A solid and accelerated upturn in incoming new business placed with Indian service providers led companies to scale up activity during October. Survey data indicated that this placed pressure on firms capacity as backlogs of work rose further, but employment levels were unchanged over the month. Input costs increased again, although at a marginal rate that was softer than in September. As for output prices, these were broadly unchanged.
At 54.5 in October, the seasonally adjusted Nikkei Services Business Activity Index recorded above the no-change mark of 50.0 for the sixteenth straight month, highlighting ongoing growth in the sector. Rising from 52.0 in September, the latest figure was consistent with an accelerated rate of expansion that was marked overall.
Manufacturing production also increased at a quicker rate, one that was the fastest in 46 months. Subsequently, the seasonally adjusted Nikkei India Composite PMI Output Index rose from 52.4 in September to 55.4 in October. This pointed to a marked pace of expansion in private sector activity that was the quickest in nearly four years.
Boosting growth of services output was a pick-up in new orders, which expanded at a solid pace that was faster than in September. According to panellists, the upturn was supported by greater client requests and improved demand conditions. Manufacturing order books also rose at a quicker pace, with growth climbing to a 22-month high.
October data highlighted ongoing pressures on Indian service providers capacity, as unfinished business volumes rose for the fifth consecutive month. Little-changed since September, the overall rate of backlog accumulation was solid. A similar trend was seen among manufacturers, where outstanding business rose solidly.
Service sector employment was unchanged over the month, with almost all survey participants reporting the same payroll numbers as in September. Likewise, manufacturing staffing levels stagnated in October.
Higher prices paid for petrol resulted in a further increase in average input prices facing services firms. That said, October saw cost inflation ease to a marginal pace that was much lower than the long-run series average. In fact, less than 2% of monitored firms reported rising cost burdens. Within manufacturing, purchase price inflation reached a 26-month peak.
Softer inflationary pressures assisted service providers with their pricing strategies. Amid reports of efforts to attract new customers, selling prices were left unchanged by around 98% of firms. Overall, a fractional reduction was recorded as the respective index recorded only just below the no-change mark of 50.0. Conversely, factory gate charges rose again, and at the quickest pace since April.
Indian services companies remained upbeat towards the 12-month outlook for activity, but the overall level of sentiment was at a four-month low. Those firms anticipating growth indicated that improved market conditions and aggressive marketing campaigns are expected to boost activity. Nevertheless, worries regarding fierce competition for new work restricted confidence.
Commenting on the Indian Services PMI survey data, Pollyanna De Lima, economist at IHS Markit, and author of the report, said:
The service sector joined its manufacturing counterpart in offering a more upbeat level of performance this month, providing reassurance in the sustainability of the upturn of Indias economy. Incoming new work was the main driver of output growth, with survey respondents highlighting strong demand and improved market conditions.
One underlying concern is the sustained stagnant trend in workforces, with both manufacturers and service providers showing some reluctance to hire. Hopefully, the added pressure on capacity shown in the PMI surveys will translate into job creation as we move towards the end of 2016.
Nonetheless, a healthy level of overall positive sentiment regarding future business opportunities was seen and, with competitive pressures offering just a minor bump in the road of confidence, the services economy looks set to maintain its strong performance in the near term.
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Kerala and Tamil Nadu have also rolled out the National Food Security Act (NFSA). With this, now the Act has been implemented in all the States and Union Territories. As a result, now 81.34 crore persons will get wheat at Rs. 2/ kg and rice at Rs. 3/ kg. This was announced by Union Minister of Consumer Affair, Food & Public Distribution, Shri Ram Vilas Paswan. Being an important initiative for ensuring food security of the people, the Government of India actively pursued with all the States/UTs for its early implementation.
Shri Paswan said now the Center will focus on further reforms in PDS, which will include end to end computerization of the system for which States/UTs are being technically and financially assisted. He said this is important for bringing in transparency in the functioning of the public distribution system (PDS), which is vital feature of NFSA, in order to check leakages and diversion of foodgrains.
Highlighting other initiatives taken by the Centre to make the PDS leakage proof, Shri Paswan said that the beneficiarys data base has been digitized in all the 36 States/UTs, wherein, information is available right upto beneficiary level and is in the public domain. Online allocation of foodgrains in being done in 28 States/UTs, and the entire foodgrain supply chain has been computerized in 18 States/UTs. 100 percent linkage of Ration Cards with Addhar, which is 71% at the moment, will be achieved. Foodgrains losses of FCI have been brought down to 0.04 percent and major FCI depots have been made online.
. In another significant step towards better targeting and leakage-free distribution of foodgrains, direct benefit transfer is being carried out in two different modes. In the first mode, food subsidy is being transferred in cash into the bank account of beneficiaries, who then have the choice to buy foodgrains from the open market. This has been started in UTs of Chandigarh, Puducherry and urban areas of Dadra & Nagar Haveli. The second mode involves automation of fair price shops, for distribution of foodgrains through an electronic point of sale (e-PoS) device which authenticates beneficiaries at the time of distribution and also electronically captures the quantum of foodgrains distributed to the family. As of 31.10.2016, e-PoS devices are operational in 1,61,854 fair price shops.
For smooth functioning of PDS, State Governments are also being provided Central assistance for meeting expenditure of intra-State transportation & handling of foodgrains and fair price shop dealers margin. The assistance for fair price shops dealers margin also contains a component of assistance for installation and operation of Pos devices at fair price shops. So far, Rs. 1874 crore has been released to State Governments by the Government of India in 2016-17.
At this current coverage, monthly allocation of foodgrains to States/UTs under the Act is about 45.5 lakh tons, with subsidy implication of about Rs. 11,726 core per month or about Rs. 1,40, 700 crore per year.
Regarding Sugarcane arrears, Shri Paswan said 2014-15 arrears which were Rs.21,000 at the peak have now come down Rs 205 crore. Prices of pulses except Chana have come down. Regarding wheat prices he said that Government has decided to release additional 10 lakh ton wheat for sale in domestic Market under FCI OMS scheme.
