India less vulnerable to external shocks

The CAD in the first half of current fiscal stood at 1.4 per cent of GDP, lower than 1.8 per cent in the same period last fiscal.
NEW DELHI: Indian economy is less vulnerable to external shocks as it is mainly driven by household consumption and government spending, and not dependent on hot money which can move out quickly, Standard & Poor’s Rating Services said on Tuesday.

The US-based rating agency expects the current account deficit (CAD), which is the difference between inflow and outflow of foreign exchange, to remain at a modest level of 1.4 per cent at the end of current fiscal and would continue at similar level till 2018.

“We see India as having limited vulnerability to external economic or financial shocks. This is because growth in the economy is mainly driven by domestic factors, such as household consumption and government spending.

“At the same time this is a country that has low reliance on external savings to fund its growth. In other words, the banks are mainly deposit funded and don’t rely on wholesale funding to grow their loan books,” S&P Rating Services India Sovereign Analyst Kyran Curry told PTI.

He said India’s capital markets are diversified and deep enough for companies to raise funding.

“Another favourable aspect of India external settings is that it is generally not subject to hot money inflows that can turn into outflows with shifts in investor sentiment. As such we see the external risks for India to be relatively contained,” Curry said.

He said while export growth may be disappointing, the current account deficit likely to be a modest 1.4 per cent in 2015, with similar levels through 2018.

“Our forecasts are partly informed by our view of increased monetary credibility, which dampens the demand for monetary gold imports. In addition, we expect India to fund this deficit mostly with non-debt, creating inflows,” Curry added.

The CAD in the first half of current fiscal stood at 1.4 per cent of GDP, lower than 1.8 per cent in the same period last fiscal. For full 2014-15 fiscal, the CAD stood at 1.3 per cent of GDP.

Alstom delivers ‘Made in India’ coaches to Kochi Metro

Three indigenously-designed and manufactured coaches were flagged off by Union Minister for Urban Development and Parliamentary Affairs, M. Venkaiah Naidu, on Saturday.

Alstom, the French transportation equipment maker, rolled out the first set of railway coaches for the Kochi Metro project from its facility at Sri City in Andhra Pradesh. The three indigenously-designed and manufactured coaches were flagged off by Union Minister for Urban Development and Parliamentary Affairs, M. Venkaiah Naidu, on Saturday. The Kochi coach order is the second rolling stock contract for Alstom in the country, with Chennai metro the first. The Metropolis coaches, which were handed over to Kerala Minister for Power and Railways Aryadan Mohammed, will take at least 10 days to reach Kochi where they will be received by Kerala Chief Minister Oommen Chandy.

Trial runs

The civil works are at an advanced stage and trial runs expected to commence in the next few weeks.

“It is not only the fastest manufactured coach but also one of the most indigenised metro coaches to be manufactured in India with indigenisation level of nearly 70 per cent. It is not only a truly Make in India product but it is also a testimony to the fact that Indian skills, craftsmanship, technical prowess and entrepreneurship are one of the best in the world,” Mr Naidu said.

Alstom Deputy Senior Vice President, Jean Francois Beaudoin, said it was truly a ‘Make in India’ product for them as it was conceptualised, designed, manufactured and tested by an Indian team.

The coaches manufactured by Alstom were unique in many ways as they were the most modern coaches to be manufactured in India, Kochi Metro Rail Managing Director, Elias George, said. They were way ahead of schedule and costs lower compared to other metro coaches. It had 70 per cent indigenisation level.

Delhi Metro Rail Corporation Managing Director, Mangu Singh, said that they are willing to help secondary cities to implement metro rail project at lower cost.

Mr. Naidu said: “We have received the report. We are yet to study it to find out if they were feasible for some cities.”

Annual solar power capacity to quadruple next fiscal year: Goyal

Piyush Goel

India may increase its solar energy capacity four-fold during the next fiscal year ending March 2017, Piyush Goyal, Union Minister of Coal, Power and Renewable Energy says.

“Today our solar capacity is about 4,500 MW and the capacity addition target for this year is about 2,000 MW. During 2016-17, we are hoping to add 12,000 MW in solar sector alone. Thus, including other renewable sources, there will be a total capacity addition of about 15,000 MW during next fiscal,” he said.

