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Extension of the validity of Central Order regarding de-hoarding of sugar upto April 2017
Oct 28,2016

The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has given its approval for extending the validity of the existing Central Order in respect of Sugar for a further period of six months from 29 October 2016 to 28 April 2017.

The main objective of the decision is to enable the State Governments to issue control order with the prior concurrence of Central Government, for fixing stock limits/licensing requirements in respect of sugar, whenever need is felt by them. This is expected to help in the efforts being taken to improve the availability of these commodities to general public at reasonable rates, and control the tendencies of hoarding and profiteering.

Background

The Cabinet in its meeting held on 27 April 2016, decided to enable the States to regulate supply, distribution, sale, production, stock, storage, purchase and movement etc. in respect of sugar for a period up to six months up to 28 October 2016. Accordingly, vide Notification No. GSR 1584(E) dated 29 April 2016, Department of Consumer Affairs issued the Removal of (Licensing requirements, Stock limits and Movement Restrictions) on specified Foodstuffs Amendment Order, 2016 for enabling the State Government to impose stock limits on sugar upto 28 October 2016. Subsequently, the said Order was merged with all the existing Orders in respect of essential commodities and a consolidated Order G.S.R. 929(E) dated 29th September 2016 was issued. It has been noticed that the average retail price of sugar has escalated in the recent past, in-spite of adequate availability of sugar stock with the mills. The price rise appears artificial as being mainly due to hoarding of sugar by traders/sugar dealers etc. Such situations in past were dealt with exercising the powers to regulate stock holding limits etc. for sugar. The validity of the current Order in respect of sugar is expiring on 28.10.2016 which caused the reason for further extension of the validity of Central Order GSR No. 929(E) dated 29 September 2016 in respect of sugar up to 28 April 2017.

The current decision will be notified by the Central Government and will be communicated to all the States/UTs. The States/UTs may exercise the powers and issue control orders with prior concurrence of the Central Government.

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Cabinet approves release of instalment of DA to Central Government employees and DR to Pensioners due from 01 July 2016
Oct 27,2016

The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has given its approval to release an instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to Pensioners w.e.f. 01 July 2016 representing an increase of 2% of the revised Basic Pay/Pension, to compensate for price rise. The increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission.

The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs. 5622.10 crore per annum and in the Financial Year 2016-17 for the period of 8 months (i.e. from July 2016 to February 2017), it would be Rs.3748.06 crore. About 50.68 lakh Government employees and 54.24 lakh pensioners will be benefitted.

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Cabinet approves establishment of National Academic Depository
Oct 27,2016

The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has accorded its approval for establishment and operationalisation of a National Academic Depository (NAD). The decision aims at bringing another dimension and enhancement of the vision of Digital India.

The NAD would be established and operationalised within the next three months and would be rolled out throughout the country in 2017-18.

The Finance Ministers Budget Speech of 2016-17, in February this year, incorporated this commitment to establish a Digital Depository for school learning certificates, degrees and other academic awards of Higher Education Institutions, on the pattern of a Securities Depository.

The NAD would be operationalised by NSDL Database Management (NDML) and CDSL Ventures, (CVL) - two of the wholly owned subsidiaries of the Depositories registered under Securities Exchange Board of India (SEBI) Act, 1992.

Academic institutions would be responsible for the authenticity of data digitally uploaded by them into the system. The depositories will ensure the integrity of the data in the NAD. The NAD will register educational institutions/boards/eligibility assessment bodies, students and other users/verifying entities like banks, employer companies, government agencies and academic institutions.

It will provide digital or a printed copy of the academic award with security features to the students or other authorized users. NAD will verify academic awards online on the same day of request initiated by any authorized user.

Requests for access to academic awards, for example, from potential employers, and academic institutions would be only on the basis of consent of the student.

NAD shall maintain the authenticity, integrity and confidentiality of its database. It will also train and facilitate academic institutions/boards/ eligibility assessment bodies to efficiently lodge academic awards in the database.

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Cabinet approves Agreement between India and Estonia on the transfer of sentenced persons
Oct 27,2016

The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has given its approval for signing and ratification of an Agreement between India and Estonia on the transfer of sentenced persons.

Signing the Agreement shall facilitate the Indian prisoners imprisoned in Estonia or vice-versa to be near to their families, for serving remaining part of their sentence and shall facilitate their social rehabilitation.

