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Extension of time limit for taking central excise registration of an establishment by a jeweller
Jul 02,2016

The Central Government announced that the time limit for taking central excise registration of an establishment by a jeweller is being extended up to 31 July 2016.

The liability for payment of central excise duty will be with effect from 1st March, 2016. However, assessee jewellers may make payment of excise duty for the months of March, 2016; April 2016 and May, 2016 along with the payment of excise duty for the month of June, 2016 upto the extended date of 31.07.2016.

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India improves its ranking by 19 places on World Bank Logistics Performance Index
Jul 01,2016

India has improved its ranking in the World Bank Groups bi-annual Logistics Performance Index 2016, jumping from 54th in 2014 to 35th in 2016. This was announced by the World Bank Group in its recent launch of the report. In the latest ranking India has gone past countries like New Zealand, Thailand, Saudi Arabia, Iceland, Latvia and Indonesia who were ahead of it in the index. Indias jump of 19 positions in the ranking demonstrates the commitment of various Ministries and agencies of Government of India to make it easy to do business in India. Dr. Jim Yong Kim, President of World Bank met the Prime Minister of India recently and congratulated him on this achievement.

The World Bank studies the policy regulation as well as supply chain performance outcomes across six sub-indices of the Logistics Performance Index and ranks countries based on their performance in all the indices. It is a perception survey based on the feedback of operators on the ground as they are the people who can best assess the aspects of logistics performance. Feedback of companies responsible for moving goods around the world like multinational freight forwarders and express carriers is taken on a structured online survey. Various aspects of international trade relating to streamlining border clearance procedures, ensuring access to physical infrastructure and quality of logistics services are assessed.

Among the six sub-indices of the Logistics Performance Index, India improved the most on the efficiency of customs and border management clearance, jumping from 65 in 2014 to 38 in 2016. Recent reforms at Customs, such as the introduction of a Single Window Interface for Trade (SWIFT) and electronic messaging system between Shipping lines and Custodians for electronic delivery order,filing of import and export declarations and manifests online with digital signature,extension of Customs risk management system to other regulatory agencies to ensure risk-based inspection, reduction of documents required for export and import, extension of 24x7 customs clearance facilities to 19 seaports and 17 air cargo complexes, removal of limit on the number of consignments released under direct delivery,etc.,have resulted in improvement in the indicator.

India also improved significantly in the following sub-indices:

- The ability to track and trace consignments, improving from 57 to 33;

- The quality of trade and transport infrastructure, improving from 58 to 36; and

- The competence and quality of logistics services, improving from 52 to 32.

On the remaining two sub-indices - the ease of arranging competitively priced shipments and the frequency with which shipments reach consignees within scheduled or expected delivery times - by 5 and 9 places respectively.

The World Bank Groups bi-annual report Connecting to Compete 2016: Trade Logistics in the Global Economy, launched on Wednesday, captures critical information about the complexity of international trade. The Logistics Performance Index (LPI) within the report scores 160 countries on key criteria of logistics performance.

The scores are based on two sources of information: a worldwide survey of logistics professionals operating on the ground (such as global freight forwarders and express carriers), who provide feedback on the countries in which they operate and with whom they trade; and quantitative data on the performance of key components of the supply chain, such as the time, cost and required procedures to import and export goods.

Global trade depends on logistics and how efficiently countries import and export goods determine how they grow and compete in the global economy. Countries with efficient logistics can easily connect firms to domestic and international markets through reliable supply chains. Countries with inefficient logistics face high costs - both in terms of time and money - in international trade and global supply chains. Indias improvement in Logistics Performance Index is ample evidence that our competitiveness in manufacturing and services is also improving which will provide the required boost to the Make in India programme.

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In-principle agreement reached on all pending issues on Double Taxation Avoidance Agreement between India and Cyprus
Jul 01,2016

An official level meeting between India and Cyprus took place in New Delhi on 28 and 29 June, 2016, to finalize the new India Cyprus Double Taxation Avoidance Agreement, wherein all pending issues, including taxation of capital gains, were discussed, and in-principle agreement was reached on all pending issues. It was agreed to provide for source based taxation of capital gains on transfer of shares. However, a grandfathering clause would be provided for investments made prior to 1.4.2017, in respect of which capital gains would be taxed in the country of which taxpayer is a resident. These provisional agreements will now be placed before the Cabinet for its approval, subsequent to which the new tax treaty can be signed by the two countries.

