STIMULUS UNLIMITED:PRANAB Opens National Revenue Gates for Desi ILLUMINATI. Tonic to Realty Sector after NILEKANI Booster. MNCS, BUILDERS, PROMOTER Sand LPG Mafia gets TAX Break. Tax Holy Day for Industry Parks. Realty Majors and Dons Rule India!
Tonic to builders and buyers
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EXCISE DUTY, SERVICE TAX REDUCED
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Pranab gives tax break, praises govt for growth
Published on Tue, Feb 24, 2009 at 15:45, Updated on Tue, Feb 24, 2009 at 17:21 in Business section
Tags: Taxes, Excise Duty , New Delhi
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| July 28, 2009 | |
New Delhi: The Lok Sabha on Tuesday approved 2-percent cuts in excise duty and service tax proposed by Union Minister Pranab Mukherjee, who said resilience of the economy which grew by an average of 9 percent annually in the last three years will help it overcome the current crisis.
Replying to the debate on the interim budget in the Lok Sabha, Mukherjee said the government had taken steps in the past two months to lift the economy and that such steps will bear fruit soon.
He proposed that the 4 percent cut in central value-added tax (Cenvat), announced in December to 10 percent, be extended beyond March 31, while proposing that the excise duty be further reduced from 10 percent to 8 percent.
The minister also proposed that naphtha imported to generate electricity be fully exempted from customs duty, and service tax on taxable services be cut from 12 percent to 10 percent.
In the case of cement, he proposed the excise duty at 8 percent ad valorem or a specific duty of Rs 230 per tonne, whichever was higher, resulting in a gain of Rs 3.50 per bag.
The House later passed by voice vote the interim budget, including the vote-on-account, to help fund the government expenditure till the regular budget is presented by the next government after elections, and passed by parliament.
"I express satisfaction on our overall performance for five years," Mukherjee said, summing up the achievements of the United Progressive Alliance (UPA) government since it took office under Prime Minister Manmohan Singh May 22, 2004.
External Affairs Minister Mukherjee, who had also tabled the interim budget, made comparisons with the achievements of the previous National Democratic Alliance (NDA) government.
"Never in the history of this country we can find a period of three consecutive years of sustainable growth of 9 percent," he said, adding: "And the allegation is we have destroyed the economy!"
He said under the NDA regimes, which lasted six years till 2004, the average growth was 5.8 percent, while under the UPA regime, the overall gross domestic product (GDP) expanded by an average of 8.6 percent.
He said, on every count - fiscal deficit, revenue deficit, tax-to-GDP ratio, or the savings and investment rates - his government had turned out much better performance.
At the same time, the revised budgetary estimates during the past five years had always turned out a much better performance compared with what had been budgeted for, said Mukherjee, who was himself finance minister in the 1980s.
"And you call it dismal performance?"
The veteran politician said all this had been achieved despite the high average cost of crude oil in the past few years, when it even touched $147 per barrel last year, as opposed to $27 per barrel during the NDA government.
"Let us have some self-confidence in ourselves," he said. "I have expressed deep concern on the impact of the global meltdown. Any responsible finance minister has to express this concern," he said.
"But I said I have confidence on the resilience of the Indian economy."
According to the foreign minister, it was because of parliamentary etiquette that he did not unveil new measures in the interim budget, as he thought it fit for the next government to present a regular budget after elections.
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"Despite fall in overall inflation, for some of the food products and items of daily use like tea and sugar, it continues to remain high on account of lower production, increase in the minimum support prices and growth in demand," Mukherjee told the Rajya Sabha in a written reply.
Prices of certain food prices have continued to soar despite inflation entering negative territory in June. As per the latest figures, inflation was -1.17 for the week ended July 11.
Mukherjee, however, refused to link the sub-zero inflation to contraction of money supply saying "no one-to-one link can be ascribed to the inflation measured by WPI and changes in money stock and currency".
The minister said the overall monthly average wholesale price index-based inflation, which was 4.9 per cent in January, declined to 1.3 per cent in April before entering the negative zone next month.
The government is monitoring the price situation regularly, Mukherjee said, adding it has taken a slew of measures to check rising prices.
Mumbai (PTI): Shares of real estate companies advanced in early trade on the bourses ahead of the RBI quarterly monitory policy review on Tuesday, led by Unitech which surged nearly 5 per cent after the government provided interest subsidy on home loans.
Shares of Unitech opened firm on the bourses and gained further ground surging to a high of Rs 92.10, up 4.70 per cent over previous close.
Country's largest real estate developer DLF gained 4 per cent to a high of Rs 428.50 and Indiabulls Real Estate was up 2.06 per cent to Rs 243.
Mirroring the gains in the sector scrip, the 14-share BSE realty index rose 3.30 per cent to 4,037.62 points.
RBI in its quarterly monetary policy today is unlikely to tinker with key rates, as either a reduction or increase in rates would disturb the optimum level of liquidity.
Explaining the uptrend, marketmen said Pranab Mukherjee's yesterday's announcement to support lower and middle income housing was a major boost for this segment. The RBI policy scheduled to be unveiled today has also boosted the sector.
Finance Minister Pranab Mukherjee yesterday said lower and middle income housing deserves to be supported and announced a slew of concessions, including one per cent interest subsidy for lower and middle income housing loans.
Other major gainers on the index include Omaxe (2.17 per cent), Ansal Infra (4.53 per cent), HDIL (3.21 per cent) and Parsvnath (2 per cent).
The finance minister on Monday proposed an extension of tax breaks for industrial park schemes by two years to the end of March 2011.
Pranab Mukherjee also told lawmakers in parliament tax breaks would be offered to real estate developers and food processing units.
"Reforms will be on our agenda... reform is a continuing process," he added.