Background:

Prior to 2004, there was no domestic Legislation under which foreign prisoners could be transferred to the country of their origin to serve the remaining part of their sentence, nor was there a provision for the transfer of prisoners of Indian origin convicted by a foreign court to serve their sentence in India. The transfer of such prisoners to their own native countries shall facilitate their social rehabilitation.

Hence, the Repatriation of Prisoners Act, 2003 was enacted for serving the above purpose. For achieving the objectives of the Act, a Treaty/Agreement is required to be signed with countries having mutual interest with India and later to the notified in the Official Gazette.

The Government of India has so far signed bilateral Agreements on Transfer of Sentenced Persons with United Kingdom, Mauritius, Bulgaria, France, Egypt, Sri Lanka, Cambodia, South Korea, Saudi Arabia, Iran, Bangladesh, Brazil, Israel, Bosnia & Herzegovina, UAE, Italy, Turkey, Maldives-, Thailand, Russian Federation, Kuwait, Viet Nam, Australia, Hong Kong, Qatar, Mongolia, Kazakhstan and Bahrain. So far total 65 prisoners have been exchanged, out of which 55 were Indians.

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Cabinet approves New Productivity Linked Reward Scheme for all Major Port Trusts and Dock Labour Board employees/workers for years 2015-16 to 2017-18
Oct 27,2016

The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has given its approval to New Productivity Linked Reward Scheme for all Major Port Trusts and Dock Labour Board employees/workers for the years 2015-16 to 2017-18.

The new PLR scheme applicable from 2015-2016 to 2017-2018 will benefit about 37870 Port and Dock workers/employees in all the Major Port Trusts and the yearly outgo will be Rs. 49.58 crore.

Ministry of Shipping has formulated a New Productivity Linked Reward (PLR) Scheme for all Major Port Trusts and Dock Labour Board employees/workers for the years 2015-16 to 2017-18. PLR will be calculated on the enhanced wage ceiling for calculation of Bonus at Rs. 7000/- per month. PLR shall be paid annually on the basis of 50% weightage given to all India Performance and 50% weightage given to the individual Port Performance. The arrear payments of PLR for the year 2014-15 to the employees/workers by the Major Port Trusts and Dock Labour Board will be calculated on the enhanced wage ceiling of Rs.7000/- per month for calculation of Bonus instead of Rs.3500/- per month on the existing methodology of combined All India Port Performance.

For the year 2014-15, an amount of Rs 25.93 crore has already been paid to about 41,492 Major Ports & Dock workers/employees as per wage ceiling of Rs.3500/-. The total additional outgo for all Major Ports & Dock workers/employees on account of payment of arrear of PLR for the year 2014-15 as per enhanced wage ceiling of Rs. 7000/- will be about Rs. 25.93 crore.

There is an existing scheme of Productivity Linked Reward (PLR) for the employees/workers of Major Port Trusts and Dock Labour Board, wherein Productivity Linked Reward (PLR) was granted on yearly basis based on the settlement arrived at between Management and the Labour Federations of the Major Port Trusts.

The new PLR Scheme will foster better industrial relationship and congenial work atmosphere in the Port Sector, apart from stimulating better productivity.

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Cabinet approves one time relaxation in the cost norms and guidelines of MIDH
Oct 27,2016

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi has given its approval for one time relaxation of Mission for Integrated Development of Horticulture (MIDH) cost norms for implementation of PMs Special package for Jammu & Kashmir towards restoration of damaged horticulture areas and development of horticulture in State. CCEA approved the following:

a. Import of planting material at the maximum rate of Rs.460 per plant for 329 hectares of new apple orchards and restoration of 3900 hectares of old damaged apple orchards. The rate of financial assistance shall be 90% i.e 90% shall be borne by the Government and 10% by the beneficiary farmer.

b. Import of 4 wire trellis system at the rate of Rs.9.8 lakh per ha for 329 ha of new apple orchards. The rate of financial assistance shall be 50% i.e. 50% shall be borne by the Government and 50% by the beneficiary farmer.

c. Applicability of MIDH cost norms for the interventions approved for implementation of PMs Package in J&K till financial year 2018-19.

d. Additional fund requirement of Rs. 111.89 crore, Rs. 171.66 crore, and 166.48 crore amounting to Rs. 450 crore in FY 2016-17, 2017-18 and 2018-19 respectively as 90% Government of India share in the overall package of Rs.500 crore.

PMs special package for J&K included Rs.500 crore towards restoration of damaged horticulture areas and development of horticulture in the State.

One time relaxation in MIDH cost norms was approved for import of special varieties of plants for better survival, early flowering and enhanced fruiting apple planting materials and four wire trellies system which may increase the productivity 3-4 times.

