A 42-gallon barrel of crude oil produces about 19.5 gallons of gasoline after refining. Oil is broken down into the following components: 19.5 gallons is used to produce gasoline, 9.2 gallons are used to produce distillate fuels (such as Heating Oil), 4.1 gallons go for the production of kerosene jet fuel, and 2.3 gallons are used in the production of residual fuels. The remainder is primarily for chemical production and lubricants.

Gasoline characteristics are also affected by other ingredients that may be blended into it, such as ethanol. Most of the fuel ethanol added to gasoline is made from corn grown in the United States. The gasoline performance must meet industry standards and environmental regulations that vary by location.

The world demand for gasoline averages about 20 million barrels a day. Of this, US consumes the most with an average daily demand of 8 million barrels a day. The demand increased to over 9 million barrels a day in 2007, but tempered to about 8.9 million barrels per day by December 2008. In 2007 U.S. refineries produced 90 percent of the gasoline used in the United States. Although the United States is the world’s third largest crude oil producer, less than 35 percent of the crude oil used by U.S. refineries is produced in the United States. Net petroleum imports (imports minus exports) accounted for 58 percent of total petroleum consumption. About 48 percent of net petroleum imports were from countries in the Western Hemisphere, 18 percent from the Persian Gulf, 22 percent from Africa, and 12 percent from other regions. Most gasoline is used in cars and light trucks. It also fuels boats, recreational vehicles, farm, construction, and landscaping equipment.

There are so many factors, which affect gasoline prices, many of which are unpredictable, such as natural disasters, changing governmental policies and evolving international relations. Uncontrollable environmental factors can significantly impact the price of oil and thus the price consumers pay for gasoline. Generally, the demand for oil in the form of gasoline rises during the summer, when automobile and air travel increase. Correspondingly, the price for gasoline tends to be higher during the summer months than it is during the remainder of the year, with other factors being constant. While this is not always the case, the price of gasoline is affected by the magnitude of demand and thus follows a somewhat seasonal fluctuation.

A future trading in gasoline is so popular, now gasoline futures are globally traded in New York Mercantile Exchange and Intercontinental Exchange.

The commodity market regulator Forward Markets Commission (FMC) has cleared Multi Commodity Exchange’s (MCX) will launch futures trading in gasoline.

• Symbol: CU
• Density: 8930 kg/m3
• Melting point: 1083°c
• Available in all forms including sheet and strip
• Durability: Over 700 years
• 100% recyclable with no loss of properties

Some Amazing facts about copper

Ø Copper is the only metal other than gold that has natural color. Other metals are either gray or white.

Ø Copper does not corrode, rust, or damage easily.

Ø The Statue of Liberty is covered with 200,000 pounds of copper sheeting.

Ø In January 2000, the US Mint began production of the new “Golden Dollar Coin” which is made of 88.5% Copper.

Ø A Boeing 727 airplane uses 9,000 pounds of Copper.

Ø A car in the 1970s used about 35 pounds of copper. Now, 50 to 80 pounds of copper will go into one automobile.

Ø Copper ranks third in world metal consumption after steel and aluminum. It is a product whose fortunes directly reflect the state of the world’s economy.

Ø Copper ranks third in world metal consumption after steel and Aluminum.

Introduction

Copper is a reddish brown nonferrous mineral, which has been used for thousands of years by many cultures. The metal is closely related with silver and gold, with many properties being shared among these metals.

Characteristics of Copper

Ø Copper is valued for strength, ductility and ability to conduct electricity and heat.

Ø Copper is an essential component of energy efficient motors and transformers and automobiles, transporting water and gas.

Ø Copper is also used in power cables, either insulated or uninsulated, for high, medium and low voltage applications.

Ø Copper is creep and corrosion free metal.

Copper: Natural, Recyclable and Essential

Copper occurs naturally in the environment in a variety of forms. Copper is one of the most recycled of all metals. It is our ability to recycle metals over and over again that makes them a material of choice. Recycled copper (also known as secondary copper) cannot be distinguished from primary copper (copper originating from ores), once reprocessed. Recycling copper extends the efficiency of use of the metal, results in energy savings, and contributes to ensuring that we have a sustainable source of metal for future generations.

Copper also occurs naturally in humans, animals, and plants. Organic life forms have evolved in an environment containing copper. As a nutrient and essential element, copper is vital to maintaining health. Life sustaining functions depend on copper.

HISTORICAL IMPORTANCE

Archaeological evidence indicates that copper was used as far back as 10,000 years ago in western Asia. During the prehistoric Chalcolithic Period, societies discovered how to extract and use copper to produce ornaments and implements. As early as the 3rd-4th Millennium BC, copper was actively extracted from Spain’s Huelva region. Around 2500 BC, the discovery of useful properties of copper-tin alloys led to the Bronze Age .It has been documented that Israel’s Timna Valley provided copper for the Pharaohs. Papyrus records from ancient Egypt reveal that copper was used to treat infections and sterilize water. The island of Cyprus is known to have supplied much of the copper needed for the empires of ancient Phoenicia, Greece, and Rome.

