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Sharp Rise in Cotton Prices to Hurt Ginners and Spinners Profitability by Over 15% in FY17
Jul 25,2016

The sharp rise of over 35% in domestic cotton prices since May 2016 will squeeze ginners and spinners profitability by over 15%, says India Ratings and Research (Ind-Ra). Ind-Ra expects prices to remain elevated around the current levels of INR120/kg - INR127/kg till the end of the cotton crop year of September 2016. The spike in cotton prices has been due to the 7.4% yoy fall in its production domestically at 35.2mn bales in Crop Year: October 2015 to September 2016 (CY16), as per the Cotton Advisory Board estimates and globally by 18% yoy to 98.1mn bales in CY16, as per the United States Department of Agriculture.

Ind-Ra expects profitability of pure cotton ginners and spinners will be lower by at least 15%, on account of their inability to pass on this steep increase in cotton prices to their customers, due to decreasing cotton demand and increased competitiveness of manmade fibre. Demand for manmade or blended fibres has been rising due to the fall in crude prices and lower exports of raw cotton in 2016. In fact, in spite of lower production in CY16 as compared to CY13, the prices have consistently remained lower than the peak of CY13, on account of decreasing demand for cotton.

The increase in prices will impact small textile players the most, since cotton is the key raw material and it will also lower their inventory holding capacity. Ginners and spinners are most likely to be affected, however, some organised spinning units with interchangeability from cotton to blended or manmade yarn, will be able to adapt. Also players which stocked up cotton at lower prices in March-April 2016 are better placed. Further, fabric manufacturers are likely to be affected the least, on account of their better interchangeable use of looms. Cotton traders are likely to perform substantially better in CY17, on account of inventory gains from existing stock at lower prices of below INR34,000 per candy (one candy is 356 kg) in March (last month of the cotton production season) and having sold at higher realisations of above INR36,000 per candy post May, up to INR42,000 per candy in June.

The lower production of cotton in India is mainly due to two consecutive bad monsoons and damaged cotton crop, caused by the pink bollworm pest in central and southern belt in India and due to whitefly pest attacks in northern India. Ind-Ra expects the acreage under cotton cultivation to fall in CY17 from 119 lakh hectares in CY16 (provisional as per Cotton Advisory Board), despite higher realisations. Fear of losses from pest attacks and due to the lack of alternatives to biotech cotton hybrids, acreage is likely to decline. This may push up cotton prices further, however increasing demand for manmade fibre, will contain the price rise.

The recent government directive to Cotton Corporation of India to sell its entire cotton stock acquired through the minimum support price scheme to micro, small, medium scale spinning units will help contain the price rise of cotton. However, Ind-Ra believes that cotton prices will not see any steep decrease, till the arrival of the next cotton crop, since the prices already factor in the release of stock from inventory.

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Ind-Ra: Steel Production May Not Rise in FY17, In the Absence of MIP
Jul 25,2016

The pick-up in Indian steel production is supported by the Minimum Import Price (MIP) policy and is unlikely to continue beyond August 2016 after the expiry of MIP says India Rating & Research (Ind-Ra). Since the imposition of MIP, domestic producers have benefited, by way of import substitution. In Q1FY17 production grew by 3.8% yoy, compared to a contraction experienced in FY16. Ind-Ra believes that the continuation of protection measures beyond August 2016 will be required to safeguard the interest of the domestic steel industry, which has shown signs of a recovery in the current fiscal on the back of MIP.

Ind-Ra notes, that the replacement of MIP with anti-dumping duties may not have the desired impact, since anti-dumping may not be as widely encompassing as the MIP. While the steel industry is arguing for an extension of MIP, the rollover would remain a formidable decision for the government, since the economy has not moved to the Pareto-optimal equilibrium when MIP was imposed.

Post the introduction of MIP, there was minimal growth in domestic steel production during February and March 2016, with total steel production growing by a meagre 0.3% yoy. Exemptions available for letters of credit for imports opened prior to the imposition of MIP resulted in imports growing by 4.4% yoy during the said period.

In Q1FY17, total domestic steel production growth was healthy at 3.8% yoy, while the overall steel consumption grew by only 0.3%. Additionally, in Q1FY17 imports fell by 30.7% yoy. Thus its fair to say that the domestic production growth has been a result of import substitution and not steel consumption growth.

Another interesting observation is the sharp decline of 4.3% yoy in steel consumption in June 2016. This is in stark contrast to the positive yoy growth in steel consumption seen since April 2015 till May 2016. One reason for the fall in consumption levels in June 2016 could be attributed to the delay in purchases by users, based on the expectation that prices will moderate post the expiry of MIP. In that scenario the consumption levels could pick up once clarity emerges on the future of the MIP policy.

