GDP forecasts will see downward revisions

Continuously rising inflation has produced a flurry of mitigating steps from the government, the latest being the move to ban futures trading in some key agricultural commodities. While experts disagree on the efficacy of such a measure in taming inflation, the government seems to be optimistic. Service tax will be applicable on seven new services. Mid size IT companies will be impacted due to US slow down.

- Chillibreeze Business Research Team

Government Policy & Infrastructure
Economy
Sector Specific – Telecom
Banking & Finance
Power
Steel
Cement
International
Agriculture

Government policy & Infrastructure

$90 billion industry corridor on track: Minister

Ambitious $90 billion industrial corridor project is on track, and rising prices of steel and cement will not hamper work, the junior industry minister said.

The project spanning the capital city of New Delhi and the financial hub of Mumbai is being built with Japanese help on the lines of the Tokyo-Osaka industrial corridor. It includes high speed rail freight lines, power plants to supply an additional 4,000 megawatt, three new sea ports and six airports, 12 new industrial clusters, 10 logistic parks and agricultural hubs.

"I believe that between October and December, the trial runs of the electric tractions between Mumbai and Pune should be completed," Ashwani Kumar told media in an interview.

"Depending on the results of the trial runs, the matter will then be pushed full steam ahead so that we achieve the target date of 2012 for the first phase." Kumar said he did not expect rising prices of steel, cement and other metals and building materials to hamper the process, adding that the total cost may rise to $92 billion which should not matter.

Japanese and German companies were among those that have showed interest in the project, he said. Kumar said the government was actively involving private and foreign players for improving India's infrastructure, which would require $500 billion by 2012, and provide the trigger for growth in Asia's third-largest economy.

"We are encouraging domestic, private and government, investment in infrastructure under public-private partnership mode. We are also actively wooing foreign investment and technology in the infrastructure sector."

May 13th, 2008
Source: Economic Times

7 new services under tax net from May 16

Come May 16, service tax will be applicable on information technology (IT), software services, investment management services under unit linked insurance plan (ULIP), internet telecommunication services and services provided by stock exchanges, commodity exchanges and clearing houses.

With the Finance Bill 2008 receiving Presidential assent here on Saturday, the Finance Ministry notified May 16 as the date from which service tax would be applicable on the seven new taxable services announced in Budget 2008-09.

The revenue department has also extended the scheme of refund of service tax paid by exporters to three additional services, taking the total number of services for which service tax refund is available to exporters to 19.
Exporters can now get service tax refund on purchase or sale of foreign currency by authorised dealers or foreign exchange brokers.

However, exporters have to produce evidence to show that the services utilised by them for purchase or sale of foreign currency is related to export of goods.

They can also get service tax refund on services provided in relation to supply of tangible goods, without transferring right of possession and effective control of the tangible goods.

The Finance Ministry has also now provided an optional scheme for payment of service tax on purchase or sale of foreign currency (including money changing), which will attract service tax from May 16.

“Where the consideration (commission) for the services provided in relation to purchase or sale of foreign currency is not explicitly indicated, the person liable to pay service tax has been given the option to pay service tax calculated at the rate of 0.25 per cent of the gross amount of currency exchanged,” the Finance Ministry said in a release here.

May 11th, 2008
Source: The Hindu Businessline

CAS delayed as govt wants details

The expansion of the conditional access system (CAS) beyond southern parts of Delhi, Mumbai and Kolkata, and subsequently to 55 more cities, may be further delayed with the Ministry of Information and Broadcasting (I&B) seeking a detailed report from the cable industry on tackling piracy of pay channels after the system comes into effect.

This means the service, scheduled to be introduced this November, may see an on-ground implementation from only 2009.

The move comes within a month of the government giving approval in principle to the rollout of CAS according to the schedule proposed by the Multi-System Operators (MSO) Alliance.

The extension of CAS has been pending for over a year since the system was enforced in southern areas of the three metros on January 1, 2007, following a Delhi High Court order of March 2006.

CAS technology enables consumers to pay for only the channels they wish to watch, thereby lowering their cable bills. To access the service, consumers need a set-top box — a hardware device that decodes encrypted digital pay channels.

Currently, consumers of CAS in the three metros pay only Rs 5 per pay channels they subscribe to, in addition to Rs 75 for a bouquet of free-to-air channels.

"We are going to submit a detailed note on tackling piracy under CAS. Once the doubts are addressed, we expect to see its roll out shortly," said MSO Alliance Secretary A Mohan. According to the initial report by the alliance, curbing piracy should primarily be the responsibility of the MSOs.

MSOs are aggregators and distributors of cable television channels who supply and manage these channels through a network of local cable operators.