It will benefit about 21,000 orchardists located in more than 491 villages where horticulture areas of more than 5200 ha. was severely damaged by floods/landslides in September 2014.

CCEA approval would help in setting up of 329 ha of new apple orchards and restoration of 3900 ha of damaged orchards over a period of 3 years with overall financial implication of Rs. 500 crores with Rs. 450 crores as central share.

High and medium density apple plantation would generate round the year employment for 3300 and 18,000-20,000 people respectively. These initiatives will also result in employment in allied sectors such as grading/packing units. CA/Cold storage units and transportation sector etc. As the high density plantation involves technology and regular up keep of orchards, therefore, it will also result in wage enhancement n overall horticulture sector due to the increase in the farmers income as a result of the increase productivity.

It may be recalled that in 2014, the State had suffered due to the devastating floods of September, 2014. The infrastructure was destroyed due to floods. After the floods, the Prime Minister visited Kashmir on 23rd October, 2014 to spend time with those who were affected by floods and understand their problems and status of their relief and rehabilitation work. He met many delegations, from political parties, from trade representatives, from NGOs and citizens groups.

During his visit he talked about improving road connectivity and overall development of the State. He also announced to provide Rs.570 Cr. under Prime Ministers National Relief Fund (PMNRF) for providing assistance for construction of houses of the affected families. An amount of Rs. 565 Cr. has been already provided to 2.18 lakh affected families directly through their bank accounts.

The Government of India has been working on post flood long term reconstruction measures to improve the infrastructure in the State. The Government has been proposing to work towards development of key infrastructure in thrust sectors like Power, Health, Roads and Highways, Tourism, Textile, Food processing, HRD and Water resources etc.

Considering above, and the commitment for development of the State of J&K, the Honble PM on his visit to J&K State on 07.11.2015 announced Prime Ministers Development Package for the State of J&K with financial assistance of over Rs.80,000 Cr.

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Cabinet approves the new Agreement on Trade, Commerce and Transit between India and Bhutan
Oct 27,2016

The Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi, has approved an Agreement on Trade, Commerce and Transit between India and Bhutan.

The bilateral trade relations between India and Bhutan are governed by the Agreement on Trade, Commerce and Transit between the Government of India and Bhutan. The Agreement provides for a free trade regime between two countries. The Agreement also provides for duty free transit of Bhutanese merchandise for trade with third countries.

The Agreement was renewed on 29th July 2006 for a period of ten years. The validity of this Agreement was extended, with effect from 29th July 2016, for a period of one year or till the new agreement comes into force, through exchange of Diplomatic notes.

The traditionally unique bilateral relations characterized by trust and understanding between India and Bhutan have matured over the years and would be further strengthened by execution of the proposed Agreement on Trade, Commerce and Transit Agreement.

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Cabinet approves exchanging of land between AAI and Government of Odisha for widening of road at Biju Patnaiak Airport, Bhubaneshwar
Oct 27,2016

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved the exchanging of Airports Authority of Indias (AAI) land measuring 1.6 acres with an equivalent land area of 1.6 acres offered by Odisha Government.

The State Government has offered 1.6 acres of land in lieu of 1.6 acres land of AAI and agreed to undertake and relocate all the existing infrastructure of AAI on the subject land on its own cost. Further, the land offered by the State Government is contiguous to existing airport and it will be used by AAI for construction of Parallel Taxi Track. The exchange of land is not only beneficial to the State Government & AAI but also to the people.

Odisha Government wants to widen the State Government road near Bhubaneswar Airport (known as Ekamara Marg/Palashpalli Road) for streamlining the security arrangements of the VIP movements and creating buffer zone for public use. For this purpose requires 1.6 acres land of AAI is required by the State Government.

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Cabinet approves Budgetary support to HMT for payment of outstanding salary, introduction of VRS/VSS and closure of operations of Tractor Division
Oct 27,2016

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi has approved the budgetary support to HMT for payment of outstanding salary / wages and other employee related dues. It also approved closure of HMT Tractor Division by offering attractive VRS / VSS at 2007 notional pay scales.

It will have a financial implication (cash outgo) of Rs. 718.72 crore for payment of outstanding salary, wages and statutory dues, VRS/VSS ex-gratia payments and clearing of Tractor Divisions liabilities towards Bank, creditors etc.

The Cabinet has also given its approval for transfer of selected small parcels of HMT land at Banglore and Kochi to different Government entities for their use in larger public interest.

