By Aaron Chaze
Faced with a daunting budget deficit, the Indian government has decided to risk a painful backlash by India’s poor and eliminate price controls on gasoline. The government also cut subsidies on diesel, LPG and kerosene, which is widely used by lower income households as cooking fuel. Price control on diesel is expected to be eliminated soon as well. The government spends $3.2 billion a year on fuel subsidies, which is 1.5% of total government expenditure. The government expects that the reduction in fuel subsidies will help considerably in reducing the budget deficit from 6.9% to 5.5% by March 2011.
India's poor hit as fuel subsidies are scrapped
In late June, India’s Reliance Industries announced it was acquiring a 45% stake in the Eagle Ford shale gas field in Texas for $1.3 billion from Pioneer Natural Resources and Newpek. Reliance will pay $263 million in cash to the two companies and $1.05 billion as its share of the drilling costs over a four-to-six year period. This is the second acquisition by Reliance Industries in the April-to-June quarter of shale gas properties, having acquired a 40% interest in the Marcellus shale gas property from Atlas Energy in April.
Reliance Industries is not the only Indian name making its presence felt in the US. As part of a deal with the National Stock Exchange of India (NSE), futures contracts on India’s key equity benchmark index, the Nifty 50, are to start trading on the Chicago Mercantile Exchange (CME) on July 19. The CME will launch an E-mini and E-micro contract. In case of the E-mini, the contract value will be the index multiplied by $10, while in the E-micro contract the index value will be multiplied by $2. This is the second global trading location for Nifty futures contracts, which are already being traded in Singapore. The NSE will in turn launch S&P 500 futures contracts denominated in rupees on the Indian exchange.