Pranab announces 1% home loan subsidy
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New Delhi/Mumbai: Finance Minister Pranab Mukherjee announced an interest subsidy of 1 per cent for one year on housing loans of up to Rs 10 lakh for properties worth less than Rs 20 lakh, a move that has been widely welcomed by realtors and home loan companies. The measure is expected to cost the exchequer Rs 1,000 crore.
Mukherjee also allowed developers of housing projects a tax holiday under section 80 IB(10) of the Income Tax Act on profits from projects approved between April 1, 2007 and March 31, 2008, provided the projects are completed on or before March 31, 2012. Mukherjee asked developers to pass on the benefits of this tax break to consumers.
Mukherjee made these announcements in the Lok Sabha today as part of his reply to the discussion on the Finance Bill. Both houses of Parliament passed the Finance Bill 2009-10, which included a raft other concessions.
Assuming a monthly saving of Rs 60 per lakh, today's announcement implies that a borrower saves about Rs 7,200 on a 15-year loan of Rs 10 lakh. The interest rate subvention will be routed through the scheduled commercial banks and the housing finance companies registered with the National Housing Bank.
Pranab's panaceas
* Extension of tax breaks for industrial park schemes by two years till the end of March 2011
* Poultry, real estate developers and food processing units to get tax breaks
* Tax sops on natural gas produced from coal seams
* Service tax on new services applicable from September 1, 2009
* Road repair and maintenance services exempt from service tax
* Legal guardian of the student who has applied for an education to get tax break
"The demand for affordable housing is picking up and the interest subvention of 1 per cent on home loans will make it easier for people to buy homes," said Pradeep Jain, chairman, Parsvnath Developers.
Today's announcements mark the second stimulus package for the slowing real estate sector, which has been hit by slowing demand and rising costs. Last December, the government had announced a concessional interest rate scheme for housing loans as part of the first fiscal stimulus package. The Indian Banks Association (IBA) had accordingly worked out an interest rate of 8.5 per cent for fresh home loans below Rs 5 lakh and 9.25 per cent for loans between Rs 5 lakh and 20 lakh. Now the rate for loans up to Rs 10 lakh will drop another percentage point.
http://news.in.msn.com/business/article.aspx?cp-documentid=3116377
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Chawla spoke shortly after the central bank left its short-term rates and banks' cash reserve requirement unchanged as expected on Tuesday, and stressed that nurturing growth remains its priority as the economy recovers from the global downturn.
FICCI has emphasised such incentives on sectors with significant forward and backward linkages.
Winding up the discussion on the Finance Bill (No 2), 2009 in Lok Sabha, the Finance Minister announced a slew of amendments on both income-tax and service tax fronts to achieve the objective of "generating economic activity in the present environment of economic slowdown."
The Lok Sabha later passed the Finance Bill (No 2) 2009, completing the third and final stage of the Budget exercise for 2009-10.
Mr Mukherjee also announced an interest subvention scheme to support lower and middle income housing. Under this scheme, interest subvention of one per cent would be provided to all housing loans up to Rs 10 lakh to individuals, provided the cost of house does not exceed Rs 20 lakh.
The Government had in April simultaneously launched eighth round of NELP and fourth round of CBM offering 70 exploration and 10 CBM blocks, respectively. Under the tax holiday for NELP VIII and CBM IV, profits from production of natural gas is proposed to be tax exempt for seven consecutive years in cases where commercial production starts on or after April 1, 2009.
The repo rate remains at 4.75%, the reverse repo rate at 3.25%, and the reserve requirement ratio at 5%. Amid a positive outlook, the need for monetary easing has softened. However, to support the current recovery, the central bank is expected to keep monetary policy at the accommodative setting at least for the rest of the year.
"Monetary policy moves take time to filter through to the economy. Although the global climate is still a little unstable, cutting rates cannot help to immediately boost domestic activity. Instead, policymakers are counting on previous rate cuts to influence market rates now. The several-month lag is due to commercial banks offering high interest rates to term deposits late last year, thereby preventing themselves from trimming lending rates in line with the RBI's policy rate cuts, or they would narrow the interest margin and hence drag on profitability," said Sherman Chan, economist at Moody's Economy.com.
According to Chan, the RBI will likely commence monetary tightening a year from now, as inflation may again emerge as a concern to policymakers. Although the wholesale price index has declined on a year-ago basis in recent weeks, it is expected to return to positive territory by the end of 2009, as improving global economic conditions continue to put upward pressures on commodity prices.
The central bank has had little success in containing inflation during recent years and is therefore reluctant to push interest rates to even lower levels despite strong public calls to stimulate the economy. However, recent history shows that policymakers had been relatively less hesitant in hiking rates when needed.
According to the report on Macroeconomic and Monetary Development, which is released on the eve of RBI's quarterly monetary policy review, there is a turnaround in business sentiment as per industrial outlook survey conducted by the central bank. The index measuring respondents' assessment for April-June 2009 improved sharply by 20.3% over the previous quarter. The index, which measures expectations for forthcoming quarter (July-September 2009), improved by 14% over the pervious quarter. Notably, last quarter these indices had touched their lowest levels since the inception of this survey less than four years ago.
"In a way, this is positive for equities as well as bonds. RBI is talking about some improvement in domestic growth, and at the same time, it appears to be taking a pretty benign view of inflation," said Sujan Hajra, chief economist at Anand Rathi Securities . He pointed out that since macro-economic surveys did not throw light specifically on growth or inflation, the market looked out for observations on business outlook and prices. "I expect RBI will upgrade its growth outlook in tomorrow's (Tuesday's ) policy and at the same time, maintain the outlook for inflation."
