The Tribune, Chandigarh, India

RBI lauds reforms, but warns inflation remains a risk
TNS & Agencies

Mumbai, October 29
The Reserve Bank of India on Monday noted that the recent reform measures announced by the government were important for turning the economy around. The central bank, which released its review of macroeconomic and monetary developments ahead of its monetary policy review on Tuesday, noted it was concerned about balancing growth with inflation.

"Growth-inflation balance warrants careful policy calibration as growth slows but inflation risks persist," it added.

The central bank said the government's reform efforts are a move in the right direction but said swift implementation and further measures are needed, and warned that inflation remains a risk, a day before it is expected to keep interest rates on hold.

Still, the RBI's language was less hawkish than in the recent past, as it said inflation pressure is likely to moderate starting in the January-March quarter, a sign it may soon be ready to ease policy interest rates after leaving them unchanged since April.

"As macro-risks from inflation and twin deficits recede further, that could yield space down the line for monetary policy to respond more effectively to growth concerns," the RBI wrote in its review of macroeconomic and monetary developments for the July-September quarter. The twin deficits refer to India's fiscal and current account deficits.

While most economists in a Reuters poll last week said they did not expect the RBI to cut its policy repo rate on Tuesday, nearly half forecast that it would cut the cash reserve ratio, or the share of deposits banks must maintain with the central bank.

The RBI said its survey of professional forecasters had lowered its median growth forecast for the fiscal year that ends in March to 5.7% from 6.5% previously, and lifted its average wholesale price index inflation forecast for the fiscal year to 7.7% from 7.3%.

"A credible fiscal consolidation strategy is now on the anvil but needs to be backed by further measures," the RBI said.

In September, wholesale price index inflation rose a faster-than-expected 7.8% from a year earlier, on higher fuel prices, and economists expect it to remain near 8% for the next couple of months.

India has taken several recent measures to bolster investment and ease its fiscal deficit, including raising the price of subsidized diesel and easing foreign direct investment in several industries, including supermarkets and airlines.

"The announcement of these reform measures in themselves are not sufficient to ensure recovery as their impact would critically hinge on successful implementation," the central bank wrote.

Indicates rate cut likely in POLICY review

Indicating that a cut in interest rate is likely, the Reserve Bank has said despite high inflation it would take steps to support growth in the half-yearly review of monetary policy tomorrow. "Monetary policy needs to be cautious in the interim, focusing on inflation while using the available space to support growth to the degree it can," the central bank said in its macroeconomic and monetary development review. It said the global growth prospects, both in advanced and emerging economies, have weakened and the euro zone troubles have affected business confidence and caused deceleration in global trade. Risks of spillovers from global financial markets remain. Unconventional monetary policies have transitorily moderated uncertainties, but the underlying stress has not diminished with incomplete deleveraging and unfinished financial sector reforms," the RBI said. — PTI

Investor sentiment picking up, IPOs getting sanitised: SEBI

Mumbai, October 29
Enthused by a renewed optimism among the corporate and individual investors in the capital market, Securities & Exchange Board of India chief UK Sinha has said that complaints of manipulations in initial public offers have dried up after the recent corrective steps.

"We’re noticing there is a renewed optimism about the economy and about the market. Corporates who were not making investments, my impression is that they have started looking at making investments once again," Sinha said.

"The IPO market has been very sluggish this year, but in the last four weeks we are noticing a renewed interest and this gives us an impression that people are optimistic and they are going to make investments," he said.

Asked about the various reform measures undertaken by the government and the capital markets watchdog itself in the past couple of months, Sinha told PTI in an interview here that all these initiatives have certainly helped boost the investor sentiment and the impact is quite visible.

Listing out various steps taken for giving a boost to the IPO market without compromising on the retail investors' interest, Sinha said that measures have been put in place to check issues like overpricing of shares and listing day manipulation, and to ensure confirmed allotment to small investors.

Sinha said all these measures have helped develop the market, while safeguarding the investors' interest.

