Microsec - NEWS ANALYSIS
RAJESH DESAI
INFRASTRUCTURE
R Power begins coal production at Sasan
· Coal production from Reliance Power Ltd’s mines at Sasan in Madhya Pradesh has commenced six months ahead of schedule. The mines will meet the coal requirements of RPL’s Sasan Ultra Mega Power Plant. The company aims to attain a production capacity of 20 million tonnes of coal a year from the mines linked to the Sasan power project in four years, it said in a statement.
IL&FS Engineering bags Rs 269-cr Rail Vikas Nigam order
· IL&FS Engineering and Construction Company Ltd has won a contract from Rail Vikas Nigam Ltd (RVNL), Chennai, for construction of a new broad gauge railway line in Kadapa and Nellore districts of Andhra Pradesh.The contract worth Rs 269.19 crore will be executed through a joint venture in which IL&FS has a 50 per cent stake.
· The contract involves construction of two tunnels with ballast-less tracks and developing a road bed including earthwork, major and minor bridges for a new broad gauge railway line. The project is to be executed in the stretch between Obulavaripalle to Venkatachalam in Kadapa and Nellore districts of Andhra Pradesh coming under the South Central Railway. The project has to be completed within 40 months.
Power Ministry proposes to reform tariff-fixing process
· In a bid to provide a much-needed relief to crisis-hit power companies, the power ministry has proposed changes in the Electricity Act to reform the tariff determination mechanism. If the ministry has its way, rates will not be fixed by appropriate commissions, but by competition.
· However, the Forum of Regulators (FoR), a representative body of regulatory commissions in the country, has taken strong objection to the power ministry’s ministry’s proposal to amend the Section 62 and 63 of the Act, citing the Indian power market was still evolving and there was no need for such amendments at this point in time.
· The ministry under Section 61 (1) has proposed: “Appropriate Commission may, for promoting competition among distribution licensees, fix only maximum ceiling of tariff for retail sale of electricity.”
METALS & MINING
Coal block de-allocation: Firms get last chance to present their case this week
· The Government has offered companies that have been allocated captive coal mines but not started production, a last chance to present their case before the inter-ministerial panel. The companies will meet the inter-ministerial panel between Thursday and Saturday. They would present their case individually. After this, the panel would take a final decision on de-allocation.
· The companies involved include GVK, JSPL, Bajaran Ispat, Monnet, DB Power, Usha Martin and Abhijit Power. The panel will submit its report to the Coal Ministry on September 15 after discussions with the companies,” the source said.
· Jaiswal said that only these 58 blocks are under review at present. The ministry had issued cancellation notices to 58 coal block owners. Of these, 20 blocks figured in the CAG report. Meanwhile, Anil Ambani-promoted Reliance Power said on Monday that coal production from mines at Sasan has commenced.
Orissa Mineral crashes 5% as meet on bonus, stock split is put off
· The highest-priced stock on the Indian bourses — Orissa Mineral Development Corporation — crashed five per cent on Monday, after the company deferred a board meeting that was to consider a stock split and bonus issue besides capital-raising plans. Orissa Mineral plunged Rs 2,810.70 to Rs 53,404.30.
· The meeting of OMDC board scheduled to be held on September 3 is postponed due to some unavoidable circumstances,” the company informed the Bombay Stock Exchange. Intra-day, the stock hit a high of Rs 58,000 and a low of Rs 53,404.30.
· During the 52-week period, it touched a low of Rs 25,550 (June 4) and high of Rs 60,392.25 (August 7). The stock has been on the rise ever since it announced its bonus plans. The stock has been one of the star performers of 2012, gaining 52 per cent.
Coal India arm hopes to restart six mines in Odisha soon
· Mahanadi Coalfields Ltd (MCL), a subsidiary of Coal India Ltd, expects to restart operations at six mines in the Orient area of Ib Valley in Odisha within a week. MCL has approached the Supreme Court seeking a stay order against closure of the mines by the Odisha Government.