Ind-Ra opines that profitability for most steel producers is likely to remain under pressure, due to the newly added capacity. The interest cost and depreciation from these new capacities have now started to impact the income statement and have increased both operating and financial leverage in the business. Therefore, marginal improvements in capacity utilisations are unlikely to improve the profitability. For these companies to see a healthy profit generation, capacity utilisations levels will need to increase significantly.

Ind-Ra however notes that some steel players have been able to garner a higher share of domestic steel production growth in 1QFY17. Ind-Ra believes that this has been on account of the ability of such players to leverage their distribution network, strong retail presence and a change in the product profile. The higher volume growth can also be attributed to a relatively better financial position than the rest of the industry participants, thus allowing such players to support higher sales with their access to working capital financing.

The government imposed MIP in February 2016 on 173 steel products for a period of six months, ending on 5 August 2016.

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Ind-Ra: Tamil Nadu Government Faces Budget Squeeze Due to Provision for Pay Hikes
Jul 25,2016

The Government of Tamil Nadus FY17 budget presented in the state assembly reflects the weak financial position of the state, says India Ratings and Research (Ind-Ra). The committed expenditure growth is affected by the provision for salary revisions. In the FY17 budget, expenditure on salaries and pension are budgeted to grow by 30% and 35% respectively. As per the FY17 budget estimates, the state is expected to have a revenue deficit for the fourth consecutive year (from FY14). The state finances are affected by increasing committed expenditure on four key items - salaries, pension, subsidies and interest - which alone account for 93.8% of revenue expenditure. Thus leaving the state with very little funding for operations and maintenance and any other schemes. The revenue expenditure on these four sub-heads alone is budgeted at 110.7% of the FY17 revenue receipts.

The revenue deficit since FY14 has reduced capital expenditure in the last few years and capital expenditure in FY17 is budgeted to grow by a mere 7.8%. Lower capital expenditure growth does not augur well from the medium- to long-term growth perspective of the state economy.

The governments FY17 revenue and fiscal deficit is pegged at 1.16% and 2.96% of Gross State Domestic Product (GSDP) respectively. While the fiscal deficit/GSDP ratio is within the regulatory limits, revenue deficit is breaching these limits and continuous revenue deficits are a cause of concern. The quality of deficit (proportion of deficit/debt used to finance current consumption) deteriorated to 39.1% in FY17 (BE) from 26.47% in FY15.

The two crucial positive aspects of the government of Tamil Nadus credit profile are: a relatively better state GSDP growth (FY16: 8.79%) compared to GDP growth of 7.6% and relatively lower debt/GSDP at 18.43% in FY17 (BE). Despite the pressure on the revenue front, according to RBI, in FY16 (BE) the state had a debt/GSDP ratio of 21.2% (sixth lowest among the non-special category states after Chhattisgarh, Odisha, Maharashtra, Madhya Pradesh and Jharkhand) compared to 22% average of all states.

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Ind-Ra: Sharp Cut in MRP of Non-urea Fertilisers to Hurt Producers Profitability by Around INR30bn
Jul 25,2016

The reduction in the maximum retail price (MRP) of non-urea fertilisers by the public sector fertiliser producers is significantly higher than the decline in raw material prices since March 2016 and could squeeze non-urea producers operating profitability by around INR30bn, says India Ratings and Research (Ind-Ra). Pure play urea producers are unlikely to be affected, while players which are primarily in the non-urea business will be the most affected. The decision to reduce the MRP of non-urea fertilisers comes against the backdrop of a sharp decline in the nutrient based subsidy rates announced for FY17 by the government of India in March 2016.

The reduction in MRP translates into lowering of the end user prices by 5%-31% across various non-urea fertilisers, namely diammonium phosphate (DAP - 10%), muriate of potash (MOP - 31%) and other nitrogen, phosphorus and potassium based complex fertilisers (NPK -5%), which is not commensurate with the 5%-7% decline in raw material prices since March 2016. While the lower MRP is initiated by public sector fertiliser producers; the market dynamics will compel private players to fall in line.

Raw materials constitute 60%-70% of the total input costs, and thus the reduction in MRP will directly impact the operating profitability, thereby resulting in the weakening of credit metrics of non-urea producers. Nevertheless, Ind-Ra notes that a further reduction in raw material prices and a healthy demand due to the expectation of a normal monsoon, could partly offset the negative impact on operating profit and support the financials of non-urea producers.

Ind-Ras Market Wire Governments Cut in Subsidy for Complex Fertilisers to Dent NPK Producers Profitability highlighted that the reduction in the subsidy rates announced for FY17 was offset by a commensurate decline in raw material prices during FY16. Thus, the further decline in raw material prices since March 2016 supported the profitability until recently when the MRP reduction kicked in.

The MRP reduction however will be positive for the soil nutrient balance, which has suffered due to the excessive use of cheaper urea compared to other nutrients. The price reduction in non-urea fertilisers will also lower the price gap between urea and non-urea fertilisers, which will support the use of non-urea fertilisers.