About the call-auction system that has been put in place to checklisting day price manipulation, Sinha said: "You’ll be happy to know that since we started this system about six months ago, there have been about five or six issues in the market then and in none of these issues we have received any complaint of manipulation.

"This is another step we have taken to safeguard the interest of retail investors," he said.

Talking about the steps taken by the government to boost investment, Sinha said: "So far as the public sector units are concerned, you are seeing that the government is creating National Investment Board and the idea is to accelerate the approval process and the investment process for the PSUs.

"Of course, the government policies have helped and the factors outside India have also helped, because this year, we have seen record volume of FII inflows. If you look at the market, I think that for the calendar year, starting January, our market has given more than 20% return, which is a very-very healthy return."

Sinha added: "So, the market has given a very good return and even the rupee is stabilizing, the FII inflows are good and on the policy front also, positive developments are happening. So, may be all these factors combined together, have led to people looking to start making investments and coming to the primary market."

The SEBI chairman said the feedback from stock exchanges about secondary market trends has also been very encouraging. — PTI

Essar Energy looks to improve financials, cut rupee debt

Mumbai, October 29
India-focused Essar Energy plans to refinance up to US $1.5 billion of its rupee debt within a couple of quarters, as it focuses on improving its balance sheet after a turbulent period that included heavy capital expenditure and regulatory setbacks.

The London-listed company missed its 2011 earnings forecast, put some of its India power projects on hold due to delays in coal mining approvals, and lost a court case for a tax break in its majority-owned Essar Oil unit.

Earlier this year, its shares fell to as low as a quarter of their 2010 listing price of 420 pence, and are down by four-fifths from a peak in December 2010.

"The focus has now completely shifted to asset optimization, and to ensure we start generating the cash flows and income envisaged at the time of investment decisions," chief executive officer Naresh Nayyar told Reuters in an interview. "The second focus is to improve the overall health of our balance sheet. We have just completed a massive capex program, we are very highly geared."

Essar Energy — 77% owned by privately held Indian conglomerate Essar Group, controlled by billionaire brothers Shashi and Ravi Ruia — had net debt of $5.8 billion at the end of June, mainly from boosting its India refinery capacity by a third and to fund power projects there.

The company is facing delays in environmental approvals for coal mining and shortages in coal supply, forcing it to delay three of its coal-fired projects, but Nayyar said he was confident of producing 6,700 megawatts by a March 2014 target. "This is a temporary setback. Once we start getting the coal this business will start generating strong cash flows."

Essar Energy currently operates six power plants in India and another in Canada with a total capacity of around 3,055 MW.

STAKE SALE OFF, REFINANCING ON: Essar Energy has shelved plans to sell about 15% of unit Essar Oil, Nayyar said, after a recent clarification by the markets regulator that depositary receipts would not be included to comply with a minimum 25% public shareholding rule.

"The latest interpretation is if they don't include Global Depositary Receipts (GDRs), we have sufficient public shareholding, so no further dilution is required," Nayyar said. He added Essar also did not require funds at present as Essar Oil had tied up a loan facility to help settle a large sales tax liability in India.

Navyar said the plan to refinance $1.5 billion in debt would nearly halve Essar Energy's rupee debt cost from the current average of 13%. "Particularly in our Essar Oil business in India, we have a currency mis-match and also maturity mis-match. So we are pursuing that option," he said.

Essar Oil's assets had lifespans of 30-50 years, but project funding was on an average for 7 years tenure. Its crude purchases and revenues are in dollar terms, and most of the loans are rupee debt, Navyar added. — Reuters

OilMin to seek over Rs 1 lakh crore towards fuel subsidy

New Delhi, October 29
The oil ministry will seek over Rs 100,000 crore from the finance ministry this fiscal towards fuel subsidies, new Petroleum Minister M. Veerappa Moily said Monday.

State-owned fuel retailers are likely to end the fiscal with a revenue loss of over Rs 163,000 crore on sale of diesel, domestic cooking gas (LPG) and kerosene at government-controlled rates that are way lower than cost, he said soon after taking over as the new oil minister.