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India Ratings and Research (Ind-Ra) says that East North Interconnection Company (ENICL) is expected to record an availability of 98% for the upcoming months until the damaged section of its transmission line is fully restored, in accordance with the force majeure provisions. The force majeure event is credit neutral, subject to ENICL recording an availability of at least 98% - the target availability to realise full revenue according to the transmission service agreement. The company recorded an availability of 98.507% in August 2016 (source: Availability certificate from Eastern Region Power Committee (ERPC). The period of non-operation of Purnia-Bihar Sharif transmission line due to floods constitutes a force majeure event.
Ind-Ra rates ENICLs non-convertible debentures at IND AAA(SO)/Stable.
The transmission line was affected by flash floods in the Ganges and has not been operating since 23 August 2016. A transmission tower in the river bed was washed away and three adjacent transmission towers were also affected.
ENICLs bank statement confirms the cash availability of about INR450m, which is adequate to meet the estimated construction expenses and debt servicing. ENICL also expects to receive an advance payment from insurers. Insurance covers force majeure and revenue loss due to such events as well. Presence of bank guarantee covering six months debt service provides comfort regarding debt servicing.
In the conference call held on 21 October 2016 with the stakeholders, the company said restoration is expected to be completed by January 2017. The company also informed that contractors have been mobilised to carry out the restoration works. A reasonable time for restoration will be determined by ERPC, generally in discussion with the transmission licensee and delay in restoration beyond such timeline could affect the availability of the project.
The Power Grid Corporation Indias 400kV Patna - Kishanganj transmission line, crossing the Ganges in the same region, was also affected due to the floods. Force majeure was recognised for it, as well.
ENICLs revenue receipts remain unaffected till date. Availability certificate at 98.507% for August 2016 is in place. The company expects the deemed availability of 98% to be approved by ERPC from September 2016 to the time the line is charged and becomes operational again. ERPC has already approved the incident as force majeure and it is highly likely that ENICL will receive full revenue based on deemed availability till the line is made operational. Against this backdrop, the management expects the cash flow mismatches to be minimal and debt service coverage ratios not to be affected.
Ind-Ra would continue to monitor the availability of assets, revenue receipts, proceeds from insurance cover and progress in the restoration of transmission line to assess the impact on the rating, if any. Please refer the last rating rationale here.
ENICL, held by Sterlite Grid1 Limited and Sterlite Power Transmission Limited, has set up a 400kV double circuit transmission line for the import of surplus power from the north eastern and eastern regions to the northern region. The transmission line comprises two sections - from Bongaigaon in Assam to Siliguri in West Bengal (commissioned on 13 November 2014) and from Purnia in West Bengal to Bihar Sharif in Bihar (commissioned on 13 September 2013).
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Ministry of New and Renewable Energy (MNRE) issued Guidelines for transparent bidding process for implementation of Scheme for setting up of 1000 MW Wind Power Project connected to inter-state transmission system (ISTS).
As per Guidelines the Wind Power Projects will be selected through open and transparent competitive bidding followed by e-reverse auction and the capacity may go higher than 1000 MW, if there is demand from Buying Entities. The implementing agency SECI has already floated RfS document for selection of bidders under the Scheme.
Discoms of non-windy State and UTs and also the bulk consumers of any State/UTs who intend to buy 10 MW or more can buy wind power under the Scheme.
PTC India, trading company selected by SECI under the scheme, will sign Power Purchase Agreement (PPA) with wind projects at bidded tariff and back-to-back Power Sale Agreement (PSA) with Buying Entities at a pooled price of the total bids selected. The term of PPA and PSA will be 25 years.
Bidder can bid for a minimum capacity of 50 MW and maximum up to 250 MW. The selected bidder is required to injected wind power at ISTS interconnection point. Bidder is allowed to install 5% of additional rated capacity that will compensate auxiliary consumption and system losses up to interconnection point.
Provision relating to pass through of GST impact, part commissioning, efficiency in generation, performance monitoring have also been stipulated in the guidelines.
The Guidelines are available at http://mnre.gov.in/file-manager/grid-wind/Scheme-for-Setting-up-of-1000-MW-ISTS-connected-Wind-Power-Projects.pdf
Ministry sanctioned a Scheme for setting up of 1000 MW ISTS connected Wind Power Project on 14 June 2016.
The objective of the Scheme is to encourage competitiveness through scaling up of project sizes and introduction of efficient and transparent e-bidding and e-auctioning processes. It will also facilitate fulfilment of Non-Solar Renewable Purchase Obligation (RPO) requirement of non-windy states.
In order to facilitate transmission of wind power from these windy states to non-windy states provisions have been made in the Tariff Policy to waive the inter-state transmission charges and losses for wind power projects and Ministry of Power has already issued order in this regard.
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S&P Global Ratings affirmed its BBB- long-term and A-3 short-term sovereign credit ratings on the Republic of India. The outlook is stable.
The ratings on India reflect the countrys sound external profile and improved monetary credibility. Indias strong democratic institutions and a free press, which promote policy stability and predictability, also underpin the ratings. These strengths are balanced against vulnerabilities stemming from the countrys low per capita income and weak public finances.
Indias governing parties have made progress in building consensus on a passage of laws to address long-standing impediments to the countrys growth. These include comprehensive tax reforms through the likely introduction in the first half of 2017 of a goods and services tax to replace complex and distortive indirect taxes. Other measures include strengthening the business climate (such as through simplifying regulations and improving contract enforcement and trade), boosting labor market flexibility, and reforming the energy sector.
We believe these measures, supported by Indias well-entrenched democracy, will promote greater economic flexibility and help redress public finances over time.
Indias external position remains a credit strength. The country has a floating exchange rate and limited reliance on external savings to fund its growth. While India experiences modest volatility in its terms of trade, we expect it to record a moderate current account deficit of 1.4% in 2016 (2.1% in 2015), and to average similar levels through 2018. Our forecasts are partly informed by our view of enhanced monetary policy credibility. In addition, we expect India to fund this deficit mostly with inflows without adding to debt.
