Saturday, November 8, was a working day for senior bureaucrats at the finance ministry. Minister Arun Jaitley held a meeting to review the impact of a global slump in commodity prices. He wanted to know how best India could draw advantage from it, say sources who attended it. Barring aluminium and zinc, the prices of most commodities - crude oil, coal, iron ore, tin and rubber, among others - have all been falling for many months. The brent crude oil price, for instance, fell below $80 a barrel in mid-November from $114 in August 2013.

The government has already used the opportunity to take the politically sensitive decision of lifting its control over diesel prices. With global crude oil prices down, the de-control actually lowered the price of diesel instead of increasing it. But the fiscal deficit target of 4.1 per cent for 2014/15 remains a concern and Jaitley wondered aloud if, given the favourable circumstances, the indirect taxes kitty could be increased by raising customs duty, as well as the cess, on oil. With just four-and-a-half months of the financial year remaining, the government has collected only 32 per cent of the indirect taxes it had targeted. He also made other suggestions such as fixing the subsidy on LPG at Rs 400 per cylinder. LPG accounted for Rs 46,458 crore of the Rs 1,38,869 crore oil subsidy in 2013/14. (Subsequently the LPG subsidy was finalised at Rs 538 per cylinder.)

On November 13, hours before the oil marketing companies were to review the price of petrol and diesel, the finance ministry announced Rs 1.5 additional excise duty on both products. This may help the government to pocket an additional Rs 4,000 crore in the remaining days of the current financial year.

The petroleum ministry too is keen to use this chance to fill the three giant storage tanks - 'cravens' in technical parlance - it has built to keep strategic crude reserves. The three together - one in Visakhapatnam and two near Mangalore - can store 5.5 metric tonne (MT) of crude, enough to meet the country's requirements for 70 days. The cravens have been ready for the last six months but no decision on buying extra crude could be taken when oil prices were high. "It is good opportunity now," says Aditya Gandhi, Director, Sapient Global Markets, India chapter.

The slide in commodity prices has had many ramifications. For some sectors it is a boon, for others, a bane. The oil marketing companies (OMCs), for instance, are delighted. "They now require less working capital to buy crude from the international market," says a market insider. While the public-sector OMCs - Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation - are partially constrained by norms which allow them to buy only 30 per cent from the spot market, the private ones, such as Reliance Industries' OMC arm or Essar Oil, are in a better position to leverage more by hedging prices.

In contrast, oil exploration and production companies are adversely hit. Cairn India, for example, which sells oil at roughly 15 per cent discount to brent crude prices, saw its profit fall to Rs 2,278 crore in the second quarter of 2014/15, almost 33 per cent down from that in the corresponding quarter of the previous fiscal year. Interim CEO Sudhir Mathur has acknowledged that the fall in oil prices - as well as the high maintenance cost of the company's Mangla field - was responsible for the drop.

Market leader Oil and Natural Gas Corporation's profits and net realisation per barrel rose in the first quarter of 2013/14, but market estimates suggest the rest of the year may not be the same - the company's contribution to the exchequer could fall from Rs 56,380 crore in 2013/14 to Rs 36,760 crore this time, an official at the petroleum ministry says. Its enhanced oil recovery (EOR) operations, which add a cost of $12 per barrel, may also have to be curtailed. At the same time, any oil subsidy cut - which is also being mooted - will help its margins. "The lower the subsidy, the more we can spend more on exploration and acquiring good assets," D.K. Sarraf, Chairman and Managing Director, ONGC, told Business Today in an interview earlier this year.

Again, Indian power and metal producers using imported coal have reason to smile. In October, coal was trading in the Indonesian spot market at $68 per tonne, down from $81.9 per tonne in January. In November, the Indonesian government set its benchmark coal price reference at $65.7 per tonne - the lowest in four years. Indian coal imports have already risen by around 10 per cent in the last two months compared to the same months of the previous year. Domestic coal shortage was bound to increase after the Supreme Court judgment holding 214 coal block allotments since 1993 illegal and cancelling them, but the fall in global prices has come as a breather for coal users. Aluminium major Hindalco, for instance, has decided to use imported coal for its plant in Mahan, Madhya Pradesh, rather than domestic. "It makes sense for Hindalco to do so rather than wait for local coal," says a leading industrialist who does not want to be named. JSW Steel is also taking advantage of falling iron ore prices, and has imported 10 metric tonne of the raw material already. The company doesn't have captive mines, and the imports would help it ensure adequate supply to its steel mills.

Leading business groups such as the Tatas, the Aditya Birla Group, the Adanis, the Jindals - all of whom have been sourcing commodities such as coal, iron ore and other metals globally - have been affected in different ways. The Ratan Jindal-owned Jindal Stainless, for instance, the country's biggest stainless steel maker, is hurting. "Nickel prices have fallen and the industry trend is that whenever this happens, orders dry up," says a company insider. "Customers expect prices to fall further and hold back." As it is, domestic stainless steel manufacturers had been having a tough time due to cheaper Chinese imports. "This is a double whammy for us," the insider adds.

The fall in commodities' prices should have been anticipated. "For the last two years I have been expecting this," says Sushil Maroo, CEO, Essar Energy. "Energy costs in the US have been falling. This was bound to have a cooling effect on the input costs of commodities and their prices would naturally drop." No doubt Essar Energy is a gainer, but Maroo believes the overall impact is also positive as it will lead to lower freight costs and energy tariffs. "This is a great opportunity for manufactures to respond to Prime Minister Narendra Modi's 'Make in India' call," he adds.

Pradeep Bhargava, Director, Cummins India, agrees. "Manufacturers have been grappling with inflation, so a fall in prices will help make manufacturing more competitive," he says. It also points, some experts believe, to a fall in Chinese demand and a slowing of the Chinese economy, which in turn they hope will help India compete better with its giant neighbour. "The government should also do its bit with supportive energy policies and help industry to cut energy cost," says Maroo. The fall also portends a US manufacturing revival which - along with a widely expected increase in US interest rates in coming months - could offset some of the gains, although lower energy costs will still offer some advantage.

The big question is the future. Will the trend continue, will commodity prices level off or will they start to rise again? At least seven finance experts Business Today spoke to say the third option is the most likely. Prices will pick up again by the end of the financial year. "The fundamentals of the market are fine," says Hemal Shah, Partner, EY. "Global financial markets need commodity players."