· The closure, however, will not have much impact on the company’s production outlook as the total output of the Orient area is well below 2 million tonne (mt) a year. Of the six mines, Lajkura is a small open-cast asset and, the rest are underground mines, operating for nearly a century.
· According to a release issued by the MCL, the company’s application for environment clearance is pending with the director of mines for clearance due to non-clearance of stage-1 forest clearance. MCL, the release stated, has already paid the net present value of all the forest areas within the mining lease.
Vedanta likely to shut Lanjigarh refinery in Odisha
· Faced with virtually no supply of bauxite, billionaire Anil Agarwal’s Vedanta Aluminium may close its alumina refinery at Lanjigarh in Odisha. The company is expected to send a formal notice to the authorities in a day or two.
· It has put up this world class refinery based on Odisha bauxite with environment-friendly low temperature and low pressure technology. In spite of Odisha having huge reserves, non-availability of bauxite is driving us to a situation where continued operation of the refinery is rendered difficult.
· The company refinery, located in the ‘very backward’ district of Kalahandi, has a capacity of one million tonnes. It has invested over Rs 8,000 crore out of Rs 50,000 crore total investments in Odisha. The refinery feeds alumina to its smelters located in Jharsuguda and Korba.
Rain hits operations at RINL steel plant at Visakhapatnam
· The rain gods have played havoc with unlisted Rashtriya Ispat Nigam Ltd (RINL) and its listed subsidiary Orissa Minerals Development Co Ltd (OMDC). Excessive rain in the past few days has caused serious problems in Vizag Steel Plant operations, forcing him to stay away from board meeting of OMDC, scheduled for Monday. OMDC informed the BSE that the board meeting, to be held on September 3, was postponed “due to some unavoidable circumstances”.
· Apart from the issue of bonus shares, the board was to consider the proposed merger, with itself, of Bisra Stone Lime Co Ltd, another mining subsidiary of RINL. OMDC, a step-down mining subsidiary of RINL, has iron-ore and manganese mines in Odisha. Choudhary, who is Chairman of OMDC too, was completely preoccupied with the boiler shutdown and severe power crisis at VSP. “Coal handling in torrential rain created a crisis of sorts. To add to the woes, VSP could not draw much from the Andhra Pradesh State Electricity board, which was also reeling under shortage.
· VSP is currently running its 247 MW captive power plant at 63 per cent capacity.
SC Allows 18 Mines in Karnataka to Resume Operations
The Supreme Court on Monday allowed 18 mines to resume mining in Karnataka, partially easing a 16-month-old ban on iron ore mining due to environment concerns. The move is expected to add 5 million tonnes (MT) of iron ore supply to steel companies, which have been starved of this crucial raw material for more than a year. But the decision may not lift the industry out of its gloom as the so-called 18 category A mines in Karnataka’s Chitradurga, Bellary and Tumkur districts can resume operations only after getting necessary government approvals a process likely to take many months.
· The move is expected to add 5 mt of iron ore supply to steel cos The decision may not pave the way for iron ore exports immediately Miners, equipped with far more stringent relief and rehabilitation norms, will also have to get all their regular clearances from ministry of environment and forests.
AUTOMOBILES
Tata Motors bets on Xenon variants to boost pick-up segment
Tata Motors, the country’s largest commercial vehicle maker, expects to improve its market share in the pick-up truck segment following the launch of Xenon variants.
The company, which had been selling passenger version - Xenon XT – launched commercial models of Xenon in single and dual cab versions. It has been priced at Rs 5.44 lakh (ex-showroom Mumbai) for the single cab version and Rs 6.34 lakh for a dual cab version.
The pick-up segment is growing rapidly and Tata Motors see this trend continuing. With the launch of the Tata Xenon pick-up, Tata Motors are strengthening existing pick-up portfolio.
Tata Motors expects its market share to go up to 25-30 per cent “very soon”. With this launch, Tata Motors would be competing with the market leader in the pick-up truck segment, Mahindra & Mahindra (M&M).
The Tata group company, which has a range of pick-ups such as Tata RX Pickup, Telcoline 4x4 and Tata Super Ace, has a 20 per cent market share.