"...MSOs will ensure a monitoring practice for set-top boxes through fingerprinting mechanism for a particular channel at frequent intervals and also physical monitoring of the boxes with the help of broadcasters through their teams at field level...," said a letter by the alliance that was submitted to the I&B ministry in March along with the detailed timeline of the CAS roll-out.

May 11th, 2008
Source: Business Standard

MERC okays selection of distribution franchisee

The Maharashtra Electricity Regulatory Commission (MERC) on Thursday cleared all hurdles leading to the appointment of a power distribution franchisee for three divisions of Maharashtra State Distribution Company Ltd (MSEDCL).

This is the first such franchisee agreement to be entered into by the MSEDCL in the region. The move is being strongly opposed by consumer bodies.

The MERC, in its detailed order, went over each and every objection raised by the petitioners before the Nagpur Bench of the Bombay High Court before arriving at its decision to permit the franchisee agreement.

The decision was largely based on the aggregate revenue that the MSEDCL hopes to earn upfront from the deal, besides improvements in future collections.

The decks have thus been cleared for Crompton Greaves Ltd to take over energy distribution and billing rights for the three divisions of Nagpur Urban Circle of MSEDCL — Gandhibagh, Mahal and Civil Lines.

The MERC found that the MSEDCL had followed all norms in changing the base year for calculation of expected revenue, introducing a "discount" factor and using the weighted average method for obtaining the overall average loss to the franchisee.

The MERC's decision is to be communicated as an opinion to the high court, but basically serves to remove all legal impediments in the path of the franchisee to take over the distribution network.

The MERC found that the expected additional revenue to MSEDCL over the period of the franchisee agreement, calculated at Rs 2098.49 crore, to be genuine given the present circumstances. This amount is to be used for reducing the tariff for all consumers and regions of MSEDCL's licence area.

May 10th, 2008
Source: Business Standard

Govt mulls ban on agri futures trading

The Government is contemplating a ban on futures trading in all agricultural commodities, according to a note circulated by the Minister of State for Industries, Mr Ashwani Kumar, here on Thursday.

There has been reports that the future trade is shifting towards black market trade to avoid payment of taxes to the Government. In this context, it is widely reported that the Ministry of Commerce and Industry is contemplating to ban futures trade in agricultural commodities, the note said.

The Minister told in a press conference here that though the Abhijit Sen panel report did not recommend ban on futures, on Wednesday, the Government, as a temporary measure, has suspended futures in for more agricultural commodities – potato, soya oil, chana and rubber — for four months.

The Minister said that the measures initiated to tame inflation are yielding results. Inflation would come down by more than one percentage point within in the next six to eight weeks according to extrapolated data analysed by the Department of Industrial Policy and Promotion (DIPP), he said.

The administrative measures will include steps to restrain the inclination of producers to increase prices simply because the situation allows them to exploit, the note pointed out.

Reiterating the Government resolve on not compromising growth in the process of taming inflation, the Minister said that “our policy initiatives will bring down prices without slowing down growth. We will achieve eight per cent growth and also maintain prices,” he said.

May 9th, 2008
Source: The Hindu Businessline

Economy

GDP for FY08 may miss projections

The Indian economy is projected to have grown at a slower pace in 2007-08, as data released today showed industrial production growth during the year moderated considerably over the previous year.

The advance estimates for national income for 2007-08 had pegged the growth of gross domestic product (GDP) at 8.7 per cent. Economists now expect it to be a notch lower.

In addition, if industrial production growth continues to moderate in the current fiscal (2008-09), overall economic growth in the year is also expected to be lower than the Reserve Bank of India's GDP estimate of 8-8.5 per cent.
The Central Statistical Organisation (CSO) will release fourth quarter as well as full-year revised estimates of GDP growth for 2007-08 on May 30.

"GDP growth in 2007-08 will remain between 8 and 8.5 per cent," said N R Bhanumurthy, associate professor, Institute of Economic Growth, adding that forecasts for 2008-09 would also have to be revised downward. "I think GDP growth in the current fiscal will remain between 7 and 7.5 per cent."

The dip in industrial production growth is being attributed to lower domestic as well as external demand. "A slowdown in the US economy and high domestic interest rates are the major reasons for the current state of industrial growth," Bhanumurthy added.

Industry was quick to demand that interest rates be lowered in order to revive the consumer goods sector. "The government should give a leg-up to industry by providing the right environment, including an interest rate revision. Performance of the manufacturing sector is expected to be lower even in the first quarter of 2008-09.

