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Credit rating of cities under urban reforms begins; Ahmedabad, NDMC get A- - rating
Sep 06,2016

Speedy implementation of new urban missions launched last year has resulted in the Ministry of Urban Development spending 70% of Plan Funds for 2016-17 during the last five months of the current financial year. This was revealed during a review of progress under different missions taken by the Minister of Urban Development Shri M. Venkaiah Naidu.

Under the initiative of Credit Rating of urban local bodies, 85 cities have launched the process and the same has been completed in respect of 12. Ahmedabad Municipal Corporation and New Delhi Municipal Council (NDMC) has got A- - rating (positive credit worthy). All these 85 cities would be given credit rating by March next year. Pune and Ahmedabad are in advanced stage of going for municipal bonds.

The Minister has directed the officials to follow up with States and ULBs on a regular basis to ensure that all ULBs get credit rating at the earliest which is necessary to float municipal bonds for mobilizing resources.

As a part of handholding the States and Urban Local Bodies for speedy execution of projects under new initiatives, the Ministry of Urban Development has identified substantial sources of resources from various domestic and multi-lateral lending agencies. This includes ; Asian Infrastructure Investment Bank- US $ 5 billion, Asian Development Bank- US $ 1 billion, Japanese International Cooperation Agency- US $ 500 million, BRICS Bank- US $ 500 million per city, AFD-Euro 100-200 million. HUDCO is likely to support Smart City Mission with Rs.10,000 cr.

The Minister was informed that in addition to 68 projects that were launched in 14 smart cities in June this year, another 134 projects have been identified of which 114 projects are under bidding. While the first batch of all 20 smart cities have set up Special Purpose Vehicles, the 13 cities identified under Fast Track Competition would do so by the end of this month.

Shri M.Venkaiah Naidu expressed satisfaction over the Ministry approving an investment of Rs.1.24 lakh crore for improving basic urban infrastructure. This includes Rs.78,000 cr investment under Smart City Plans of 33 cities and another Rs.45,935 cr under Atal Mission for Rejuvenation and Urban Transformation (AMRUT).

Shri Naidu noted that reforms introduced like involvement of States and ULBs in conceptualization of new urban missions, autonomy to States in formulation of projects, their appraisal and approval, competition based selection of cities etc., have begun to yield positive results in the form of speedy clearance of investments.

The Minister directed the concerned officials to take necessary measures jointly with States and ULBs to promote conversion of municipal solid waste into compost.

As against Plan allocation of Rs.21,000 for 2016-17, the Ministry of Urban Development has incurred an expenditure of Rs.14,725 cr till August this year.

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Asia Pacific Shows Progress in Water Security, But Challenges Remain - ADB
Sep 06,2016

Water security in Asia and Pacific has progressed overall in the past 5 years, but major challenges remain, including overexploited groundwater, demand from rising populations, and climate variability, according to a new report from the Asian Development Bank (ADB).

The new edition of the Asian Water Development Outlook (AWDO 2016) released at World Water Week in Stockholm provides a snapshot of the water security status of 48 of the regions countries, using latest data sets. According to these, the number of countries assessed as water insecure has dropped to 29, compared to 38 (out of 49 countries) identified in the previous issue of the report in 2013.

n++Asia and Pacific remains the worlds most vulnerable region to water insecurity and cannot sustain its recent economic growth without addressing this issue,n++ said ADB Vice-President for Knowledge Management and Sustainable Development Bambang Susantono, who led the launch in Stockholm. n++Meeting the regions socioeconomic challenges and achieving Sustainable Development Goal 6 on water will require bridging the gap in provision of water services between rich and poor in urban areas, and between rural and urban areas.n++

The report cites that in Asia and the Pacific, 1.7 billion people lack access to basic sanitation. Recent estimates suggest that by 2050, 3.4 billion people could be living in water-stressed areas in Asia and the Pacific while water demand will increase by 55%.

AWDO 2016 assesses water security in 5 key dimensionsn++namely household access, economic viability, urban services, restoring rivers and ecosystems, and resilience to water-related disasters. Advanced economies such as Australia, Japan and New Zealand consistently lead the way, followed by countries in East Asian++led by the Peoples Republic of China (PRC), which has taken the biggest stride to improve water security since the AWDO 2013 edition.

On household access to piped potable water and improved sanitation, the water security score in Asia and the Pacific on a 20-point scale ranges from 4.5 for South Asia to 20.0 for the advanced economies. All parts of the region improved their performance by about 2 points since 2013, except for the Pacific islands. But although the rural-urban gap has been reduced in some countries (such as Armenia and Thailand), the report says major disparities remain between rural and urban areas and between rich and poor on services and infrastructure for piped water supply and sanitation. South Asian countries particularly need to make considerable efforts to improve their performance in this dimension.

The second key dimension, economic water security, provides an assessment of the productive use of water to sustain economic growth in food production, industry and energy. Most of the change since 2013 has been positive with advanced countries again showing the highest scores and Pacific islands lagging. But there remains room for improvement across the region. Countries that merit strengthening current conditions are concentrated in Central Asia.