The Tata group company would also launch another version of Xenon by the end of the year, in addition to the launch of the three diesel variants.
Globally, the company had already sold about 35,000 Xenon pick-ups, mainly across markets such as South Africa, Thailand and Italy.
BANKING
SBI chief calls for debate on doing way with CRR
State Bank of India Chairman Pratip Chaudhuri has underscored the importance of having a debate on doing away with the Cash Reserve Ratio and the need to adjust rules in accordance with changing times. “This (doing away with CRR) should not be the only view…there should be more discussion on this,” Chaudhari said. CRR is the slice of deposits that banks are required to keep with the Reserve Bank of India. Currently, banks need to park Rs 4.75 for every Rs 100 deposit they collect.
The SBI chief said there are three reasons why the CRR should go. Firstly, CRR hurts the national economy; secondly, the funds parked with the RBI as CRR does not earn any interest for banks, and thirdly, when insurance companies, NBFCs and mutual funds are not required to keep any CRR, it is the banks that are subjected to unfair treatment. Referring to the fact that the Government amended the RBI Act in 2007, doing away with interest on CRR, Chaudhari said “Rules should change along with changing times. The laws cannot be rigid…even the Constitution of the country has been amended more than 90 times.”
Controversy
Chaudhuri’s comment on phasing out CRR had sparked a controversy last week with the RBI Deputy Governor K. C. Chakrabarty making a strong statement that “If the SBI Chairman is not able to do the business in this regulatory environment, he has to find out some other place.” The SBI chief observed that while some are saying that CRR cannot be done away with, no one is giving the rationale why it cannot be done.
ICICI Bank to hike overseas ATM cash withdrawal fee by 17%
ATM cash withdrawals at international locations by ICICI Bank customers are set to get dearer by nearly 17 per cent by the middle of this month. “With effect from September 15, 2012, ATM cash withdrawal fee at international location will be increased from Rs 107 to Rs 125,” the country’s largest private sector bank said in a notification to its customers.
Service tax and other ‘terms and conditions’ would continue to be applicable to this fee. The latest revision in charges is being effected to offset a hike in overseas partner banks/financial institutions fees for this type of service. At present, other leading private banks, including HDFC Bank, Axis Bank and Kotak Mahindra Bank, charge their customers a fee ranging from Rs 110 to Rs 125 per transaction for ATM cash withdrawals at international locations. Among others, ING Vysya Bank charges its debit cardholders the rupee equivalent of $2.5 per withdrawal. The charges for this service are higher for some public sector banks, as compared to their private sector peers. Bank of Baroda customers have to pay Rs 200 per withdrawal at VISA member banks abroad. Globally, banks charge higher fees for international ATM withdrawals — either a flat rate (typically $1-6) or a set percentage of total withdrawal (usually 1-3 per cent).
The biggest advantage of withdrawing money abroad with an ATM card is that all cash withdrawals, regardless of amount, are executed based on the wholesale exchange rate, which are usually reserved only for very large inter-bank exchanges.
PNB cuts interest rates on home, car loans
Punjab National Bank has reduced interest rates on housing loans by 25 basis points across the board. The public sector lender has also reduced interest rates on car loans with tenure less than three years by 50 basis points. The interest rate changes are effective from 03/09/2012 (Monday). The reduced rates will be applicable to new as well as existing borrowers. For housing loans less than Rs 75 lakh, the interest rate is pegged at base rate10.50 per cent a year, from 10.75 per cent at present.
In the case of home loans of Rs 75 lakh and above, the interest rate is at base rate +25 basis points (10.75 per cent), against 11 per cent a year at present. For car loans, PNB has moved to a system where the interest rate is linked to the tenure of the loan. For loans with tenure of less than three years, the rate has been pegged at base rate plus 1 per cent (11.5 per cent). In the case of car loans with tenure of three years and above, the rate will be at base rate plus 1.5 per cent (12 per cent). Prior to the latest revision, car loans attracted an interest rate of 12 per cent a year irrespective of the tenure.
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CA. Rajesh Desai