The downtrend had been reflected in the CII-ASCON survey released by the Confederation of Indian Industry (CII) last week. Today, the chamber said there was an urgent need to build infrastructure, create institutions and policy for advanced manufacturing and engineering, remove bottlenecks regarding power costs and labour laws. "Announcement of a national manufacturing policy will help manufacturing consolidate in long term," it added.

May 13th, 2008
Source: Economic Times

Mid-size IT cos likely to be impacted by US slowdown

Mid-sized IT services and BPO companies are vulnerable to the adverse impact of US slowdown due to exchange rate volatility, slower deal closures, inflation and low billing rates than their bigger counterparts, a study said on Monday.

The large vendors with multi-shore delivery capabilities like TCS, Wipro, Infosys, Satyam and HCL Technologies would be better equipped to exploit new opportunities in the slowdown period, it added.

However, the study said slowdown in US economy will have moderate impact on the global IT services and BPO industry. The economic slowdown in the US would impact profitability and revenues in the short term, the study said.

The industry is gearing up with a two-pronged approach of re-aligning existing service areas and increasing focus on non-US geographies to shield itself from impact of a slowdown.

Nearly 75 per cent of the service providers who were surveyed said that by adopting this approach, their companies could marginalise the net impact on revenue growth and profitability, it added.

Nearly half of the service providers, primarily representing BPO, infrastructure management and application maintenance areas, indicated that the slowdown has not impacted the deals pipeline in the current quarter. On the contrary, many of these companies are seeing a stronger deals pipeline and accelerated sign-ups.

May 12th, 2008
Source: Economic Times

Rupee loss is exporters' gain

Reversal of rupee's fortunes in the last 10 days has brought smiles back on the faces of Indian exporters whose competitive strength is growing in global markets against rivals from China, the Philippines and Thailand.

The Indian currency, which had made strong gains in excess of 10 per cent in 2007-08, started losing ground since April 30 due to increased demand for US dollar in importing crude oil at the skyrocketing price of over $120 a barrel.

Rupee has lost value against the greenback by about three per cent in the last 10 days, reaching a level of 41.8, resulting into commensurate increase in the realisations for exporters.

"Our competitiveness has gone up by 3-4 per cent and the traditional exporting sectors like textile, handicrafts and leather would stand to gain more," Federation of Indian Export Organisations (FIEO) President, Ganesh Gupta said.

The trend in the last few days has put the Indian exporters at an advantage against China, Thailand and the Philippines, whose currencies have appreciated in the recent past due to dwindling dollar.

The CII National Committee Chairman on Trade Sanjay Budhia said the rupee appreciating to about 41 to a dollar level would return some comfort level to the exporters and help them remain competitive.

The appreciating rupee augurs especially well for exporters who had not hedged their orders or taken forward cover when the rupee was at the 39 to a dollar level around November last year.

With the weak rupee resulting into improved remittances, export target of $200 billion, that looked ambitious till about a few weeks back, would become achieveable, Gupta said.

May 11th, 2008
Source: Economic Times

Falling Re likely to scuttle govt effort to cut oil tags

An over 4 per cent weakening of the Indian rupee during the last one month could spoil the government's plan to keep edible oil prices stable.

The rupee factor has led to a 6 per cent increase in the landed prices of crude palm oil (CPO) and has also caused an increase in domestic edible oil prices.

The depreciation of the rupee will partly offset the gains brought by the import duty cuts on edible oil.

The landed price of CPO between April 8 and May 8 rose by 1.28 per cent in dollar terms (from $1,170 to $1,185 a tonne). However, in rupee terms, the price rose by almost 6 per cent since the value of a dollar rose from Rs 40 to Rs 41.86 during the same period. This translates into a price increase of Rs 2.80 a kg.

Taking a cue from this increase, the domestic wholesale price of mustard oil increased by 4.67 per cent over the last one month to Rs 56,000 a tonne while refined soybean oil rose by 2.65 per cent to Rs 58,000 a tonne. Industry expects the price change to get reflected at the retail level in the coming days.

To cushion domestic consumers against rising edible oil prices, the government reduced Customs duty on various edible oils by 20-55 per cent on March 20.

After inflation hit a 13-month high of 6.68 per cent for the week ended March 15, the Cabinet Committee on Prices (CCP) on March 31 decided to make imports of all varieties of crude edible oil duty free while cutting the import duties on all refined oil to a uniform level of 7.5 per cent. The country imports 45 per cent of its edible oil requirements.

