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FICCIs Economic Outlook Survey projects GDP growth of 7.4% for 2017-18
May 17,2017

The latest round of FICCIs Economic Outlook Survey, conducted during March & April 2017, puts forth a median GDP growth forecast of 7.4% for the fiscal year 2017-18, with a minimum and maximum level of 7.0% and 7.6% respectively.

While agricultural sector is estimated to clock 3.5% growth in 2017-18; the pick-up in overall GDP growth will also be supported by an improvement in industry and services sector growth. The industry and services sector are expected to grow by 6.9% and 8.4% respectively in 2017-18.

The survey was conducted amongst economists belonging to the industry, banking and financial services sector and the participants feel that with the process of re-monetisation almost complete, consumption activity has witnessed an uptick and will further build up going ahead. Also, Indian Meteorological Departments latest forecast of monsoon arriving on time and being sufficient provides some reprieve amidst earlier reports of El Nino having a dampening effect this year.

Moreover, the outlook of economists with regard to prices remains benign and is in line with RBIs projection put out in the monetary policy statement announced in April this year. According to the Economic Outlook Survey results, Consumer Price Index has a median forecast of 4.8% for 2017-18 with a minimum and maximum level of 4.0% and 5.3% respectively. RBI in its latest policy statement estimated CPI inflation to average 4.5% in the first half of the year and 5% in the second half.

The economists were also asked to share their assessment of the concept of Universal Basic Income and suggest ways to ensure its success. The idea of Universal Basic Income (UBI) for guaranteeing minimum basic support to the Indian citizens has been in discussion for some time now and found a special mention in the Economic Survey 2016-17.

A majority of the economists participating in the survey were supportive of the idea of Universal Basic Income. The respondents felt that UBI can be an efficient framework which would help reduce poverty and transfer the choice/decision to spend on the individual. It would also promote labor market flexibility as individuals can enter the labor market without the fear of losing the benefits.

The economists participating in the survey opined that the idea must be taken forward and explored in detail, which would include a plan on implementation and evaluating & overcoming the possible road blocks.

However, the participants also pointed out that though the concept of UBI is relevant in context of providing guaranteed minimum basic support to the people, implementation of same in a highly diverse country like India will be a difficult task. Several challenges could emanate, right from stage of selection of beneficiaries to deciding on an acceptable income level and its distribution. Implementation could be challenging given the poor state of financial infrastructure with digital payments still being a small proportion of the total financial transactions.

It was also pointed out that India lags behind on key human development indicators such as health, nutrition, education, sanitation and drinking water. In such a scenario, a universal income hand-out would not entirely solve some of the key problems that the poor face.

The participants pointed out that the success of the program depends largely on the coordination between states and central government. Once the implementation hurdle is crossed, UBI could be an important welfare program in the country.

Another area where the participating economists were asked to share their views was on the wave of protectionism engulfing the global economy. The respondents were asked to opine on how they see this development unfolding and what steps should India take to minimize the impact resulting from such moves.

Economists participating in the survey unanimously believed that protectionism is becoming a new normal led by certain advanced economies which are increasingly looking inwards to propel growth and increase employment. This could result in increased tension between nations which could lead to trade wars according to some of the respondents.

The economists felt that while protectionism is a challenge, India needs to keep its focus on implementing reforms. The situation calls for improving the investment climate in the country, enhancing hard and soft infrastructure and continuing the efforts on tackling the issue of non-performing assets. Economists felt that higher government and private investments towards infrastructure development and capacity expansion can play a pivotal role in revitalizing domestic demand and would encourage the domestic industry.

Participating economists were of the view that strengthening the domestic economy, in terms of sustainable macroeconomic stability, enhancing skills among youth and the workforce and continuing on the reform path will help India maneuver the rough patches.

It was also suggested that India should look at signing preferential trade agreements with other emerging market economies.

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Ind-Ra: States Fiscal Deficit Rises Most in 12 Years Due to Higher Capital Expenditure
May 16,2017

The states fiscal deficit in FY16 (revised estimate, RE) as a percent of gross domestic product (GDP) rose to the highest since FY04, however expansion of state budgets have been mainly on account of capital expenditure, which is a long-term credit positive for states, says India Ratings and Research (Ind-Ra).

For FY16 the consolidated fiscal deficit to GDP would have been 0.7% lower excluding Ujjwal Discom Awas Yojana (UDAY). Ind-Ra had highlighted the impact that UDAY will have on states deficit in the report UDAY Unlikely to Destabilise Aggregate State Finances but Select States Will Feel the Pinch.

