Chandigarh, February 6
In the era of changing interest rates, Reserve Bank of India (RBI) has now revised its Asset Liability Management guidelines. Banks have now been asked to calculate modified duration of assets (loans) and liabilities (deposits) and duration of equity.

This was stated by the executive director of RBI, V K Sharma, here today. He said that this concept gives banks a single number indicating the impact of a 1 per cent change of interest rate on its capital, captures the interest rate risk, and can thus help them move forward towards assessment of risk based capital. This approach will be a graduation from the earlier approach, which led to a mismatch between the assets and liabilities.

The ED said that RBI has been laying emphasis that banks should maintain a more realistic balance sheet by giving a true picture of their non performing assets (NPAs) , and they should not be deleted to show huge profits. Though the banking system in India has a strong risk management architecture, initiatives have to be taken at the bank specific level as well as broader systematic level.

He also emphasized on the need for sophisticated credit-scoring models for measuring the credit risks of commercial and industrial portfolios.

Emphasising on a need for an effective control system to manage risks, he said that the implementation of BASEL II norms by commercial banks should not be delayed. He said that the banks should have a robust stress testing process for assessment of capital adequacy in wake of economic downturns, industrial downturns, market risk events and sudden shifts in liquidity conditions. Stress tests should enable the banks to assess risks more accurately and facilitate planning for appropriate capital requirements.

Sharma spoke at length about the need to extend the framework of integrated risk management to group-wide level, especially among financial conglomerates. He said that RBI has already put in place a framework for oversight of financial conglomerates, along with SEBI and IRDA. He also said that at the systematic level efforts are being made to create an enabling environment for all market participants in terms of regulation, infrastructure and instruments.

New Delhi, February 6
Indian economy will attract more global investments benefiting from the US slowdown but the country should not get ‘psyched’ by the bubble burst there, Commerce and Industry Minister Kamal Nath said today.

However, on the cautious side a study has been initiated in his Ministry to assess the impact of US slowdown on the Indian economy.

“It will take a fortnight to do an assessment of what it means to India,” he told PTI.

Earlier, the US was the most attractive investment destination for funds from the Middle East and Russia. “All this is changing... India is becoming an important parking lot for investments,” Nath said, adding gloomier the US outlook, better it was for India from an investment point of view.

He said the fundamentals of the Indian economy remained strong “but a fine calibration is required to ensure that the momentum continues despite the gloomy economic outlook globally”.

Nath said the country’s GDP would grow by more than 9 per cent in 2007-08 when asked whether he shared the optimism of Finance Minister P Chidambaram.

But Nath agreed that the country needed to manage the dangers of overflow of overseas funds, which through impact on rupee have been affecting the country’s exports.

Nath said though the global economy had an impact on exports, the government has not revised the target of $ 160 billion dollars for the current fiscal. Nath said even if targets were not met, exports would still grow by 20 per cent over last year.

With less than 20 per cent share of the Gross Domestic Product, the one trillion dollar Indian economy is pre-dominantly driven by the domestic consumption, which in turn is getting a boost from over 8 per cent rise in per capita income.

While putting up a brave face and stating that the US economic troubles would not creep into the Indian economic outlook, he agreed that the country was engaged with the world’s largest economy, which faces more threats in the weeks to come. — PTI

New Delhi, February 6
The government seems to buying more time to decide on revision in petrol and diesel prices with the issue not being listed for discussion at the Cabinet meeting scheduled for tomorrow.

“It was expected that the Cabinet would this week take a decision on the issue that has been hanging for months now.

But the agenda for the tomorrow’s Cabinet meeting does not list fuel price revision as an item for consideration,” a Petroleum Ministry official said.

A Rs 2 a litre increase in petrol and Re one per litre hike in diesel prices is being contemplated but a duty rejig to minimise impact of high international crude oil prices looks unlikely.

The official, however, added that such sensitive items are sometime added to the Cabinet agenda at the last moment.

On his part, Petroleum Minister Murli Deora remained non-committal. “The Cabinet is to meet tomorrow (afternoon). But I can’t say if this (fuel price revision) will be discussed.”

Insiders said several quarters within the ruling UPA alliance were opposed to even a marginal auto fuel price increase and that probably has kept the issue hanging.

Petrol and diesel price increase and possibly also domestic LPG rate hike had been on cards since October-end when international crude oil prices touched record high, but political compulsions has led to its postponement several times.

