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Cabinet approves the repealing of the obsolete and redundant laws
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for introduction of the Repealing and Amending Bill, 2017 to repeal 105 Acts.

Background:

The two Member Committee constituted by the PMO, the Law Commission of India and the Legislative Department identified 1824 redundant and obsolete Central Acts for repeal. After careful examination and consultation with various Ministries/Departments in the Government of India, four Acts have been enacted to repeal 1175 Central Acts (during the period May, 2014 to August, 2016) by Parliament which are -

i) The Repealing and Amending Act, 2015 (17 of 2015) repealing 35 Acts; The Repealing and Amending (Second) Act, 2015 (19 of 2015) repealing 90 Acts;

ii) The Appropriation Acts (Repeal) Act, 2016 (22 of 2016) repealing 756;

iii) Appropriation Acts including Appropriation (Railways) Acts;

iv) The Repealing and Amending Act, 2016 (23 of 2016) repealing 294 Acts.

Out of the aforesaid 1824 Acts, 227 Acts (including Appropriation Acts enacted by Parliament for the States under Presidents Rule) are identified to be repealed by State Governments have been requested to take necessary action to repeal them.

A list of remaining 422 Central Acts was circulated among all the Ministries/ Departments for their comments on repeal of Acts pertaining to their respective Ministries/Departments. Till date, 73 Ministries/Departments including Legislative Department have given their comments whereby they have agreed to repeal 105 Acts and disagreed to repeal about 139 Acts. On the basis of the comments/concurrence received from the Ministries/Departments, 105 Acts have been identified for repeal by this Department.

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Cabinet approves the exclusion of States from the investments of National Small Savings Fund from 1 April 2016
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to exclude State Governments States/UTs (with Legislature) except Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh from National Small Savings Fund (NSSF) investments from 01.04.2016. It also approved providing a one-time loan of Rs. 45,000 crore from NSSF to Food Corporation of India (FCI) to meet its food subsidy requirements.

The details are as under:-

a) Exclusion of States/UTs (with Legislature) excepting Arunachal Pradesh, Kerala, Madhya Pradesh and Delhi from NSSF Investments. Arunachal Pradesh shall be given loans to the tune of 100% of NSSF collections within its territory, whereas Delhi, Kerala and Madhya Pradesh shall be provided 50% of collections.

b) Servicing of interest and principal of debt extended to FCI through the budget line of Department of Food and Public Distribution. The repayment obligation of the FCI in respect of NSSF Loans would be treated as the first charge on the food subsidy released to the Food Corporation of India. In addition, FCI shall reduce the amount of its current Cash Credit Limit with the banking consortium to the extent of the NSSF loan amount.

c) NSSF in the future shall, with the approval of Finance Minister, invest on items the expenditure of which is ultimately borne by Government of India and the repayment of principal and interest thereto would be borne from the Union budget.

The States except Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh shall be excluded from NSSF investments from 01.04.2016. A legally binding agreement will be signed between FCI, Department of Food and Public Distribution and Ministry of Finance on behalf of NSSF on the modalities for repayment of interest rate and principal and the restructuring of FCI debt will be made possible within 2-5 years.

Once states are excluded from NSSF investments, the investible funds of NSSF with Gol will increase. Increased availability of the NSSF loan to Gol may reduce the Gols market borrowings. The States will however, see an increase in market borrowings. Any increase in yields due to an increased demand for loanable funds in the market from Centre and States combined would be marginal. The reduction of FCIs borrowing cost equivalent to the extent of the interest differential will be reflected in the Gols savings on the Food Subsidy Bill.

Implementing the decision to exclude states from NSSF investments and extending the loan will entail no additional cost. Instead a reduction in the food subsidy bill of the Gol is anticipated.

Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh will continue availing of NSSF loans, 26 other States and Puducherry who are eligible to borrow from the market have preferred to stop taking loans from the NSSF.

Background:

The Fourteenth Finance Commission (FFC) recommended that State Governments be excluded from the investment operations of the NSSF. The NSSF loans come at an extra cost to the State Government as the market rates are considerably lower. The Union Cabinet in its meeting held on 22nd February, 2015, accepted that this recommendation will be examined in due course in consultation with various stake holders. Barring Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh, the other State Governments/UTs expressed a desire to be excluded from NSSF investments. The involvement of States which are excluded from operations of National Small Savings Fund with effect from 1.4.2016 would be limited solely to discharging the outstanding NSSF debt obligations as on 31.3.2016 (FFC Recommendation). The loan contracted by States till 31.3.2016, from the National Small Savings Fund will stand completely repaid by the Financial Year 2038-39.