On No. 3, urban water security, East Asia has shown positive progress while South and Southeast Asia still have some way to go, particularly Myanmar, Pakistan, and the Philippines. Nearly half of the economies have piped water supply levels higher than 85% but less than 50% of the urban population have access to improved sanitation. In many areas, the majority of wastewater is discharged to the environment having received little to no treatment. The report says significant investment and leadership is needed to reliably meet the water needs of cities.

The fourth key dimension describes how well a country is able to manage its river basins and sustain ecosystem services. This shows a wide range of results, with the Pacific islands scoring highly due to good river health and advanced economies doing well due to strong governance. Declining river health is most evident in Bangladesh, the lower Yangtze River Basin of the PRC, Nepal, and Mekong Delta in Viet Nam, the report says.

For the fifth key dimension, resilience to water-related disasters, advanced economies show the strongest performance while much of the rest of Asia and the Pacific has been weak. Between 1995 and 2015, there were some 2,495 water-related disasters striking Asia, killing 332,000 people and affecting a further 3.7 billion. South Asia showed the lowest resilience score, but several other countries showed strong improvement since 2013. These included Pakistan; the Philippines; and Taipei,China.

The report concludes that the relationship between water security and the economy can be a virtuousn++or a viciousn++circle. n++There is a strong relationship between water management and the economy, and investments in good water management can be considered as a longer term payback for increased growth and poverty reduction,n++ the publication says. n++Water-related investments can increase economic productivity and growth, while economic growth provides the resources to invest in institutions and capital-intensive water infrastructure.n++

AWDO 2016 is produced by ADB in partnership with the Asia Pacific Water Forum and three specialist agenciesn++Asia Pacific Center for Water Security at Tsinghua University, International Water Management Institute, and International Water Centre. Key contributions have also been made by the International Institute for Applied Systems Analysis.

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Good rains set to move up earnings of farm related firms: ASSOCHAM study
Sep 06,2016

Thanks to bountiful rains this year, a large part of corporate India with direct connect with the agro and the entire rural economy is set to post handsome growth in the coming two quarters in sales and profitability ranging between 15 and 45% with benefits of Monsoon accruing to several mid and large cap firms Mahindra and Mahindra, Rallis India and Jain Irrigation, according to an ASSOCHAM paper.

n++The firms benefiting directly from abundant rainfall relate to those in the irrigation infrastructure, farm equipment like tractors, seed development and the food processingn++, the ASSOCHAM comprehensive Paper Monsoon Showers Fortune on Farm Related Firms noted.

It said a host of other firms engaged in fertilizers, seeds, farm equipment, food processing and consumer consumption would immensely benefit from a sizeable improvement in the demand for farm inputs as also higher farmers income leading to a significant rise in rural demand.

The paper projected that with a good monsoon, sale of tractors for Mahindra and Mahindra is expected to rise. The sale during the Sep-Mar 2017 window is expected by at least over 15 per cent, also resulting in commensurate uptick in bottom line. Other leading tractor and farm equipment firms including Escorts and VST Tillers Tractors are also expected to do well both in income and net earnings, according to the paper.

n++With Monsoon being the lifeline of the Indian economy, it is no surprise that good rains would bring good fortune not only to the companies engaged in the farm related sectors but also the entire macro picture,n++ ASSOCHAM President Mr. Sunil Kanoria said.

Likewise, for Rallis India is a subsidiary of the Tata Group which is a key player in the agriculture business, bountiful rains are expected to generate 33.58% higher sales during the monsoon months. Positive monsoon sentiment has already started showing its results. The company has reported a profit of Rs 174.20 crores for its first quarter of 2016, implying a 55% increase in sales.

Similarly, Coromandel International, a mid cap company operating in fertilizers sector is likely to see a trend of surge in sale during the months Sep-March, post the active period of monsoon and sowing of seeds. The company is expected to see a rise in sales by 5.13% for the period March -September 16, and a 19.82% for the period September 16-March 17.

Jain Irrigation Systems is a leading manufacturer of micro irrigation systems, piping, tissue cultured plants, solar photovoltaic and solar water heating systems. Micro irrigation systems and related products make up about 40% of the total sales of the company. Piping is also partly dependent on water and monsoon rains. A positive monsoon for the year 2016 is projected to put the irrigation business in good shape. A growth of 17-18% is expected in the sales during the monsoon season as well as the lean season.

Likewise, the leading sugar firms like Balram Chini and Mawana Sugar are projected to improve their performance significantly in the coming months, thanks to rain Gods and firming of prices.

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Demand for Air Cargo Strengthens in July 2016: IATA
Sep 06,2016

The International Air Transport Association (IATA) released data for global air freight markets in July 2016 showing robust growth in demand. Measured in freight tonne kilometers (FTKs), demand increased 5.0% in July 2016, compared to July 2015. This was the fastest pace in almost 18 months. Freight capacity measured in available freight tonne kilometers (AFTKs) increased by 5.2% year-on-year, outstripping demand and keeping yields under pressure.

Despite the subdued global trade backdrop, carriers in the worlds four biggest air cargo markets - Asia-Pacific, Europe, North America and the Middle East - reported an increase in freight demand. The strongest growth occurred in Europe and the Middle East, with July demand up by 7.2% and 6.7% respectively, compared to the same period last year.