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174 Villages Electrified Last Week ; 9,134 Villages Electrified till date under DDUGJY
Jul 25,2016

141 villages have been electrified across the country during last week (from 18th to 24th July 2016) under Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUGJY). Out of these electrified villages, 12 villages belong to Arunachal Pradesh , 82 in Meghalaya, 15 in Assam, 12 in Uttar Pradesh, 3 in Mizoram, 18 in Jharkhand, 3 in Rajasthan , 11 in Odisha and 15 in Bihar, 1 each in Madhya Pradesh, Himachal Pradesh and Chhattisgarh .

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Early operationalising of BIMSTEC FTA imperative for greater push to trade: ASSOCHAM study
Jul 25,2016

India should work closely with the seven-nation BIMSTEC grouping to conclude trade negotiations and attempt early operationalising of the Bay of Bengal free trade agreement (FTA) to give a big push to trade in the region, an ASSOCHAM study said today.

n++BIMSTEC FTA may help activate production links among member countries and help in rationalising various non-tariff measures (NTMs) which would give big push to regional trade and generate regional value chains,n++ highlighted the ASSOCHAM study titled BIMSTEC Economic Integration: Opportunities and Challenges.

The study was jointly released by Ms Preeti Saran, secretary (East), Union Ministry of External Affairs and Bangladesh state minister for foreign affairs, Mr Shahriar Alam at 7th ASSOCHAM-BIMSTEC Business Forum, along with ASSOCHAM president, Mr Sunil Kanoria; chambers secretary general, Mr D.S. Rawat and Mr Sumith Nakandala, secretary general, BIMSTEC.

n++To achieve trade and connectivity, the FTA, which has been under negotiations since the inception of BIMSTEC needs to be accomplished and all other areas of cooperation will follow once the member countries are connected and trade and commerce flourishes,n++ noted the study.

n++What BIMSTEC needs is firm handholding and visionary leadership that can harness these resources for its own good,n++ it added.

There is also the need to focus on trade facilitation through transport efficiency in maritime and land transport, regulatory environment and service sector infrastructures like electronic documentation, harmonising regulations and others.

The study further said that there is a need to liberalise trade and investment measures in services considering the lack of adequate physical infrastructure in the region, more so as services exports are performing well compared to manufactured exports that are more dependent on infrastructure.

It also suggested that the BIMSTEC countries should work on Single Window facility that allows parties involved in trade and transport to lodge standardized information and documents with a single entry point to fulfil all import, export, and transit-related regulatory requirements.

Elimination of non-tariff barrier within a mutually agreed timeframe, reduction in negative list to unlock trade potential, introduction of transit facilities to promote effective intra-BIMSTEC trade, improvement in regional connectivity and introduction of a BIMSTEC visa to facilitate movement of people particularly for investors and businessmen are certain other key recommendations of the ASSOCHAM study.

In her address at the ASSOCHAM summit, Ms Saran said, n++Members of BIMSTEC have been struggling to negotiate a successful free trade agreement which has over the years been overtaken by other instruments which has been somehow disincentive for a greater push on this FTA.n++

n++Even as we strive together to open our borders to free trade in goods. I think the potential for the future lies in investments in the services sector,n++ said Ms Saran.

n++There is a memorandum of understanding (MoU) on establishment of a BIMSTEC technology transfer facility also under negotiation which has the potential to assist small and medium enterprises (SMEs) in sharing their experiences in capacity building, technology evaluation, market assessment and intellectual property management,n++ she said.

Highlighting that the Bay of Bengal is home to over 30 per cent of worlds fishermen, Ms Saran said that sustainable development and modernisation of fishing industry in the region can contribute substantially in improving standards of living of our people.

n++I would urge to look at potential of development of marine resources in agriculture, particularly in the fisheries sector.n++

Talking about role of financial co-operation for boosting intra-regional trade and investment she said, n++Financial co-operation may eventually cover currency swap agreements, pooling of reserves by the Central Banks, exchange rate co-ordination mechanisms, regional supervisory institutions, regional payment agreements and establishment of regional development banks and regional bond markets to boost access to long-term financing.n++

Terming terrorism as a major challenge to regions economic growth and development, Ms Saran said, n++What we together as BIMSTEC need is a concerted action to deal with terrorism including dismantling of structures of terrorism, trainers of terrorism and isolate those who sponsor, finance and train these terrorists.n++

Pushing for early realisation of BIMSTEC FTA to promote trade and investment, Bangladesh state minister, Mr Alam said, n++We would also like to see negotiation on investment in services be fast-tracked to run parallel to the negotiations on trade in goods.n++

He said that in order to sustain the economic growth we need to secure a stable and affordable energy supply through exploration of regional energy resource potential.

n++We expect to sign the MoU on BIMSTEC Energy and Grid Interconnection which will help to foster co-operation in energy sector,n++ said the minister.

