Delhi Metro to change route of its special line to airport - read more news...

Weekly reports on Indian economy and business

Finance Minister P Chidambaram said that the Government was keeping a close watch on inflation and would keep it under control. While industry associations insist that further interest rate hikes will adversely affect GDP, surplus funds in the banking system might mean that the victory over inflation might be a short-term one. This is a tight rope walk indeed for the planners!

- Chillibreeze Business Research Team

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

Government Policy & Infrastructure

Delhi Metro to change route of its special line to airport

With Delhi Urban Arts Commission and city administration raising objections, Delhi Metro network on Thursday night decided to change the route of its special rail line connecting the Airport with the heart of the capital.

As per the fresh plans, the Metro line linking New Delhi Railway Station and the Airport will now take the Karol Bagh- Ridge Road-Dhaula Kuan route.

Earlier, the Metro Line was to be built along the Sardar Patel Marg, but had to be changed following security concerns raised by the New Delhi Municipal Council.

The decision was taken at a meeting attended by Delhi Metro chief E Sreedharan and Delhi Chief Secretary R Narayanswami, official sources said.

The new route will be slightly longer than the earlier one that stretched to 9.5 km.

July 26, 2007
Source: The Times of India

Cheaper credit for SMEs on the cards

Small and medium enterprises (SME) can look forward to cheaper credit. Apart from lower interest rates, they are also likely to get more credit from the banking system and direct access to the Small Industries Development Bank of India (SIDBI).

The National Board for Micro, Small and Medium Enterprises (NBMSMEs) has urged the Reserve Bank to direct banks to earmark at least 10% of their loan disbursals to micro and small units. SIDBI should expand its direct lending and function like a bank, the recently-constituted Board has emphasised.

According to government sources, the Board also discussed ways to ensure that cost of credit for small units is at least 1% cheaper than the prime lending rate (PLR) which is available to large corporates. At present, the rate at which the loans are extended to large enterprises ranges between 9% to 10%. If the board has its way, SMEs could be given loans at 8% or 9%. At present, SMEs have to pay at least 11% on loans from the banking system.

July 25, 2007
Source: The Economic Times

FDI in retail to come with riders

Entry of FDI in retail, on the backburner since Congress president Sonia Gandhi expressed concern over the fallout of entry of large chains like Wal-Mart on corner stores, might move forward with checks on retailing of cheap imports and monopoly formation - factors that can impact small shops adversely.

The view in government is that entry of FDI as well as large domestic players in retail offering a range of goods can be considered afresh once specific measures to buffer “mom and pop” enterprises are put in place. These suggestions would be part of a report that department of industrial policy and promotion (DIPP) will submit to government.

The issue is being monitored by PMO - which asked DIPP to commission a study on retailing - and there is a confidence that small shops are not threatened to the extent that has been made out. Corner stores are seen as fairly resilient with their ability to provide “home service” seen as an USP not likely to diminish. “We can see entry of food chains like McDonalds did not drive the dhabas or Indian fast food suppliers out of business. Similarly, small shops will adapt and survive,” said an official source.

The DIPP report is expected to suggest guidelines that would prevent business practices that could deliver an unfair advantage to foreign entrants in retail trade. Large retailers turning operation into monopoly is another aspect that would be addressed.

July 24, 2007
Source: The Times of India

Metro airports may set up entertainment zones

As you wait at the airport to board your flight, killing time with games, some news and entertainment, perhaps free Internet browsing too, would not be a bad idea after all.

Working on the lines of the Changi Airport in Singapore, airports in Indian metro cities are exploring the possibility of setting up ‘entertainment zones’ in the passenger waiting areas soon.

Sources told Business Line that Mumbai airport would be the first one to have such systems followed by all metro airports. Mumbai airport already has a Wi-Fi system in place, powered by Bharti Airtel Enterprise Services, for passengers to avail the facility on their Wi-Fi-enabled laptops, hand-held devices such as pocket PCs, smart phones, mobile phones, gaming devices, and PDAs.

The telecom company told Business Line it will be through with its plans of setting up free Internet kiosks at all terminals by next month. To begin with, there will be four kiosks in all, with one at each terminal, and will be extended depending on space and usage, the company said.

Gaming zones also form a part of the company’s road map, for which content providers need to be finalised. No timeline has been set for the same.

Other airports like Delhi are also looking to setup gaming areas, a senior official from the airport said, “As we have food and beverage outlets, gaming areas would also be looked into.”