The government is focusing on speed, skill and scale rather than subsidies to drive reforms and progress in the energy sector. The minister said water heaters that ran on solar energy had subsidy components some years ago.

“Our government inherited a huge subsidy bill,” he said adding, “If you keep depending on the clutches of the government, you would never able to achieve scale and path breaking innovation. Our government will handhold and support you in the initial period for a while, but ultimately the project has to be techno-economically viable,” he added.

LED bulbs

He highlighted the pace with which LED bulbs were distributed in the country as part of government’s energy efficiency drive initiative. Energy Efficiency Services Ltd (EESL), a public sector entity engaged in distribution of LED bulbs, is expected to contribute about seven crore bulbs this year.

“The same company distributed six lakh bulbs in 2013-14 during previous government’s regime. Due to economies of scale, the prices have come down by 76 per cent now. It is a standalone project now and there is zero subsidy. Upfront payment is Rs.10 and the balance is paid over 10 months. Today, about 4 lakh bulbs are distributed every single day,” he added.

Mr Goyal also said that the ministry was expediting electrification of all villages without power. As on April 1, 2015, there were 18,452 villages across 19 states without electricity.

“Prime Minister, in August this year, has asked us to electrify these villages in the next 1,000 days. But we have taken a pledge to achieve that in the next 730 days. Currently we are electrifying 100-120 villages every day. We will ramp it up to 200 villages a day. We have also planned to install off-grid systems in villages that pose challenges for grid power,” he stated.

Maharashtra may waive all taxes for EVs

Maharashtra is likely to be the first State to waive value added tax (VAT), registration charges and road tax on electric vehicles (EVs), according to Mr.Goyal.

“I suggested it to the Maharashtra Chief Minister some time ago to waive all taxes on EVs as a mark of our support to clean environment. He was very responsive to the idea. So, I am confident that the state will exempt EVs from VAT, registration and tax charges,” he said.

On the challenges of imposing a charge on infrastructure for EVs, he stated: “I would ideally like to see every petrol bunk in the country to have a charging station. Normally, such vehicles can be charged at home. But, if one is doing long distance travel, he/she should be in a position to do that at a charging station. We are working on building that infrastructure.

Initial seeding

“It could be a public-private partnership or initially seeded by the government and then subsequently it could become a business model. Also, power will no longer be an issue we have surplus coal and power in the country today.”

He added that the government was keen on facilitating faster roll-out of EVs across the states and government would partner with initiatives relating to EVs, hybrid technology or biogas programmes.

India did well in year of global economic turmoil: Finance Minister Arun Jaitley

Finance Minister Arun Jaitley dismissed grumblings about the economy not having taken off as "cynicism - a way of life in India".NEW DELHI: Voicing “great satisfaction” over performance of the Indian economy in “a year of turmoil and volatility” globally, Finance Minister Arun Jaitley today dismissed grumblings about the economy not having taken off as “cynicism — a way of life in India”.

Looking back at 2015, Jaitley said India has been the bright spot with growth prospects of 7-7.5 per cent despite global slowdown and adversities, and expressed optimism that the growth rate which is “quite good” would improve further in the months to come.

India has responded well to the challenge posed by the slowdown in global economy, he said, but acknowledged that “there are areas (in which) we have to respond faster”.

“As the year ends, I look back with a sense of great satisfaction,” Jaitley told PTI in an interview, during which he underlined that India’s fiscal fundamentals are “extremely sound”.

Outlining his priorities for the New Year, the Finance Minister said he would continue with structural reforms and the priorities would include GST, rationalising direct taxes, further easing the system of doing business.

“After having done that, I would like to concentrate essentially on three things – more money for physical infrastructure, more money on social infrastructure and lastly more money on irrigation because that is a neglected sector.”

Asked about murmurs that the economy has not really taken off, Jaitley dismissed such grumblings as without merit and said that “the revenue collections do not go up without the economy taking off”.

“Cynicism is a way of life in India. You can question any other data but you cannot question the actual rise of revenue and the actual rise of revenue is showing that the economy is doing better,” he said.

Asked whether the Indian industry was also prone to such cynicism, Jaitley said, “Well, I think a section of the Indian industry has overstretched itself and those who have overstretched themselves see this as a universal problem.”

