Retail, aviation FDI: Govt formally opens supermarket sector to foreign chains

Despite huge political opposition, the UPA government today notified the cabinet decision to allow foreign supermarkets like Walmart to enter the Indian market, showing new found determination to press ahead with economic reforms. Multinational retailers are allowed to invest up to 51% to open stores in 10 states and UTs which, till date, have agreed to implement the decision. “51% FDI in multibrand retailing, in all products, will be permitted,” a department of industrial policy & promotion notification said, adding the decision will take immediate effect. The DIPP also operationalized cabinet decisions taken last week to relax the sourcing norms for foreign retailers investing beyond 51% in single brand retail and allow 49% FDI by foreign airlines in domestic carriers. Besides, permitting 49% FDI in power exchanges and hike in foreign equity cap from 49% to 74% in service providers like DTH in broadcasting sector have also been notified.— TNS

New Delhi, September 20
Cautioning the government against rollback of diesel price hike, credit rating agency Moody's today said that any such step would limit its subsidy reduction plan.

"If the government rolls back a part of the hike, as some coalition partners and members of opposition parties have demanded, the decline in subsidies will be smaller," Moody's said in its credit outlook report.

Battling huge fuel subsidy payouts, the government last week raised diesel prices, the first since June 2011, by Rs 5 a litre.

Moody's statement comes on a day when opposition parties are observing nationwide strike to protest against the price hike and government's move to operationalize its decision on allowing foreign direct investment in multibrand retail.

Moody's said the price hike would lower government's subsidy burden by Rs 20,000 crore in the current fiscal to an estimated Rs 1.7 lakh crore. "Still, the subsidy will be 23% higher than the Rs 1.4 lakh crore for the previous fiscal year," it said.

Moody's said since June 2011, import parity prices, which are used as a reference to calculate the subsidies, have risen by nearly 25% because of higher international diesel prices and the depreciating rupee. "But the near double-digit domestic inflation and the political consequences of pushing through unpopular reforms have kept the frequency of price hikes low," it added.

Moody's said the price hike is credit positive for oil marketing firms. "The initiatives are credit positive for state-owned oil refiners and retailers, including and upstream oil companies, including ONGC," it said. — PTI

New Delhi, September 20
The Competition Commission of India (CCI) has found evidence of cartelization in the country's tyre manufacturing industry and is expected to issue an order soon, an official said.

The antitrust regulator has been probing allegations of cartelization among tyre manufacturers following a complaint.

A senior Competition Commission of India official said on Thursday that the commission had found cartelization in the tyre industry and an order could be issued shortly.

However, names were not divulged.

The director general of the Competition Commission of India, which acts as its investigating arm, has already submitted the report on the issue.

Generally, cartelization refers to entities entering into agreements whereby they decide not to compete on pricing or products or customers. Such practices adversely impact overall competition in the wholesale and retail markets.

Cartelization is prohibited under the Competition Act, enacted in 2002.

The Competition Commission of India has the mandate to eliminate practices that have an adverse impact on competition and protect the interests of the country’s consumers.

Recently, the fair trade regulator had passed an order against cement companies on charges of cartelization.

According to official data, the commission was looking into 39 cases while 26 others were under investigation with the Competition Commission of India director general as on June 30, 2012.

A majority of antitrust cases relate to anticompetitive agreements and abuse of dominant market positions by different tyre manufacturing entities. — PTI

Mumbai, September 20
Rupee fell to its lowest in nearly a week on Thursday as a key ally of the country's ruling coalition withdrew its support, raising worries the government may roll back big ticket reforms such as the hike in diesel prices.

Investors are worried India will retreat on some of its measures and fear the political crisis could threaten future reforms in sectors such as pension and insurance, although for now they expect the government to hold its ground.

"I don't see any rollback of recent measures. Probably we may not see follow-on measures for some time, it is neither bullish nor bearish at this moment; hence look for consolidation in rupee at 53.65-54.50," said Moses Harding, head of asset-liability management at IndusInd Bank.

The partially convertible rupee ended at 54.3850/3950 to the dollar from its Tuesday close of 54.01/02. Markets were closed on Wednesday.