July was a positive month for air freight - which is an all too rare occurrence. Despite that, we must recognize that we face some strong headwinds on fundamental aspects of the business. Global trade growth is sluggish and business confidence is weak. And the political rhetoric on both sides of the Atlantic is not encouraging for further trade liberalization, said Alexandre de Juniac, IATAs Director General and CEO.

Regional Performance

Asia-Pacific airlines reported a 4.9% increase in demand for air cargo in July compared to last year. In particular, growth has been driven by strong increases in the large within Asia market in recent months, but the latest business surveys from the region paint a mixed picture. Capacity in the region expanded 2.7%.

North American carriers saw freight volumes expand 4.1% in July 2016 compared to the same period last year, and capacity increase by 3.4%. International freight volumes (which grew 1.3% in July) continue to suffer from the strength of the US dollar which has kept the US export market under pressure.

European airlines posted the largest increase in freight demand of all regions in July, 7.2% year-on-year. Capacity increased 3.8%. The positive European performance corresponds with an increase in export orders in Germany over the last few months. Europes freight volumes have now surpassed the level reached during the air freight rebound following the Global Financial Crisis. The only other region to achieve this is the Middle East.

Middle Eastern carriers saw air freight demand increase by 6.7% in July 2016 year-on-year. Capacity increased by 11%. The regions growth rate, while still strong, has eased to half the 14% recorded annually between 2012 and 2015. This is mainly attributable to slower freight growth between the Middle East and Asia.

Latin American airlines saw demand contract by 5.6% in July 2016 compared to the same period last year and capacity increase by 10.1%. The region continues to be blighted by weak economic and political conditions, particularly in the regions largest economy, Brazil.

African carriers recorded a 6.8% decrease in year-on-year freight demand in July 2016 - the largest decline in seven years. African airlines capacity surged by 31.3% on the back of long-haul expansion (from a small base).

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Expansion of India - Chile Preferential Trade Agreement (PTA)
Sep 06,2016

An agreement on the expansion of India-Chile Preferential Trade Agreement (PTA) was signed between India and Chile in a meeting held between Ms. Rita Teaotia, Commerce Secretary and Mr. Andrn++s Barbn++ Gonzn++lez, Ambassador, Embassy of Chile on 6th September, 2016.

A Preferential Trade Agreement (PTA) between India and Chile was earlier signed on March 8, 2006 and came into force with effect from August, 2007. In the original PTA concluded in March 2006, Indias offer list to Chile consisted of 178 tariff lines the Margin of Preference (MoP) ranging from 10%-50% at 8-digit level and Chiles offer list to India consisted of 296 tariff lines with MoP ranging from 10% - 100% at 8-digit level.

Under the expanded PTA, Chile has offered concessions to India on 1798 tariff lines with Margin of Preference (MoP) ranging from 30%-100% and India has offered concessions to Chile on 1031 tariff lines at 8-digit level with MoP ranging from 10%-100%. Indias export basket with Chile is diversified and keeping in view the wide variety of tariff lines offered by Chile, the expanded PTA would immensely benefit India.

Among the LAC countries, Chile was the third largest trading partner of India during 2015-16. Indias bilateral trade with Chile stood at US$ 2.64 billion with exports at US$ 0.68 billion and imports at US$ 1.96 billion respectively during 2015-16(P). Indias exports to Chile are diverse which consist of transport equipment, drugs and pharmaceuticals, yarn of polyester fibres, tyres and tubes, manufacture of metals, articles of apparel, organic/inorganic and agro chemicals, textiles, readymade garments, plastic goods, leather products, engineering goods, imitation jewellery, sports goods and handicrafts. Major items of Import from Chile are copper ore and concentrates, iodine, copper anodes, copper cathodes, molybdenum ores & concentrates, lithium carbonates & oxide, metal scrap, inorganic chemicals, pulp & waste paper, fruits & nuts excluding cashews, fertilizers and machinery.

India has friendly relations with Chile. Chile has been cooperating with India at the International fora and expansion of India Chile PTA will enhance the trade and economic relations between the two countries. The expansion would be an important landmark in India-Chile relations and consolidate the traditional fraternal relations that have existed between India and LAC countries.

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Credit for unclaimed TDS made on declared income shall be allowed
Sep 06,2016

The Income Declaration Scheme, 2016 (the Scheme) provides an opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income and assets. The Scheme has come into effect from 1 June 2016 and is open for declarations up to 30 September 2016. The Income Declaration Scheme, 2016 Rules (the Rules) have been notified on 19 May 2016. The amount payable under the Scheme can be paid in instalments viz. 25% of the total amount payable by 30 November 2016; another 25% by 31 March 2017 and balance 50% by 30 September 2017.