May 10th, 2008
Source: Business Standard

Inflation unabated, rises to 42-month high of 7.61%

The government, which has been combating inflation on a war footing for the past few weeks, faced fresh pressure today as the latest wholesale price index (WPI)-based figure rose to a 42-month high of 7.61 per cent for the week ended April 26 against 7.57 per cent in the previous week. Rising prices of food and some manufactured products continued to do the damage. WPI-based inflation stood at 6.01 per cent in the corresponding week a year ago.

During the week, prices of tea jumped by 11 per cent, fruits and vegetables by 1 per cent, fish marine by 2 per cent, spices and cardamom by 3 per cent. However, prices of pulses declined by nearly 1 per cent. Prices of mustard oil and imported edible oil went expensive by 1 per cent and 4 per cent respectively. Among manufactured products, cement prices went up by 0.2 per cent, aluminium ingots by 6 per cent and other aluminium materials by 4 per cent. However, much to the respite of the government, iron and steel prices declined by 0.1 per cent during the week. After a meeting with the Prime Minister Manmohan Singh on May 7, steel companies decided to reduce prices of flat products by Rs 4,000 per tonne and those of rebars and structural steel by Rs 2,000 per tonne. The move is expected soften the prices of steel in the coming weeks.

May 10th, 2008
Source: Indian Express

Funds may stay out of road projects as input costs rise

Inflation seems to have claimed yet another victim. This time it is the government’s ambitious roads and highways project, including the north-south-east-west corridor and the Golden Quadrilateral. With input costs for constructing roads and highways rising by almost 40%, funding agencies have pulled back from road projects fearing lower margins and losses in some cases.

Private equity player ICICI Venture has expressed its reluctance to invest more in highways. With bids for projects worth Rs 40,000 crore opening in the next three months, medium to small players will be affected adversely. “Small players will find it difficult to tie up funding before going in for bids on account of existing projects becoming unviable,” National Highway Business Federation (NHBF) director general M Murali said. With more than 30 road and highway projects to be opened for bidding in the next three months, the industry fears that road construction may become a monopoly of a few large players.

A top infrastructure fund said that it will be considered necessary for an escalation clause to be built into the contract between the government and the builder.

The clause should factor in cost escalation. “It would be preferable to fund projects where the contractor has entered into a compensation clause with the government. This would mean our investments would be safer, as anyway these projects have a long gestation,” a senior executive of one of India’s top infrastructure fund told ET.

“While large players can absorb the cost escalation better, it is the smaller developers who will be hit more,” SKIL chairman Nikhil Gandhi said. Funding needs to be tied up in advance before going in for a bid. If smaller players don’t insist on an escalation clause, financial institutions may shy away from helping them.

May 10th, 2008
Source: Economic Times

Sector Specific

Telecom

Bharti-MTN alliance talk gets a boost; key investor backs the deal

Bharti Airtel’s bid to strike a strategic partnership with South Africa-based MTN may have got a boost with one of the key investors in the company supporting the deal.

The Makati family, led by former Lebanese Prime Minister Mr Najib Makati, has indicated that two companies could become a unique mobile player in emerging markets. The Makati’s hold 9.8 per cent stake in MTN through their London-based M1 Group.

Bharti will, however, have to convince other stakeholders including Alpine Trust, a consortium of MTN management and a private family, which is the single largest shareholder with 23 per cent stake in MTN. South Africa Government Pension Fund holds 13.5 per cent.

Sources said that though Bharti wanted to pick up a controlling stake in MTN, talks may be steering towards a ‘marriage’ between the two companies. “A deal should be in place soon. While the two sides have agreed on the basic principles, the structure of the agreement is being worked out,” sources said without indicating whether Bharti has made a financial offer yet.

May 10th, 2008
Source: The Hindu Businessline

Power

NTPC inks agreement with NDPL

NTPC Ltd, country's largest power generator today signed a long-term power purchase agreement (PPA) with North Delhi Power Limited (NDPL) for supply of power from its various power stations in New Delhi. The agreement which was signed by the two companies comes after the assignment of power purchase functions to the Distribution Licensees of Delhi.

May 10th, 2008
Source: Business Standard

Coal situation worsens at thermal stations

Nearly a third of the country’s thermal stations are now reported to be facing “critical stocks”, where coal stocks are expected to last less than seven days.

Of the 77 thermal stations in the country, 25 have now been bracketed as having “critical stocks”, of which 13 are reported to be “super critical”, with precariously low levels of coal stocks of under four days, according to the Government’s latest data on coal stock positions at power stations (up to May 5).

While a coal shortage has been brewing since the beginning of last year, domestic production is unlikely to be ramped up significantly in the near future. The import option is increasingly getting tougher as China, which is also facing low domestic reserves and acute power shortage, has stepped up coal purchases internationally.

