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Monday,17-January-2022

Business

After petrol and diesel, consumers face cooking gas price rise

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LPG-cylinders

Government seems to be in no mood to subsidise the price of common mans cooking gas which like the price of auto fuels petrol and diesel has maintained consistent increase for past few months.

The price of domestic 14.2-kg LPG cylinder was increased by Rs 25 on Thursday, the third increase in the month of February itself, taking its price Rs 794 a cylinder in Delhi.

While the practice of weekly or fortnightly price revision of cooking gas is normally done for non-subsidised cylinders, this year oil companies shave maintained almost equal increase in price of subsidised LPG cylinders as well.

This has equated its price with market prices cooking gas and thus helping the government to completely eliminate direct benefit transfer (DBT) benefits extended to cooking gas consumers.

“There may just be some element of subsidy that still may be involved in cooking gas if it is getting transported to far off distances from bottling plants. Otherwise, subsidised and non-subsidised cooking gas prices have almost remained same during entire FY21,” said an official of a public sector oil marketing company not willing to be named.

While consumers focus has remained on petrol and field prices, the cooking gas price has gone almost unnoticed. It had risen sharply by over Rs 100 a cylinder in the month of February itself from a level of Rs 694 to Rs 794 a cylinder now.

This month cooking gas prices increased on February 4 by Rs 25 (costed: Rs 719) and February 14 by Rs 50 (costed: Rs 769) and now again on February 25 by Rs 25 to Rs 794 a cylinder.

With government not supporting even cooking gas consumers in the time of rising prices, consumers are bearing the brunt of increase in both their transportation and cooking expenses during the difficult period of pandemic.

There are around 30 crore LPG connections in the country and the the levelling of non-subsidised and subsidized LPG cylinder means that the government substantially reduces DBT payments in FY22 as well.

If oil and products prices remain range bound even next year, by the end of the year even LPG subsidy would be completely eliminated, oil sector experts said.

Government’s DBT burden even from middle of current fiscal has reduced to nil due to softer LPG prices. The only money that the government would need in FY 22 is towards providing free cooking gas connection to 1 crore additional beneficiaries under the Ujjwala scheme.

As per provision made in this year’s budget, DBT transfer towards LPG subsidy has been brought down to Rs 12,480 crore in FY22 from a level of Rs 25,520.79 crore in the revised estimates for FY21.

The budget estimate for LPG subsidy this year (FY21) was even higher at Rs 35,605 crore but subdued global prices helped government to save on LPG subsidy prices that got used for providing three free cylinders to Ujjawala consumers for the lockdown period.

Government provides 12 subsidised LPG cylinder to a household in a year.

While the household buys LPG cylinders at market price, the gap between subsidised and non subsided cylinders is transferred to consumers bank accounts under the DBT scheme.

This transfer has remained suspended during most parts of FY21 as oil companies have raised price of even subsidised cylinders to market levels.

Business

Credit Suisse chief resigns after attending Wimbledon in breach of Covid rules

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 Antonio Horta-Osorio, Chairman of the global banking giant Credit Suisse, has resigned with immediate effect after he was reportedly found to have broken the UK’s Covid-19 quarantine rules, the BBC reported.

A former boss of Lloyds Banking Group, Horta-Osorio joined Credit Suisse after a series of scandals at the Swiss bank.

After being the chairman of Credit Suisse for just eight months, he has now been replaced by board member Axel Lehmann.

“I regret that a number of my personal actions have led to difficulties for the bank and compromised my ability to represent the bank internally and externally,” Horta-Osorio said in a statement issued by the bank.

“I therefore believe that my resignation is in the interest of the bank and its stakeholders at this crucial time,” he added.

A preliminary investigation by Credit Suisse had found that Horta-Osorio reportedly attended the Wimbledon tennis finals last July when the UK’s Covid-19 rules required him to be in quarantine, the report said.

He was brought in to lead Switzerland’s second-largest bank to help clean up a corporate culture marred by its involvement with collapsed investment company Archegos and insolvent supply chain finance firm Greensill Capital.

In February 2020, then-Credit Suisse chief executive Tidjane Thiam resigned after a scandal revealed the bank had spied on senior employees, the report said.

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Business

Union Budget 2022: Tax rebates in Budget for realty vital for salaried class

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Currently, one-third of India’s population reside in cities and it is estimated to go up to 50 per cent by 2030. There is a steady rise in the number of households with a shift towards nuclear families and increased urbanisation.