Besides global headwinds due to slowdown in China and weakness in commodity markets, India also had to face domestic challenges in form of two continuous weak monsoons and slower private sector investment, making the management of the Indian economy a “great challenge for us,” Jaitley said.

“Private sector investments continued to be slow because the private sector had overstretched itself… they had surplus capacity and demand was slow.”

The government responded well to these challenges by stepping up public investment, which has been complemented by 40 per cent rise in FDI and a rebound in consumption, he said.

The government has utilised the savings from low oil prices for infrastructure spending, resulting in sectors like highways, rural roads and railways getting a significant step-up of investment. Port areas have also been targets of private sector investments, he said.

“As a result, despite the global slowdown and adversities, India became the bright spot in the global economy with a growth prospect of 7-7.5 per cent. It is lesser than our targetted 8 per cent. I have no doubt if we have had a normal monsoon, we would have been close to the target.”

Jaitley said the services sector continues to be strong, while “revival of manufacturing and the IIP (Index of Industrial Production) are high points of this year”, which is also reflected in record rise in indirect tax collections.

“Inflation remains under control, the repo rate (the policy interest rate decided by RBI) has come down this year by 125 basis points. Foreign exchange reserves were as good as always. Compared to the rest of the global economies, we were far more stable vis-a-vis the dollar,” Jaitley said while summing up the macroeconomic trends for 2015.

“The year 2015 has been an extremely challenging year as far as economy is concerned, because the world economy has been going through a downturn,”he said, while adding that imports as well as exports have shrunk due to decline in prices and shrinking of the global trade.

“International trade has contracted. So both imports and exports have shrunk. In India context, the shrinkage is more in value (terms) because the prices are low and to some extent in volumes because of the shrinkage of global trade,” he said.

Jaitley further said that the government has continued with its reform process including on fronts like FDI norms and ease of doing business, while some of the old taxation issues are being resolved “one by one”.

“The rationalisation of subsidies in a big way has taken place. The methodology of distribution of natural resources has become extremely fair… These are important positives which have emerged as far as our economy is concerned.”

On way ahead for the Indian economy, Jaitley said a “fast moving economy” will help generate more revenues for investing in physical and social infrastructure as well as irrigation.

“I have already been constrained by a 42 per cent (tax) collections going to the states on recommendation of the Finance Commission. Next year, I am constrained by Rs 1,02,000 crore extra spending because of the Pay Commission. So, I have to always keep counting my balance resources,” he said.

On some states requesting deferring the Pay Panel recommendations due to lack of resources available with them, Jaitley said a committee of secretaries was already working on the implementation.

“The Pay Commission has already raised the expectations of government servants and defying that expectation is very difficult. I don’t grudge the government servants being paid more because after all they are supposed to work harder and work honestly.”

Asked whether it would be implemented from January 1, Jaitley said, “The expert committee will decide (that). The Secretaries Committee is already working on the matter”.

Asked whether there have been any disappointment, Jaitley said, “I would say fighting a slowdown is a challenge, it can never be a disappointment and we have responded to the challenge”.

On areas where the government needs to respond faster, he said these include various structural changes.

“We need to bring our direct taxes at par with what is happening elsewhere in the world… I had hoped that we complete the process of GST this year,” Jaitley said, while putting the blame on Congress for delaying this reform with its “plain and simple obstructionism”.

“In fact, a national party adopting a disruptionist role and getting a sadistic pleasure in stalling a reform which could add to India’s GDP is a disappointment.

“It used disruption in order to obstruct and I think it is a very bad precedent for India’s Parliamentary democracy if this is followed in state legislatures, if this is followed by future opposition parties, I think it would be a bad trend to set.”

Jaitley further said the Parliament itself would have to find alternative methods of approving legislation if the Congress party does not change its tactics.

Asked about such alternatives, he said, “I hope it does not come to a stage where all legislations are passed in a din or you rely on money legislations, you rely more on executive decision making”.

Stating that some of the legislations have been passed even without discussion, Jaitley said it was not the “ideal way how laws should be passed”.

On his comments about the role of Rajya Sabha, Jaitley said, “I have frankly not argued for a fresh look at Rajya Sabha. Rajya Sabha is essential and part of India’s basic structure. The structure of Rajya Sabha cannot be altered.”
Asserting that he would never suggest altering this structure, Jaitley said, “I am only on the impact on Parliamentary democracy if the indirectly elected house continues to veto a directly elected house”.