In order to address concerns of the stakeholders and to clarify the queries relating to the provisions of the Scheme, the Rules have been amended from time to time and six set of circulars (FAQs) have been issued. The following major issues addressed through Rules and FAQs are as under:

n++ The information in respect of a valid declaration is confidential and shall neither be shared with any law enforcement agency nor shall be enquired into by the Income-tax Department.

n++ The assets declared under the Scheme are to be valued at cost of acquisition or at fair market price as on 1 June 2016 as determined by the registered valuer, whichever is higher. However, an option for valuation of registered immovable property on the basis of stamp duty value of acquisition adjusted with the Cost Inflation Index has also been provided.

n++ Credit for unclaimed TDS made on declared income shall be allowed.

n++ Neither any capital gains tax nor any TDS shall be levied on transfer of declared benami property from benamidar to the declarant without consideration.

n++ The amount of fictitious liabilities recorded in audited balance sheet and not linked to acquisition of an asset can be disclosed under the Scheme as such.

n++ The period of holding of declared registered immovable assets shall be taken on the basis of the actual date of registration.

n++ The valuation report obtained by the declarant from a registered valuer shall not be questioned by the department. However, valuers accountability will remain.

n++ No adverse action shall be taken by FIU or the income-tax department solely on the basis of the information regarding cash deposit made consequent to the declaration under the Scheme.

n++ No enquiry/investigation shall be made in respect of the undisclosed income and assets declared under the Scheme even if the evidence of same is found subsequently during course of search or survey proceedings (circular No.32 dated 01 September 2016).

Further, vide Circular No. 31 dated 30.8.2016 an option has been provided to the declarants to file the declaration under the Scheme electronically under digital signature with the Commissioner of Income-tax, Centralised Processing Centre, Bengaluru [CIT(CPC)]. In case the declarant exercises the said option the declaration shall not be shared with the jurisdictional Principal Commissioner/Commissioner under the Income-tax Act.

In view of the fact that all the major queries and concerns of stakeholders have already been addressed by issue of circulars (FAQs) and also to provide stability and certainty to the Scheme, it is envisaged that no further clarifications on the Scheme shall be issued.

It is reiterated that the Scheme closes on 30.09.2016. The extension of the scheme is out of question.

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Special Investigation Team (SIT) on Black Money asks RBI to develop institutional mechanism to track illicit financial flows out of country
Sep 06,2016

Chairman, Special Investigation Team (SIT) on Black Money, appointed by the Honble Supreme Court, in a letter dated 11 August 2016, to Governor, RBI has impressed upon the imperative need to establish the following institutional mechanism for sharing of data with the RBI in its various data bases with the Enforcement Authorities so that the data could be cross checked with other information available with Enforcement Authorities and illicit financial flows could be curbed :

(a) Foreign Exchange Transactions Electronic Reporting System (FET-ERS):

FET-ERS was introduced through RBI Circular No.77 dated 13 March 2004. All authorized dealers are obligated to report each foreign exchange transactions (inward and outward remittances in FET-ERS). Access to this database would needs to be given to authorities like Enforcement Directorate and Directorate of Revenue Intelligence, so that the above analysis could be done;

For this, SIT has suggested that FET-ERS data should capture the PAN number of the importer or the exporter and that RBI take necessary steps for the same to get this done on an urgent basis.

(b) Export Outstanding Data:

In the data provided by RBI to the SIT, huge amounts were found outstanding beyond a period of one year in violation of FEMA. The SIT had noted that the possibility of the concerned Companies having wrongly claimed duty drawback also cannot be ruled out. Further, the possibility of the concerned Companies having availed of various export promotion schemes also cannot be ruled out.

In light of this, the SIT has asked the Enforcement Directorate, Directorate of Revenue Intelligence and Ministry of Commerce to analyze the data of export outstanding and take necessary action in this regard.

RBI maintains export realization data in its EDPMS database. Chairman, SIT in his letter has observed that it is important to co-relate shipping bills with confirmation from banks on the EDPMS database itself rather than Bank Realization Certificate (BRC) which is different database and that RBI may impress upon the banks to inform regarding realization of export proceeds on the EDPMS itself.

(c) Monitoring of Advance Remittances against Imports:--

In wake of the Bank of Baroda scam, the SIT had asked RBI to institutionalize a mechanism for cross checking of advance remittances against Bill of Entry irrespective of value of advance remittances sent. RBI had informed the SIT that huge advance remittances running into billions of dollars were outstanding as on 30th September, 2015 for which Bill of Entry correlation has not been done. SIT had thereafter asked RBI to get this co-relation completed and inform. Chairman, SIT in his letter has asked RBI to complete this exercise at the earliest and send information to SIT. Chairman, SIT in his letter expressed satisfaction that IDPMS (Import Data Processing and Monitoring System) is being set up by RBI which is expected to be launched by the end of September which will enable cross checking of each advance remittance irrespective of value against the Bill of Entry.

Chairman, SIT in his letter requested RBI to develop, in consultation with Department of Revenue, an institutional online mechanism for sharing of data of all the above three databases being managed by RBI i.e. FET-ERS, IDPMS and EDPMS. Chairman, SIT has also asked the Revenue Department to identify a single point agency in the Revenue Department which could access the above three databases and could thereafter disseminate them to various Enforcement Agencies.