July 24, 2007
Source: The Hindu Businessline

Govt to tighten noose on excise evaders

Concerned over lower than budgeted growth in excise duty collections despite booming industrial activity, FM P Chidambaram on Tuesday said the government would leverage VAT statistics and draw a relative comparison with the declaration made by industries with regard to their excise obligation.

“Trend in VAT must mirror trend in excise,” the FM told reporters after a meeting with chief commissioners and directors general of central excise and customs. In addition, the Central Board of Excise & Customs will undertake “high impact audit” of firms producing steel, chewing tobacco and furnace oil to check possible instances of evasion.

Government’s action stems from fears that firms were evading excise duty since collections during the Q1 had increased by 6.8% while VAT mop-up rose nearly 25% when industrial output grew at double-digit rates. High level of exemptions, in addition to evasion, was seen as the other reason for low growth.

July 25, 2007
Source: The Economic Times

MRTPC lens on cement makers

Allegations of cartelisation continue to swirl around the cement industry. India’s trade practices regulator MRTPC on Tuesday ordered a probe into the business practices of 14 leading cement manufacturers. These manufacturers colluded to hike prices, alleges a preliminary report by MRTPC’s investigative wing.

The panel issued notices of inquiry against these companies after its investigation wing — the Director General of Investigation and Registration (DGIR) — submitted its preliminary report. The companies have time time till October 25 to reply to the charges. The companies include Birla Corporation, Zuari Cement, Binani Industries, ACC, NCL Industries, Gujarat Ambuja Cement, Grasim Industries, Sanghi Industries, Saurashtra Cement, JK Cement, India Cement and Ultratech Cement.

July 25, 2007
Source: The Economic Times

Allow flexible labour laws: Assocham

The government should completely deregulate the country’s handloom sector and make labour laws more flexible to help textile industry, attract FDI, upgrade technology and create adequate employment, said industry body Assocham.

“At present, domestic textile sector attracts less than 1.5% to the overall FDI in India. This is because domestic textile sector continues to struggle under shackles of stringent laws and is yet to get deregulated,” said Assocham president Venugopal Dhoot.

He said the technology upgradation fund schemes (TUFs) for the textile sector, which were introduced last year in March, were hardly used for upgradation. The chamber has suggested that the government should consider bringing in more flexibility in labour laws and amendments in the fiscal policies.

July 25, 2007
Source: The Economic Times

FDI in SSI units may be freed from export strings

In a move that comes as a big boost to foreign companies looking to invest in sectors reserved for small scale units, the government plans to scrap the mandatory export obligation imposed on such investments. As of now, FDI in sectors reserved for SSIs is permitted only if the company concerned agrees to export 50% of the production.

As many as 114 items are reserved for SSIs and the list includes expresso coffee maker, electric kettle, chemicals, dyes, PVC footwear, pens and steel items. Foreign investors have been demanding that export obligation on investment in these areas should be scrapped.

The SSI department has discussed the issue with the department of industrial policy & promotion (Dipp), senior government officials said. While there is unanimity on the need to scrap the mandatory export obligation, the modalities are yet to be decided. The government wants to avoid political criticism while going ahead with the liberalisation, they added.

July 24, 2007
Source: The Economic Times

Economy

23 sectors record over 20% growth, says CII survey

Cold rolled steel strips, pig iron, textile machinery, industrial gases, electric fans, microwave ovens are some of the sectors that reported growth rate of more than 20 per cent in the April to June period of the current year over the same period last year.

Out of 101 sectors reporting production, 23 sectors recorded over 20 per cent growth, 27 sectors recorded growth rate of 10-20 per cent, 36 sectors registered growth rate of up to 10 per cent, while 14 sectors reported negative growth, according to an industry survey conducted by the Confederation of Indian Industry.

August 5, 2007
Source: The Hindu Businessline

Further rise in interest rate will impact GDP growth’

A further rise in the interest rate will impact GDP growth and bottomline of corporates, according to the PHD Chamber of Commerce and Industry.

Against the backdrop of moderate inflation and rising rupee, the RBI, in its Review of Monetary and Credit Policy to be announced on Tuesday, should take steps so that there is no further hardening of the interest rate structure. The impact of dear money policy is already visible in the reduction in offtake of non-food credit. The Monetary Policy should ensure that adequate funds are available at affordable cost to the industry, especially to the micro, small and medium enterprises. The prime lending rate is high compared to international interest rates and is impacting the competitiveness of the domestic industry and exports. The key rates need to continue at the existing level, if it cannot be brought down, so that balance between growth rate and inflation rate is maintained, the chamber said.

July 31, 2007
Source: The Hindu Businessline

Inflation Watch

The Finance Minister, Mr P. Chidambaram, said on Friday that the Government was watching inflation situation carefully and promised that all necessary steps would be taken to control it.

