The Tribune, Chandigarh, India

Govt’s deficit-cutting plan faltering as clock ticks

New Delhi, November 26
Finance Minister P. Chidambaram has banned government officials from holding conferences at five-star hotels, restricted travel and ordered a freeze on hiring to fill vacant posts.

A single-minded political veteran who commands both fear and respect in officialdom, Chidambaram is squeezing government ministries hard to cut spending wherever they can, and quickly, to help rein in a widening fiscal deficit.

He is a man under pressure and with an eye on the clock.

Four weeks ago to the day, he set himself an ambitious target: to hold the government’s fiscal deficit for 2012-2013 to 5.3% of gross domestic product, even as sceptical private economists forecast a deficit closer to 6%.

But a series of revenue-raising setbacks since October 29 now means it will be almost impossible for the government to meet that target, economists say, and some finance ministry officials privately agree. That increases the risk that credit rating agencies could downgrade India to junk in the coming months.

“This has taken on a very great sense of urgency,” said Rajiv Biswas, chief Asia economist at market information and analytics company IHS, as he called on Chidambaram to draw up a credible medium-term road-map for cutting the deficit.

The deficit reduction plan unveiled by Chidambaram last month was panned by economists for being short on specifics and putting a firewall around fuel subsidies and expensive social welfare programmes for the country's millions of poor.

A month earlier a deficit reduction panel appointed by Chidambaram had urged the government to cut such spending. Their language was dramatic: India was on the edge of a ‘fiscal precipice’ and the economy was ‘flashing red lights’, they said.

BAND-AID APPROACH

The government is pursuing a ‘band-aid approach’ to deficit reduction, favouring quick fixes instead of implementing structural reforms to slash the deficit, said economist Rajeev Malik of CLSA in Singapore, who is sticking to a deficit forecast of 6% of GDP.

Financial markets are already expecting the government to overshoot its target and hit around 5.6% of GDP, which helped push benchmark 10-year bond yields to the highest in nearly three months late last week.

But the big unknown is the response of the rating agencies, which have repeatedly warned India to get its finances in order.The agencies are unlikely to reveal their thinking until after Chidambaram unveils his budget in February, analysts said.

But in October, Standard & Poor's said India still faced a one-in-three chance of a downgrade within the next 24 months. Such an outcome would hurt investor sentiment and push up overseas borrowing costs for Indian companies.

Sensex rallied more than 6 % after the reforms were announced in mid-September. But concerns over implementation, the fiscal deficit and falling foreign fund inflows have since pushed it down 3.3%.“We believe that this is the beginning of the realisation that a sustainable turnaround in India’s growth prospects would require considerable effort, well beyond the burst of measures seen in September," Deutsche Bank said.—Reuters

Crunch Time

A series of revenue-raising setbacks has made it difficult for the government to achieve target

A deficit reduction panel appointed by the FM had urged the government to cut wasteful spending

No plans to bid for Spicejet, says AirAsia

Kuala Lumpur, November 26
Malaysian budget carrier AirAsia Berhad has dismissed speculation that it is bidding for struggling airline SpiceJet Ltd.

“AirAsia rejects the speculation surrounding our possible expansion in India. These reports are completely incorrect,” AirAsia Group CEO Tony Fernandes said in a statement.

“AirAsia has not submitted a bid for the budget carrier, and has no intention of doing so,” he added.

Earlier in the day, struggling carriers Jet Airways and SpiceJet are in talks with Abu Dhabi's Etihad Airways and Malaysia's AirAsia Bhd to sell minority stakes, a senior government official with direct knowledge of the talks said.

India changed its rules in September to allow foreign carriers to buy stakes of up to 49 per cent in local airlines, which have been battered by fierce competition and high operating costs.

The Jet-Etihad tie-up would be the bigger of the two deals, with a possible value of up to nearly $440 million, but the government official provided no details on the stakes involved or costs.

Talks between Etihad and Jet, which has 100 planes and is India's largest airline by total passengers carried, have been the subject of recent media reports citing unnamed sources.

"The talks are on. This is more or less final. It may take around a month and half," the government source told reporters, referring to the Jet-Etihad negotiations.

"This deal is not just about investment but also technology and partnership in many other ways," said the source, who declined to be identified.

The Indian aviation industry lost a combined $2 billion last year, and all but unlisted IndiGo lost money, hurt by high state taxes on jet fuel, expensive airports and regulatory uncertainty.

Jet and Etihad already have a code-sharing agreement and a deal could help them win market share from state-owned Air India, as well as from Dubai-based Emirates Airline, which dominates routes between India and the Middle East.