While the Greeks during Aristotle’s era were familiar with brass, it was not until Augustus’ Imperial Rome that brass became abundantly used. In South America, the pre-Columbian Maya, Aztec, and Inca civilizations exploited copper, as well as gold and silver. During the Middle Ages, copper and bronze flourished in China, India, and Japan. Copper coins have also played an important role in the history as a medium of currency. The earliest instance found of copper being used as a currency was in the form of lumps in the 6th century BC by the people of Italy. The shape of copper lumps were molded to coins with the invention of new copper alloys. Rulers like Julius Caesar and Octavianus use to have their own coins having their own symbols. This shows that copper has ever been a prominent contributor to the all of the various aspects of history, culture, technology and medicine and is still used extensively.
It is a ductile metal with excellent electrical conductivity, and finds extensive use as an electrical conductor, heat conductor, as a building material, and as a component of various alloys. It occurs in various minerals on earth and is also forms part of a lot of alloys.

The discoveries and inventions in the late 18th and early 19th Centuries by Ampere, Faraday, and Ohm propelled copper into a new era. Demonstrating excellent electrical conducting and heat transfer characteristics; copper played a pivotal role in launching the Industrial Revolution.

Indian Scenario

India is not a major producer of copper ore but it produces the refined form of copper. It contributes to about 3.5 to 4% of the world’s total production of copper that sums up to a figure of 6 lakh tons. India is indulged in importing copper ores from the ore exporting countries of the world and extract copper out of them as there is a shortage of copper mines in the country. The production of copper in India is dependent on these imports only. The size of Indian Copper Industry is around 4 lakh tons, which as percentage of world copper market is 3 %. Birla Copper, Sterilite Industries are two major private producers and Hindustan Copper Ltd the public sector producers.

Copper goes into various usage such as Building, Cabling for power and telecommunications, Automobiles etc. Two major states owned telecommunications service providers; BSNL and MTNL consume 10% of country’s copper production. Growth in the building construction and automobile sector would keep demand of copper high.

India’s Primary copper consumption increased 5.9% in FY2005 to 0.27 mt. Consumption increased 6% during FY2006 to 0.29 mt. Between FY2004-06, consumption has increased at a 3-year compound average growth rate (CAGR) of 4.8%. The total copper usage, including recycled scrap, is estimated to have increased from 0.335 mt in FY2004 to 0.386 mt in FY2005 and to 0.413 mt in FY2006. India’s copper consumption is expected to grow at around 8% per annum in the medium-term driven by growth in key end-use segments such as electricity, consumer electronics, industrial machinery and equipments, and construction.

Global Scenario

Economic, technological and societal factors influence the supply and demand of Copper. As society’s need for copper increases, new mines and plants are introduced and existing ones expanded. Land-based resources are estimated at 1.6 billion tons of copper, and resources in deep-sea nodules are estimated at 0.7 billion tons.The global production of refined copper is around 15 million tons.

The major copper-consuming nations are Western Europe (28.5%), the United States (19.1%), Japan (14%), and China (5.3%). Copper and copper alloy scrap composes a significant share of the world’s supply. The largest international sources for scrap are the United States and Europe.
Chile, Indonesia, Canada and Australia are the major exporters and Japan, Spain, China, Germany and Philippines are the major importers.

MAJOR COPPER PRODUCERS

USES OF COPPER

§ Electrical: Copper is the best non precious metal conductor of electricity. Copper is used in power cables, for different voltage applications. Copper’s exceptional strength, ductility, and resistance to creeping and corrosion, makes it the preferred and safest conductor for building wiring.

§ Electronics and Communications: The introduction of optical fibre in communication trunk lines has led to an increase in demand for copper. Copper continues to be the preferred carrier for the last mile or segment. Furthermore, domestic subscriber lines, wide and local area networks, personal computers and other hardware all require copper and copper alloys.

§ Construction: Copper and brass are the materials of choice for plumbing, taps, valves and fittings. The use of copper doorknobs and plates is also very common in building.

§ Transportation: All major forms of transportation depend on Copper to perform critical functions. Copper-nickel alloys are used on the hulls of boats and ships to improve fuel consumption. Copper’s superior thermal conductivity, strength, corrosion resistance, and recyclability make it ideal for automotive and truck radiators. Today’s average size automobile contains about 27.6 kilograms of copper and a Boeing 747-400 contains 4,000 kilograms.

§ Industrial Machinery and Equipment: Due to copper’s durability, machinability, and ability to be cast with high precision and tolerances, copper alloys are ideal for making products such as gears, bearings, and turbine blades. Copper’s superior heat transfer capabilities and ability to withstand extreme environments makes it an ideal choice for heat exchange equipment, pressure vessels and vats.

Industrial production VS Copper consumption

As depicted in the figure above, India’s copper consumption has increased with increased industrial production. Although copper demand stagnated in the early-2000s because of decline in demand from the telecom sector, demand has increased at a healthy rate during FY2004-06 because of a significant increase in the automotive sector and buoyant construction activity. Further, as depicted below, annual growth in copper consumption is related with annual growth in industrial production.

Commodity Currencies- Effects of a strong and weak US Dollar

The chart above, illustrates both a commodity currency effect and a metals vs. US Dollar hedge. Australia, Canada, South Africa and New Zealand are still seen as commodity countries. Their export mix of agriculture, precious metals, gold, iron ore and base metals provides an ideal investor tool to bet on both commodities and US $ weakness. The chart for the Australian dollar vs. the copper prices shows a very high degree of correlation. Obviously there are times when the currency leads the way or vice versa but the relationship is undeniable. The same relationship would be true if we replaced copper with a basket of commodities. The majority of world-traded commodities are priced in US dollars and consequently market forces do impact national currencies in countries where a significant proportion of export revenue is generate from commodities itself. In the simplest sense if commodity prices are rising, then the commodity producing country should benefit and in turn the nation currency gets stronger vs. the US
Dollar. Because of this natural reaction investors do, and also currently are, using commodities as hedge against US dollar weakness. Thus, we have seen with a high degree of correlation the LME metals complex moving higher in reaction to foreign exchange markets pushing US dollar values lower.

