BASE PRICE FOR AUCTION OF 2G SPECTRUM SET AT 14000 CR. RUPEES

The Union Cabinet approved the reserve price for auction of 2G spectrum as well as spectrum usage charges (SUC). The Cabinet set the reserve price of 14000 crore rupees for the 5 megahertz pan- India spectrum in the 1800 megahertz band. The price is 22 percent lower than the telecom regulator’s suggestion. An auctioneer will be soon appointed to conduct a fresh auction. The Cabinet also endorsed the EGoM’s recommendation that the reserve price for the 800 megahertz band, which is used by CDMA operators, be fixed at 1.3 times the price for 1800 megahertz band. Telecom Regulatory Authority of India (TRAI) had recommended the base
price at 18000 crore rupees, which drew a heavy criticism from telecom companies, who argued that the base price suggested by TRAI is irrational. The fresh auction of 2G spectrum was necessitated after the Supreme Court scrapped 122 telecom licences on 2 February 2012 as it found the process of spectrum allocation cramped with flaws.

REPO RATE UNCHANGED AT 8 %

The Reserve Bank of India (RBI) in its April-June quarter monetary policy review released on 31 July 2012 left the key policy rates unchanged. The repo rate - the rate at which banks borrow from RBI - thus remained unchanged at 8 percent while the reverse repo rate – the rate at which, the banks lend to RBI – remained stable at 7 percent. Cash Reserve Ratio (CRR) - the amount of total deposits that banks are required to keep with the central bank - also remained unchanged at 4.75. The statutory liquidity ratio (SLR) - the percentage of total deposits that banks need to invest in the government bonds was changed to 23 percent from the erstwhile 24 percent. The cut in SLR is broadly aimed at enhancing the liquidity in the system to ensure free flow of credit growth. RBI had last cut the policy rates by 50 bps in its annual monetary policy announced on 17 April 2012. The bank decision had come after three years of stringent monetary policy. With the overall inflation continuing to be above the RBI’s comfort level, the central bank raised the baseline projection of WPI based inflation to 7 percent for March 2013 as against the earlier projection of 6.50 percent. RBI also cut its economic growth outlook for the fiscal year 2012-13 to 6.5 percent, from the earlier projection of 7.3 percent made during the
annual monetary policy review in April 2012. RBI is presently facing a tremendous pressure from different quarters of economy to revive the sluggish economy. Critics have even blamed RBI of being ineffective in reversing the pessimistic environment of domestic economy. The RBI, on the contrary, has been of the view that until the inflation does not come under its comfort level it can not take any call on policy rate cut. According to the
Wholesale Price Inflation (WPI) data released by the Ministry of Commerce and Industry on 16 July 2012, India’s headline inflation in the month of June 2012 slowed to 7.25 percent. Highlights of the RBI Quarterly Monetary Policy Review:

•  Repo rate - the rate at which banks borrow from RBI remained unchanged at 8 percent.

• Reverse repo rate – the rate at which, the banks lend to RBI – kept unchanged at 7 percent.

• CRR - the amount of total deposits that banks are required to keep with the central bank - also remained unchanged at 4.75

• SLR was changed to 23 percent from the erstwhile 24 percent

• Projection for WPI based inflation for March 2013 raised to 7 percent

• Economic growth outlook for the fiscal year 2012-13 cut to 6.5 percent

E-VOTING IS MANDATORY FOR TOP 500 LISTED COMPANIES OF BSE & NSE

The capital market regulator Securities and Exchange Board of India (SEBI) made it mandatory for top 500 listed companies to hold evoting with an objective to widen shareholder participation in key decisions. SEBI’s decision on evoting is to be implemented in a phased manner. The implementation will begin by subjecting the top 500 listed companies at the Bombay Stock Exchange and the National Stock Exchange based on market
capitalization to e-voting. The structural changes like scrutiny of audit reports as well as e-voting are expected to benefit the capital market in the medium term. SEBI also decided to create a Qualified Audit Report review Committee (QARC) represented by accounting regulator ICAI (Institute of Chartered Accountants of India) and stock exchanges. The committee would be responsible for processing qualified annual audit reports filed by the listed entities with stock exchanges. The committee will be expected to study reports where accounting  irregularities have been pointed out by Financial Reporting Review Board of the Institute of Chartered Accountants of India (ICAI-FRRB). The regulator relaxed norms for Offer For Sale (OFS). OFS is a new route introduced by SEBI in early 2012 to help companies increase their public shareholding. A minimum gap of two weeks between two OFS issuances was permitted by SEBI. SEBI made it easier for promoters of listed companies to dilute their stake and comply with public holding rules by 2013.As specified by SEBI, private sector companies and also the state owned corporations is required to have a minimum public holding of 25% by August 2013. In the SEBI board meeting, the regulator also announced a simpler share auction
mechanism that would help listed companies to attract investors. It provided institutional investors with the option of applying for shares either with 100% margin or with a lesser margin to be fixed by stock exchanges. However in case of the lesser margin being fixed by the stock exchange the bids cannot be changed. With regards to fulfilling public holding norms, the board decided that issuers will be required to disclose the floor price
a day before the share auction. The floor price may or may not be a part of the notice given by companies on the offer. Investors were barred from modifying or cancelling bids during the last 60 minutes from the close of the bidding session in the auction. Exchanges are required to display the indicative price during the last 60 minutes of the close of bidding session irrespective of the book being built.

