Oil prices, factors that effects it,GDP

    The infrastructure industry is very important in fuelling the economy. But when it comes to such critical issues as pricing, the oil industry is about as transparent as the crude oil that it processes. The price that we pay for a litre of petrol has no relation whatsoever to what it costs to produce that for Oil Company. Before going to the depth of the topic let us first know about 'under-recovery.' Under-recovery is the difference between the price that the oil company would like to charge for say, petrol, based on its international traded price, and the price at which it supplies the fuel to pumps, excluding taxes. Decisions to increase or decrease retail prices of products such as petrol, diesel and cooking gas are made based on this concept.  

    It is a common perception that under recoveries is losses suffered by state run oil marketing companies; these losses are just 'notional 'and not actually incurred by the companies. But this is because the Government uses import parity basis to calculate under recoveries. For example in case of diesel, the fixed selling price of the diesel is compared to the amount the companies would have paid had they imported the diesel (this will include international price of diesel, custom duties, transportation costs and marketing costs and margins). However, the price thus arrived has nothing to do with the actual cost of producing diesel which will be lesser (considering domestic over capacity in petroleum products refining markets). The way whole thing is projected makes one feel that the Government is making net losses in oil marketing business so as to keep the fuel prices affordable. 

     The critical point to be noted is that under-recovery is not equal to loss for the oil companies because they oil companies import only raw materials in the refineries to produce various fuels like kerosene, petrol, cooking gas etc. The strange pricing policy that is unfavorable to consumers is adopted mainly due to two reasons. The first one is the Govt. encouraged investment in new domestic refineries. This policy was successful in India when it was short of refining capacity and had to import petroleum products. Now the scenario is entirely different with many leading players like Reliance, HP, Essar and many others in the field producing more products and exporting petrol and diesel.. This can be clearly noticed that from that statistics, with 206 million tones in 2010-11, only 154 million tones were demanded. This clearly shows that the policy should be revised and thus decreasing the prices. 

    The second reason is it is difficult to apply the cost-plus-margin approach to each and every product but we can use costing theory here. The scientific approach could mean a loss of protection to oil companies but the numbers show huge profits to the oil companies where the numbers won't dip too much for them if they adopt it.

   With prices of petroleum products raising high and with too much burden on consumers it is now time to reassess the policies. The Government also needs to reassess its taxation policy for petroleum products. Higher taxes on petrol are driving consumers to diesel vehicles which in turn is increasing the subsidy burden on the government.

     Conventional wisdom would suggest that an increase in global oil prices would hurt the oil importing countries and, perhaps, reduce their GDP growth rates — and have the opposite effect on oil exporters. But data for the last 15 years does not corroborate with that claim. The five-year rolling average for crude oil prices and growth rates of real GDP show that economic growth for the US, China, and India — three of the top ten oil consumers — did not suffer from rising oil prices. Nor did the economies of Saudi Arabia, Russia, and Mexico — three of the top ten oil producers across the globe, receive an unusual lift from such a trend. For instance, oil price increased at a higher rate in 2006 compared with 2005. Prices rose by 1.62 per cent in 2005 and 1.87 per cent in 2006. During this period, India's real growth rate in GDP also increased from 5.61 to 6.38 per cent. This only goes to prove that oil prices are just one among many variables which can affect a significant metric such as GDP.

"Digitalisation in India" : a complete essay !

Digitization has sneaked into every aspect of our life. The latest directive of TRAI for digitization of cable T.V is another initiative to bring the advances of technology to our door step.  By considering the factors like providing services, subscriber, the cable operator, industry structure and the industry challenges we can understand the present scenario and estimate the future consequences.

TV viewing services in India is currently provided mainly by three mediums Analogue Cable Services, Digital Cable Services and Digital DTH Services. Analogue cable services have been existing in India for more than two decades in India; however, analogue cable services have limited number of channels and do not have extra features and value added services. Digital DTH services in India have been started less than a decade back and are gaining popularity and acceptance in India mainly because of their superior picture and sound quality. The receptivity is much clearer and all the channels have the same reception quality. As both the signals are received at the same time, there are no issues with the synchronization of sound with video. This is a major constraint which subscribers tend to think over.

Through DTH which means Direct to Home Service, the recipient will receive the signals directly from the satellite on his Set Top Box. The viewer gets a wider range of channels to choose from which can be activated through packages. The picture quality is much superior and the sound is crystal clear. The viewers are also able to watch High Definition content which is set to make television viewing even more superlative. One can now watch his favorite sports action or travel or adventure series in high definition recording it and by replaying it. There is up to 5 times picture quality over normal or standard definition picture quality and the images carry 16: 9 aspect ratios.

With Indian TV market 3rd largest in the world with 146 million households it takes some time to digitize the TV connections. This is the reason why Govt. has ordered to digitize in four phases. The government on its part has been rational on its part by introducing the digitization in phased manner.

