IT/ILT : While determining ALP of software development services rendered by assessee to its AE located abroad, comparable companies having RPT upto 15 per cent of total revenues alone could be included
Sunday 5 April 2015
Agri-Commodity Exports To Fall Over 10% Due To Slump In Global Food Prices
With global food prices slumping to six-year lows in March due to bumper production and high inventory levels, Indian agri-exports are likely to face a setback. Most agri-commodities are currently trading below Indian minimum support price (MSP) in the global markets.
“Most commodities in global markets are trading below the prevailing MSP in India. This will translate to at least 10% lower exports of agri commodities from India in 2015-16 from the current estimated level of $32 billion including agri commodities and plantation products,” said Ajay Sahai, Director General, Federation of Indian Export Organisation (FIEO).
While India’s agri commodity exports would be lower, import bill for commodities like vegetable oil and pulses will also be subdued.
Data compiled by the Food and Agriculture Organisation (FAO) of the United Nations showed the world food price index continued to drop in March, down 18.7% (40 points) below its level a year ago. It is also a 1% dip over February 2015. Overall, except for a pause in October 2014, global food prices have been falling steadily since April 2014, on account of large supplies.
“Fall in global prices will impact prices of agri commodities in India to the extent they are traded with global markets. Commodities like chana, wheat and rice are determined largely by domestic factors as they are less connected to global markets. Sugar, pulses and edible oils, however, will be affected. Commodities like maize will also get impacted as India exports huge quantity of maize,” said Madan Sabnavis, Chief Economist, Care Ratings.
Agri commodity prices have declined by up to 34% in the last one year. Wheat prices in global markets have plunged 34.4% to trade at $181.18 a tonne. Cotton and maize prices have also fallen by 33.24% and 31.32% to end the financial year 2014-15 at $1376.34 a tonne and $175.89 a tonne respectively. RBD palmolein and sugar posted a decline of 28.99% and 24.59% to trade at $612.50 a tonne and $357.60 a tonne respectively.
“Despite government’s assistance of Rs 4,000 a tonne on raw sugar exports, Indian mills are unable to ink purchase contracts with global buyers due to steep fall in raw sugar prices in the benchmark New York Mercantile Exchange. Sugar prices have hit seven-year lows due to over production in global markets and falling Brazilian real which makes export from Brazil more remunerative,” said Abinash Verma, Director General Indian Sugar Mills Association (ISMA).
Meanwhile, FAO has raised production and carryover stocks of cereals in March from its earlier forecast in February. Since last month, FAO has raised its 2014 world cereal production forecast by 2 million tonne to 2,544 million tonne, mainly accounting for a larger than anticipated maize harvest in the EU. At this level, global cereal output in 2014 would outstrip the 2013 record by 1%.
Source:hellenicshippingnews.com
Strategy Paper To Boost Dairy Exports On Anvil
Concerned over a sharp drop in dairy exports due to quality issues, the government has initiated an exercise to boost shipments of dairy products like milk powder and asked the sector to prepare strategy paper in this regard.
The Commerce Ministry had recently convened a meeting of dairy industry representatives including Amul and discussed problems being faced by domestic companies and exporters to major markets including Europe, Japan and Russia.
"Huge scope is there in Europe and Russia for dairy exports. But they are facing phyto-sanitary (quality) issues. Exporters raised the issue of non-tariff barriers in these countries. The industry is expected to submit the paper very soon," the official said.
The Ministry "would take appropriate steps" to encourage export of dairy products after deliberating recommendations of the paper, the official added. The move assumes significance as India is the world's largest producer of milk and has huge potential for exports.
The country's export of dairy, meat and poultry products has declined by 32 per cent to USD 302 million year-on-year in February this year.
The official further said the government would take up the issues faced by domestic companies at bilateral level besides helping the industry to improve quality and standard in order to comply with global norms.
India has already discussed the sector's issues with Russia, where a huge export potential exists in view of sanctions imposed by western countries.