Investors have been raising concerns lately on the increasing fiscal deficit of the state governments. According to the latest RBIs publication n++State Finances A Study of Budgets of 2016-17n++, shows that the combined fiscal deficit of the states in FY16 (RE) has increased to 3.6% of GDP, highest since FY04 (4.2% of GDP).

The combined fiscal deficit of the states have been showing an increasing trend since FY12 (Fiscal Deficit: 1.2% of GSDP). Fiscal deficit can be decomposed in two parts -revenue deficit and capital expenditure net of capital receipts.

Between FY12 and FY16 (RE), combined fiscal deficit of the states increased by 1.7pp of GDP. While there was a reversal in the trend of the combined revenue account of the states from a surplus of 0.3% of GDP in FY12 to a deficit of 0.2% of GDP in FY16 (RE), which added 0.5pp of GDP to fiscal deficit, an increase in the combined capital expenditure of states added 1.0pp of GDP to the fiscal deficit during the same period. The average growth of states aggregate capital expenditure during FY12-FY16 (RE) was 23.7%. Ind-Ra notes that between FY12-FY16 (RE) close to 60% of total capital expenditure was divided almost equally between sectors namely, transport (mainly roads and bridges), power and irrigation.

As against the Union Governments capital expenditure which has remained less than 2% of GDP since FY12, the states combined capital expenditure/GDP ratio has remained over 2% since then. Another noteworthy feature of state finances has been the restrain shown by the states in spending the higher devolution received due to the recommendation of the fourteenth finance commission. The fear was that the states will use higher devolution to enlarge their budget mainly via current expenditure. However, the data suggests that expansion of state budgets have taken place mainly on account of capital expenditure, which is a long-term credit positive for states.

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Half Yearly Import of Vegetable Oils down by 6% during November 2016-April 2017
May 16,2017

Import of vegetable oils during April 2017 is reported at 1,339,489 tons compared to 1,248,887 tons in April 2016 i.e. up by 7%, consisting of 1,324,014 tons of edible oils and 15,475 tons of non-edible oils, as per the data compiled by The Solvent Extractors Association of India for import data of Vegetable Oils (edible & non-edible) for the month of April 2017. Import during April 2017 is the highest monthly import during current oil year. The overall import of vegetable oils during first six months of current oil year 2016-17, November 2016 to April 2017 is reported at 7,134,265 tons compared to 7,568,709 tons i.e. lesser by 6%.

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Ind-Ra: National Steel Policy Bets on Higher Infra Spending Through Government Initiatives to Double Demand Growth
May 16,2017

The National Steel Policy 2017 announced by the Ministry of Steel is betting on higher spending on infrastructure and construction sector through government initiatives to push steel demand and increase utilisation, says India Ratings and Research (Ind-Ra). It is a comprehensive policy, with a focus on targets and means to achieve them. Ind-Ra believes the policy will give a boost to the struggling Indian steel industry; however the execution of provisions in the policy will remain a key challenge for the government. The policy sets guideline to address all the pain points of the industry namely, muted demand, over capacity, raw material price volatility and technology inefficiency, which if adhered to diligently will enable the industry to be better placed to absorb any external shocks.

To achieve the expected demand of 230 MT in 2030-31, steel demand will need to grow at a CAGR of around 7%-7.5% during the period against a CAGR of 3.5%-4% over the last 5 year. In order to achieve the aggressive demand growth target governments focus on building steel demand will be the key, which requires accelerated spending in infrastructure, construction, railways and the defence sector. The policy also focuses on taking steps to encourage the higher use of steel in projects by replacing other materials being used with steel wherever possible. Ind-Ra believes that the expected growth in steel demand looks ambitious and may face hurdles namely, political instability, budget constraint and timely execution of projects.

Further in order to protect the domestic industry from imports to meet the accelerated demand growth the government has announced another policy which provides preference to domestically manufactured iron & steel products for government procurement with immediate effect. The aforesaid policy excludes procurement of grades of steel not manufactured in India or where demand cannot be met through domestic sources. Ind-Ra believes the policy is likely to boost demand and realisations of domestic producers as they will not have to compete with imported material and is likely to increase capacity utilisation though it will be marginal. The steel producers with a higher proportion of value added products in their baskets will benefit the most from the preference policy.