In fact, the Special Investigation Team (SIT) on Black Money, appointed by the Honble Supreme Court, is consistently of the view that there should be effective sharing of information between various Government Departments, particularly of Enforcing Agencies. The SIT feels that the data can be shared only by having one agency such as Central Economic Intelligence Bureau (CEIB) or any other agency, as a data warehouse. From the said data warehouse, various agencies can gather the relevant information for taking early appropriate action. This is so since the data available with one agency can be relevant to action expected to be taken by other Law enforcement agency. Presently, RBI holds the information with respect to all types of foreign exchange transactions under various categories as elaborated below

SIT feels that for controlling and tracking illicit financial flows out of the country, use of RBI data by various Law enforcement agencies like Enforcement Directorate, Directorate of Revenue Intelligence and CBDT is of critical importance. The SIT in the past had raised this concern and had requested RBI to provide data on advance remittances sent abroad for which corresponding Bill of Entry has not been received by the authorized dealer. The SIT had also requested RBI to provide details of export outstanding for more than one year. The data provided by RBI on both the above counts clearly showed that there are gaps in monitoring the above trade flows which are used by unscrupulous elements to take out precious capital outside the country, thus damaging the fabric of Indian economy.

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Total Production of The Horticulture Crops Estimated to be around 283.36 Million Tonnes During 2015-16
Sep 06,2016

The Department of Agriculture and Farmers Welfare has released the Third Advance Estimates for 2015-16 of area and production of horticulture crops. These estimates are based on the information received from different State/UTs in the country. The total production of the Horticulture crops in the country is estimated to be around 283.36 million tonnes during 2015-16.

The following table summarises the All-India Final Estimates: 2014-15 and Third Advance Estimates: 2015-16:

(Area in 000 Hectare)                    (Production in 000 MT)Total Horticulture2014-152015-16FinalThird Advance
Estimate
Area2341023787Production280986283360

Highlights:-

n++                The total horticulture production of the country is estimated to be around 283 million tonnes during 2015-16 which is 0.8% higher than the previous year.

n++                Production of fruits is estimated to be 91 million tonnes which is 2% higher than previous year. 

n++                Production of vegetables is estimated to be around 167 million tonnes which is almost same as the previous year.

n++                Production of spices is estimated to be around 6 million tonnes which is 4% higher than the previous year.

n++                Production of onion is estimated to be around 210 lakh tonnes which is 11% higher than the previous year.

n++                Production of potato is estimated to be around 437 lakh tonnes which is 9% lower than the previous year.

n++                Production of tomato is estimated to be around 184 lakh tonnes which is about 12 % higher than the previous year.

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Strike to cost up to Rs 18,000 crore to economy; exports too get hurt: ASSOCHAM
Sep 03,2016

With all-India strike by central trade unions affecting trade, transport, key manufacturing facilities and banking services in Kerala, Karnataka, Tripura, Haryana and Uttar Pradesh besides other parts of the country, the loss to the economy is estimated at between Rs 16,000 - Rs 18,000 crore, according to an ASSOCHAM assessment.

Lamenting the fact that India can ill-afford strikes and bandhs as it needs to ramp up its GDP growth by boosting manufacturing and other key sectors like services, the chamber said , reports of production halts in public sector and private sector firms along with stoppage of transport services would damage the pace of growth.

n++Trade, transport and hotels form a major part of the countrys Gross Domestic Product . The other major component to the GDP and GVA is the entire package of financial services including banking. Both these key segments have been crippled by the striken++, ASSOCHAM Secretary General Mr D S Rawat said.

He said, the best course for the trade unions should have been to sit across the negotiating table with the government to reach a middle ground. n++The industry is not against fair wages and a decent living standard for the workforce. But the demand for minimum wages should be balanced enough not to lead to a high cost economyn++.

The strike, the chamber said, would also leave a crippling impact on the domestic as also export despatches. n++For one, in several facilities the manufacturing has been affected. Secondly, in the absence of financial and banking transaction, the entire supply chain gets affected. Then, with transport getting hit, the shipment for exports also gets hitn++.

While the strike had a limited impact in Delhi, Mumbai and Kolkata, the problem is that the entire trade chain gets hit with disruption in either of the centres. n++Once the Goods and Services Tax is implemented, the inter-dependence among different manufacturing and trading centres would even go upn++, ASSOCHAM added.

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Kharif Crop Sowing Crosses 1034 Lakh Hectare Areas
Sep 03,2016

The total sown area as on 2nd September, 2016 as per reports received from States, stands at 1033.99 lakh hectare as compared to 997.11 lakh hectare at this time last year.

It is reported that rice has been sown/transplanted in 372.95 lakh ha, pulses in 142.02 lakh ha, coarse cereals in 184.13 lakh ha, oilseeds in 179.60 lakh ha, sugarcane in 45.77 lakh hectare and cotton in 101.96 lakh ha.

The details of the area covered so far and that covered during this time last year are given below:

Lakh hectare 

CropArea sown in 2016-17Area sown in 2015-16Rice372.95364.43Pulses142.02 106.92Coarse Cereals184.13 175.59Oilseeds179.60178.67Sugarcane45.7749.60Jute & Mesta7.567.73Cotton101.96114.17Total1033.99  997.11

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Paradip to be develop as World Class Smart Industrial Port City
Sep 03,2016

The port city of Paradip is to be develop as World Class Smart Industrial Port City. Joint Secretary (Ports) Sh. Pravir Kishn informed that the Ministry of Shipping is planning to develop Paradip as a world class, globally competitive, smart industrial Port City. The rationale behind developing Paradip as a smart city is that Paradip already have a Major Port and strong mineral resource presence in the region, these factors will make Paradip a hub for Micro Small & Medium Enterprises (MSME).