A team from Russia's phyto-sanitary watchdog, Rosselkhoznadzor, had visited India to inspect several cheese and dairy product units.
As per estimates, Russia's annual dairy product import requirement is about 5,000 million tonnes. The country is facing problem in meeting this demand due to trade sanctions.
Source:economictimes.indiatimes.com
Cheaper Cousins Pull Down Sunflower Oil
If you love fried food, you can rejoice in the fact that the price of cooking oil has been slipping since mid-2013. The price of refined sunflower oil (Source: Solvent Extractors Association of India), a popular cooking medium, ruled at ?63,000 a tonne in end-March 2015.
This was 10 per cent lower than the same month last year. Prices have reversed trend in the last two years. Between March 2009 and August 2013, prices of refined sunflower oil soared, rising 87 per cent from ?45,000 levels to ?84,000 a tonne. They have since corrected by 25 per cent.
Global prices of sunflower oil have corrected much more steeply than domestic prices. They have been on a relentless downward trajectory since mid-2011. Global prices have tanked from $1,700 per tonne in June 2011, to under $900 by March 2015, with the fall punctuated by hardly any intermittent rally.
Global prices of sunflower oil have responded both to rising production of sunflower seed and to bearish trends in other vegetable oils. Statistics from Oil World and USDA show that between 2010-11 and 2013-14 (October to September), world crushing volumes of sunflower seed rose from 30 million tonnes to 38 million tonnes, boosting sunoil production from 4.8 million tonnes to 8.1 million tonnes.
Sharply higher sunflower output in Ukraine and Russia (the world’s largest producers) and European Union contributed much of this spike. But with consumption failing to keep pace, global inventories have mounted and pressured prices.
At the same time, sharp price increases in the output of competing cooking oils such as palm oil and soyabean oil have also added to the downward pressure on sunoil too. Globally, some consumers use sunflower oil, soyabean oil and palm oil interchangeably to meet their cooking needs.
They dynamically shift between them based on the price differentials between palm oil (the cheapest oil) and other soft oils such as sunflower and soyabean. In the last year or so, a record US harvest of soyabean has triggered a meltdown in soyabean oil prices. This has had its impact on the entire oil complex, including sunflower oil.
The meltdown in global crude oil prices has had an indirect impact on cooking oils too. What is the link? With cooking oils such as palm oil used in bio-ethanol production, the fall in crude oil prices has led to lower diversion of food crops to bio-ethanol. This has contributed to excess supplies in the market.
Going forward, fundamental factors point to tighter sunflower oil supplies in the crop year 2014-15 (ending September 2015).
Output estimates for the year have been progressively trimmed due to a lower crop expected in Ukraine and Russia, and crushing volumes are expected to fall by about 4 per cent for the season after many seasons of gains. But prices are yet to respond to these trends because alternative cooking oils such as soyabean and palm oil continue to trade cheap.
In contrast to the global situation, oilseed production in India has consistently failed to keep pace with burgeoning demand. Therefore, Indian imports of cooking oils have shot through the roof in the last five years.
Between 2010-11 and 2013-14, total imports shot up from about 84 lakh tonnes to 116 lakh tonnes, registering a 40 per cent jump. In the current oil year (November 2014 to February 2015), domestic shortages have sparked a 23 per cent jump in cooking oil imports by volume.
But with soyabean and sunflower oil turning cheaper in global markets, the import mix has changed significantly.
While palm oil made up three-fourths of the total imports in the some months last year, this year soft oils such as soyabean and sunflower have been in greater demand, accounting for a third of all imports.
With sunflower acreage down sharply both in the kharif and rabi seasons this year, the forecast for domestic prices would normally be bullish. But with imports flooding in and rival oils such as soyabean and palm oil trading cheaper, Indian consumer can probably look forward to a few more months of benign sunflower oil prices.