To meet the demand growth the government plans to increase the steel capacity to 300 MT by 2030-31 (122 MT 2015-16), which would require extensive efforts toward increasing the availability of resources namely, infrastructure, raw material and finance. Ind-Ra believes that the capacity creation which requires capital expenditure of around INR10 trillion will lead to stretched credit metrics on a sustained basis for companies, due to the continuous capex undertaken. Ind-Ra expects central public sector enterprises to be under pressure to build capacity for catering to any demand-supply gap after considering the capex by the private sector. Capex undertaken by public sector enterprises may further stretch the metrics of public undertaking, unless the government infuses funds to support capex instead of adding debt. Apart from resources, other hurdles also needs to be addressed like improvement in the approval processes for setting up plants, which generally leads to delays in the completion of projects.

The Indian steel industry imports around 85% of coking coal for producing steel, which is highly volatile and has impacted and continues to remain a concern for companies profitability. The policy has taken cognisance of the same and plans to increase the domestic availability of coking coal through acquisition of overseas assets and the auction of domestic coking coal blocks in coalition with the Ministry of Mines and by installing coal washeries. If successfully implemented and the linkages provided to domestic producers, it will provide some stability to input cost, since producers will continue to depend on imports for majority (around 65%) of their requirements.

India is self-sufficient in terms of iron ore availability to meet the estimates rise in requirements, but needs to expedite the approval process to enable timely availability of the resource. The policy also focuses on increasing the use of low grade iron ore fines in an efficient manner by bringing in regulatory changes, where required.Indian steel industry lacks technological efficiency compared to global standard, thus making us uncompetitive against countries like China, Japan and Korea as well as poses a threat from import substitution. The policy focuses on improvement in the efficiency parameters so as to reduce the cost of production and develop advanced steel products to reduce the dependence on imports. However in order to achieve efficiency levels in most plants a significant amount of capex will be required to be undertaken by steel companies, which looks tough considering their financial health, baring for few large producers.

Ind-Ra believes that policy will be positive for the steel industry, however timely implementation of various steps will be crucial. Further, for the policy to be successful immediate steps to improve the existing situation of the struggling steel industry and ways to build demand leading to improvement in capacity utilisations of existing plants is warranted.

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One time exemption given to NGOs to file missing Annual Returns
May 16,2017

Government has given one final opportunity to all associations/organizations which have applied for renewal of their registration under the Foreign Contrubtion (Regulation) Act, 2010 (FCRA) but not uploaded their Annual Returns from Financial Year 2010-11 to 2014-15. All such NGOs can upload their missing Annual Returns along with the requisite documents within a period of 30 days, starting from May 15, 2017 to June 14, 2017. Further no compounding fee will be imposed on them for late filing of Annual Returns during this period.

This exemption is one time measure and available to those associations who upload their missing Annual Returns from FY 2010-11 to FY 2014-15 within this period. The renewal of registration under FCRA cannot be granted unless the Annual Returns are uploaded by the organization.

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Fitch: Developing Markets to Sustain Airport Growth for Decades
May 16,2017

Developing markets have helped push airport traffic growth in the past decade to its fastest rate in 40 years. Airports in Asia and Latin America look set to be the source of global growth for the industry for many years to come, Fitch Ratings says.

Disruptive technology could become a threat to traffic volumes in the long term, along with geopolitical and climate-change related developments. But there is nothing in sight that could displace flying as the main mode of transportation for medium- and long-distance travel.

Our analysis of airport trends over the last decade shows global traffic volumes outpaced economic growth rates even during the worst of the global recession, with traffic over the decade rising at three times the rate of GDP, compared to two times GDP over the previous 30 years. This growth has been unevenly distributed and is largely from countries where increasing economic development, affordability and offerings boosted the propensity to fly.

We think this trend is far from over. Improving household incomes, better local infrastructure and more competitive pricing will all contribute, particularly in Asia and Latin America, but also at some point in Africa. Greater ability to connect with hubs will also benefit long-distance flights and therefore provide some growth potential for airports in developed markets.

Performance across the airport sector has been strong, as demonstrated by very stable ratings, but large international gateway airports have, on average, performed better in economic downturns than origin and destination (O&D) airports. The stronger performance at gateway airports reflects the reduced dependency on local economic conditions and the ability to benefit from supporting traffic from other regions that remain more active. The competitive landscape for airports is also a differentiating factor. Our analysis also shows that airport performance is not closely correlated with the financial condition of airlines.