Both sides also discussed the issue of notification of Cyprus under section 94A of Income-tax Act, 1961. It was agreed that India will consider rescinding the said notification with effect from 1st November, 2013, and will be initiating the process for the same. Both sides expressed satisfaction with the progress achieved in the meeting, and hoped that it would lead to resolution of all pending matters at the earliest.

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India Manufacturing sector growth at three-month high
Jul 01,2016

Supported by a stronger increase in new business inflows, Indian manufacturers raised production at a faster rate during June. At 51.7 in June, the seasonally adjusted Nikkei India Manufacturing Purchasing Managers IndexTM (PMI), pointed to a further improvement in the health of the sector.

The favourable operating environment encouraged businesses to purchase additional inputs, but was insufficient to generate jobs. Meanwhile, cost inflation eased, while output charges were broadly unchanged. Rising from 50.7 in May, the headline index was at a three month high.

The main contributing factors to the upward movement in the PMI were stronger rates of growth in new orders and output, both of which reached three-month highs in June. Incoming new work rose across the three broad areas of the manufacturing economy, as did production. The best-performing category was consumer goods.

Offsetting the decline seen in May, the first in 32 months, new export orders increased in June. However, the rate of expansion was only slight and below the long-run series average. Two of the three monitored market groups recorded higher levels of new business from abroad, the exception being intermediate goods. Boosted by sustained growth of order books, buying levels rose in June.

Despite being slight, the rate of expansion was the quickest in the current six-month sequence of increases. Purchasing activity grew in each of the three sub-sectors, led by consumer goods. Data implied that the upturn in buying levels placed pressure on the capacity of vendors, as average delivery times lengthened to the greatest extent since April.

June saw input costs increase for the ninth month running, with survey participants reporting higher prices paid for metals, chemicals, plastics, textiles, petrol, food and paper. That said, the rate of inflation eased to the slowest since March, and was moderate overall. Concurrently, factory gate charges were broadly unchanged in June. Where average selling prices remained the same as in May, at 95% of firms, panellists reported efforts to remain competitive.

There was broadly no change to manufacturing employment in India during June, with some panellists reporting sufficient staff to work on both new and existing projects and others noting shortages of skilled labour in the country. Finally, there were diverging trends with regards to stock levels in June, as post-production inventories dipped and holdings of purchases increased.

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Storage status of 91 major reservoirs of the country is 15% of total storage capacity as on June 30, 2016
Jul 01,2016

The water storage available in 91 major reservoirs of the country for the week ending on June 30, 2016 was 23.94 BCM which is 15% of total storage capacity of these reservoirs. This was 48% of the storage of corresponding period of last year and 70% of storage of average of last ten years.

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

REGION WISE STORAGE STATUS:-

NORTHERN REGION

The northern region includes States of Himachal Pradesh, Punjab and Rajasthan. There are 6 reservoirs under Central Water Commission (CWC) monitoring having total live storage capacity of 18.01 BCM. The total live storage available in these reservoirs is 4.37 BCM which is 24% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 44% and average storage of last ten years during corresponding period was 32% of live storage capacity of these reservoirs. Thus, storage during current year is less than the corresponding period of last year and is also less than the average storage of last ten years during the corresponding period.

EASTERN REGION

The Eastern region includes States of Jharkhand, Odisha, West Bengal and Tripura. There are 15 reservoirs under CWC monitoring having total live storage capacity of 18.83 BCM. The total live storage available in these reservoirs is 3.18 BCM which is 17% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 29% and average storage of last ten years during corresponding period was 17% of live storage capacity of these reservoirs. Thus, storage during current year is less than the corresponding period of last year but is equal to the average storage of last ten years during the corresponding period.

WESTERN REGION

The Western region includes States of Gujarat and Maharashtra. There are 27 reservoirs under CWC monitoring having total live storage capacity of 27.07 BCM. The total live storage available in these reservoirs is 2.42 BCM which is 09% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 25% and average storage of last ten years during corresponding period was 22% of live storage capacity of these reservoirs. Thus, storage during current year is less than the storage of last year and is also less than the average storage of last ten years during the corresponding period.

CENTRAL REGION

The Central region includes States of Uttar Pradesh, Uttarakhand, Madhya Pradesh and Chhattisgarh. There are 12 reservoirs under CWC monitoring having total live storage capacity of 42.30 BCM. The total live storage available in these reservoirs is 8.65 BCM which is 20% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 30% and average storage of last ten years during corresponding period was 17% of live storage capacity of these reservoirs. Thus, storage during current year is less than the storage of last year but better than the average storage of last ten years during the corresponding period.