INDIA’S EXPORTS SLIPPED BY 4.16 %

According to the latest foreign trade data released by the Union Commerce Ministry, India’s exports slipped by 4.16 percent to 25.68 billion dollar in May 2012. The slump was largely attributed to sluggish global economic outlook and declining domestic industrial growth. Imports during the May 2012, also saw a sharp plunge of 7.36 per cent to 41.9 billion dollar. The trade deficit also contracted to 16.3 billion dollar in May, from 18.5 dollar in May 2011. On exports front petroleum products with -26.07 per cent, engineering products with -15.67 per cent, gems and jewellery with - 9 per cent and readymade garments with -15.82 per cent saw maximum decline. In the import segment, gold and silver witnessed a fall of around 51 per cent, while plant and machinery nosedived by 8 per cent. Imports of crude oil, however, saw a 14 per cent hike. On a collective basis the imports in the first two months of fiscal year 2012- 13 slipped by 2.42 per cent to 79.8 billion dollar while, the exports contracted by 0.69 per cent to 50.13 billion dollar during April to May, 2012. The declining trade number came against the backdrop of government’s ambitious 20 percent growth target in exports for the fiscal year 2012-13. The Union Government in its recently announced Foreign Trade Policy had vowed to achieve 20 per cent exports target for the fiscal year 2012-13. The Union Commerce Ministry in its trade policy, had also introduced a host of measures to boost exports of the country.

FIRST INVESTMENT TO INDIA THROUGH QUALIFIED FRAMEWORK INVESTOR ROUTE

Following the deal struck by Kotak Mahindra Bank worth $5 million India received its first investment through the qualified framework investor (QFI) route. The deal formally put an end to speculation that India’s attempt to get investors to buy shares directly will go kaput. Kotak Mahindra Bank has concluded the deal worth $5 million for a US-based client. The scheme to attract investment through the Qualified Framework Investor route is expected to attract investment worth about $30 billion in 2012-13 period thereby helping the country fund a chunk of the current account deficit pegged at 4.2% of GDP in 2011-12. The finance ministry had in the recent
past conducted road shows in five countries in the Gulf region— Riyadh, Dubai, Muscat, Kuwait and Bahrain - to project India as the incredible investment destination for wealthy investors. A person or a trust resident in
a country which is a member of the Financial Action Task Force (FATF) can invest directly in India. Such a person or trust is termed as Qualified Foreign Investors. QFIs have been permitted to invest in all the three segments of the Indian Capital Market namely- Mutual Funds (MFs), Equity and Corporate Debt. The wealthy investors, the finance ministry felt should be encouraged to invest directly so that the stable in-flows could fund the current account deficits

MCX STOCK EXCHANGE (MCXSX) TO OPERATE AS A FULLFLEDGED STOCK EXCHANGE

Market regulator Securities and Exchange Board of India (SEBI) permitted MCX Stock Exchange (MCX-SX) to operate as a full-fledged stock exchange thereby ending nearly four-yearlong wait of the bourse. With the
grant of the permission MCX-SX will from hereon be able to offer additional asset classes such as equity and equity F&O (Futures and Options), interest rate futures and  wholesale debt segments. So far the market regulator had been renewing MCX-SX’s licence for one-year periods only. However it had not allowed MCX-SX to operate in segments other than currency derivatives stating that the bourse was not compliant to the shareholding and other regulations. The promoters of MCX-SX, in their submissions and the undertakings to SEBI mentioned that the shareholding of MCX and Financial Technologies (India) Ltd. (FTIL) (the two promoters) would be brought within the 5 per cent limit within 18 months from 10 July 2012 itself. The promoters also informed SEBI that the combined voting rights of FTIL and MCX in the stock exchange would not exceed 5 per cent at any point of time. MCX and FTIL would reduce their rights over equity arising from instruments such as warrants to within the shareholding limit in accordance to what was specified in the revised SEBI regulations within three years. SEBI’s decision is likely to bring in more competition in markets. MCX is the largest commodity exchange in the country while its promoter FTIL offers technology and other solutions for exchange businesses. MCX-SX was first granted recognition by SEBI in September 2008, however it was allowed to conduct trading only in the currency derivatives segment only. SEBI granted permanent recognition to eight stock exchanges in the country. Of the total eight only two of them — BSE and NSE are operating as active national level bourses across the segments.