The bullishness is also there in the revised growth outlook by various professional economists whose forecasts are aggregated by RBI. The median of these forecasts, including those from IMF and the World Bank, has been revised upward to 6.5% from 5.7%. While agriculture growth could decelerate , industry and services are expected to clock higher growth.
Shubhada Rao, chief economist of YES Bank, shared Hajra's views on a higher growth forecast . "RBI may revise its growth forecast from 6% to 6.5% for FY10. We also expect inflation to pick up in the fourth quarter on the back of supply constraints as well as expected economic recovery," the chief economist said, adding that the central bank is likely to maintain a status quo on interest rates.
The report, which provides a disaggregation of bank credit, throws up another positive. Although credit growth has slowed, the industry's share of bank loans has grown. Bank loan data (up to May 22, 2009) show that 47.4% of incremental nonfood credit (Y-o-Y ) was absorbed by industry compared with 43.2% a year ago. The growth was essentially led by infrastructure, iron & steel, engineering and construction industries. The agri-sector absorbed 16.9% of the incremental non-food bank credit compared with 10.1% a year ago. Though home loans decelerated, real estate loans continued to be high (52% Y-o-Y).
RBI expects inflation to firm up by the end of the year, from 1.12% (negative) as of July 11. This is because the waning of the high base effect of last year, increase in commodity prices, delayed progress of monsoon that can drive up food prices, and inflationary implications of expansionary fiscal policy and accommodative monetary policy. It has also pointed out that inflation expectations have not declined, as consumer prices remained high in the face of negative wholesale level inflation.
The central bank said the growth in non-food credit, which witnessed deceleration since October 2008, has also reversed from June 2009, indicating signs of revival in demand for credit. Signs of improvements in global financial conditions observed in the first quarter of 2009-10 are necessary, but not sufficient, to induce a firm global recovery, particularly in view of the depressed demand conditions.
"The government would offer small portions of its shareholding to the general public in the domestic market through initial public offerings or follow-on public offerings," Mukherjee said in a written reply in parliament in New Delhi today.
India should aim to raise as much as 250 billion rupees ($5.2 billion) a year from asset sales to stimulate an economy growing at the slowest pace since 2003, the finance ministry said in a report on July 2.
"The policy of the government is to develop people- ownership of public-sector undertakings while ensuring that the government equity doesn't fall below 51 percent," Mukherjee said in his reply.
The share sales of NHPC Ltd., the nation's largest hydroelectric power generator, and Oil India Ltd., are likely to be completed in the current fiscal year that started April 1, S.S. Palanimanickam, junior finance minister, said in a separate reply. "All cases of disinvestment are decided on a case-by- case basis."
The minister declined to say how much the government would raise from asset sales.
"It's not feasible to estimate the realizations from stake sales as the same would depend on various factors such as the percentage of equity to be disinvested, the prevalent market conditions and the time of actual disinvestment," Palanimanickam said.
The Bombay Stock Exchange Public Sector Undertaking index of 34 state-run companies jumped 52 percent in the quarter ended June 30, the most since the three-month period ended March 2002, on optimism the government will resume asset sales.
India Leaves Rates Unchanged on Inflation Concerns
http://www.bloomberg.com/apps/news?pid=20601091&sid=aamtPh9NMsdQ
India's central bank kept borrowing costs unchanged, signaling an end to its deepest round of interest-rate cuts on concern that inflation will "creep up" from October.
The Reserve Bank of India held its reverse repurchase rate at 3.25 percent, according to a statement in Mumbai today. The central bank raised its inflation forecast for the year to March 31 to around 5 percent from an April estimate of 4 percent and said it may soon need to "reverse" the loose monetary policy of the past ten months.
Inflation risks increased after Finance Minister Pranab Mukherjee this month unveiled plans to raise spending and widen the budget deficit to a 16-year high to bolster growth. Policy makers from Tokyo to London, who in some cases cut interest rates to close to zero, have started to discuss when they will exit from the emergency measures employed to ease a global credit freeze.
"Central banks need to put in place now a timely, smooth and systematic exit from the monetary easing," said Siddhartha Sanyal, an economist at Edelweiss Capital Ltd. in Mumbai. "For India, it would be difficult to continue pursuing the current low-rate regime beyond six to nine months."
Governor Duvvuri Subbarao said the central bank will maintain an "accommodative monetary stance" until there are "definite and robust" signs of recovery.
Policy Reversal
"This accommodative monetary stance is, however, not the steady state stance," he said in today's statement. "On the way forward, the Reserve Bank will have to reverse the expansionary measures to subdue inflationary pressures while preserving the growth momentum."
Stocks narrowed losses after the central bank decision, which was expected by 20 of 23 economists in a Bloomberg News survey. The Sensitive stock index fell 0.4 percent to 15,312.63 on the Bombay Stock Exchange at 11:20 a.m. The benchmark 10-year government bond yields rose 1 basis point to 6.96 percent while the rupee was little changed at 48.225 against the dollar.
India, which releases final inflation numbers after a two- month lag, raised its estimate for the benchmark wholesale price index in the week ended May 16 to 1.65 percent from 0.61 percent, indicating that price gains are gathering pace.
Consumer price indexes that measure the cost of living for industrial and farm workers were running at between 7 percent and 10 percent in May, driven by high food costs.
'Danger Zone'
"The continuation of the monetary-fiscal stimuli is now hitting the danger zone," S. S. Tarapore, a former deputy governor of the central bank, said in Mumbai on July 16. "Given the budget is strongly expansionary, the RBI has little option but to gradually withdraw the monetary accommodation."
Mukherjee on July 6 announced plans to borrow a record 4.51 trillion rupees ($94 billion) to fund spending on roads, power and aid for the poor. The budget shortfall is forecast at 6.8 percent of GDP in the year to March 2010.