Etihad is interested to access to Jet's low-fare domestic network under JetKonnect, an industry source said in Dubai.

A Jet official could not immediately be reached for comment. Etihad declined comment.— Reuters

Sensex ends up; IT, airline shares gain

The Sensex provisionally ended up on Monday, led by gains in export-driven technology shares such as Infosys following weakness in the rupee, while airline shares such as Jet Airways surged on stake sale talks.

Infosys rose 1.6%, Jet Airways rose 9.88%, while SpiceJet gained 13%. The Sensex provisionally ended up 0.17%, while the Nifty also gained 0.17%.

PM to launch Electric Mobility Mission in next few weeks

New Delhi, November 26
The National Electric Mobility Mission Plan 2020 will be launched by Prime Minister Manmohan Singh in the next few weeks, Minister of Heavy Industries and Public Enterprises Praful Patel said today.

“We have an ambitious electric vehicle mobility plan. In the next few weeks, the Prime Minister will officially launch it,” Patel said at the diesel technology summit by Society of Indian Automobile Manufacturers here.

The minister’s statement comes after months of delay of the Mission Plan, which was originally proposed to be launched by July 2012. The mission aims at promoting electric and hybrid vehicles.

At present, India's production of hybrid or electric vehicles is almost negligible.

The government had decided to set up the National Council for Electric Mobility (NCEM) and National Board for Electrical Mobility (NBEM) under the chairmanship of the minister.

The first meeting of the NCEM, which covers two-wheelers, four-wheelers and commercial vehicles, was held in August that approved the way forward.

The NCEM had adopted the National Electric Mobility Mission Plan 2020 (NEMMP 2020), which is the mission document for National Mission for Electric Mobility.

Last year, the Cabinet had cleared the National Mission for Electric Mobility.

The Plan lays the vision, sets the targets and provides the roadmap for achieving significant penetration of efficient and eco-friendly electric vehicle (including hybrids) technologies in India by 2020.

According to industry, the government will save Rs 30,000 crore in fuel by giving Rs 14,000 crore in subsidy to industry for manufacturing electric vehicles. The industry contribution would be about Rs 8,000 crore.

India has set a target to produce 6 million green vehicles by 2020, of which 4-5 million are expected to be two-wheelers. — PTI

OVL to buy ConocoPhillips’s 8.4% stake

New Delhi, November 26
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, today agreed to buy US energy major ConocoPhillips’s 8.4 % stake in Kazakhstan's Kashagan oilfields for about $5 billion (around Rs 30,000 crore).

The stake buy in Kashagan field, which at present produces about 370,000 barrels day is subject to approval of governments of Kazakhstan and India and and also to other partners in the Caspian Sea field waiving their pre-emption rights.

ONGC Videsh and ConocoPhillips, in separate but almost identical statements, said the transaction is expected to close in the first half of 2013. This is the biggest deal by an Indian company this year.

The Indian firm will pay a base purchase price of $4.25 billion plus cash calls on 8.4% share of the operating and development cost as well as interest, taking the total deal size to about $5 billion.

The field, where plans have already been made to ramp up output to 450,000 bpd, is operated by international consortium under the North Caspian Sea Production Sharing Agreement. Italy’s Eni, Royal Dutch Shell, France’s Total, ExxonMobil and KazMunayGas have 16.81% stake each while Inpex of Japan has the remaining 7.56%.— PTI

Wedding season: Gold prices at all-time high

New Delhi, November 26
Gold prices today surged by Rs 100 to all-time high of Rs 32,950 per 10 grams here on sustained demand from stockists and retailers to meet the rising requirements during the ongoing wedding season.

The previous record of gold price was Rs 32,900, set on September 14.

Silver also rose by Rs 200 to Rs 63,200 per kg on increased offtake by industrial units.

Traders said the Gold sentiment turned bullish on rising wedding season demand and a weak rupee against the US dollar.

Continuing its decline against the American currency for the fifth day, the rupee in early today declined to 55.61 a dollar due to persistent dollar demand from banks and importers.

On the domestic front, gold of 99.9 and 99.5 per cent purity added Rs 100 each to Rs 32.950 and Rs 32,750 per 10 grams, respectively, a level never seen before. The yellow metal had gained Rs 450 in last three sessions. Meanwhile, sovereigns held steady at Rs 25,650 per piece of eight grams.

Similarly, silver ready strengthened by Rs 200 to Rs 63,200 per kg and weekly-based delivery by Rs 340 to Rs 63,860 per kg, respectively. Silver coins continued to be asked around previous level of Rs 81,000 for buying and Rs 82,000 for selling of 100 pieces. — PTI

Sensex likely to see handsome gains in Dec: Morgan Stanley

New Delhi, November 26
The BSE benchmark sensitive index Sensex, which has soared 20% this year so far is likely to see handsome gains in the coming month, according to a report by Morgan Stanley.