Demand and Supply

Demand
Between 1900 and 2000, copper demand grew from 500,000 tonnes to around 13,000,000 tonnes, with growth accelerating since the 1950’s. With some many widespread uses it is not surprising copper demand keeps growing and now with China, India and many other developing countries starting to industrialise and urbanise, demand is likely to grow from strength to strength. Per capita demand for copper rises as GDP per capita rises. The large populations of China, India, Eastern Europe and South America are all consuming less than 2kg per capita – this is a huge indicator of what lies ahead for copper demand.

India produces approximately 650,000 tons of refined copper per annum and consumes nearly 290,000 tpa. The rest is exported.The demand is likely to grow by 7-8 % over the next few years, owing to the growing demand from the electronic equipments, wiring & telecom sectors. The global usage of refined copper is expected to be approx. 17.16 million metric tons for 2006, up about 5.4%.The consumption is slated to rise approx 5% in the year 2007. Consumption growth will be mainly driven by Asia, EU and the US. Global mine production is expected to be nearly 16 million tons in 2007. This will be on the back of ramping up operations at the existing mines due to availability of better facilities like equipments.

Supply
India produces copper from the imported copper ore that accounts to around 6 lakh tons of production. This production level is contributes to a mere 4% share in the total copper production in the world. Indian market is divided into three parts i.e. primary and secondary. Primary segment comprises of the producers that convert copper ore into refined copper.

Market influencing factors of Copper

Ø Price fluctuations of copper in London Metal Exchange.
Ø Production level of copper in the world.
Ø Growth prospects of the major copper consuming countries of the world.
Ø Growth prospects of the various consuming sectors in the market.
Ø Inventory Levels at LME, Comex and Shanghai Warehouses.
Ø Smelter capacities around the world.
Ø Economic growth of China and the US, especially from the housing, construction and electronic and Telecom sectors

International trade in Copper

Copper is traded around the world. Producers store it in warehouses until it is sold and shipped to the buyer. The price changes daily, depending on the supply of copper and the demand for copper. The principal place where the trading takes place is in London, at the London Metal Exchange. There, copper sellers try to find a buyer who will pay the highest price for shipment at a certain time, while buyers look for the lowest priced copper. Other metals can substitute for copper in some uses. For example, Aluminum may be used in electrical equipment, automobile radiators and refrigerator tubing. Titanium and steel are used in heat exchangers. Steel is used for artillery shell castings. Plastics substitute for copper in water pipe and plumbing fixtures.

CONSUMPTION OF COPPER IN CHINA

China has now developed to be the world largest country for Copper consumption, processing & manufacture and even for copper primary products export. The year of 2005 witnessed a growth of world copper ore and refined copper in output, reaching 14.98 million tons and 16.34 million tons respectively, both up 3.1%. Meanwhile, China also made a great progress in Copper output and consumption in 2005. The output amounted to 2.53 million tons, increasing by 23% year on year.

Copper industry has experienced a rapid development but still cant satisfy the demands. In 2005, only 73.7% of refined copper can be self-supported, so 1.082 million tons of refined copper and 68,000 tons of copper alloys had to be imported. The supply-demand gap and shortage of raw materials resulted in the rise in copper price. The average price rose 26% to RMB 35254 per ton at home in 2005 while that in the international market increased by 28.4%. All these factors accelerated the growth in profit and investment in domestic copper smelting industry, each up 92.4% and 130.2%.

In the first half of 2006, Chinas copper products totaled at 2.4232 million tons, increased by 7.99% compared to the same period of 2005. As the domestic price was lower than that in the international market, the total imports of copper dropped by 43.7% to 389,560 tons over the same period of 2005, among which 65,521 tons of refined copper were imported in June, down 52.3% over June 2005.

After 26 years of development since reform and opening policy, China national economy will still remain a rapid growth in a long run and so does Copper consumption due to the potential drives from three industries including power, appliance and construction.

According to nearly 20 years of statistics on copper raw material import structure and average copper consumption and growth, the copper consumption in China will be expected to keep growing at an average rate of 5%-10% in 2006-2010 and then reach a peak in 2015-2020.

Factors to watch for Copper in the year 2008

Ø China
China, the growth engine for economic growth around the world is already showing some signs of fatigue. The Chinese authorities have been trying their best to bring about a soft-landing and cool down the economy since 2005. While their measures of curbing credit and hiking rates has not worked as well as they would have expected, it is now showing signs of lag effects working their way through. The markets have been working on 9.5-10.0% GDP growth projection for China. Any slowdown in the USA and other markets will only hurt Chinese growth more. Also, while they’ve been importing all the raw materials and we all know how much their prices have risen in recent years, it is very easy to understand it will be increasing the cost of living for the Chinese. Inflation will bring about a nasty surprise to any optimistic projections for their GDP.

Ø Housing Sector
The US housing sector has been another source of fuel for the rally in copper prices in recent years. Signs of slowdown are now quite evident and the Fed chairman has introduced the word ‘significant’ to his outlook on the slowdown in the US housing sector. This can add the weight on copper prices and will take copper prices lower as we head into 2007. Similar slowdowns in housing sectors of other countries in Europe, Middle East, and Asia can also be expected to further curtail projections for demand of copper.

