(Current Affairs For SSC Exams) Economic Issues,Nov. 2012 - Other Topics

Economic Issues

November 2012

Topic : Other Topics


The Union Government of India approved fourteen foreign direct investment (FDI) proposals, which would bring in the capital inflow of 113.35 Crore Rupees. The major portion of 81.05 crore Rupees investments accounts to the three clearances made in the Pharmaceutical Sector. Approval of these proposals was made in accordance to recommendations made by the Foreign Investment Promotion Board (FIPB) during the meeting held on 18 September 2012. The FIPB is headed by Arvind Mayaram, the Secretary of Department of Economic Affairs (DEA). Proposals of the companies approved include Dashtag, Neo Capricorn Plaza Ltd., Pipavav Defence and Offshore Engineering Company Ltd., Prime Surgical Centers Private Ltd., Calyx Chemicals and Pharmaceuticals Limited, Egon Software Pvt. Ltd. and Alburaq Trading LLP. Datsang got an approval to hike its foreign equity of value 68.22 crore Rupees with a nod of carrying out the pharmaceutical business especially in products related to antibiotics, anti-histamines, dermatology and oncology. Prime Surgical Centers Private Ltd. is allowed for setting-up of the Limited Liability partnership (LLP) for carrying put and setting up the business of establishing centers for short stray surgery in India. The company will have its flagship center at Pune and bring in an investment of 14 crore Rupees. Neo Capricorn Plaza Limited a Mumbai based company was allowed with post-facto approvals to carry out its business of constructing five-star hotels. Pipavav Defence and Offshore Engineering Company Limited is allowed to issue foreign currency convertible bonds (FCCBs) for raising its foreign equity and carrying out the businesses of ship repairs, ship building and production of offshore assets.


The Civil Aviation Ministry on 16 October 2012 announced to abolish the airport development fee on Delhi and Mumbai Airports, from 1 January 2013. The ministry directed the operators of the two airports to stop levying the charges for Airport Development Fee from the travellers from next year and also asked the Airport Authority of India to infuse equity in form of joint venture firms that operates the two largest airports of the nation. The Civil Aviation Minister Ajit Singh asked the DIAL (Dial International Airport Ltd) and MIAL (Mumbai International Airport Ltd) to submit proposals for stopping the Airport Development Fee to the Airports Economic Regulatory Authority (AERA). Charges paid by domestic fliers in Delhi and Mumbai are 200 rupees and 100 rupees and for international fliers it is 1300 rupees and 600 rupees respectively.


C.P. Joshi, the Union Minister of Road Transport and Highways on 11 October 2012, approved two pilot projects for development of People Friendly Roads. This project will involve construction of National highways on corridor redevelopment and spot improvement concepts. This will help in reducing the financial burden from the government making it public friendly. The pilot projects in this regard will be experimented at the Hero Honda chowk on the Delhi Gurgaon Expressway for its spot improvement concept and Delhi-Dasna Section of NH-24 will be used for implementation of corridor redevelopment concept. Additional features like premium cluster, higher education cluster, business cluster, Social Economic Zone (SEZ) and specialty cluster will be provided in the corridor redevelopment concept at Delhi-Dasna section of NH-24. The concept just not focus upon, development of the Highways but also have a prime objective of developing livelihood spaces and residential complexes, for people whose lands will be acquired.


Worried over rising oil subsidy, Finance Minister P. Chidambaram, on Wednesday, pitched for a rational energy pricing mechanism and correction of distortion in petrol and diesel prices resulting from unequal taxation. “With less than adequate pass-through, subsidies on these (petroleum) products have burgeoned.

The problem is that these are clearly not sustainable, and we must devise ways and means of correcting price distortions,” he said while addressing the valedictory session of PetroTech-2012. The Minister also made a case for introducing a rational and transparent energy pricing mechanism to prevent leakages while protecting the interest of poor and vulnerable sections of the society. Referring to the impact of high oil prices on the world economy, Chidambaram said “the relentless rise in crude oil prices is hurting growth ... In the last few years, all economies are under pressure. India is no exception”.

India imports about 75 per cent of its crude oil requirement. This has resulted in widening of current account deficit (CAD), while the rising subsidy bill increased the government’s fiscal deficit. “Tighter product markets, rising prices and growing demand could slow and indeed have slowed economic growth and has serious implications ... and consequently a major challenge for the policy makers,” Mr. Chidambaram said. Indian economy was growing at 9 per cent plus rate before the global economic crisis struck in 2008. The economic growth has slowed to a nine-year low of 6.5 per cent in 2011-12. “Our macro economic outcome in 2008-09 (the year of global financial crisis) and 2011-12 (which witnessed the eurozone crisis) were significantly impacted by the rise in global prices of crude oil,” he said. While the government subsidises oil marketing companies (OMCs) for selling diesel, kerosene and LPG at below market rates, the price of petrol is fixed by the OMCs themselves. At present, petrol price in Delhi hovers around Rs. 67.90 a a litre, while subsidised diesel costs Rs.46.95 a litre.

Mr. Chidambaram said the single most fiscal risk not only to India but to all developing countries was the burgeoning subsidy bill. “While some provision is being made under oil subsidy year after year, we have found that provision is always way off the mark as oil prices are globally determined,” he said. Referring to price disparities on account of unequal taxation between petroleum products, he said it results due to in-efficient substitution of one fuel with the other.