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Rise in financial frauds big sour point for foreign investors, says ASSOCHAM-Grant Thornton Paper
Jul 25,2016

A rise in financial frauds over the past few years has emerged as one of the sour points for foreign investors in India and if not checked by a global standard regulatory framework coupled with strong internal corporate prevention mechanism, the menace could take disastrous proportions in corporate India, an ASSOCHAM-Grant Thornton paper has cautioned.

n++With the increased prevalence of fraud and the negative consequences associated with it, there is a strong argument that companies should invest resources and time to tackle it. n++n++cases of financial fraud have risen in India over the last few years and have become one of the main factors deterring foreign companies from investing in India. As the economy is growing, increasing corporate frauds will prove to be disastrous for India,n++ the paper said.

It said while entering India would be a critical component of growth for many international organisations, understanding the risks in India is also critical for the survival of business operations. It is not to suggest as if there are no financial frauds taking place in rest of the world; in fact, the paper has enumerated several big time scandals which had hit the international headlines. These included Lehman Bros which triggered the 2008 global financial crisis and USD 74 billion Enron scam of 2001.

Listing several challenges on the issue, the joint ASSOCHAM-Grant Thornton paper expressed concern over the fact that n++financial managers and accountants at organisations who understand the limitations of an audit and standard auditing procedures are deliberately trying to deceive external auditors and investors by cooking the booksn++.

Noting inability to perform an effective fraud risk assessment, the paper said technology is a double-edged sword. n++As technology is advancing, fraudsters are able to find ways to use it and perpetrate a fraud. Tech-savvy fraudsters are using technology in a variety of ways to commit frauds. Some include creation of false or misleading information accounting records.

n++Putting restrictions on what your employees have access to will limit the potential of misappropriation of assets but if an employee has access to all aspects of an organisation, the potential for fraud is significantly increasedn++.

ASSOCHAM President Mr Sunil Kanoria said n++Devious ingenuity of the human brain is now leveraging technology to indulge in more sophisticated methods of crimes which are very much capable of creating systemic instabilityn++.

Ms Vidya Rajarao, Partner, Grant Thornton India said, the initiative to stop frauds must come from the top. n++The responsibility of preventing, detecting and investigating corporate and financial frauds rests squarely on Board of Directors and this requires board members to adopt preventive steps. Also the BoD and the top management should jointly agree and define their anti-fraud strategy, establish appropriate fraud mitigation steps and train their employees to combat financial and corporate fraudsn++.

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M/o Tourism sanctions 25 projects worth Rs. 2048 Crore to 21 States and UTs sanctioned under Swadesh Darshan scheme
Jul 25,2016

Ministry of Tourism has sanctioned 25 projects under the Swadesh Darshan scheme worth Rs. 2048 Crore so far to 21 States and Union Territories since its launch of in January 2015. These States and UTs include Jammu and Kashmir, Uttarakhand, Rajasthan, Maharashtra, Kerala, Puducherry, Andhra Pradesh, Telangana, Madhya Pradesh, Chattisgarh, Bihar, West Bengal, Sikkim, Assam, Meghalaya, Mizoram, Arunachal Pradesh, Nagaland, Manipur and Tripura.

(a) For North Eastern States, the Ministry has sanctioned 9 projects worth Rs. 821 Crores covering all the 8 states.

(b) For Tribal areas, the Ministry has sanctioned 3 projects for Rs. 282 Crores to the SG of Nagaland, Chhattisgarh and Telangana.

(c) For Buddhist Circuit, the Ministry has sanctioned 2 projects worth Rs. 108.11 Crore to the SG of Bihar and Madhya Pradesh.

The Ministry of Tourism has launched the Swadesh Darshan Scheme in 2014-15 with an objective to develop theme based tourist circuits in the country on the principles of high tourist value, competitiveness and sustainability in an integrated manner by synergizing efforts to focus on needs and concerns of all stakeholders to enrich tourist experience and enhance employment opportunities. Under this scheme, 13 Thematic Circuits have been identified, for development namely: North-East India Circuit, Buddhist Circuit, Himalayan Circuit, Coastal Circuit, Krishna Circuit, Desert Circuit, Tribal Circuit, Eco Circuit, Wildlife Circuit, Rural Circuit, Spiritual Circuit, Ramayana Circuit and Heritage Circuit.

The aim of the scheme are:

n++ To position tourism as a major engine of economic growth and job creation;

n++ To promote India as a global brand and a world class tourist destination;

n++ To develop world class infrastructure in varied thematic circuits and pilgrimage sites;

n++ To showcase full potential of wide range of unique products;

n++ To provide complete tourism experience by enhancing tourist attractions;

n++ Responsible Tourism Initiative- active involvement of local communities , pro-poor approach in a sustainable and inclusive manner.

The work on all sanctioned projects during 2014-15 & 2016-17 has started and Ministry is monitoring the work rigorously. List of Updated Sanctioned projects are as follows :

(Amt. in Rs.crore)

Sr. NoCircuitStateName of ProjectYearSanction Amt.Release Amt.