Ø Monetary Tightening
Central banks have stuck to hawkish views and monetarism has begun to influence global policy makers once again. While the global markets have seen incredible amounts of funds being released for the last decade or so (commencing from the Mexican Crises in the mid-90’s), we’re now entering an era where a increased monetary tightening can be seen from the central bankers of the world. Any tightening is going to cause collateral damage in commodities as well. This will impact Copper from two sides. First, the real sector (industry) will face lower demand owing to rising cost of funds and second, the financial sector (speculators and investment funds) will find it increasingly difficult to fund their long positions in commodities. This will be negative for the outlook on the price of copper and other base metals.

Ø Industrial Sector
After the gigantic rally in Copper prices, it has become increasingly difficult for manufacturers of industrial and consumption goods to pass-on the prices to the end-user. As history has repeatedly taught us, business will always find a cheaper alternative/substitute when prices go up alarmingly. While substitutes are one issue, business is already working its way to find other alternatives. One glaring example that has come to our attention is that the cable industry has begun reducing the amount of copper that is used in their cables. Since conduction occurs mainly at the periphery of the conducting media, some cable manufacturers have been busy cutting copper usage by using it only on the periphery rather than using it in complete. When the industry has started resorting to such alternatives, we need to adopt a cautious outlook for the price of the underlying commodity.

Ø Inflation
Inflation numbers in many economies have moved above comfort zone for central bankers. The US is seeing higher inflation, Japan has certainly moved out from deflation, China, India, Eurozone, Asia-Pac have all been throwing up rising inflation numbers. While prices of commodities have been on an incline since 2002-03, so far we have seen that has caused no damage to global demand and economic growth. However, constantly rising prices extended over time can surely put a spoke in the wheels of global growth. Rising wages are good for some time as consumers get more money to spend, but while that is good for consumables, it has the potential to cause a dent in the Industrial and capital sector. Rising wages and commodity prices mean rising cost of production and increasing capital outlay for capital projects. What is a threat to capital projects and investments is a threat to demand for copper as well.

Major trading centers of Copper

Ø The London Metal Exchange (LME)
Ø New York Mercantile Exchange (NYMEX)
Ø The Shangai Exchange
Ø Multi Commodity Exchange (MCX)
Ø National Commodity and Derivatives Exchange (NCDEX)
Ø National Multi Commodity Exchange of India. (NMCE)

Conclusion

In India the users segment such as winding wire, power cables, transformers industry and continued increased export of down stream products supporting higher Deemed Export sales have enabled the copper producers to report high production growth Other Segments help in expectation of slight recovery in the domestic demand. Further, increased exports of downstream products from India continue to support higher Deemed Export sale. India’s copper demand is expected to increase at an annual rate of 7-8% per annum over the short-term. India is expected to emerge as a potentially large consumer of copper. India’s population exceeds 1.1 billion, and is expected to eventually surpass that of China. India is attempting to substantially expand its electric power generating capacity to reduce the frequency of power outages and provide the basis for strong economic growth. The government has targeted capacity increases of 100,000 MW over 2002-12. Thus as such, copper consumption in India is forecast to grow strongly.

Outlook

Copper market is expected to continue to witness strong prices for next couple of years, thanks to extremely low inventory, supply disruptions helping to maintain tightness and continuing robust demand. A large number of supply disruptions due to strikes, mine production problems, equipment delays and lower ore grades are cited as factors for the bullish view on prices. As a result, the refined market could swing into deficit in the current year. Their calculations suggest that market stocks are unlikely to return to reasonably comfortable levels before 2010.
Copper is almost reaching the peak of the cycle on account of strong GDP growth, as well as by being aided by very strong Chinese demand. Strong Chinese demand will help offset a US economic slowdown and supplies will continue to be constrained by a lack of “meaningful” new production capacity.. Global demand for copper is healthy and supply will remain tight, keeping stockpiles low compared to historic averages. A five-year rally in metals has boosted profits at mining companies and fueled a record amount of mergers and acquisitions in the metals industry.

The Long-term fundamentals still remain encouraging. While supply will be higher in coming years, demand will keep growing as well. The telecom and housing sectors in will keep creating demand for the metal like it was in the past. WE REMAIN BULLISH ON COPPER PRICES SEEING THE UPCOMING DEMANDS FROM VARIOUS COUNTRIES.

GlaxoSmithKline Pharmaceuticals Limited (GSK Pharma), incorporated in 1924, is a pharmaceuticals company with the product portfolio of Prescription Medicines like anti-infectives, dermatology, gynaecology, diabetes, cardiovascular disease respiratory diseases etc. and Vaccines for the prevention of hepatitis A, hepatitis B, invasive disease caused by H, influenzae, chickenpox, diphtheria, pertussis, tetanus and others. With opportunities in India opening up, GSK India is aligning itself with the parent company in areas such as clinical trials, clinical data management, global pack management, sourcing raw material and support for business processes including analytics.

INVESTMENT RATIONALE

§ GSK Pharma has received approval from the USFDA for Requip XL tablets, in the strengths of 2 mg, 3 mg, 4 mg and 8 mg, used for the treatment of idiopathic Parkinson`s disease.

§ GSK Pharma has announced a collaboration with Japan based Astellas Pharma for exclusive rights for the latter`s injectible anit-fungal agent namely, Micafungin in the India market.