The Reserve Bank of India (RBI) on 18 October 2012 extended the lending’s on the Priority sectors like housing, agriculture, small and medium enterprises, and expanded the scope of bank loans for these sectors up to 2 crore Rupees. These amendments would be in effect from 20 July 2012. The decision came after discussions were held with the CMDs/CEOs of selected banks as well as the heads of Priority Sectors of selected banks and based on the same the new guidelines and amendments were made. The banks were permitted by the central bank to offer loans up to an aggregate limit of 2 crore Rupees, to corporate that includes farmers’ producer companies, co-operatives and partnership firms of famers indulged in agricultural and allied activities including animal husbandry, bee-keeping, dairy, fishery and sericulture. The Priority loan would also be made available for pre-harvest and post-harvest activities like weeding, spraying, grading, harvesting and sorting. Export Credit loans for exporting one’s own farm produce would also be made available. The lending scheme fulfills the criterion mentioned under the MSMED Act-2006. Bank loans to Micro and Small Enterprises (MSEs) those are engaged in providing services would be eligible for the direct finance of up to 2 crore Rupees per borrower per unit under priority sector. In case the loan amount per borrower increases the limit of 2 crore rupees, than it can be considered as the indirect finance for agriculture.

Loans under priority sector would also include loans provided to Government agencies for development of dwelling units or slum clearance and rehabilitation up to 10 lakh rupees. This provision also spreads for low income group and the economically weaker sections of the society in form of housing finance, construction and re-construction, purchase and more up to ceiling. The Central Bank also guided the banks to keep a check on the loans, which are offered for the approved purposes. Thus the banks engaged in issuing loans would have to put forward a fine and channeled internal system and control in this regard. The apex court decision came to ensure that credit needs of people who don’t have access to institutional finance.



The Dow Chemical Co. will eliminate about 2,400 jobs and close roughly 20 manufacturing facilities as part of a restructuring plan aimed at coping with slowing economic growth in Europe and elsewhere. The manufacturing giant said on Tuesday that the job cuts amounted to 5 per cent of the company’s workforce worldwide.

Dow expects the strategy will result in roughly $500 million in annual cost savings by the end of 2014. The company also plans to slash capital spending and investments. It expects that will save an additional $500 million. Dow anticipates it will save $2.5 billion, including other cost-cutting measures. Dow produces materials used in nearly every business sector and region of the world, leaving it exposed to shifts in global economic growth. Rival DuPont Co., on Tuesday, reported a big drop in quarterly profit and missed Wall Street expectations. The company announced a restructuring that includes 1,500 layoffs. Over the next two years, Dow plans to close certain manufacturing facilities in the U.S., Belgium, the Netherlands, Spain, the United Kingdom and Japan.


The Northern Railways on 18 October 2012 introduced Pink coloured forms for Tatkal reservation. These forms would be made available with a printed warning column at the booking counters itself and would have enough space to fill in the details like names, contact number, address and others. This step of Railways would help in getting away from the menace created by touts and unauthorized ticket agents. If the passenger is caught for buying the tickets from any of these touts or unauthorized agents, he will be responsible for the consequences that may be a fine in form of penalty or imprisonment following the provisions available in the Railway Act 1989.

In case address or phone number provided in the ticket is found false, the passenger would be deboarded from the train on the very next station. Tatkal being a special service offered by the Railways requires special documents to be presented and hence the form would serve to the requirements.


The Commerce Ministry on 11 October 2012 released a data that showcased the dip of 11 percent in exports and rise of 5.1 percent in imports. Exports in India for the fifth consecutive month reported fall in its percentage. With 11 percent fall to $23.7 in export, the trade deficit widened to $18.1 billion in a months’ time. The imports of the country showcased a positive figure in the month of September saw a rise of 5.1 percent at $41.8 billion to that of $39.8 percent recorded in the month of August, 2012. The cumulative recorded value of the exports in a period of April to September in 2012-13 down by 6.8 percent at $143.7 billion as compared to the $154.1 billion recorded in the same tenure in the previous fiscal year 2011-12.


Walmart, the American multi-national retail giant, is being reportedly investigated by the Commerce Ministry for allegedly “clandestinely and illegally” investing $100 million in an Indian chain of convenience stores two years ago in violation of a ban on foreign direct investment in the retail sector that existed at the time. The move could hinder Walmart’s plans to expand in India following the government’s recent decision to allow foreign direct investment. The Financial Times said it had obtained documents showing that the Commerce Ministry last week asked the Reserve Bank of India to launch an investigation into Walmart’s allegedly illegal investment in as many as 200 convenience stores and hypermarkets in 2010 when foreign direct investment was banned. “The Easyday stores in question are ostensibly owned by Walmart’s partner, Bharti Enterprises, though Walmart effectively manages them and Walmart executives have been seconded to Bharti,” it said.

The paper said the investigation would focus on whether Walmart directly invested in Bharti’s retail operations through a holding company known as Cedar Support Services Ltd. Walmart insisted that it was “in complete compliance” with FDI laws. “All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the Reserve Bank of India,” it said. The company has been previously investigated in America for allegedly paying bribes to open stores in Mexico. The Financial Times said that, according to company documents and the Communist Party of India’s Rajya Sabha member M. P. Achuthan who has written a letter to Prime Minister Manmohan Singh demanding a ban on Walmart, “Cedar owns Bharti Retail and thus the Easyday chain”. Mr. Achuthan alleged that Walmart used “complex arrangements” to circumvent FDI rules.

