Differences between the government and its communist allies: Tracking India Business and Economy News

Growing differences between the government and its communist allies could mean that India's economic reform process might get stalled. However analysts assure us that while there might be delays, reforms are not likely to be derailed.

- Chillibreeze Business Research Team

Government Policy & Infrastructure
Economy
SEZs
Agriculture
Sector Specifics
Power
Banking & Finance

Government Policy & Infrastructure

Nagpur airport transfer mired in red tape

The Maharashtra government has decided to take up the asset transfer issue of Nagpur airport with the civil aviation ministry at a meeting this week, according to Mantralaya sources.

Chief minister Vilasrao Deshmukh is keen on getting the Airport Authority of India (AAI) to hand over all the assets there to the Maharashtra Airport Development Corporation (MADC), which is developing India’s first multi-modal international hub airport in Nagpur (MIHAN).

Mr Deshmukh is the chairperson of MADC, which has formed a special purpose vehicle with the AAI to facilitate land transfer. The MADC has a 51% stake in the SPV and the AAI 49%.

IT majors like Satyam Computers, HCL, L&T Infocity and realty player Shapoorji Pallonji have all zeroed in on the Nagpur SEZ. Plus, Boeing has announced an investment of $185 million in setting up a maintenance, repair, and overhaul (MRO) facility and an aeronautical training institute here. But a key prerequisite to MIHAN and the SEZ project is upgradation of the Nagpur airport.

The MADC plans to extend the runway from the existing 3,200 metres to 4,000 metres and upgrade infrastructure at the terminal so that it is able to cater to 1,500 passengers per day. But the project won’t take off unless it gets the control of all airport assets.

20 August, 2007
Source: Economic Times

PM promises policies for rapid industrialization

The Prime Minister, Dr Manmohan Singh, on Wednesday asserted that industrialisation was critical for progress and that it offered “new opportunities and hope, especially for people in rural areas displaced by agrarian change.”

In his address on the 61st Independence Day here today, Dr Singh promised that the Government would pursue policies that would help in rapid industrialisation, while reassuring farmers that their welfare was at the core of all concerns.

The Prime Minister said that the final shape being given to a national policy for rehabilitation and resettlement for all those displaced by major projects would ensure that displacement did not lead to impoverishment; that those who lose land do not lose livelihoods and those who have lost employment get better opportunities.

The Prime Minister announced a slew of initiatives including extension of the National Rural Employment Guarantee Act across the country, a programme to invest Rs 25,000 crore in agriculture and old age pension to citizens over 65 years and living below the poverty line.

The Government also plans to open 1,600 new industrial training institutes (ITIs) and polytechnics, 10,000 vocational schools, 50,000 skill development centres and provide vocational training to 100 lakh students annually with the active help of private sector.

16 August, 2007
Source: Hindu Businessline

Economy

India's growth to steam on, unharmed by political woes

India's economic reform process is as good as stalled due to differences between the government and its communist allies, but analysts say the economy has gained its own momentum and will keep growing robustly for now.

The latest and loudest disagreement, which blew up at the weekend over a nuclear energy deal with the United States, has yet to be resolved. While many expect a compromise rather than a new election, reforms are seen as the likely losers once again.

The four communist parties, who provide crucial support to the coalition headed by Prime Minister Manmohan Singh, have already blocked plans for partial privatisations. Reforms of pensions and insurance have also slowed to a crawl.

Despite this, economic growth has averaged 8.6 percent a year since the coalition took power in 2004. Growth hit 9.4 percent last fiscal year and foreign investors, attracted by the long-term prospects, have poured in billions of dollars.

"I don't think it will derail the strong economic performance, but (it) will delay reforms," said D.K. Joshi, principal economist at domestic rating agency Crisil.

20 August, 2007
Source: Economic Times

Inflation dips to 4.05% on cheap food

Lower prices of essential food items, particularly vegetables and fruit, in the light of a good monsoon and receding water in the flood-hit areas pulled down inflation to a seven-week low of 4.05% for the week ended August 4, compared to 4.45% in the previous week. The wholesale price index (WPI), on which inflation is based, declined 0.1% to 213.1 points during the week under review from 213.4 in the previous week.

Receding flood waters in northern and eastern parts of the country resulted in a decline in the prices of vegetables and fruit. Prices of vegetables fell by 6.5% for the week, while for fruit the decline was 2.6%.

On a year-to-year basis, inflation declined by over a hundred basis points as it stood at 5.08% during the corresponding period last fiscal. Analysts said the inflation figure depends a lot on the base figure, which is the figure for corresponding week last year.