“There is nothing to worry… Whatever steps are needed will be taken to control prices. We are watching the situation carefully. Let me say the rise is mainly due to pressure on primary articles and seasonal factors,” Mr Chidambaram told reporters here. The Wholesale Price Index based inflation accelerated to a six-week high in the week ended July 14 to 4.41 per cent, higher than the annual rise of 4.27 per cent in the previous week.

July 28, 2007
Source: The Hindu Businessline

Victory on inflation short-lived

With inflation in India holding near a 13-month low of about 4.3%, government bonds are rallying: Traders don’t see any reason for the central bank to raise interest rates in its July 31 monetary-policy announcement.

While that may turn out to be the correct bet, the surfeit of cash the monetary authority is allowing to slosh about in the banking system raises the risk that the victory against inflation will be short-lived.

The overnight interbank call-money rate has averaged just 0.5% this month. To be considered “normal,” the call rate should fall within the central bank’s benchmark interest-rate corridor. It isn’t even close. The floor of the band is currently set at 6% and the ceiling is at 7.75%.

The $14 billion increase in the Reserve Bank of India’s foreign-currency reserves since the end of May seems to suggest the central bank has added rupee funds to the banking system.

At the same time, it has done little to drain the excess liquidity. Banks haven’t been asked to set aside more money as cash balance with the central bank since a quarter-percentage-point increase in the reserve ratio on April 28.

The Reserve Bank is routinely withdrawing Rs 30 billion ($745 million) from the banking system by borrowing surplus cash for a day at 6%. Banks have plenty more idle cash, yet the central bank has refused to increase the self-imposed limit on the amount it will absorb on a temporary basis.

Nor does the monetary authority appear very willing to soak up liquidity on a more permanent basis. The central bank is only selling Rs 45 billion in bonds and bills this week, less than half last week’s amount.

All of this suggests a deliberate accommodation of easy liquidity conditions even when the stated stance of the monetary policy is to put inflation control above all other objectives.

July 25, 2007
Source: The Economic Times

Strong Re hits textile exports

The appreciating rupee has dragged down textile exports in the first quarter of the current fiscal to about $5 billion, which is 36% less than the expected $7.5 billion.

Textile minister Shankersinh Vaghela, however, is confident that the export target of $25 billion set for the current fiscal would be met as the bulk of orders come during the last two quarters of the fiscal. The package announced by the government earlier this month would also aid the exporters, he said.

He said the package, which is effective from April, would help the export sector overcome the problems posed by the strengthening rupee, which has appreciated by more than 11% since August last year.

Vaghela said the textile ministry will push for increasing drawback rates further, expedite the refund of terminal excise duty and make the foreign currency account of exporters interest bearing.

July 25, 2007
Source: The Times of India

Turn savvy: Slimmer PSUs show the way

The age of the stodgy Indian PSU is over. Even as the economic reforms have played out in India, the public sector has seen an image makeover like never before.

A pre and post liberalisation survey by Sunday ET shows that India’s largest companies of 1991 — IOC, SAIL, SBI, HPCL, BHEL and BPCL — are now producing 10 times more revenues with same, and in some cases, almost half the number of employees. Incidentally, the top 10 companies of the country during the pre-liberalisation period were all PSUs.

A look at 32 top listed companies of 1991 shows that their productivity level in terms of profit (net profit/number of employees) has improved almost 14.5 times. The latest available figures (March 2006) show an increase of profit per employee from 0.40 lakh in FY92 to Rs 5.9 lakh in FY06 for the 32 listed PSUs. The aggregate revenue per employee figure for 32 listed companies increased by 8.5 times during the 16 year period.

Take the country’s biggest bank SBI for example. It has seen its profit go up 25 times with 89% of the 1991 workforce, resulting in productivity improvement of 28 times. For equipment major BHEL, though the workforce has come down to 59%, the maximum reduction, its profit has gone up by 11.2 times.

Almost all the PSUs have trimmed their workforce since then. There are some, which have added people as well such as Oriental Bank, Corporation Bank, BPCL and NALCO.

July 22, 2007
Source: The Economic Times

SEZs

Reliance Energy bags Sasan mega power project

The government on Monday awarded the 4,000 MW Sasan ultra mega power project to Anil Ambani's Reliance Energy as the company submitted the lowest bid of Rs 1.19616 per kilo watt hour.

"The revised bid of Reliance Power Ltd quoting levelised tariff of Rs 1.19616 per kilo watt hour was the lowest of the three bids ...accordingly, the eGoM has advised that the procurer should consider taking immediate action to issue the letter of intent to the lowest bidder," Power Minister Sushilkumar Shinde told reporters here.

