The Tribune, Chandigarh, India

Inflation rises to 8.56 pc in Jan

New Delhi, February 15
The government today said inflation surged to 8.56 per cent in January, the highest in over 13 months, ahead of the Union Budget for 2010-11 that would spell out the stance on stimulus packages.

Inflation, which has already breached the RBI's estimate of 8.53 per cent, has also fuelled concerns that the apex bank could further tighten the monetary measures initiated earlier this month in its third quarter monetary policy review.

Projecting that inflation would touch 8.56 per cent by current fiscal-end, the RBI had sucked out about Rs 36,000 crore from the banking system to check the rising prices.

Over one-year high inflation was led by costlier sugar and potato prices. Sugar rates rose by 58.96 per cent while potatoes turned costlier 53.39 per cent.

Economists predict inflation to reach 10 per cent by fiscal-end, making the rollback of stimulus measures a tricky issue for Finance Minister Pranab Mukherjee.

"There is a tough balancing act ...in the Budget. If he withdraws stimulus then it would put pressure on inflation.

However, withdrawing stimulus is necessary to reduce fiscal deficit," Crisil Principal Economist DK Joshi said.

In the wake of the global slowdown in 2008, the government had announced many sops, including cut in excise duty, to prop up the then slowing economy. Now that the industrial growth is also at 16-month high of 16.8 (December), experts feel the upcoming Budget may see stimulus being withdrawn.

In order to help the industry tide over the impact of the global financial crisis, the government came up with three stimulus packages sacrificing Rs 1.86 lakh crore in revenue.

The stimulus packages, which included tax cuts and raising public expenditure, are estimated to push the fiscal deficit to 6.8 per cent of the GDP from 6.2 per cent a year ago.

Riding on the back of stimulus the Indian economy grew at a stunning rate of 7.9 per cent in the second quarter of 2009-10. This prompted the RBI also to revise its growth projection upwards to 7.5 per cent for the fiscal.

After industrial production grew by 16.8 per cent, Mukherjee had also said that it would have a positive bearing on the GDP.

However, economists say with inflation at a 13-month high, the government is faced with the classic dilemma of choosing between supporting growth and curbing inflation.

Fuel index rose by 1.8 per cent due to higher prices of naphtha, which rose 21 per cent. Furnace oil rose 6 per cent while bitumen, non-coking coal and light diesel oil rose 3 per cent each.

Many economists feel Finance Minister Pranab Mukherjee would partially roll back stimulus measures in the Budget, which will be unveiled on February 26. — PTI

Continue incentives, say exporters

New Delhi, February 15
Amid speculations that stimulus measures could be rolled back in the forthcoming Budget, apex body of exporters FIEO today asked the government to continue the incentives for at least another one and a half years.

After a 13-month contraction following the slowdown in demand in the western markets, India's exports started recovering from November. Exports increased by 18.2 in November and by 9.3 per cent in December 2009. It grew by 11.5 per cent in January this year.

The Federation of India Export Organisations (FIEO) said the growth in exports seen in the past three months is mainly on account of low base effect and the stimulus provided by the government to exporters.

The chamber has urged the government "to extend the stimulus for exports by at-least one and half years." "...while determining whether a sector has done well or not, reference point should be the year when the sector was doing well," added FIEO president A Sakthivel.

FIEO said that sectors like tobacco, man-made yarns, tea and coffee have shown growth due to stimulus provided by the government and "in case of abrupt withdrawal of stimulus these sectors may again enter into negative territory".

In the wake of the contraction in exports, the government had provided incentives like two per cent interest subsidy, higher duty drawback and refund of services tax in 19 categories of services. — PTI

Industry, analysts divided over stimulus exit

New Delhi, February 15
As the day of the Budget draws closer, the industry, analysts and government advisers stand divided over the issue of withdrawing the stimulus measures.

The stunning December industrial growth numbers and advance estimates by the CSO pegging economic growth at over 7 per cent for the current fiscal have prompted analysts and government advisers to call for a phased exit of the stimulus packages as it has widened the fiscal deficit hugely.

However, industry says the recovery is still confined to a few large sectors and the government should not rush in to exit the stimulus measures, as it would be dangerous for both economic growth and employment generation.

Industrial production recorded a 16-year high of 16.8 per cent in December, reflecting well the dividend of stimulus packages given by the government over the past five quarters.

However, the very same packages, comprising heavy duty cuts and stepped up public spending have also jacked up fiscal deficit to 6.2 per cent of GDP last fiscal from the budgeted level of 2.5 per cent. This fiscal, it is estimated at a hefty 6.8 per cent.

Prime Minister's Economic Advisory Council chairman C Rangarajan said the very strong IIP (industrial production) numbers for December will likely put in motion the process of fiscal consolidation by withdrawing some of the stimulus measures.