SOUTHERN REGION

The Southern region includes States of Andhra Pradesh, Telangana, AP&TG (Two combined projects in both states) Karnataka, Kerala and Tamil Nadu. There are 31 reservoirs under CWC monitoring having total live storage capacity of 51.59 BCM. The total live storage available in these reservoirs is 5.33 BCM which is 10% of total live storage capacity of these reservoirs. The storage during corresponding period of last year was 33% and average storage of last ten years during corresponding period was 24% of live storage capacity of these reservoirs. Thus, storage during current year is less than the corresponding period of last year and is also less than the average storage of last ten years during the corresponding period.

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

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Banks may have to take 40-70 % hair cuts in 240 firms: ASSOCHAM-Ind-Ra Study
Jul 01,2016

Lenders would need to take hair cuts or cut their losses between 40 and 70 per cent in at least 240 companies which are under heavy debt mostly in steel, construction, power, textiles and infrastructure, an ASSOCHAM-India Ratings and Research (Ind-Ra) joint study has pointed out.

The study to be released at an ASSOCHAM programme in Mumbai tomorrow, suggests asset reconstruction with the help of a revamped Asset Reconstruction (ARCs) sector for achieving a sustainable level of bank debts, going down the non-performing assets (NPAs).

Since in the current cycle most of the stress is driven by stretched balance sheet, viability assessment needs to be looked at on a going concern basis. However, a mix of measures such as recognition of sustainable debt, ability to bring third-party investors in Security Receipts (SR) could set the ball rolling for the revival of distressed companies.

It suggested encouraging third-party capital to replace banks investment in SRs. The current model of banks investing in SRs backed by their own distressed debt has its own limitations. The current model could still be useful for cases of liquidation where further capital commitment is not called for. The benefit of the prevailing model was that it allowed banks to capture the contingent upside and also in some cases harmonise the required provisioning by investing in SRs.

However, this model has had a number of issues such as misalignment of interest between banks and ARCs, the existence of an unsustainable level of debt delaying the restructuring of companies and banks having to subsist with the problem in their investment books. n++This problem can be solved if banks are allowed to transact at realistic haircuts with the benefit to amortise the loss on sale as long as third-party investors are ready to fully step into their positions.

Asset reconstruction companies need re-positioning; the issue of bad debt amounting to Rs 6 trillion would need ARCs to re-orient themselves, if they are to facilitate the resolution process. With the 15 per cent mandatory investment rule and the capital constraint, ARCs would need to be supported with third-party capital for any meaningful movement on the bad debt issue.

The study argues that the current capital position of ARCs can at most take care of 10 per cent of the bad debt in the Indian banking system. Also, a debt-led strategy for investing in SRs that result in the leverage of more than 2x equity could create liquidity issues for ARCs and may not be coherent with the long gestation period for recovery in India.

It said the adoption of the Insolvency and Bankruptcy Code is likely to streamline debt resolution. However, it is important that the impact of the new regime is reflected in better recoveries or lower loss given default over a period of time.

Currently, India is classified as a Group D country by Fitch with recoveries expected in the range of 30-50 per cent given the level of creditor-friendliness of its insolvency regime. An improved recovery in at least the 50-70 per cent range will be the real achievement of the effective implementation of the code. In developed countries such as the United States, continued operation as going concern after emergence from bankruptcy as reorganised company or via sales of the whole company as a going concern is a much more common outcome than liquidation.

While releasing the paper Mr.Sunil Kannoria, President ASSOCHAM said, the number of ARCs has been inadequate vis-n++-vis the need. These ARCs typically have low capital base and their methodology towards addressing needs of troubled companies has an overt financial focus. The average recovery rate for ARCs in India has been around 30 per cent of the principal and the average time taken has been anything between 4 to 5 years.

However, that scenario is about to change. In the Union Budget 2016-17, 100 per cent foreign direct investment (FDI) has been allowed for ARCs which is expected to substantially improve their capital base. Moreover, the introduction of the Bankruptcy Code has now positioned ARCs as a very important intermediary between lenders and borrowers, adds its chief.

