Industrial production to grow by 10%: CMIE

News updates on Indian business and economy

India is expected to record a 10% growth in industrial production. The key contributors to this growth would be sectors like machinery, chemicals and transport. A pilot project on olive plantation is being implemented in Rajasthan and nuclear energy sector will see some major business activity.

- Chillibreeze Business Research Team

Government Policy & Infrastructure

Economy

Sector Specific – Telecom

Banking & Finance

Power

Cement

Oil and Gas

Roads

Agriculture

Government policy & Infrastructure

Delisting norms to get fair face

The companies in which public shareholding is marginally above the mandatory requirement for remaining listed would be able delist only if at least 50% of the public shareholders respond to its buyback offer. Insertion of this clause would ensure that promoters do not indulge in frivolous delisting from stock exchanges.

In other words, if public shareholding in a company is 12% — just 2% more than the norm of 10% — it would be allowed to delist only if it manages to acquire at least 6% from shareholders. According to current norms, if shareholding falls below the minimum prescribed level, the company can go in for voluntary delisting.

“If the proposal to make promoters buy back at least half of public shareholders in such cases, naturally, it would be beneficial for public shareholders as the promoters have to ensure their offer is attractive. If the company is allowed to get delisted when non-promoter holding falls marginally below the required minimum, the number of public shareholders who would be left at the mercy of the promoters in the absence of a liquid market would be large,” ICSI council member and former president Preeti Malhotra said. A better price may attract more non-promoter shareholders to exit the company, as it would give them the sense of getting good returns on their investment.

The provision has been included based on the feedback received from public and experts. While the process of delisting is being made simpler, the proposed norms will ensure it is fair on shareholders as well as promoters of the company.

Aug 4th, 2008
Source: Economic Times

Govt plans to revive indisposed PSUs by selling surplus land

Surplus land may breathe life into ailing public sector units (PSUs). The government is considering proposals from PSUs to sell 1,300 acres in various states, worth several thousand crores of rupees, and use the proceeds to revive business.

The companies which want to encash their surplus land include Heavy Engineering Corp (HEC) of Ranchi with 894 acre, Hindustan Photo Films with 150 acre in Tamil Nadu, National Textiles Corp with 130 acre of which 93 acre is in Mumbai, HMT with 30 acre in Bangalore and ITI with land in several states.

Some PSUs like HMT Chinar owning land in tourist centres are looking at JVs to set up hotels and resorts. “There is surplus land available with the PSUs. This can be put to commercial use and the money raised can be used to revive the companies,” a department of disinvestment (DoD) official said.

Aug 4th, 2008
Source: Economic Times

Economy

Industrial production to grow 10% in FY`09: CMIE

The slowdown in the industrial growth is a short-term phenomenon and the country is expected to record a 10 per cent growth in industrial production during the current financial year (2008-09), as against 8.3 per cent in the previous fiscal, Centre for Monitoring Indian Economy (CMIE) has said.

The key contributors to this growth would be sectors like machinery, chemicals and transport, CMIE said.

“The recent trends reflected in the Index of Industrial Production (IIP) have raised anxieties of a slowdown in industrial activity,” CMIE said.

This, combined with the simultaneous rise in inflation, implied that the country was facing some kind of stagflation. But this was not likely to occur, CMIE said.

“We believe that industrial growth has slowed because of capacity constraints and inflation is high because demand is high,” the report said.

The growth in metals, non-metallic mineral products and textiles was also expected to contribute in the industrial growth, the report said.

“The chemical industry will show modest growth. It would grow from 10.4 per cent in 2007-08 to 13.2 per cent in 2008-09,” the report said.

In FY’09, while the machinery industry was expected to grow by 22 per cent, the transport sector was likely to accelerate its growth sharply by 10.2 per cent, CMIE said.

Also, higher capacity expansion coupled with increased consumption of metals are likely to push up the growth of the basic metals sector by 12.6 per cent in 2008-09, it said.

In the current financial year, the cement industry would grow by 11.5 per cent, it added.

Aug 4th, 2008
Source: Business Standard

Sector Specific

Telecom

Govt allows mobile number portability; to start in 2 months

Mobile users unhappy with their current service providers will soon have the option of switching operators without changing numbers, thanks to the government announcing guidelines for the same.

Telecom Minister A Raja on Friday said MNP would first start in the four metros in next two months and subsequently roll out in rest of the country over the next 6-12 months.

As per the guidelines, the whole country will be divided into two MNP zones consisting of 11 service areas with two metros in each zone.

The MNP service provider and the mobile operators would not be allowed to have equity (direct or indirect) stake in each other's operations.