NSSF shall extend a part of its collections to Food Corporation of India (FCI) to meet its food subsidy requirement. This will help the FCI reduce its interest cost. FCI presently takes working capital loans through Cash Credit Limit (CCL) at an interest rate of 10.01% and Short Term Loan (STL) at a weighted average interest rate of 9.40%, whereas the NSSF currently charges 8.8% p.a interest on its loans. This savings on interest rate outgo will reduce the food subsidy burden of the Government of India.

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Cabinet approves MoU between India and Vietnam In the field of cyber security
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given ex-post facto approval to the Memorandum of Understanding (MoU) between India and Vietnam in the field of Cyber Security. It was signed between Indian Computer Emergency Response Team (CERT-In), India and the Cyber Security Department, Ministry of Public Security, Vietnam on 3rd September 2016 at Hanoi.

The MoU intends to promote closer cooperation for exchange of knowledge and experience in detection, resolution and prevention of cyber security-related incidents between India and Vietnam.

Implementation of the MoU will result in significant mutual benefits in the cyber security sector, through institutional and capacity-building in the field of cyber security in the Socialist Republic of Vietnam.

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Cabinet approves the Establishment of Indian Agricultural Research Institute, Jharkhand
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for the 12th Plan Proposal of the DARE/ICAR Plan Scheme of the Establishment of Indian Agricultural Research Institute (lARI)-Jharkhand. It will have an estimated outlay of Rs. 200.78 crores (100% ICAR share) on 1,000 acre land provided by the Government of Jharkhand at the Gauria Karma Village in Barhi Block of Hazaribag.

lARI-Jharkhand would be a unique Institution, which would possess all the hallmark identities as that of IARI at New Delhi including all sectors of agriculture like field crops, horticultural crops, agro-forestry, animal husbandry, fisheries, poultry, piggery, silk and lac rearing, honey production etc.

IARI-Jharkhand would work on the agrarian challenges and complexities of eastern India with all existing Central and State Government R&D institutions and Private sector enterprises. It will undertake research, education, extension programmes in its mission towards developing quality human resource, generation of farmer friendly technologies to enhance productivity, quality and profitability. It will also promote agro-based industries and generate employment opportunities for holistic and sustainable development of the agriculture sector in the eastern region. It will be an off-campus of IARI, New Delhi and integrated multi-disciplinary research would be undertaken in School mode, i.e. Schools of Crop Sciences, Natural Resource Management, and Animal Sciences.

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Cabinet approves MoU between India and the United Arab Emirates on Bilateral Cooperation in the Road Transport and Highways sector
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the Memorandum of Understanding (MoU) between India and the United Arab Emirates on Bilateral Cooperation in the Road Transport and Highways Sector to be signed between the Ministry of Road Transport and Highways, India and the Federal Transport Authority - Land and Maritime, U.A.E.

The proposed MoU envisages increased cooperation, exchange and collaboration between India and the UAE, and will contribute to increased investment in infrastructure development and enhance logistics efficiency. This will help in promoting safe, economical, efficient and environmentally sound road transport in the country and will further help both the countries in creating an institutional mechanism for cooperation in the field. Salient features of the MoU are:

a. Exchange and sharing of knowledge and cooperation in the area of transportation technologies and transport policies, for passenger and freight movement by roads;

b. Planning, administration and management of road infrastructure, technology and standards for roads/highways construction and maintenance;

c. Sharing of information and best practices for developing road safety plans and road safety intervention strategies, and outreach activities aimed at reducing deaths and injuries resulting from road accidents through:

d. Sharing of knowledge and best practices in user-free (toll)-related issues; including modern systems, technologies and methods of levying of user-free and collection including Electronic Toll Collection System;

e. Sharing of information areas of improved technologies and materials in road and bridge construction, including joint research; and

f. Sharing of information and cooperation for mobilizing investments for setting up of Logistics Parks, freight logistics, transportation warehousing and value added services (VAS) as an enabler and as a catalyst of economic growth and seamless freight movement.