The on-going Sagarmala programme and the expansion plan of the outer harbor will only increase the port traffic. The Smart City at Paradip will be built on a PPP basic and it will have Multi-modal Logistics Parks (MMLPs), Industrial Parks, Residential and Commercial areas, water management system, waste recycling centre & creek development programme for tourism.

The proposed smart city will be spread across 6727.17 acres, out of which 1652 acres will dedicated to the residential area, where as 1,950 acres and 3,115.17 acres will be dedicated to industrial area and custom bound area respectively.

The greening and road beautification works worth Rs. 6 crores are already underway. The smart city will also have a Solar Energy Park of 20 MW spread over 90 acres of land. 10 MW of this is proposed to be completed by March 2017 and the rest is to be completed by December, 2017. The total cost of the proposed Solar Power project is approximately 160 crores.

The proposed Smart City will also have dedicated drinking water supply lines and a very efficient drainage system. The road network will have dedicated lines for township and port.

The slums area which is currently scattered in 155 acres will be rehabilitated through Pradhanmantri Awaas Yojana.

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Data Tariffs to See a Major Correction Due to the Disruptive Launch of RJio
Sep 02,2016

Data tariff structures are likely to be disrupted following the launch of services by Reliance Jio Infocomm Limited (RJio), while data volumes and subscriber growth will accelerate, says India Ratings and Research (Ind-Ra). The agency expects the launch of RJio, which has a data centric strategy, to intensify competition which will squeeze the market share, EBITDA margins and credit metrics of incumbents. Large telecom companies (telcos: Bharti Airtel, Vodafone India and Idea Cellular) have already undertaken pre-emptive price cuts by offering higher data volumes for the same price to retain customers.

Ind-Ra believes that the launch of RJio will accelerate 4G adoption in India, backed by its attractive tariffs, low cost handset pricing, perceived superior quality of services driven by its huge investment in network. RJio, which is officially launching services from 5 September 2016, will be offering data services free for four months, after which it will offer 10 tariff plans starting at INR19 a day for occasional users, INR149 a month for low data users and INR4,999 a month for heavy data users. Prima-facie RJios pricing is not just highly competitive but also challenges the prevalent tariff structures asRJio will offer free voice calling and SMS services bundled with the data tariff. This could hurt the voice tariffs and average revenue per user (ARPU) of existing operators as well as pushing them to match the pricing, in a bid to protect their market share.

RJio may look to disrupt some of the prominent geographies of existing operators, leading to a re-distribution of the market share which is concentrated among the top three operators,. The incumbents debt profile will deteriorate in FY17 as the agency expects them to incur high capex on network expansion and acquisition of additional spectrum to compete with RJio.

Ind-Ra had highlighted in the report RJio to Up the Ante for Telecom Operators in FY17 that data revenues will remain stagnant on a 30%-40% decline in data realisations/megabyte (MB) in FY17 driven by RJios launch, while support from data consumption growth to data average revenue per user (ARPU) will be gradual. Ind-Ra expects RJio to not just contend for market share out of the existing pie of subscribers which are being serviced by incumbent operators but also lead to acceleration in data subscriber growth. RJio has incurred aggregate pre-launch capex of around INR1.75trn signifying the magnitude of its potential reach and capabilities.

Ind-Ra highlighted in the report Market Wire: Telcos to Exercise Selective Bidding; Spectrum Acquisition Strategy to Revolve Around 4G that the top telcos already have moderate-to-high leverage levels, which will weigh on their ability to reduce rates at a time when they are expected to invest in the spectrum auctions later in October 2016. Idea reported a higher net debt/EBITDA ratio in FY16 at 3.25x (FY15: 1.31x), which is the peak financial leverage of the last five years. Bhartis financial leverage stood at 2.4x in FY16, which is expected to go up in FY17 with the increase in capex and margin moderation due to the intensifying competition in the data segment. Reliance Communications Ltd (RCom) on the other hand is highly leveraged (net debt/EBITDA: 5.6x in FY16).

Bharti has the largest spectrum holding at present, of the total 770MHz, across bands (900MHz, 1,800MHz, 2,100MHz and 2,300MHz); followed by Reliance Jio Infocomm (RJio), which holds 596MHz spectrum across 800MHz, 1,800MHz, and 2,300MHz bands and then followed by Vodafone (302MHz) and Idea (271MHz).

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Investment Demand Crucial for Sustained Acceleration in GDP
Sep 02,2016

The revival of investment demand will not gather steam anytime soon and will be a long drawn process, hindering acceleration in gross domestic product (GDP) growth, says India Ratings and Research (Ind-Ra). In other words, the pace of a sustained economic recovery is likely to be slow, despite the push coming from consumption demand in the form of higher rural expenditure due to a favourable monsoon and higher urban expenditure due to the 7th Pay Commission payout in FY17.