The resultant rise in the global spot prices of coal, which have shot up to over $140 per tonne in Australia and above $125 per tonne in South Africa, could further stymie plans by Indian utilities to use imported coal to tide over shortages.

NTPC, which has 15 coal-fired stations, has already reported loss of generation in four stations due to coal shortages last fiscal, with the Farakka’s plant load factor dipping 4.66 per cent, and Kahalgaon, Talcher and Vindhyachal stations reporting partial outages.

Thermal stations are normally expected to hold coal stocks of between 15 and 30 days, with pithead stations expected to have stocks of 15 days or more, while others are expected to have stocks of 21-30 days.

May 9th, 2008
Source: The Hindu Businessline

Banking & Finance

SBI to tap semi-urban, rural areas for growth, will add 1,000 branches

State Bank of India, the country’s largest bank, will add 1,000 branches in rural and semi-urban areas this fiscal.

The bank will also expand its sales force and tie-ups with business correspondents and business facilitators to double its growth of deposits and advances from rural branches, a senior official said.

The bank currently has around 7,000 branches in rural and semi-urban areas; deposits from these branches grew by 18 per cent and advances by 20 per cent in the just ended fiscal. The bank has set a target of 36 per cent growth in deposits and 34 per cent growth in advances for the current fiscal.

“We are looking to increase our reach in rural and semi-urban areas through three channels — branches; business correspondents and business facilitators; and point of sales machines and smart cards,” the official said.

For business correspondents, the bank has tied up with 110 post-offices to offer its deposit and loan products in under-banked areas. It plans to increase the number to 1,000 by next month. Through its tie-up with ITC’s e-Choupal and Drishti, the bank will expand its business and increase growth and volumes.

Its agri-and-rural sales force is 3,000 strong and it plans to hire 3,000 more this year.

May 11th, 2008
Source: The Hindu Businessline

High inflation to eat into depositors`returns

Bank depositors, who have locked in money for tenure of less than one year, could be the major losers and earn negative interest rate on their fixed deposits if high inflation persists over a longer time.

A study of interest rates, offered by different public sector banks, revealed that all of them are currently offering 6 per cent to 7.50 per cent interest on deposits for duration of six months to one year. Whereas, inflation has spiralled to 7.61 per cent as of April 26.

If this trend persists and deposit rates are not revised, bank deposits would start or are already earning negative interest rate (rate of inflation being higher than the rate of interest) since the last few weeks. Logically, interest rate on FDs need to be higher than inflation, which helps depositors earn real interest rate or at least beat inflation.

The interest rates offered by banks for term deposits of more than one year are, however, between 8.25 per cent and 8.75 per cent and in some cases even 9 per cent and thus depositors are well protected from inflation.

Ajit Ranade, Group Chief Economist, Aditya Birla Management Corporation said it is true the bank depositors will get negative interest rate if the rate of inflation is higher than the rate of interest. However, he pointed out the inflation is a weekly number. One needs to consider the average rate of inflation over a period of time, he said.

S K Goel, chairman and managing director of UCO Bank, argued that the interest rates offered by banks at present are taking care of higher inflation.

"The inflation has gone up only during the last few weeks. You are to consider average rate of inflation and compare it with duration of deposits," he said.

Interaction with bank depositors revealed that most of them do not factor in the rate inflation when they put their money in short term deposits like 15 days or 30 days or three months.

More than individuals, corporates go for short term deposits. In those cases, the idea is only to park the fund for a temporary period. However, for a longer period of deposit of six months to one year to three years, people would of course like to earn interest rate which will be higher than the rate of inflation.

If the interest rate is negative - when inflation is more than the interest rate - people will be better off spending their money rather than invest in bank FDs and see erosion in its value, they pointed out.

May 11th, 2008
Source: Business Standard

Health insurance likely to see annual growth of 50%

Health insurance industry is expected to grow at about 50 per cent per annum, Insurance Regulatory and Development Authority Chairman C S Rao said here on Friday.

On the sidelines of the First Health Insurance Summit organised by CII, Rao told reporters that the premium collected under health insurance was only about Rs 600 crore when he took over as Chairman of the regulatory body in 2003. Whereas, during 2006-07 the premium collection was about Rs 3,200 crore, having grown 35 per cent over the previous year.

The figures for 2007-08 have so far not been released but are expected to be well over Rs 4,000 crore.

"The health insurance business is likely to grow by about 50 per cent per annum," he said.

Rao, who is close to completing his tenure as Chairman of IRDA said: "The health insurance segment has been growing much more than the overall general insurance industry and collection of premium of health insurance now accounts for about 16-17 per cent of the total collection of the general insurance industry".