"Of this, about Rs 60,000 crore will come from upstream companies Oil & Natural Gas Corp (ONGC), Oil India Ltd and GAIL India. We’ll ask the finance ministry to compensate the rest by way of cash subsidy," he said.

State-owned oil companies, he said, cannot sustain high level of under- recoveries or revenue losses and ways have to be found to drastically bring down these.

"How long can you run these companies at a loss? How long can you go with these kind of underrecoveries? It’s criminal. We need to prepare a roadmap to see underrecoveries drastically comes down," he said. "I’m not saying subsidy should be cut but inefficiencies have to be removed from the sector."

State retailers currently lose Rs 9.82 per litre on diesel, Rs 33.93 a litre on kerosene and Rs 468.50 per 14.2-kg subsidized LPG cylinder. They currently are losing Rs 433 crore per day.

Upstream firms ONGC, OIL and GAIL share a part of the revenues that retailers lose on selling diesel, LPG and kerosene at government-controlled rates. Their share to begin with was 33% of the revenue loss on fuel sales but has slowly risen to 40%.

Their contribution now has been capped at US $56 per barrel. This means that suppose ONGC realizes $100 per barrel from sale of crude oil it produces, it will be allowed to retain only $44 and the rest $56 would be taken away for subsidizing fuel.

Upstream firms had in 2011-12 made good 40% of the Rs 138,541 crore revenue that Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp lost on fuel sales. Their Rs 55,000 crore contribution that year compared to Rs 30,297 crore in 2010-11 and Rs 14,430 crore in 2009-10.

The remaining revenue loss was made good by the finance ministry by way of cash subsidy. In 2011-12, government gave out Rs 83,500 crore by way of cash subsidy, up from Rs 41,000 crore in 2010-11 and Rs 26,000 crore in 2009-10.

In the first quarter of current year, upstream firms made good Rs 15,061 crore out of the Rs 47,811 crore retailers lose on sale of diesel, cooking gas and kerosene. The finance ministry has not given any subsidy this fiscal so far, Moily said.

"We plan to shortly make the short trip to the finance ministry to request for release of subsidy," he added. — PTI

Consumer confidence strongest in India, Indonesia: Nielsen

London, October 29
Global consumer confidence edged higher in the third quarter, underpinned by an improvement in the United States, although uncertainty about the economy continued to cap spending, a survey showed.

Sixty two percent of global consumers said they believed their national economies were in recession, up from 57% in the previous quarter, according to the survey by global information company Nielsen, released Monday. Half of them expected recession to last for another year.

Sixty nine percent of respondents said they were changing their spending habits to save more.

Confidence remained strongest in emerging markets, headed by India and Indonesia. Switzerland, however, also featured in the top 10 most bullish consumer markets after its score jumped from the previous quarter, highlighting a widening recovery gap between northern and southern Europe.

Thailand, Belgium, Australia and Norway also saw a noticeable increase in confidence while sentiment deteriorated sharply in Hong Kong, Israel, Argentina and South Korea.

The Nielsen Global Consumer Confidence Index rose 1 point in the third quarter to 92, after dipping 3 points in the second quarter, and was 4 points higher than a year earlier.

The reading of below 100 nevertheless signals consumers are pessimistic about the outlook.

Venkatesh Bala, chief economist at The Cambridge Group, a part of Nielsen, said further policy action was needed to boost global consumer confidence. "Much depends upon policymakers in the US, Europe and Asia to ensure healthy growth and lower unemployment as we move into 2013," Bala said.

"Support for the weaker economies in Europe and eliminating the threat of combined tax increases and federal spending cuts in the US are critical. Emerging economies, such as China and India, need to also shift more toward domestic consumption and industrial liberalization respectively.

"With the right policy actions, the global consumer will gain confidence to resume spending next year," he added.

The survey was conducted between August 10 and September 7 and covered more than 29,000 online consumers across 58 markets.

EUROZONE WOES: Hungarians, struggling with economic recession, rising inflation and uncertainty about whether the government will secure an IMF aid deal, remained the most pessimistic consumers for a fifth straight quarter, although their score jumped 7 points from the second quarter.