“… Rajya Sabha as a house which is supposed to maintain a check and balance, can once in a while disagree with a legislation passed by the Lok Sabha. It can be referred to a joint session, but every other law they cannot disagree with. It cannot happen too frequently.
“And if the indirectly elected house, for political and collateral reasons, vetoes a directly elected house, it does not augur well,” he said.

Talking about the system in other countries, Jaitley said, “In Britain, they follow a pattern that the Upper House can send it (a bill) back once for reconsideration to the Lower House and if the Lower House, which works on a mandate and which has been elected on a manifesto, second time approves it, the Upper House always accepts it.”

Asked whether that can be followed in India too, he said, “That could be accepted as a possible precedent.”

On rising bad loans of banks, Jaitley said it was “a problem inherited from the previous regime”.

“We are addressing each one of the sectors – the highways, the infrastructure contracts, the discoms. There is a lot of activity on each and all of these fronts. There is a system of recapitalisation of banks, but the problem is large and therefore, we will have to continue this effort and probably even improve on these efforts,” he added.

Power utilities owe Rs 8,279 crore to Coal India

An NTPC official said that it has not received any communication in this regard.An NTPC official said that it has not received any communication in this regard.

NEW DELHI: Power generation utilities including country’s largest power producer NTPC and Damodar Valley Corporation (DVC) owed about Rs 8,279.19 crore to state-owned Coal India, as on November 30.

“Power generation companies, like NTPC and DVC have an outstanding dues of Rs 8,279.19 crore to Coal India as on November 30, 2015,” an official said.

While state-run power producer NTPC owe around Rs 500 to the coal PSU, DVC has an outstanding dues of around Rs 1,500 crore, the official said.

Power companies of states like West Bengal, Chhattisgarh, Rajasthan and Madhya Pradesh also owe dues to CIL, the official said.

An NTPC official said that it has not received any communication in this regard.

“NTPC’s negligible amount may be due with Coal India, which is a routine matter,” the official said.

The state electricity distribution companies, which buys electricity from power PSUs, like DVC owe significant outstanding dues to power firms as discoms are facing tough financial conditions, a Coal India official said.

“So this is can be seen as one of the reasons for the power generation firms owe huge dues to Coal India,” the CIL official said.

In a bid to rescue almost bankrupt state electricity retailers, the central government had last month approved a scheme to rejig Rs 4.3-lakh crore debt of the utilities.

The Union Cabinet had approved the scheme to ease the financial crunch of power distribution companies or discoms that has impaired their ability to buy electricity.

The rescue plan, called Ujwal Discom Assurance Yojna or UDAY aims at reviving ailing state electricity boards and operational efficiencies of power distribution companies.

Coal India produces 9 percent more in FY 2015

Coal India Limited (CIL).Coal India Limited (CIL).

NEW DELHI: State-run Coal India Limited (CIL) produced 9 percent more coal in the current fiscal than in 2014, the government said on Saturday.

In a tweet, coal secretary Anil Swaroop said: “Coal production by Coal India crosses nine percent over last year’s record production. Well done. Keep it going. Still a very long way to go.”

In the current fiscal, CIL’s production rose by 8.8 percent to 321.38 million tonnes from April to November against 295.4 million tonnes in the year ago period, an official said.

For CIL, the government set a target of one billion tonnes of coal production by 2020. This year’s target was fixed at 550 million tonnes while last fiscal’s target was missed by 3 percent with an output of 494.23 million tonnes.

World Bank may revise India’s growth projection: Kaushik Basu

(Representative image)

KOLKATA: World Bank chief economist Kaushik Basu on Saturday indicated that the bank may revise its GDP growth projection for India after it goes for a stock-taking in a few months.

“There could be some changes in the January review of India’s growth forecast,” Basu said.

He was responding to media queries on whether failure of the Centre to get the GST Bill passed will have an impact on the projection.

“Decision-making and reforms can have an impact in terms of growth rate and the fact that a couple of important decisions did not go through could have an impact. But India is dominating for a couple of reasons,” Basu said here today.

Recession in Brazil and Russia and slowdown in China have made India the leading economy in terms of growth prospects for the first time this year, Basu said.