The central bank today estimated policy measures since September including lower interest rates and a reduced cash reserve ratio were worth 6 trillion rupees. It said a prolonged budget deficit can "crowd out" private investments and trigger inflation, and urged the government to lay out a roadmap to trim the budget shortfall, including details on revenue and expenditure targets.
Growth Forecast
The "immediate challenge" before the central bank is to provide ample cash in the banking system for companies and government borrowings to support growth, while at the same time control the "potential build-up of inflationary pressures on the way forward," Subbarao said in today's statement.
Inflation is showing signs of picking up elsewhere, with China's central bank today forecasting price gains to rebound in the second half of the year. The Organization for Economic Cooperation and Development expects U.K. inflation will be the highest among Group of Seven nations next year.
Subbarao today also raised the central bank's growth forecast for India in the year to March 2010 to 6 percent "with an upward bias" from the 6 percent estimated in April because of favorable funding conditions for companies and a revival in industrial production.
He said an "uptrend in growth momentum" is unlikely before September and that less-than-adequate monsoonal rainfall could reduce farm output. The rains, which start in June and last until September, were 17 percent deficient as of July 24.
India's $1.2 trillion economy, Asia's third largest, expanded 6.7 percent in the year ended March 31, the weakest pace since 2003.
Reliance Industries Ltd., India's most valuable company, on July 24 reported an 11 percent fall in net income in the three months to June 30 as the global recession curbed fuel demand.
Subbarao also backed Mukherjee's goal to boost growth to a 9 percent pace each year and sustain that momentum to cut poverty in the South Asian nation.
"The clear message seems to be that growth will be the main priority," said Finance Secretary Ashok Chawla. "But they're also going to watch how inflation plays out."
U.S. stocks rose on Monday after data showed home sales surged in June, a sign that the domestic housing market -- which led the world's biggest economy into recession -- may have hit bottom and is starting to rebound. More housing data is due later.
"After yesterday's much better new home sales data and continued theme of better-than-expected news, we may well see traders taking the opinion that this rally has a few more legs to run yet," Jimmy Yates, head of equities at CMC markets, noted. MSCI world equity index rose 0.7 percent to its highest since October. The index is up 7.6 percent this month and has risen nearly 16 percent since January.
"The rally witnessed over the last two weeks could, in fact, imply that the market is getting ahead of itself and discounting a profit rebound, but we believe the underlying cyclical rally ultimately will be durable," Bob Doll, global chief investment officer at BlackRock, said in a note to clients.
"The risks are that inflation expectations put Treasury yields and borrowing rates higher before the recovery gains traction, and that improving consumer spending contracts again next year after the impact of fiscal stimulus."
The FTSEurofirst 300 index rose 0.7 percent, hitting its highest since November.
Deutsche Bank fell more than 5 percent after reporting a significant rise in loan provisions despite better-than-expected quarterly net profit.
According to Thomson Reuters data, out of 202 firms on the S&P 500 index, 156 -- or 77 percent -- beat earnings expectations.
Emerging stocks rose 1.1 percent.
U.S. crude oil rose 0.6 percent to $68.79 a barrel, supported by general flows into risky assets.
The September bund futures fell 17 ticks.
The dollar fell to its weakest level since December against a basket of major currencies while it hit eight-week lows of $1.4303 per euro.
The Australian dollar hit a 2009 high against the dollar and government bonds fell after the country's central bank governor Glenn Stevens said risks to the economy were now more balanced and warned that low interest rates could merely inflate a new housing bubble.
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Liverpool Owners Said to Refinance Soccer Team's Debt After Making Payment Liverpool soccer club's American owners have refinanced 290 million pounds ($476.6 million) of debt with Royal Bank of Scotland Plc and Wachovia Corp., a person with knowledge of the transaction said.
Lennar Signals Fleeting Homebuilder Rally as Developments Miss New Buyers Townhouses and loft-style condominiums overlook manicured green lawns, flower-lined footpaths and gurgling stone fountains at the Central Park West development in Irvine, California. Just a short walk away there's a basketball court, a junior Olympic pool and a park.
Tightening Credit Becomes Bernanke Bind as Fed Faces Bond Purchase Unwind Now that the U.S. economy shows tentative signs of recovery, James Bullard, president of the Federal Reserve Bank of St. Louis, wants the Fed to adopt a plan for taming the inflation he expects may follow the end of the recession. Unless the central bank puts a strategy in place and presents it to the public, inflation expectations may run rampant, Bullard says.
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Berlusconi's Sex Tape Scandal Unlikely to Be Fatal in Homeland of Casanova Italian Prime Minister Silvio Berlusconi will likely survive the sex scandal involving a high- priced prostitute that is dominating the Internet, front pages and espresso-bar conversations in a nation that made a hero of Latin lover Giacomo Casanova, political analysts say.
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| RBI's wait and watch stance has merit 28 Jul 2009, 1605 hrs IST, Mythili Bhusnurmath, ET Bureau | |||
On Tuesday the Bank lived up to its reputation, opting to wait and watch before acting; and then, possibly, regretting! All policy instruments – the repo rate (at which the RBI pumps in liquidity) the reverse repo rate (at which the bank absorbs liquidity) the CRR or cash reserve ratio which is the quantum of bank deposits impounded by the RBI, the bank rate (a largely defunct rate at which, in theory, the Bank lends to commercial banks) – have been kept unchanged.
Rightly so! Not only because the Bank had given sufficient indication of its thinking in its first quarter review of Macroeconomic and Monetary Developments Document released on Monday but because there is no case whatsoever to loosen policy further. Its actions since September last have already resulted in an actual/potential liquidity injection of Rs 561,000 crore (excluding Rs 40,000 crore freed up as a consequence of the 1% reduction in SLR (statutory liquidity ratio).
