Fw: Cygnus Daily Business Update 23 Apr,10
G.V.Sandeep
Headlines
Govt rules out tax holidays for power sector, port trusts
Mumbai's GDP may exceed Thailand and Hong Kong's by 2030
IIFCO to set up training institute for Orissa farmers
Met department forecasts normal monsoon in 2010
Most auto parts cos' Jan-March profit may shrink
Dubai exposure of banks in India at USD 537 mn
Steel prices up Rs 10,000 a tonne in last 8 months
Jindal Steel to go 'flat' out on diversification
Govt expects $300-bn investment in power sector in XII Plan
Karnataka expects Rs 2000 crore investment from Guj textile cos
More Details
Indian Economy
Govt rules out tax holidays for power sector, port trusts
The government rejected the demands for tax exemption on setting up power plants, state maritime boards and port trusts, saying it was inconsistent in a moderate tax regime. The representations were examined and were not found feasible considering the need to phase out exemption as these are inconsistent with a moderate tax regime. To a different query regarding tax holidays for setting up power plants, the power sector, particularly the private sector, has significantly matured, benefitting from direct tax holidays for almost two decades and there was no need for any extension. There is no proposal under consideration of the government to provide further extension of tax holidays for setting up of power plants in terms of direct taxes. However, in the power sector, as far as indirect taxes are concerned, all items of machinery and equipments required for initial setting up mega power projects are fully exempt from duties and customs. All such goods domestically procured for initial setting up of mega power plants awarded on an international competitive bidding basis or tariff-based bidding are also fully exempt from payment of central excise duties.
Mumbai's GDP may exceed Thailand and Hong Kong's by 2030
India, ranked below war-ravaged Ivory Coast and Sri Lanka for the quality of infrastructure, needs to spend $2.2 trillion by 2030 on transportation, housing and office space in its cities to accelerate economic growth, according to McKinsey & Co. Cities, such as Mumbai, could generate 70% of new jobs, produce almost three quarters of gross domestic product and drive a near four-fold increase in per capita incomes in the country in the next two decades, McKinsey said in a report, titled “India’s Urban Awakening: Building Cities, Sustaining Economic Growth. Financial capital Mumbai’s gross domestic product may exceed that of Thailand and Hong Kong by 2030, as population in Indian cities surges 74% to 590 million. India’s per capita spending on urban infrastructure is just 15% that of China. Unless the government boosts spending eight-fold it may jeopardise expansion in the world’s fastest growing major economy after China. India’s per capita spending on city development is $17 each year, just 15% of what its northern neighbour spends. India will have 68 cities with a population of more than one million people, 13 cities with more than four million people and 6 mega cities with populations of 10 million or more, at least two of which will be among the five largest cities in the world by 2030.
Industry News
IIFCO to set up training institute for Orissa farmers
From fruit preservation to bee keeping, farmers in Orissa can now gain expertise in varied aspects of agriculture with agri cooperative IFFCO planning to set up a training institute in the state. The fertiliser producing and distribution cooperative, Indian Farmers Fertiliser Cooperative (IFFCO) would set up the institute at its plant in Paradeep in the coastal state. In the proposed institute, farmers would be trained on best crop practices of cereals, pulses, and oilseeds, vegetable and horticultural crops etc. Fruit preservation, fish farming, dairy and poultry, maintenance of agricultural equipment, bee keeping etc. IFFCO further proposes to carry out soil study to improve soil health and productivity of crops with balanced and integrated use of nutrients. The cooperative has applied to Industrial Promotion and Investment Corporation of Orissa (IPICOL) for allotment of suitable land near its phosphatic fertilizers complex for setting up the institute.
Agri Inputs
Met department forecasts normal monsoon in 2010
India's summer monsoon is likely to be normal this year, allaying fears over an event crucial to the economic fate of the world's second- most populous nation. Rainfall is likely to be 98 percent of the long-term average, said the weather office, whose forecast is closely watched by commodities and financial markets as well as the government, which is battling to rein in inflation against a backdrop of intense protests over rising food prices. The monsoon winds bring 75 to 90 percent of the rainfall in most parts of India, the world's top edible oils importer and biggest sugar consumer, and are vital for cane, rice and oilseeds crops as 60 percent of cultivated areas depend entirely on the rains for irrigation. Last year, the government's forecast of a normal monsoon proved wrong and the country grappled instead with a baking drought caused by its driest monsoon in 37 years.
Automobile
Most auto parts cos' Jan-March profit may shrink
India's top auto parts players are broadly expected to report lower profits as a result of higher year-ago gains and rising input prices, though a recovery in the domestic sector may have helped boost sales. The auto ancillary makers would see robust sales in FY11 due to a pick up in both domestic and export markets, but rising raw material costs may pinch profit margins. Indian vehicles sales are expected to reach a record high for the second year in a row in 2010/11, as rising incomes in a rapidly growing economy boosts demand. Hero Honda, the country's largest two wheeler maker said earlier this week that margins could be hit due to inflation and rising commodity prices. Partially the input costs pressure will be mitigated due to the utilisation levels improving for auto ancillary companies. The raw material factor is however company-specific.