Government would distribute the licenses for MNP soon and the eligible applicant should have an experience of operating successfully, number portability solution for a mobile subscriber base of not less than 25 million in one or more countries for at least two years.

According to guidelines, the applicant company shall have a minimum paid up capital of Rs 10 crore on the date of application and a networth of Rs 100 crore.

Aug 1st, 2008
Source: Economic Times

SC asks govt to introduce do-call register

The Supreme Court on Thursday asked the government to introduce a system of ‘do-call register’ within six weeks to curb the menace of unsolicited calls to mobile phone users.

A bench headed by Justice AK Mathur directed the government to introduce the new facility in view of the failure of the recently-introduced ‘do-not-call register’ which was aimed at checking unwanted calls, mostly by telemarketing operators.

The ‘do-call register’ will list the names of cell phone users who wish to receive calls related to marketing promotions. Telemarketing companies would be allowed to call only these users. Once such a facility is in place, unsolicited calls made to all other cell phone users would become illegal, SC said. The apex court asked the government to file a compliance report within six weeks, stating that the new mechanism was being adopted by it to check unsolicited calls made to cell phone users across the country.

It also asked DoT to disconnect the unregistered telemarketing companies which had failed to register themselves within the three months’ time given to them in March this year. The court also directed the authorities to terminate the licences of those companies, which had continued to call consumers who had registered with the ‘do-not-call register’.

Aug 1st, 2008
Source: Economic Times

Banking & Finance

Exchangeable bonds may be a reality soon

There may finally be some good news for Indian companies on foreign currency exchangeable bonds (FCEB's).
The finance ministry wants the central bank to permit corporate houses to use FCEBs for import of capital goods. The ministry said RBI’s proposal to limit the use of the instrument only for financing overseas acquisitions by Indian companies is “too restrictive.”

Exchangeable bonds are instruments that allow a holding company or the parent company of a group to raise funds from the overseas markets for use by any of the group companies. The bonds will then be converted into shares of the company for which funds were raised.

The finance ministry notification had also specified that a promoter group company couldn’t utilise the proceeds for investments in the capital market or in real estate in India. RBI has also written to the government arguing that it may be difficult to monitor whether companies were adhering to the foreign investment limit.

Aug 3rd, 2008
Source: Business Standard

Power

Companies queue up for nuclear power play

It is all set to emerge as the next big rush for India Inc. Within days of the UPA government winning the trust vote on the Indo-US nuke deal and the International Atomic Energy Agency (IAEA) approving it, Indian companies seem to be making a beeline for a piece of the nuclear power business pie.

Soon after the deal was voted on, JSW Steel said it was keen to jump into the bandwagon.

Oil and gas major ONGC said it would start mining uranium with Uranium Corporation of India (UCIL). A new joint venture company, ONGC UCIL, through a 74:26 partnership, will handle ONGC’s international uranium mining operations.

Engineering and constructions major L&T is also hopeful of foraying into reactor manufacturing.

However, private sector players are yet to be allowed an entry into nuclear power generation. It will require an amendment of the existing Atomic Energy Act. Till then, R-ADAG is also believed to be holding exploratory talks with global majors for a foray into manufacture of nuclear power reactors.

Reliance Infrastructure is also exploring the possibility of the company's entry in the nuclear power and is in talks with global builders of nuclear reactor like General Electric, Russia-based Atom Story Export (ASE) and state-run Nuclear Power Corporation of India (NPCIL) for a possible JV.

Reliance Power has planned an initial investment over Rs 20,000 crore to foray into nuclear power generation.
State-owned Bhel has plans to spend Rs 1,500 crore in two years for building plants to supply components for reactors of 1,600 mw.

Aug 5th, 2008
Source: Economic Times

Cement

Cement firms unlikely to hike prices

Companies may maintain status quo on low monsoon demand, capacity addition.

Cement companies, which agreed in May to hold prices for three months to help the government contain inflation, could find it difficult to raise rates when the moratorium ends on August 14.

Top producers say the current market condition is not buoyant enough to absorb a price hike. This means the ement industry may have to continue absorbing the input cost for a major period of the current quarter.

Cement companies saw a cost push of 12 per cent on the input side during the January-March quarter on account of a surge in prices of coal, gypsum, power, freight and so on. However, before they could pass on this entire increase to consumers, the government, desperate to contain inflation, persuaded the industry to hold prices.

Most companies saw a dip in their profitability during the January-March quarter, as they could not raise prices. This trend has continued in the April-June quarter.

While companies may find it difficult to raise prices during the rainy season, the situation is unlikely to improve even after rains as large new capacities are slated to go on stream later this year. This might put a pressure on prices.