1.n++n++n++n++n++ n++

CoastalAndhra PradeshDevelopment ofn++ Kakinada-Hope Island- Konaseema as World class Coastal & Eco Tourism Circuit in Andhra Pradesh2014-1569.8313.96

2.n++n++n++n++n++ n++

North East IndiaArunachal PradeshDevelopment of Bhalukpong- Bomdila-Tawang in Arunachal Pradesh2014-1549.7710.00

3.n++n++n++n++n++ n++

Buddhist BiharConstruction of Cultural Centre atn++ Bodhgaya, Bihar2014-1533.176.63

4.n++n++n++n++n++ n++

North EastManipurDevelopment of Tourist Circuit in Manipur: Imphal-Moirang-Khongjom-Moreh2015-1689.6617.93

5.n++n++n++n++n++ n++

North EastSikkimDevelopment of Touristn++ Circuit linking - Rangpon++n++n++n++ (entry) - Rorathang -n++ Aritar -n++ Phadamchen - Nathang - Sherathang - Tsongmo - Gangtok - Phodong - Mangan - Lachungn++ - Yumthang - Lachen - Thangu -n++n++ Gurudongmer - Mangan - Gangtok - Tumin Lingee - Singtam (exit) in Sikkim2015-1698.0519.61

6.n++n++n++n++n++ n++

Eco UttarakhandIntegrated Development of Eco-Tourism, Adventure Sports, Associated Tourism related Infrastructure for Development of Tehri Lake & Surroundings as New Destination-District Tehri, Uttarakhand2015-1680.3716.07

7.n++n++n++n++n++ n++

Coastal Andhra PradeshDevelopment of Coastal Tourism Circuit in Sri Potti Sriramalu Nellore in Andhra Pradesh2015-1660.3812.08

8.n++n++n++n++n++ n++

North East IndiaArunachal PradeshIntegrated Development of Adventure Tourism in Arunachal Pradesh2015-1697.1419.43

9.n++n++n++n++n++ n++

Eco KeralaDevelopment ofn++ Pathanamthitta - Gavi - Vagamon - Thekkadyn++ as Eco Tourism Circuit in Idduki and Pathanamthitta Districts in Kerala2015-1699.2219.8410Desert RajasthanDevelopment of Sambhar Lake Town and Other Destinations under Desert Circuit in Swadesh Darshan Scheme2015-1663.9612.7911Tribal NagalandDevelopment of Tribal Circuit Peren -Kohima-Wokha, Nagaland2015-1697.3619.4712Eco TelanganaIntegrated Development of Eco Tourism Circuit in Mahaboobnagar district, Telangana2015-1691.6218.3213

Sports ministry recommends finance ministry for considering Sports Infrastructure: Secretary, Sports
Jul 25,2016

Sports ministry has proposed the ministry of finance for considering Sports Infrastructure as a concessional finance, said Secretary, Department of Sports, Mr. Rajiv Yadav at an ASSOCHAM event.

n++We have proposed the ministry of Finance for considering sports infrastructure as a concessional finance and I am happy to announce you that finance ministry principals are agreed for this and now putting up the definition in consultation with Reserve Bank of India (RBI) defining as sports infrastructuren++, said Secretary, Department of Sports, Mr. Rajiv Yadav while inaugurating a national summit on Olympics & Role of Corporate India, organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Minister of State for Youth Affairs & Sports, Mr Vijay Goel said at an ASSOCHAM event that we want to create a fever of Olympics in the country and we will be organising a Run for Rio event from India Gate. Thousands of people will join the run to give their support to the Olympic athletes.

n++A big screen will be placed below the flag at the central park along with an exhibition in which there will be posters and cutouts of Olympians like Vijender Singh and othersn++, said Mr. Goel.

The International Hockey federation has changed the specification for hockey just about a year back. This year, we managed to provide and able to trained our athletes on same surface which is to be played in Rio, said Mr. Yadav.

This time we have tried to get very professional mental trainers at the same time, most of the sportsperson are non-urban people keeping that in mind we have allowed their own close family members like father, mother, husband who have been their coach or mental trainer. My classic examples in this Tennis star Sania Mirzas mother, said Mr Yadav.

As far as performance of the team is concerned a lot depends on individual sports person and the slight luck factor also, said Mr Yadav.

This time the sports ministry have allowed the athletes to reach much in advance to acclimatize, to practice there and be ready for the show. The classic case in case of sports which is require lot of concentration like Archery and Shooting . We have allowed our teams to go much in advance. The Archery team is already in Rio and they are already in that environment, added the secretary.

In the department, we have set up a National Sports Development Fund, the unique feature of this fund is whatever contribution you make to it, the equal amount will be contributed by the government of India. So, your contribution become double and you can also specify the field of activities in which you want to invest that money. I request all of you to join hands with us in this effort, whatever you contribute, will also contribute the equal amount, added the sports secretary.

