Not interested in foreign banks, want more branches: ICICI - livemint

PTI reports:

"“You must let the local players grow up before further opening the sector for foreign players to put Indian banking sector on a global stage.” Kamath also said India can emulate China in encouraging domestic banks, instead of foreign banks. “They are not giving unrestricted access to foreign banks, rather they are allowing the local banks to grow up... besides their economy started opening up about 15 years ago, while India is only two-three years in this process,” he said."

Parliament passes bill to regulate goods carriers

BS/PTIreports:

"Parliament today passed a key bill to regulate and fix the liability of goods carriers by road, including agents and courier agencies.....The legislation will cover the entire chain of intermediaries engaged in the transport of goods by road. The liability of the common carriers for loss or damage to any consignment will be limited to Rs 10,000."

Time to rescind the ban

BS writes:

"The suggestion mooted by the Confederation of Indian Industry (CII), to extend the ban on milk powder exports till March, is bizarre. The ban was ill-advised in the first place because milk production has steadily and consistently been growing at more than double the rate of population growth, and there was no fear of any shortage of milk. The milk price index, too, has historically remained lower than that of all food items taken together, and also of individual major food items grouped as cereals and pulses, fruits and vegetables, and eggs, meat and fish. If the government’s decision to ban exports, taken last February, which is the beginning of the seasonal lean phase in milk output, was meant to ward off any abnormal rise in prices, that threat (if it ever existed) is now over."

Govt to curb STC`s monopoly of wheat imports

BS reports:

"At an emergency meeting held here on Friday, the empowered group of ministers (EGoM) on wheat, headed by the union minister for external affairs Pranab Mukherjee, has decided in all future wheat import contracts, both MMTC and PEC, which are trading corporations under the commerce ministry, will also be involved. However, STC, which is also a commerce ministry body, will continue to import wheat, said highly placed sources in the food ministry."

By doing what?

Textile ind cautions govt on FTAs

FE reports:

"Nair’s note of caution is significant as India is eager to sign FTAs with Thailand and the ASEAN. The industry has already suggested to the government not to go for tariff reduction for textile products while signing FTAs and bilateral trade agreements with Asian neighbours. The WTO draft on non-agriculture market access (NAMA) released by Don Stephenson in July has already invited concerns for the industry. Indian textiles face tough competition from China, Bangladesh, Pakistan, Laos, Vietnam, and Cambodia. One of the main reasons for China's competitiveness is the artificial exchange rate of its currency. “Some Asian countries procure cheap yarns and fabric from China and export garments and apparels at competitive prices,” said Nair."

Milk prices drop Rs 4/litre in 2 months

BL reports:

"Speculation over a possible extension of the ban on skimmed milk powder (SMP) exports beyond this month has led to a crash in milk prices. Private dairies in the North are currently paying Rs 15-15.50 for a litre of buffalo milk containing 6.5 per cent fat and 8.5 per cent solids-not-fat (SNF) delivered at their dock. The same milk was being sourced at Rs 19-20 a litre in July. “We have seen a drop of around Rs 4 a litre in the last two months. Over the last week alone, prices have gone down by roughly Rs 1.50 a litre,” said Mr Kuldeep Saluja, Managing Director of the Delhi-based Sterling Agro Industries Ltd. Product prices fall He attributed the fall to the decline in realisations from products and speculation over the ban on SMP exports continuing beyond September 30."

Allianz bank gets RBI nod with rider

Allianz bank gets RBI nod with rider:

"The Reserve Bank of India has finally agreed to give a licence to European financial conglomerate Allianz AG for domestic retail banking. However, sources at the central bank point out that in order to obtain the banking licence, Allianz had to compromise by dropping its earlier plan to seek the licence in its own name.

Allianz has now agreed to accept RBI’s condition that the bank be known as Dresdner, a global bank owned by Allianz, which has had a representative office in India since 2000. The central bank has given permission to Dresdner to open one branch in the country."