Background:

HMT, a Central Public Sector Enterprise under the Ministry of Heavy Industries and Public Enterprises of the Government of India was established at Bangalore in 1953 with the objective of producing machine tools required for building an industrial edifice for the country. HMT played a key role in laying the foundation for evolution of engineering and manufacturing capabilities in the country. HMT Tractor Division was established in Pinjore, Haryana in 1971 to manufacture HMT Tractors. Performance of the company started to decline in the 90s, in the post liberalisation economic environment with rising costs, stiff competition from international players and availability of imported goods at cheaper rates. Several efforts were made in past to arrest the declining trend but it could not succeed to turn around. HMTLs profit making tractor business was affected due to poor off-take, under-utilisation of capacity and working capital constraints, etc. It was observed that continuation in Tractor Business with its insignificant market share in the sector may not be a financially viable and sustainable option for HMT Ltd., and hence it would be prudent to close the tractor business, make an exit from this segment and focus on the core sector of machine tools.

The Tractor Division has been incurring losses continuously and is unable to pay the salaries and other statutory dues of its employees. The employees of Tractor Division based at Pinjore have not been paid salary since July, 2014 and other statutory dues are also pending since Nov., 2013. The statutory dues (Terminal benefits, PF, Gratuity, Leave encashment etc.) are also pending for the employees of other Divisions of HMTL [Corporate Head Office(CHO), Common Service Division(CSD) and Food Processing Machinery unit, Aurangabad (FPA)]. In view of the deteriorating position of the company and hardship being faced by the employees due to non-payment of salary / wages and other retirement dues, it has been decided to close down the Tractor Division of HMT Ltd by offering attractive VRS / VSS to its employees and clearing all their dues.

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FICCI signs MoU with India New Zealand Business Council to organize Education Summit in Auckland in 2017; with Indian-NZ Trade Alliance
Oct 27,2016

The Federation of Indian Chambers of Commerce and Industry (FICCI) and India New Zealand Business Council (INZBC) signed a Memorandum of Understanding (MoU) on the side lines of the visit of the Prime Minister of New Zealand to India. The MoU is for collaboration for organizing an Education Summit Edutech 2017-Knowledge, Skill, Technology in Auckland in 2017.

Since education has been identified as one of the focussed sectors for collaboration between the two countries, the Summit would provide an ideal platform for bringing the people involved in the education sector on a common platform. The Summit is supported by the New Zealand Government.

It is noteworthy that a number of members on the official business delegation of the Prime Minster of New Zealand are from the higher education sector and key members were present at this MoU signing.

FICCI also signed a MoU with India Trade Alliance, New Zealand, to work together for taking initiatives for further enhancing India-New Zealand trade relations.

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Major Ground Level Changes in Investment Climate: CII President
Oct 27,2016

n++On the ground, there have been significant changes in Ease of Doing Business which are insufficiently captured in the latest World Bank Doing Business rankings. The Government has made much effort to improve the investment climate through a range of measures, including small enterprises, labour regulations, environmental clearances, and company registrations, among others,n++ said Dr Naushad Forbes, President, Confederation of Indian Industry (CII).

n++This years Doing Business report takes into account the position as of June 1, and therefore does not include crucial changes such as GST and the Insolvency and Bankruptcy Code which are taking effect later,n++ noted Dr Forbes.

n++The Doing Business report recognizes Indias reforms in key parameters, but measures the investment climate only in Delhi and Mumbai. Many reforms that have taken place with the monitoring of DIPP at the state level are not considered and do not reflect in the countrywise ranking,n++ pointed out Dr Naushad Forbes.

n++CII has been working closely with all stakeholders including the World Bank, DIPP, and state governments as also industry to identify and resolve roadblocks to Ease of Doing Business. We find that the situation has significantly improved and we appreciate DIPPs constant focus on improving the investment climate,n++ added Dr Forbes.

The World Bank Doing Business 2017 report includes reform policies completed by June 1, 2016. Further, it considers the investment climate and procedures implemented in two cities of Mumbai and Delhi. As such, most of the progress taking place across the state governments is not incorporated in the Report.

The Central Government has undertaken major policies in areas pertaining to legislation, which will translate into outcomes shortly. The progress on the Goods and Services Tax (GST) is an outstanding example of Center-State coordination and the introduction of the tax next year will transform the business environment and add to growth rates. Besides, the Insolvency and Bankruptcy Code will enable businesses to exit smoothly, said CII in its release.