• Phase-I : In four metros by December 31, 2011
• Phase-II :  In all cities having a population of over one million, by December 31, 2012
• Phase-III : In all other urban areas (municipal corporations/ municipalities) by December 31, 2013
• Phase-IV : In the rest of India by December 31, 2013

 The government is also furthering its cause of connecting every village with broadband through this digital revolution. The increase in competition between the broadcasters will invariably lead to viewers getting more out of their rupee paid. The users are also set to gain from the fact that digitization enables a more interactive T.V viewing, piggy backing of other value added services like the broadband though the cable network. But the shortage of set top boxes and the issue of hike in the monthly subscription fee by many cable operators brought in a little bitterness to this whole exercise.

Industry structure

The distribution side of the value chain remains highly fragmented - though market structure changing rapidly with a thrust on consolidation. The cable and satellite television market in India had emerged in the 1990s and has since then experienced a strong growth in terms of number of subscribers having grown from mere 400,000 in 1992 to around 90 million today, representing a CAGR of 35 percent for the last 18 years. The channels seen on TV (pay channels or free to air, FTA, channels) are created by different broadcasters and transmitted from satellite to receiving stations (head-ends) owned by MSOs. The MSOs in turn re-transmit these signals through cables to the LCOs (Local Cable Operators), who have their own last mile cable network to individual homes.

Industry challenges

Under-reporting of subscriber base by LCOs (Local Cable Operators) leading to inequitable distribution of value : In the absence of an addressable system, the subscription revenue transaction among the broadcasters, MSOs, and LCOs is currently undertaken either on a fixed-fee basis or on the basis of a negotiated subscriber base. Considering the strong bargaining power enjoyed by LCOs who own the last mile, the distribution of subscription revenue in effect remains heavily skewed in their favour. As per the industry estimates, LCOs declare only around 15 percent of their paid connectivity to MSOs and broadcasters. This not only deprives the MSOs and broadcasters of their fair share of value, but also results in service tax leakage for the government. The lack of trust and transparency in the business models of the industry has also led to frequent disputes between stakeholders and increased litigation incidences.

Non-standard pricing and local monopoly status of LCOs leading to sub-optimal customer service: In a market survey commissioned by TRAI, it had observed that the average monthly cable bill for a subscriber varied widely from Rs. 149 in Kochi to Rs. 322 in Shillong, even though services being provided did not warrant such variation. Apart from this, there are instances where the cable charges are increased by LCOs for a locality arbitrarily. These shortcomings are the natural fallout of the local monopoly status enjoyed by most LCOs and small MSOs who are able to avert competition and thus prevent free market forces to keep prices under check.

Capacity constraints in analog cable stifling growth of new channels and introduction of technologically advanced content: The number of television channels in India has grown at a rapid pace from two in 1992 to 120 in 2003 to around 600 at present. Arrival of a plethora of new channels in the Indian television space in the backdrop of limited bandwidth of the analog cable system, results in allocation of prime frequencies by MSOs to channels offering higher carriage (or placement) fee. Limited capacity, coupled with the absence of an addressable system, has also resulted in limited availability of subscription-driven niche content such as science, golf as well as technologically advanced content like high-definition (HD) channels. This trend is further fed by the inordinate dependence of broadcasters' revenues on advertising(less on subscription) impacting niche content offerings since focus tends to shift on advertisement friendly genres.

Since digitization would bring about full addressability, it would eliminate the menace of under-reporting of subscriber base by LCOs. This will aid increase in subscription revenues for broadcasters. Further, the increased capacity of digital distribution channel is likely to spur greater investments by broadcasters toward niche, targeted and HD content and lead to diversification of their revenue streams. The carriage costs paid by broadcasters to distributors, which currently remain high in view of the limited bandwidth of analog cable, may decrease post digitization. This is all about digitalization in India.

Neo-natal deaths in India !

It is a mere disaster for a country which boasts its  indigenous development in the field of  Science and technology, a mark on the country's image which has seventh largest defence budget in the world.
According to the statistics in the "State of the World's Mothers" report released by Save the Children recently have showed that the neo-natal death rate in India is the highest amongst the other nations in the world. Also shockingly, the huge gap between India and the other countries following it shows how much India should improve in taking proper careof its young ones.Over three lakh newborns in India die on the very first day of their birth. Despite 33% drop in  Neo-natal Mortal Rate (NMR) in 2009 from 1990s and 62% percent decline in 2012 still India has highest share in the world. Poor health and hygenity of the mother, no proper equipment in the labour room, un-trained personnel attending the delivery,female foeticide are the causes of neo-natal deaths.

 Tremendous gain can be achieved by preventing childhood marriages as teenage pregnancy greatly contributes to 1st day deaths. Poor mothers living conditions in rural areas are another at risk-group that needs undivided focus. If poor health before and during pregnancy is already a big risk factor, lack of good medical care during delivery exacerbates it. This brings to the spotlight the need to have a greater percentage of the institutional deliveries.  The personnel attending to deliveries should be properly trained and hence making them fully proficient in labour-room protocols.Equipping labour rooms with essential medicines, equipments and electricity is also a prevention measure. By having a check on the above things and counselling the families and mothers reagding hygenity before, during and after pregnancy will show a drastic improvement in the reduction of neo-natal deaths.