The official said the government may raise the quantum of oil bonds to be issued to state-run retailers to partly compensate them for selling petrol, diesel, LPG and kerosene below the cost.

Presently, 42.7 per cent of the under-realisation on petrol, diesel, LPG and kerosene is met by the government through issue of oil bonds. This percentage may increase, the official said.

Another 33 per cent is chipped in up upstream companies like ONGC and GAIL, while the remaining has to be borne by the retailers - Indian Oil, Bharat Petroleum and Hindustan Petroleum.

The total under-realisation this fiscal is estimated at around 71,808 crore, he said.

“We wanted a Re 1 a litre reduction in excise duty on petrol and diesel. But, I don’t think that is happening just now,” the official said. — PTI

New Delhi, February 6
The government has asked public sector oil companies to increase supply of domestic LPG to ease shortages in availability of the cooking gas in some parts of the country.

“We are taking all steps and you will see the situation will ease in next few days,” Petroleum Minister Murli Deora told reporters here.

Shortages arose after consumers resorted to panic booking for LPG refills following reports of a proposed steep hike in cooking gas prices and also due to extended winter because of which the fuel was being used for heating purposes, Petroleum Secretary M S Srinivasan said.

“There are huge diversions taking place. LPG cylinders meant for domestic use are finding way to restaurants and hotels and even wedding meals are being cooked on domestic gas. That is gross misuse. This has resulted in inconvenience to household users in some parts,” he said.

India imported 2.288 million tons of LPG in 2006-07 fiscal and is expecting a 11-12 per cent growth in the cooking gas consumption, Srinivasan said. “This year we are expected to end up with 2.9 million tons and even more. We imported five extra cargoes during last two months just to ease the winter demand,” he said.

Admitting LPG bottling plant constraints with some companies, he said the plants have been asked to operate even on holidays to clear the backlog.

LPG shortages were reported from parts of Uttarakhand, Himachal Pradesh, J&K, Maharashtra, Rajasthan, Delhi, Kerala and Karnataka. To check diversion of subsidised domestic cooking gas, the government had introduced a system of providing a LPG refills to a household once in 21 days.

Requests for LPG refills are accepted only after 21 days from the previous delivery. —PTI

Ludhiana, February 6
Induction and furnace industry here has recorded a decline of roughly 25 per cent in demand for steel post price hike. Nearly 150-odd units, including 40 in Ludhiana, cater to domestic demand for steel-consuming industries like fasteners, cycle and parts, nut bolts and auto parts manufacturing industries.

Manufacturers said that steel-consuming units in domestic markets are shying from placing orders hoping for a decline in near future.

For industries using steel as raw material the situation is already tough due to increase in rates by leading steel manufacturers in the country.

The price hike by the five leading steel manufacturers, over Rs 7,000 within a span of around three months, has led to an agitation by industry here, which also plans to join the SAD-BJP rally to the Parliament on February 22 to mark their protest.

Domestic manufacturers, while expressing their inability to control rising steel prices, said the galloping rates were causing harm to them too as scrap rates had also increased proportionately. While the rate of ingot today was Rs 30,500 per metric tonne today, that of MS rounds was Rs 34,500 per metric tonne, which is a rough increase of Rs 4,000 within the last three months.

“Our rates move in proportion to those of leading manufacturers as the price of scrap, which we use as raw material, is increased by suppliers accordingly. However, the excessive increase that has happened this time has caused a dent in demand and reduced it by at least 25 per cent,” said K.K. Garg, president of North India Induction Furnace Association, adding, “scrap rates have increased from $410 to $490 per metric tonne within a month.

Industrialists said that a duty of 5 per cent on import of scrap was another factor causing price hike.

Meanwhile, with increase from both ends, manufacturers of cycles and cycle parts, fasteners, auto parts, nut bolts and other industries are finding it tough to strike maintain their margins. “We hope the government intervenes so that the industry can function smoothly,” said S.C. Ralhan, president of Hand Tools Manufacturers Association.

New Delhi, February 6
Bharti Airtel today said it would set up another high-capacity undersea cable, which will connect India to France through West Asia, in association with eight global telecom players by the end of next year.

A formal construction and maintenance agreement to build a high-capacity fibre-optic submarine cable that would stretch from India to France through West Asia was signed today in Rome the firms.