18 August, 2007
Source: Economic Times

Core sector growth slows down to 5.3%

Decline in production of crude oil coupled with a slowdown in output of other products pulled back the growth of six key infrastructure industries to 5.3% in June compared to 7.7% a year ago.

The growth of the six infrastructure industries, which have a combined weight of 26.7% in the index of industrial production (IIP), during the April-June quarter was also slow at 6.9% as against 7.4% in the first quarter of 2006-07, according to government data released on Friday.

Barring electricity, every other industry — petroleum refinery products, coal, cement and finished steel — recorded a slow growth in June. The sixth industry — crude oil production — saw a decline in June by 1.8% to stand at 27,74,000 tonne compared to 28,26,000 tonne a year ago. Electricity, which has the largest weight of over 10% in IIP, however, grew by 6.8% in June compared to 4.9% in the same month last year.

18 August, 2007
Source: Times of India

NCAER raises GDP growth estimate to 8.53% for 2007-08

Economic think-tank NCAER on Friday raised the forecast for the country's economic growth in this fiscal to 8.53 per cent in the backdrop of good corporate performance and expectations of higher farm sector growth.

Expectations of better monsoon and impact of higher capital inflows have led to higher growth estimates for these two sectors, it said.

NCAER's revised estimate comes days after International Monetary Fund raised the GDP forecast to 9 per cent in 2007. While Reserve Bank of India expects economy to grow at 8.5 per cent, the Economic Advisory Council to the Prime Minister has pegged the economic growth rate at 9 per cent in 2007-08.

According to NCAER, agricultural production outlook for 2007-08 has improved, thanks to expectations of a better monsoon than last year. The weighted average index of rainfall during June-July 2007 is 18 per cent above normal rainfall, as compared to eight per cent for the same period in 2006.

10 August, 2007
Source: Economic Times

SEZs

JDU to launch campaign against SEZs

JDU President Sharad Yadav on Sunday accused the Centre and the state governments of promoting SEZs with the sole aim of divesting farmers of their lands and said his party would launch a nationwide campaign to oppose it.

Yadav, after meeting a group of farmers who would be loosing their fertile land for the SEZ, apparently hit out at former prime minister H D Devegowda saying "why this son of the soil is keeping silent?, without taking the latter's name. "It is a major scam in the name of SEZ," Yadav alleged.

He urged farmers in Nandagudi not to sell their lands and suggested in the event they want to give land to the SEZ, farmers should demand 50 per cent stake in it.

There are several PSUs in the country that have turned sick, Yadav said and asked the governments to promote SEZs in those land instead of acquiring land from farmers.

19 August, 2007
Source: Economic Times

Centre asks states to clear air on pending SEZs

The Centre has given an ultimatum to the states to clear the backlog of pending SEZ proposals by August 23, failing which it may scrap over 170 applications.

States have been asked to revert to the Centre by August 23 on the status of pending SEZs. If it does not get their reply by that date, it may even scrap these proposals.

There are 268 proposals pending with Commerce Ministry, which can go to the Board of Approval only after they are approved by state governments. Of these, there are about 170 cases on which state governments' response is awaited.

Although the SEZ Rules require the promoters to get the state clearance before the proposals are taken up by the BoA, many of the applications are sent directly to the Centre.

This way the promoters try and speed up the process of clearance both at the central and state level. Applications for formal approvals can be taken up only if the promoters have land in possession. The government has so far given formal approval to 364 proposals and in-principle nod to 180 other. This takes the total number of clearances to about 550.

19 August, 2007
Source: Economic Times

Ambani's SEZ a casualty under new UP policy

With the adoption of a new Special Economic Zone (SEZ) policy by the UP government, the Anil Ambani group’s proposal to set up an SEZ over about 2,000 acres of land in Noida, is all set to be turned down.

The state’s new SEZ policy was approved by the cabinet at its meeting presided over by chief minister Mayawati on Saturday. Encompassing the provisions enacted by the Centre, the state’s new policy envisages land for the purpose of the SEZ would not be acquired forcibly under the land acquisition act (LAA).

This is a major shift in the new policy, which otherwise incorporates many other provisions for encouraging private-public partnership (PPP) and protecting the interest of farmers. As for the land acquisition, the policy states clearly that no coercive methods would be used under the LAA. For this purpose, land would be taken only after taking farmers into the confidence.

This way the policy would immediately affect the Anil Ambani’s group, which has fallen short of requisite land for its multi-purpose SEZ at Noida. A project submitted to this effect during the tenure of the Mulayam Singh Yadav government had already been referred to the Centre by the state government.