§ Compared to a 53% fall in the Sensex, GSK’s stock has logged a price appreciation of 3%. This makes it an attractive defensive bet for investors in the current uncertain times.

§ The company’s bias towards mass-market products, strong brand equity and a rich product pipeline have helped it to become one of the top three players in the domestic pharma market.

§ GSK has been in a transformation phase since the past couple of years. It divested two of its non-core businesses – animal healthcare and fine chemicals – in ‘06 and ‘07, respectively. The company has recently re-organised its business units to focus on three major areas of mass-market products, vaccines and chronic therapy products.

§ The company plans to tap growth in acute therapeutic segments at lower levels of the pyramid as well as semiurban areas and small towns. It also intends to grow its chronic therapeutic product portfolio, primarily supplemented by in-licensing products from other companies.

§ It is also de-risking its business by reducing emphasis on price-controlled products and focusing on priority products, which are nonregulated products outside price control. In ‘00-01, price-controlled products constituted 40% of GSK’s product portfolio. This figure has now come down to 27%. The company is also bullish on its vaccines business, which currently contributes 11-12% to its topline. GSK is present in all types of vaccines, and this business segment is growing at 15% p.a. Riding on its reputation, the company is focusing on hospitals to tap institutional business. It is also looking at in-licensing seriously to enrich its product pipeline.

§ Currently, revenues from in-licensing account for just 2-3% of the company’s total revenues. GSK plans to increase this to 5-6% in 2-3 years.

§ GSK is conservative in its finances and has been debt-free. It has also been consistently rewarding its shareholders with high dividends. In the past five years, its dividend payment per share has jumped by over five times to Rs 36 per share in CY07, against Rs 7 per share in CY02. Sales have seen a CAGR of 8.2% over the five-year period ended December ‘07 to Rs 1,602.2 crore. Net profit (adjusted for extraordinary items) posted a CAGR of 23.5% to Rs 365.2 crore during this period. GSK has been steadily increasing its operating profit margin (OPM) over the past five years; its OPM for CY08 was 31% – much higher than that of most domestic pharma companies.

§ The company expects to break into double-digit revenue growth by CY10. Assuming that GSK maintains its growth in sales and profits, its valuations will be fairly comparable with that of its peers. GSK is a classic case of a defensive stock. Investors interested in steady capital returns, along with consistent dividend income, should accumulate the stock at its current price.

With the country’s largest development financial institutions (DFIs) like ICICI and IDBI having been converted into banking entities, the term DFI has lost its relevance in the country. Institutions that today have replaced them in playing a vital role in long-term financing and project financing are the NBFCs, which have their relative specializations, for example, HDFC (mortgage loans), IDFC (infrastructure loans), PFC, REC (power project finance) and Mahindra Finance, Shriram Transport (auto loans). The trend of segmental monopoly is now changing with banks entering long term finance and FIs also meeting the medium and short – term needs of the business masses. NBFCs are now recognised as complementary to the banking system capable of absorbing shocks and spreading risks at times of financial distress. The RBI also recognises them as an integral part of the financial system and is trying to improve their credibility in the financial sector

Higher penetration, per capita consumption, increasing population base, and rising household income continued to drive the growth in the FMCG sector in FY08. The Rs 700 bn FMCG sector grew by 12% YoY in 2007. Rural regions, where nearly 70% of India’s population resides, accounted for 34% of the off take for FMCG products. Since urban regions are already matured, the rural region is expected to be the key growth driver. In urban areas, introduction of newer, convenience and higher end products propelled the growth. However, concerns with respect to the increasing competitive environment, input cost pressures and infrastructure bottlenecks continued to worry.

The importance of the tourism and hospitality industry for the Indian economy is apparent. As per WTTC, Indian tourism demand will grow at 8.8% from 2004-13, which would place the country as the third-most rapidly growing market in the world, after Montenegro and China. However with tourist arrivals of 4 m as compared to China’s 45 m, Singapore’s 7.5 m and Spain’s 55 m, the number is very small amidst a huge supply crunch. In the long term, for the growth of the industry to be sustained, issues like poor infrastructure, high levels of taxation need to be solved. Land development, less of paper and legal work, faster execution is needed to meet the growing demand. Adding rooms at a faster pace would also stabilise the room rates and not have a negative effect on potential demand in the future.

The Indian Entertainment and Media industry is projected to grow from an estimated Rs. 437 billion to Rs. 1 trillion in 2011, translating into a cumulative growth of 18 percent over the next five years. The Indian economy continues to perform strongly and one of the key sectors that benefits from this fast economic growth is the E&M industry. It also grows faster than the nominal GDP during all phases of economic activity due to its income elasticity wherein when incomes rise; more resources get spent on leisure and entertainment and less on necessities.

There is a gap between the Energy requirement and availability, which is shown by above figure and this gap is increasing showing the rise is demand compared to supply. The demand is increasing due to increase in disposable income and the increased standard of life. Lot of capital goods and infrastructure companies are entering into power generation and/or distribution directly or through joint venture like Crompton Greaves, Larsen and Toubro Ltd., GVK Infrastructure etc. This will enhance the existing capacity and achieving the target of capacity addition in 11th plan.

Retailing in India is gradually inching its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping. India is the second largest consumers of whisky after the United States. However, India has the large opportunity for exports of wine, considering the willingness of western aficionados to try out different types of wine.