In the long-term, airports could face challenges to growth. While there is currently little competition in certain markets for medium- and long-distance travel, new technologies could start to take market share. Projects such as the Hyperloop concept between San Francisco and Los Angeles could eventually displace some shorter air traffic routes, or force price reductions that weaken profitability. Climate change considerations will also almost certainly have an impact. This may not result in fewer flights, but more fuel-efficient planes could fly further without stopovers, displacing some hub airports on long-distance routes.

Other major factors that could affect long-term prospects include geopolitical and security risks and the emergence of ultra-low cost carriers. For more information on how airports have performed in the last decade and how this could change in the next decade see Airports - 10 Years in Infrastructure available from www.fitchratings.com or by clicking the link above.

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Fitch: Global Attacks Spur Demand for Cyber Insurance
May 16,2017

The slew of recent ransomware attacks in over 150 countries reveals the widening scope of corporations cyber risk exposures, which is likely to increase demand for related insurance protection, Fitch Ratings says. Insurers are in a unique position to assist customers in addressing the cyber threat. However, a cautious approach to adding cyber exposures is warranted as there is considerable uncertainty in pricing and underwriting this risk. Aggressive expansion by individual underwriters into the segment could be credit negative.

Tallying the costs from recent attacks will take time. However, growth in corporate anxiety from cyber-related threats amid regular reports of data breaches and other information system intrusions will spur demand for cyber protection and solutions including insurance protection. Furthermore, compliance with developing regulations will likely increase the demand for coverage.

Insurers are playing an expanded role in countering the cyber threat, utilizing traditional expertise in risk management and claims services. They are also gaining more technical expertise in cyber threat testing and prevention and post-event resolution through acquisitions or alliances with cyber security vendors. Cyber protection coverage, therefore, increasingly includes a service and advisory component, as well as insured loss limits.

Besides cyber extortion and ransomware attacks, cyber-related events may include systems hacking, data theft and denial of service attacks. These events may create economic losses from damage to systems and property, remediation costs, lost revenue due to business interruption and reputation damages. Hacking events can also generate third-party liability exposures triggered by errors and omissions or failure to protect data. Professional liability exposures, including potential claims against directors and officers for failing to manage risks and prevent cyber incidents, are also possible.

US insurers wrote approximately $1.3 billion in cyber coverage in 2016, and this market could grow more than tenfold to $14 billion by 2022. Leading writers of cyber risk include American International Group, Inc. XL Group Ltd and Chubb Limited. Many insurers have taken a cautious approach to introducing cyber coverage, particularly with regard to liability coverage. Underwriting experience relating to cyber coverage, as reported by insurers, has appeared relatively favorable for insurers in the past two years, but the market remains untested.

Insurers reluctance to write more cyber coverage lies with challenges in establishing actuarially robust pricing and coverage terms for cyber-related risks given still-limited data from historical claims losses. The evolving nature of events and uncertainty regarding the source and range of potential losses add further challenges. Premium growth in cyber products may also be dampened somewhat by contrasts between the coverage insurers are currently willing to offer and the policyholders perspective of the nature of their cyber risk and protection needs. Over time, these differences will likely converge as the market matures.

Given the scope of these challenges, we would view aggressive growth in stand-alone cyber coverage, or movement to high portfolio concentration in cyber, as negative for an insurers credit profile. Underwriting, pricing and reserving uncertainties would outweigh the potential earnings growth benefits. Controlled growth as part of a diversified portfolio, coupled with continually enhanced underwriting standards, would generally be neutral for the credit profile.

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Prompt disposal of grievances by Government: Dr Jitendra Singh
May 16,2017

The Union Minister of State (Independent Charge) for Development of North Eastern Region (DoNER), MoS PMO, Personnel, Public Grievances, Pensions, Atomic Energy and Space, Dr Jitendra Singh has said that grievances filed by the public with the Government increased five times during the present Government. While the number of grievances has increased almost five times, Dr Jitendra Singh said, this was possible mainly because of the prompt disposal of complaints in a time-bound manner, which encouraged larger and larger sections of population to come forward and file their complaints. Now people feel motivated to file a complaint, he added.

Dr Jitendra Singh cited figures to state that before the present government came in, the total number of grievances or complaints filed in the grievance cell in the DARPG was hardly about two lakhs annually, which showed a steep and progressive rise in the last three years. In 2013, from 1st January to 31st December the total number of grievances filed was 2,09,297 but in 2014 after the present Government took over on 26th May, the seven months period also made a difference and the total number of grievances registered was 2,70,413. In 2015, the number further increased to 8,79,230, in 2016 it went up to 11,94,931 and in the current year 2017, from 1st January to 15th May we have already received 5,49,761 grievance complaints, which means that by the end of this year, this figure may go up beyond around 12 lakhs.

