London, November 26
Massive stimulus plans to drive the world out of recession took centre stage on Wednesday with the European Union considering a 200 billion euro ($260 billion) boost and China announcing its biggest interest rate cut in 11 years.

The moves came on the heels of an $800 billion credit market bailout from the US Federal Reserve.

Underlining the troubles facing industry from a deteriorating global economy, Toyota Motor Corp had its top-notch credit rating cut for the first time in a decade.

China's cut in banks' benchmark lending and deposit rates by 108 basis points came a day after the World Bank said Chinese growth next year would be around 7.5 per cent, the slowest rate since 1990.

The People's Bank of China (PBOC) also reduced reserve requirements by 1 percentage point for big banks and by 2 percentage points for smaller banks.

The European Commission approved a package aimed at giving the sagging European economy a sharp, temporary boost with a 200 billion euro spending plan across the 27-nation bloc, an EU source said.

The plan, higher than initially thought, calls for a targeted and temporary fiscal stimulus of 1.5 per cent of EU gross domestic product. National measures would account for around 170 billion euros, or 1.2 per cent of GDP, and EU and European Investment Bank budgets around 30 billion euros.

The Commission wants the EU's 27 countries to unite on a two-year dash for growth, even if it means breaking the region's national deficit targets.

Some EU countries were cautious. German Chancellor Angela Merkel warned EU partners against competing to produce big stimulus packages for their economies and defended her plans for Germany as policies of "measure, middle ground and reason".

Equity markets slipped over worries about the impact of huge stimulus programmes on national accounts. Japan's Nikkei average shed 1.3 per cent and the index of top European shares was down 1.5 per cent.

The Organisation for Economic Cooperation and Development forecast on Tuesday that growth among its 30-member nations would contract by 0.4 per cent next year, with "negative growth" in 19 countries.

Elsewhere, Indonesia approached Australia, the World Bank and other creditors to help cover its budget deficit next year, an Indonesian finance ministry official said.

More evidence of the sharp global downturn's impact on business came when Fitch Ratings downgraded Toyota's long-term foreign and local debt ratings to AA from AAA, with a negative outlook.

"The negative developments in the industry are so substantial and fundamental that even the strongest player — Toyota — can no longer support an 'AAA' rating," said Fitch Director Tatsuya Mizuno.— Reuters

New Delhi, November 26
Country's third largest lender Punjab National Bank today slashed the benchmark interest rates by 100 basis points, a decision that will make auto, home and other commercial loans cheaper, besides stepping up pressure on private sector lenders to announce similar cuts.

The reduced rates would come into effect from December 1.

The bank decided to cut its benchmark Prime Lending Rate (BPLR) by 100 basis points to 12.5 per cent, which would automatically reduce PLR-linked loans by the same margin.

This would be the lowest PLR offered by any public sector bank at present.

Besides, PNB has also slashed peak deposit rate to 9.5 per cent from earlier level of 10.5 per cent for 1-2 years fixed deposits.

The deposit rates for other maturities too have been reduced by 25-75 basis points.

The reduction of interest rates by the PSU banks follows a number of steps taken by the Reserve Bank to inject into the banking system Rs 2.75 lakh crore since October and cuts in the short-term (repo) rates, signalling soft interest rate regime. — PTI 

New Delhi, November 26
Japanese auto major Suzuki Motor Corp (SMC) is set to buy out the stake of its Indian partner in two wheeler-venture Suzuki Motorcycle India Pvt Ltd (SMIPL), which could happen this fiscal.

The Japanese firm is looking to make the Indian subsidiary a wholly owned venture, a process that started with it holding a 74 per cent stake and the remaining 26 per cent by the family of company managing director Satya Sheel.

"There is a discussion within Suzuki on such a move," SMIPL joint managing director Katsumi Takata told reporters here, when asked if SMC planned to buy out the Indian partner.

Industry sources, however, said the two partners are in advanced stages of negotiations, which would see Sheel's stake in the company bought by the Japanese firm.

"It is likely to happen within this fiscal," a source said. However, both SMIPL and Sheel are tight-lipped over the issue. "No comments," Takata said.

When contacted, Sheel, who is in China now, said he was not in a "position" to comment on the matter immediately.— PTI

Chandigarh, November 26
Market regulator SEBI is all set to open a separate exchange for the small and medium enterprises (SMEs). SEBI has already issued norms — legal framework for setting up this exchange, which is expected to become operational within two months.

This was stated by T.C. Nair, whole-time member, SEBI, while talking to mediapersons on the sidelines of a seminar on "Financing future giants" organised by industry body Assocham here today. He said the norms for these exchanges were being finalised and an entity having a minimum net worth of Rs 100 crore would be eligible to set up an exchange for SMEs.