Greece, Italy and Spain, at the centre of the euro zone debt crisis, were also among the weakest consumer markets. While confidence deteriorated in Spain, however, it picked up slightly in Greece and Italy. — Reuters

Kingfisher may face more trouble over Rs 330 crore revenue dept dues

New Delhi, October 29
Kingfisher Airlines, which days ago emerged out of an impasse over salary payment to its staff, is likely to face more trouble soon with the revenue department deciding to move the Supreme Court to expedite recovery of about Rs 330 crore dues.

The department's decision to move a Special Leave Petition comes in the backdrop of the Airports Authority of India also asking it to vacate two hangars in Kolkata and Chennai airports to recover dues worth Rs 293 crore, official sources said.

The SLP, which is to be filed jointly by the income tax and service tax departments, would apprise the apex court "of the magnitude of pending dues to the government" and seek vacation of a September 26 Karnataka High Court order restraining the IT department from making "further recovery".

Following this, the IT department had lifted its attachment orders on the airline's bank accounts. — PTI

Germany’s Lemken sets up first plant outside Europe at Nagpur

Ruchika M. Khanna/TNS
Chandigarh, October 29
German agro equipment manufacturer, Lemken GmbH, is aiming at solving the crisis of agriculture labour in Punjab, by bringing its state of art agricultural implements. With the state having a huge tractor population for agriculture use, the German company sees a huge potential for selling its primary tillage, stubble cultivation and seed bed preparation equipment here.

The company has set up its first plant outside Europe, at Nagpur in Maharashtra, which will start commercial production of equipment within a month. The first phase is now complete and the company has invested Rs 60 crore to set it up, having a production capacity of 3,000 unit per annum. In the second phase, the company will invest another Rs 60 crore so as to double its annual capacity to 6,000 units. Both the phases will be operational by 2015, and the company hopes to achieve an annual sales turnover of Rs 150 crore by 2015.

Arvind Kumar, MD & CEO of Lemken India Agro Equipment (a wholly-owned subsidiary of Lemken GmbH), said the firm will initially focus on areas growing cotton, sugarcane, soyabean and maize. Lemken India will manufacture pre-harvesting equipment used with tractors.

Rupee falls to over 1-mth low; doubts on RBI rate cuts

Mumbai, October 29
The rupee fell to its lowest in over a month on Monday, weakening past the 54-level against the dollar, as caution prevailed ahead of the central bank's policy review and as the euro was dragged lower by uncertainty over Greece and Spain.

Most analysts expect the RBI to keep interest rates on hold on Tuesday, although they remain open to a cut in the cash reserve ratio, or the amount of deposits lenders must keep as cash with the central bank. A decision not to lower India's repo rate would defy growing political pressure on the central bank.

"If the RBI delivers a rate cut, or hints at one, we may see some large gains towards the 53.50-53.20 zone," said Subramanian Sharma, director at Greenback Forex. "However, if the RBI does not cut, the rupee weakness should not extend beyond 54.20."

The partially convertible rupee closed at 54.08/09 per dollar versus its previous close of 53.56/57. — Reuters

Suzlon Energy plans debt recast

New Delhi, October 29
Loss-making wind turbine maker Suzlon Group said Monday it had started discussions with lenders for restructuring debt, including a two-year moratorium on repayment of term loans.

The development comes in less than three weeks after bondholders rejected its proposal seeking four-month extension to repay overseas debt worth about $221 million.

Currently, Suzlon has a debt burden of over Rs 13,000 crore including FCCBs obligations.

Suzlon said in a statement it had “initiated discussions with its senior secured lenders and plans to restructure its debt with a maturity period of ten years”. — PTI

Hyundai India to raise car prices

New Delhi, October 29
Korean auto majo Hyundai Motor Co's Indian unit on Monday joined other leading car makers in increasing vehicle prices of all its models by up to Rs 5,000 from November 1 to offset the impact of rise in input prices.

The price increase by Hyundai, India's second-largest carmaker, comes after market leader Maruti Suzuki India and other major auto manufacturers raised prices this month due to rising costs, despite a slowdown in the country's car market. — Reuters