We forecast that Indias external debt net of public and financial sector external assets will average only 5% of current account receipts over 2016-2018 (our forecasts reflect the adoption of the sixth edition of the IMFs Balance of Payments and International Investment Position Manual). Although we expect some decline in Indias external liquidity metrics in the next three years as its banks increasingly turn to external financing, we project that Indias gross external financing needs will remain below its current account receipts plus usable reserves through 2018.
The Reserve Bank of Indias foreign reserves reached US$369 billion as of September 2016 (or four-and-a-half months of current account payments, US$352 billion, in September 2015). The authorities also maintain contingent financing facilities of US$68 billion through bilateral swaps and contingency reserve arrangements.
A rating constraint is Indias low GDP per capita, which we estimate at US$1,700 in 2016. That said, Indias growth outperforms its peers and is picking up modestly. We expect GDP growth of 7.9% in 2016 (6.6% in per capita GDP) and 8% on average over 2016-2018 (6.7% in per capita GDP). We believe domestic supply-side factors will increasingly bind economic performance, and the government has little ability to undertake countercyclical fiscal policy given its current debt burden.
This debt load and Indias overall weak public finances are additional rating constraints. India has a long history of high general government fiscal deficits (averaging 8.8% of GDP over the past 20 years and 7% in the past five years). The deficits have not closed Indias sizable shortfalls in basic services and infrastructure. The countrys fiscal challenges reflect both revenue underperformance and constraints on expenditure. Indias general government revenue, at an estimated 21% of 2016 GDP, is low among rated sovereigns. Its expenditure constraints are mainly related to subsidies (about 2% of 2016 GDP) for food, energy, and fertilizers. Although we expect the administration to pursue medium-term fiscal consolidation, we foresee that planned revenues may not fully materialize and subsidy cuts may be delayed. In the medium term, we expect improved fiscal performance primarily from revenue-side improvements brought about by the coming introduction of the GST and administrative efforts to expand the tax base.
Indias high fiscal deficits have led to the accumulation of sizable general government borrowings (about 69% of GDP, net of liquid assets) and debt servicing costs (over a quarter of general government revenue). We project net general government debt to decline only modestly over our forecast horizon. A high proportion of Indias resident banking sectors balance sheet is exposed to the government sector via loans, government securities, or other claims on the government (partly for regulatory requirements, as banks are required to invest 22% of their net demand and time deposits in government securities).
This implies that there may be limited capacity for Indias banks to lend more to the government without further crowding out private-sector borrowing. Indias government borrowings are mostly denominated in rupees, which mitigates the risks. The small portion of external government debt is mostly sourced from official lenders over long terms and at concessional rates.
These fiscal figures do not include losses of electricity distribution companies. Although we expect their operations to improve with lower oil prices, they will remain exposed to Indias terms of trade. Hence, overall, we believe public finances are set to remain key rating constraints for some time.
India has a divided banking sector. Its private sector banks (about one-quarter of banking system assets) have better profitability, higher internal capital generation, and capitalization with lower-stressed assets than government-owned banks. We estimate public-sector banks need capital infusion of about US$45 billion (2% of GDP) by 2019, given their weaker profitability, to meet Basel III capital norms. The government has committed US$11 billion (0.5% of GDP) to support public-sector banks. The government may have to increase the allocation if the banks are not able to secure capital from alternative sources, such as equity markets, additional tier-1 bonds, and insurance companies. We include this assessment in our assumptions of the sovereigns fiscal balances. Our Bank Industry Credit Risk Assessment for India is 5 (with 1 being the highest assessment and 10 being the lowest).
Combining our view of Indias government-related entities and its financial system, we view the countrys contingent fiscal risks as limited.
The Reserve Bank of India (RBI) has made progress in lowering CPI inflation following the introduction in February 2015 of its medium-term inflation target band (with 4% CPI inflation n++ 2% as the principal nominal anchor for monetary policy). We expect the RBI to achieve the inflation target of 5% by March 2017 as it advances along a glide path to the medium-term inflation target. Further steps to strengthen policy formulation are being taken through the introduction of a monetary policy committee, improved communication, and efforts to strengthen monetary policy transmission (such as through new guidelines requiring banks to determine their lending rates using marginal cost of funds).
We believe these RBI measures will support its ability to sustain economic growth while attenuating economic or financial shocks. We see some risks that strong inflows to the financial sector combined with higher inflation in India vis-n++-vis its trading partners could pressure the real and nominal effective exchange rates, which in turn could hurt competitiveness, if not matched by strong productivity growth.
The stable outlook balances Indias sound external position and inclusive policymaking tradition against the vulnerabilities stemming from its low per capita income and weak public finances. The outlook indicates that we do not expect to change our rating on India this year or next, based on our current set of forecasts.
Upward pressure on the ratings could build if the governmen
Sharp anomalies in the taxation rates and structure across different industries such as telecom, tobacco, textiles, food processing and tourism , should be addressed to as the country moves in a transition period for implementing the Goods and Services Tax, the ASSOCHAM-KPMG paper has said in a joint paper for the GST Council.
The exhaustive paper stated that taxation structure, say, for, tobacco industry should not be based on some emotive issues and be rational enough to check a huge amount of illicit trade which stays outside the taxation net. It said instead of subjecting the tobacco and tobacco products at a higher than the standard rate, the entire sector should be placed under the standard rate with the focus of bringing exempted items under the GST net to eliminate the rampant illicit trade. As per IMF report high rates of GST / VAT lead to manipulation and fraud.
Similarly, for the telecom sector, the paper cautioned that GST may negatively impact the working capital cost since initial landed price of purchases including imports may increase due to increase in tax rates. Cost of procurement of services may increase to more than 18 per cent from the current rate of 15 per cent, which will be a challenge for the industry, especially if CENVAT credit on passive infrastructure and fuel consumption is continued to be denied.