The Indian IT services sector has been in the doldrums since the start of FY2008 with the sector under-performing the market. The appreciating rupee and the worries of a slowdown in the US economy has impacted the performance of the sector.

However there has been a spring in the stride of IT industry. The companies’ focus is now changing to higher end services. They are now shifting their attention from the current services to more innovative products and services. Not only that but also the already existing companies where the investors are finding value and segregating them from the traditional IT-ITES players are at added advantage. These are companies that either have a domestic focus or are in the niche segments or are product focused or are benefited by the egovernance initiatives.

Here is the rationale, and some tips, for doing so, if you agree.

ZIG WHEN THEY ZAG “If your competition is busy nursing their recessionary wounds, then you should become aggressive in marketing yourself and your products,” argues Morebusiness.com, a Web site that describes itself as a “one-stop resource Web site for entrepreneurs.”

By increasing spending when your competitors are cutting back on theirs, you will have a chance to increase market share and be much better positioned to be profitable when the downturn ends.

HIGHER PRICES On her blog, smallbusinessboomers.com, Jean Murray, a small-business consultant, discusses the arguments on whether it is a good time to raise prices. “There are two schools of thought on this one: One, it’s a recession. No one is buying. So in order to get new customers and keep current customers happy, you lower your prices.” On the other hand, she writes, despite the talk that deflation — a period of declining prices — may occur sometime in the near future,most business are facing rising costs, especially if they purchase commodities. That, she says, gives them “every right to pass along these increases” to their customers.

Given recessionary pressure on one hand, and rising operating expenses on the other, Ms. Murray says she chooses raising prices. “If people see the value in your product or service, they will keep buying.”

MORE THAN HIGHER PRICES For small businesses worried that a price increase will drive away customers, Entrepreneur magazine says there is a way to gain the benefits of a price increase without actually charging more.

“Prices don’t exist in a vacuum. Like the earth under your feet, a price is supported by the value the customer perceives in the product or service to which the price is attached. Thinking about price and value in this way makes it clear that this is at least a two- dimensional problem. That is, you can change the pricing and leave the value alone, or you can change the value and leave the pricing alone.”

Food companies are the perfect example of this. They often leave the price unchanged, but give you less. Coffee used to be sold in 16-ounce containers but is now sold in 13-ounce cans at the price companies used to charge for a full pound.
A similar business analogy may be to keep your prices the same, but have lower-priced people — senior associates, instead of partners — do the work.

HEDGE YOUR BETS If you are going to raise your prices, set them higher than you have to, suggests Karen E. Klein, writing on
businessweek.com.

That way, if your customers balk, you can reduce the price increase a bit and still end up with the increase you need.

Here’s an example — ours — of how that might work.

Suppose you want to raise prices 8 percent. You would announce a price increase of 10 percent, knowing that if customers object, you could offer them “special terms” of some sort that reduces the actual increase to the 8 percent increase you want.

And, of course, if no one objected, you would keep the full 10 percent.

LAST CALL With his tongue only partly planted in his cheek, Hesh Reinfeld suggests that if you want to get more from your marketing spending, learn to hate your customers.

Mr. Reinfeld, a small-business consultant who also writes a humor column, says that his “success is tied to being able to serve as many clients as possible.” But he adds, “There are only 24 hours in a day. By analyzing my work schedule and those of my employees, I found that we spent way too much time with clients we liked.”

Mr. Reinfeld said he found that for every hour of billable work, he and his staff spent another, nonbillable hour talking to clients they liked about their children or playing golf. “These people made great potential friends but terrible clients,” he
says. “I usually lost money on each one of those consulting contracts. On the other hand, when I despised a client, I’d do the work, and then get out of his office. I didn’t ask any questions about the boar head on the wall or the photo of him bicycling with the president at what looked like Camp David.”

And he turned a profit as a result.

Apart from concerns over high oil prices, the growing interest in ethanol has other notable motives. These include: the need to diversify energy sources, the desire of many countries to meet their greenhouse gas abatement targets under the Kyoto Protocol and with the idea in mind that the increasing demand for ethanol itself could facilitate export opportunity to the self-sufficient countries.

Global production of ethanol fuel increased by 18 percent to 46 billion liters in 2007, marking the sixth consecutive year of double-digit growth. Developed countries like Brazil, Japan, and the United States are in this industry since the long time. Today, Brazil gets more than 40% of its automobile fuels from sugar cane-based ethanol.

It increased its ethanol production by 21% in 2007 to 19 billion litres. United States produced about 24.5 billion litres and imported an additional 1.7 billion litres, mostly from Brazil, in 2007. Brazil and the United States accounted for 95 percent of all ethanol production in 2007.

Today, this industry is no longer restricted to a few countries and is building momentum in other parts of the world, including China, India, Thailand, EU member countries, and Australia.

In India, ethanol is currently a neglected business but, as also being realized by many economists, it has great future as a world-class producer of Ethanol.

So, is it feasible for India to produce Ethanol when it has been argued globally that diversion of food crops towards production of Ethanol resulted in rise in commodity prices?

First we need to take a look over the basics of ethanol to consider this view.

About Ethanol…

Ethanol is a liquid alcohol made of oxygen, hydrogen and carbon and is obtained from the fermentation of sugar or converted starch contained in grains and other agricultural or agri-forest feedstocks. It is already being used extensively as a fuel additive, and alone or as part of a mix with gasoline is increasing.