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Cabinet approves MoU on cooperation on Youth matters between India and Russia
Jan 18,2017

Exchange programmes in the field of Youth Affairs between India and Russia will help in promoting exchange of ideas, values and culture amongst Youth through establishment of people-to-people contacts and in consolidating friendly relations between the two countries.

The selections for participation in exchange programmes shall be done in an objective and transparent manner and the outcomes of the programmes under the MoU shall be open for public scrutiny.

Exchange programmes will help in developing international perspective among the Youth and expanding their knowledge and expertise in the areas of Youth Affairs.

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Cabinet approves Indias Membership in the International Vaccine Institute (IVI), South Korea
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to the proposal for Indias taking full membership of the International Vaccine Institute (IVI) Governing Council. The move involves payment of annual contribution of US $ 5,00,000 to the International Vaccine Institute (IVI), Seoul, South Korea.

Background

International Vaccine Institute (IVI), Seoul, South Korea, established in 1997 on the initiatives of the UNDP, is an international organization devoted to developing and introducing new and improved vaccines to protect the people, especially children, against deadly infectious diseases. In the year 2007, with the approval of Cabinet, India joined IVI. India is a long-term collaborator and stake-holder of IVI. In December, 2012 the Board of Trustees (BOT) of IVI approved the formation of its new governance structure. As per the new governance structure of IVI, a member State has to contribute to the IVI by paying a portion of its core budget. Since India is classified in Group-I, it has to pay an annual contribution of US $ 50,000.

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Cabinet approves MoU between India and Serbia for cooperation in the field of Information Technology and Electronics
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given ex-post facto approval to the Memorandum of Understanding (MoU) signed between India and Serbia for promoting cooperation in the field of Information Technology and Electronics.

The MoU aims to promote cooperation between India and Serbia in the field of IT and Electronics, and to foster active cooperation and exchanges between the private entities, capacity building institutions, the Governments and other public and private organizations of the two countries in IT & Electronics.

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Cabinet apprised of the MoU between the ISRO and the JAXA for cooperation in the field of outer space
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has been apprised of the Memorandum of Understanding (MoU) signed on November 11, 2016 at Tokyo, Japan between the Indian Space Research Organisation (ISRO) and the Japanese Aerospace Exploration Agency (JAXA) for cooperation in the field of outer space.

The purpose of this MoU is to pursue future cooperative activities in the exploration and use of outer space exclusively for peaceful purposes in accordance with the laws and regulations applicable in each country and their international obligations.

This MoU provides scope for pursuing cooperation in various areas of space science technology and applications including: eearth observation, satellite communication and navigation; exploration and space sciences; Research and development (space systems and space technology); and Space industry promotion.

ISRO and JAXA will bear the costs of their respective activities under this Memorandum, unless they decide otherwise in writing. Ability to fulfil their respective roles and activities under this Memorandum and its relevant separate Implementation Arrangement is subject to their respective funding procedures, the availability of appropriated funds and their respective national laws.

Framework MoU would lead to joint activity in the field of application of space technologies for the benefit of humanity. Thus all sections and regions of the country will get benefited.

Background:

India and Japan pursue space cooperation for more than 5 decades and carried out studies in the field of atmospheric study, observation of universe and scientific investigation in remote sensing. With the formation of JAXA in 2003, an arrangement concerning the considerations of potential future cooperation in the field of outer space was signed in October 2005 between ISRO/ Department of Space (DOS) and JAXA. Subsequently both agencies have signed cooperative documents addressing lunar exploration, satellite navigation, X-ray astronomy and Asia Pacific Regional Space Agency Forum (APRSAF).

During the ISRO-JAXA bilateral meeting held at New Delhi on April 05, 2016, both sides stressed the need for updating the contents of 2005 Arrangement with enhanced scope of cooperation. Accordingly, both sides have arrived at the draft of new Memorandum of Understanding (MoU) between ISRO and JAXA concerning cooperation in the field of outer space and got it signed on November 11, 2016 at Tokyo during the visit of Prime Minister of India to Japan.

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Cabinet approves Trade Agreement negotiations with Peru
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for amendment in the Modified Special Incentive Package Scheme (M-SIPS) to further incentivize investments in Electronic Sector and moving towards the goal of Net Zero imports in electronics by 2020.

Besides expediting investments into the Electronics System Design and Manufacturing (ESDM) sector in India, the amendments in M-SIPS are expected to create employment opportunities and reduce dependence on imports. The projects already received under the scheme have the potential to generate employment to the extent of upto one million persons (direct and indirect).

