The Tribune, Chandigarh, India

October inflation declines to 7.45%; slowest in 8 months

New Delhi, November 14
India’s headline inflation unexpectedly eased to its slowest pace in eight months in October, a welcome relief from a string of bad data but still high enough to be a headache for policymakers struggling to balance the need for growth with taming prices.

Wholesale prices — India’s main inflation gauge — rose an annual 7.45%, the slowest pace since February, the government data released on Wednesday showed.

The figure was slower than the 7.81% recorded in September, as food and fuel prices rose less quickly, and less than the 7.96% predicted in a poll of analysts.

With the country’s economy on track to grow at its worst pace in a decade, and a general election due in just over a year, the government has been pressing the Reserve Bank of India (RBI) to cut interest rates to revive growth. But the central bank has rebuffed those calls, saying prices are still rising too fast to risk loosening policy.

The latest inflation reading is still seen as too high for the RBI to bow to pressure from the government and businesses by cutting rates at its next policy review in December. However, it could do so early next year.

“Despite the downtick, elevated inflation will prevent the RBI from easing aggressively,” said Jyoti Narasimhan, senior principal economist, IHS Global Insight.

“With inflation unlikely to recede substantially, we no longer expect the RBI to soften its stance and cut policy rates on December 18 to support flagging economic growth."

DISMAL DATA

Data on Monday showed the monthly trade deficit climbed to its highest-ever level, while industrial production surprisingly contracted, dashing hopes that the economy was regaining traction.

Prime Minister Manmohan Singh’s government is trying hard to get the economy back to the near double-digit growth that helped project India as a rising global power and helped Singh’s party win two back-to-back elections since 2004.

But with state polls looming and a general election due in 2014, an economic revival would help Singh generate resources to fund big-ticket welfare programmes meant for his party's core constituency comprising poor and rural voters. It would also help mitigate anger at rising prices.

Singh said in a speech over the weekend that his government had ‘dispelled doom and gloom’ about the economy with a series of policy steps, including curbing fuel subsidies and liberalising foreign investment rules.

But investors are clamouring for the government to do more. They want PM to push ahead with a reform agenda that has progressed fitfully, calling for a more business-friendly tax regime and speedier clearances for infrastructure projects.

“The (inflation) number is better than what most people had expected, but based on the past experiences there is a likelihood of the numbers getting revised,” said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.

The government revised up August inflation to 8.01% from the 7.55% initially reported.

“The Reserve Bank will wait till the headline inflation falls by 100 basis points more. The government is putting on pressure, but the Reserve Bank will not succumb to that pressure until the inflation comes down to the comfort zone,” Rupa Rege Nitsure said.— Reuters

Diageo deal could pull Kingfisher from the brink

Mumbai/New Delhi, Nov 14
Liquor baron Vijay Mallya's $2.1 billion deal to sell a stake in United Spirits Ltd could throw a lifeline to his grounded Kingfisher Airlines, although pulling the carrier back from the brink will not be easy.

The flamboyant "King of Good Times" is keeping his plans to himself for now. However, his decision to give up control of his group's flagship company as Kingfisher heads towards the point of no return suggests that he is unwilling to write off his airline business, bankers and industry analysts say.

The proceeds from Mallya's deal with Diageo Plc will not be enough in themselves to rescue the ailing airline, which has failed so far to find fresh investment to prop it up or a global carrier willing to play white knight.

It could still give him enough to make a piecemeal payment to his creditors and draw them back to the negotiating table for fresh loans and another restructuring of the airline’s debt. “The deal has surely changed the mood of Kingfisher lenders and investors from absolute despair to some hope,’ said a senior investment banker with a European bank in Mumbai, declining to be identified as he was not authorised to speak to the media.

“Kingfisher is a liquidity issue and if he is able to inject some liquidity that will get banks to open the lines again, he will definitely do that,” the investment banker said. “He wouldn't have sold his flagship firm now without a turnaround plan for Kingfisher,” he further stated.

Indeed, shares in Kingfisher have gained nearly 15% in three sessions since the United Spirits deal was announced on November 9. If Mallya is planning to use the liquor deal to rescue his airline, he will need to act quickly.

Kingfisher needs to raise or commit at least $1 billion by November 30, according to the State Bank of India, the leader of a 17-bank consortium that has lent about $1.4 billion to the carrier. The consultancy Centre for Asia Pacific Aviation says Kingfisher's total debt is about $2.5 billion.

“Kingfisher Airlines needs a significant cash infusion if it is to be revived,” said Amber Dubey, head of aviation at KPMG. “Diversion of some funds from the United Spirits deal may be a good first step,” he added.