GDP in 1QFY17 came in lower at 7.1% than Ind-Ras expectation of 7.5%. However, gross valued added (GVA) at basic constant (2011-2012) prices came in line with Ind-Ras forecast of 7.3% in 1QFY17. On the expenditure/demand side, real GDP was boosted by government spending. Government final consumption expenditure clocked a strong growth rate of 18.8% yoy in 1QFY17. However, it has failed to revive the investment demand in the economy as the gross fixed capital formation contracted 3.1% yoy in 1QFY17.

Ind-Ra has pointed out earlier that government expenditure alone can play only a limited role in reviving the capex cycle, as an overwhelming proportion of the total capex (FY16: 83.96% of investment) in the economy comes from the private sector (including central and state public sector undertakings and households). Private corporate sector investment continues to be constrained by factors such as leveraged balance sheets of infrastructure players, a high level of non-performing assets in the banking sector and low capacity utilisation rates in the manufacturing sector.

At the sectoral level, manufacturing growth at 9.1% surprised on the upside, particularly in the backdrop of weak factory output data for manufacturing in April-June 2016. The robust manufacturing growth in 1QFY17 clearly shows that the Index of Industrial Production (IIP) in its present form and shape is not capturing the manufacturing activity correctly and requires an upgrade immediately, lest it becomes a redundant indicator. The base year used for IIP calculation is 2004-2005, while industrial GVA is based on 2011-2012 prices. The use of 2004-2005 means a lot of data relating to industrial output is not captured by IIP.

The mining and quarrying sector contracted 0.4%, while electricity, gas, water supply, and other utilities grew at 9.4% in 1QFY17 year-on-year, respectively. The negative growth in mining activity is at variance with the positive growth registered by the sector in April-June 2016 as reflected in the IIP data. Construction activity also disappointed with a growth rate of 1.5% in 1QFY17, which is much lower than 5.6% in the same quarter of FY16. Services sector growth at 9.6% was the key driver of GVA, primarily led by the strong growth rate of 12.3% in government services. This is a welcome development from 4QFY16 when services sector clocked the lowest growth in seven quarters at 8.7%.

The agricultural sector grew at 1.8% in 1QFY17, which is lower than the growth rate of 2.6% in the same quarter of FY16. After two years of sub-par monsoon, the first half (June-July) of the monsoon season this year has witnessed a normal rainfall (same as long period average). July is the crucial month for sowing and rainfall for the country in this month was 6.6%, above the long period average. The cultivated area under kharif crops was higher than the normal area as of August 2016. The benefit of higher kharif acreage, mainly of pulses and oil seeds, will be realised in 3QFY17. Therefore, Ind-Ra expects agricultural GVA to pick up pace in 2HFY17, which will give a fillip to the overall economic growth.

GDP growth was lower than the GVA growth after five quarters. This was due to the slower growth of net taxes on products. The growth of net taxes on products (3.6%) in 1QFY17 was the lowest in last 16 quarters. Mirroring the trend of both wholesale and retail price inflation, in 1QFY17 both GVA and GDP deflators were the highest in last six quarters. The impact of high food price inflation was visible on agricultural GVA deflator (6.2%). Ind-Ra expects a softening in pulses prices to continue; however, the prices are likely to remain volatile due to structural issues related to agricultural supply chain.

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Water level of 91 major reservoirs of the country goes up; reaches 67% of total storage capacity
Sep 02,2016

The water storage available in 91 major reservoirs of the country for the week ending on September, 01 2016 was 105.248 BCM, which is 67% of total storage capacity of these reservoirs. This was 114% of the storage of corresponding period of last year and 99% of storage of average of last ten years.

The total storage capacity of these 91 reservoirs is 157.799 BCM which is about 62% of the total storage capacity of 253.388 BCM which is estimated to have been created in the country. 37 Reservoirs out of these 91 have hydropower benefit with installed capacity of more than 60 MW.

REGION WISE STORAGE STATUS:-

NORTHERN REGION

The northern region includes States of Himachal Pradesh, Punjab and Rajasthan. There are six reservoirs under CWC monitoring having total live storage capacity of 18.01 BCM. The total live storage available in these reservoirs is 13.91 BCM which is 77% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 92% and average storage of last ten years during corresponding period was 79% of live storage capacity of these reservoirs. Thus, storage during current year is less than the corresponding period of last year and is also less than the average storage of last ten years during the corresponding period.

EASTERN REGION

The Eastern region includes States of Jharkhand, Odisha, West Bengal and Tripura. There are 15 reservoirs under CWC monitoring having total live storage capacity of 18.83 BCM. The total live storage available in these reservoirs is 12.49 BCM which is 66% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 57% and average storage of last ten years during corresponding period was 61% of live storage capacity of these reservoirs. Thus, storage during current year is better than the corresponding period of last year and is also better than the average storage of last ten years during the corresponding period.

WESTERN REGION

The Western region includes States of Gujarat and Maharashtra. There are 27 reservoirs under CWC monitoring having total live storage capacity of 27.07 BCM. The total live storage available in these reservoirs is 20.03 BCM which is 74% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 58% and average storage of last ten years during corresponding period was 69% of live storage capacity of these reservoirs. Thus, storage during current year is better than the storage of last year and is also better than the average storage of last ten years during the corresponding period.