INDIA’S FISCAL DEFICIT FOR APRIL-MAY PERIOD STOOD AT 1.41 LAKH CRORE RUPEES

As per the latest data released by the Controller General of Accounts (CGA), India’s fiscal deficit during the April-May, the first two months of the fiscal year 2012-13 stood at 1.41 lakh crore rupees, 27 per cent of the budget estimates. The increased fiscal deficit figure came despite revenue receipt witnessing a substantial hike and stood at 47897 crore rupees, which was 5.1 per cent of the budget estimates. Total expenditure of the government in the first two months of fiscal year 2012-13 was 1.90 lakh crore rupees, or 12.8 per cent of the budget estimates. For the fiscal year 2012- 13, the government has pegged the fiscal deficit target at 5.13 lakh crore rupees, or 5.1 per cent of GDP. In the corresponding period during the last fiscal year, the fiscal deficit was 32 per cent of the budget estimate amounting 1.3 lakh crore rupees.

EXPORTS FROM SEZS GREW 64%

Exports from Special Economic Zones (SEZs) grew 64 per cent to Rs 118321.56 crore during the first quarter (April-June) of the fiscal 2012-13. Export Promotion Council for EOUs and SEZs (EPCES) mentioned that
investments worth Rs 213605.54 crore were made in SEZs as on 30 June 2012. As on 30th June, 2012 investments worth Rs.213605.54 crore were made in SEZs and this sector generated employment to 920243 persons. The Union Government had granted 588 formal approvals for setting up of SEZs. Of the total 588, 386 had been notified while 158 were in operation as on 30 June 2012. The Minimum Alternate Tax and Dividend Distribution Tax had affected SEZ growth, investments, employment and exports. MAT/DDT implementation also sent wrong signals to the international investment community which look at India for its resources of skills and manpower. The EPCES had on 30 July 2012 sought Prime Minister Manmohan Singh’s intervention for some long-term benefits to this sector in order bring it back to its  established state.