“Cedar was originally set up in 2007 as Bharti Retail (Holding) Private Ltd, but its name was changed in 2009. Its articles of association were amended to make it a real estate and design consultancy service company, in which foreign direct investment was allowed,” the newspaper said. The report said that according to the commerce ministry, Walmart Mauritius (4) Holdings invested Rs.456 crore, equivalent to about $100 million at the time, in “compulsorily convertible debentures” giving Walmart a 49 per cent stake in the company on conversion.


After months of intense stand-off, the Oil Ministry has given nod to Reliance Industries’ plans to raise natural gas output from the flagging KG-D6, and agreed that CAG cannot do a performance audit of the company. The Ministry, on Tuesday, sent a letter to RIL stating that “all the government nominees” on the KG-D6 block oversight committee have “already approved” to all the development proposals made by RIL, sources said.

Also, it relented and agreed to RIL stand that an audit by the Comptroller and Auditor General of India (CAG) of its spending on KG-D6 block has to be a financial audit and not a performance audit. “...the proposed audit would be under Section 1.9 of the Accounting Procedure of the Production Sharing Contract, and not a performance audit of the operator (RIL),” the ministry wrote. On the same day, the ministry also wrote to Principal Director of Audit (Economic & Service Ministries), CAG, stating that “subject to certain conditions, RIL has agreed for an audit under Section 1.9 of Accounting Procedure to the PSC by CAG and to co-operate with such audit without prejudice to any of their rights and contentions.” Oil Ministry had been withholding approvals to RIL’s investment plans saying the company must first agree to CAG doing a second round of audit of KG-D6 field for the 2008-09 to 2011-12 periods. RIL had stated that it was ready for a CAG audit if done under the PSC which provides for checking of the contractor’s accounts in order to verify the charges and credits but not questioning efficacies of processes or technology used in the complex deep-sea operations.

The Ministry finally agreed to RIL position. Sources said the ministry wrote to RIL “to take necessary actions” on the items approved by the Management Committee (MC). While the Management Committee (MC) of KG-D6 block in August approved annual capex plans pending for past three years, the resolution had not been signed. These capex included those on well interventions to reverse the trend of falling gas output. Also, at least three discoveries RIL has made in the block had not been declared commercial, a step necessary to begin production from them. Besides, the MC had approved the revised field development plan for MA oil and gas field in the same block in August but formal orders had not been issued. All these investments, RIL says, are necessary to reverse drop in output at the fields. After the ministry action, RIL can now implement urgent remedial measures at KG-D6 where output has dipped by more than 55 per cent in past two years to about 26 million metric standard cubic meters per day. The CAG has called a kick-off meeting, called the Entry Conference, with RIL on October 31 to begin the second round of audit, sources said. RIL had, last month, stated that CAG’s 2009 audit, which it had agreed to as a one-time exception, turned out to be a ‘performance’ audit which was contrary to the provisions of the PSC. The CAG had, in its first round of audit, questioned the ‘reasonableness’ of costs incurred in the gas field development and said the government should revisit the profit-sharing mechanism.


The Cabinet Committee on Economic Affairs (CCEA), cleared a 10 per cent stake sale of the Centre’s equity holding in NMDC through the ‘offer for sale’ route. The transaction is likely to fetch about Rs.7,000 crore. The CCEA has approved the disinvestment of 10 per cent paid-up equity capital (39.65 crore shares of face value of Re.1 each) of NMDC out of the government’s shareholding of 90 per cent through ‘Offer for the sale of shares through stock exchange’ (OFS) method, as per SEBI Rules and Regulations, an official statement said here.


Following the stake sell-off, the government’s equity holding in the iron ore mining ‘Navaratna’ public sector undertaking under the administrative control of the Ministry of Steel will come down to 80 per cent. Although NMDC with a paid-up equity capital of Rs.396.47 crore as of March 31 this year is primarily engaged in the ore mining business, it is also expanding its activities towards production of steel and other value-added products. The country’s largest producer of iron ore, it is operating two mining complexes in Chhattisgarh and one in Karnataka. The government, it may be recalled, had proposed disinvestment in NMDC earlier but the move had to be shelved on account of poor market conditions. As and when this transaction comes through, it would be the first issue during this fiscal. For, having set a disinvestment target of Rs.30,000 crore for 2012-13, the government has not been able to roll out any public issue thus far this fiscal, primarily owing to uncertain market conditions. For the very same reason, the government could manage to mop up a paltry Rs.14,000 crore through disinvestment during the last financial year as against a budgeted target of Rs.40,000 crore set for the fiscal.


Alongside, at the meeting chaired by Prime Minister Manmohan Singh, the CCEA also approved authorisation in favour of EGoM (Empowered Group of Ministers) to change the method of disinvestment from the OFS method, if the same is required subsequently due to market conditions or due to change in SEBI Rules and Regulations. Moreover, the floor price, the number of tranches, the basis of allotment and the number of shares to be allotted in each of the tranches will also be decided by the EGoM. According to the official statement, the EGoM may also accept or cancel the offer, if there is not enough demand at or above the floor price; in case of over-subscription in one or more tranches, the EGoM can decide whether the over-subscribed amount is to be retained subject to the overall disinvestment of 10 per cent. Allotment of additional shares to eligible and willing employees can be offered at a discount of 5 per cent to the issue or discovered (lowest cut-off) price up to a maximum of 0.50 per cent of the paid-up equity capital subsequent to completion of the transaction under OFS. The method and procedure of allotment of shares to the employees will be worked out in consultations with merchant bankers or advisors to the issue, the statement said.