The processes by which ethanol can be produced are diverse as it can be produced from wheat, corn, beet, sweet sorghum, sugarcane juice, rice etc.

It is a renewable fuel because it is produced from biomass. Ethanol also burns more cleanly and completely than gasoline or diesel fuel and reduces greenhouse gas (GHG). It is one of the best tools to fight vehicular pollution and also reduces particulate emissions that pose a health hazard.

World’s ethanol production is expected to pass 20 billion gallons with CAGR (Compounded Average Growth Rate) of about 5% from 2008 – 2012. US and Brazil being the leaders in the production of Ethanol are expected to have the most growth in this industry along with the emergence of new ethanol producers in Asia and Latin America.

Trading of Ethanol is also done in the derivatives market in some exchanges like NYMEX under the category of “Energy” and CME under “Chemical”.

Feasibility to produce ethanol in India

In India, ethanol is produced mainly from the molasses, which is the byproduct from the processing of the sugarcane or sugar beet. In October’07, India’s government issued a 5 percent mandate for blending ethanol with petroleum with immediate effect. Recently, the Centre has allowed the sugar mills only to produce ethanol directly from sugarcane juice. Ethanol is currently used to meet the demand of the potable and chemical industries in the country. Ethanol producing states are UP, Karnataka, Tamil Nadu, AP, Maharashtra, Gujarat and Bihar.

The feasibility to produce ethanol can be analyzed very easily by taking into consideration various benefits that can be availed through it. Keeping in mind the importance of sugarcane from India’s point of view, as Sugar sector is the second largest sector in India, one can realize that ethanol industry is a blessing for Country, its Economy, its Citizens on the whole and the Farmers too. Some of the benefits are summarized below.

Firstly, India is the largest consumer of Sugar in the world. Indian sugarcane is currently used to produce sugar for our domestic consumption as well as for exporting to other countries. Still India is producing excess sugar as compared to its demand and this resultant oversupply is creating a downward pressure on the market price of sugar, affecting the economics of the sugar industry and consequently the livelihood of millions of sugarcane farmers that the industry supports.

Surplus cane can be used to produce ethanol as is done in Brazil. Instead of storing millions of tonnes of sugar in a falling market and exporting the balance at very low international prices, the same could instead be used to produce a few billion litres of ethanol.

Secondly, India’s transport sector is growing rapidly and presently accounts for over half of the country’s oil consumption whilst the country has to import a large part of its oil needs. India imports nearly 70% of its annual crude petroleum requirement, which is appox. 110 million tonnes. With oil prices touching a record high, it could have a significant impact on the country’s foreign exchange reserves, along with the increasing losses in the oil sector as the government tries to insulate domestic prices of petroleum products from global price increases.

Thirdly, with existing technologies, production of ethanol from sugarcane has been the most economic compared with ethanol from other feedstocks, and with biodiesel from vegetable oils.
Brazil’s sugar cane-based industry is far more efficient than the U.S. corn-based industry. Brazilian distillers are able to produce ethanol for 22 cents per liter, compared with the 30 cents per liter for corn-based ethanol. U.S. corn-derived ethanol costs 30% more because the corn starch must first be converted to sugar before being distilled into alcohol.

Fourthly, demand for ethanol, globally, is set to increase providing biggest opportunity for sugarcane producing countries to export.

Fifthly, when it comes to the storage quality ethanol is again advantageous as it can be stored for up to 5 years and sugar does not have that long a shelf life. So, in seasons of heavy cane crop, sugar industries can manufacture ethanol and store it. When the crop is limited it can be used to produce sugar, and the stored ethanol can be used for meeting commitments.

Sixthly, as estimated at the present level of petrol and diesel consumption, the ethanol requirement for 10% blend of each of these products means around 6 billion litres per year which would require nearly 90 to 100 million tonnes of additional sugarcane to be converted to produce it, which is around 30% of total sugarcane grown in India as against 55% used in Brazil for ethanol program, providing additional income for the farmers as well as for the country.

Seventhly, the nation can also save million tonnes of carbon emission equivalent every year, which can mean additional income from international carbon trading.

Lastly, according to the estimates setting up of new ethanol capacity to meet the energy demand is far more economical in terms of capital investment than setting up an oil refinery of the same capacity.

So, sugarcane, which is globally under pressure due to the excess production, is the main source for the Indian ethanol industry and its conversion to produce some economical as well as environmental friendly commodity would be very advantageous for India providing no pressure on the supply side of sugar.

…not here to fulfill the wishes for free but to give sleepless nights to the people who have to spend more on their living.

When inflation accelerates, governments across the globe rush out with anti-inflationary packages, especially in a country like India, where, as estimated, 25% of population is living below the poverty line.

In India, inflation is measured as change in the Wholesale Price Index (WPI) since the comparable week a year ago tracking the data on price level of 435 commodities. The commodities are divided into three categories:

·   Primary Articles (Weight 22.02%)

·    Fuel, Power, Light & Lubricants (Weight 14.23%)

·    Manufactured Products (Weight 63.75%)

As can be seen from the graph, India’s inflation rate is on the rising trend since last 5 months creating the worrisome situation for politicians, policy makers and above all, the middle and lower class people.

Indian government has, till now, initiated many corrective steps to contain this continuous rise in inflation, like cut customs duties on edible oils, disallowed export of non-basmati rice and cement, extended ban on pulses exports for another year to soften inflation and scrapped export incentives for rice, steel and cement.