Likewise, the ASSOCHAM-KPMG also went into the impact of GST on the textile sector and suggested ways to find an ideal situation. It said in case, India opts for higher tax rates under the proposed GST regime, and then in the long-term, it will lose its market share to the developing and highly competitive economies.
Hence, it is recommended that India also implements policies that capitalize on the potential of its textile and apparel industry so that the country has a higher bargaining power in procuring export orders in the international trade vis-n++-vis other developing economies. Thus, the Government should make a conscious call to retain lower rate for this industry by introducing a special lower slab of 4 per cent to 6 per cent under the proposed GST regime along with full input tax credit of GST paid on goods and services used in the supply chain.
n++As we are in a transition period, several industry sectors are faced with challenges of adapting to new tax regime. While the GST is a path-breaking reform, its implementation should be calibrated in a manner to cause least disturbance to the existing taxation structure. The Government should unshackle its mind if it really wants to achieve the objectives of GST - Expanding the tax base, reduction in exemptions; mitigating cascading and double taxation, enabling better compliance through lowering of overall tax burden.
The Government should follow the recommendations of eminent economist like Dr. Vijay Kelkar and Dr. Arvind Subramanium, which suggest that moderate rate of taxes will expand the tax base resulting in high collections, which will be the success of GST. Otherwise it will be Old Wine in a New Bottle. n++ Mr. D S Rawat, Secretary General ASSOCHAM said.
Elaborating, the paper said the tobacco industry has been the second largest contributor to Indian excise revenue after the oil and gas sector. The combined tax revenue collected from tobacco industry (Centre and States) was more than Rs 29,000 crore in FY 2014-15. Tobacco products are being cultivated in an area of about 4.68 lakh hectares (0.24 per cent) of total arable land in the country with a production of 800 million kgs13. The tobacco industry provides employment to nearly 4.5 crore people in India comprising farm labourers, farmers, traders, etc. Thus, the sector gives livelihood to a considerable size of the population, particularly rural women, the tribals and labourers who are under stress with no employment alternatives especially when India is experiencing jobless growth for the last many years.
Under the GST regime, it is proposed to levy both dual taxes as well as higher rate of GST. The endeavor should be to tax the hitherto untaxed/ insignificantly taxed segments of the tobacco industry i.e. tobacco products other than cigarette as the consumption of such products is way higher than that of legal cigarettes. Thus, levy of standard GST rates with excise duty on a wider tax base will yield a higher tax revenue collection than continuing with levy of high rates of taxes on only one segment of the tobacco industry i.e. cigarettes.
For tourism sector, at present, different abatement schemes addressing different situations are available under service tax such as 30 per cent in case of composite package and 60 per cent for dining in a standalone restaurant. This is leading to ambiguity and complexity in determining the value on which service tax is payable. In order to overcome such situation, uniform tax treatment i.e. one standard rate dealing with all the situations should be introduced. The rates should be moderate to remain competitive.
Besides, in current regime, all the taxes cumulatively applicable to restaurants (i.e. VAT, Service Tax and other applicable taxes) increases the value on which tax is payable to more than 100 per cent. Such a situation increases the tax cost substantially. Therefore, a mechanism should be introduced whereby value on which GST would be applied should not increase 100 per cent in any case.
As for the food processing, the industry is taxed at a concessional rate/ zero rate. GST is likely to be based on minimal exemptions regime leading to increase in the tax cost for the food processing industry and inflation. A distinction needs to be made based on the necessity. Taking from the example of Canada the food products, which are essential for human consumption, should be taxed at zero rate. As food comprises a major part of the WPI, which is nearly 14.3 per cent, an increase in tax on food items will adversely impact WPI leading to higher inflation in the country.
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Union Agriculture & Farmers Welfare Minister, Shri Radha Mohan Singh brief the media about the outcome of Swachhta Pakhwada and initiatives taken by the Ministry. Shri Singh informed that as per the directions of Honble Prime Minister of India, the Swachhta Pakhwada was observed this year from 16th to 31st October, 2016 in all the three Departments under the Ministry of Agriculture & Farmers Welfare, namely Department of Agriculture, Cooperation & Farmers Welfare, Department of Animal Husbandry Dairying & Fisheries and Department of Agricultural Research & Education. Going out from the confines of the office premises Swachhta drive was carried out in Agricultural Mandis, Fish Markets & villages near each Krishi Vigyan Kendras (KVKs). During the Pakhwada focus was laid to put certain measures that are dynamic and to be continued beyond Pakhwada period. Some of the activities carried out are as under:
n++ Cleaning drives were undertaken in 271 Agricultural Mandis. Further, Swachhta Action Plan has been prepared in which it was decided to make provision of Rs.10 lakh for each mandi for setting up waste management plants under e-Nam scheme. It was also decided that under one flagship scheme, namely RKVY, managed by DAC&FW one percent funds will be spent on Solid and Waste Management. Besides this, various offices under the three Departments were cleaned involving, inter alia, installation of sensors in toilets, installation of motorized grinder and weeding out of unwanted records, removing encroachments and all junk lying in the offices. Honble Agriculture & Farmers Welfare Minister was involved in cleanliness & plantation drive at DAC&FW (Hq.) in Krishi Bhavan on 26.10.2016 and at Agricultural Mandi in Chandigardh on 18.10.2016. Centers of All India Soil & Land Use Survey of India (SLUSI), a subordinate office under DAC&FW, involved local MPs/ public representatives in the Swachhta Activities. Further, a Compost pit has been inaugurated in SLUSI, Kolkata. Compost Machines are being installed in the Mandis in coordination with States.
n++ The National Fisheries Development Board (NFDB), Fishery Survey of India (FSI), Central Institute of Fisheries Nautical and Engineering Training, (CIFNET), National Institute of Fisheries Post Harvest Technology and Training (NIFPHATT), Central Institute of Coastal Engineering for Fishery (CICEF), in coordination with State/UTs conducted the following major activities during the Swachhta Pakhwada:
i. Cleaning of 50 wholesale & retail Fish markets in 15 states was done and also awareness about maintenance of cleanliness was spread during this drive.