Until October, the World Bank retained India’s growth forecast at 7.5 per cent for 2015-16 and expected it to be 7.8 per cent in 2016-17 and 7.9 per cent in 2017-18.

Basu indicated that India’s dominance in growth will continue due to a couple of reasons. “China has slowed a lot and would go below 7 per cent growth, and Russia and Brazil are in recession,” Basu said.

“But what is helping India is a positive general mood which helps investment climate. The oil price drop is also helping India and Bangladesh.”

He, however, did not clarify on whether the uncertainty over the country-wide sales tax reform would influence the investment sentiment and the projection.

India gets oil deals as Russia opens doors

Representative image.

NEW DELHI: India returned to Russia after six years for a bouquet of oil deals, potentially worth $2-3 billion, as Moscow actively seeks partners for meeting capital needs of new fields, amid low crude prices and western sanctions.
On Thursday , Rosneft, the world’s largest publicly-traded oil company , formalised sale of 15% stake in its 100% subsidiary Vankorneft to ONGC Videsh (OVL) for $1.3 billion. The deal gives OVL access to Rosneft’s crown jewel Vanko, the largest onland Russian field developed in the last 25 years. This was followed by a preliminary agreement for giving OVL more stake later and partnerships in other onland fields.

Rosneft also signed a preliminary agreement with a consortium of IndianOil and OIl India (OIL) for selling a stake in another subsidiary , TaasYuryakh Neftegazodobycha, which is developing the Srednebotuobinskoye field. Though the IOC-OIL combine is seeking 29%, which could be worth in excess of $1 billion.Rosneft sold 20% in Tass-Yuryakh to BP for $750 million in October and is negotiating with another company .

OVL had made its last big deal in 2009 by acquiring Imperial Energy . The oil sector agreements, reached as part of the annual summit between PM Narendra Modi and President Vladimir Putin, we re overshadowed by weightier deals in defence and nuclear power. But they indicate a change of heart on both sides.

Nations cut taxes to help oil firms, India stays put

with taxes and levies in India remaining the same while realisation from crude sales falls, oil producers here have no option but to slash capex plans.

The vertiginous fall in crude oil prices has forced many countries to cut taxes and levies on hydrocarbon production and exports, but India’s stiff imposts have only turned more onerous for explorers here.

As gathered by consultancy firm Wood Mackenzie, countries like the UK, US, Colombia, Australia, Russia, Kazakhstan and Argentina have in recent weeks given a helping hand to their oil producers and exporters through steps such as reduced export duty

and petroleum revenue taxes, removal of carbon tax and even cuts in the corporate tax rate.

However, with taxes and levies in India remaining the same while realisation from crude sales falls, oil producers here have no option but to slash capex plans. In the case of nominated blocks, for instance, the oil cess, which was raised 80% to Rs 4,500 per tonne in March 2012, accounts for a huge 25% of the gross realisation from sale of crude oil at present, with Brent crude at $36 per barrel. When crude was hovering around $100 per barrel in early 2004, the cess worked out to be only 10% of the gross realisation. Analysts suggest the cess could be made an ad valorem levy, given the volatility in the crude market.

India’s oil producers like ONGC and Cairn India, as reported by FE earlier, have cut capex plans given the depressed global oil prices which, many analysts believe, could plunge further given likely supply increases from the US, Russia and Iran. Many believe that state-run ONGC may put in abeyance further development of the much-touted deepwater block KG-DWN-98/2 in the Krishna Godavari basin, which entails an investment to the tune of $6-7 billion to pump out oil and gas by 2018. Similarly, Cairn India’s FY16 capex plan could be slashed by a steep 40%, in what could accelerate the fall in output from the country’s largest onshore oil block at Barmer in Rajasthan.

Exploration and production (E&P) players in India are subject to royalty, profit petroleum (for blocks auctioned under NELP regime), cess (for pre-NELP blocks and nominated blocks), service tax, VAT, and National Calamity Contigent Duty (NCCD) etc.

Of these, the cess has proved most onerous for the industry as it was hiked to Rs 4,500 per MT from Rs 2,500 per MT in March 2012. While the cess was  10% of the gross realisation when Brent crude was ruling above $100 per barrel, it is now close to a quarter of the realisation.

Industry (Development) Act, 1974, provides for collection of cess as a duty of excise on indigenous crude oil. Cess incurred by producers is not recoverable from refineries and thus forms part of the cost of production of crude oil. The cess was levied at Rs 60 per tonne in July 1974 and subsequently revised several times.