Similarly, on the other hand, Dr Jitendra Singh claimed that in 2013, the average time taken for the disposal of any grievance was 220 days, which has been remarkably reduced to just 24 days in the current year.

Dr Jitendra Singh said, a number of innovative steps in the last two to three years also helped in making the Grievance Cell proactive. For example, now we have a round-the-clock portal and the facility is also available on mobile app so that a citizen is in a position to file complaint any time from anywhere. In addition, he said, a Twitter Sewa is also available for the purpose. Referring to a unique experiment started by him, Dr Jitendra Singh said, in the last one year, he started the practice of randomly calling up some of the complainants in order to assess the level of satisfaction and also to seek their inputs and suggestions. He said, the response to this exercise has been unique and citizens have showered compliments through social media and other means.

Dr Jitendra Singh also read out the names and telephone numbers of some of the complainants who he has been speaking from time to time at random and also gave the contact details of two of such complainants whom he had spoken this morning, one of the them being from Telangana and the other from Punjab.

Dr Jitendra Singh appealed to the media to help in educating the masses to understand that grievance disposal does not necessarily mean fulfillment of individual aspiration or wish. For example, he said, if a citizen files a complaint claiming that he is more deserving to get a departmental promotion than his other colleagues, the grievance disposal cell will provide him with the response from the respective department within stipulated timeframe, but that does not mean that grievance cell gets him the promotion if the concerned department denies him so on its own considerations.

He also appealed to the State Governments to activate their respective grievance cells and expressed disappointment that in certain States, the grievance cell was dormant or was never even attended appropriately.

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Overall trade deficit for April- March 2016-17 is estimated at US$ 40980 million, 16.87% lower from April-March 2015-16
May 16,2017

I. MERCHANDISE TRADE

EXPORTS (including re-exports)

In continuation with the double digit growth exhibited by exports during March 2017, exports during April 2017have shown growth of 19.77 per cent in dollar terms valued at US$ 24635.09 million as compared to US$ 20568.85 million during April,2016. In Rupee terms, duringApril 2017 exports were valued at Rs. 158913.79 crore as compared to Rs. 136720.11 crore during April 2016, registering a positive growth of 16.23%.

Non-petroleum and Non Gems & Jewellery exports in April 2017 were valued at US$ 17718.87 million against US$ 15136.41 million in April 2016, an increase of 17.06%.

The growth in exports is positive for all major economies, USA (4.74%), EU (0.16%), Japan (13.30%) except for China (-1.56%)for February 2017 over the corresponding period of previous year as per latest WTO statistics.

IMPORTS

Imports during April 2017 were valued at US$ 37884.28 million (Rs. 244380.52 crore) which was 49.07 per cent higher in Dollar terms and 44.67% higher in Rupee terms over the level of imports valued at US$ 25413.72 million (Rs. 168923.71 crore) in April 2016.

CRUDE OIL AND NON-OIL IMPORTS:

Oil imports during April 2017 were valued at US$ 7359.27 million which was 30.12% higher than oil imports valued at US$ 5655.92 million in April 2016.

In this connection it is mentioned that the global Brent prices ($/bbl) have increased by 25.40% in April 2017 vis-n++-vis April 2016 as per World Bank commodity price data.

Non-oil imports during April 2017 were estimated at US$ 30525.01 million which was 54.50% higher than non-oil imports of US$ 19757.80 million in April 2016.

II. TRADE IN SERVICES (for March 2017, as per the RBI Press Release dated 15th May 2017)

EXPORTS (Receipts)

Exports during March 2017 were valued at US$ 14179 Million (Rs. 93406.57 Crore) registering a positive growth of 8.57% in dollar terms as compared to negative growth of 3.76% during February 2017 (as per RBIs Press Release for the respective months).

IMPORTS (Payments)

Imports during March 2017 were valued at US$ 8267 Million (Rs. 54460.27 crore) registering a positive growth of 14.26% in dollar terms as compared to negative growth of 13.96per cent during February2017 (as per RBIs Press Release for the respective months).

III.TRADE BALANCE

MERCHANDISE: The trade deficit for April 2017 was estimated at US$ 13249.19 million which was 173.47% higher than the deficit of US$ 4844.87 million during April 2016.