December is very kind to equities and in the last 32 years (since 1980), December has produced a 4.6% median return — the best for any month in the calendar, the research report said.

Moreover, over the last 20 years, only on four occasions — on 1994, 2000, 2001 and 2011— December generated negative returns and there was not a common cause for these poor months.

“Since the 1990s, when FIIs started buying Indian equities, the December phenomenon is explained by the fall in institutional activity associated with the holiday season. Consequently, local speculators tend to exert higher influence on shares and they rise in anticipation of fresh FII allocations in January,” the report said.

According to Morgan Stanley this December should prove ‘good for bulls’.

However, one of the biggest concerns for the Indian markets this year include the Parliament session, which may cause damage to the policy environment, it added.

The logjam in Parliament continued for the third day as the storm over FDI in retail rocked Parliament with a determined Opposition adamant on a discussion on the issue under a rule that entails voting.— PTI

Rupee slides for 5th straight day

Mumbai, November 26
The rupee slid for a fifth day on Monday and hit its lowest level in more than two-and-a-half months, weighed down by heavy dollar buying by oil refiners, with gains in the euro failing to offer much respite. The rupee today lost 22 paise to end at 55.73 against the US dollar due to sustained demand for the American currency from importers and banks.

Forex dealers said the dollar demand was so strong that even sustained capital inflows amid stable dollar overseas and positive local equities could not stem the rupee’s fall.

The local unit commenced better at 55.45 a dollar from last Friday’s close of 55.51 and immediately touched a high of 55.42 on the back of firm local stocks. — Agencies

87 firms disappear after raising capital through IPO

New Delhi, November 26
The government today said as many as 87 ‘vanishing’ companies remained untraced at the end of last fiscal after having raised funds through initial public offerings (IPOs).

Minister of Corporate Affairs Sachin Pilot in a written reply to the Rajya Sabha said there are 238 firms in the list of ‘vanishing companies’.

Of 238 firms, 151 companies have been traced (including 32 under liquidation) and other 87 remained untraced.

“As on March 31, 2012, there were 87 companies which remained untraced after having raised funds through IPOs,” Pilot said.

Vanishing companies are those firms which cease to file their statements of return or where, after raising capital, whereabouts of their registered office or directors are not known.

Pilot said the government has been taking action against companies and their directors which disappear after raising money from public.

He said that a central coordination and monitoring committee, co-chaired by ministry of corporate affairs chairman and market regulator SEBI monitors efforts to identify ‘vanishing companies’ and take stock of action against them.

The minister said that the government is seeking assistance of police authorities and filing FIRs.

“The committee receives feedback from all the stakeholders and makes suitable procedural adjustments on a continuing basis,” Pilot said.

Besides, Pilot said that provisions in laws and rules have been made to ensure that companies raise money in a manner which is transparent, accountable and is in accordance with provision of the Companies Act and other enactments. — PTI

Audi plans to start assembling of SUV Q3 in India

Ahmedabad, November 26
German luxury car maker Audi today said it is looking to start assembling SUV Q3 in India at its Aurangabad plant.

The car maker at present assembles sedan A4, A6 and SUV Q5, Q7 in India. It plans to have an installed capacity of up to 12,000 cars a year in the country within the next 18-24 months, a top company official said.

"We are planning to start assembling Q3 in India," Audi India head Michael Perschke said. "Now, with a single shift in the new hall, our installed capacity is reaching out between 7,500 to 9,000," he said.— PTI

Essar Energy profit up on Stanlow boost

London, November 26
Power plant operator and oil refiner Essar Energy reported an 18 per cent rise in core earnings for the first-half as the benefit of a contribution from its British Stanlow refinery offset its struggling Indian power business.

The company, which is 77 per cent-owned by privately held Indian conglomerate Essar Group, said operational earnings before interest, tax, depreciation and amortisation (EBITDA) was $383 million for the six months ended September 30.

The company, which recently changed its accounting period, reported operational EBITDA of $324 million in the six months to June 30, 2011.

Essar said Stanlow, the second largest UK refinery which Essar acquired from Royal Dutch Shell last year, had operational EBITDA of $132 million in the first half.

The company’s power business continues to be hit by regulatory and coal supply issues in India, where it is struggling to obtain the permits it requires to mine the coal needed to fuel its stations.

Essar said initiatives and investments at Stanlow aimed at improving margins by a total $2-$3 per barrel by 2014-15 are continuing—including installation of natural gas to fuel the six boilers on site.— Agencies