The cable system - I-ME-WE (India, West Asia, Western Europe)- is the fifth in the series of similar cable systems, which includes the SEA-ME-WE series, and is likely to be available for service by the end of 2009, a Bharti Airtel statement said here.

The nine global telecom companies that have come together to form the I-ME-WE consortium include Bharti Airtel (India), Etisalat (UAE), France Telecom (France), Ogero (Lebanon), PTCL (Pakistan), STC (Saudi Arabia), TE (Egypt), TIS Sparkle (Italy) and VSNL (India).

A supply contract was also signed by the consortium members, the statement added.

About the project, Rajan Swaroop, executive director, Global Network Services, Airtel Enterprise, said: "This is in line with our strategy to extend our international footprint and focus on connecting our customers in India to the Middle East and Europe."

The partnership would also play a key role in providing alternate routes for meeting the bandwidth requirements of our customers at any given time, he added.

Mumbai, February 6
With support from the government, a clutch of private companies in India are all set to emerge as suppliers to major international civil and defense aircraft manufacturers.

As per the proposal mooted by the government, winner of the bid for the 126 fighter aircraft, being purchased by the Indian Air Force, will have to spend about 50 per cent of the order in procuring Indian made goods and services. With the bill likely to exceed Rs 42,000 crore, major Indian companies are setting up special divisions to bid for projects from aircraft manufacturers.

The latest to join the fray is TAL Manufacturing Solutions, a wholly owned subsidiary of Tata Motors. The company announced today that it has signed a deal with Boeing to manufacture structural components for Boeing’s 787 Dreamliner airplane programme.

Tata Motors is among nearly a dozen Indian companies that are in the race to be awarded the Raksha Udyog Ratna status, which would put them on par with public sector defence companies like Hindustan Aeronautics.

Equipment suppliers, who have tied up with major fighter aircraft manufacturers, are already scouting for suppliers and a number of high value bids are likely to be announced in the coming months, say defense sources. Apart from components, Indian expertise is being sought for software and avionics.

Apart from Tata Motors, other private companies already supplying to defense-related companies include Larsen and Toubro and Astra Microwave Products. Recently, Wipro joined the select group to build electronic warfare systems, radars and flight simulators to be used in missiles by US defence contractors like Lockheed Martin and Northrop Grumman Corp.

Reports say, Wipro will go on to build command and control systems and simulators for the big defence contractors.

Recently Hindalco, the aluminium major in the Kumaramangalam Birla stable, announced that it was setting up capacities in building structures for aircraft. Others like Bharat Forge, which supplies ancillary equipment for the automobile industry is also said to be entering the aviation industry.

Under the offset clause mandatory by the Indian defence ministry, benefits will flow to Indian companies over the next 20 years - the life of the fighter aircraft contract.

New Delhi, February 6
NTPC has sought for waiver of ceiling of Rs 1000 crore that restricts it from bidding for power projects in India and abroad. The move is necessitated by the power major to enable it to form JVs and participating in the bidding for state power utilities. This will also enable NTPC to bid for development of power projects initiated by utilities enabling greater competition and establishment of public sector power projects.

At present, with a ceiling of Rs 1,000 crore for bidding, the company cannot go for bigger projects and has to wait for the Cabinet clearance, which causes delay. NTPC is bidding for seven projects, which have investment needs from Rs 5,500-8000 crore, and the PSU will have to investment between Rs 1,500-2,500 crore per project.

The National Electricity Policy, notified by the government on February 12, 2005, has targeted to meet the demand of power in full by 2012 and increase per capita availability to over 1,000 units by 2012. Achievement of this target requires development of large capacity projects resulting in a capacity addition of more than 78,000 MW in the Eleventh Plan period.

The tariff policy in January 2006 has further mentioned that all future power procurement shall be through a competitively bid process. Though there is a window available for public sector projects for the time being, PSU generating companies, including NTPC have to participate in the tariff bidding by various state distribution licensees initiated for various power projects under the competitive bidding guidelines.

The bidding documents of these projects often envisage the execution of the project on a stand-alone basis through a special purpose vehicle. In the vent of being declared as a successful bidder to acquire the shares of SPV, it shall continue to exist as a separate legal entity as all the clearances and allocations shall be in its name. NTPC is keen to participate in the bidding process initiated by the state distribution licensees for setting up of power projects under the bidding guidelines in addition to ultra mega power projects.