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Nikkei India Manufacturing PMI: Output growth at three-month high
Jul 01,2016

Supported by a stronger increase in new business inflows, Indian manufacturers raised production at a faster rate during June 2016. The favourable operating environment encouraged businesses to purchase additional inputs, but was insufficient to generate jobs. Meanwhile, cost inflation eased, while output charges were broadly unchanged.

The seasonally adjusted Nikkei India Manufacturing Purchasing Managers Index TM (PMI)TM - a composite single-figure indicator of manufacturing performance - pointed to a further improvement in the health of the sector. Rising from 50.7 in May, the headline index was at a three-month high of 51.7 in June 2016.

The main contributing factors to the upward movement in the PMI were stronger rates of growth in new orders and output, both of which reached three-month highs in June. Incoming new work rose across the three broad areas of the manufacturing economy, as did production. The best-performing category was consumer goods.

Offsetting the decline seen in May, the first in 32 months, new export orders increased in June. However, the rate of expansion was only slight and below the long-run series average. Two of the three monitored market groups recorded higher levels of new business from abroad, the exception being intermediate goods.

Boosted by sustained growth of order books, buying levels rose in June. Despite being slight, the rate of expansion was the quickest in the current six-month sequence of increases. Purchasing activity grew in each of the three sub-sectors, led by consumer goods.

Data implied that the upturn in buying levels placed pressure on the capacity of vendors, as average delivery times lengthened to the greatest extent since April.

June saw input costs increase for the ninth month running, with survey participants reporting higher prices paid for metals, chemicals, plastics, textiles, petrol, food and paper. That said, the rate of inflation eased to the slowest since March, and was moderate overall.

Concurrently, factory gate charges were broadly unchanged in June. Where average selling prices remained the same as in May, at 95% of firms, panellists reported efforts to remain competitive.

There was broadly no change to manufacturing employment in India during June, with some panellists reporting sufficient staff to work on both new and existing projects and others noting shortages of skilled labour in the country.

Finally, there were diverging trends with regards to stock levels in June, as post-production inventories dipped and holdings of purchases increased.

Commenting on the Indian Manufacturing PMI survey data, Pollyanna De Lima, Economist at Markit and author of the report, said: Indian factories registered a welcome upturn in growth of both production and new orders mid-way through 2016, but producers clearly remain stuck in a low gear. Rates of expansion remain weak by historical standards, with the PMI average for April-June being lower than that seen in the prior quarter and thereby signalling a softer contribution from the sector to overall GDP during this period.

The domestic market continues to be the main growth driver, as the Indian economic upturn provides a steady stream of new business. Nonetheless, there were also signs of an improvement in overseas markets, as new foreign orders rose in June following a decline in May. However, it looks as if lacklustre global demand remains a headwind for Indian manufacturers.

Sustained growth of output and order books failed to encourage producers to raise employment. In fact, it has been roughly three years since the sector has seen any meaningful job creation.

Another key aspect from the latest PMI results is the trend in prices. Purchasing cost inflation softened, while selling prices were broadly unchanged. This lack of inflationary pressures provides the RBI with further leeway to boost economic growth through cutting its benchmark rate.

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Growing e-commerce to invest $8 billion in infra, logistics: study
Jul 01,2016

With the growing popularity of online shopping which is expected to catapult the e-commerce market to $80 billion by 2020 in India, the online companies are expected to invest close to $6-8 billion in logistics, infrastructure and warehousing in the next few years, an ASSOCHAM-PwC study has said.

Presently, there is a very low level of air cargo penetration characterised by only a few airports equipped to handle large volumes of express delivery parcels. As the e-commerce gathers momentum and moves to the tier-II and tier-III cities, there will be increasing demand of expanding air cargo connectivity to smaller towns. The industry would invest in about $8 billion by 2025, the study noted.

The overall e-commerce industry, valued at $25 billion has been growing at a compounded annual growth rate of about 35-40 per cent each year, the study said, adding that it is expected to cross the $100 billion mark in five years, adds the paper.

n++Innovations are very important in this sector, as the demand is always for more reach and faster shipping at lower costs. The companies will need to invest in automation, while utilising existing resources welln++, ASSOCHAM Secretary General Mr D S Rawat said.

In India roughly 60-65 per cent of the total e-commerce sales are being generated by mobile devices and tablets. Shopping online through smart phones is proving to be a game changer, and industry leaders believe that m-commerce could contribute up to 70 per cent of their e-commerce revenues, noted study.

n++Increasing internet and mobile penetration, growing acceptability of online payments and favorable demographics have provided the e-commerce sector in India the unique opportunity for the companies to connect with their customersn++, adds ASSOCHAM paper.