NATIONAL CERTIFICATION STANDARDS FOR ORGANIC TEXTILES

The Union government introduced national certification standards for organic textiles to boost the demand for organic textiles in major markets, including Europe and Japan. The Indian Standards for Organic Textiles (ISOT) launched by Commerce, Industry and Textiles Minister Anand Sharma here is to be included under the National Programme for Organic Productions (NPOP). The NPOP includes norms for organic production and processing of agriculture crops along with certification standards. All organic products are grown under a system  of agriculture without the use of chemical fertilisers and pesticides.Prior to the introduction of the national certification standards, private standards prevailed in the country for organic textiles. The private standards were not in conformity with the international benchmarks. India with the introduction of the national certification standards thus took over the long-standing position of the Global Organic Textiles standards (GOTS), which are private standards prevailing in the organic textiles industry. India became the only country in the
world to have introduced organic textiles standards at the national level. Organic textiles exports were pegged at Rs 1027 crore in 2011-12 as per the data provided by the APEDA. In 2011 India exported certified organic products to various countries in Europe, Asia and the US worth Rs 1866 crore. India currently produces more than 1000 branded organic products which are backed by certification. The demand for Indian organic products such as tea, coffee, spices, basmati rice, cereals, garment, vegetables and medicinal plants was found to be steadily growing in recent years as consumers’ prefer products which are free from chemical residues. CDMA Airwaves in the 800 MHz band at 1.3 times the Base Price for GSM Airwaves recommended A high-powered ministerial panel responsible for finalising rules for upcoming second generation (2G) spectrum auctions recommended fixing of minimum price for CDMA airwaves in the 800 MHz band at 1.3 times the base price for GSM airwaves in the 1800 MHz band. Empowered Group of Ministers (EGoM) headed by home minister P Chidambaram, in its meeting on 20 July 2012 had rejected the department of telecom’s (DoT) suggestion that reserve price in the 800 MHz band for CDMA players be twice as that of airwaves in the 1800 MHz band. In the same meeting the EGoM had recommended that the minimum price for GSM airwaves be cut to Rs 14000 to Rs 16000 crore. The EGoM’s proposal disappointed the mobile phone companies who were pitching for an 80% reduction from the Rs 18111 crore proposed by the telecom regulator, TRAI. The EGoM has recommended two specific reserve price for the 1800 MHz band at Rs 14111 crore and Rs 15111 crore for 5 units of airwaves on a pan-India basis. The group of ministers provided two options to the Cabinet on the spectrum usage charge that forms part of the revenue share for mobile phone companies. The first option is to (1) keep this levy at 5% of the telco’s annual revenues, or (2) calculate this levy according to the current rules. The spectrum usage charges currently range between 2% and 7% of the telcos’ annual
revenues depending on two factors – the quantity of airwaves as well as the availability of third generation airwaves. One unit of GSM airwave in the 1800 MHz on a pan-India basis to cost Rs 2822 crore and Rs 3022 crore, respectively, at the base price of Rs 14111 crore and Rs 15111 crore, respectively. Airwaves will be sold in blocks of 1.25 MHz and on a circle-wise basis. India is divided into 22 circles. This thus translates to a reserve price of Rs 18344 crore to Rs 19644 crore for 5 MHz of airwaves in the 800 MHz band for CDMA companies. For a single unit, the telecom companies will have to pay between Rs 3668 crore and Rs 3928 crore. The mobile phone companies in the GSM space slammed the inter-ministerial panel for suggesting that the base price for 800 MHz be at 1.3 times that for 1800 MHz. The EGoM also specified that new entrants and companies that lost their mobile permits on account of the Supreme Court’s ruling can bid for a maximum 6.25 MHz of airwaves in the 1800 MHz band in the upcoming auctions, while existing operators in the GSM space can bid for a maximum of 2 blocks or 2.5 MHz of airwaves. GSM & CDMA It is argued that discrimination between GSM and CDMA is being widened by keeping the auction reserve price for 800 MHz at 1.3 times of 1800 MHz on the rationale that less than 5 MHz is being put up for auction. A similar option is however not being extended to GSM operators to retain their 900 MHz spectrum at a price of 1.3 times of 1,800 MHz in the event that less than 5 MHz is obtained at the time of the license extension. The requirement for 25% of upfront payment for CDMA and 35% of upfront payment for GSM is another example of discrimination between CDMA & GSM. This discrimination will go against the objective of creating a level playing  field among the operators.

GAS ALLOCATION OF DMICDC DISCARDED

The Petroleum and Natural Gas Ministry discarded Gas allocation of Delhi-Mumbai Industrial Corridor Development Corporation (DMICDC). The gas allocation was of 8 million metric standard cubic metres per day (mmscmd) gas from two of DMICDC power projects, to provide gas at reasonable rate. The request was neglected because as per Petroleum Ministry there is additional demand of fertilizer about 22 mmscmd and any allocation of gas to DMICDC projects was not possible. Delhi- Mumbai Industrial Corridor Development Corporation (DMICDC) is a mega infra-structure project of 90 billion dollar. It has the financial & technical help  of Japan. It is covering the length of 1483km between Delhi and Mumbai. DMICDC strains on expanding the manufacturing and services base and to develop DMIC as the Global Manufacturing and Trading Hub.

INDIA’S FISCAL DEFICIT REACHED 37 PERCENT

According to the latest data released by the Controller General of Accounts (CGA) on 1 August 2012, India’s fiscal deficit in the  first quarter (April-June) of thefiscal year 2012-13 stood at 1.90 lakh crore rupees which was 37 percent of the entire budget estimate. The Union Government in the budget 2012 had pegged the fiscal deficit for the financial year 2012-13 at 5.13 lakh crore, or 5.1 percent of total GDP. Fiscal deficit during the corresponding period of fiscal year 2011-12 was 39 percent of the budget estimates amounting 1.63 lakh crore rupees. The revenue receipts, however, increased in the first three months of fiscal year 2012-13. The revenue receipt during the given period stood at 1.18 lakh crore rupees, which was 12.7 percent of the budget estimates. Total expenditure of the government stood at 3.12 lakh crore rupees, or 21 percent of the budget estimates.