19 August, 2007
Source: Economic Times

Agriculture

'Overall crop situation in the country remains good'

The overall crop situation in the country is "good" despite few areas like Bihar being hit by recent floods, a top government official said.

"In few district of Bihar there are some damage but overall that would not not affect the crop situation," Agriculture Secretary P K Mishra told reporters on the sidelines of a workshop on modern terminal market here

He said the Kharif sowing so far was higher than the corresponding period last year. The sowing is higher in case of oilseeds, pulses and cotton, he said, adding that in case of rice it was same as last year.

20 August, 2007
Source: Economic Times

Spices Board introduces e-auction in cardamom trading

The Spices Board has introduced electronic auction in cardamom trading with a view to promoting transparency in transactions and discouraging formation of cartels in the sector.

The e-auction system would be launched by Minister of State for Commerce Jairam Ramesh on August 23 in Tamil Nadu's Bodinayakanur, which is a major assembling centre for cardamom and accounts for 80 per cent of traders of this commodity and 21 per cent of the total cardamom auctioned.

Developed in collaboration with Tata Consultancy Services, Bangalore, the system is aimed at providing transparency in transactions, promoting competition for purchases and revamping existing manual procedures.

The Board would be introducing e-auctions in four other auction centers of Vandanmedu, Kumili, Thekkady and Pulianmala in Idukki district of Kerala in due course based on the performance of Bodinayakanur, an official release said on Monday.

20 August, 2007
Source: Economic Times

PNB to set up farmers training centre in Orissa

Punjab National Bank (PNB) has envisaged interest to set up a farmers training centre here.

Official sources said bank chairman K C Chakraborty met Chief Minister Naveen Patnaik here on Monday and the state government agreed to provide requisite land for the purpose in Ganjam district. The farmers of Orissa would be imparted training on modern technologies in cultivation, Chakraborty said.

During the meeting, Patnaik asked him to provide loan and financial assistance to self-help groups, particularly to those run by women created under Mission Shakti, the state's initiative to make women economically independent.

Chakraborty, on his part assured the government that the bank would like to provide education loans to students in the state.

20 August, 2007
Source: Economic Times

India unlikely to meet Rs 1,000 cr floriculture target by 2010

Hampered by bottlenecks like infrastructure, plant material, production technology and lack of cold storage facilities, India's floriculture exports are likely to stay around Rs 700 crore by end of 2010 against projected level of Rs 1000 crore, Assocham said today.

It said although five agri-export zones have also been set up in Sikkim, Tamil Nadu, Uttaranchal, Karnataka and Maharashtra, Karnataka continues to contribute 75 per cent of flori production without significantly enhancing to export quality floriculture. "India's contribution to world flower trade of about 12 billion dollar remains much below the potential," the release said.

In order to meet the ambitious export target of Rs 1000 crore by 2010, key issues like economies of scale, product range, incorporation of latest varieties and quality control and certification, besides creation of effective cold chain management need to be addressed.

20 August, 2007
Source: Economic Times

Sector Specifics

Oil & Energy

ONGC's refinery to come up at Kakinada

Amid reports of Oil and Natural Gas Corp dilly-dallying on setting up a refinery at Kakinada in Andhra Pradesh, Minister of State for Commerce Jairam Ramesh has said the project has the Prime Minister's backing and will be implemented.

"The Prime Minister has said categorically that the ONGC refinery would come up at Kakinada," Ramesh, a Rajya Sabha MP from Andhra Pradesh, said in an interaction with journalists from the state.

ONGC had in a pre-feasibility report found the size of 7.5 million tonnes economically unviable and was now doing a techno-economic analysis of a 15 million tonne unit. Even on the enlarged capacity, it had sought fiscal incentives like exemption from local levies and free of cost land.

19 August, 2007
Source: Economic Times

Power

Dabhol power plant shut again

The Dabhol power plant in Maharashtra has been shut down after gas supplies to the beleaguered project were stopped due to a court order on pricing of the fuel.

The operations of one 740 MW unit were stopped six days ago, sources in Ratnagiri Gas and Power Pvt Ltd, the owner of the 2,184 MW plant, said.

Gujarat High Court had on July 31 stayed the Centre's decision to raise prices of regassified-LNG supplied to consumers like Essar Steel and Gujarat State Petroleum Corp (GSPC) to subsidise fuel cost of Dabhol power plant.

Petronet LNG Ltd, which is importing 1.25 million tons of liquefied natural gas (LNG) for the power plant on short term basis, was supplying the fuel after the price of high cost short-term LNG was averaged with that of its long-term imports.

This essentially meant that fuel prices for Essar Steel and GSPC, which were paying $3.86 per million British thermal unit for the R-LNG, went up to $5.8 per mBtu. This is the price Dabhol is paying for the gas instead of import price of 8-9 dollars per mBtu.