SERVICES: As per RBIs Press Release dated 15th May 2017, the trade balance in Services (i.e. net export of Services) for March, 2017 was estimated at US$ 5912 million. The net export of services for April- March, 2016-17 was estimated at US$ 65214 million which is lower than net export of services of US$ 69419million during April- March 2015-16. (The data for April-March 2015-16 and 2016-17 has been derived by adding April-March month wise QE data of RBI Press Release).

OVERALL TRADE BALANCE: Overall the trade balance has improved. Taking merchandise and services together, overall trade deficit for April- March 2016-17 is estimated at US$ 40980 million which is 16.87% lower in Dollar terms than the level of US$ 49297.53 million during April-March 2015-16.

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NHAI signs MoU with TIDCO for Development of Multimodal Logistics Park in Tamil Nadu
May 15,2017

The National Highways Authority of India signed an MoU with the Tamil Nadu Industrial Development Corporation Limited (TIDCO) for the development of a Multimodal Logistics Park in the Ponneri Industrial Node area near Kamarajar Port in Tamil Nadu. The MoU was signed in the presence of the Road Transport and Highways and Shipping Minister Shri Nitin Gadkari and Shri M.C. Sampath, Minister for Industries of Tamil Nadu government.

Speaking on this occasion, Shri Gadkari said that it is an important agreement for the development of an integrated, multi-modal transport infrastructure in the country.

The Ministry of Road Transport and Highways is planning to develop Mutimodal Logistics Parks in under its Logistics Efficiency Enhancement Programme (LEEP) in 15 locations all over India at a cost of Rs 33,000 crore, including Rs 1295 crores investment for the Chennai Region. The proposed logistics parks will bring down the overall freight costs, reduce vehicular pollution and congestion and will enable reduction of warehousing costs. All this is expected to result in lower logistics costs.

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V.O. Chidambaranar Port Trust and TANGEDCO Sign MoU to upgrade Coal Jetty-I&II
May 15,2017

V.O. Chidambaranar Port is all set for a four-fold increase in the capacity of two of its Coal Jetties - Jetty I and II from 6.25 MTPA to 24 MTPA. The VOCP Trust signed a Memorandum of Understanding with Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) for the upgradation of Coal Jetty I and II in New Delhi today. The Minister of Shipping and Road Transport and Highways Shri Nitin Gadkari and Minister for Electricity, Prohibition and Excise, Government of Tamil Nadu Shri P. Thangamani were present on the occasion.

Speaking on the occasion, Shri Gadkari said that the project would benefit both TANGEDCO and the VOCPT. It would make coal handling by the jetties much more voluminous and efficient, and thus bring down logistics costs. He said this would also allow for cheaper production of electricity, which would be very beneficial for industrial growth.

With the upgradation of the coal jetties, TANGEDCO will be able to handle additional volume of coal cargo for the upcoming new power plants in Uppur and Kadaladi in Ramanathapuram district in Tamil Nadu. In addition to this, there will be quicker turnaround of vehicles with the deployment of high tech handling equipments like two ship unloaders, each with a minimum 2000 TPH capacity and a high capacity conveyor system of 4000 TPH. This enhancement of handling capacity and upgradation of infrastructure will result in reduction of logistics costs. TANGEDCO will therefore be able to utilize the services of the Port in a more cost-effective way. With the power generation from TANGEDCOs Tuticorin plants being linked to the National Grid, this would enable availability of additional power at reduced costs, which, in turn, can fuel industrial growth and employment generation.

The project is the outcome of Ministry of Shippings Project Unnati, under which a study, Unlocking National Ports Potential was done to improve the handling capacity of CJ-I & II. The estimated cost for upgrading CJ-I & II is about Rs.800 Cr. As per the MoU, initially Coal Jetty-I will be upgraded in about 24 months by constructing a new Coal Jetty-I of 300m x25m along with repair of the existing CJ-I. CJ -II will be upgraded thereafter. The upgradation will give a competitive edge to VOC Port and will help it maintain its lead position in coal handling.

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Indian Navy and Space Application Centre, Ahmedabad Sign Memorandum of Understanding
May 15,2017

Vice Admiral SN Ghormade, AVSM, NM, Director General Naval Operations and Mr Tapan Misra, Director, Space Application Centre (SAC) signed a Memorandum of Understanding on Data Sharing and Scientific cooperation in the field of Meteorology and Oceanology on 15 May 2017 at SAC, Ahmedabad. With this initiative, both the organisations have embarked on a common platform of mutual cooperation, wherein the scientific advancements and expertise achieved by SAC would be synergised into the Indian Naval efforts to keep the Nations Defence Forces in step with rapid development in the field of Environment Sciences and Satellite Data acquisition technology. This has further boosted the already established collaboration between the two organisations.