RBI SIGNED MOU WITH FINANCIAL REGULATORS OF 9 COUNTRIES

The Reserve Bank of India (RBI) signed three memoranda of understanding – with Jersey Financial Services Commission (JFSC), Financial Services Authority of UK and Financial Supervisory Authority of Norway. The
Memorandum of Understanding (MoU) was signed with regulators of other countries to promote greater co-operation and sharing of supervisory information between the regulators. RBI signed nine MoUs thus far with financial regulators of different countries. The MoU with the Jersey Financial Services authority was signed. Jersey Financial Services Commission (JFSC) is an independent statutory body. The main function of JFC is the
regulation, licensing and supervision of financial services providers for compliance with prudential norms and conduct of business requirements in Jersey. The MOU with the Financial Services Authority (FSA), UK was signed at FSA, UK Headquarters, London. The FSA is the United Kingdom’s principal national financial services and markets regulator and administers the  Financial Services and Markets Act 2000(FSMA) that provides for the supervision of firms, financial services, financial products as well the financial markets. The MoU with the Financial Supervisory Authority of Norway (Finanstilsynet) was signed at FSA, Norway headquarters. Finanstilsynet as the supervisory authority is entrusted with supervision of banks (insurance companies and investment firms, etc.) in Norway as per the Financial Supervision Act of 1956.

GROWTH OF EIGHT CORE SECTORS SLIPPED TO 3.6 %

As per the official figures released on 31 July 2012, growth of eight core sectors slipped to 3.6 percent in June 2012 against 5.6 percent in June 2011. During April- June 2012-13, the cumulative growth rate of the Core industries was 3.6 % as against their growth at 5.2% during the corresponding  period in 2011-12. Core sector growth in May 2012 had moderated to 4 percent, from 5.9 percent in May 2011. The Eight core industries that include crude oil, petroleum refinery products, coal, electricity, cement and finished steel have a  combined weight of 37.90 per cent in the Index of Industrial Production (IIP).

Coal: Coal production (weight: 4.38% in IIP) registered a growth of 7.2% in June 2012 compared to its growth at (-) 3.0% in June 2011. The growth of the coal sector in cumulative terms witnessed a growth of 6.4% during April-June 2012-13 compared to its growth at 0.3% during the same period of 2011-12. Crude Oil: Crude Oil production (weight: 5.22% in IIP) registered a growth of (-) 0.8% in June 2012 compared to its growth at 7.7% in June 2011. Cumulatively
Crude Oil production registered a  growth of (-) 0.5% during April- June 2012-13 compared to its growth at 9.5% during the same period of 2011-12.

Natural Gas: Natural Gas production (weight: 1.71% in IIP) registered a growth of (-) 11.1% in June 2012 compared to its growth at (-) 11.7% in June 2011. Cumulatively, Natural Gas production registered a growth of (-) 11.1% during April-June 2012- 13 compared to its growth at (-) 10.2% during the same period of 2011-12. Petroleum Refinery Products: Petroleum refinery production (weight: 5.94% in IIP) had a growth of 6.1% in June 2012  compared to its growth at 4.6% in June 2011. In cumulative terms, Petroleum refinery production saw a growth of 3.2% during April-June 2012-13 compared to its 5.2% growth during (April-June) period of 2011-12.

Fertilizers : Fertilizer production (weight: 1.25% in IIP) registered a growth of (-) 11.7% in June 2012 against its growth at (-) 2.4% in June 2011. Cumulatively Fertilizer production had a growth of (-) 12.2% during April-June 2012- 13 corresponding to 1.1% growth during (April-June) period of 2011- 12. Steel (Alloy + Non- Alloy): Steel production (weight: 6.68% in IIP) registered a growth rate of (-) 0.5% in June 2012 against
its 14.5% growth in June 2011. Cumulatively, Steel production registered a 3.6% growth during April-June 2012-13 compared to its 8.4% growth during the same period of 2011-12. Cement: Cement production (weight: 2.41% in IIP) registered a growth of 10.2% in June 2012 against its 1.7% growth in June 2011. The cumulative growth of Cement Production was 9.9% during April-June 2012-13 compared to its 0.1% growth during the same period of 2011-12.

Electricity: Electricity generation (weight: 10.32% in IIP) had a 8.1% growth in June 2012 compared to its 7.9% growth in June 2011. The cumulative growth of Electricity generation was 6.4% during April-June 2012- 3
compared to 8.2% growth during the same period of 2011-12. India’s economic growth rate dipped to nine-year low, both in the March quarter at 5.3 percent, as well as for the 2011-12 fiscal at 6.5 percent on account of global economic slowdown and its own domestic problems thereby prompting the industry to demand immediate and bold action to arrest slowdown.