The rupee fell to a session low of 54.42, its lowest since September 14. Local stocks also fell, with the benchmark BSE Sensex ending down 0.8%, after foreign investors had pumped in Rs 62.62 billion in net inflows over the previous three sessions.

The rupee has gained over 2 per cent since the government announced a steep hike in diesel prices and permission for foreign direct investment into multibrand retail sector. — Reuters

The local unit could remain volatile in the days ahead, as investors track political developments.

UBS called Trinamool's withdrawal "political theatre", but warned they could threaten the government's reform initiatives.

Trinamool's decision "raised not only political entropy but also the risk that announced measures may be either diluted or delayed," UBS said in a noted dated on Wednesday.

USD/INR 1-month non-deliverable forwards were bid and last trading at 54.60 versus its previous close of 54.49.

In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 54.365 with a total traded volume of around $4.5 billion.

Singapore, September 20
The number of rich Asians surpassed North Americans for the first time last year, but their fortunes shrank slightly and still trailed total wealth on the other side of the Pacific, Capgemini and RBC Wealth Management said on Wednesday.

The Asia-Pacific region is now home to 3.37 million high net worth individuals (HNWI) — people with $1 million or more to invest - compared with 3.35 million in North America and 3.17 million in Europe, the firms said in a report.

Asia's wealthy — 54% of whom are concentrated in Japan, almost 17% in China and more than 5% in Australia — saw their total fortunes slip to $10.7 trillion last year from $10.8 trillion in 2010, and lag North America's $11.4 trillion.

The Asia-Pacific Wealth Report, compiled by Capgemini and RBC Wealth Management, is closely watched by wealth managers, high-end property agents, luxury goods retailers and other businesses for signs of how and where the ultra-wealthy are investing and how their fortunes are faring.

Many of Asia's rich made their millions and billions through family businesses and property. "We don't see massive shifting in the allocations of portfolio management," Claire Sauvanaud, vice president of Capgemini Financial Services, told a news conference.

Wealth fell most significantly last year in Hong Kong (20.1%) and India (18%) and grew most strongly in Thailand (9.3%) and Indonesia (5.3%). Growth was more modest in Japan (2.3%) and in China (1.8%).

Weakness in Europe and other global trends played their part in the slight fall in total Asian wealth, the report said, but the "region grappled with its own economic challenges, including inflation, slowing growth and capital outflows."

"Nevertheless, Asia-Pacific is expected to continue showing stronger growth than other regions going forward, and its HNWI population and wealth are likely to keep expanding," it said. As part of that, Asia's rich are looking more to offshore wealth centres close to home. — Reuters

Chandigarh, September 20
The National Cooperative Agriculture& Rural Development Banks Federation has welcomed the government’s move for allowing 51% FDI in multibrand retail. This, says the federation, will not only improve the economic condition of farmers, who will get better pay for their produce, but also improve business prospects of rural banks.

Barring a few, most of these banks are in dire financial straits. In fact, because of poor or no recovery of the agriculture loans disbursed by these banks, many of them have stopped further lending. With the coming in of big retail chains, the cooperative banks in the country will not only get an opportunity to lend more, but with increase in farmers’ income levels, the loan recovery from them, too, would improve.

Talking on the sidelines of a conference of principal secretaries (cooperatives), the federation’s MD K.K. Ravindran said with middlemen exploiting them farmers were presently denied actual prices of their produce. “We endorse the decision to allow FDI in multibrand retail, as it will ensure better price to farmers with the elimination of the middlemen in the food procurement chain”.

Federation chairman K. Sivadasan Nair said with retail FDI pushing up farmers’ income they would be in a position to repay loans and banks in turn would be able to improve on credit offtake. “For improving the banks’ financial viability the government should ensure the implementation of the Vaidyanathan Task Force 11, which recommended rural banks be allowed to accept deposits and function like other banks to be profitable”, he added.

Earlier, Punjab principal cooperatives secretary Vishwajeet Khanna said it had been unanimously decided at the conference that NABARD must reduce its rate on investment credit for refinance to banks from 10%, adding it was also decided to initiate better loan recovery from defaulters of these banks through legal process.