Mr Vijender Singh, Olympian Champion 2016, WBO, Asia Pacific Super Middleweight also stressed for the need for playground for children and emphasised the corporate to take an initiative in this regard.

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Telecom firms seek clarity on GST on value added services: ASSOCHAM
Jul 25,2016

As prospects for passage of the Goods and Services Tax Bill in Parliament improve, the telecom industry has impressed upon the government to come out with a clear cut position with regard to levy of taxes on Value Added Services (VAS) even as the firms across the entire value chain look forward to a smooth transition to much awaited GST, an ASSOCHAM-KPMG Paper has said.

n++Given the broad framework of GST, it is expected that even under the proposed GST regime, the telecom service providers may face significant challenges. For the first time, both the Centre and State governments will have powers to tax services n++The proposed GST law should support the governments overall initiative of ease of doing business and offer a simplified tax regime to telecom service providers,n++ the paper pointed out.

Certain VAS such as ring tones are regarded as entertainment under certain states entertainment tax laws and are therefore subject to taxation. n++Since the service tax is also liable on the revenue generated from rendering such services, there is a dual levy in the form of service tax and entertainment taxn++.

ASSOCHAM Secretary General Mr D S Rawat said the government should clarify the applicable tax on such value added services. This would help move the industry move seamlessly to the GST, adding to the dynamic growth of the sector.

The KPMG, in its note said, the n++growth of the sector is highly dependent on a forward looking policy and regulatory environment that fosters investment, innovation and productivity. However, the industry is grappling with a number of challenges around complexity in policy, regulatory and taxation framework that impacts implantation of well-intentioned ideasn++.

The paper said the GST law should provide clear and comprehensive provisions with respect to coverage of telecom services for providing clarity of levy of taxes on VAS, infrastructure sharing and e-commerce transactions, since these transactions could have different treatment under GST.

Besides, the joint ASSOCHAM-KPMG Paper said, clear and specific place of supply rules should be notified for telecom services, specifically for pre-paid services, B2B transactions, B2C transactions, mobile wallet, VAS etc. n++This will help determine the State in which telecom services would be deemed to have been provided.

Moreover, there should be simplification of overall tax procedures such as a single unified registration for all the states, sharing of tax revenue from telecom service among central and state government without involvement of operators.

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States Asked To Consider Pricing Policy To Cap Prices Of Essential Commodities
Jul 25,2016

In order to ensure adequate availability of pulses, edible oils and other essential food items at reasonable prices, the Center has urged the States to remove all local taxes on essential food items. In a letter written to Chief Secretaries of the States, Shri Hem Pande, Secretary Union Department of Consumer Affairs has asked the states to take up the market intervention on a real time basis and to review APMC Acts on priority to delist pulses and other essential food items so that farmers can sell their produce at any place of their choice, minimizing stages of supply chain from farm gate to ultimate consumers. It will ensure reasonable prices for consumers and also fetch better prices for farmers. The Consumer Affairs Secretary has invited Statess attention towards the action plan adopted for this purpose in the States Food Ministers meeting held in May this year.

States have also been requested to consider a pricing policy for pulses and such other essential food items under Section 3(2) (c) of the EC Act and to make it enforceable for all the stake holders to cap the prices of essential commodities.

The Secretary has also asked the States to implement the Price Stabilization Fund Scheme for market intervention to enhance availability and check prices of essential. For successful functioning of the Scheme, adequate and timely lifting of pulses from buffer stock is a pre-requisite besides strengthening storage facilities for pulses, vegetables edible oils seeds, Onions, he has said

States have also been requested to keep a close watch on hoarding and black marketing of essential commodities in view of coming festival season. Besides regular raids, strict action should be taken against the habitual violators and speculators under the EC Act and PBMMSEC Act which provides for preventive detention up to 6 months. States may also consider creation of a dedicated Force under the EC Act, on the lines of Tamil Nadu Civil Supplies Crime Investigation Department, for effective operations against hoarders, blackmarketeers, profiteers and unscrupulous traders/speculators of essential commodities.

States have been asked to create a robust Information Management System of prices, production, availability, unscrupulous trading, hoarding, black marketing and to strengthen the Price Monitoring Cells to have the ground zero information available on daily basis and sharing it with all the enforcement agencies of Union and state Governments. A monthly report on enforcement actions under the EC Act & Prevention of Black Marketing & Maintenance of Supplies of Essential Commodities Act is mandatory to ensure regular review of the same at highest level and to make public the Action Taken Report of States regularly on the website of Department of Consumer affairs.

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18 Districts of MP to become ODF in FY16-17
Jul 23,2016

The State of Madhya Pradesh today declared that 18 districts of the State, taken up by the Ministry of Drinking Water and Sanitation, will become Open Defecation Free (ODF) by March 2017.