The study notes currently India operates at a very low level of air cargo penetration characterised by only a few airports equipped to handle large volumes of express delivery parcels. It predicts as the market gathers momentum and moves to the tier-II and tier-III cities, there will be increasing demand of expanding air cargo connectivity to smaller towns.

India is successful in becoming the largest e-commerce market in the world. The rapid transformation in logistics, innovation, consumerism and productivity prove to be an interesting case study for other emerging economies, Rawat said.

The growth of the e-commerce industry has a huge potential in the country translating into beneficial effects for the manufacturing industry, infrastructure and jobs, mentioned study.

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International Solar Alliance Cell and World Bank Signs Declaration for Promoting Solar Energy
Jul 01,2016

On the occasion of the visit of the World Bank President to India, the Interim Administrative Cell of the International Solar Alliance (ISA Cell) and the World Bank declared their intention to promote solar energy globally.

The declaration was signed & exchanged by Shri Upendra Tripathy, Secretary, Ministry of New and Renewable Energy and Chairperson, ISA cell and Mr Onno Ruhl, India Country Director, World Bank in the presence of Shri Arun Jaitley Union Finance Minister, Shri Piyush Goyal, Minister of State (IC) for Power, Coal and New & Renewable Energy, and Dr Jim Yung Kim, President, World Bank.

Major areas identified for working jointly include:

a) Developing a roadmap to mobilize financing

b) Developing financing instruments including credit enhancement, reduce hedging costs/currency risk, bond raising in locally denominated currencies etc. which support solar energy development and deployment

c) Supporting ISAs plans for solar energy through technical assistance and knowledge transfer;

d) Working on mobilization of concessional financing through existing or, if needed, new trust funds

e) Supporting RE-INVEST events. In addition, both sides decided to work in other areas and themes as jointly decided. France was represented by H.E Mr Christan TESTOT, Minister Counsellor and Mr. Frann++ois-Joseph Schichan, Second Counsellor (Political), French Embassy in India

The Joint Declaration by the ISA cell and the World Bank will help in accelerating mobilization of finance for solar energy, and the Bank will have a major role in mobilizing more than US $1000 billion in investments that will be needed by 2030, to meet ISAs goals for the massive deployment of affordable solar energy.

In a short span of time ISA activities have increased significantly. Two Programmes of the ISA n++Affordable finance at scalen++ and n++Scaling solar applications for agricultural usen++, have been launched. In addition, USA, UK and EU have evinced interest in developing additional programmes. Further, Interim Administrative Cell of International Solar Alliance (ISA Cell) and the UNDP have joined hands for promoting ISA objectives in 121 prospective ISA member countries. This apart establishment of 24x7 knowledge centre is under way with the help of UNDP and NIC, Government of India.

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Government Notifies Rules regarding Fair market value and reporting requirement for Indian concern
Jul 01,2016

Under section 9 of the Income-tax Act, 1961 (the Act), any income arising from transfer of any share of or interest in a foreign company or entity that derives its value substantially from the assets located in India, is deemed to accrue or arise in India.

. For this purpose, following were to be prescribed:

n++ the manner of computation of fair market value (FMV) of Indian and global assets of the foreign company or entity,

n++ determination of income attributable to assets situated in India, and

n++ information or documents required to be maintained and furnished by the Indian concern under section 285 of the Act.

The draft rules in this regard were formulated and placed in public domain on 23.05.2016 for comments from stakeholders and general public. After due consideration of the comments received, the Government has notified the Rules vide S.O. No. 2226 (E) dated 28.06.2016. These rules will be applicable from the date of publication in the Official Gazette, i.e.; 28.06.2016. The rules and formulation thereof is part of the Governments continuing effort at providing predictable, transparent and fair tax regime.

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CBDT issues new set of FAQs to clarify queries regarding Income Declaration Scheme, 2016
Jul 01,2016

The Income Declaration Scheme, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income and assets. The Scheme came into effect on 1st June, 2016. Declarations under the Scheme may be filed upto 30th September, 2016. Vide Circular No. 17 dated 20th May and Circular No. 24 dated 27th June, 2016 the Board has issued clarifications in the form of FAQs.