Year-on-year broad money growth is 20% and likely to grow further as a consequence of the RBI's open market operations. In a scenario where GDP is expected to grow 6%, even assuming an upward bias, the kind of growth in money supply should be more than adequate to oil the wheels of the economy.
Indeed it could well prove in excess of the economy's needs in which case we could see a return of inflationary pressures of the kind that we witnessed not so long ago. Already food prices are edging ominously higher and with the rains playing truant, the RBI cannot afford to relax its vigil or its 'accommodative stance' any further
In the circumstances the governor has rightly opted to hold his horses. For now! After all, there is no compulsion that policy announcements should always coincide with the Review. A proactive policy is one that responds as the situation evolves. Luckily for us, the RBI's track record on that front has not been wanting.
 More Pics: J&K assembly uproar |
During the J&K assembly session today, PDP leader and former deputy chief minister Muzaffar Beig linked the J&K chief minister to the infamous sex scandal that had rocked Srinagar in 2006.
He was accompanied to the governor's residence by his father Farooq Abdullah.
In an emotional outburst in the assembly, Omar Abdullah said," I can't bear this kind of humiliation. I am innocent until proven guilty."
Omar's name figures at 102 on the list of offenders involved in the sex scandal, the opposition alleged. His name is being probed by the CBI, it claimed. "I have to say with regret, there is the name of Omar Abdullah, son of Farooq Abdullah, in the list. He has lost the moral authority to rule the state. He must resign," Muzaffar Beig said, PTI reported.
To which the J&K CM said, "I am going to submit by resignation to Governor N N Vohra. I know it is a false allegation. But I want to resign till I am cleared of this false allegation. I cannot work till I am proved innocent. It is a blot on my character.
There was huge uproar in the assembly during Omar's statement. The MLAs and ministers physically restrained him from going out telling him not to resign and that the party would not accept it. He was virtually forced to take his seat by the ruffled members but he got up to shout at them saying "allow me to take this first step."
Abdullah, who came to power in January this year at the head of a National Conference-Congress coalition, was virtually forced to take his seat by the ruffled members but he got up to shout at them saying "allow me to take this first step"".
A huge sex scandal hit the Valley in 2006. According to reports, girls, including minors, were coerced into prostitution, blackmailed and supplied to top police officials, bureaucrats, politicians, ministers and surrendered militants. The state had witnessed angry protests over the issue.
The country's stock market regulator said earlier this month it would abolish front-end or entry fees charged by mutual funds from August 1, a move aimed at cutting costs for investors
It is expected to be particularly hostile to small and new players who depend on agent networks. Beyond a handful of firms such as Reliance Capital Asset Management and UTI, Indian money managers have limited reach and rely heavily on distributors to build up their client base. The move will also make it harder for the more than 20 would-be entrants into the market, which is forecast by Boston Consulting Group (BCG) to manage $520 billion by 2015, compared with $120 billion now.
Allianz, UBS and Credit Agricole are among foreign firms looking to set up shop in India. "It's bit of a blow ... a lot of the AMCs will have to look back at their strategy," said Sanjeev Gupta, chief executive of the emerging market investment unit of South Africa's second-biggest insurer, Sanlam.
"It's not just something that affects newcomers," said Gupta, whose firm is looking to enter the Indian market and had anticipated a ban on entry fees. For existing players, it would mean taking a hit on revenues to pay agents at a time when sales have dropped and operating expenses have nearly tripled to 113 basis points since 2004 due to higher marketing, distribution and administrative expenses. The upcoming rule change has led to a scramble to launch funds before it takes effect.
Units of Religare, Canara Robeco, JPMorgan, BlackRock and Franklin Templeton are among 10 firms who have launched funds in July. Domestic money managers typically charge about 2.25 percent as entry fee on equity mutual funds, their most profitable assets, and pay the entire amount as fees to distributors. By comparison, funds charge three to five percent in Singapore and about one percent in Europe and the United States.
| 'Daughter' at rights panel door |
| OUR CORRESPONDENT |
| Bhubaneswar, July 27: The "daughter" of MLA of Jaydev Assembly constituency, Arabinda Dhali, today approached state human rights commission (SHRC) to claim her right as his legal daughter after demanding a DNA test to prove her claim yesterday. On Saturday, Sanjita Dhali, 24, had claimed that the MLA was her father and alleged that she was tortured and harassed by him and his second wife. She had filed a complaint in this regard with Mahila police station yesterday. "I hope that justice would be done. My two children and I require police protection and financial aid," Sanjita said, talking to reporters today. Sanjita has claimed that she is the daughter of Dhali's first wife, Kamala Baral. The couple had separated when she was three. Following the separation, Sanjita was allegedly dumped at her maternal uncle's house and later married off to Dhali's driver at 14 years. "My family tortured me. They wanted to get rid of me and married me off to the driver," she said, adding that she was subjected to physical torture several times. After her wedding, Sanjita was allegedly tortured by her husband, till she left with her two children. Sanjita also carried her school transfer certificate that carried the names of Arabinda and Kamala as her parents. Meanwhile Dhali, the newly elected MLA from Jaydev Assembly constituency has refuted the woman's claim. "She is not my daughter," Dhali said, agreeing to any test to prove his point. "I have been seeking my family's support to feed my two children, but so far my father has only threatened me," she alleged. |
| Tonic to builders and buyers | |
| OUR BUREAU | |