Reliance Power Ltd (RPL) is a subsidiary of Reliance Energy Ltd.

Shinde was heading the empowered Group of Ministers (eGoM) on ultra mega power projects which met for the fifth time to take a decision on the vexed issue.

Sasan Power Ltd, the special purpose vehicle set up by Power Finance Corporation for setting up the project, had asked three other bidders - RPL, NTPC and Jaiprakash Associates - to submit fresh bids. NTPC and Jaiprakash Associates, however, did not change the prices.

The eGoM directed the matter to be put before the board of Sasan Power Ltd for "expeditious action."

July 30, 2007
Source: Hindu Businessline

Carlyle invests $ 41 mn in Great Offshore

US-based private equity firm Carlyle on Friday said it has invested $ 41 million (about Rs 1,644 crore) in Great Offshore, a city-based service provider engaged in the oil and gas sector. The investment has come through Carlyle Asia Growth Capital Partners, a $ 680 million fund.

Great Offshore provides services for oil and gas players to support their exploration and production activities. It has a fleet of 40 vessels, including drilling rigs, platform supply vessels, multi-support vessels, anchor handling tugs and harbour tugs.

27 July, 2007
Source: The Economic Times

SEZ status for jewellery park

After a long wait of three years, the gem and jewellery park at Ichhapore has finally got special economic zone (SEZ) status with the Union ministry of commerce notifying it on Saturday. The park, promoted by Gujarat Hira Bourse (GHB) is likely to start buzzing with this development.

GHB secretary Nanu Vanani said, "We expect the park to develop much faster now that SEZ status has been given." The park is being developed in three phases. In the first phase, the plots will be allotted to members so that they can also start construction work. For infrastructural development, tenders will be awarded soon.

With a functional airport and the possibility of more international flight connectivity, the park here will be a successful project, he adds.

26 July, 2007
Source: The Times of India

Mittal pays first instalment for 49 pc in Bhatinda

India-born billionaire Lakshmi N Mittal on Wednesday made a payment of Rs 500 crore as the first instalment for picking up 49 per cent stake in HPCL's Rs 18,919 crore Bhatinda refinery.

Mittal Investments Chairman L N Mittal today handed over a cheque of Rs 500 crore to HPCL chairman and managing director Arun Balakrishnan here.

Mittal has picked up 49 per cent in Bhatinda Refinery, the same as Hindustan Petroleum. The balance two per cent stake is with financial institutions.

The project is being financed in 1.5:1 debt-equity ratio. Total equity investment by Mittal and HPCL would be Rs 3,577.50 crore each.

Mittal's investment in Bhatinda is the single largest foreign direct investment (FDI) in the refining sector and his coming on board has helped the project take off, Petroleum Minister Murli Deora had said earlier.

25 July, 2007
Source: the Economic Times

We don't want Reliance to colonise us, say farmers

It's a hot, humid Sunday morning in northern India, but the oppressive heat does not deter a group of about 15 farmers from trudging door-to-door, offering advice and sometimes warnings.

"Do not sell your precious land. Even if you are offered millions of dollars, do not sell. It is your only source of livelihood," Mahavir Gulia, the leader of the group, tells a villager in Mundha Khera, 100 kilometres (60 miles) from New Delhi. "Sell your land and you will lose your identity," he warns another as the group winds its way through the cluster of austere mud, brick and cement homes.

Gulia is trying to spell out the dangers to locals whose land has been earmarked for a Chinese-style business enclave - a joint venture between the Haryana state government and Reliance Industries, India's largest private conglomerate.

"We want to be sure our fertile land that gives us three crops a year does not end up as part of the Reliance empire," he said. "We don't want Reliance to colonise us. Land is what sustains us farmers with food, respect and dignity."

Many farmers find that their land is now part of the 25,000-acre Reliance-Haryana government Special Economic Zone (SEZ) -- a project encouraged by the Indian government to spur industrialisation, infrastructure development and push economic growth into double digits.

For foreign and domestic corporate giants, the SEZs are a tempting option -- promising a way around the country's notoriously slow, corrupt and spirit-crushing bureaucracy. But opponents say the government is merely sidelining the still-crucial farm sector -- stealing labour and prime land from a sector which employs more than 60 percent of the workforce and generates more than a fifth of India's gross domestic product.

Journalist-turned-activist Praful Bidwai says the years 2006 and 2007 "will be noted in history for the launch of the Great Land Grab". "It's happening across India," added social activist Vandana Shiva, pointing to farmers' protests in the Communist-ruled eastern West Bengal state in March.