Source:thehindubusinessline.com
Rising Thermal Coal Imports Set To Propel India To Top Spot
India may soon become the world’s largest importer of thermal coal, nudging the current top-ranking China to second position. India’s thermal coal imports have begun to attract global attention as volumes steadily grow and China begins to slow.
Although India has been among the top destination markets for thermal coal over the last ten years or so, the expectation of increased demand in the coming years – on account of economic growth prospects, growing power demand and government policies – is driving traders to keep a close watch on developments here.
Over the last decade, India’s thermal coal demand has grown robustly, estimated at around 25 per cent CAGR. Currently, at 150 million tonnes (mt) import, the country accounts for about 16 per cent of the seaborne trade of 915 mt. Although a large coal producer, Indian coal quality is sub-standard with a high ash content of over 30 per cent. So, many power plants routinely blend indigenous coal with imported ones to derive productivity benefits.
Starting at a modest 25 mt in the year 2000, thermal coal imports expanded to 50 mt in 2009 and to 100 mt in 2012 and further to 150 mt in 2014. Projections for the next three years are placed at 165 mt, 180 mt and 190 mt until 2017.
At the same time, domestic thermal coal production is expected to increase by approximately 30 mt per annum from 510 mt in 2014.
For years, coal-fired power capacity additions have exceeded other forms of power generation while domestic feedstock production growth has trailed demand growth. By 2018, India is poised to overtake China as imports potentially reach 200 mt accounting for a fifth of the world seaborne thermal coal trade. According to the Ministry of Coal, although India has adequate coal reserves (over 300 billion tonnes of which 125 billion tonnes are in the ‘proved’ category), actual production falls short of consumption demand and the gap is met through imports.
“The domestic production of coal has been constrained due to problems in expanding the capacity arising from difficulties in land acquisition, geo-mining conditions, environment and forest clearance issues. Inadequate infrastructure is another constraining factor,” the government has said.
For coal exporters such as Indonesia, South Africa and Australia, India is some kind of a saviour even as Chinese coal imports are slowing and may not anymore be the buyer of last resort. It is generally known that China’s metals and mining sector is not in a good financial shape.
Source:thehindubusinessline.com
Rupee Opens Stronger Against Dollar As Us Job Data Disappoints
The rupee had ended 18 paise higher at 62.49 against the American currency on Tuesday on selling of dollars by banks and exporters on expectation of resumption of foreign capital inflows into equity market.
The rupee appreciated by 37 paise to 62.12 against the dollar in early trade today at the Interbank Foreign Exchange after the American currency weakened overseas amid a higher opening in the domestic equity market.
Forex dealers said that besides selling of the American currency by exporters and banks, weakness in the dollar against other currencies on disappointing jobs data supported the rupee.
Source:dnaindia.com
ITAT affirms inclusion of co. with related party transactions of more that 15% in list of comparable
IT/ILT : While determining ALP of software development services rendered by assessee to its AE located abroad, comparable companies having RPT upto 15 per cent of total revenues alone could be included
Commissioner(A) can't condone delay beyond 30 days even if delay is occurred due to perusal of wrong
Excise & Customs : Section 14(2) of Limitation Act providing for 'exclusion of time spent in pursuing wrong remedy bona fide' cannot be used by Commissioner (Appeals) to condone delay/exclude period beyond his maximum period of condonation, as section 14(2) ibid cannot override section 128(1) of Customs Act
No denial of sec. 10B benefit if transaction with AE wasn't made for shifting profits to assessee
IT: Where finding of Assessing Officer that related parties had sold granite to assessee at lesser price thereby shifting their profit to assessee, and that such amount of profit was to be reduced from business profits of assessee while computing deduction under section 10B, was berefit of details and based on incomplete investigation, disallowance made under section 10B was to be deleted
No denial of exemption to a trust if trustees were paid for their services in proportion to growth o
IT : When there was substantial growth in trust on account of services rendered by trustees, to trustes payment made to trustees for such services was not in violation of section 13 and benefit under section 11 was available
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