The broad areas of cooperation include, sharing of non-confidential observational data for pre-launch sensor calibration and post launch satellite data validation, operational use of SAC generated weather products, provisioning expertise for installation of various satellite data processing modules at Naval METOC organisations, carrying out calibration and validation for ocean models, transfer of technology to generate weather information, training on latest technology and sharing of subject matter experts between the organisations for effective knowledge transfer.

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Ind-Ra: PSBs Reliance on Inorganic Portfolio Acquisition from NBFCs Needs to Pass Profitability Filter
May 15,2017

Funding non-banking financial companies (NBFCs) on a non-recourse basis by acquiring retail portfolio through buy-outs is inferior than direct lending, as banks typically lend to NBFCs at 15-25bp over the one-year lending benchmark which does not adequately factoring in reasonable credit costs estimates says India Ratings and Research (Ind-Ra). Effectively, in a rising credit cost scenario, banks could be receiving much lower comparative returns for direct assignment (DA) transactions compared to other alternate investments/lending avenues such as non-convertible debentures (NCDs), loans and pass-through-certificates (PTCs). In FY16, of the total off-balance sheet funding availed by NBFCs of about INR700billion, almost INR450 billion (64%) was contributed by DAs. The share of public sector banks in the overall off-balance-sheet funding to NBFCs was about INR330 million.

Ind-Ras simulation exercise highlights that even assuming credit cost equivalent for banks self-originated retail asset lending book on the portfolio acquired from NBFCs, pre-tax return on asset on DA is at least 40% lower than banks self-originated retail asset book and 25% lower than the return on a PTC. In FY16, retail credit growth of PSU banks was 15.8% (net of repayments) accounting incremental retail credit of about INR1.4 trillion, of which at least one-fifth was accounted by DA pool buyouts from NBFCs. Ind-Ra believes public sector banks in a quest for growing their retail asset loan books may have taken their eyes off other critical factors such as risk adjusted return and optimal utilisation of capital while underwriting a DA transaction.

Ind-Ra believes when accounting for capital efficiency, a PTC compares superior to DA transactions for banks. Ind-Ras analysis reveals PTC transactions are at least 50% more efficient when considering capital consumption. This is because portfolio acquisition under the DA option attracts higher risk weights (ranging from 35-100% across different retail categories) and considered for risk weights as if originated by the buyer. This is in sharp contrast to the investment in other capital market instruments (NCDs and PTC) which attract much lower risk weights (20% on AAA rated instruments and 30% on AA rated instruments).

Ind-Ras analysis indicates that microfinance as an asset class, which is prone to various local socio-political factors and other idiosyncratic issues, exhibits very high volatility of defaults (4-5x higher) than other retail loans, thus making it a less suitable choice for DA buy-outs. Asset classes such as mortgages and commercial vehicle loans that have seen many business and credit cycles from established NBFCs/housing finance companies are more amenable to direct portfolio buy-outs, if at all, suitable through-the-cycle credit costs that are built into the initial pricing, resulting in a commensurate return for buying banks.

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ASSOCHAM seeks exemption from blanket levy of charges on any transfer of captive mining lease obtained otherwise than through auction
May 15,2017

Apex industry body ASSOCHAM has reiterated its plea with Ministry of Mines seeking exemption from blanket levy of charges on any transfer of captive mining lease obtained otherwise than through auction, without any exemption on such levies on transfers within group companies, where the effective management control of mining lease does not change.

n++Our member companies are delaying intra-group restructuring, in absence of any clarity on transfer and imposition of transfer levy between group companies,n++ said Mr D.S. Rawat, secretary general, ASSOCHAM in a communication addressed to Mr Arun Kumar, secretary, Ministry of Mines.

Which, he said otherwise could have resulted amongst others in consolidation of business operations, synergies, unlocking shareholders value and above all better corporate governance structure.

ASSOCHAM is rest assured that government policies would not stand in the way of such benefits arising out of intra group restructuring and would implement changes clarifying the term, transfer of mining leases for mines alienated otherwise than through auction, exempting imposition of charges in transfers wherein effective control of mining lease does not change.

Previously in its request letter dated December 14, 2016, the chamber highlighted that the Mines and Minerals (Development and Regulation) Amendment Act, 2016 facilitated banks and financial institutions in liquidating stressed assets together with sale of units/assets by regulatory orders or otherwise.