The Policy covers all States and Districts and provides them an opportunity to attract investments in electronics manufacturing. So far, 243 applications have been received under the scheme, out of which 75 applications have been approved involving investment proposals of Rs. 17,997 crore.

The salient features of the amendment are:

a) The applications will be received under the scheme upto 31st December 2018 or till such time that an incentive commitment of Rs 10,000 crore is reached, whichever is earlier. In case the incentive commitment of Rs 10,000 crore is reached, a review will be held to decide further financial commitments.

b) For new approvals, the incentive under the scheme will be available from the date of approval of a project and not from the date of receipt of application.

c) The incentives will be available for investments made within 5 years from the date of approval of the project.

d) Approvals will normally be accorded to eligible applications within 120 days of submission of the complete application.

e) A unit receiving incentives under the scheme, will provide an undertaking to remain in commercial production for a period of at least 3 years.

f) The Appraisal Committee recommending approval of project will be chaired by Secretary, Ministry of Electronics and IT.

g) A separate Committee headed by Cabinet Secretary and comprising of CEO, NITI Aayog, Secretary Expenditure and Secretary, MeitY will be set up in respect of mega projects, envisaging more than Rs. 6850 crore (approx. USD 1 Billion) investments.

Background

The Cabinet had, in July, 2012 approved the M-SIPS to provide a special incentive package to promote large scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector. The scheme provides subsidy for capital expenditure - 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs. The Scheme was amended in August, 2015 for scope enhancement and simplification of procedure. The Scheme has attracted investments in the ESDM sector to the tune of Rs. 1,26,838 crore, of which investments of around Rs. 17,997 crore have been approved by the MeitY. The M-SIPS has been able to create positive impact on investment in electronics sector.

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Cabinet approves MoU between India and the United Arab Emirates on the Mutual Recognition of Certificates of Competency
Jan 18,2017

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the Memorandum of Understanding (MoU) between India and the United Arab Emirates on the Mutual Recognition of Certificates of Competency.

The proposed MoU will pave way for recognition of maritime education and training, certificates of competency, endorsements, training documentary evidence and medical fitness certificates for seafarers issued by the Government of the other country in accordance with the provisions of Regulation 1/10 of the Convention, and cooperation between the two countries in training and management of seafarers.

The MoU will ensure that the education, training and assessment of seafarers, as required by the STCW Convention, are administered and monitored in accordance with of the STCW Code for each type and level of training assessment involved.

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Cabinet approves listing of PSU General Insurance Companies
Jan 18,2017

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Narendra Modi has given its in principle approval for listing the following five Government owned General Insurance Companies in the stock exchanges. These are:

(i) The New India Assurance Company

(ii) United India Insurance Company

(iii) Oriental Insurance Company

(iv) National Insurance Company and

(v) General Insurance Corporation of India

The shareholding of these Public Sector General Insurance Companies (PSGICs) will be divested from 100% to 75% in one or more tranches over a period of time. During the process of disinvestment, existing rules and regulations of Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority of India (IRDAI) will be followed.

Listing of (PSGICs) is likely to yield the following benefits:

a. Listing on the Stock Exchange necessitates compliance with a number of disclosures and accounting requirements of SEBI, which acts as an additional oversight mechanism. The disclosures bring about transparency and equity in the companies functioning.

b. Listing is expected to lead to improved corporate governance and risk management practices leading to improved efficiency. A greater focus on growth and earnings can also be expected.

c. Listing will open the way for the companies to raise resources from the capital market to meet their fund requirements to expand their businesses, instead of being dependent on the Government for capital infusion.

The Finance Minister in his Budget Speech for 2016-17 had announced that public shareholding in Government-owned companies is a means of ensuring higher levels of transparency and accountability; and to promote this objective, the general insurance companies owned by the Government will be listed on the stock exchanges.

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13 Private Companies Compete in $13 Million World Bank Climate Auction
Jan 18,2017

The World Bank Group allocated $13 million through the third auction of the Pilot Auction Facility for Methane and Climate Change Mitigation (PAF). Thirteen companies from nine countries participated in the online auction, and five won contracts that give them the right to sell their future carbon credits to the PAF at a fixed price. If redeemed, these contracts will reduce the equivalent of 6.2 million tons of carbon dioxide emissions.