The CBDT has since received further queries from stakeholders seeking clarifications about various provisions of the Scheme. The issues raised have been examined and a further set of eleven FAQs have been issued today vide Circular No.25 of 2016. The circular inter alia provides clarifications on issues such as confidentiality of information disclosed in the declaration, allowability of TDS credit against declared income, enquiry in respect source of income and payment of tax and initiation of enquiry against third parties on the basis of information furnished in the declaration.

An issue regarding the advantage of declaring undisclosed income and assets under the Scheme vis-n++-vis declaration of the same as current income for Assessment Year 2017-18 was also raised. In this regard it has been clarified that declaration of undisclosed income and assets as current income for Assessment Year 2017-18 would attract prosecution for false verification and also cannot explain acquisition of undisclosed assets in the past years. Attention of taxpayers has also been drawn to the comprehensive data-mining programme launched by the Department which will provide pin-pointed information about transactions undertaken by the taxpayer and the year to which the same relate.

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Eight crore infrastructure sector output rises 2.8% in May 2016
Jun 30,2016

The output of Eight Core Industries comprising nearly 38% of the weight of items included in the Index of Industrial Production (IIP) rose 2.8% in May 2016 over May 2015. Its cumulative growth 5.5% in April-May 2016.

Coal production increased by 5.5% in May 2016 over May 2015. Its cumulative index during increased by 2.3% in April-May 2016.

Crude Oil production declined 3.3% in May 2016, while slipped 2.8% in April-May 2016. The Natural Gas production also fell 6.9% in May 2016 and 6.9% in April-May 2016.

Petroleum Refinery production rose 1.2% in May 2016, while jumped 9.0% in April-May 2016. Fertilizer production zoomed 14.8% in May 2016, while galloped 11.6% in April-May 2016.

Steel production increased by 3.2% in May 2016, while increased by 4.6% in April-May 2016.

Cement production moved up 2.4% in May 2016, while increased 3.4% in April-May 2016. Electricity generation gained 4.6% in May 2016, while increased 9.4% in April-May 2016.

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Indias external debt rises to US$ 485.6 billion at end March 2016
Jun 30,2016

Indias external debt at end-March 2016 witnessed an increase of 2.2% to US$ 485.6 billion at end March 2016 over its level at end-March 2015, primarily on account of a rise in outstanding NRI deposits. Furthermore, the increase in the magnitude of external debt was partly offset by valuation gain resulting from the appreciation of the US dollar vis-a-vis the Indian rupee and other major currencies. The external debt to GDP ratio stood at 23.7% at end-March 2016, a shade lower than its level of 23.8% at end-March 2015.

Valuation gain, due to appreciation of the US dollar against the Indian rupee and other major currencies, was placed at US$ 5.9 billion. Excluding the valuation effect, the increase in external debt would have been higher by US$ 16.4 billion at end-March 2016 over the level at end-March 2015.

Commercial borrowings continued to be the largest component of external debt with a share of 37.3%, followed by NRI deposits (26.1%) and short-term trade credit (16.5%).

The share of short-term debt (original maturity) in total debt witnessed a decline over the corresponding quarter of the previous year. Similarly, the ratio of short-term debt (original maturity) to foreign exchange reserves declined to 23.1% as at end-March 2016 (25.0% as at end-March 2015).

On residual maturity basis, short-term debt constituted about 42.6% of total external debt at end-March 2016 (38.2% at end-March 2015) and stood at 57.4% of total foreign exchange reserves (53.2% at end-March 2015) (Table 2). The rise in short-term debt (residual maturity) mainly reflects payments due on account of maturing of FCNR(B) deposits mobilised under the special swap scheme in 2013.

US dollar denominated debt continued to be the largest component of Indias external debt with a share of 57.1% at end-March 2016, followed by Indian rupee (28.9%), SDR (5.8%), Japanese Yen (4.4%) and Euro (2.5%).

Across borrower categories, the outstanding debt of Government as well as non-Government debt increased and their shares in total external debt were 19.2% and 80.8%, respectively, at end-March 2016.

Debt service payments increased to 8.8% of current receipts at end-March 2016 as compared to 7.6% at end-March 2015.

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Ind-Ra: Wind Energy Developers Face Possible Incentive Cut
Jun 30,2016

The Gujarat Electricity Regulatory Commissions (GERC) proposal to share the generation based incentive (GBI) as per the discussion paper on wind projects, may result in 75bp lower project internal rate of return (IRR) for wind energy developers projects, says India Ratings and Research (Ind-Ra). Ind-Ra believes such policy level changes which impact the developer IRRs would lead to a slowdown in wind capacity addition.