ii. Cleaning of Institute Buildings and premises by all the Subordinate institutes under Fishery Division.
iii. Awareness camps including Padayatra (procession) on hygienic Fish handling, maintaining cleanliness in fish markets, cleanliness in processing, cleanliness in marketing etc. and distribution of Pamphlets.
iv. Conducting of State level Workshops viz., (i) Recycling of waste through integrated fish farming for NE States at NFDB NE Center, Guwahati (ii) Waste Water Aquaculture, Nalban, Kolkata etc.
n++ Honble Members of Parliament, State Fisheries Minister from West Bengal, Mayors and Councilors from Kerala and Tamil Nadu, Senior officials from the State Fisheries Department, District Collectors etc. actively participated in the Swachhta Pakhwada activities. Minister of State for Agriculture & Farmers Welfare, Shri Parshottam Rupala also participated in cleanliness activities at Amreli (Gujarat). Also, the Fish vendors, retailers, net makers, students, staff and trainees of the institutes, members of fisherman associations and general public were also involved in the various activities under taken during Swachhta Pakhwada across the State/UTs. The awareness camps/cleaning drives were taken up across the country with the help of State/UT Governments. Some of the notable activities were held in Bilaspur and Durg in Chhattisgarh, Guwahati, Silchar, Cachar in Assam, Bishnupur in Manipur, Nellore in Andhra Pradesh Cuddalore and Nagercoil in Tamil Nadu and also in Kolkatta Bangalore, Lucknow , Ranchi and Kochi.
n++ Department of Agricultural Research & Education/ Indian Council of Agricultural Research, celebrated Swachhta Pakhwada during Oct 16-31, 2016. The ICAR Head Quarters in New Delhi, all the 102 Research Institutes and 648 KVKs took active part in the Pakhwada activities and conducted a wide range of activities which included, cleaning of campuses, residential areas, villages and localities in their vicinity in addition to conducting Seminars, awareness camps, rallies, street plays and expert talks. Through KVKs and institutes promotion of Swachhta activities was done in 3040 villages with the active participation of farmers and village youth. Efforts were made to promote clean farming technologies and package of practices and make best use of farm waste. Central and local leaders, Senior Officers from the Institutes and the ICAR Headquarters participated in the events organised at various places across the country during the pakhwada. IARI, New Delhi has set up a team of sanitation inspectors in each block of their residential complex who organise the dry and wet waste generated from each household separately and recycle it appropriately through the participation of households. On 27th October, 2016 a special Seminar on the topic n++Creating Wealth from Agricultural Wastesn++ was organised at KVK Shikohpur (Gurgaon) in which Minister of State of Agriculture and Farmers Welfare Shri Sudarshan Bhagat was the chief guest. Various technologies making best use of agricultural wastes like, preparation of bio compost, vermin-composting, whey utilization, straw enrichment, waste water recycling, cotton waste management, fisheries waste management and engineering technologies were showcased. More than 350 farmers and Scientists participated in the event. Based on the daily and final reporting of the swachhta activities, the awards shall be given to the outstanding performers in the competitions announced for offices in ICAR Head Quarters, ICAR Research Institute and KVKs and these awards will be given on the foundation day of the ICAR.
n++ In order to sensitize state governments, a video conference was held on 27.10.2016 with representatives of States/ UTs and they have been briefed about the n++Swachhta Pakhwada Activitiesn++. They have also been requested to make adequate provisions in their existing Schemes to prepare Compost from farm wastes. Further, DD Kisan has been asked to make two films- one of Solid Waste Disposal Technology of NCOF and the second on Liquid Waste Disposal technology developed by ICAR. DD Kisan will show these films in their existing programmes.
n++ Rivers play an important role in Swachh Bharat Abhiyan. Ganga is a symbol of cleanliness as well as purity since time immemorial in India. To make the Ganga clean again, it is imperative that organic farming should be promoted in the townships and villages along the banks of the Ganga to minimize the use of harmful pesticides, fertilizers and other chemicals in agriculture. This Ministry has signed a Memorandum of Understanding on 16th September 2016 with Ministry of Water Resources, River Development and Ganga Rejuvenation (MoU). Under this MoU, the people living in 1657 clusters of 1657 Gram Panchayats from Uttarakhand to West Bengal will be motivated to carry out organic farming to reduce use of polluting chemical fertilizers and pesticides to ensure that the Ganga is restored to pristine purity.
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Target Corporation (Target) the second-largest discount retailer in the United States terminated its contracts with Welspun India (WIL: IND AA-/Stable) which may result in a one-time hit to profitability in FY17, however the long term credit profile of the company remains stable, says India Ratings and Research (Ind-Ra). WIL has initiated the review of the entire supply chain and processes through Ernst &Young and is in the process to strengthen its end to end systems for specialised products, namely from cotton procurement to spinning to processing and finishing.
As per discussions with the management, there will be a one-time impact on profitability in FY17, in case WIL bears the cost of the product recall and replacement or discounting. Ind-Ra believes that the one-time cost will not materially impact the credit profile of the company in the long term. The management has confirmed to Ind-Ra that other customers have continued their relationship / contracts with WIL.
Ind-Ra estimates that WILs credit metrics will not breach the negative triggers, namely the net debt/EBITDA being sustained above 3.0x in FY17-18, even after factoring in the one-time payouts and the loss of revenues from Target. Ind-Ra draws comfort from WILs strong liquidity, with cash and cash equivalent of INR6.26bn as at end September 2016 and low debt maturity of INR710m and INR1,990m in 2HFY17 & FY18 respectively. WILs interest out go is also low since most of the term debt drawn in the past is for capex which is covered under the Central and State Technology Upgradation Fund Scheme. WIL also has adequate access to fund based lines of bank facilities to support its working capital requirements.