The declaration was made during a State visit by the Secretary, Ministry of Drinking Water and Sanitation, Shri Parameswaran Iyer. During the visit, the Secretary held meetings with the Chief Minister of Madhya Pradesh, Shri Shivraj Singh Chouhan, and the Chief Secretary of Madhya Pradesh. The Swachh Bharat Mission and the National Rural Drinking Water Programme rollout in the State was discussed during the meetings.

The Secretary also made two village field visits and said that the State was doing extremely well on both programmes of the Government of India.

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Land allotment for four industrial cities in DMIC to begin from October: Alkesh Sharma
Jul 23,2016

The Centre will start allocating land in all the four industrial cities being implemented under the Delhi-Mumbai Industrial Corridor (DMIC) project from October this year, a top government official said at an ASSOCHAM event.

n++Land allotment for industries will begin in October this year for anyone who wants to put up an industry, we are looking at anchor investors, we are looking for some big industries to come up but we are open to all industries,n++ said Mr Alkesh Kumar Sharma, chief executive officer (CEO) and managing director (MD), DMIC Corporation Limited said while inaugurating an ASSOCHAM International Summit on DMIC-Hub for investors.

The four industrial cities that are being implemented under DMIC project include - in Dholera Special Investment Region (Gujarat), Shendra Bidkin Industrial Park & Dighi Port Industrial Area (Maharashtra), Integrated Industrial Township (Greater Noida-Uttar Pradesh) and Vikram Udyogpuri (Ujjain-Madhya Pradesh).

n++The land pricing and disposal policies have already been finalised in Gujarat, it will be finalised in a weeks time in Maharashtra and we will also be finalising it in Greater Noida and in Ujjain within this month so that by September-October we can start allotting land,n++ said Mr Sharma.

He informed that DMICDC had already developed a detailed land use plan and that it will soon come up with a mechanism whereby one can apply online and the land shall be allotted.

n++You can identify a plot on the Google maps, fill in and you will see complete details of the plot that this plot is for industrial purpose, the size of the plot is 20 acres and this is the type of industry you can set up,n++ he said.

n++We do not have any issue on land as all the land which we have in these cities are free from litigation,n++ further said Mr Sharma.

He also informed that government was looking at alternate ways of generating energy considering the current power and gas scenario.

The DMICDC CEO said that the type of industries that have been identified for these industrial cities are the ones that are not highly polluting unlike chemical factories and others.

He also said that all environment clearances had been obtained from the union Ministry of Environment and Forests for all the projects. We have taken all the sustainability parameters that are best in the world in terms of both social and economic issues.n++

He said that DMICDC would be following the best global practices be it transportation, power and water supply, water conservation, sewage treatment and others.

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Fitch Affirms India at BBB-; Outlook Stable
Jul 23,2016

Fitch Ratings has affirmed Indias Long-Term Foreign- and Local-Currency Issuer Default Ratings at BBB-. The Outlooks on the Long-Term IDRs are Stable. The Country Ceiling is affirmed at BBB- and the Short-Term Foreign-Currency IDR at F3.


The affirmation of Indias sovereign ratings balances a strong medium-term growth outlook and favourable external balances against a weak fiscal position and still-difficult business environment. However, the latter is likely to gradually improve with implementation and continued broadening of the governments structural reform agenda.

India exhibits one of the highest real GDP growth rates in the sovereigns space. Its five-year average growth is among the 10 highest of all rated sovereigns and the 7.6% real GDP growth in the financial year ended 31 March 2016 (FY16) exceeds the BBB category median of 3.3%. Fitch forecasts real GDP growth to slightly accelerate to 7.7% in FY17 and 7.9% in FY18, resulting from an expected pick-up in consumption in both urban and rural areas after a civil-servant wage hike of 24% and the strong likelihood of stronger rainfall than in the previous two poor monsoon years. Policy rate cuts of 150bp in total since January 2015 may also contribute to growth, even though weak bank balance sheets continue to impair monetary transmission. At the same time, weak private investment indicates that the economy is still not firing on all cylinders.

Fitch also expects the governments continued structural reform push to support GDP growth in the medium term. Passage of the new Bankruptcy Code in both houses of parliament in May 2016 showed that big-ticket reforms are possible in India, even though the governments proposal for a Goods and Services Tax has thus far not passed in the Upper House (Rajya Sabha). Those reforms that only require executive approval continue to be rolled out and some legislative reforms are being pursued at the state level. A resulting improvement in the business environment is also indicated by swelling foreign direct investment inflows, although India still ranks lowest among sovereigns in the BBB category in the World Banks Ease of Doing Business index, and this is not likely to change anytime soon.