According to the Cement Manufacturers Association (CMA), the industry is likely to create an additional capacity of 32 million tonnes in 2008-09, taking the total capacity close to 240 million tonnes.

Aug 4th, 2008
Source: Business Standard

Oil and Gas

IOC, BPCL, HPCL to resume issuing new LPG connections

The government today instructed state-run oil companies to immediately resume issuing new domestic LPG connections, which was suspended since April by firms like IOC following liquidity crunch.

The newly-appointed Petroleum Secretary R S Pandey called a meeting of officials from three retailers Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum to review the accumulated wait list of LPG consumers in the country.

Pandey instructed the companies to immediately resume issuing new LPG connections and wipe-out the wait list of nearly 2.5 lakh consumers within the next two months.

There would be no restrictions in releasing LPG connections by Oil Marketing Companies (OMCs). These OMCs would continue to enrol fresh applications and release the connections," a Ministry statement said.

IOC Chairman Sarthak Behuria had on July 30 stated that the company had no money to buy new equipment including LPG cylinders and so it had temporarily suspended issuing fresh connections. The action forced by Rs 338 per cylinder loss the company made on sales of domestic LPG, had led to a wait list of two lakh consumers at the company's dealers throughout the country.

The Ministry official said BPCL had a smaller waiting list while HPCL had almost nil.

Aug 1st, 2008
Source: Economic Times

Roads

Bring in more competition in highways, airport: CCI to Govt

Competition watchdog CCI has asked the government to amend existing rules to allow more competition in maintenance of highways and airports under the public-private-partnership model.

According to A Kumar, DG, CCI, currently only one private player is given exclusive rights to maintain highways for a long period to enable them recover expenses in executing the project.

Kumar added that some parameters, like threshold level of traffic, should be brought in beyond which other players could also be allowed to manage these highways.

He said once the traffic goes up the revenue collection would be higher and the company can recover cost at a faster pace than estimated.

“The government should thus set some threshold after which competition is allowed to flourish,” he added.

Presently, the government revises the toll charges for these highways, when required.

Such companies must also be asked to fulfil the promises made in the contract, which would help customers get better services, he said.

Similarly, the current norms of not permitting the setting up of airports within a certain distance of the existing one should be reviewed, as these conditions prove dearer for consumers.

Aug 4th, 2008
Source: Livemint

Agriculture

Govt not in a hurry to lift ban on rice exports

The government on Monday said export ban on rice and other food grains would stay till November end and the review would be taken only after arrival of the new rice crop.

The empowered group of ministers, chaired by external affairs minister Pranab Mukherjee, is also meeting on Tuesday to review the situation relating to the production, stocks and prices in the open market. It will review the stock availability for the public distribution system. The government has banned export of non-basmati rice, wheat, maize and pulses to ensure availability of the commodities in the domestic market and to keep a check on inflation, which has since come closer to the 12% mark.

However, rice exporters have been demanding that export ban of non-basmati rice be eased and suggested that the Centre may put a cap on the quantity to be shipped for its adequate availability in the domestic market.

Aug 5th, 2008
Source: Economic times

Olive plantation takes shape with project in Rajasthan

Olive plantation in the country is expected to get impetus with the implementation of a pilot project involving the Rajasthan government and an Israeli firm for cultivating the oil plants in 250 hectares.

"The country is taking to the olive plantation for the first time in the form of a pilot project, and if it becomes a success, the Rajasthan government is planning to extend the cultivation to about 25 million hectares," Indian Olive Association President V N Dalmia said here.

Under this project, 1,025 olive trees have already been planted against a target of 1.25 lakh. The project is a three-way joint venture between the Rajasthan government, Pune-based Plassron Industries and the Israeli firm Indolibe Enterprises.

The Rajasthan government is providing land and capital while Plassron is also pumping in funds. The Israeli firm is providing dry land farming technology and buyback opportunities, Dalmia said.

Punjab and Himachal Pradesh have also announced similar projects with Indolibe and Spain-based Sojivit, respectively, for cultivation in over 300 hectares each.

Olive plants take five years to yield first oil-rich fruit and provide good crops up to 500 years, Dalmia said. However, a good crop one year may be followed by a low-yield one the next year, he added.

The olive oil consumption in India is estimated to rise over 9 times in the next four years, prompted by an upwardly mobile consumer class' obsession with nutritious food, Dalmia pointed out.

"Olive oil consumption is pegged at 42,218 tons by 2012, growing at a rate of 75 per cent a year. The target for this year stands at 4,500 tons," he said.

Aug 4th, 2008
Source: Economic times