"These entities should be corporatised since inception and it should be demutualised within 1-2 years since it begins trading. This means that the promoter of the exchange should dilute 51 per cent equity within this period. It should also have nationwide trading terminals, online screen-based trading system, and a business continuity plan, including a disaster recovery plan," he said, adding that both the National Stock Exchange and Calcutta Stock Exchange had shown a desire to become SME exchanges.

He said they proposed to provide 3-4 licences in the initial phase. The objective would be to mobilise resources from the public on the lines of the Alternate Investment Market (AIM) set-up in London . The exchange for SMEs will be different from existing stock exchanges in terms of companies raising capital and investors investing money in such companies. SEBI has fixed the minimum trading lot of Rs 1 lakh and trading system may either be order driven or quote driven. The settlement may either be on rolling, trade for trade or call auction basis.

New Delhi, November 26
Facing political pressure for not reducing petrol and diesel prices despite raw material cost more than halving, the petroleum ministry will soon approach the cabinet for "appropriate" decision on fuel pricing even as oil firms continue to make hefty losses on sale of LPG and kerosene.

Prime Minister Manmohan Singh had categorically ruled out review in the fuel prices till losses on LPG and kerosene are wiped out.

This despite the fact that margin on petrol and diesel had turned positive leading to demand that fuel prices be cut to reflect the softening in crude prices from $147 a barrel to about $50 currently.

"It is true that margins on petrol and diesel have turned positive but there are still huge under recoveries on kerosene and LPG," petroleum secretary R.S. Pandey told the Economic Editors Conference here.

Pandey said the ministry will present to the cabinet a detailed picture of the emerging scenario and seek an "appropriate" decision, he said. Meanwhile, petroleum minister Murli Deora on his part side stepped questions on Prime Minister's categorical statements saying "I have nothing to say.... Situations keep changing everyday".

His secretary, however, acknowledged that the Rs 21.54 a litre loss on kerosene and Rs 330.28 per cylinder loss on LPG were the same even today as they were when Prime Minster on November 10 made that statement.

Pandey said fuel retailers — IOC, BPCL and HPCL — were making a profit of Rs 8.17 a litre on petrol and Rs 0.65 per litre on diesel. "Overall, there are still under recoveries," he said. Besides, the three companies in the first half of the current fiscal posted a net loss of Rs 14,431 crore. — PTI

New Delhi, November 26
The spectrum allocation policy followed by the Centre in recent years has come under judicial scrutiny as the Delhi High Court today sought response from the government on a petition challenging the policy.

A bench comprising Chief Justice A P Shah and Justice S Muralidhar issued notice to the government and fixed the matter for further hearing on December 10.

The petition filed by an NGO, Telecom Watchdog, contended that the government alloted the spectrum without following any policy and cellular operators were provided excess spectrum without charging them for the scarce resource since 2001.

"The government should withdraw the excess spectrum from the operators by applying the tougher of the two spectrum allocation norms suggested by TRAI and TEC," contended advocate Prashant Bhushan, appearing for the NGO.

The court, however, refrained from issuing notice to cellular companies.

Bharti Airtel, however, opposed the plea of the petitioner and contended that the petition is a proxy one filed by Reliance Communications.

"Reliance Communications has filed this petition. It is a proxy petition filed by the NGO. The prayers in this petition are the same as in the petition filed by Reliance Comm before TDSAT," Bharti's counsel pleaded.

The court, however, was not satisfied with this contention, and issued notice to the Centre, which was accepted by the additional solicitor general P P Malhotra.

"If we find the government needs to respond on a policy issue then we have to issue notice. We would like to hear you also on December 10," the court said.

Earlier, the court had issued notice to the government on a petition challenging the government's policy of "first come first served" followed by it in allocation of 2G spectrum. — PTI 

New Delhi, November 26
Even as the governments around the globe are struggling to pull their economies out of the financial crisis by injecting trillions of dollars, experts believe the times of layoffs, detrimental economic growth and liquidity crunch is here to stay for at least two years.

"The global economic downturn is going to continue for next one and half to two years. Post the downturn, the economy will stabilise but at a much lower level (in relative GDP growth rate) compared to the booms that we saw in 2005-2007 era," said Mayank H Shah, Global Capital Markets and Derivatives expert and Associate Partner at IBM.

Besides, a recent survey of global fund managers by Merrill Lynch revealed that four out of every five investors believe the world will continue to be gripped by recession in the coming years. Policy makers have offered fiscal stimulus packages, liquidity and interest rate cuts, but investors are not yet ready to give their policies the benefit of the doubt.