July 27: Middle and lower-income subscribers to new home loans stand to save as much as Rs 1.5 lakh on interest payment under concessions announced by the Centre today while wrapping up discussions on the budget. Finance minister Pranab Mukherjee, replying to the debate on the Finance Bill that was later passed in the Lok Sabha, also offered some concessions aimed at easing the burden of the downturn-hit industry. (See chart) The measure that will help middle-income earners most is the 1 per cent interest subsidy on home loans up to Rs 10 lakh to buy houses worth up to Rs 20 lakh. The subsidy will translate into a total saving of Rs 28,920 on interest payment during the tenure of a 5-year loan and Rs 1.51 lakh over a 20-year period. As many as 70 per cent of home loan borrowers fall in the Rs 10-lakh bracket, industry sources said. The government's offer to underwrite 1 per cent of interest is expected to cost it about Rs 1,000 crore, according to the finance ministry. "It (the subsidy) is a welcome step as it will improve affordability. Any such step tends to improve activity in the real estate and construction sectors, which are among the largest employment generators," said Renu Sud Karnad, joint managing director of HDFC. The subsidy announcement came a day ahead of the RBI's credit policy which analysts do not expect to offer interest rate cuts. Mukherjee did not confine the incentives to real estate to the subsidy alone. He also offered a tax holiday to projects that more or less got off the ground at the start of the downturn if they finish construction by March 2012. Builders of projects that got approval between April 1, 2007, and March 31, 2008, need not pay tax on profits if they are completed on or before March 31, 2012. Given the euphoria of 2007, builders had rushed to launch a slew of projects that ran into rough weather when the tide turned in the latter half of 2008. Realtors have been pleading for relief after housing prices fell by as much as 15 to 25 per cent in many cities. "The incentive is expected to help more big developers who are stuck with high leverage and low sales but the impact could be felt by all," Pradip Chopra, director of Calcutta-based developer PS Group, said. Rajiv Talwar, the executive director of developer DLF, agreed: "These measures will help to a large extent to sell stocks of affordable housing and boost overall demand." However, all real estate players were not enthused. Arun Puri, chairman of property consultant firm Jones Lang La-Salle Meghraj, said: "Such tokenism may not really perk up the market… larger gestures like reduction in interest rates and incentives for developers are needed to rescue the market." Mukherjee also addressed an accounting concern of industry, clarifying that changes in service tax would be implemented only from September 1. Industry associations had requested the government for time to make changes in their tax software. Industrial growth had shrunk in December and January, but Mukherjee asserted today that the measures already announced in the budget and earlier as part of two stimulus packages could push the growth in gross domestic product to 8 to 9 per cent by end-2010. Mukherjee said he would stick to his promise of placing a draft direct tax code within 45 days of taking over as finance minister and it would be tabled in the winter session of Parliament. "We will make some major changes in the tax administration and related laws in the country," he said. The minister promised to push through a nationwide goods and services tax by April 1, 2010, "with cooperation from states…." The measure is expected to reduce taxes on goods and services and make taxation uniform throughout the country. Mukherjee had a message for those disappointed by the lack of reforms in the budget. "Reforms will be very much on our agenda. It is a continuing process... it will not be a mantra to be chanted occasionally," he said. |
| RBI wake-up call on inflation | |
| OUR SPECIAL CORRESPONDENT | |
Mumbai, July 27: Inflation will torment the country in the second half of the year. That's no longer a gloomy forecast by number-crunching economists; it is a fear that the Reserve Bank of India has officially articulated for the first time this year. The bugbear — which had been thrown off our backs in early June when inflation turned negative for the first time after a gap 30 years — could return to haunt monetary policy makers at the central bank once again. In a document released a day before it hunkers down to review its monetary policy at the end of the first quarter, the RBI said there were indications that inflation could firm up again by the end of this year. Since September last year, the RBI had changed tack and had aggressively started trimming interest rates to jump-start a faltering economy as inflation started weakening and appeared to be less of a concern. But with the economy starting to lurch into forward drive, the RBI may have to start devising way to put a lid on inflation. "The visible signs of price pressures, even as the headline inflation number turned negative over the short-run, pose complex challenges for the conduct of monetary policy, particularly given the dampened domestic demand conditions," the RBI said. High commodity prices and the delayed monsoon could exert pressure on food prices. Moreover, the high base effect, which has been cited as one of the major reasons for the lower levels of inflation, will almost disappear by October. It cautioned that fiscal stimulus and its accommodative monetary policy could have inflationary implications if they are sustained longer. The RBI said kharif production, which accounted for about 57 per cent of the overall agricultural output, could be affected. The worst hit kharif crops could be rice, tur, urad, maize and soyabean which are all monsoon-dependent. However, rainfall in July has been relatively good and the improved sowing position as on July 17 indicates that sowing of most pulses, oilseeds and coarse cereals are close to last year's levels. Growing economy Many expect the RBI to raise its growth forecast for the economy from the 6 per cent it forecast in April. In 2008-09, the country had achieved a GDP growth of 6.7 per cent after three straight years of over 9 per cent growth. The return of the growth phase is predicated on a set of positives that the RBI listed out in the document titled "Macroeconomic and Monetary Developments: First Quarter Review 2009-10". These include a positive growth in the index of industrial production (IIP) in April-May 2009, higher growth in the core infrastructure sector and some indications of an upsurge in the services sector that accounts for over 55 per cent of the country's GDP. There are other cues as well. A survey of professional forecasters conducted by the apex bank in June 2009 placed the growth rate for 2009-10 at 6.5 per cent, higher than 5.7 per cent in an earlier survey. The RBI said non-food credit growth was turning positive since the beginning of June 2009 and the year-on-year deceleration in credit growth had shown a modest reversal since the last fortnight of June. Moreover, capital flows had increased after two consecutive quarters of net outflows. "Early information on the corporate performance for the first quarter of 2009-10 is indicating positive growth in both sales and profits over the corresponding period of the previous year," it noted. Since October last year, the RBI has brought down the repo rate by 425 basis points and the reverse repo by 275 basis points to 4.75 per cent and 3.25 per cent, respectively. The repo is the rate at which RBI provides funds to banks against the government securities they hold. The reverse repo is the rate at which it absorbs liquidity. However, bankers do not expect any change in these key rates tomorrow. |
The bank wouldn't retreat from fast-growing Asian businesses even as the financial crisis has forced it to shrink its balance sheet by about 25 percent, he told Wall Street Journal in an interview at Citigroup's Hong Kong headquarters Monday.