Cautioning the government against exit steps in the Budget to be unveiled on February 26, Ficci secretary-general Amit Mitra said, "some important sectors like food products, cotton textiles, leather and miscellaneous manufacturing is lagging behind in terms of growth."

Pointing out that the current growth seems to be driven by a few large sectors, Mitra said, "We also need to be cautious because this strong (manufacturing) growth has come over the negative growth of 0.6 per cent in December 2008." Withdrawing stimulus means increasing excise duty, or service tax or cutting Plan expenditure. If tax rates are raised, Mitra said, it would lead to pressure on prices that will push up the already surging prices.

Assocham president Swati Piramal also said IIP figures indicate that recovery will become pronounced in the next few months and stay sustained provided stimulus package is continued for the next fiscal.

After the Central Statistical Organisation (CSO) came out with its advance estimates last Monday, pegging the economic growth at 7.2 per cent this fiscal, Planning Commission deputy chairman Montek Singh Ahluwalia also favoured phasing out of the stimulus packages. — PTI

ATF prices cut by 2.5 pc

New Delhi, February 15
State-owned oil firms today cut aviation turbine fuel (ATF) price by 2.5 per cent on falling global rates to give some relief to Indian carriers. Jet fuel price in Delhi was cut by Rs 974 per kilolitre or 2.5 per cent to Rs 37,982 per kl effective midnight tonight, an official of the Indian Oil Corp, the nation’s largest oil firm, said.

This is the second reduction in ATF rates this month, with prices cut by as much as 5.5 per cent on February 1 to Rs 38,956.38. Jet fuel constitutes 40 per cent of the operating cost of an airline and the cut in prices would help ease the burden on Indian carriers. — PTI

Bharti to start talks with Zain

New Delhi, February 15
Bharti Airtel today announced it would hold discussions on an exclusive basis with Zain Telecom of Kuwait for acquiring its African operations for which the Sunil Mittal-led firm has made an offer of $10.7 billion. The announcement by the Indian telecom leader for exclusive discussions till March 25 came a day after its bid was approved by the Zain telecom's Board.

During the exclusive agreement, Bharti would assess the financial parameters and other related issues, including regulatory norms that are needed to be in place for the deal that could make Bharti among the top 10 operators globally.

"Bharti and Zain have agreed to enter into exclusive discussions until March 25, 2010 for the acquisition of Zain's African unit based on an enterprise value of USD 10.7 billion," the company said in a statement.

This acquisition attempt comes within a month of Bharti buying a majority 70 per cent stake in Warid telecom of Bangladesh and the African venture could become the year's largest telecom deal.

This is Bharti's third attempt in the past two years to enter the African market. In September last year, Bharti's $23 billion merger talks with MTN fell through for the second time due to various reasons, including regulatory approvals. — PTI

Scrip plunges over 9 pc

Mumbai: Bharti Airtel today plunged over 9 per cent on the Bombay Stock Exchange on concerns that the proposed acquisition of the Kuwaiti Zain Telecom’s African operations will put pressure on the country’s largest telco’s financial as the $10.7-billion bid is at a high premium.

Shares of Bharti Airtel extended its fall during the day, plunging 9.67 per cent to a low of Rs 284 on the BSE. It later recovered a bit to settle at Rs 285.40, down 9.22 per cent over previous close.

The steep fall was precipitated by after Bank of America - Mrrill Lynch downgraded Bharti shares to “under-perform” from buy, citing rich valuation of the potential deal ($10.7 billion all cash deal) and unexciting growth outlook for Zain’s African portfolio. — PTI

Cheque Bounce Cases
Co directors can’t be prosecuted: SC

New Delhi, February 15
The Supreme Court today ruled that directors of a company cannot be prosecuted in cheque bounce cases unless it is proved that the person was directly responsible or was “in charge” of the firm’s operation at the time of issuing the cheque.

“Every person connected with the company shall not fall within the ambit of the provision. Only those persons who were in-charge of and responsible for the conduct of the business of the company at the time of commission of an offence will be liable for criminal action.

“It follows from the fact that if a director of a company who was not in-charge of and was not responsible for the conduct of the business of the company at the relevant time will not be liable for a criminal offence under the provisions,” a bench of Justices P Sathasivam and HL Dattu said in a judgement.

The apex court passed the judgement while dismissing the appeals filed by two companies challenging the Delhi High Court’s decision to quash the summons issued against Harmeet Singh Paintal and Dev Sarin, ex directors of the Jay Rapid Roller Limited and the International Agro Allied Products Ltd in two separate cases. — PTI

Japan still world's 2nd largest economy

Tokyo/New Delhi, February 15
Retaining its position as the world's second largest economy, the Japanese economy grew at a faster-than-expected pace of 1.1 per cent in the past three months of 2009.