In what could turn out to be a fresh headwind for the wind sectors already uncertain capacity addition, the GERC in a discussion paper has proposed sharing of the GBI in the ratio of 50:50 with the distribution licensee/end consumer. Ind-Ra opines such sharing of the GBI, if approved by GERC is likely to result in the decline of project IRRs by 75bp and equity IRR by 125bp. As per the current policy, the wind developers are entitled to receive an incentive of INR0.50/kwh for a unit of electricity generated.

In case a similar policy were to be implemented by other state electricity regulatory commissions, the impact on IRRs will be higher for states where the tariffs are low, since the GBI incentives would form a bigger share of the overall income stream. Additionally, the introduction of GBI was primarily to boost investments into the sector, serving as an additional source of revenue which could improve the project IRR. Sharing the GBI goes against the underlying objective of incentivising developers toward generating renewable energy.

Ind-Ra believes developers in order to protect their IRRs may need to either renegotiate with the wind turbine manufacturers to lower the capital cost or to increase hub heights in order to improve capacity utilisations.

Ind-Ra notes that investor interest has been waning in the wind sector in the last one year. The main reason for low investor interest is the lack of proper policy direction with respect to continuation of GBI beyond FY17, non-signing of fresh power purchase agreements by states electricity distribution companies particularly Maharashtra leading to stranded capacity, substantial delay in payments by some of the key wind capacity rich states (namely Maharashtra and Rajasthan) and a decline in wind tariffs in some states as highlighted in Ind-Ras recent Falling Wind Tariffs to Impact IRR in Wind Energy. Part of the reason for lower investor interest is also the Government of Indias thrust on solar capacity addition, since solar tariffs have reached INR4.5/kwh-INR5/kwh and are basis competitive bidding with a potential to fall further, if the equipment costs continue to fall. While on the other hand, wind tariffs continue to be on a preferential basis.

Ind-Ra expects a decline in capacity addition in FY17 compared to the highest wind capacity addition of 3.2GW in FY16. Installed capacity in FY16 grew by 14% to reach 26.7GW. Gujarat is among the top five states namely Tamil Nadu (29%), Maharashtra (17%), Rajasthan (15%), Gujarat (15%) and Karnataka (11%) which account for 86% of the total wind capacity installed in India. In the absence of GBI and accelerated depreciation benefits in 2013, capacity installed fell by 47% to 1.7GW in FY13. Ind-Ra believes investments in the renewal energy sector still depend on government incentives namely accelerated depreciation and GBI benefits.

Moreover, the ambitious plan set out by the Government of India for 60GW installed capacity by 2022 requires three states namely Rajasthan, Gujarat and Maharashtra to add nearly 27% of the incremental capacity. Ind-Ra believes that the continuous policy changes and non-developer friendly policies will make it difficult for key states to attract developers.

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Indian Railways PSU Rites exports modern passenger coaches to Bangladesh
Jun 30,2016

RITES, a PSU under the Ministry of Railways, has supplied 60 Broad Gauge passenger coaches (LHB type) to Bangladesh Railway (BR) against a contract agreement of 120 coaches. An intercity train with these coaches was flagged off at Dhaka by H.E. Sheikh Hasina, Honble Prime Minister of Bangladesh in presence of H.E. Mazbul Haque, Honble Railway Minister of Bangladesh and H.E Harsh Vardhan Shringla, High Commissioner of India in Bangladesh.

Two train sets, comprising of 12 coaches each- 2 AC chair car, 2 first AC sleeper car, 6 non-AC chair car and 2 power car, will presently be deployed to operate 3 pairs of inter-city trains between Dhaka and Rajshahi. These modern stainless steel coaches manufactured by Rail Coach Factory, Kapurthala, are equipped with Fiat bogies capable of running at maximum speed of 160 kmph.

RITES had earlier supplied 26 Broad Gauge diesel electric locomotives (3100 HP) manufactured by Diesel Locomotive Works , Varanasi which are successfully running broad gauge trains of Bangladesh Railway.

Shri Rajeev Mehrotra, Chairman and Managing Director, RITES said that RITES is making all efforts to augment export of rolling stock manufactured at Indian Railways Production Units. Response from South Asian markets is very encouraging.

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