Noting the pace of reforms under DIPPs Ease of Doing Business mission, CII added that online administrative processes have been introduced rapidly. The Single Window Interface for Trade (SWIFT) provides approvals and integrates nine departments for facilitation of imports. INC-29 merges getting Director Identification Number, Name Approval and Incorporation into a single form, thereby reducing time taken for incorporation of a company. The World Bank does not recognize this since a third of new companies have used this platform from its inception in 2015 rather than half as required by the metric.

Several measures introduced by the Central Government to facilitate micro, small and medium enterprises such as streamlining of inspections and self-certifications are also not part of the ten indicators covered by the World Bank. There has been considerable progress in these areas, said CII. In addition, online registration of ESIC and EPFO, as also other simplifications in labour regulations are not included in the ranking list.

On environmental and forest clearances too, the Central Government has taken steps for fast-tracking approvals.

The states have undertaken many reforms for Ease of Doing Business, emphasized CII. For example, in starting a business, Punjab, Odisha, Andhra Pradesh and others have set up centers to clear new proposals in a time-bound manner. Many states have moved quickly on land acquisition, industrial clusters, and land banks. On labour reforms, Jharkhand, Rajasthan and Madhya Pradesh have worked on registration and licensing under various labour Acts. Maharashtra, Madhya Pradesh, Sikkim, and other states have introduced best practices in resolving commercial disputes, while Andhra Pradesh and Karnataka have facilitated payment of taxes.

n++The spirit of competitive and cooperative federalism is kindling focus by states on attracting investors by building facilitative investment climates,n++ noted Dr Forbes. n++As these procedures take time to evolve across the country, we are confident that the World Bank Doing Business Report in later years would reflect the improvement in Ease of Doing Business,n++ concluded the CII President.

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EPFO joins network of Common Services Centers
Oct 27,2016

To expand the reach of convenience offered to EPF members, Employees Provident Fund Organisation (EPFO) has joined the network of Common Services Centers (CSC). A Memorandum of Understanding (MoU) has been signed between EPFO and CSC e-Governance Services India Limited (CSC SPV) on 25th October 2016. The MoU is initially for a period of five years.

To start with, the pensioners of Employees Pension Scheme of EPFO can submit their digital life certificates via Jeevan Pramaan Patra programme through a large number of points of Presence (PoP) of CSC networking in addition to those available at EPFO offices. The pensioners living in remote areas can avoid cost and inconvenience of travelling down to the EPF offices or their banks for filing paper based life certificate. In near future, it is also planned to enable various other online services namely aadhaar seeding with Universal Account Number (UAN), e KYC operated upload and update facility, UAN card related services and online claim related services.

Common Services Centers (CSC) network is one of the largest government approved online service delivery channel in the world. CSC are broadband enabled rural service delivery points established by District e Governance Societies (DeGSs), selected by the State Governments, for aggregating content and offering relevant Government to Customers (G2C), Business to Customers (B2C), Business to Business (B2B) and other services. More details about Common Services Centers (CSC) and its network can be accessed at csc.gov.in

EPF subscribers may access these services at their convenience from the nearest CSC network.

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With an aim to drive awareness around Diwali on availability of Indian Gold Coin, MMTC and WGC launch a multimedia advertising campaign
Oct 27,2016

With an aim to drive awareness around Diwali on the availability of Indian Gold Coin, MMTC along with World Gold Council (WGC) has launched a multimedia advertising campaign starting this week that includes newspapers, radio, digital and select cinema halls. More information on Indian Gold Coin can be accessed on www.indiangoldcoin.com or toll free number 1800 1800 000.

The Indian Gold Coin is available in denominations of 5 gm and 10 gm coin and 20 gm bar. The coins are currently available at all MMTC outlets across India, along with select branches of seven Banks - Indian Overseas Bank, Vijaya Bank, Federal Bank, Yes Bank, Andhra Bank, ICICI Bank and HDFC Bank. Indian Gold Coin is available at about 383 outlets across India now.

Indian Gold Coin was launched by the Prime Minister Shri Narendra Modi on 5th November, 2015. It is Indias first ever sovereign gold offering and only Gold Coin hallmarked by Bureau of Indian Standards (BIS) for purity. The creation of a national branded coin, of uniform price and quality has addressed the trust deficit that exists around the buying and selling of gold. It aligns with the n++Make in Indian++ priority of the Government.

Indian Gold Coin has the National Emblem Ashoka Chakra engraved on one side and Mahatma Gandhi on the reverse side. Its other unique features include 24 Karat 999 fineness purity, positive tolerance both in weight and purity, tamper proof packaging and advanced anti-counterfeit features.