CENTRAL REGION

The Central region includes States of Uttar Pradesh, Uttarakhand, Madhya Pradesh and Chhattisgarh. There are 12 reservoirs under CWC monitoring having total live storage capacity of 42.30 BCM. The total live storage available in these reservoirs is 35.94 BCM which is 85% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 76% and average storage of last ten years during corresponding period was 62% of live storage capacity of these reservoirs. Thus, storage during current year is better than the storage of last year and is also better than the average storage of last ten years during the corresponding period.

SOUTHERN REGION

The Southern region includes States of Andhra Pradesh, Telangana, AP&TG(Two combined projects in both states) Karnataka, Kerala and Tamil Nadu. There are 31 reservoirs under CWC monitoring having total live storage capacity of 51.59 BCM. The total live storage available in these reservoirs is 22.88 BCM which is 44% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 34% and average storage of last ten years during corresponding period was 69% of live storage capacity of these reservoirs. Thus, storage during current year is better than the corresponding period of last year but is less than the average storage of last ten years during the corresponding period.

States having better storage than last year for corresponding period are Punjab, Rajasthan, Jharkhand, Odisha, West Bengal, Maharashtra, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, AP&TG (Two combined project in both states), Andhra Pradesh, Telangana and Karnataka. States having equal storage than last year for corresponding period is Kerala. States having lesser storage than last year for corresponding period are Himachal Pradesh, Gujarat, Tripura, Uttarakhand and Tamil Nadu.

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CCI Penalty on Cement Players Credit Neutral
Sep 02,2016

The Competition Commission of Indias (CCI) penalty of INR67bn on 11 cement companies amounts to 20%-75% of the players FY16 operating profits, however the move is credit neutral on these players due to their low leverage levels, says India Ratings and Research (Ind-Ra). Most of the companies (eight out of 11) maintain a low leverage and thus will be in a position to absorb the burden, in the event the penalty has to be paid. The penalty however will put pressure on the credit metrics for companies with relatively high levels of leverage.

The CCI in its order dated 31st August 2016, imposed a penalty of INR67bn on 11 cement companies. The companies named may consider approaching the Competition Appellate Tribunal against the order. The order pertains to the potential price collusion during the period May 2009 to March 2011. Maintaining high prices in the face of declining capacity utilisation has over the past few years allowed cement companies to contain decline in profits. In the event the penalty is to be paid, Ind-Ra believes it will not affect the credit rating Ind-Ra rated Ultratech Cement (UCL, IND AAA/Stable).

As per the CCI order, among the large cement companiesn++ACC Ltd (INR11.5bn), Ambuja Cements Ltd (INR11.6bn), UCL (INR11.8bn) and Jaiprakash Associates (JAL,INR13.2bn) contribute to bulk of the penalties. The amount of penalty to be paid by the companies is substantial in comparison to their EBITDA. In addition UCL has entered into an agreement with Jaiprakash Associates to acquire its cement assets (capacity of 21.2mt including 4.1mtpa grinding capacity under construction) for a consideration of INR162bn The amount of penalty for the companies named in the order as a percent of their EBITDA in FY16 works out in the range of 20%-75%. The amount of penalty as a percent of EBITDA for UCL is 24%. Ind-Ra notes that the penalty will be rating neutral for UCL, given their low leverage of 1.2x (total adjusted debt net of cash/EBITDA). UCL has cash and cash equivalents of INR42.9bn at the end of FY16. Of the remaining 10 companies most of them have low leverage (with the exception of three companies) and Ind-Ra believes that the penalty will not impact their credit profile.

The cement industry in India is unique, with around 60% of the industrys total capacity being controlled with the top eight players. The rest of the industry is highly fragmented, with small- to medium-sized companies, mostly with uneconomical size of operations. To the extent regulatory intervention limits coordinated supplier actions with respect to price and quantity, smaller firms (single or multiple plants with high geographic concentration) with uneconomic cost structures will become uncompetitive and face significant deterioration in their credit profiles. As such, the level of fragmentation in the industry is expected to reduce and larger and vertically integrated companies are likely to gain market share. Globally, most markets have witnessed significant consolidation and this move by CCI may in turn help the Indian cement industry in correcting the structural imbalances present.

Ind-Ra maintains a stable outlook for cement manufacturers for FY17 and expects the cement industry to grow in the range of 4%-6% during FY17. Ind-Ra expects capex in the sector to be muted which will lead to higher utilisation rates in the short term. The sector also currently faces headwinds on cost inflation - pet coke prices have moved up to USD75/ton from USD48/ton in March 2016. A favourable monsoon after two consecutive bad years, can give a leg up to rural demand, and governments initiatives (such as Housing for All and the thrust on infrastructure activities) are expected to improve overall cement demand with a lag and show signs after FY17.

CCI imposed a penalty of 0.5x of net profit of cement companies for 2009-10 (from May 20, 2009) and 2010-11 in case of 11 cement companies amounting to INR67 bn and INR7.3m on Cement Manufacturers Association.

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