10.82 % DISINVESTMENT IN SAIL APPROVED

The Cabinet Committee on Economic Affairs on 20 July 2012 approved 10.82 per cent disinvestment in Steel Authority of India (SAIL). The divestment will help the government to raise about  4000 crore rupees. The government holds 85.82 per cent stake in SAIL. Earlier the government on 15 July  2012 had deferred Rashtriya Ispat Nigam Limited’s 2500 crore rupees initial public offering due to volatile state of market. The government plans to divest 10 per cent stake in RINL through IPO. The government in annual budget 2012-13 set the disinvestment target at 30000 crore rupees (300 billion rupees). Though, on the issue of ownership it made clear that at least 51 per cent ownership and management control of Central Public Sector Enterprises will remain with the Government. Union government is also eyeing to partially offload its share in PSUs like Hindustan Aeronautics, BHEL, National Aluminium Company (Nalco), Hindustan Copper and Oil India in the fiscal year 2012-13.

INDEX OF INDUSTRIAL PRODUCTION (IIP) RECORDED 2.4% GROWTH

Index of Industrial Production (IIP) recorded 2.4% growth in May 2012 as against the market expectations of 1.7% growth. The April IIP was revised lower to -0.9% from earlier estimate of 0.1%. The slight growth in IIP was attributed to growth registered in the electricity and consumer durables sector. Industrial growth had stood at 6.2 per cent in the corresponding month in 2011. During the first two months of the 2012-13 fiscal, April-May, the industrial growth rate fell sharply to 0.8 percent from 6.2 percent in the same period of 2011-12. Mining sector witnessed a fall of -0.9% compared to 1.8 percent growth in May 2011. The output of the capital goods sector (machinery and equipment) dipped by 7.7 percent in May 2012 as against a growth of 6.2 percent in May 2011. However electricity sector registered a growth of 5.9%. Power generation had witnessed a slower growth of 5.9 percent during May, compared to 10.3 percent. Manufacturing sector which constitutes over 75 percent of the index, did not perform well and grew a mere 2.5 percent in May 2012 as against 6.3 percent in May 2011

Consumer durables production showed a faster growth rate of 9.3 percent in May 2012 as compared to 5.1 percent in May  2011. The consumer non-durables segment output growth declined sharply and remained flat at 0.1 percent, as against 9 percent. Headline inflation in May moved to 7.55 percent as both food and fuel prices increased. Consumer price inflation, which is an indicator of retail price rises, remained unchanged at 10.36
percent in May 2012.

IN DROUGHT HIT AREAS EGOM APPROVED 50% DIESEL SUBSIDY TO FARMERS

An Empowered Group of Ministers (EGoM) on drought, headed by agriculture minister Sharad Pawar in a meeting on 31 July 2012 announced a 50 per cent diesel subsidy scheme for the farmers to help them save the standing kharif crop through irrigation. The total subsidy burden would be around Rs 1,260 crore and is to be borne equally by the state governments and the farmers. Districts that received 50 per cent deficient rainfalls can avail this facility. The subsidy scheme will be applicable in districts that had more than 50 per cent deficient rains as on 15 July 2012 The EGoM also approved an increase in the subsidy on the seeds of alternative crops under contingency plans. A relief package of Rs 1440 crore was also cleared towards watershed development-related efforts in Karnataka, Maharashtra, Gujarat and Rajasthan where around 56 lakh hectares of farmland are estimated to go uncultivated. Around Rs 500 crore was approved for meeting drinking water-related challenges in these states. Rs. 453 crore would be given  under the National Rural Drinking Water Programme (NRDWP) to Maharashtra, Karnataka, Rajasthan and Haryana. It was decided in the EGoM meeting that the subsidy amount on seeds of cereals is to be increased from Rs 500 a quintal to Rs 700 per quintal, while that of pulses and oilseeds would be enhanced from Rs 1200 per quintal to Rs 2000 per quintal. The government has prepared contingency plans for 320 districts. The Agriculture Ministry also decided to waive the duty on import of certain items to increase the availability of feed ingredients for animal husbandry sector needs. Duty- free imports of oil meal is to be allowed to ensure feed availability to livestock. The withdrawal of customs duty on oil meal imports is to be applicable for de-oiled soya meal, sunflower, mustard and canola oil meal. Currently, oil meal imports attract a duty of 15 per cent.