I liked the "Allianz had to compromise by dropping its earlier plan to seek the licence in its own name" part. If I were RBI I would have insisted on it dropping the 'd' in the middle. Sounds better, no?

India's iron ore exports dip, steel firms seek cap | Reuters.com

India's iron ore exports dip, steel firms seek cap | Reuters.com:

"India's iron ore industry said on Friday that a duty on exports imposed in February and a strong rupee had dragged down sales, but steelmakers disagreed and again sought a cap on overseas shipments.

The government initially set an export duty of 300 rupees per tonne of all iron ores, but later cut the rate applicable to low-grade sales to 50 rupees following protests by the mining industry."

"Losers club" sought to derail India deal - Vodafone | Reuters.com

"Losers club" sought to derail India deal - Vodafone | Reuters.com:

"Arun Sarin, the chief executive of global wireless operator Vodafone Group Plc, called for greater transparency in India's merger approval process to defeat backroom efforts by vested interests to manipulate India's political bureaucracy.

'I really did not expect people -- the 'good and great' of India -- to be calling cabinet secretaries, ministers, to say, 'You have to unwind this deal, because we want a piece of it,'' Sarin told a conference of Indian business and academic leaders taking place in Silicon Valley this weekend.

Vodafone edged out some powerful Indian business groups with an $11 billion bid for Hutchison Telecommunications' majority stake in India's fourth-biggest mobile firm in January. It then underwent a three-month regulatory wait -- rapid by U.S. or European standards, he noted.

Sarin said he was confident the deal would sail through until the regulatory process in New Delhi entered its final weeks and he became aware of behind-the-scenes lobbying of key bureaucrats by competitors attempting "to crater the deal."

"The billionaire losers' club was trying to unwind the deal," the Vodafone leader said. "What was fascinating was that there was absolutely no transparency to the process."

Valuations Professionals Bill

FE reports

A concept paper (a copy of which is with FE) on a Valuation Professionals Bill, floated by the company affairs ministry, proposes setting up a council that would certify a “valuation professional”, besides issue valuation standards, set education guidelines, recognise institutes and their course content, and frame ethical codes.

The concept paper defines a “valuation professional” as one who individually, or in partnership, or in limited liability partnership with other valuation professionals, offers services like valuation of business, shares, debt, assets, goodwill, brands and intellectual property. At a time when domestic M&As are on a rise, the concept paper seeks to prohibit companies, both Indian and foreign, from certifying valuations.

Infrastructure, not trade barriers, hurting horticulture exports

Mint reports

High delivery costs, caused primarily by a fragmented supply chain, bad logistics, together with poor standards are hurting India’s horticulture exports much more than trade barriers, says a new report prepared by the World Bank for the agriculture ministry.

Despite producing 11% of the world’s vegetables and 15% of fruits at very competitive costs of about 53% and 63% of average global prices, India’s share in global fruits and vegetables trade has remained at only 1.7% and 0.5%, respectively.

Lead economist with the Bank Aditya Mattoo says, “India is paying a huge logistical tax on agricultural products. The inability to compete abroad today might lead to the inability to compete at home tomorrow. And in horticulture, subsidies are not even an issue.” India has been strongly protesting the multilateral trade negotiation rounds against the high domestic farm subsidies enjoyed in the Euro area, the US and Japan.

The report therefore argues for creation of an integrated and competitive supply chain for agriculture along with radical reform in transport, storage and distribution services before India opens up to foreign competition.

Protectionists in India never miss a chance to point out to high domestic subsidies in US - for at least two reasons. They say US has double standards - even though its they who are guilty of that, having thanked these very subsidies when in the pre-Green revolution days. They say the root of all agricultural woes lie in these subsidies - when there is a bigger problem right here. I am not justifying policies of US, EU or Japan. But I dont think protectionist arguments based on US subsidies aren't justified.

