial low oil price, the oil sands project closed overnight. the province of alberta, where the oil tar sands is situated did not recover till recently from the economic doldrums.

things have changed now. petrocanada is now a private company. oil sands are big boom projects now thanks to the high price of and continued expectations of international oil.

re war drums beating again in the world? who can say what will happen in the future? i hope not. it will be vicious, if it ever happens.

china is weak to tackle anyone outside its own borders. it has a vast hinterland of poverty, well hidden from the world. unlike india.

the u.s. has no stomach for foreign wars. they are getting clobbered in iraq. if mccain wins, there will be more bloodshed. obama is best bet for the u.s. to withdraw, gracefully, or otherwise.

thank you.
Thanks kunjuppu for throwing light on Canada for us.

You see Nehru kept this large state called U.P. which was his home state with large Muslim population and he kept it under wraps with his cronies in charge so it aways voted for him. There was no reason to keep U.P. that large but that served his purpose so why upset the apple cart? However he had challenges from the socialists from that state particularly from Jayaprakash Narain and his chelas.

Nehru had a large following in the rest of the country excepting Kerala, West Bengal, Tamilnadu and Punjab. Then the socialists began to have upper hand followed by the rise of parochial parties like the DMK and the TDP and the Shiv Sena and the Christian outfits in the North East. The Congress party then played the religious card of Muslims and Christians for its political ends thus permanently damaging the political fabric of India. The rise of Jan Sangh which later turned into BJP is the making of the Congress Party's ill advised political gamble. It is going to destroy the Congress Party.

I see the same divide and rule politics in Canada too. First playing the two big provinces against the west which is countered by the playing of the linguistic enmity. I believe this has resulted in many minority govts succeeding each other in the last little while. But atleast Canada is not surrounded my enemies like India has.
china is weak to tackle anyone outside its own borders. it has a vast hinterland of poverty, well hidden from the world. unlike india.
So also was Japan during the second world war but it had to attack the U.S. That is the dynamics of the war. China has the largest army and has lots of nuclear warheads and can coalesce an axis power world over. It is possible that the Russians may go with them given their enmity to NATO or might stand neutral in exchange for NATO not attacking or if it bargained hard to get back the few of the countries it had lost to NATO on the collapse of the Soviet Union. The Americans will end up defending only Japan and thankfully Australia and the New Zealand is safely far away! The Europeans and the U.S. would grab the oil fields in the middle east by the ruthless incineration of people in that part of the world. No need to give democracy and freedom to them! Such would be the drive of the war machine.

China will be much more weaker post-war.

the u.s. has no stomach for foreign wars. they are getting clobbered in Iraq. if McCain wins, there will be more bloodshed. obama is best bet for the u.s. to withdraw, gracefully, or otherwise.
Appearance is not real. Already the concern for iraq war among the U.S. electorate has receded to the second or third place. If at all the war in Iraq has hurt anyone it was Hilary Clinton. She lost to Obama because she did not defend her action in the senate for the war or that she made the mistake of voting for the war in the senate.

Now the anti-war had had its political prey it is on the recede. Pearl S.Buck once wrote: "You cannot teach philosophy to wolves." That holds good for the Americans. You cannot change their warmongering. I am predicting the certain defeat of Obama. Unfortunately the democrats have chosen a black man with the communist rhetoric and muslim background and very little history of sacrifice to the nation and a very low sense of belonging to the country. His core supporters have decried the U.S., cursed it be damned and called out for the blood of white men. I tell you Obama will never win.
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Sensex plunges 513 points in early trade
Monday June 9 2008 10:28 IST PTI
MUMBAI: Amid rising crude prices and inflation, the stock market on Monday plunged by 513 points in early trade on selling in heavy-weight stocks.

The Bombay stock exchange benchmark index, Sensex, fell 513.20 points to 15,058.98 points in the first five minutes of trade in line with weakening global markets.

The wide-based National Stock Exchange index's Nifty dipped below 4,500 points level by losing 141.15 points to 4,476.65.

Marketmen said reports of weakening trends in global stock markets on concerns rising crude oil prices, which had surged to all time high of USD 139.12 a dollar per barrel on Friday and an increase in us unemployment rate mainly dampened the trading sentiments here.

In the US, Dow Jones industrial average plunged 3.13 per cent while the tech-heavy Nasdaq composite fell 2.96 per cent.

Asian markets were also in negative zone. Singapore shares were trading about 2 per cent down while Japan's Nikkei-225 index fell more than 2 per cent in early trade.
AP reports...

Airlines have been struggling to contain costs this year as oil prices have skyrocketed.

Scores of startup airlines have gone out of business because of rising fuel prices. Several major carriers have also announced they are increasing fuel surcharges or adding a baggage surcharge, reducing capacity, deferring plane orders or shedding jobs to deal with rising costs.
Here is a news letter from the expert, sort of leftist........
The Chinese Govt. has recently echoed his sentiments on oil prices

NOTE: Independent research carried out by the ATCA Research and Analysis Wing (RAW) and the mi2g Intelligence Unit does not confirm that speculation is the primary cause for the present high price of oil.

The Lord Desai of St Clement-Danes writes:

Dear DK and Colleagues

Re: High Oil Price Bubble -- Driven by Speculation?

Between February and May of this year the oil price went from below USD 90 to USD 128 a barrel, a monthly growth of 9 per cent. If the rise continued at this rate, it would mean an unprecedented doubling in price every eight months. In recent days, after the price briefly touched a high of USD 135, there has been a bout of profit-taking. Although the price fell it did not drop much below USD 125 and it has rocketed again to USD 135.