"There's no question in our mind that Asia is going to represent a disproportionate amount of the world's growth over the next decade," he said adding, that will result in big opportunities for Citi to expand its presence in trade finance, custody business and cross-border cash flows, "The intra-Asia flows are going to grow exponentially," said Pandit, 52, who has held the top job at Citi since December 2007.
Citing Citi's efforts to help American homeowners and credit-card holders who are having trouble making their payments, he acknowledged "a significant responsibility" on Citi's part to help be "an integral part of the American recovery."
But "now it's the turn for the foreign consumer to rise," he said as cited by the Journal, and American businesses can help with the US recovery through exports to overseas consumers.
Pandit also dismissed suggestions that competitors speaking ill of Citi's bailout from Washington are affecting the business. "I've usually found that you don't win business by talking down somebody," he said.
There are points in time, Pandit said, when companies in one part of the world need loans and liquidity available from elsewhere in the world. "That's the business that we're in," he was quoted as saying by the Journal.
However, he added that the safety and soundness of its local businesses was critical and Citigroup worked closely with regulators everywhere it operates.
US public pension funds such as California Public Employees' Retirement System (CalPERS), California State Teacher's Retirement System (CalSTRS) and European pension funds such as Norway's Government Pension Fund (Global), Denmark's LD Pensions, Netherlands' ABP Funds, all combined, have exposure to over 300 different companies listed in Indian bourses, apart from investments in real estate.
CalPERS, the largest public pension fund in the US, has just reported the most severe (23%) decline in assets to $181 billion in fiscal 2009 but yet it believes India is one of the "most promising" investment destinations globally. CalPERS has over $320 million exposure in listed Indian stocks plus $100 million in Indian real estate via India Realty Fund and India Real Estate Fund.
"We believe markets, including India, are perhaps the most promising investment sector in the coming years. Accordingly, our global equity, private equity, and real estate sectors are looking to allocate increasing share of their portfolios-up to 50%, to such countries. India is promising, especially compared with socalled developed US and Europe," a CalPERS spokesperson said. The fund administers retirement benefits for 1.6 million active and retired state, public school, and local public agency employees and their families.
Norway's Government Pension Fund (Global), where the surplus wealth produced by Norwegian petroleum income is deposited, has exposure to around 215 Indian listed companies. According to an official of Norges Bank Investment Management, which is responsible for investing the international assets of the fund, emerging markets such as India have been 'responsible for improvement in the returns' clocked by international listed stocks portfolio.
Netherlands' ABP and Denmark's LD Pensions have exposure to Indian stocks worth over $500 million as per latest figures. These funds serve the needs of nearly 3 million European pensioners.
Global pension funds rush to India for better returns
US public pension funds such as California Public Employees' Retirement System (CalPERS), California State Teacher's Retirement System (CalSTRS) and European pension funds such as Norway's Government Pension Fund (Global), Denmark's LD Pensions, Netherlands' ABP Funds, all combined, have exposure to over 300 different companies listed in Indian bourses, apart from investments in real estate.
CalPERS, the largest public pension fund in the US, has just reported the most severe (23%) decline in assets to $181 billion in fiscal 2009 but yet it believes India is one of the "most promising" investment destinations globally. CalPERS has over $320 million exposure in listed Indian stocks plus $100 million in Indian real estate via India Realty Fund and India Real Estate Fund.
"We believe markets, including India, are perhaps the most promising investment sector in the coming years. Accordingly, our global equity, private equity, and real estate sectors are looking to allocate increasing share of their portfolios-up to 50%, to such countries. India is promising, especially compared with socalled developed US and Europe," a CalPERS spokesperson said. The fund administers retirement benefits for 1.6 million active and retired state, public school, and local public agency employees and their families.
Norway's Government Pension Fund (Global), where the surplus wealth produced by Norwegian petroleum income is deposited, has exposure to around 215 Indian listed companies. According to an official of Norges Bank Investment Management, which is responsible for investing the international assets of the fund, emerging markets such as India have been 'responsible for improvement in the returns' clocked by international listed stocks portfolio.
Netherlands' ABP and Denmark's LD Pensions have exposure to Indian stocks worth over $500 million as per latest figures. These funds serve the needs of nearly 3 million European pensioners.
Addressing shareholders of the company, he also said the government would not lose a single rupee even if the gas from the fields off the Andhra Pradesh coast were to be supplied to his company at the originally contracted price of $2.34 per unit.
"The gas price of $2.34 per unit was not decided by two brothers on the dinner table," Anil Ambani said, adding the price was based on the prevailing global oil scenario and legitimately approved by the Reliance Industries board in 2005.
Last month, the Bombay High Court had asked Reliance Industries to supply 28 million units of gas to Reliance Natural Resources for 17 years at $2.34 per unit, after assigning 12 million units to the state-run power utility NTPC.
Reliance Industries challenged the verdict in the Supreme Court, which heard the case July 20 and fixed Sep 1 as the next date of hearing. It also asked all the parties to file their replies on the government position on the matter by then.
Anil Ambani said his Reliance Natural Resources was not claiming ownership of the gas assets as was being made out by the petroleum ministry but only staking the legitimate claim over the supplies, based on a corporate agreement.
According to him, if the government so desired, it had ample leeway to even take over the gas assets. He also sought to bring to light what he called were questionable actions by the oil ministry ever since changes were made at its top level in 2006.