U.S. Treasury Secretary Timothy F. Geithner and Indian Finance Minister P.Chidambaram for the third annual meeting of the India-U.S. Economic and Financial Partnership on 9 October 2012 discussed lowering trade barriers and extending ways to expand capital markets. Both the countries agreed to deepen cooperation at various multilateral forums, including the G20 and discussed ways to remove trade and investment barriers. Timothy F. Geithner welcomed the economic reform measures announced by the Indian government recently by saying that it would help in boosting private investment. He also asserted that India and US have agreed on the importance improving coordination on bilateral tax matters including with respect to the tax treaty and Implementation of the Foreign Account tax Compliance Act (FATCA) to address offshore tax evasion. Both the countries US and India recognize the great potential benefit from working together to meet the challenges of a shared future to generate jobs, sustain growth, and help ensure macroeconomic stability. The growing trade and investment between two countries across a wide range of products, services, and technology is a sign of commitment to build relationship on a solid foundation that utilizes mutual strengths


A joint communiqué has been signed between the Tea Board of India and the European Tea Committee (ETC), supporting the Protected Geographical Indication (PGI) registration granted to Darjeeling tea within the European Union (EU). It also involves evolving a joint working relationship to implement the PGI registration for Darjeeling in letter and spirit. The Tea Board was represented by M. G. V. K. Bhanu, Chairman, while the Hamburg-based European Tea Committee was represented by William Gorman, President. The ETC and the Tea Board have agreed that they would co-operate and work together in disseminating information about the PGI registration and its implications in the local language in Germany and other tea-consuming countries within the EU.

ETC is the Central European Federation of national associations involved in tea. Its activities focus on quality control and food laws mainly. Darjeeling tea from India received the PGI protection in October 2011. It is said that more ‘Darjeeling’ tea is sold in the international markets than is produced in Darjeeling as very often only a small portion of the authentic product is put in a packet of tea-blends from other regions. Following the registration, the teas sold in EU would have to be 100 per cent Darjeeling tea.


China’s economic growth tumbled to the lowest in more than three years in the latest quarter but retail sales and investment improved in a possible sign a painful slump might be stabilising. The world’s second-largest economy grew 7.4 per cent in the three months ending in September, data showed on Thursday. That was down from the previous quarter’s 7.6 per cent and the lowest since the first quarter of 2009. Retail sales rose 14.4 per cent, a small acceleration over the first half of the year, and investment in industrial assets and some other indicators also showed small improvements. “Judging from the third quarter figures, we can see a clear sign of steady economic growth,” said Sheng Laiyun, spokesman for the National Bureau of Statistics, at a news conference. “There is a smaller margin of decline and some major indicators have been growing faster.”
Analysts expect China’s economic growth to rebound late this year or early next year but say a recovery is likely to be too weak to drive global growth without improvement in the United States and Europe. The slowdown is due largely to government lending and investment controls imposed to cool an overheated economy and inflation. But the downturn worsened sharply last year after global demand for Chinese goods plunged unexpectedly.

The government has cut interest rates twice since early June and is injecting money into the economy through high investment by state companies and spending on building airports, subways and other public works. But authorities have avoided launching a massive stimulus after huge spending fuelled inflation. Premier Wen Jiabao said growth appeared to be stabilising and he expressed confidence the country could meet its official targets for the year. “Economic growth is stabilizing and we are confident through our efforts we can achieve the full—year targets for economic and social development,” the premier said in a Cabinet statement.


After ending its telecom joint venture Uninor with Unitech, Norway’s Telenor, on Friday, said it had signed Lakshdeep Investments and Finance as the partner for its newly formed Indian entity Telewings Communications. Lakshdeep, controlled by Sudhir Valia, will contribute an agreed amount of equity into Telewings. Mr. Valia is the brother-in-law of Dilip Shanghvi, the promoter of Sun Pharmaceutical Industries.

“This is a financial investment by Mr, Valia in his personal capacity,” Telenor said in a statement. “Upon successful participation in the upcoming spectrum auctions and post all required government approvals, the Telenor Group will eventually own 74 per cent of the joint venture,” the statement said. All assets of Unitech Wireless will be transferred to this company after getting the approvals.


“The Telenor Group will maintain operational control and upon necessary approvals all assets of Unitech Wireless (Uninor) will be transferred to this company for seamless continuity of operations,” the statement added. Telewings has already applied for prequalification procedure to participate in the upcoming spectrum auction. However, a final decision on whether to participate or not will be made before the auction starts, it added. Recenlty, realty major Unitech had said it would exit from the telecom joint venture with Telenor by selling its entire 32.75 per cent stake to the Norwegian firm. Telenor and Unitech had been at loggerheads ever since the Supreme Court in February cancelled Uninor’s 22 telecom permits. Telenor wanted to scrap the joint venture and transfer the business to a new firm and get fresh licence, whereas Unitech was opposing it. However, earlier this month, Unitech and Telenor agreed to transfer the business in Uninor to a new entity controlled by the latter.