The latest price rise has baffled many. What has happened to supply and demand to cause such a steep and sudden price rise? Gordon Brown, the British prime minister, said last week that "the cause is clear: growing demand and too little supply". China and India are buying more oil. Costs of exploration and extraction are going up. Nigeria and Venezuela are causing anxieties about supply. But these factors are not new. Nothing has happened in the real oil economy to justify such a sharp and steep rise in its price.

There is a growing feeling that the latest sharp upsurge in the price of oil may be a speculative bubble rather than an outcome of market fundamentals. The US Commodity Futures Trading Commission indicated last week that there may be "system risk" and George Soros, the veteran investor, in testimony on Capitol Hill on Tuesday, warned that commodity index funds, which treat oil as an asset rather than a commodity to be bought and sold for use, are creating a bubble.

Bubbles come to an end eventually but there is no guarantee that this will happen soon. The global economy is likely to be forced into a serious crisis if we do not explore the possibility that this is a bubble that needs to be burst quickly. The market can then resume its trend, depending on whatever the fundamentals dictate.

Much of the rise in oil price is the result of activity on the New York Mercantile Exchange, the energy exchange. This is activity by index funds and pension funds that are investing in oil futures, not for direct use but as financial assets for profit. That contrasts with activity by oil producers and consumers who buy and sell to smooth out fluctuations in price and delivery.

These financial institutions -- index funds and pension funds -- are neither buying oil nor selling it. They are passive investors in commodities. They have invested USD 260bn (EUR 169bn, GBP 133bn) in commodity markets, compared with USD 13bn just five years ago. Much of this money is in oil. The Goldman Sachs Commodity Index is heavily weighted by oil -- 78 per cent compared with less than 2 per cent for precious metals.

The point is that this paper market is not driven by the pressures on demand and supply but entirely by price expectations. An underlying situation -- which may well indicate a medium-run rise in oil price -- is being exacerbated by the bolstering of expectations that prices will rise even faster. It is this extra layer of price rise that is driving money into even the farther future contracts. There are futures contracts being bought and sold for 2016 at USD 138 -- only astrologers pretend that they can forecast that far ahead.

How large is the speculator activity? The total open interest -- the number of open or outstanding contracts for which an individual is obliged to the exchange because that individual has not yet made an actual contract delivery -- in the 2008 contracts on May 21 was 849.472 contracts, which equals 849m barrels, or nearly 10 times the daily crude oil production. The daily volume in the 2008 contracts on May 21 was 657.391 contracts, equivalent to 657m barrels or nearly 8 times the daily crude oil production.

This is a problem that requires immediate action. The best way to counter speculation is to make it less profitable. Step one is to protect the regular traders in the real oil economy (those who intend to close their positions by making or taking delivery of oil) and charge them a lower margin than those who have no intention of plying the oil trade. The purely financial traders must be made to pay a proper price for their speculation. This can be done simply by increasing the margin that they have to put down to trade as open interest, from the current 7 per cent to about 50 per cent.

It is up to the Group of Eight leading industrialised nations leaders to urge Nymex to implement this policy. It is in tune with free market logic and at the same time it makes oil speculation less profitable. There is no need for western governments to go down on their knees to Arab oil sheikhs, or to ration oil to the increasingly cash-strapped and angry consumers.

Best wishes
Meghnad Desai

Professor Lord Meghnad Desai -- Baron Desai of St Clement Danes -- (born 10/07/1940) is a British economist, writer and Labour politician. He is emeritus professor of economics at the London School of Economics and a Labour peer. His book, "Rethinking Islamism: The Ideology of the New Terror" [IB Tauris / Palgrave Macmillan] was published in December 2006. Born in Vadodara (Baroda), India, Desai grew up with his four siblings - two brothers and two sisters. He went straight to secondary school at the age of five, matriculated at 14, was an Honours student before he was 18, had a Master's degree before age 20, and a PhD at age 22. After he secured a Master's degree from the Mumbai School of Economics (then Bombay School of Economics), his parents wanted him to become an elite Indian Administrative Service (IAS) officer. But the qualifying age was 21, and he was still 19. In between, he won a scholarship to the University of Pennsylvania. He left India in August 1960. From Pennsylvania, where he completed his PhD in 1963, he served as an intern at the London School of Economics and got a job there in 1965. In 1989 he married fellow-economist Gail Wilson. Lord Desai has written extensively on a wide range of subjects. From 1984-1991, he was co-editor of the Journal of applied Economics. He has been both Chair and President of Islington South and Finsbury Constituency Labour Party in London and was made a life peer as Baron Desai, of St Clement Danes in the City of Westminster in April 1991.

In 2002, Lord Desai wrote a book Marx's Revenge: The Resurgence of Capitalism and the Death of Statist Socialism which states that globalization would tend toward the revival of socialism. He published a biography of Indian film star Dilip Kumar titled, "Nehru's Hero: Dilip Kumar in the life of India" [Roli, 2004]. He has described the book as his 'greatest achievement'. Examining Kumar's films -- some of which Desai has seen more than 15 times -- he discovers parallels between the socio-political arena in India and its reflection on screen. He discusses issues as varied as censorship, the iconic values of Indian machismo, cultural identity and secularism, and analyses how the films portrayed a changing India at that time. During the course of writing this book he met Kishwar Ahluwalia, his second wife who worked as an editor for this book. On July 20, 2004 he married Ahluwalia. Desai, then 64, and 47-year-old Ahluwalia, were both divorcees and married at a registrar's office in London. In 2005 he retired as Director of the Centre for the Study of Global Governance, which he founded in 1992 at LSE, where he is now Professor Emeritus. He is Chairman of the Trustee's Board for Training for Life, Chairman of the Management Board of City Roads and on the Board of Tribune magazine. He is an Honorary Associate of the National Secular Society.

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