The 66 per cent young population – below 35 years of age, are emerging as young millennial borrowers of home-loans. It is also true that home-loans market is driven by young borrowers within the age group of 26-35 years – about 25 per cent and also by people in the age group of 36-45 years – about 28 per cent. These are all active home-loan audience and jointly account for 53 per cent of annual originations.

The average ticket size of a home-loan of young borrowers has continued to increase over the last 5 years, with a CAGR of 6.2 per cent. The ticket size continues to increase more for women than men. The cumulative active home-loan base of these borrowers has seen continuous growth over the last 3 years at a CAGR of 3.5 per cent.

These young borrowers have been the reason for change in the home-loan market.

Within the affordable segment, volume growth in home-loans of Rs 15-35 lakh, over the last 4-5 years, indicate shifting preferences of buyers towards higher ticket sizes. Rural Housing demand for mid-range and higher ticket sizes has continued to increase over the last 5 years too. Share of annual originations (volume) of Rs 35-75 lakh ticket size has increased by 4 per cent in the last 5 years. Share of annual originations of Rs 75 lakh plus ticket size has increased from 0.37 per cent to 0.87 per cent in the last 5 years.

Share of annual originations of Rs 15 lakh ticket size has declined over the last 5 years, largely due to falling demand for very small ticket size segment of Rs 2 lakh.

The dearth of disposable income has been a deterrent factor for salaried class towards taking home-loan and buying real-estate. Since the input cost in real-estate has increased the rates, the salaried class is left with no other option but to approach for home-loans from financial institutions. Interestingly, the tenure of repayment of home-loan is fluctuating between 11-30 years.

There is also a deterrent factor for salaried class in home-loans and EMIs. The EMIs are no more supportive since the financial institutions first draw larger part of interest in the EMIs and principal component is kept less in more than first 50 per cent of the EMIs. As the EMIs near completion, the interest component becomes negligible and principal component is much higher.

Even if the buyer has the provision of pre-payment of home-loan, he ends up paying the larger portion of principal amount rather than saving on the interest. Further, the financial institutions also levy heavy fees on pre-closure of loans. In case the buyer opts for higher tenure for loan repayment, it then makes it difficult for the buyer to invest in second property.

One question that has been asked frequently is – “If the principal and interest amount are predefined, why the EMIs can’t have equal amount throughout the tenure.”

Coming to tax benefit, repayment of principal amount in a home-loan qualifies for deduction under section 80C, which has an upper limit of Rs 1.50 lakh per annum. Since the same section – 80C, accounts a number of other investments including PF, PPF and life insurance policies etc, it becomes impossible for a buyer to take advantage of any benefit out of this section.

Buyers are looking forward to increase in this limit in Union Budget-2022 since this limit has not been increased in last many years.

On the tax benefit for interest payment, since under section 20(b) of the Income Tax Act, there is a cap of Rs 2 lakh per annum on the interest part of the home-loan, home-loans being larger in size, the buyers are unable to take much benefit of the same too. To extend tax benefit to the buyers the government has also added few sub-sections 80EE, 80EEA under the Income Tax Act but the volume of loan is not allowing buyers to gain desired additional benefits out of these sub-sections.

What perhaps needed in the Union Budget 2022 is to bring dynamic changes in the income-tax slabs and increase the rebates under section 80C, 80EE, 80EEA and 24(b) of the Income Tax Act.

One of the greatest philanthropists Andrew Carnegie said – “Ninety percent of all millionaires become so through owning real-estate.” Andrew Carnegie is one of the five people who built America, the other four being Cornelius Vanderbilt, John D. Rockefeller, J.P. Morgan, and Henry Ford. Harv Eker, an author and businessman, known for his theories on wealth and motivation said – “Don’t wait to buy ‘real-estate’, buy real-estate and wait”. These two statements said all about owning real-estate and what it could mean to a buyer.

Globally, investment in real-estate is directly related to the future of a buyer and also growth of the economy, and so be in India.

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Business

Equities rise for six straight sessions

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The 30-scrip Sensitive Index (Sensex) and broader 50-scrip Nifty on the National Stock Exchange extended its gains from the past week and traded in the green in early trade on Monday.

Notably, indices had been gaining for the past six trading sessions.

At 10.15 a.m., Sensex traded at 61,288 points, up 0.1 per cent from the previous close of 61,223 points. It opened at 61,219 points.

Nifty traded at 18,280 points, up 0.1 per cent from the previous close of 18,255 points. It opened at 18,233 points.

Top gainers during the early trade were Hero MotoCorp, ONGC, Maruti Suzuki, Tata Motors, Adani Green Energy.

HCL Technologies, GAIL (India), ACC, Adani Transmission, and NMDC were some of the top losers, NSE data showed.

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