Northern Railways, Delhi Division on 9 October 2012 finished installation of about 400 CCTVs at 10 different stations of Delhi to enhance security and surveillance. Sum of more than 20 crore Rupees was spent on the project. The stations where these cameras have been installed include New Delhi, Old Delhi, Shahadra, Sarai Rohilla, Hazrat Nizamuddin, Anand Vihar, Ghaziabad, Delhi Cantt, Tilak Bridge and Shivaji Bridge.

As part of the Integrated Security System and to enhance quality of security checks, nine baggage scanners and 152 CCTV cameras were installed at the New Delhi Railway Station. This made the New Delhi Railway station, first and the only station in India to have more than 100 security cameras installed and operational.

Control rooms with monitoring officers have also been set-up at the stations and the Railway management will also keep a check on these officers. Installation of 12 escalators at different stations is in process to manage the crowd on the stations. Indian Railways has decided to implement, the Integrated Security System (ISS) at 202 different stations across the country for fine and reliable access controls, baggage and personal screening and security surveillance.


BASF of Germany, announced that it would invest Rs.1,000 crore to set up a new chemical plant at Dahej in Gujarat by March 2014. “We have drawn up plans to invest Rs.1,000 crore to set up a Greenfield speciality chemicals manufacturing facility at Dahej. This will supplement our existing plant, and also cater to expand our business,” BASF India Chairman and Managing Director Prasad Chandran told reporters at the inauguration of the Indo-German Urban Mela here. The company has already started the construction in April this year, and the plant will be operational by March 2014. “The upcoming facility will help in expanding our business in sectors such as automotives, paints, paper, home care and life style. It will also supplement our Mangalore facility,” he added.


Besides catering to the demand of the domestic market, the plant will export chemicals to other nations, including Pakistan, Sri Lanka, Bangladesh, Thailand and some other ASEAN countries. The company at present has nine manufacturing plants in India. BASF also showcased a concept car jointly developed with German auto major Daimler with an advanced technology and energy-efficient light-weight design. BASF India had clocked a revenue of Rs.7,500 crore for 2011, registering a jump of 20 per cent over the previous year. The company, which has 2,300 employees in India, also has research and development (R&D) centres at Thane and Mangalore.


Polaris Financial Technology, on Wednesday, announced that it had entered into a business purchase agreement with Pyxis to strengthen its consulting capabilities. Pyxis, which is a specialised player in technologies for global markets, would help Polaris with its market solutions, according to a press release. “This agreement would reinforce our expertise in the consulting business. We are happy to have a team of domain specialists from Pyxis joining us,” the release quoted Kedarnath Udiyavar, Head of Polaris FT Consulting, as saying. The details of the contract, however, were not disclosed.


Three Indian bourses — NSE, MCX and BSE — have made it to the world’s top 20 derivative exchanges, ahead of their peers in global financial centres such as London, Singapore and Hong Kong. While the list is topped by the CME Group, as per a list compiled by the Futures Industry Association (FIA) for trading volumes between January and June 2012, the National Stock Exchange is ranked fifth. Among other Indian bourses, MCX is ranked at 10th and BSE at the 18th position. After the CME Group, Korea Exchange is ranked second, Eurex at third and NYSE Euronext at fourth. As per FIA data, the NSE recorded a decline of 7.2 per cent to 971.8 million contracts in the derivative segment during the period under review. MCX saw its volume dip by 13.8 per cent to 489.3 million, while the BSE recorded a sharp rally to 97.4 million contracts after its renewed focus on derivatives trading in recent months.


The CME Group topped as the largest F&O exchange but recorded a decline of nearly 9 per cent with 1.55 billion derivative volumes. The second spot was taken by Korea Exchange, which witnessed a slump of 34.4 per cent at 1.39 billion contracts. The two were followed by Eurex and NYSE Euronext with 1.26 billion and 1.02 billion contracts been traded during the first six months, respectively. The exchanges ranked below the three Indian bourses in the top 20 were: JSE South Africa at 19th and the London Metal Exchange at the 20th place. Those ranked below the 20th position included Hong Kong Exchanges and Clearing (23rd), London Stock Exchange (24th), China Financial Futures Exchange (25th), Singapore Exchange (26th) and Tokyo Financial Exchange (27th).


The Union Ministry of Petroleum and Natural Gas on 9 October 2012 approved the increase in the onetime security deposit on availing a new LPG Cylinder connection. The domestic cylinder weighed 14.2 kilograms saw a rise of 250 Rupees and turned up to be 1150 Rupees from the previous one of 900 rupees in the North Eastern State and in rest of the country it turned up to be 1450 Rupees witnessing a hike of 200 Rupees.

People seeking new connection of Indane will have to pay a amount of 2500 Rupees as security deposit for the new connection. Apart from this, the security deposit for pressure regulator would be 150 Rupees, Blue consumer book will be charged 45 Rupees each and the deposit for Suraksha Tube is 170 Rupees. Consumers with stove facility available at home will have to pay an extra amount of 250 Rupees for inspection.