Fourteen farmers were killed when police entered their village to evict them from land designated for a SEZ - causing a furore and polarising public opinion. Not that land grabbing is a new concept in India - tribal peoples have long seen their forest land shrink with the march of urbanisation.

But SEZs are different, says Shiva. "These are enclaves of privilege, insulated from the laws of the land - whether it is labour laws or environment laws."

July 24, 2007
Source: The Economic Times

Defence Min wants security clause on FDI in SEZs

The Defence Ministry has cautioned against giving clearances to FDI in special economic zones from "countries of concern and unfriendly entities", insisting that a National Security Exception Clause be introduced to regulate overseas investment.

According to fresh guidelines being suggested by Defence Ministry, "foreign participation in sensitive sectors and from countries and entities of concern should be subject to appropriate screening irrespective of the fact whether the FDI is permitted through automatic route or Foreign Investment Promotion Board".

The Defence Ministry is of the view that there is a need for effective monitoring and National Security Exception Clause to regulate FDI with focus on security, official sources said.

It also wants institutional mechanism for defining policies, which should include proper feedback and control. It has also been made clear to Commerce Ministry that nationality of persons working in SEZs should be considered while giving clearances.

In many cases, SEZ operators are bringing in staff from "countries of concern" to get their projects off the ground, the sources said.

Armed forces have asked the government to keep SEZs at least 10 km away from the country's borders and 20 km from sensitive installations like airfields, radars and communication nodes for security reasons.

July 22, 2007
Source: The Economic Times

Agriculture

Bihar, UP, Assam & Orissa reel under floods

The farm ministry said on Monday it was still assessing the impact on crops of massive monsoon floods in the country’s east, but state officials said vast areas of rice and corn had been damaged.

In the rice-growing state of Bihar close to one million hectares of cultivable land have been submerged by some of the worst floods in living memory, said Manoj Kumar Srivastava, an official managing relief efforts. “We are yet to get detailed reports on the impact of floods on crops,” said NB Singh, agriculture commissioner, adding “But corn output will take a hit.”

Assam, Uttar Pradesh and now Orissa have also been inundated after unusually heavy rain caused rivers to burst their banks. Officials in Assam, another top rice producer, said 350,000 hectares of land had been inundated for a week now. Orissa mainly produces rice.

The agriculture commissioner said rice could withstand some flooding but maize, millets and pulses wither fast. Major crops are planted ahead of the monsoon in June, including rice, cotton, oilseeds and sugarcane, and harvests begin in September-October.

August 7, 2007
Source: Economic Times

SMS service for agriculture-related problems

Farmers in Haryana are using the SMS (short messaging service) facility on their mobile phones to get answers to their agriculture-related queries.

A free SMS service started by the state's agriculture department in Feb this year has become quite a hit with farmers of the state. They can get answers to all their queries by sending an SMS to a number assigned by the state government.

A spokesman of the department said Monday that they had received 1,134 SMSs till July-end and all had been answered. The department is receiving the queries on the number - 9915862026. No calls can be made on this number, however. The department was the first one in the country to start this facility for farmers.

Out of the total SMSs received, 829 were related to problems of agriculture, 273 for horticulture, 6 for fisheries, 17 for animal husbandry and 9 for forests.

The spokesman said after receiving the message, concerned scientists and officials contacted the farmers through telephone within 24 to 48 hours to answer their queries.

Senior officials of the agriculture department were actively monitoring the service, he added. The department has also introduced toll free numbers for farmers to call and get replies to their queries.

August 6, 2007
Source: Economic Times

Agri biotech on fast track in India

Riding on the success of Bt cotton, agriculture biotechnology has emerged as one of the fastest growing biotech industries in India in recent years, a latest report of the US department of agriculture (USDA) has said.

“It is the third largest contributor among various biotech sectors with total revenues of more than $229 million in 2006-07 fiscal, registering a growth of 55%,” the report said. Export revenue from agriculture biotechnology has grown to $11.6 million in 2006-07 from around $8 million in the previous year, it added. The report, titled ‘India biotechnology’ and prepared by Santosh Kumar Singh, claimed Bt cotton coverage has surged over the past five years to cover 70% of total cotton area in 2007.

July 27, 2007
Source: Economic Times

Sector Specifics

Energy

Essar bids for three oil, gas blocks in Iran

Essar Group, which has six hydrocarbon assets abroad, has bid for oil and gas blocks in Iran.