Whereas the first two auctions, in 2015 and 2016 respectively, targeted methane emissions from landfills, the third auction targeted reductions in nitrous oxide. Both greenhouse gases are highly potent, with the latter having a global warming potential of nearly 300 times that of carbon dioxide. An example of nitrous oxide emissions would be from the industrial production of nitric acid, used to produce fertilizer. Emission reductions from the production of adipic acid were not eligible in yesterdays auction.

The PAF was set up two years ago to test how auctions can effectively channel funds to projects that reduce emissions. As a pilot facility, the PAF aims to promote learning by testing multiple auction formats, with the hope that others will replicate this model. The third auction--unlike the first and second--was split into two sub-auctions, with a n++new segmentn++ dedicated to projects that had not installed clean technologies before the auction date, and an n++open segmentn++ open to both new and operating projects.

Winners in the third auctions open segment received contracts giving them the right to sell carbon credits to the PAF for $2.10/carbon credit. Bidding for this segment began at $5/carbon credit, at which price bidders demanded over five times the available supply. The PAF lowered the price over seven rounds before reaching the clearing price.

In the new segment, which occurred immediately prior to the open segment, bidding began at $6 per carbon credit. Bidders in the new segment did not demand enough credits to close the auction. As a result, the entirety of the budget for the new segment was transferred to the open segment in order to ensure maximum emission reductions per dollar.

Third auction winners received contracts called Pilot Auction Facility Emission Reduction Notes, or PAFERNs, which they may redeem between 2017 and 2020. To date, the PAF has allocated a total $53 million in climate funding and through the sale of PAFERNs, and has raised an additional $12.5 million for re-investment into climate-friendly projects. The PAFERNs are backed by funding from the governments of Germany, Sweden, Switzerland, and the United States.

The World Bank is now looking ahead, beyond the piloting phase. The PAF has successfully demonstrated that auctions can efficiently allocate scarce public funds, maximize climate impact of concessional financing, promote price discovery of reducing emissions, and help the private sector mitigate risk. According to a recent IFC study, the Paris Agreement identified nearly $23 trillion in opportunities for climate-smart investments in emerging economies. Climate auctions are an agile instrument that could channel such climate finance, motivate the private sector to reduce emissions, and raise the ambition of countries national contributions.

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The young will soon beckon the residents and visitors along Ganga to inculcate clean practises
Jan 18,2017

The young will soon beckon the residents and visitors along Ganga to inculcate clean practises! In what is aimed at generating widespread awareness on ails of polluting river Ganga, a cadre of thousands of youths will be groomed as volunteers to be deployed in villages along the river to raise clean Ganga consciousness among the local dwellers and visitors.

The step which is being taken under central governments flagship Namami Gange programme emphasizes on using the zeal of the young to engender support of people from all walks of life in conservation of the river, which faces rapid contamination from domestic and industrial effluents.

Nehru Yuva Kendra Sangathan (NYKS), an autonomous organisation under Ministry of Youth Affairs and Sports has been entrusted with the task of building capacities of more than 20, 000 young men and women from Ganga basin states, so that they can represent Namami Gange programme as n++Swachhta Dootsn++.

From over 20,000 informed youth motivators, as many as 50 enthusiastic spearhead campaigners would be identified and trained for a week. These ace campaigners will then be asked to lead this army of the young in their assigned jurisdictions in spreading the message of clean Ganga. All this will be done in consultation with village youth clubs.

The youth, once trained, would exhort and motivate local population and tourists to refrain from polluting river Ganga. They will be the new wheels on which clean Ganga awareness campaign would ride. The Swachhta Doots would not only educate the target audience about the adverse consequences of polluting Ganga but will also be an asset in providing information on existing government activities like construction of toilets, water harvesting and conservation for creation of a comprehensive database in coordination with National Mission for Clean Ganga (NMCG), the implementing arm of Namami Gange programme.

The project envisages deployment of the youth in 29 districts spanning about 2,336 villages along the river in Ganga basin States of Uttarakhand, Uttar Pradesh, Bihar and West Bengal. One project officer will be assigned to each district. The project has been approved at an estimated cost of Rs 10 crore.

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Jain Irrigation Systems Assigned Preliminary B+ Rating; Outlook Stable- S&P Global Ratings
Jan 18,2017

S&P Global Ratings assigned its preliminary B+ long-term corporate credit rating to Jain Irrigation Systems. The outlook is stable. At the same time, we also assigned our preliminary B+ rating to the proposed U.S. dollar notes to be issued by Jain International Trading BV and guaranteed by Jain Irrigation. Our rating on notes is subject to our review of final issuance documentation.

