Rising coal, crude prices will hurt corporate earnings, profit margins: UBS

HONG KONG: Profit margins of Indian companies will be under pressure as rising coal prices force them to pass on the increase in cost to customers, according to commodity analysts present at the UBS APAC Journalist Forum in Hong Kong. UBS expects thermal coal's contract price to remain above $100 per tonne over the next one year.

"Domestic prices for coal in India is still 20-25% lower than international prices," Peter Hickson, global basic materials strategist, UBS, told ET on the sidelines of the conference. "But then, even a small increase will affect the bottom lines of cement, power and steel companies, which use coal in a big way."

Demand for coal in India has grown at 9% a year for the past five years. The country, along with China, will play an important role in driving up global coal prices. India expects power coal usage to rise from 400 million tonnes to 600 million tonnes by 2015. Apart from coal, crude prices will also play a major role in the corporate earnings of Indian companies. Analysts expect the effect of oil prices to start showing on the earnings from the April-June quarter.

"We're not sure where oil prices are headed," Mr Hickson said. "In normal circumstances, we expect crude prices to hover at $85-90 per barrel level but there are many concerns. The crisis in Gulf countries, tight supply environment and steady demand will keep crude prices firm."

Problems in Japan , volatile west Asia and "slower" economic activities in China could have an impact on the overall commodity prices. Crude oil, platinum, phosphate, lead and palladium are on the 'preferred commodity list' while nickel, steel, uranium and aluminium have fallen out of favour - at least in the short-term - for most commodity analysts.

"Cost curve will be up for most commodities over the next few years," said Andrew Ferguson, CEO of APAC Resources . "It'll not be excess liquidity alone that will keep commodity prices up; demand-supply gap and high cost of extraction will add to the overall prices. Raising interest rates to control commodity price inflation will not bring about a big change in prices."

Copper prices are likely to be governed by China's seasonal restocking, which should last till May. The recent spike in steel prices in US and Europe is largely driven by an increase in seasonal activity, low steel inventories and raw material cost-push. Analysts are worried that key-end markets like construction, infrastructure and real estate have not contributed much to the demand for steel.

Gold prices may benefit from lingering European Union sovereign debt concerns, rising inflation fears and the West Asian crisis. "Gold prices will be firm this year. We do not expect a sharp spike up, but a gradual rise in prices. I am bullish on gold as an asset class," said Mr Ferguson.

source:http://economictimes.indiatimes.com/markets/analysis/rising-coal-crude-prices-will-hurt-corporate-earnings-profit-margins-ubs/articleshow/7840309.cms

Union Budget - Expectations of the education sector

Every year the Union Budget creates lot of eagerness in the mind of every Indian as regards the Government's plans for different sectors. The Education sector also hopes to get its due share in the Union budget every year.

Though the Government expenditure - both, state and central combined - on education has grown over the years, from about Rs.97,375 cr in 2004-05 to Rs.1,89,325 cr in 2008-09, (according to data estimates by the Center for Budget and Governance Accountability) - this cannot be considered enough if we look at the actual requirements and needs of the sector. 

As a share of total government expenditure, the spending on education is stagnating at about 11.6%, while as a share of GDP it has increased only marginally from 3.01% in 2004-05 to 3.4% in 2009-10. 

The National Knowledge Commission (NKC) in its report on Higher Education has said "The present support for higher education, at 0.7 per cent of GDP, is simply not adequate. In fact, over the past decade, in real terms, there has been a significant decline in the resources allocated for higher education, in the aggregate as also per student. In an ideal world, government support for higher education should be at least 1.5 per cent, if not 2 per cent of GDP, from a total of 6 per cent of GDP for education. This is easier said than done. But the government should endeavor to reach these levels by 2012. Even this magnitude of state financing, however, would not suffice for the massive expansion in higher education that is an imperative." 

The recent report of the District Information System for Education (DISE) says that 29% of elementary schools did not have a pucca building in 2009-10, up from 27% in 2007-08. Over 49% schools do not have boundary walls, only a slight improvement over two years when the proportion was 50%. Girls have a separate toilet in only 59% of schools, again only slightly better than 50% in 2007-8. Desperate parents are shifting their kids to private schools where enrollment is up from about 20% in 2007 to 24% in 2010. The number of Class 8 students taking private tuitions is also up from about 22% in 2007 to 31% in 2010. Most alarming is the fact pointed out in the DISE report that net enrollment ratio dropped from about 98% in Class 5 to 58% in Class 8. 

We have been talking of making India - knowledge capital of the world but is the government doing enough to provide good quality education? Budget speeches and political propaganda gives an impression that the government has increased spending on education in the past few years and the Right to Education Act (RTEA) is propelling an education revolution. But the reality appears to be different.

A meeting of state education secretaries in January last year had estimated that Rs 1.82 lakh crore will be needed to ensure that every child between 6 to 14 years gets good education, as per the RTEA act. This was to be given to the states over 5 years starting 2010. 

Let's not forget - our first generation scientists, scholars, teachers, leaders - all came from the village schooling system. If we want to see the country progressing in all areas - we must first improve our education system with the due budgetary support from the government.

source:http://www.indiaedunews.net/Today/Union_Budget_-_Expectations_of_the_education_sector_13581/