The Reserve Bank of India, on Wednesday, eased norms for priority sector lending by banks and also expanded the scope for distributing loans to agriculture and weaker sections of the society. “The additions and amendments will be operational with effect from July 20,” the RBI said in a notification. The central bank allowed banks to include loans to corporates, including farmers’ producer companies of individual farmers, partnership firms and co-operatives of farmers directly engaged in agriculture and allied activities — dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture (up to cocoon stage) — up to an aggregate limit of Rs.2 crore per borrower, to be considered as apriority sector lending. Further short-term loans for raising crops, which include traditional/non-traditional plantations, horticulture and allied activities, would be included in the priority sector.

Loans for pre-harvest and post-harvest activities, spraying, weeding, harvesting, grading and sorting will be included in the priority sector. Now priority sector lending would also include export credit for exporting own farm produce. During the interaction the RBI Governor had with bankers on July 31, 2012 in connection with the first quarter review of Monetary Policy 2012-13, certain concerns were raised by the banks on the revised priority sector guidelines. “Discussions were held with CMD/CEOs of select banks and also with priority sector heads of select banks. Based on the feedback received, it has been decided to make certain additions and amendments, in the guidelines on priority sector issued on July 20,” the RBI added. Bank loans to Micro and Small Enterprises (MSEs) engaged in providing or rendering of services will be eligible for classification as direct finance to the MSE sector under the priority sector up to an aggregate loan limit of Rs.2 crore per borrower/unit, provided they satisfy the investment criteria for equipment as defined under the MSMED Act, 2006.
In the housing sector, bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to a ceiling of Rs.10 lakh per dwelling unit would be considered as priority sector lending. “For the purpose of identifying the economically weaker sections and low income groups, the family income limit of Rs.1.120 lakh per annum, irrespective of location, is prescribed,” it added. Bank loans to housing finance companies (HFCs) — approved by the NHB for their refinance — for on-lending for the purpose of purchase, construction and reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of Rs.10 lakh per borrower, would come under priority sector lending. However, the RBI stipulated that all inclusive interest rate charged to the ultimate borrower would not exceed the lowest lending rate of the lending bank for housing loans plus 2 per cent per annum. The eligibility under priority sector loans to HFCs is restricted to 5 per cent of the individual bank’s total priority sector lending, on an ongoing basis. The RBI also asked banks to ensure that loans extended under the priority sector are for approved purposes and the end use is continuously monitored. “The banks should put in place proper internal controls and systems in this regard,” it added.


Indian Oil Corporation (IOC), on Wednesday, entered into a memorandum of understanding (MoU) with Korea Gas Corporation (Kogas) for jointly exploring opportunities in exploration of oil and gas and LNG business. “IOC and Kogas signed an MoU for joint participation in exploration and production of gas and oil at the global level, and developing natural gas infrastructure projects and LNG sourcing,’’ the company said in a statement.


Petronet LNG, on Friday, said its import terminal at Kochi in Kerala would be commissioned by the first quarter of 2013 calendar year. Talking to reporters here, Petronet LNG CEO and Managing Director A. K. Balyan said the Kochi terminal would operate only to less than a fifth of its 5 million tonnes a year capacity as the offtake infrastructure was not yet ready. GAIL (India) is laying pipelines connecting the Kochi terminal to consumers in two phases. The first phase, connecting four consumers such as Kochi Refinery and FACT Tranvancore, would be completed by December-end. Upon this, the Kochi LNG terminal would be commissioned. However, it would operate at only 0.5-1 million tonnes capacity for the first year due to limitation of gas offtake, he added. The second-leg of the pipeline, which would connect Kochi to Bangalore and Mangalore, was expected to be completed by next year-end, he said. The company reported its highest quarterly profit at Rs.315 crore in the July-September period on the back of better margins and operational efficiency.


Mr. Balyan said the net profit rose by 21 per cent to Rs.315 crore from Rs.260 crore a year ago. “We operated the 10 million tonnes a year Dahej import terminal at 106 per cent capacity during the quarter,” he added. Volumes imported remained flat at 135 trillion British thermal units but there was a 5 per cent increase in margin it gets on turning the liquid gas (LNG) back into its gaseous state.


The turnover soared 41 per cent to Rs.7,549 crore. The company had a forex gain of Rs.114 crore against a loss of Rs.52.6 crore, year-on-year. Petronet, which is in expansion mode, will commission its second import terminal at Kochi by the first quarter of 2013 calendar year. The Dahej facility will be expanded to 15 million tonnes by 2015, and a third terminal is being planned at Gangavaram in Andhra Pradesh.


Apple, on Saturday, opened its biggest Asian store yet in Beijing. The shop, on the major shopping street of Wangfujing in the heart of the capital, covers an area of 2,300 sq. metres, according to Chinese media reports.



Dr.Reddy’s Laboratories announced the intended public offer to acquire Octoplus N.V., a service-based speciality pharmaceutical company for 27.39 million euros (nearly Rs. 192 crore) in cash. Dr.Reddy’s offered to acquire 100 per cent of the issued and outstanding shares of OctoPlus with a premium of 30 per cent over the closing price of OctoPlus, as on October 19. Dr.Reddy’s already has commitment from over 50 per cent of shareholders of OctoPlus, whose executive board unanimously recommended the offer to the remaining shareholders. A release from Dr.Reddy’s said that the deal would help expand the company’s expertise and scientific capabilities. “We are looking forward to build a research base in Leiden (Netherlands). The acquisition would help us remap up our technology capabilities in drug delivery,” G.V.Prasad, CEO and Vice-Charman of Dr.Reddy’s, said in a statement.