He, however, pointed out that the overall penetration made by the industry segment is still low. At present, there are quite a few players offering health insurance and the IRDA Chairman indicated that a few more are planning to enter the sector.

Referring to the high claim ratio witnessed by health insurance companies, he said the ratio could come down if the volume of business goes up. Besides, he felt if the health policies are sold to different age groups, particularly young, the claim ratio could go down.

May 10th, 2008
Source: Economic Times

Decline in bank loan growth continues

Loan growth during the second fortnight of this fiscal has been sluggish. According to the weekly statistical supplement of the Reserve Bank of India, bank credit for the fortnight ended April 25 was down by Rs 11,964 crore. But this is in line with the trend seen every year, when bank credit declines in the first quarter.

Some of the decline in bank loans is also attributable to the unwinding of the huge build-up in loans that takes place in the last fortnight of every fiscal (March end). The last fortnight is invariably the busiest – the numbers notched up in this fortnight usually account for about 20 to 25 per cent of the annual figures for each parameter.

For instance, in the last fortnight of March this year, bank loans grew by almost Rs 76,000 crore. That was about 18 per cent of the annual loan growth last fiscal.

Bank loans are growing at 23 per cent year on year and seem well matched with deposit growth that is currently at about the same level. There has been a noticeable slowdown in the rate of growth even in the last fiscal, following four years of 30 per cent growth.

The RBI had projected a growth of 20 per cent in credit and 17 per cent in deposits in this fiscal. These projections are in line with the lowered growth expectations of money supply at about 17 per cent in this fiscal compared to about 21 per cent last fiscal.

May 10th, 2008
Source: The Hindu Businessline

Steel

Land acquisition, eco hurdles hit new steel projects

With the demand for steel growing at around 12 per cent annually, the Government has planned to create more than 250 million tonnes of additional steel making capacity. But land acquisition and environmental problems have effectively stalled all new projects.

Another factor delaying new steel capacities is the stand taken by mineral rich States which insist on granting iron ore mining leases only if the plant is set up within the State.

However, expansion plans of the existing major steel manufacturers are on schedule as there are no land and environmental issues involved. When these projects go on stream, an additional 36.95 mt capacity would be available by 2011-12.

Several State Governments have signed 195 memoranda of understanding (MoUs) with steel companies for putting up an additional 252.9 mt of steel capacity with an estimated aggregate investment of Rs 5,55,038 crore.

But almost all of them have been stalled on issues such as land acquisition. In addition to the opposition from the local population, environmental clearance is also a major hurdle. In Orissa, around 43 per cent of the land is covered by forest while in Chhattisgarh 46 per cent is under forest cover. In Jharkhand also, large parts of the State are forest land. Neither the State Governments nor the Centre has any powers to speed up the process of environmental clearance.

After a company gets clearance from the Ministry of Environment and Forest, it has to get this clearance vetted by a division bench of the Supreme Court.

For setting up steel plants, the eastern region has various advantages like iron ore and coal mines, water supply and logistics, such as proximity to ports.

However, steel companies’ efforts to capitalise on the combined benefits offered by the eastern region have failed to take off because of the uncompromising attitude of some State Governments in extending cooperation to the neighbouring States. For instance, Orissa, Chhattisgarh and Jharkhand are not ready to grant mining licence to companies that have proposed to set up plants in West Bengal.

In order to sort out these problems, the Ministry of Steel is contemplating a policy to bring together the four eastern States and set up a steel investment region because all the raw materials for steel making are available there.

May 12th, 2008
Source: The Hindu Businessline

Secondary steel makers allege arbitrary pricing by big units

Secondary steel producers have complained to the Finance Minister that after announcing conditional price reduction of up to Rs 4,000 a tonne, the major steel producers, both in private and public sectors, have started to arbitrarily fix the ratio between the export and domestic sales of their customers in order to extract higher prices.

The Cold Rolled Steel Manufacturers Association of India (Corsma), in a letter to the Finance Minister, Mr P. Chidambaram, has complained that “the ratio between domestic and export sales are being arbitrarily fixed.”

The Executive Director of Corsma, Mr S.C. Mathur, said that the major producers are offering a portion of the total quantity at reduced prices and charging the pre-reduction prices for the remaining quantity assuming that it would be used for export production, he said.

Major steel producers, while announcing the price reduction earlier this week after a meeting with the Prime Minister, had made it clear that the reductions would be applicable only for steel that gets consumed in India either directly or after processing.

Though the major producers are in no way equipped to monitor how much quantity is being exported by a secondary producer, they are charging higher prices by fixing arbitrary ratios which should immediately be stopped, Mr Mathur said.