Sources said, “National Iranian Oil Co (NIOC) had put on offer 17 offshore and onshore oil and gas blocks for exploration and development. Essar through its Mauritius-based investment arm, Essar Infrastructure Holding Ltd, has bid for three blocks.”

While declining to disclose any further details, sources told Business Line that Essar has bid for two onshore and one offshore asset. These are Naft Shahr onshore block, Bandar Abbas onshore block and Laleh offshore block.

The 17 blocks include five offshore and 12 onshore, spread across nine provinces in the country, covering a 1,29,000 km area. Iran sits on the world’s second largest oil and gas reserves, a huge potential prize for international oil companies.

Essar has bid alone for these blocks, sources added. Recently, Essar submitted bids along with Gujarat State Petroleum Corporation Ltd for a block in Syria. Currently Essar, through Essar Exploration and Production, holds two blocks in Mynamar, three in Madagascar and one in Nigeria. Essar has been scouting for opportunities in upstream sector in 12 countries in West Asia, Central Asia, South-East Asia and Africa.

The company plans to produce 1,50,000 barrels of oil a day from its domestic and overseas fields in the next three years.

August 7, 2007
Source: Hindu Businessline

RIL pricing formula not OK: CoS

The committee of secretaries (CoS), which has submitted its report on the vexed issue of pricing of RIL’s KG Basin gas, has cautioned the petroleum ministry against approving the company’s market prices before a final decision is taken on a transparent gas allocation and utilisation policy.

The CoS report, submitted on Friday, has questioned RIL’s gas pricing and bidding process. It said the gas pricing formula, submitted by RIL, suffers from several infirmities in respect of both the formula employed and the bidding process. It advised the policy should be formulated by the petroleum ministry in consultation with other arms of the government, including the Planning Commission and the power and fertiliser ministries.

The report also cautioned the government against approving the formula as it would weaken NTPC’s court case against RIL. RIL is entangled in a legal battle with gas consumers NTPC and Reliance Natural Resources (RNRL). The consumers allege RIL is backing out of contracts signed earlier for supplying gas.

August 7, 2007
Source: Economic Times

Reliance, Tata evince interest in Punjab's 3 power plants

Corporate leaders like Reliance Energy and Tata group have evinced interest in Punjab government's proposed three power plants of 5,000 mw -- a move that will make the state power surplus within three and half year.

"Total power generation in Punjab is 6,500 mw against the demand of 9,000 mw, a shortage of about 30 per cent. It has been decided to install three power plants of 5,000 mw on BOT basis to make the state a power surplus state," Punjab Chief Minister Parkash Singh Badal, who was campaigning for SAD-BJP candidates for civic polls, told reporters.

Badal said 90 per cent formalities to install the power plants in Amritsar, Goindwal and Sangrur have already been completed and tenders would be called soon.

August 6, 2007
Source: Economic Times

Crude facts: Your fuel bills may go up again

It’s time to brace for a price hike in petrol and diesel. With state elections still far away and inflation under control, the general view in the government is that this is an opportune time for increasing fuel prices with minimal political opposition.

The feeling is that the oil marketing companies (OMCs) need to be helped as they are losing Rs 5.88 on the sale of every litre of petrol and Rs 4.80 per litre on diesel. There seems to be no respite in the near future with the average price of Brent crude crossing $77 a barrel.

The government is under pressure to hike fuel prices as continued artificial suppression of price cannot be sustained for long and would have an adverse impact on the performance of public sector oilcos.

With the inflation rate staying below 5% for several weeks now, it is felt that most economic indicators are in favour of a fuel price hike. It will, however, be difficult to increase prices of fuel to market-determined rates in one go. It is likely that the government may adopt a gradual approach by increasing price of petrol by Rs 2/litre and diesel Re 1/litre, to begin with.

August 4, 2007
Source: Economic Times

Telecom

'Reliance Comm in talks for unit stake sale'

Reliance Communications Ltd. is in advanced talks with American Tower Corp. to sell a strategic stake of up to 21% in its telecoms towers unit, and is looking at a valuation of at least Rs 350 billion ($8.7 billion) for the business, a source said.

On July 19, the company said it had sold a 5 percent stake in the unit, Reliance Telecom Infrastructure Ltd. (RTIL), to seven institutional investors for Rs 14 billion, which valued the unit at Rs 270 billion.

August 7, 2007
Source: Economic Times

Telcos oppose Trai suggestions

Private telecom operators on Monday opposed regulator Trai's recommendation to include sale and rent of building, leasing of infrastructure, vendor's credit and other income such as earning from consultancy and training fee in their adjusted gross revenue.