The reason for Target terminating the contract with WIL was following a product specification issue with respect to provenance of Egyptian cotton in bedsheets. Target contributed to around USD90m of WILs revenues in FY16 (around 10% of WILs revenues). The quality issue was with respect to Egyptian cotton in one of the program of bedsheets valued at around USD8.50m in FY16. WILs overall shipment to Target under the said programme was around USD19m during the period July 2014 to August 2016. In FY16, the US geography contributed 70% of WILs revenues, including sales through Welspun Global Brands Ltd (WGBL; IND AA-/Stable) its sales and marketing arm (Ind-Ra has taken a consolidated view of WIL & WGBL).
Ind-Ra will continue to monitor the development and outcome of Ernst &Youngs review and any other action that may impact the credit profile of the company.
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Debt and currency markets will focus on the slew of global data and on the outcomes of major central bank policy meetings. The 10-year G-sec yield could trade at 6.75%-6.85% (6.79% at close on 28 October 2016). The rupee is likely to trade at 66.55/USD-67.25/USD (66.78/USD at close on 28 October 2016).
Central Banks to Set Tone: A host of meetings of major central banks will set the market tone and determine investors risk appetite. The Bank of Japan kept its monetary policy unchanged. Global markets now await the US Federal Open Market Committees decision on 2 November 2016. Markets are pricing in only a remote possibility of rate movement this week (implied probability from federal funds futures rate probability at around 6%). The Bank of England meets for its monetary policy decision on 3 November 2016.
Bond Markets to Remain Range-bound: In the absence of any surprises on the global developments front, the domestic bond market will trade with a consolidation bias. Domestic investors are unlikely to heavily churn their portfolio ahead of global risks and may adopt a wait-and-watch approach. Foreign investors, on the other hand, have exhibited limited appetite for local bonds.
Risk Appetite to Drive Rupee Movement: The global risk appetite along with the markets ability to tide over FCNR (foreign currency non-resident) redemptions will have a deterministic impact on the rupee trajectory going forward. The near-term outlook for the rupee, against the backdrop of global developments, indicates potential volatility as investors reassess their outlooks. A clear indication by the Fed over its imminent rate hike could rein in any major appreciating bias of the rupee against USD.
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As part of its Coastal Community Development Programme under Sagarmala, the Ministry of Shipping has sanctioned Rupees 10 Crore as part of the first instalment to the Gujarat Maritime Board for capacity building and safety training of 20,000 workers involved in the ship recycling activities at Alanag- Sosiya recycling yard in Bhavnagar district in Gujarat. The total project cost is estimated to be Rupees 30 Crore over a period of 3 years.
The initiative has been identified in the National Perspective Plan (NPP) of Sagarmala for the upliftment of the coastal community and aims to provide health and safety training to the skilled and semi-skilled workers which is required while performing their work at ship recycling yards. Due to the accident prone nature of the ship breaking activity, Gujarat Maritime Board has been running an indigenous Safety Training and Labour Welfare Institute at Alang and has trained about 1.10 lakh labors over the last 12 years. However, with the increased volume of ship recycling over last decade and to bring the training standards at par with the international regulations like UN Body -International Maritime Organization, it is imperative to enhance the capacity build-up and upgrade the existing training standards.
The safety training programme under Sagarmala has been specifically designed and conforms to the Common Norms for Skill Development Schemes under National Skill Qualification Framework notified by the Ministry of Skill Development & Entrepreneurship in Gazette Notification dated 8th August, 2015. A new module has been proposed which would impart comprehensive training to workers about Occupational Safety & Hazards at workplaces that are likely to cause injuries, death or chronic occupational diseases.
In India, ship recycling has emerged as an activity of sizeable volume, supplying raw material to steel industry for both re-rolling and re-melting. The Alang Sosiya Recycling yard is the largest ship-recycling yard in Asia, which employs an average 15000,-25000 labourers at a time and generates about 35 lakh LDT (Light displacement) per annum. On an average 350 numbers of ships are recycled every year in which more than 3 million MT of steel is generated through recycling route.
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In one of the biggest seizure of Narcotic Drugs & Psychotropic Substances, the officers of Directorate of Revenue Intelligence (DRI), apex counter-smuggling agency of the Central Board of Excise and Customs (CBEC), have seized about 23.5 metric tonnes of Mandrax Tablets (Methaqualone), a banned psychotropic substance under Schedule I of NDPS Rules, 1985. Active assistance of officials of Border Security Force at Udaipur has been taken by the officers of DRI for the operation.
Information was received that huge quantities of Mandrax Tablets have been concealed in a premises at Udaipur (Rajasthan) by one Mumbai-based mastermind. On 28th October 2016, a team of officers of DRI raided the premises of M/s Marudhar Drinks, Bhamasha Industial Area, Kaladwas, Udaipur.
During the search, DRI officers detected a hidden room filled with cartons of Mandrax tablets. The total number of tablets are estimated to be about 2 crore in numbers with a weight of about 23.5 metric tonnes (23500 kgs). The international market value of seized tablets is estimated to be over Rs. 3000 crores. This is one of the largest seizures of Methaqualone not only in India but also in the world. The mastermind of the syndicate has been arrested by DRI and follow-up operation is underway to nab others involved with the drug syndicate.
The major raw material for Mandrax is acetic anhydride which was manufactured by the syndicate at Shreenath Industries, Rajsamand. The other raw materials for Methaqualone, apart from acetic anhydride (manufactured at Shreenath Industries) are Anthranillic Acid (which was imported from Indonesia from Kandla Port by misdeclaring it as Mallic Anhydride), ortho toloudiene, phosporous trichloride, caustic soda (procured locally).
Methaqualone is a depressant, overdose of which can lead to coma and death. It is used as a recreational drug in Africa and Asia. It is commonly known as Mandrax, M-pills, buttons, or smarties and is usually smoked mixed with cannabis.