However, he said the airline would need more funds to continue operations on a sustainable basis, he said.

Diageo agreed to buy a majority stake in United Spirits for $2.1 billion after months of talks, fuelling a push by the world's biggest spirits group into fast-growing markets.

United Spirits and Mallya’s group company United Breweries Holdings will get about half of the sum. Sources said the bulk of this will be used to pare United Spirits’ debt and release its shares, which were pledged by its founders to raise loans.

Mallya may infuse some of the proceeds into Kingfisher to pay staff salaries, airport fees and fuel bills to make it airworthy again, said investment banking sources and analysts.

A Kingfisher spokesman did not respond to a request for comments. — Reuters

KFA employees to chalk out action plan after November 17

Kingfisher Airline employees, who have not received their May salary despite an assurance from the airline management, are likely to chalk out an action plan next week, if they do not receive their dues by November 17.

"Divali has come and gone but we have still not received the salary for May. The management, as usual, has once again backtracked on its commitment and there is no word from them on payment," sources in airline staff said.

"We will wait till Saturday for the payment of May salary. If the airline does not pay by November 17, we will chalk out our further action plan," they said. The grounded airline continues to maintain silence over the payment to its nearly 3,000 employees, despite an assurance from the management last month that the third tranche of the dues would be paid by Divali, they stated. — PTI

Vodafone posts 13% increase in revenue
Tribune News Service

New Delhi, November 14
Telecom major Vodafone India today reported an increase of 13.3 per cent to Rs 17,580 crore in revenue for the six months ended September 30.

The firm’s revenues, including revenue from its subsidiaries and proportionate consolidation of Indus Towers, stood at Rs 15,510 crore in the same period last year.

“We have been able to improve our operational profit margin to 28.4% as a result of our increasing operating efficiency based on scale and lower customer acquisition cost,” Vodafone India managing director and CEO Marten Pieters said.

In India, service revenue growth slowed to 11% in Q2, reflecting the impact of regulatory changes, the recognition of SMS termination revenue for the first time in the prior financial year and a less active market for new customer acquisitions, the firm said.

For H1 as a whole, the growth was affected by the introduction of new regulations on the charging of access fees, and the marketing of integrated tariffs and value-added services.

Vodafone India’s capex was lower at Rs 1,700 crore in the April-September 2012 period compared to Rs 2,430 crore in the same period last year. The company registered 39% growth in operating free cash flow at Rs 3,380 crore.

Toyota to recall 2.8 m vehicles worldwide

Tokyo, November 14
Toyota Motor Corp said it will recall around 2.77 million vehicles worldwide, including certain models of the Prius, due to problems with the steering mechanism and the hybrid system water pump, its second multi-million car recall in two months.

Toyota is recalling 1.5 million vehicles in Japan, 670,000 vehicles in the United States and 496,000 vehicles in Europe over a problem in the steering intermediate extension shafts, which could be damaged at slow speed, spokesman Joichi Tachikawa said on Wedne day.

This problem, seen in cars such as the second-generation Prius and certain Corolla models can be fixed in about 50 minutes, he said.aSeparately, the Japanese carmaker is also recalling 630,000 vehicles worldwide to fix water pumps in hybrid vehicles, Tachikawa said. — Reuters

Aviation Notes
Authorities told to gear up for foggy weather
By K.R.Wadhwaney

Dense fog has been disrupting international flights in Delhi every winter for the past several years.

This time, the Indian Meteorological Department has predicted that foggy conditions will prevail over Delhi between December 10 and February 10. It has also issued warnings to the aviation units concerned.

In view of this forecast, the Minister of State for Civil aviation, Ajit Singh, has asked airlines, air traffic controller, DIAL and AAI to take steps for smooth operations without troubling the passengers during the fog season. The Directorate-General of Civil Aviation, in a response, summoned a meeting of all the operators concerned to streamline preparedness at airports across north India.

In addition to briefing, DG Arun Misra has also issued specific instructions to each agency that underlines its role during fog-related disruptions. The statistics reveal that there are Indian carriers, which have adequately trained pilots to operate flights during the days of low visiblity and runways that are equipped with the latest and sophisticated gadgets but pilots have expressed their doubts about efficient functioning of the category-III Instruments Landing System.

The international aviation analysts have often impressed upon the Indian authorities, including the Delhi International Airport Limited and the Airports Authority of India, that there is no other option except to re-schedule flights to avoid midnight landings and taking-offs during the winter.

But the authorities concerned said there are night flying curfews in the United States and Tokyo and therefore re-scheduling of international flights is not possible. "If it has to be done, it can only be done by the foreign carriers themselves," a senior official said.