Apart from that, the rapid increases in the prices of many commodities, especially basic food commodities, taking weekly inflation to 3 and a halfyear high of 7.41%, for the week ending 29^th March 2008, has raised questions in the mind of many people, including politicians and farmers, that futures trading is the root for the spike in inflation rate, who are demanding ban on future trading of some commodities.

Will a ban on future trading in commodities really help in arresting the rising prices?                              

Let’s check out some facts, proving that the idea of such a ban will not suffice in overcoming the current inflationary problem…

Fundamental factors behind inflation…

 ·        Demand-supply mismatch, which has become a global issue for worry, is the main factor behind the current inflationary situation. World’s major countries like Japan, Australia, South Africa, India, USA, China, etc. are suffering from high inflation.

According to the UN Food & Agriculture Organisation (FAO) and the European Bank for Reconstruction & Development, world food prices rose 40% last year which are fuelling inflation globally and have become a concern for many governments. Since January 2008, international rice prices have seen a steep increase of 20%, according to FAO’s All Rice Price Index alongwith increasing prices of most cereals, wheat and maize resulting from dwindling cereal supplies and rising demand.

It has been argued that these developments are largely demand driven, being the result of several years of rapid global growth and the voracious demand from some fast-growing countries such as China and India. Additionally, the impact of high oil prices, first, affecting agricultural costs directly because of the significance of energy as an input in the cultivation process itself (through fertiliser and irrigation costs) as well as in transporting food and second, promotion of bio-fuels as an alternative to petroleum which has led to significant shifts in acreage as well as use of certain grains in many countries including US, Europe and Brazil. 

Import of commodities with high prices internationally affects domestic prices. Many of the commodities, included in WPI, are being imported resulting in the impact of prices prevailing in the international market on the domestic prices and as rising inflation has become the global issue it can be said that India has imported inflation to some level.

As can be seen in the case of edible oil, India imports around 50% of its annual 11 million tonne consumption of Edible Oil. Globally, the prices of Edible Oils are on the rising spree due to increase in demand resulting from the greater diversion of these commodities to produce bio-fuels. This can be taken as the fact behind the domestic rise in prices of Edible Oil.

Last year’s ban on wheat, tur, etc. is a lesson…

In early 2007, Government banned future trading in some commodities with the aim to arrest the rising inflation. On 23rd January “Urad and Tur” and then on 28th February “Wheat and Rice” were banned to be traded in the future market.

But since then prices of these commodities have moved in the opposite direction from the government’s expectation thereby showing the negligible impact of the ban on the prices.

Wheat prices, which were ruling at Rs 1,100 a quintal when trading was banned, have marginally increased to Rs 1,130 while rice prices have gone up from Rs 1,245 to over Rs 1,700 a quintal. Tur has increased from Rs 2,340 to Rs 2,720 per 100 kg, which even reached to Rs. 3,050 in Nov’07 in Maharashtra. Urad prices, however, have slipped from Rs 3,550 a quintal to Rs 2,600 a quintal.

Traded vs. Non-traded commodities…

According to the study conducted by NCDEX, some of the commodities that are not traded in futures market have shown greater percentage increase in prices as compared to the commodities traded.

A basket of 15 commodities traded on the exchange were included in the study showing a year-on-year price increase of 5.84% as against 9.04% for nearly 30 items not traded in the futures market. Certain items have shown price increase of as much as 47-48%, but these were both in the traded and non-traded baskets.

The above discussed factors proves that measures like ban on future trading of commodities is not a good idea as the prices are bound to move due to the fundamental factors like supply shortage. Instead, such a ban would deprive off from the benefits availed trough future trading like price discovery, price risk hedge, bringing reforms in logistics and warehousing sector, help in standardisation and grading of various agro-commodities and dissemination of current prices in rural areas to create awareness among the farmers.

The government is rather expected to take corrective measures which could provide a relief to the country from the current critical situation and in the long run too, while taking the global situation in due consideration and also the long term impacts of such measures.

Government is first required to overcome the various flaws in the calculation of inflation (as detailed below), which could thereafter show the true picture of country’s inflation growth.

Flaws in the calculation of Inflation……

·     Non-inclusion of service products still when service sector contributes 55% to the country’s GDP

·   The prices of the items included in WPI are to be revised from time-to-time to reflect the changes, but currently WPI includes large number of items whose prices have not changed since long time. Combined weight of such static items in WPI, including household items, fertilizers and pesticides, electrical appliances, etc., is more than 10%

· According to one of the prominent economists, out of 435 commodities included in the WPI, over 100 have ceased to be important from the consumption point of view. Some of the WPI commodities include coarse grains that go into making of livestock feed. But they continue to be considered while measuring inflation.

· The current WPI measures headline of inflation and don’t provide an accurate measure of the price rise that consumers face at the retail level. WPI, that was constituted in 1993-94 and has remained unchanged since then, needs a revision in the way of measuring the inflation.

The government is working to recast WPI since last three years and a committee headed by Abhijit Sen was also set up in 2005, which suggested to revise the currently used base year, i.e. 1993-94, to 2001-02. Also the doubling of the number of commodities included in WPI is also suggested, along with, the revision in the weightage of some commodities like sugar, fuel, etc. But the government has taken no steps yet in the recommended direction.              

Instead of cursing future trading in commodities for these historical price rises, Government should seriously consider to bring “second green revolution” to meet the voracious appetite for food grains in the country. Rather, it is required worldwide.