Relentless efforts put in by the Directorate of Revenue Intelligence has resulted in neutralizing 10 other factories across several States in the recent past manufacturing various types of synthetic drugs like Mephedrone, Ketamine, Alprazolam and precursor chemical like Ephedrine.
In last five years, DRI has seized more than 540 kgs of Heroin, and 7400 kgs of ephedrine along with other narcotics and psychotropic substances under NDPS Act 1985. DRI has been in active liaison with international enforcement agencies for combating the menace of drug abuse.
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In a significant initiative, the Ministry of Housing & Urban Poverty Alleviation has enabled online submission of applications by the urban poor for affordable houses under the Pradhan Mantri Awas Yojana(Urban) from tomorrow.
A Memorandum of Understanding (MoU) in this regard was signed today by the Ministry of HUPA and Common Services Centre e-Governance Services India of the Ministry of Electronics and Information Technology, in the presence of respective ministers Shri M.Venkaiah Naidu and Shri Ravi Shankar Prasad.
Out of the over two lakh Common Services Centre across the country, about 60,000 located in urban areas will enable online submission of applications from November 3,2016 at a nominal cost of Rs.25/- per application. As per the MoU, CSCs will also facilitate printing of the acknowledgement receipt with beneficiary photograph which helps applicants in tracking application status. Beneficiaries have to visit the nearest CSC for seeking assistance for seeking benefits of PMAY(Urban) online. In case the beneficiary does not have Aadhar Card, CSCs will enable beneficiaries acquiring them. This process of applying online is e-KYC (Know Your Client) enabled which means applications are submitted after due verification.
Minister of HUPA Shri M.Venkaiah Naidu said on the occasion that Digital India Mission is transforming the country and collaboration with CSC SPV will help in bringing more urban poor under the ambit of PMAY(Urban) by addressing the difficulties associated in physical submission of applications to Urban Local Bodies, for want of adequate help and guidance. He said that while 13.70 lakh urban poor were sanctioned affordable houses during 2005-14, about 11 lakh houses have been already sanctioned for urban poor during the last one year and this will pick up further momentum through online applications.
Minister of Electronics and IT Shri Ravi Shankar Prasad said that CSCs are the front end soldiers of Digital India Mission and are engaged in empowering different sections of the society through skilling and online delivery of services.
The MoU was signed by Shri Amrit Abhijat, Joint Secretary, Ministry of HUPA and Shri Dinesh Tyagi, CEO, CSC e-Governance Services India Ltd.
Through a similar MoU with the Ministry of Urban Development, CSCs have so enabled 15 lakh transactions helping beneficiaries apply on line for construction of toilets under Swachh Bharat Mission in urban areas.
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To ensure timely implementation of real estate projects, the Real Estate (Regulation & Development) Agreement for Sale Rules, 2016 specify in black and white, the rights and obligations of both the promoters and buyers, including the right to terminate the agreement entered into by them in case of default by each other.
Agreement for Sale Rules notified by the Ministry of Housing & Urban Poverty Alleviation notified on October 31, 2016 seeks to eliminate the scope of such agreements being in favour of either of the parties. These Rules are applicable to the Union Territories of Andaman & Nicobar Islands, Dadra and Nagar Haveli, Daman & Diu, Lakshadweep and Chandigarh.
Under these Rules, a 20-page Agreement has been specified in which the date of delivery of possession to buyer is to be clearly mentioned and a schedule of payment as agreed upon by both parties is to be enclosed. Violation of these commitments is to be treated as default, in which case, promoter and buyer can terminate the agreement.
If the buyer defaults by not paying to the promoter for a specified number of demands made by promoter and such a default persists for an agreed upon number of months, promoter can terminate the agreement and cancel the allotment made to buyer. Promoter, can then deduct the booking amount and interest liabilities from the amount to be repaid to buyer.
If promote fails to give ready to move in possession of the apartment or fails to complete the project as per the stipulated time, amounting to default, buyer can then terminate the agreement and is entitled to refund of amount paid with interest in 45 days of such termination. In case, the buyer does not want to withdraw from such a delayed project, he needs to be paid interest till the project is completed. This however, does not apply if the development of project is delayed by force majeure conditions like war, floods, cyclone, drought, etc., which are beyond the control of promoter.
The Agreement to be entered into stipulates that the total price of apartment/plot shall be escalation free except when development charges are increased by the competent authorities.
Agreement provides for certain rights of promoters including timely payments as per the mutually agreed upon payment schedule, interest in case of delay in payments by buyer, additional payments for increase in carpet area up to 3% of corporate area originally offered to buyer and no liability on his part in case of delay in execution of project due to force majeure conditions.
The rights of buyers include timely delivery of possession of property by buyer, refund or payment of compensation with interest in case of delays, rectification of structural defects by promoter over a period of five years from the date of issuance of occupancy certificate etc.
The Agreement for Sale Rules, notified along with General Rules make it mandatory, disclosure of the number of apartment and the floor allotted to buyer, carpet area, number and the area of garage/covered parking, date of grant of commencement certificate by the competent authority, name of the authority that granted required approvals, Regulatory Authority with which the project is registered and such registration number, break up of cost including the cost of apartment, exclusive balcony or verandah, exclusive open terrace, proportionate cost of common area, preferential location charges, taxes and maintenance charges etc.
Underlining that timely execution of project is the essence of the Agreement to be entered in to, the Rules define the role and responsibilities of both buyers and promoters.
The Rules provide for amending the agreement with written consent of both the parties.
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Indian economy would be performing better in the second half of the current fiscal and the trend appears to have begun from the quarter beginning October, 2016 with 66.7 per cent of the latest ASSOCHAM Bizcon Survey respondents expecting uptick in sales, capacity utilization, though positivity on fresh investment is tentative.
Increased spend on infrastructure development, largely in the government is seen as the most important driver for a turnaround in the economic outlook for the current quarter and the last quarter of the financial year 2016-17.
The second best driver for the optimistic outlook is effective policy reforms followed by a stable foreign exchange rate of the Indian currency despite global head winds like uncertainty on account of the Federal Reserves next policy move and the most bitterly fought US Presidential elections.