INDIA’S PUBLIC DEBT ROSE BY

4.9 % According to the quarterly report on ‘Public debt management’ prepared by the Department of Economic Affairs (DEA) under the Ministry of  Finance, India’s public debt rose by 4.9 per cent to 3752576 crore
rupees during the first quarter (April-June) of fiscal year 2012 from 3578244 crore rupees in the fourth quarter (January-March) of 2011- 12. The report was released by the government on 27 July 2012.The report pointed out that internal debt constituted 90.6 per cent compared with 90.1 per cent at the end of March, 2012 quarter. The report noted that outstanding internal debt of the Government at 3398154 crore rupees constituted 33.4 per cent of GDP compared with 36.4 per cent in the last quarter of 2011-2012. On the tax front, report revealed, the government did remarkably better as gross tax collections during April-May period at 7.8 per cent of budget estimate were higher than 6.6 per cent a year ago. Personal income tax collections at 25999 crore rupees also surged by 44.2 per cent against  budgeted estimate of 13.9 per cent for 2012-13.
In the direct taxes, corporate tax collections at 10137 crore rupees showed a healthy growth. Among the indirect taxes, customs and excise duties showed negative growth of 2 per cent and 4.6 per cent, respectively, against budgeted growth rates of 22 per cent and 29.1 per cent. Service tax collections, however, increased by 37.7 per cent during April-May 2012-13 as against budget estimate of 30.5 per cent.

NEW GUIDELINES FOR BOOKING OF TATKAL TICKETS

Amidst the increasing number of reports of the misuse of tatkal scheme, the Indian Railways on 9 July 2012 introduced new guidelines for booking of Tatkal tickets. Under the new guideline the Railways revised the time  for booking the tatkal tickets to 10am from earlier 8am. Besides, under the new scheme, agents will not be allowed to book Tatkal tickets from 10am to 12pm either from the ticket counter or on the internet. Some zones  will be provided the facility of separate Tatkal ticket counters while, others will issue Tatkal tickets from the same counters between 10 am to 10:30 am. Several other measures have also been introduced under the new tatkal scheme, which includes;

• Individual users can not book more than two tickets from 10 am to 12 noon.

• Quick book option and cash card option will remain inactive between 10 am and 12 pm

• Installation of CCTVs in major booking centres,

• Booking clerks barred from carrying cellphones inside counters,

• Display of helpline numbers

• Expansion of the e-ticket handling capacity of Railways website through short-term and long-term measures

• Server capacity to be increased from 3.5 lakh bookings to about 5 lakh bookings per day in about four months, which will eventually be increased to about 8 lakh bookings a day.

EIGHT CORE SECTOR REGISTERED 8 PER CENT GROWTH

As per the latest data released by the commerce and industry ministry on 29 May 2012, the eight core sectors registered a higher growth rate of 3.8 per cent in May 2012. The sector had posted a sluggish 2.2 per cent growth in April 2012. The infrastructure sector had witnessed a 5.8 per cent growth in May 2011. However, the collective growth of infrastructure sector in April-May 2012 stood at 4.2 per cent, against 5 per cent in the corresponding period during the fiscal year 2011-12. The growth rate of cement and coal industries soared up by 11.3 per cent and 8 per cent, respectively, while production of natural gas and fertiliser during May 2012
shrunk by 10.8 per cent and 15.1 per cent, respectively. The growth of petroleum refinery products and crude oil decelerated to 2.9 per cent  and 0.5 per cent. Similarly, the steel and electricity sector also registered
a declined growth rate at 4.9 per cent and 5.2 per cent in May 2012. The eight industries - steel fertilisers, coal, petroleum refinery products, crude oil, natural gas, electricity and cement - collectively amounts 37.9 per cent of the Index of Industrial Production (IIP). India’s Headline Inflation slowed to 7.25 percent in June 2012 According to the Wholesale Price Inflation (WPI) data released by the Ministry of Commerce and Industry on 16 June 2012, India’s headline inflation in the month of June 2012 slowed to 7.25 percent, marking the lowest in the last five months. The inflation figure stood at 7.55 per cent in May 2012, while at 9.51 percent during the
corresponding month of 2011. The government revised the inflation figure for the month of April 2012 to 7.50 percent from earlier 7.23 percent. Food Inflation, however, did not show any restraint as it stubbornly stood in double digit zone. The food inflation for the month of June 2012 stood at 10.81  percent as compared to 10.74 percent in May 2012. The persistent high food inflation left RBI with very little room to consider any policy rate cut in its upcoming monetary policy review. Annual fuel inflation at 10.27 per cent in June 2012, showed a little moderation as it stood at 11.53 percent during the same period in 2011. The persistent decline in the
value of Indian rupee in the global currency market has not let the fuel prices in India come down, despite the global fuel prices dropped significantly. RBI is set to review its quarterly monetary policy on 31 July 2012, though any decision on change in policy rates is unlikely unless the inflation remains above the comfort level of the common man of the country. The Central Bank in its mid-quarterly review of monetary policy on 18 June 2012 had left various key policy rates unchanged.