Indian companies which invested in controversial deals involving hundreds of thousands of acres of land in Ethiopia have found themselves out of their depth in a fast-growing African economy that is still in the process of building critical transport and irrigation networks. Documents related to one such transaction reveal how Emami Biotech, a subsidiary of the Rs.2,200-crore Emami Group, pulled out of a Rs. 400-crore, 40,000-hectare, bio-fuel plantation only a year after the project was announced. Indian companies are the second largest investors in the Ethiopian economy with approved investments worth nearly $5 billion. While a majority of the businesses are small manufacturing and trading enterprises run by business families long settled in East Africa, the big money has come with the recent entry of large Indian investors. A number of Indian companies have signed agreements to lease more than 4,40,000 hectares of land across Ethiopia, 1,00,000 hectares of which has been granted to a single Bangalore-based company, Karuturi Global Ltd. International. Rights organisations and NGOs have characterised the deals as instances of land grab and have accused the government of forcibly resettling pastoral communities.

The Ethiopian government has denied these allegations, insisting that large-scale commercial agriculture is a vital part of an ambitious project to transform the national economy. Yet, the failure of Emami Biotech’s plantation and the glacial progress of Karuturi’s 1,00,000-hectare project in Gambella have led some to question the ability of these companies to manage such large plots of land. “We think [that] before making necessary preparations, they just express interest, get investment licences, get land and then preparations take more time,” said Federal Minister for Industries Mekonnen Manyazewal. “Once they start operations, obviously there will be challenges but we are prepared to solve their problems.” A senior Ethiopian bureaucrat said the government had taken considerable political risk by embarking on such sensitive projects involving the displacement of thousands and felt that the Indian investors had not done their homework. Emami Biotech’s project in Oromia, he said, was a case in point.

In August 2009, the company announced it was investing Rs. 400 crore to acquire 100,000 acres to plant Jatropha and other oil seeds and to set up an oil extraction plant. Mott McDonald, a reputed engineering and development consultancy, conducted a feasibility study. The Ethiopian government welcomed the investment and even appointed Emami Director Aditya V. Aggarwal as Honorary Ethiopian Consul at its newly opened Consular Office in Kolkata.


The following year however, Emami was ready to pull out. On December 22, 2010, the company wrote to the Oromia Investment Commission, claiming that only half the land initially allotted to Emami was suitable for agriculture, and even that land didn’t have enough water. As per the letter, the company invested $1.5 million in the project, dug several bore wells, and constructed a check dam. It also tried to grow maize, pulses, soya bean and sunflower, “but all our hard works becomes in vain [sic],” the letter said. The other parts of the land, the company claimed, lay along a disputed border between Oromia and the neighbouring province of Somaliland. The letter lists seven additional problems, including crop damage by local villagers and their cattle and a lack of cooperation from the local administration. While Oromia officials said there were no clashes between the company and the local villagers, a researcher acquainted with the project said the company and the villagers had clashed over scarce water supplies. The Ethiopian government is sceptical of the company’s claims. “It is a matter of due diligence, they must have known [about the water]. I don’t think that has lead to the withdrawal,” said Mr. Mekonnen, the Minister for Industries, noting that the company had conducted a feasibility study.


Analysts said the global recession could have led to a slump in demand for biofuels, affecting the viability of Emami’s project. “Since Jatropha plantation does not require [much] water, the land allocated was arid and the lease rental was extremely low,” said an analyst, adding Emami realised that the Jatropha plantation was not lucrative and tried to cultivate other crops, “This led Emami to request the government to reallocate the land and give them land that has much better water resources.” “[In Ethiopia] the cost of clearing land and making it into a farm is about $1,500 per hectare,” said Bharat Kulkarni, Director, Stalwart Management Consultancy Services, a firm that advises those looking to invest in Africa. “Unfortunately, investors land up in Ethiopia without actually realising this challenge.” Other factors include the high internal cost of transport, the absence of trained labour, government inefficiencies and the high costs of equipment. “We have returned the 30,000 acres of land handed over to us but are in talks with the government for alternative land,” said a spokesperson from Emami Biotech, but refused to share the reasons for this decision. Asked whether the Ethiopian government would reallocate land to the company, Mr. Mekonnen was non-committal. “We will think twice,” he said.


Jindal Poly Films has entered into an agreement with ExxonMobil Chemical to purchase its biaxially oriented polypropyline (BOPP) global films business. The agreement covers five BOPP production locations in the U.S. and Europe. The transaction also includes a technology centre and sales office in Rochester, New York and an office in Luxembourg, says a company release.


A day ahead of the second quarter monetary policy review by the Reserve Bank of India (RBI), Finance Minister P. Chidambaram, on Monday, unveiled a five-year roadmap for fiscal consolidation in keeping with the Kelkar Committee recommendations to contain the twin deficits and high inflation, spur investments and put the economy back on a higher growth track. Making a statement at a press conference here to mark acceptance of a number of reform measures in taxation, disinvestment and expenditure recommended by the Kelkar panel, which had cautioned the government that a “business-as-usual scenario for the current year” might lead to the fiscal deficit rising to 6.1 per cent of GDP [gross domestic product], Mr. Chidambaram asserted that efforts would be continued to restrict the fiscal deficit to 5.3 per cent of the GDP this fiscal, and reduce it to 3 per cent over a five-year period in 2016-17.