While a big chunk of Bizcon Survey participants felt the present economic situation appears to be in a better shape than the previous six months on several parameters, the optimism is more pronounced for the second half of the current fiscal.
For instance on the parameter of industrial performance, the ASSOCHAM Bizcon done in September , noted over 83 per cent of the respondents believing things would look better in at the industry level in the ongoing six month period.
n++Good thing is, there is a clear turnaround in business confidence, which holds the key to new investment and consumer confidencen++, the chamber President Mr. Sunil Kanoria said. He said unlike the previous surveys, the latest round indicates a slight uptick even with regard to capacity utilization going forward and the order book. However, generation of new employment and improvement in wages is still some distance away.
The confidence was quite pronounced at the level of individual firms level, as about 89 per cent of the respondents expressed optimism about better days ahead.
In terms of the capacity utilization expectations, over 66 per cent participants shared the opinion that the industry would be operating at higher levels than 70 per cent of the plant or service facility capacities.
The majority (55.6 percent) of the respondents feel that there is an increase in the sales volume during July to September 2016 and also expecting better sales volume during October to December 2016. However, 38.9 percent of the respondents feel that their profits may not change in the short term (October to December 2016). n++The power to increase price on the part of producers and service providers would remain constrained till there is some more improvement in the consumer demandn++, Mr Kanoria said.
In the short horizon, the survey indicates that there will not be any change in the employment scenario in the industry. As majority (55.6 percent) of respondents believe that employment condition will not improve in the coming days.
In terms of the wage costs scenario, the majority of the industry (44.4 percent) opines that in the July to September 2016, there is no change in wages costs. Going forward as well, majority of the industry respondents (50.0 percent) feel that the wage costs will not change in future also (October to December 2016).
As many as, 38.9 per cent respondents felt that there was an increase in the raw material prices. In the shorter horizon industry is not confident about the raw material price witnessing much movement.
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During the FY 2016, domestic Fast-moving consumer goods (FMCG) companies have performed significantly well vis-n++-vis the multinational companies in India, according to the just concluded study by ASSOCHAM-TechSci Research.
The combined overall revenue of selected eight MNCs during the FY 16 registered a total of $9436.66 million, whereas the combined revenue of selected seven Indian FMCG is $11066.46 Million, reveals the joint study.
The highest profit after tax margin of leading Indian FMCG is maintained at 25.48% by ITC as comparative to Procter & Gamble Hygiene & Health Care among selected Leading MNC players in FMCG Sector in India, which maintained the highest profit after tax margin by 17.03% which is comparatively lower.
The study has observed performance analysis of selected Indian FMCG Companies that the ITC is leading amongst others with its recorded 25.48% After Taxes Profit Margin (PAT) during the Financial Year, 2016; as its Profit After Taxes is $ 1514.57 Million against revenue of $ 5944.79 Million. While Britannia Industries stands second among other selected ones in terms of generated revenue by $1222.75 Million during the FY 2016 and has registered growth in revenue by 10.76% as comparative to FY2015, however its After Taxes Profit Margin (PAT) is 9.43% which is comparatively lower than its peers in the sector.
The performance of Dabur India is next to ITC in terms of After Taxes Profit Margin (PAT) registered with 16.34% which is $ 144.54 Million against the revenue of $884.62 Million. In terms of After Taxes Profit Margin (PAT), the Godrej Consumer Products is close to Dabur India with 15.37% which is on the basis of $113.80 Million of PAT against revenue of $740.24 Million.
The Marico also performed closely with that of Godrej Consumer Products as the percentage of PAT margin remained 14.19% which comes out on the basis of the disclosed figure of PAT $107.98 Million against the $761.14 Million of revenue. About the performance of Amul, although the company has revenue $743.69 Million, which is slight more than Godrej Consumer Products but the PAT margin is least amongst others having just 0.32%. In case of Amul, the reason can be the fact of controlled prices and nature of milk and milk made products.
The Performance of Patanjali Ayurved has been unmatched and leaves behind all its competitors in the segment with record growth of 146.31% in the revenue on Y-o-Y basis. As the Patanjali Ayurved has achieved the revenue of $769.23 Million during FY 2016 against just $ 312.31 Million during FY 2015.
After analyzing the performance of selected Multi-National Companies of FMCG Sector in India, the study has observed that the Hindustan Unilever is leading with its revenue earned $4921.10 Million with 3.84% Y-o-Y growth in the revenue. But its PAT margin during the year is $628.06 Million i.e only 12.76% which is comparatively lower than its competitor. As data analysis shows that Procter & Gamble Hygiene & Health Care is leading amongst others with its recorded 17.03% After Taxes Profit Margin (PAT) during the Financial Year 2016 because its Profit After Taxes is $ 65.10 Million against revenue of $ 382.20Million.
Where the performance of Glaxosmithkline Consumer Healthcare has recorded 15.94% PAT margin for having its After Taxes Profit of $105.68 Million against Revenue of $662.88Million, the Colgate-Palmolive (India) achieved 13.85% PAT Margin with its $88.69Million against revenue of $640.35 Million.
Gillette India achieved 10.19% PAT Margin for its just $32.77Million of PAT against $321.62 Million of revenue. The performance of Nestle India has declined during the FY2016 by 17.04% in the revenue achieved upto $1257.74 Million comparative to FY2015 when it was $1516.13 Million. Hence the Overall PAT margin during the year remained only 6.89%. The logic behind the data decline of Nestle India can be publicly known facts of post Maggy issue.
About the performance of PepsiCo India, there is 13.00% growth in the revenue during the FY16, when it has achieved $1250.77 Million as Compared to $1106.88 Million during FY15 and thereby the company could manage to reduce the negative Profit After Taxes from $43.08 Million in FY15 to $ 27.23 Million during FY16 however, company could not make it possible to have satisfactory overall profit as there was negative PAT margin by 2.18%.
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