Inflation has substantially come down in the past two years, even though it started to pick up again in recent months to 5.8% in June 2016 on the back of food price pressures. Fitch expects inflation to remain below the five-year average of 7.8%, which is high compared with the BBB median of 3.3%, given the change to an inflation targeting framework in February 2015. To what extent the new monetary framework will represent a true regime shift will become clearer in the period ahead, when a new Reserve Bank of India governor will take over from Raghuram Rajan, the Monetary Policy Committee will be established and perhaps more clarity will exist on the life span of the current inflation target (4% +/- 2pp).

Weak fiscal balances, Indias Achilles heel for years, continue to constrain its ratings. The central governments consolidation efforts, illustrated by meeting its deficit target of 3.9% for FY16 and sticking to its 3.5% target for FY17, strengthen its fiscal credibility. The government continues to face a difficult trade-off between its desire to crowd-in private investment by spurring public capex and to further consolidate, especially since a public wage increase of 24% has recently been approved. The review of the Fiscal Responsibility and Budget Management Act leads to short-term uncertainty on the medium-term fiscal framework, but might also provide an opportunity if it brings the fiscal parameters closer in line with Indias peers. This was happening in the years until FY08, just before the Global Financial Crisis. Fitch expects general government debt to reach 69.4% of GDP in FY17 and the general government deficit to slightly fall to 6.8% of GDP, which compares unfavourable with BBB peer medians of 40.6% and 2.6% respectively.

The banking sectors non-performing loans (NPLs) rose to 7.6% of total assets in FY16 from 4.6% in FY15, mainly resulting from stricter implementation of standards. The NPLs are most prevalent in public-sector banks, highlighting significant sovereign contingent liabilities. It is not clear if the governments budgeted IDR700bn capital injection into banks between FY16 and FY19 will be sufficient. Fitch estimates the banking system needs around USD90bn (INR6trn, or 4% of GDP in FY17) of capital, while many public-sector banks are likely to find it difficult to access new capital from non-government sources.

Indias relatively strong external balances make the country less vulnerable to external shocks than many of its peers. The foreign reserves buffer is solid at 8.3 months of current external payments, while gross and net external debt levels also compare well. A narrower current account and a pick-up in FDI caused Indias basic balance to turn positive in FY16. India is not immune to emerging-market turmoil, but should generally be able to weather such jitters relatively well. India is less vulnerable to a severe slowdown scenario in China, as Indias exports to China comprise only 3.5% of total exports and its more domestically based economy is not part of the Asian supply chain. The medium-term Brexit impact on the real economy seems limited given that Indias exports to both the UK and the rest of the EU have fallen to 3.4% and 13.6% respectively of total exports.

The Indian economy is less developed on a number of metrics than many of its peers. Average per capita GDP remains low at USD1,647 compared with the BBB range median of USD9,358, while Indias ranking on the United Nations Human Development Index indicates relatively low basic human development. Governance also continues to be weak, as illustrated by a low score for the World Bank governance indicator (41th percentile versus the BBB median of 57nd percentile) and Transparency Internationals corruption index (76th of 168). Nonetheless, press reports seem to suggest that high-level scams are less prevalent than in the past.


Fitchs proprietary SRM assigns India a score equivalent to a rating of BBB- on the Long-Term Foreign-Currency IDR scale. Fitchs sovereign rating committee did not adjust the output from the SRM to arrive at the final Long-Term Foreign-Currency IDR.

Fitchs SRM is the agencys proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a Long-Term Foreign-Currency IDR. Fitchs QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.


The Stable Outlook reflects Fitchs view that upside and downside risks to the ratings are balanced. The main factors that individually or collectively could lead to positive rating action are:

- Fiscal initiatives that would cause the general government debt burden to fall more rapidly than expected in the medium term

- An improved business environment resulting from implemented reforms and persistently contained inflation, which would support higher private investment and real GDP growth

The main factors that individually or collectively could lead to negative rating action are:

- Further deviation of the already high public-debt burden from the peer median, which may be caused by stalling fiscal consolidation or greater-than-expected deterioration in the banking sectors asset quality that would prompt large-scale sovereign financial support

- Loose macroeconomic policy settings that cause a return of persistently high inflation levels and a widening current-account deficit, which would increase the risk of external fundin

Kharif Crop Sowing Crosses 692 Lakh Hectare Area
Jul 23,2016

The total sown area as on 22nd July, 2016 as per reports received from States, stands at 692.98 lakh hectare as compared to 671.01 lakh hectare at this time last year.

It is reported that rice has been sown/transplanted in 183.06 lakh ha, pulses in 90.17 lakh ha, coarse cereals in 130.80 lakh ha, oilseeds in 149.16 lakh ha, sugarcane in 45.41 lakh hectare and cotton in 86.86 lakh ha.

The details of the area covered so far and that covered during this time last year are given below:

Lakh hectare 

CropArea sown in 2016-17Area sown in 2015-16Rice183.06182.38Pulses90.1764.69Coarse Cereals130.80126.27Oilseeds149.16143.03Sugarcane45.4147.40Jute & Mesta7.527.71Cotton86.8699.52Total692.98671.01

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