Jain Irrigation is an India-based company engaged in manufacturing of plastics-based micro irrigation piping and plumbing systems. The company also has a small but growing food processing business, which mainly produces fruit pulps and dehydrated onions. Jain International Trading BV is a wholly owned subsidiary of Jain Irrigation incorporated in the Netherlands.

Our rating on Jain Irrigation reflects the companys high leverage compared with peers and elongated working capital cycle, resulting in pressure on liquidity, said S&P Global Ratings credit analyst Ashutosh Sharma. The companys business is exposed to cyclicality due to the variability in monsoons and seasonality in sales.

Jain Irrigations strong franchise with a dominant market position in India and second rank globally in the niche micro-irrigation systems market supports its credit profile. We also expect leverage to reduce and liquidity pressure to subside with growth in business and managements commitment to deleverage and reduce dependence on short-term working capital facilities.

In our view, Jain Irrigations higher leverage than that of peers, such as Valmont Industries Inc. and The Toro Co., weighs down on its financial risk profile, Mr. Sharma said.

The company has an elongated working capital cycle of more than 160 days due to the seasonal nature of the agricultural business. This duration, combined with high cyclicality and seasonality, will likely keep the leverage high, with the ratio of funds from operations (FFO) to debt likely to remain below 20% over the next 24 months. Agricultural demand is subject to vagaries of rains, which in our view induces demand volatility.

We believe Jain Irrigations working capital management remains a key risk to our estimates. Any delay in collection of receivables or liquidation of inventory could add further pressure on the companys leverage.

We believe Jain Irrigations micro irrigation and the piping systems business face stiff competition from small and midsize players in India, given that these businesses have lower barriers to entry, especially in emerging markets.

We believe management is committed to reducing leverage by focusing on cash flows. A recently adopted cash-and-carry model in India should help reduce the working capital intensity. We expect Jain Irrigations proposed issuance of senior unsecured notes to help it to refinance a significant part of its short-term working capital facilities and certain higher-cost long-term facilities, and improve the overall tenor of borrowings.

Jain Irrigation is well-diversified across its key markets, which include India, the U.S., Europe, Israel, Latin America, and Africa. In fiscal 2016 (year ended March 31), the company generated more than 45% of its revenues internationally, of which more than 30% was derived from Europe and North American markets. We expect the company to continue to increase its international presence by penetrating new markets in Latin American and Africa.

We consider Jain Irrigations profitability to be average for the industry. The profitability compares well with that of its peers such as Netafim (up to 2015) and Valmont but ranks below Toro, which has highly evolved brands. We expect Jain Irrigations business mix to ensure steady to slightly improving profitability of 13%-15% over the next two years.

Our preliminary rating is based on the expectation that the Jain Irrigation will largely use proceeds from the proposed notes to partly repay its short-term debt and refinance a portion of its long-term debt. This will help relieve some pressure on liquidity for the company and result in a better capital structure. In the absence of the retirement of some of the working capital facilities and short-term debt maturities, the companys liquidity will come under pressure and result in a weaker credit profile.

The stable outlook reflects our view that Jain Irrigations proposed notes and satisfactory banking relationship will help the company to manage its short-term working capital facilities over the next 12 months. We expect double-digit revenue growth driven by favorable monsoons and managements commitment to deleveraging to result in a ratio of FFO to debt of above 12% over the period.

We may downgrade Jain Irrigation by multiple notches if the companys credit standing in the capital markets weakens, such that we assess its liquidity to be weak. This could happen if the company is unable to secure working capital facilities for its subsequent operating season due to deteriorating working capital or pressure on its banking relationships.

We may also downgrade Jain Irrigation if the companys working capital needs remain high, resulting in significant shortfall of funds in the absence of the proposed notes. We may also downgrade Jain Irrigation if poor monsoons in India result in the ratio of FFO to debt falling below 12%.

We are unlikely to upgrade Jain over the next 12-24 months due to the companys high leverage and liquidity pressure. However, we may upgrade the company if: (1) the FFO-to-debt ratio reaches close to 20%, possibly due to strong operating performance; and (2) the company ensures adequate liquidity and a sustainable capital structure with a longer maturity profile.

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