China, the fastest-growing large economy, clocked a growth of 10.7 per cent in the December quarter, bringing it at a sniffing distance to surpass Japan as the second largest economy in the world.

The Japanese Cabinet Office today said the island nation's economy, which is primarily exports-driven rose 1.1 per cent in the fourth quarter of 2009. On an annual basis, GDP expanded a much higher pace at 4.6 per cent.

For the whole of 2009, the Japanese economy shrank 5 per cent and is valued at 474.92 trillion yen (about $5.1 trillion), according to the official data.

Last month, China said its 2009 GDP was "33,535.3 billion yuan (about $4.91 trillion), up by 8.7 per cent at comparable prices." Severely hit by the global financial meltdown, the Japanese economy has slumped into one of the worst recessions in recent history. This has brought down the GDP gap (in terms of US dollars) between Japan and China to a narrow range.

Japan climbed out of recession in the June quarter of 2009 after clocking a growth of 1.3 per cent.

Meanwhile, the better-than-expected Japanese growth in the December quarter was mainly driven by better exports and effects of stimulus measures.

In 2009, the Chinese economy expanded at a stunning rate of 8.7 per cent, primarily on the back of improved domestic output driven by government stimulus and tightly held yuan.

Despite the GDP rising at a good rate in the December quarter, the exports-driven Japanese economy is expected to see a sluggish growth in the near-term.

Going by the latest figures, the Japanese economy witnessed zero growth in the September quarter of 2009.

Interestingly, preliminary estimates pegged GDP to expand at 1.2 per cent for the same period and the figure was later revised to 0.3 per cent.

To bolster the recession-hit economy, Japan had unveiled stimulus measures worth over $130 billion. — PTI

Soon, farmers to get better prices with futures trading
Ruchika M Khanna
Tribune News Service

Chandigarh, February 15
Farmers will soon be able to get a better value for their produce. Based on the current spot prices of a particular agri-commodity, these farmers will also be able to decide on what crop to grow, so as to get the best price for their produce later.

With the National Commodities and Derivatives Exchange (NCDEX) now creating awareness on aggregation of farmers produce for participation in futures markets and the proposed amendments in the Forwards Commission Regulatory Act, making it possible for banks to participate in futures trading, farmers can soon begin to avail the benefits of futures trading. This issue was highlighted by officials of NCDEX during a state-level awareness programme for futures trading in agri-commodities, organised by NABARD here today. Deliberations were held as to how farmers can benefit from futures trading and the role that bankers can play in helping farmers.

Talking to TNS on the sidelines of the seminar, officials of NCDEX said through the aggregation process, an attempt was being made to bring farmers to sell on the futures platform. “As a single entity farmers cannot trade on the futures platform as the contract sizes required for this are large. General lack of awareness about forward trading, rigorous trading procedures, inability to meet quality standards, high membership fees, bank guarantees and other technological requirements were other specifications that becomes a handicap for individual farmers. It is thus that we are now recommending aggregation of farmers so that they too can benefit on the futures platform,” said Rohit Shukla of NCDEX.

The commodities exchange now proposes that farmers can group together and form an intermediary, which in turn can take care of the constraints and trade on the exchange on the farmers behalf. These intermediaries would identify and bring farmers who can satisfy the exchange on the quality front, while taking care of all other requirements independent of the farmer for the fee, and would ensure better realisation for them.

The emphasis would be on small and medium farmers, so that they too can benefit.

Shukla said they had done some experimentation earlier in Haryana, with HAFED becoming the intermediary for five farmers societies and trading 25,000 metric tonnes of wheat. Though the farmers did well, this could not be repeated as futures trading in wheat was banned by the government. Constraints with regards to finance too cropped up. “Now, we are trying to clear all these obstacles. With the proposed amendments in the FMCR Act, banks will be allowed to trade on futures platform. So far their role is restricted to financing goods. Once all these things are in place, farmers will be able to get much higher returns that just the minimum support prices offered by the government,” he added.

PVR calls off DT Cinema deal

New Delhi, February 15
The country’s largest theatre chain PVR Cinemas today called off the deal to acquire DT Cinemas.

PVR said the deal had been terminated as conditions for the acquisitions had not been met by the DLF-promoted cinema chain, the company said.

“The 60-day period and the mutually extended period have elapsed and the condition precedents for the acquisition have still not been satisfied,” it said, adding the two parties have mutually agreed not to further extend the period to complete the deal. As part of an deal, estimated to be around Rs 60 crore, signed last November, PVR was to pay Rs 20.20 crore in cash and issue 25.57 lakh shares on a preferential basis to DT Cinemas.

The issue of preferential shares was, however, subject to completion of certain pending compliances by DT Cinemas. The companies on January 27 agreed to extend date to February 15. — PTI