About 40 per cent of the panel still believe that monetary policy is "too restrictive" and asset allocators remain overweight cash and bonds relative to equities.

According to government data released yesterday, the US economy contracted at the fastest pace in seven years with a negative growth of 0.5 per cent in the third quarter this year.

In a latest report by Organisation for Economic Cooperation and Development (OECD), it has predicted a prolonged economic downturn in the coming months with the US projected to shrink as much as 0.9 per cent in 2009.

The "projections point to a protracted downturn, with GDP likely to decline by a third of a per cent in 2009, but the uncertainties are large. That goes not least for the depth and duration of the financial crisis, the prime driver of the downturn," OECD report stated. Further, global research and analytics company Evalueserve founder and director Alok Aggarwal also believes the crisis to continue for the coming two years at least.

"Although I do not have a crystal ball, I do believe that this downturn is going to last between 12 and 24 months. The liquidity crunch still exists and may exist for another six months." "Once the liquidity crunch is over, the companies will need to fix their balance sheets and start improving their profit-loss situation and that may take another 6 to 18 months." Aggarwal said.

"Investors remain embedded in a defensive asset allocation mindset. Many acknowledge the global policy response seen in recent weeks, but fear of deflation may be keeping them on the sideline," Merrill Lynch head of EMEA equity strategy Gary Baker said. — PTI 

New Delhi, November 26
A regulator in the postal and courier sector, like the Telecom Regulatory Authority of India (TRAI), the regulator in the telecom sector, could be on the cards if the suggestions to be made by the Universal Postal Union (UPU), the UN body for the sector go through with the government.

Vijay Bhushan, former director-general of posts in India and secretary in the ministry of communications and IT, who is now the expert envoy of the UPU on the reform and development of the postal sector, feels that major reforms are needed in the postal sector in the country and having a regulatory body was a necessity.

Bhushan feels that there is a major threat to the postal system with advent of the couriers and major reforms have to be carried out to ensure that the age-old system does not whither away.

He said regulators, independent bodies, were needed through out the world as the courier system was there to stay along with the postal system. However, without a regulator there was no clarity in the sector.

It was also needed to legitimise the sector besides providing quality service. After putting forth his suggestions to some of the countries, he is also expected to make his recommendations on the issue to the Government of India soon.

He said the UPU had carried out an assessment where it came out that the communications market was being controlled by the telecom sector. While it has a whopping 70 per cent share, the rest was a mixed bag of which 20 per cent was mail and couriers and 10 per cent fax and emails.

Till recently of the 20 per cent of the mail and couriers, more than 90 per cent share was of the ‘letter mail’. But the monopoly had been threatened now by the couriers and as such the need to recognise them.

He said that new laws have to be brought in to give the postal service a commercial outlook.

BRIEFLY

Sun Pharma buyout
Mumbai: Sun Pharmaceutical on Wednesday said it has acquired US-based drug ingredients manufacturer Chattem Chemicals for an undisclosed amount. The American subsidiary of Sun Pharma has bought Chattem Chemicals from Elcat Inc, the domestic drug firm said in a filing to the Bombay Stock Exchange.— PTI

TNEB, BHEL tie-up
Chennai: State-run power equipment maker BHEL and the Tamil Nadu Electricity Board on Wednesday signed an agreement for a joint venture for setting up 1,600 MW Thermal power plant in Tuticorin district, Tamil Nadu. The venture, Udangudi Power Corporation Ltd, would set up 2x800 MW supercritical thermal power project in the state, an official statement said. — PTI

MDLR Airlines’ plans
Lucknow: Unfazed by the downturn in avaition sector, low-fare regional carrier MDLR Airlines plans to expand its route network, connecting major cities across the country. "Our operations on the low-fare, full service model has strengthened our presence as a scheduled regional operator in Northern India and this new flight is just a step forward in that direction," executive director of MDLR Koustav M Dhar said as the airline launched a maiden six-day a week service between New Delhi and Lucknow.— PTI

Gold falls by Rs 80
New Delhi: Gold prices fell by Rs 80 in the bullion market here with stockists, influenced by weak global trends, resorting to selling at existing higher levels. The precious metal closed at Rs 13,100 per 10 gram, a loss of Rs 80 from the previous close. Silver plunged by Rs 550 to Rs 17,150 per kg.— PTI

Australia's QBE acquisition
Sydney: QBE Insurance Group Ltd, Australia's top insurer by premium income, will buy US-based underwriting agency ZC Sterling Corp for $575 million, part funded by a $1.3 billion equity raising, and raised its 2008 revenue growth target. QBE would also buy three more underwriting agencies for a total cost of $120 million. The new purchases would help QBE to achieve gross written premium of A$16.5 billion in 2009.— Reuters