Supporting their point of view, the article has a table that compares Arab Gulf price of diesel with that of domestic price for the period between September 1997 and October 1999. Using this comparison, the article has come out with some interesting conclusions. Firstly, diesel prices in September 1997 were at $163.15 per tonne while domestic diesel (Mumbai) was beingsold at Rs 11.53 per litre. In spite of a subsequent fall to $83.39 per tonne in international diesel prices, domestic prices remained at around the same level at Rs 11.21 per litre. The article questions the logic of Mumbai consumers paying Rs 16.54 per litre in September 1999 when international diesel prices have touched $162 per tonne while they were paying Rs 11.53 per litre for the same international price.

The article mentions that while international prices of diesel were low the finance minister in his budget speech on February 27, 1999, introduced an additional duty of Re 1 per litre on imported and domestic HSD. Now when the prices have shot up, there are no signs of removal of this additional duty.While the demand for removal of the additional duty is justified, the comparison made between domestic prices for the two periods is not. The flaw lies in the fact that during the two periods, September 1997 and September 1999, the rupee has depreciated by 20 per cent. At the same time the centralGovernment has introduced a cess of Re 1, twice during the period.

Additionally in case of Mumbai, the State Government introduced an additional cess of Re 1. Taking these into account, the domestic prices of diesel has moved in line with international parity.

However, the case stands that as diesel prices internationally has shot up from February levels, the Government should withdraw the additional duty.

Cables
The cable industry, as a whole, appears to have posted a most encouraging performance, after a long period of struggle. Half-yearly results of 16 cable manufacturers reveal that the turnover has improved by 28 per cent from Rs 700 crore in September 1998 to Rs 897 crore in September 1999. Interestingly, their bottom lines have also soared from Rs 24.4 crore to Rs 41.1 crore during the same period, registering a handsome growth of 68.6 per cent. Incidentally, this performance includes the power cable and telephone cable manufacturers as well.

Importantly, growth in telephone cableindustry was much higher than among the power cable manufacturers, largely because of excellent growth achieved in jelly filled telephone cable (JFTC). The growth of JFTC is attributed to the large scale orders placed by Department of Telecommunication (DoT) and Mahanagar Telephone Nigam Ltd (MTNL). DoT and MTNL are expected to increase their orders from 365 lckm (lac core kilometer) in 1998-1999 to 500 lckm in the current year. Thus the size of the order will maximise capacity utilisations of the JFTC manufacturers. Additionally, although the realisation per ckm was low as compared to the previous year, the fact that players like DoT and MTNL were both paying cash against delivery proved quite beneficial to the fortunes of the telecom cable manufacturers.

However, this cheer among the telecom cable manufacturers may not last for long, given the onset of an era of technological convergence. The rapid pace of technological innovation might well obviate the need of JFTC in communication. Incidentally, thephasing out of JFTC has already started with the introduction of optic fibre cables. But given the onslaught of technologies like the wireless in local loop (WILL), direct to home (DTH) telephony and cellular phones, the potential threats are all too obvious. Further, the rapid growth in JFTC is not likely to remain after a few years.

It is perhaps due to all these negatives which outweigh the positives in the long-term, that even in spite of full capacity utilisations there are now new plants coming up with either new capacities or expansions in JFTC.

Auto/Steel
News reports suggest that large-scale imports of hot-rolled steel are finding a way into the domestic automobile and ancillary manufacturers. The automobile industry, incidentally, is the largest user of flat steel and consumes more than one million tonnes of steel every year.

Approximately, 1.5 lakh tonnes of HR coils have been imported during the first five months of the current fiscal, a large part of which has been utilised in theautomotive sector.

Interestingly, the average price of imported HR is around Rs 9,600 per tonne ($229) which is almost 32 per cent lower than the domestic cost and 25 per cent lower than the floor price of $302 per tonne.

Importantly, though most of these imports have come under the advance license scheme and should be re-exported within 18 months and cannot be used for local production, it seems that there could be a little check over utilisation of the steel.

Interestingly, the current half-yearly results in the automotive sector reveal a remarkable jump in the profits of 18 automobile manufactures from Rs 276 crore to 373 crore which can be mainly attributed to the cheap import of steel. The prices of imported HR is still heading southwards and was quoted at $ 213 per tonne in the third quarter of this fiscal year. This means that there is a further bumper profit waiting for the automobile manufacturers.

Emcee (with contributions from Shishir Asthana & Dhruv Rathi)