Banking
Dubai exposure of banks in India at USD 537 mn
As many as seven banks in India, including SBI and ICICI Bank, had exposure worth USD 537 million in Dubai World and other group companies at the time of the Emirate's debt crisis in November 2009. The exposure of the Indian Scheduled Commercial Banks in India to Dubai World, Nakheel Reality and its Group companies as on November 30, 2009, was USD 454.03 million for fund-based facilities and USD 82.94 million for non-fund based facilities, Minister of State for Finance Namo Narain Meena informed the Lok Sabha. The country's largest lender State Bank of India had exposure to the tune of USD 50 million, while Bank of Baroda had an exposure of USD 200 million. Besides, private sector lender ICICI Bank had an exposure of over USD 28 million and HDFC Bank of USD 4.23 million. The Dubai government owned Dubai World had asked its creditors for six more months to repay its debts as asset prices were coming down. Dubai World has total debts of USD 59 billion. This raised concerns over the financial health of the once financially strong Gulf country. The government is of the view that the recent global financial crisis has proved the soundness and resilience of our banking system, which has regained and sustained economic growth momentum in the country. The Indian public sector banks are adequately capitalised and that they are maintaining higher Capital-to-Risk Weighted Assets Ratio (CRAR) to meet any additional provisioning requirement arising out of any unforeseen higher NPA slippages.
Metals
Steel prices up Rs 10,000 a tonne in last 8 months
Domestic steel prices have gone up by as much as Rs 10,000 a tonne on different products in the last eight months. According to a compilation of steel prices presented in the Rajya Sabha by Minister of State for Steel , vital steel product hot-rolled coil (HRC) was priced in the national capital at Rs 45,670 a tonne, up about 28 per cent from the rates in September, 2009. By the end of the second quarter of the last fiscal, HRC was available in the local market at Rs 35,633 per tonne. HRC is further processed for making flat products, which are primarily consumed by the automobile and white goods industry. The prices of steel in the country vary widely between the various products, categories and the retail market price thereof announced by the individual producers. Moreover, the price of steel depends upon the cost of input materials, demand-supply situation in the market and movement of steel prices in the international market.
Jindal Steel to go 'flat' out on diversification
Naveen Jindal-owned Jindal Steel & Power has appointed Vidya Rattan Sharma, an experienced technocrat, to head its steel operations, leading to speculation that the Delhi-based steelmaker, which essentially makes rails, could soon branch out into the lucrative flat steel business. It is a Power & Steel, a hot and cold rolled coil producer, which makes products for the consumer goods industry. Flat steel essentially consists of products used by consumer goods companies and commands higher premium in the range of 30-50%, compared with rail products, which are part of the long steel family. The rapidly growing steel market in India and China has brought in steelmakers from across the world, who lured by robust margins in the flat steel segment, have either formed joint ventures with Indian steel companies or ventured to set up their own projects. But as execution of new steel projects is a challenge, foreign steel companies are more keen to form joint ventures in automotive steel, a major part of the flat steel family.
Power
Govt expects $300-bn investment in power sector in XII Plan
The government is expecting an investment of $300 billion to come in the XII Five-Year Plan in the power sector. They are expecting an investment of $300 billion in the power sector, including in power generation, transmission and distribution during the XII Five-Year Plan period. The government is likely to award three interstate power transmission projects to private entities by September. Chaturvedi also mentioned that investments in distribution utilities are also picking up. The Planning Commission is also expecting an investment of Rs 50,000 crore to come in distribution through the Accelerated Power Development Reforms Programme. The government is also keen to put emphasis on non- conventional energy, such as solar energy and wind energy. The government took initiatives for further availability of wind energy in states like Tamil Nadu, Andhra Pradesh and Maharashtra. On nuclear power, the government is looking for JV partners from countries like France, Russia and and US.
Textiles
Karnataka expects Rs 2000 crore investment from Guj textile cos
Karnataka government expects Gujarat-based textile firms to invest around Rs 2,000 crore for setting up units in the State taking advantage of abundance in cotton production locally. Mills in Surat source cotton from Karnataka to a large measure. Karnataka produces nine lakh bales annually. MoUs envisaging an investment of around Rs 2,000 crore by Gujarat-based companies, particularly in processing and spinning, are expected to be signed in the Karnataka Government-driven Global Investors' Meet (GIM) slated to be held here on June three and four. At the GIM, textiles sector expects MoUs envisaging a total investment in the region of Rs 5,000 crore to Rs 10,000 crore to be inked. A Mumbai-based company has come forward to set up a denim unit either in Nippani or Hosdurg, while a Chennai firm intends to set up a global apparel village near here with an investment of Rs 300 crore. Karnataka Textiles Department delegation is holding road-shows in Sri Lanka, Turkey and Indonesia next month to woo investment.
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