47.16 % INCREASE IN INDIA’S DIRECT TAX COLLECTIONS

At 84273 crore rupees India’s direct tax collections registered a 47.16 per cent increase in the first quarter of the fiscal year 2012-13. On a cumulative basis, direct tax collections in the first quarter (April-June) swelled 6.77 per cent at 111182 crore rupees. This growth is, however, much lower than the 23.91 per cent growth witnessed in the same quarter of fiscal year 2011-12. The rise in direct tax collections is vital as the country had recorded a 17 per cent decline in direct tax collection during the corresponding period of fiscal year 2011-12. The poor show of manufacturing sector over the past few months widely reflected in corporate tax collection, as its growth pegged at a meagre 3.48 per cent in the first quarter of fiscal year 2012-13. Personal taxes went up by 13 percent. Corporate and personal tax had witnessed 23.49 per cent and 24.63 per cent growth, respectively, during the corresponding period of fiscal year 2011-12. Securities transaction tax (tax on stock exchange trades), slumped 0.52 per cent to 952 crore  upees, while wealth tax revenues dropped 3.03 per cent in April-June to 32 crore rupees. The sluggish economic environment in the country is making it all more  difficult for the government to meet its targets. The Union Governmentpegged direct tax collection target at 5.70 lakh crore rupees this fiscal, which is 15 percent higher than its total collection in fiscal year 2011-12.

NBFCS TO MAINTAIN NET-OWNED FUNDS (NOF) AT RS 3 CRORE

The Reserve Bank of India (RBI) in a notification issued stated that all registered non-banking financial companies (NBFCs) which who intend to convert themselves into non-banking financial company-micro finance institutions (NBFC-MFIs) would have to seek registration with immediate effect, not later than 31 October 2012. The central bank also mentioned that the NBFCs have to maintain net-owned funds (NOF) at Rs 3 crore by 31 March 2013, and at Rs.5 crore by 31 March 31 2014. If the NBFCs fail maintain the NOF they will have to ensure that lending to the micro finance sector, that is, individuals, SHGs or JLGs, which qualify for loans from MFIs to be restricted to 10 per cent of the total assets. The NBFCs operating in the north-eastern region are to maintain the minimum NOF at Rs.1 crore by 31 March 2012, and at Rs.2 crore by 31 March 2014.
The RBI also decided that the cap on margins as defined by the Malegam Committee are not to exceed 10 per cent for large MFIs (loans portfolios exceeding Rs.100 crore) and 12 per cent for others. The measure was initiated to ensure that in a low cost environment, the ultimate borrower will benefit, while in a rising interest rate environment and that the lending NBFC-MFIs will have sufficient leeway to operate on viable lines.

SEBI TIGHTENED ELIGIBILITY & EXIT CRITERIA FOR STOCKS IN DERIVATIVES

The market regulator, Securities and Exchange Board of India (SEBI) tightened eligibility and exit criteria for stocks in the derivatives segment by increasing the benchmark liquidity level for any scrip to be eligible for trading in the derivatives segments. By doing away with illiquid stocks SEBI aims to check manipulation. According to the circular issued by SEBI, scrips with a minimum trading volume value of Rs 10 lakh and market wide position limit (MWPL) or market capitalisation of Rs 300 crore cannot be eligible for entry into the Future and Options (F&O) segment. Over 220 scrips trade in the F&O segment on the National Stock Exchange (NSE) at present. Of these 220 scrips only 100 scrips will possibly meet the new eligibility criteria set by the market regulator. The minimum Median Quarter Sigma Order Size, which indicates liquidity/order size in a scrip, a requirement for introduction in derivatives segment was revised to Rs 10 lakh, from Rs 5 lakh at present. The  MWPL, indicating the size of the company was also raised to Rs 300 crore, from Rs 100 crore. Scrips which fail to maintain a minimum MWPL requirement of Rs 200 crore would cease to be in the F&O segment. The earlier limit was set at Rs 60 crore. SEBI also tightened theminimum conditions for a stock to continue trading in the derivatives segment. As per the circular, a stock’s MQSOS over the last six months ought to be more than Rs 5 lakh against Rs 2 lakh earlier for the stock to continue trading. SEBI’s measures in this respect are expected to restrain any manipulation in share prices and bring in more meaningfulness to the F&O segment. Stock exchanges (SEs) will now have to thus follow strict criteria for futures and option (F&O) securities.