In a meeting with the Steel Minister on April 3, the secondary producers had assured the Government that they would import an equivalent amount of steel as they export.

The Steel Secretary, Mr R.S. Pande, had told newspersons after the meeting that “the secondary producers today said that they would be importing HR steel to the extent they export cold rolled (CR) and galvanised steel.”

May 11th, 2008
Source: The Hindu Businessline

Cement

Cement firms talk tough on price cuts

Striking a defiant note against the government's efforts for a price cut, cement companies today said that they will not follow ACC's move to hold prices for a couple of months.

The statement from the industry came minutes after Finance Minister P Chidambaram said around noon that the government was trying to persuade cement companies to lower prices. On Thursday evening, India's largest cement manufacture, ACC, which accounts for over one-tenth of the market, had announced its intent to freeze prices for two-three months.

Instead, cement companies demanded "concrete" assurances from the government regarding excise duty reduction. Companies want the Centre to allow them 55 per cent abatement on the duty paid by them.

At present, companies have to pay excise duty of Rs 350 a tonne in case the maximum retail price for a 50-kg cement bag is Rs 190 or less. For the more expensive varieties, the levy is Rs 550-600 a tonne.

"Freezing prices is not the industry's call. It is an individual decision and the cement firms are behaving in their own way," said H M Bangur, president of the Cement Manufacturers' Association and the managing director of Shree Cement.

According to a senior executive of a southern cement major, so far, the government has not come up with any specific proposals. "If they (government) give some relief on excise, the reduction will be passed on to the consumers," the executive added.

Top officials of the Birla group too said that cement companies would take independent decisions on pricing and added that there is constant input pressure, which is shrinking the margins.

The stance adopted by the cement companies is akin to the approach followed by steel firms, which were refusing to lower prices despite the government's repeated requests. It was only after some tough talking and fiscal steps to increase supply in the domestic market that steel companies agreed to lower prices.

May 10th, 2008
Source: Business Standard

International

Record crop production to ease food crisis

Good weather will help the world's farmers reap record wheat and rice crops this year, the US government said on Friday, which should allay fears of shortages and help bring prices down from current high levels.

The US Agriculture Department also forecast a record global crop of feed grain, used to feed livestock. The USDA announcement was expected to calm fears of food shortages, worsened by the cyclone that hit Myanmar's rich rice-producing Irrawaddy delta last week, and by a larger than expected 500,000 tonne Malaysian rice purchase on Thursday.

Disappointing harvests, the boom in biofuels and higher meat consumption have pushed up grain prices in the past two years, raising food prices and sparking protests in some 40 poorer countries whose people have felt the effect most strongly.

Officials at the UN Human Rights Council said it would hold a special session on May 23 to assess the effect of the food crisis on the right to food of millions of people suffering from high prices, notably in sub-Saharan Africa and South Asia.

"We're keeping our fingers crossed that we get good harvests this year... and that it brings prices down some from their high peaks," said analyst David Orden of the International Food Policy Research Institute, a think tank.

Even with bountiful crops, Orden said, larger international food aid efforts would be vital because prices would be higher than usual for the next couple of years at least. The USDA said the world wheat crop would rise 8 percent to a record 656 million tonnes in 2008/09.

May 10th, 2008
Source: Economic Times

Oil hits record $126 on supply worry

Oil jumped to a record above $126 a barrel on Friday, extending gains to more than 11 per cent since the start of the month on fuel supply concerns and a rush of speculator buying.

US crude settled up $2.27 at $125.96 a barrel before rising to a record $126.25 in late post-settlement trade. London Brent crude gained $2.56 to settle at $125.40 a barrel, off the earlier high of $125.90.

"It appears that any calculations that included waiting for the next pullback were discarded on the European opening this morning as waves of buying materialized, particularly from speculative interests," said Mike Fitzpatrick, Vice-President at MF Global.

Oil has surged since slipping as low as $110.53 a barrel on May 1. Investors have seized on disruptions to crude oil supplies in the North Sea and Nigeria, as well as galloping demand for distillate fuels, a category that includes diesel fuel and heating oil.

Strong demand for diesel fuel in Europe, along with the growing use of distillates for generators to supplement strained power grids in fast growing emerging markets, have cut into stocks of distillate fuel and pushed up prices sharply.

"Lingering geopolitical fears and high heating oil prices are helping the market, but the speed of the rise is too fast," said Tatsuo Kageyama, analyst at Kanetsu Asset Management in Tokyo.

The steady rise in crude oil prices once again has turned the spotlight on the Organisation of the Petroleum Exporting Countries (OPEC), which for months has insisted it has no control over the factors it blames for pushing up the price of oil, including speculation and the weak US dollar.