However, a blanket levy of transfer charge on any transfer of captive mining lease obtained otherwise through auction, without any exemption ins a cause for concern for industries which hold and depend on captive mines for their continued operations.

As such lack of any specific exemptions in the scope of transfer as referred to in the current law prevents the stakeholders from undertaking transfers of mining leases even within their own group entities whether by way of restructuring or undertaking mergers and amalgamations or otherwise.

It noted that manufacturing units with captive mines operate such units through various subsidiary companies. n++Such companies falling within the same group structure often undertake corporate restructuring for the purposes like - consolidation of business and operations, achieving synergies in operations, simplification of group structures, unlocking shareholder value, achieving greater economies of scale, reduction of shareholder tiers and better corporate governance structure.n++

ASSOCHAM also highlighted certain positive outcomes of an exemption in levy of charges to transfers within group companies where effective management control of mining lease does not change.

Some of these positive externalities are - consolidation of companies and simplification of multi-layered structures relating to the same; promotion of goal of restricting extremely complicated corporate holding structures; assist in making effective owners also actual owners of operating company thereby increasing its accountability and oversight; reduction of ambiguity in regulatory framework; ease of doing business and better allocation of resources within the group companies.

ASSOCHAM had also highlighted that a blanket levy of transfer charges on any incident of transfer not only impacts the operation of captive mines, but also on cement, steel and other such industries that are reliant on captive mines for their own continued operation, development of critical infrastructure and growth of the economy.

As such with a view to facilitate ease of doing business and to ensure efficient allocation of resources, ASSOCHAM had urged the Centre to amend the Mineral Rules 2016 to provide that transfer of captive mining leases within the group companies where there is no change in the effective control and management should be freely permissible and not subject to a levy of transfer charge.

It also suggested that to obviate any ambiguity in this regard, the exemption may be based on a shareholding threshold.

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Waning appetite for credit in power, telecom, mining; steel witnesses uptick: ASSOCHAM
May 15,2017

With appetite disappearing for both lenders and borrowers in highly debt-ridden sectors like power, telecom and mining, the deployment of bank credit to these industries have witnessed a plunge and the trend may continue unless the basic issue of red mark in the balance sheets of banks by way of Non-Performing Asset (NPAs) and the corporate firms in the form of back breaking leverage, is addressed, an ASSOCHAM Paper has said.

Analysing the Reserve Bank of India (RBI) data, the Paper noted that the mining sector, battling slowdown in demand and pricing power , saw a maximum of de-growth in deployment of bank credit in the financial year 2016-17 , by 11.5 per cent, to Rs 345 billion in March, 2017 from Rs 390 billion in the corresponding month of the previous year.

n++All the buzz around coal block auctions is missing, with subdued demand for coal, as also bleak outlook for the thermal power plants which are themselves struggling, after adding capacities based on assumptions of pricing and demand which have turned out to be far from the real situation, at the moment. Both the coal and coal-fired power stations are in a state of uncertainty; thus it is no surprise that these two sectors have no appetite left for expansion in fund deployment,n++ the ASSOCHAM Paper observed.

Like mining and quarrying, including coal, the bank credit in power sector saw a contraction of 9.4 per cent to Rs 5256 billion as on March, 2017 from Rs 5799 billion a year ago. The sector is battling issues like high debt level, low prices of merchandise power, unwillingness of the state owned distribution firms to revise tariffs and a potential competition from solar energy, which , backed by the government subsidy has seen the generators made bids for solar energy as low or even lower than the conventional sectors.

n++Aggressive bidding for spectrum and intense competition for tariffs have brought the telecom sector as well to such a pass that the bank credit to the telcos is decreasing. It has become a game of deep -pockets but those pockets cannot be filled by borrowed money always,n++ said ASSOCHAM Secretary General Mr D S Rawat.

The bank credit to the telecom sector during 2016-17 dropped by 6.8 per cent to Rs 851 billion from 913 billion, adds the paper.

However, a good part of the story is visible in iron and steel, which saw a positive growth, though by modest 2.6 per cent to Rs 3195 billion from Rs 3155 billion. n++The sector seems to be witnessing a recovery, helped by certain policy measures like restrictive imports from Chinan++, said the Paper.

It would be quite a haul before the situation in the highly leveraged sectors becomes healthy. Good part is that banks as also the borrowers are working towards resolutions of the staggering non-performing assets.

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