During the hearing in Telecom Disputes Settlement and Appellate Tribunal, the Association of Unified Telecom Service Providers of India (AUSPI) protested Trai's suggestion on including such income and said it would reduce the competitiveness of the sector.

Protesting the inclusion of sale and rent of building, AUSPI contended that their core business is to run telecom operations and not to sell or rent any premises. "This income is arising out of third party and not from our customers and is not a part of telecom earning.

It has nothing to do with the telecom licence," the AUSPI counsel said. It also opposed the regulator's suggestion to add income earned from mobile tower leasing. "Our business is not to buy or sell building and telecom equipment. We are service providers not a real estate developer like DLF," he further contended.

Trai's recommendations came on direction of TDSAT, which had in July 2006 allowed an appeal of AUSPI and said revenues arising only from telecom services should be included for levying licence fee.

August 7, 2007
Source: Economic Times

FIPB okays change of name to Vodafone Essar

The Foreign Investment Promotion Board (FIPB) on Friday notified the change of name in the mobile joint venture Hutch Essar to Vodafone Essar following the change in ownership.

Earlier Registrar of Companies had approved the change of name of cellular major Hutch Essar to Vodafone Essar following the British mobile major's acquisition of controlling stake in the JV in May.

The FIPB also notified the foreign investment limit both direct and indirect in Vodafone Essar to 74 per cent.

The FIPB notification marks the first formal step for Vodafone's entry into the Indian market. The company has already appointed a new board chaired by Ravi Ruia, Vice-Chairman of Essar Group and Arun Sarin, CEO, Vodafone Plc as the Vice-Chairman of the Indian mobile venture.

Vodafone is now expected to phase out the Hutch brand over the next few months. The company has already started using the Vodafone Essar Ltd name in all its official communication with the telecom regulator and the Government authorities.

August 3, 2007
Source: Economic Times

Call for lower roaming cost in Saarc

The Indian government is likely to play a decisive role in paving the way for a steep reduction in the ultra-high global roaming rates within the SAARC group of countries, comprising India, Sri Lanka Nepal, Maldives, Bangladesh, Bhutan and Pakistan. At present, it costs more to avail international roaming while travelling within some Saarc countries, when compared to Europe and the US, as international roaming rates in subcontinent are amongst the highest in the world.

According to sources, the communications ministry is likely to ask the Centre to take up this issue with India’s neighbours as efforts by telecom regulator Trai to facilitate better cooperation between telecom operators in SAARC countries has failed to make any serious headway.

July 31, 2007
Source: Economic Times

Cement

Cement cos report higher July output, dispatches

Cement companies continued their robust growth in production and dispatches in July and for the quarter ended July 31, 2007.

Cement major ACC has reported a 10 per cent rise in production to 1.63 million tonnes (mt) in July compared with 1.47 mt in the corresponding period of the previous year.

The Aditya Birla Group’s cement production in July rose 9.13 per cent to 2.39 mt, while dispatches when compared with last year grew 13.10 per cent to 2.39 mt. The production of the group during the first quarter of the financial year was up 6.98 per cent to 7.66 mt.

Similarly, Ambuja Cements production in July were up 18 per cent to 1.40 mt (1.18 mt).

August 3, 2007
Source: Hindu Businessline

Cement prices continue to rule high in South

Cement prices continue to rule high in the southern States despite the rains, especially in Tamil Nadu where it has gone up by over Rs 10 per bag of 50 kg in the first quarter.

The western region (excluding Mumbai), and the eastern and northern regions reported a minuscule dip.

The firm cement prices in the South augurs well for South-based companies such as Madras Cements, India Cements and Dalmia Cements.

Demand in the South, especially Tamil Nadu, is expected to be stronger in the coming months, which may pave the way for another hike, said a dealer. In Karnataka, cement costs Rs 230 a bag, up by nearly Rs 10.

In May, the Government removed dual excise duty and introduced an ad valorem duty of 12 per cent on cement sold above Rs 190 a bag. Post-changes, prices in Mumbai remained stable at an all-time high of Rs 250, whereas in Ahmedabad it declined by Re 1 in May to stabilise at Rs 222. Prices in Jaipur fell Rs 6-10 in May to stabilise at Rs 205.

A major reason for the sharp fall was annual capacity addition of 2.25 million tonnes by Binani Cement in Rajasthan.

Prices in Delhi have remained at Rs 222, while in Kolkata (East) they have dipped by Rs 5 to Rs 225. Despite the Government relaxing import norms, import has not taken off as BIS norms are mandatory for sale in the country.