Indian Gold Coin is minted in India from gold sourced domestically from Gold Monetisation Scheme. It enters the international basket of National Gold Coins which is minted locally by India Government. Mint, Mumbai and Kolkata and therefore also promotes n++Make in Indian++. It will aid in recycling of gold through transparent buy-back option being brought by MMTC. Through the Indian Gold Coin, the Government of India aims to reduce dependence on gold imports to meet the local gold demand as Indian Gold Coin is being minted from the gold collected under Gold Monetization Scheme (GMS).

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Transition to Direct-to-Consumer to Impact M&E Sector: Manoj Sinha
Oct 27,2016

Manoj Sinha, Minister of State for Communications (I / C) & Railways stated, n++Indias media and entertainment industry is going through a rapid transition to a direct-to-consumer world through new digital technologies. Curation, customization and convenience play a prime role in this disruptive environment.n++

Priyank Kharge, Minister of Information Technology & Biotechnology, Government of Karnataka, announced that the Karnataka government will soon come out with a center of excellence for the AVG sector. He invited startups to participate in this.

Sunil Kumar Singhal, Advisor, Telecom Regulatory Authority of India (TRAI), shared that TRAI is focusing on a homogeneous network to reach of broadband to the public across the country. He stated that India needs to focus on fixed network to back data, as otherwise monetizing the spectrum would be a challenge.

Vikram Chandra, CEO, NDTV, observed that content creators should not slow down creating or gathering content while awaiting new technologies for distribution and monetization.

T V Ramachandran, President, Broadband India Forum, said that innovative solutions to match growing demand for data are required, while a huge bandwidth goes waste.

Kaveree Bamzai , Editor of Robb Report and Editor (Special Projects), India Today, noted that education is central to create quality content. Arjun Pandey, CEO 24 Frames & Founder Delhipedia, focused on education quality. Harish Vaidyanathan, Director ISV, Microsoft India, felt that more needs to be invested at a government level to ensure seamless content delivery.

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Moodys: Hyundai Motors rating unaffected by weaker 3Q 2016 results
Oct 27,2016

Moodys Investors Service says that the year-on-year weakening in Hyundai Motor Companys operating results for 3Q 2016 will not impact the automakers Baa1 issuer rating and stable outlook.

Hyundai Motors weaker operating performance in 3Q 2016 was mainly because of a prolonged strike by its labor union in Korea, as well as continued intense competition in the global auto market, says Wan Hee Yoo, a Moodys Vice President and Senior Analyst.

According to the companys announcement on 26 October 2016, Hyundai Motors unadjusted operating margin (ex-finance) fell to 5.0% in 3Q 2016 from 6.4% in 3Q 2015.

The strike by Hyundai Motors labor union in Korea during 3Q 2016 led to a significantly lower utilization rate of its domestic plants, which pressured in turn its profitability. The year-on-year appreciation of the Korean won against US dollar in 3Q 2016 also negatively affected the companys earnings.

These factors more than offset the sales recovery in emerging markets such as China (Aa3 negative), Russia (Ba1 negative) and Brazil (Ba2 negative).

Year-on-year unit shipment growth in 3Q 2016 n++ including sales from its joint venture in China n++ registered negative 3.3%, while global retail sales grew about 1.9% during the same period. These results indicate that the companys inventory levels fell, which has a positive impact on its cash flow.

The growth in retail sales in 3Q 2016 was mainly a result of robust sales in China, India (Baa3 positive) and Western Europe, despite weak performance in the domestic market.

Moodys anticipates that Hyundai Motors auto shipments will rebound in 4Q 2016 to make up for the production loss in 3Q 2016. However, the companys auto shipments should fall by about 1.5% year-on-year for the whole of 2016, owing to weak sales growth in the domestic market, as well as some emerging countries.

The companys reported operating margin (ex-finance) will likely weaken moderately year-on-year to about 6.3% in 2016 from 6.8% in 2015, because of a decline in auto shipments, as well as continued intense price competition. This level of profitability remains consistent with its Baa1 rating category.

Moodys expects Hyundai Motors profitability in 2017 to remain similar to the level seen in 2016, given the persistently challenging operating environment in the global auto industry, and an increase in R&D expenses.

Moodys estimates that Hyundai Motors reported net liquidity holdings (ex-finance) at end-September 2016 are at levels largely similar to the KRW11.4 trillion at end-2015. Such large liquidity holdings continue to provide a key support to its Baa1 rating.

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