While Essar Steel had petitioned Delhi High Court against the move, GSPC had approached the Gujarat High Court. The Gujarat High Court on July 31 stayed the new pricing. Gas supplies to Dabhol stopped as RGGPL was not willing to pay the import price, they said.

17 August, 2007
Source: Economic Times

New hydro electricity policy in two months: Govt

A new hydro electricity policy will be unveiled in two months, government told the Lok Sabha on Friday while acknowledging that the target of producing 41,110 MW of power fell short by about a half in the 10th Plan.

During the 11th Plan, the electricity generation is targeted to be 78,700 MW, Power Minister Sushil Kumar Shinde said in reply to questions in the House.

"New policy on hydro electricity is coming in two months," he said, adding it is aimed at addressing the problem of power shortage in the country. He said the energy and peak shortages at the end of 10th Plan were 9.6 per cent and 13.8 per cent respectively as compared to 7.5 per cent and 11.8 per cent at the end of 9th Plan.

The capacity addition during the 10 Plan was proposed to be 41,110 MW but only 21,180 MW was achieved, the Minister said. He said one of the main reasons for the shortage was inability of states to add capacity. There is availability of 1,50,000 MW of electricity in the Himalayan region, Shinde said.

As part of efforts to tap it, the central government recently signed an MoU with Arunachal Pradesh for generation of 21,000 MW, he said.

17 August, 2007
Source: Economic Times

30,000 MW to be added using imported N-fuel

The Department of Atomic Energy (DAE) plans to add 30,000 MW of power based on imported nuclear fuel in the near future. The site selection committee of the DAE has already identified five coastal sites for setting up the nuclear power plants, said Dr S.K. Jain, Chairman and Managing Director, Nuclear Power Corporation of India Ltd (NPCIL).

Dr Jain said that the committee has identified sites in Gujarat, Andhra Pradesh, Orissa and West Bengal for setting up the plants. Each plant would have a capacity of 6,000 MW to 8,000 MW. It would require six large reactors, each having 1,000 MW to 1,650 MW configuration.

On the question of private sector participation in nuclear technology, Dr Jain said, “Today, the private players do not have skills to handle nuclear technology. Nor they would be able to deal with the statutory requirements of the Atomic Energy Board. These skills cannot come overnight,” he said.

16 August, 2007
Source: Hindu Businessline

Banking & Finance

UBI hawks savings a/cs to street vendors

Union Bank of India (UBI) has initiated a financial inclusion plan for hawkers in Mumbai by enabling them to open saving bank accounts with the bank. Under the project, hawkers would be able to transact with the bank, using biometric smart cards.

“There are close to 2.5 lakh hawkers registered with the Hawkers Association of Mumbai. Union Bank is targeting to cover about one lakh hawkers under its financial inclusion plan.” said Union Bank of India chairman and managing director MV Nair.

As per the arrangement, the bank will issue biometric cards to hawkers, who, in turn, can deposit their savings with the bank. The bank has appointed Fino Fintech as its business correspondence in order to reach out to hawkers. The IT company, Fino, in which Union Bank has close to 7% equity stake, will provide technological back-up to this project. It will provide the biometric card and machine. In order to cover one lakh hawkers, the bank will require 250 biometric terminals.

17 August, 2007
Source: Economic Times

South Africa's Standard Bank plans Indian branch

South Africa's Standard Bank plans to establish a branch in India and had applied to convert its Angolan representative office into a bank, Chief Executive Officer Jack Maree said on Wednesday.

Maree told an analysts presentation on the group's first-half results that the group, Africa's biggest bank by assets, aimed to become a bigger player in Nigeria, Ghana, Angola, Kenya and Tanzania

15 August, 2007
Source: Economic Times

SME credit growth of public sector banks tops 25%

Public sector banks’ overall credit exposure to small and medium enterprises grew 25.81 per cent in fiscal year 2006-07 to Rs 1,84,589 crore, surpassing the minimum 20 per cent year-on-year growth targeted for this sector.

SME credit exposure of PSBs (including the State Bank Group and IDBI Bank) stood at Rs 1,46,718 crore as on March 31, 2006. In fiscal 2005-06 also, the PSBs’ overall exposure to SME sector grew over 20 per cent.

The policy package on stepping up credit to SME sector, announced in Parliament in August 2005, had set the objective of doubling the flow by 2009-10, within a period of five years.

Banking industry sources said that some of the large PSBs are targeting SME credit growth of about 25 per cent this fiscal.

13 August, 2007
Source: Hindu Businessline