August 3, 2007
Source: Hindu Businessline

Banking & Finance

Canara Bank plans tie-up with airlines, financial institutions

As part of its exercise to provide additional services to customers, Canara Bank will enter into a tie-up with several financial and service sector institutions including Kingfisher, Indian and Jet Airways. The tie-up will facilitate the bank’s customers to book air-tickets.

The proposal has already been approved and will be implemented shortly, its General Manager, Mr N. Somasundaram, said here on Sunday. He said that the bank would also tie-up with Paymate and Bill Junction.com. Credit/debit cardholders of Canara Bank could make payments towards services such as power consumption bills, water-tax and also buy consumer goods, he said.

Mr Somasundaram said that the bank would also enter into a tie-up with the National Financial Switch and State Bank of India and its subsidiaries to interconnect 20,000 automated teller machines (ATMs) of 28 banks.

August 6, 2007
Source: Hindu Businessline

SBI eyes more fee income from credit card purchases

State Bank of India wants to use its vast branch network to get a little more of the fee income from credit card purchases. It plans to acquire one million Point of Sale (POS) terminals — machines used to swipe credit cards — over the next three years and put them up at shops. Mr O.P. Bhatt, Chairman and Managing Director, State Bank of India, said that the bank’s strong presence in various cities would act as a benefit in this venture.

There are approximately 3.7 lakh such terminals, mostly in cities. Considering the vast retail trade network in the country, SBI reckons that there is immense scope for installation of more such terminals. It plans to tap the boom in retail trade by setting up POS in towns where it has a stronger presence.

The POS will enable the bank to have access to more customers and will also act as a source of income for the bank. The bank is in talks with several vendors to finalise the plan by the end of this year.

August 5, 2007
Source: Hindu Businessline

Banks trim deposit rates

Depositors may have to scramble and quickly lock into the interest rates that some banks are currently offering. The window of opportunity may not last long as deposit rates are tumbling down.

Banks have started slashing rates on short-term funds for various periods of 15 days onwards to about one year. The amount of cuts varies from bank to bank and across different periods. But it is clear that the deepest cuts have come in the very short term (15 days to 6 months).

August 7, 2007
Source: Hindu Businessline

Money lender’s diktats soon over

Amid a spate of farmer suicides that have rattled the government, the Reserve Bank of India has proposed a solution that no country has ever tried. The idea is to get all village money lenders who have thrived for centuries registered themselves with state governments and give cheaper loans to rural households.

State governments will fix a cap on loan interest rate while “registered money lenders” will be financed by regular commercial banks. Even if banks lend to money lenders at a market-related rate, the final interest for farmers will be way below the usurious levels prevailing today.

Over 27% of loans taken by rural households are from money lenders. This figure has gone up from 19% since 1991. The interest that farmers pay varies from 24% to an unbelievable level of 1000%.

July 25, 2007
Source: The Economic Times

State Bank group loses deposit game to private peers

The State Bank group has recorded a dip in its market share in deposits while its share in credit increased marginally in FY07.

According to data released by the Reserve Bank of India (RBI), the State Bank group, including the parent and its seven associates, lost its market share in deposits from 23.4% in March 2006 to 22.3% in March 2007.

July 24, 2007
Source: The Economic Times

Centurion Bank eyes pension fund business

Private sector lender Centurion Bank of Punjab said on Monday its board had approved setting up a subsidiary to undertake pension funds management.

Ahead of the news, shares in the company ended 1.47 percent down at 40.20 rupees in a firm Mumbai market.

July 24, 2007
Source: The Economic Times

Sebi regulate investment advisers

Last week at a meeting of the senior officials of the finance ministry and financial sector regulators, an issue that came up for discussion was oversight of investment advisers. It’s been a boom time for them, given the way the local financial markets have grown.

But thousands of such advisers have bloomed across the country, raising concerns relating to their ability to carry out a fiduciary obligation to clients. In India, the problem has been exacerbated considering that investment advisers provide advice to clients on a range of financial products such as equities, insurance, mutual funds, fixed income and deposits.

Ideally, when it comes to oversight of these intermediaries, some sort of regulatory convergence would have helped achieve policy goals.

However, ensuring such a regulatory convergence would mean ceding a bit of turf by all the regulators involved and that’s easier said than done.

Given the problems associated with having several regulatory bodies already in place, it may now move towards encouraging the formation of a self-regulatory organisation (SRO) to carry out this mandate. SRO, as a first-level regulator, may be favoured by the regulator since a great deal of investment advice is dispensed through the platform of media and any attempts at oversight could end up inviting flak for possible transgression of individual liberty.

July 23, 2007
Source: The Economic Times