"For the record, I want to emphasise that the government does not stand to lose even a single rupee even if Reliance Industries sells the gas at lower than approved valuation price to any party," he contended.
"If Reliance Industries gets a higher sale price from us based on the price of what the petroleum ministry wants to fix for the first few years, 99 percent of all revenues and profits will go to Reliance Industries," he said.
"Only a measly 1 percent will accrue to government of India."
Petroleum and Natural Gas Minister Murli Deora said he could not comment on the scathing accusations levelled against his ministry by Anil Ambani as the matter was sub-judice.
Anil Ambani said Reliance Industries, founded by his late father Dhirubhai Ambani, was misusing its power as India's largest company and the near monopoly it enjoyed over natural gas production.
"It is unfortunate that Reliance Industries has tried every trick in the book, and apparently several outside the book, to back out of its solemn, legal and contractual agreement."
| RIL-NTPC gas sale negotiations hit 'prejudice' clause roadblock 28 Jul 2009, 0202 hrs IST, Subhash Narayan, ET Bureau | |||
RIL has turned down NTPC's request to include a clause in the gas sales purchase agreement (GSPA) that the sale will be "without prejudice to the ongoing case over gas supply to NTPC's Kawas and Gandhar plants".
"We have reached an agreement on most things pertaining to the GSPA for supply of 2.67 mmscmd (million standard cubic metres per day) of gas. We are only saying this supply should be without prejudice to our rights and contentions in our court case. However, RIL is reluctant to give a written undertaking in this regard. This is likely to further delay the process," a high-level official at NTPC said, requesting anonymity.
The GSPA is for 2.67 mmscmd of KG gas from the 28 mmscmd gas made available by RIL for power companies under the government's gas allocation policy. This gas would be supplied at the government-mandated price of $4.20 per million British thermal units (mmBtu).
NTPC isn't keen on signing an agreement without this clause because it feels that doing so might affect its position in the case it is fighting in the Bombay High Court. The case pertains to supply of 12 mmscmd of KG gas at a price of $2.34 per mmbtu for expansion projects of NTPC's Kawas and Gandhar plants in Gujarat.
When contacted, an RIL spokesperson said: "Discussions between RIL and NTPC over finalisation of GSPA have progressed well and RIL is hopeful of concluding the GSPA with NTPC soon." While RIL has already concluded GSPAs with a host of power companies such as Torrent Power Limited Vatva, GVK Industries, Lanco Kondapalli Power, it has been negotiating with NTPC for past several weeks without a breakthrough.
The delay has cropped up even as the power PSU has agreed to other terms of the GSPA like payment of marketing margin and take or pay arrangements. RIL has included the "without prejudice" clause in GSPAs with other consumers in power and fertiliser sectors where it has agreed to supply gas for a period of five years.
The case between NTPC and RIL in the Bombay High Court dates back to December 2005. It concerns supply of gas from RIL's KG basin to NTPC's Kawas and Gandhar plants, expansion projects, for 17 years at a price of $2.34 per mmbtu. The non-availability of gas has held back expansion of these projects.
Meanwhile, the high court has also temporarily allowed RIL to sell gas from its KG basin finds to other consumers as per government's allocation policy. The legal battle between RIL and NTPC is linked to the more famous fight between RIL and the Anil Ambani-controlled RNRL over supply of gas from the KG basin as the price of $2.34 specified in that contract is derived from the NTPC case.
Government gets $510,000 as profit share from KG crude production
In a written reply tabled in the Rajya Sabha, Petroleum and Natural Gas Minister Murli Deora said that the government received $510,000 for the period between September 2008 to March 2009.
Profit petroleum is non-tax revenue receivable by the central government out of the profit generated from production of crude oil and natural gas from the fields it has awarded under a production sharing contract.
Deora told the house that Reliance Industries Ltd and Niko Resources had invested $5.98 billion till March 2009 on two major natural gas discoveries and one crude oil discovery.
Deora said the natural gas production from the KG-DWN-98/3 block is about 31 million metric standard cubic metres per day (mmscmd), which accounts for 25 percent of total natural gas production of the country.
The production in the block is currently 13,500 barrels per day, which is about 1.9 per cent of the total crude oil production of the country.
"This is so far the single-largest investment in any pipeline by Gail," he said. "Besides the 2,050-km pipeline, the company will invest an additional Rs 400 crore to lay two spur pipelines. The board had approved the pipelines at its meeting on Friday, which are estimated to cost Rs 8,000 crore."
The two spur lines will link Barauni and Chhapra in Bihar with Gail's pipeline network. It currently operates 7,100 kms of gas pipelines and plans to double its network by March 2012 with an investment of around Rs 28,000 crore. Gail director (finance) RK Goel said funding the project will be done through internal accruals and debt. Gail's current debt, equity ratio is 0.12:1. Hence, the company is in a comfortable position to borrow substantially, he said. The company's current net worth is around Rs 14,000 crore.
Giving details of the Jagdishpur-Haldia project, Mr Choubey said it would be executed in phases. First 1,410 kms of pipeline will be laid from Haldia to Phulpur, along with spurlines to various consumers like Hindustan Fertiliser Corp at Durgapur and Barauni, Fertiliser Corp of India at Sindri and Barauni, power plant at Barh and Bettiah and in Patna, Chhapra, Siwan, Gopalganj and Bettiah, he said.
In the next phase, spurlines and feeder lines will be laid for a length of 450 kms to Kolkata, Ranchi, Jamshedpur, Varanasi and Allahabad and Sagardighi. In the last phase, the gas pipeline infrastructure will connect SAIL's plants at Durgapur and Bokaro and the petrochemical plant at Barauni with Gail's network.
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