While NELP blocks, including Reliance Industries’ KG-D6 block on the east coast, are exempted from cess, pre-NELP discovered blocks like Panna-Mukta-Tapti and Ravva pay a fixed rate of cess of Rs 900 per tonne. Royalty is charged at 12.5% for crude oil from onland areas and 10% from offshore areas from the blocks awarded under NELP auction. The royalty on natural gas is levied at 10%.

“This coupled with other levies and operational expenditure, which may not commensurately fall with oil prices, leaves very little at the net level for the affected players. Hence, it may be imperative to make cess an ad-valorem levy, which moves in line with the oil prices for the industry to make meaningful cash generation in this high-risk industry. Barring that, the firms may have to borrow to sustain capex or curtail the capex, both of which may not be in the interest of the industry and the country over the long term,” said K Ravichandran, senior VP and co-head, corporate sector ratings, Icra.

Officials told FE the petroleum ministry favoured levying cess on ad-valorem basis, although the finance ministry would have to take a final call.

“Oil explorers such as ONGC and Oil India have shared oil subsidy bill when crude oil prices were high. Now, the scenario has reversed and government may consider giving them sops as their revenues are hit after crude prices have plummeted to an 11-year low. In the short-term, the government may not have much leg room to offer tax sops, but it could reduce the royalty or cess rate,” said Salil Garg, director, India Ratings & Research. PetroFed, an association of oil and gas companies, recently wrote to revenue secretary Hasmukh Adhia and petroleum secretary KD Tripathi seeking levy of 8% cess on the price of crude oil realised.

Policy gap stops investors from expanding power grids in rural India

bgr electric

Lack of clarity on policy governing privately-owned renewable energy-based mini-grids is preventing investors from expanding their network in the hinterlands of north India.

Husk Power Systems, which was formed in 2007 and operates over 70 mini-grids in several districts of Bihar, is one such company that is unsure about its investment if the state government decides to install centralised grids in the areas of its operations. Each of the company’s mini-grids is connected to a 25 kW biomass power plant.

“The policy isn’t clear for players like us and while the Electricity Act, 2003, allows us to put up mini-grids
without securing any licence, it doesn’t deal with the situation where centralised grids eventually come in our area of operation,” Manoj Sinha, co-founder, Husk Power Systems. He added that centralised grids jeopardise the viability of mini-grids as consumers prefer power from state discoms which have a dubious distinction on billing efficiency.

The issue was raised with the authorities by California-based SunEdison, when it announced it would install 241 kW of solar PV micro-grids with battery storage in 54 remote Indian villages, providing electricity to 7,800 off-grid individuals. The company had, in September, said it will build, operate and then transfer the facilities to the public within five years.

However, the company had maintained that policy uncertainty would affect its expansion plans in the absence of an investment protection mechanism.

Husk Power uses rice husk as the source of power to cater to nearly 15,000 households in 400 villages, including commercial installations like rice mills in power-starved Bihar. In the last seven years, Husk Power has established a business of selling power to villages for six hours daily at Rs 160 per month but the company, in October, tied up with a US-based photovoltaic maker to install solar power plants to double the capacity of their installments, thus enabling them to offer 24X7 power supply to each household.

“We will convert three more of our installations into hybrid (rice husk and solar) ones and study the data to ensure its economically viable before we convert all our installations into hybrid,” Sinha said. He added that policy uncertainty will continue to be an overhang as the company has already had to shut at least three of its installations after consumers moved to a centralised grid that was installed in their area of operation. Each of these hybrid installations cost nearly $80,000 or over Rs 50 lakh.

Although the firm says the government has assured them of a policy framework to deal with the gray area, the current amendments pending in Parliament do not address the lacunae. “We have proposed several solutions to the authorities to safeguard investments in distributed, mini-grid solutions. One of them is allowing mini-grids to feed in power to a central grid at a fair feed-in tariff. The other option could be of discoms entering into power purchase agreements with us,” Sinha said.

Despite the threat of uncertain policy, Husk Power is looking to raise $10 million for expanding operations in India and Africa. Another US-based solar power producer, SunEdison, which has been developing mini-grids for villages around Lucknow, has raised the issue with the government.