Referring to the lower fiscal deficit target that was set in the Budget for 2012-13, Mr. Chidambaram said: “5.1 per cent was very challenging. After looking at all the factors, we think 5.3 per cent is doable, and we intend to work hard and achieve that.” As per the roadmap, the deficit is to be brought down to 4.8 per cent by 2013-14, to 4.2 per cent in 2014-15 and further to 3.6 per cent in 2015-16 and finally to 3 per cent per cent in 2016-17. “This plan is necessary, this plan must be implemented and the government is very serious about implementing this fiscal consolidation plan…As fiscal consolidation takes place and investors’ confidence increases, it is expected that the economy will return to the path of high investment, higher growth, lower inflation and long-term sustainability,” he said.

The timing of the announcement is significant, in that it is quite evident that the government would like the RBI to heed India Inc.’s demand, and ease its key policy rates to kick-start the economy by reviving demand and catalysing investment. While it remains to be seen whether the apex bank responds to the government’s fiscal action or waits for the measures to take effect in view of the persistently high inflation, Mr. Chidambaram gave a clear indication that the government would welcome reciprocal action in view of the deceleration in industrial and overall economic growth. Without referring to the RBI, Mr. Chidambaram said: “Well, I am making the statement so that everybody in India acknowledges the steps which we are taking. And also acknowledges the government is determined to bring about fiscal consolidation. And I sincerely hope that everybody will read the statement and take note of that...” In his statement, Mr. Chidambaram pointed out that among the reform measures recommended the Kelkar panel strongly advocated a transition to the Goods and Services Tax (GST), a quick review of the Direct Taxes Code (DTC) before its introduction and passing in Parliament and a number of administrative measures to improve tax collection. On disinvestment, it suggested a number of new models for disinvestment and has pitched for disinvestment of the government’s residual stake in some companies that were privatised earlier. On the expenditure front, it suggested rationalisation of schemes, and strict control and monitoring of expenditure. “These recommendations are wholesome and have been accepted by the government,” he said.

Expressing confidence that the government would be able to mop up Rs.30,000 crore from disinvestment and Rs.40,000 crore from sale of spectrum, Mr. Chidambaram stressed that every effort would also be made to realise the revenue budgeted under tax receipts. “The government also expects to be able to contain and economise on expenditure, both on Plan and non-Plan side. While funds will be made available for essential expenditure, especially capital expenditure, every effort will be made to avoid parking or idling of funds. As regards subsidies, the Government will also increasingly rely on Aadhaar-enabled direct cash transfers of merit subsidies to eliminate duplication or falsification,” he said. The Finance Minister also expressed the government’s firm resolve to address the challenges posed by the rising current account deficit (CAD). The CAD, he said, was expected to come down to $70.3 billion or 3.7 per cent of GDP in the current fiscal, from $78.2 billion or 4.2 per cent in 2011-12. “The government is confident that the CAD will be fully financed by capital inflows, and expects that a substantial part of it will be in the form of foreign direct investments, foreign institutional investments and external commercial borrowings ,” he said.

As for the reforms in direct and indirect tax laws, Mr. Chidambaram said the introduction of the amended Direct Taxes Code (DTC) Bill was under review and would be presented to Parliament after taking the recommendations of the Standing Committee into account. “A quick review of the DTC Bill will be done. We are looking at the Bill that was introduced, at the Standing Committee’s recommendations. We are also looking at current economic situation and therefore final version of bill that will be introduced in Parliament will reflect all these. By and large, we will have to abide by Standing Committee recommendations,” he said. Alongside, work is in progress on the Goods and Services Tax (GST).


Penguin and Random House, two of the world’s top English-language publishing houses, have agreed to merge, it was announced on Monday, in a move seen as a precursor to more such mergers as the publishing industry struggles to overcome growing competition from digital publishing, notably Amazon. At present, Penguin is owned by Pearson, publishers of The Financial Times , and Random House by the German media group Bertelsmann. The latter will control 53 per cent of the proposed joint venture, to be called “Penguin Random House’’, and Pearson 47 per cent. The deal, which will create a business with estimated annual revenues of £2.5 billion accounting for 25 per cent of the British and American book markets, will be subject to normal regulatory approvals. It is expected to come into effect in the second half of 2013. There were calls for competition authorities to look at the deal closely, given the size of the merged group.

The move came as Rupert Murdoch’s News Corp, which owns Harper Collins, was reported to have approached Pearson with “substantial cash offer’’, estimated to be about £1 billion. But there was no official comment either from News Corp or Pearson. Meanwhile, Pearson said the merger with Random House would “bring together two of the world’s leading English language publishers, with highly complementary skills and strengths.’’ “Random House is the leading English language publisher in the U.S. and the U.K., while Penguin is the world’s most famous publishing brand and has a strong presence in fast-growing developing markets. Both companies have a long history of publishing excellence, and both have been pioneers in the dramatic industry transformation towards digital publishing and bookselling,’’ it said.


Marjorie Scardino, Chief Executive of Pearson, said that together two publishers would be able to share a large part of their costs, and invest more in their authors.
Thomas Rabe, Chairman and CEO of Bertelsmann, described the proposed merger as “the best course for new growth for our world-renowned trade-book publishers.’’ “It will build on our publishing tradition, offering an extraordinary diversity of publishing opportunities for authors, agents, booksellers, and readers, together with unequalled support and resources,” he said.

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