An OPEC source said the group might consider boosting output before its next scheduled meeting in September should crude oil prices keep rising.

But Ecuador's Oil Minister said there were no plans for an early meeting.

"If the price keeps going up, OPEC may consult on an increase in production before it meets in September. In my view, any increase would have to be more than 500,000 barrels per day to have an impact on the price," said the OPEC source.

Although Lebanon is not an oil producer, civil unrest there has pushed up oil prices in the past, most recently in the summer of 2006 when Israel invaded Lebanon in an unsuccessful attempt to subdue Hezbollah.

May 10th, 2008
Source: yahoo.com

Agriculture

Punjab contributes 35 lakh MT wheat

Punjab has contributed 35 lakh metric tonne (MT) more to the  central pool till today this year. According to an official spokesperson, Punjab has contributed 95,35,273 metric tonne of wheat against 60,96,462 MT contributed to the central pool in last Rabi season till today.

The spokesperson said that though there was a minor increase in area under wheat  from 34.67 lakh hectares to 34.80 lakh hectares this year, wheat procurement in 1623 procurement centers had already touched the mark of 100,98,803 MT as against 73,61,133 MT procured last year.

Out of total procurement till date, 95,35,273 MT (94.4 per cent) has been procured for the central pool and 2,80,038 MT (2.8 per cent) for the State pool whereas traders lifted 283492 MT of wheat.

The spokesman said that Pungrain procured 17,80,238 MT (18.7 per cent) whereas Markfed procured 22,85,863 metric tonne (24 per cent), Punsup procured 21,93,424 MT (23 per cent), PSWC procured 11,69,233 MT (12.3 per cent) whereas PAIC was able to procure 10,79,398 MT (11.3 per cent) of wheat for the central pool.

The Central Government agency FCI had been able to procure 10,26,617 MT  (10.8 per cent) for the central pool.
Ferozepur District with 11,74,915 MT of procurement was leading in procurement operations whereas Sangrur District with 9,43,036 MT of procurement was at second slot and Ludhiana district with 8,39,262 MT of procurement ranked at third position.

The Punjab Government allocated more than Rs. 11,116 crore to the agencies for making payment to the farmers.

May 11th, 2008

Source: Business Sstandard

Tremendous scope for vertical growth in biotech crops

With trials of India’s first genetically modified (GM) food crop, Bt. Brinjal (insect-tolerant vegetable), progressing well, the anti-biotechnology lobby seems to have become active. Those opposed to biotechnology in agriculture are spreading disinformation, according to Dr Usha B. Zehr, Joint Director of Research with Maharashtra Hybrid Seeds Company Ltd (MAHYCO), pioneer in the country’s foray into agbiotech.

Indeed, Bt Brinjal is not the first GM vegetable crop. Globally, as many as 23 vegetable crop species (excluding potato and sweet corn) have been genetically engineered. China grows tomato, papaya, petunia and sweet pepper, while the US grows squash (a variety of gourd) and papaya.

Currently, over a dozen biotech crops are being field-tested in different parts of the world. These include three major staples (rice, maize and wheat) as also potato, tomato, soyabean, cabbage, peanut, melon, papaya, sweet pepper, chilli and rapeseed.

Talking about China’s advances into agbiotech, Dr Zehr said the country has planted about one quarter of a million Bt. Poplars and in 2006, started to commercialise an approved virus-resistant biotech papaya (a fruit/food crop) developed by a Chinese university and grown on approximately 3,500 hectares.

Interestingly, India is the world’s second largest rice producer (after China) with output of about 94 million tonnes. Planted in about 45 million hectares, paddy yields are on an average 3.5 tonnes a hectare, equivalent to roughly 2 tonnes of milled rice. China’s paddy yields are far superior at about 6 tonnes a hectare or over 3.6 tonnes.

Cultivation of rice in smallholdings is common to both the countries. If India has to remain self-sufficient in rice, yields have to be raised. There is tremendous scope and need for vertical growth.

According to Dr Zehr, last year (2007 was the 12th year of biotech farming), 120 million farmers in 23 countries grew biotech crops on 114.3 million hectares.

India’s experience with Bt. Cotton has been positive. Cotton output has gone up from about 17 million bales in 2001 to over 30 million bales in 2007. As a result, India has turned into a cotton exporter. Bt. Cotton is now grown in over half the planted area of about 9 million hectares. That should provide sufficient motivation and support to accelerate infusion of more biotech products, especially at a time when a food crisis looms large, Dr Zehr said.

May 9th, 2008
Source: The Hindu Businessline