Steel industry wants new panel on mineral policy

PTI reports

“The Hoda Committee has been unable to address the interest of steel industry. The need of the hour is to conserve iron ore to protect the future of steel utilities. So, there is an express need for setting up a new panel to delve into the entire gamut of issues pertaining to iron ore and come out with a mineral policy for the benefit of one and all,” the (Indian Steel Alliance) official said.

After sugar, state to bail out mango growers now

ET reports

THE Maharashtra government seems to have developed “sweet tooth”. Having pumped in hundreds of crore to rescue sugarcane, the cashstarved Maharashtra government is set to help mango.

The state government is giving finishing touches to a financial package for the mango farmers in Konkan, Mantralaya officials told ET. The package could be announced at the cabinet meeting next week, sources said. The state has around 4.5 lakh hectares of land comes under mango orchards, most of it in Konkan. In 2005-06, the state produced more than 6.3 lakh metric tonnes of mangoes. The current season, however, is likely to see the output drop to less than 3 lakh metric tonnes, officials said.

Interestingly, revenue minister Narayan Rane and his bete noire Ramdas Kadam, Leader of the Opposition in the legislative assembly, are seen helping the government in finalising the package, sources said. Both the leaders are from Konkan.

The package would be the first major sop for the region since Mr Rane became the revenue minister. “It’s very important for Mr Rane to pull this off for his region. Sugar barons from western Maharashtra and Marathwada have recently cornered huge subsidies for their regions,” sources said.

A substantial drop in the mango output this season has made legislators from Konkan seek a compensation from the government.

How Indian tax payers subsidize foriegn sugar consumers

Business Standard reports

White sugar fell to the lowest since November 2005 in London after India, the world’s second-biggest producer, agreed to subsidise exports of the sweetener.

The Election Commission approved a government plan to build a sugar stockpile and provide subsidies to exporters, a trade body said today. India will pay exporters up to Rs 1,450 ($34.50) a tonne for transportation costs to the ports, Agriculture Minister Sharad Pawar said March 29 in New Delhi.

Domestic sugar prices have fallen by more than a fifth in the past year because of record output, reducing local producers’ earnings. This prompted the government to lift a ban on exports in July to stop the prices from sliding.

Cement makers irked over lifting of addl customs, CVD

BL reports

The cement manufacturers have expressed concern over the Centre's decision to do away with countervailing duty and additional customs on imported Portland cement. However, the impact is likely to affect investor sentiment and capacity creation rather than encouraging imports, they say.

According to Mr Puneet Dalmia, Vice-President, Dalmia Cement (Bharat) Ltd, the decision brings down the price spread between imported cement and domestic product. The price difference is about Rs 25-35 a bag.

With the Government doing away with the 16 per cent countervailing duty, amounting to Rs 600 a tonne, the difference drops by Rs 30 and the lifting of additional customs duty means an impact of another Rs 1-2.

Effectively, the prices of imported cement and domestic cement are brought on par with each other. This could have some marginal impact on prices in the coastal areas, but prices elsewhere will not be affected because of the logistics cost. Another leading cement manufacturer based in the South said that it was regrettable that the Government had decided on the move despite cement prices being stable for the last month or two. It is the market that is deciding the prices.

Lowering trade barriers - such as bringing down import duties - is good. But it's better to be skeptical when government does it to control prices.

At the same time, look at how cement makers behave.

Some time back, the virtues of free market were so clear to them. When FM introduced a dual tax rate for cement, they all cried whats happening to free markets.

Now, when trade barriers come down, they say it's 'regrettable'.

Cement import: Makers must conform to Indian standards

Business Line reports

Overseas cement manufacturers intending to export have to obtain quality certification from the Bureau of Indian Standards (BIS) to the effect that their manufacturing units conform to Indian standards.

"Foreign manufacturers seeking to export cement to India will have to obtain a licence under the BIS Certification Scheme for their units," Mr P.K. Batra, Director, Central Marks, BIS, told Business Line.

The grant of licence by BIS is subject to an application to be made by the exporting manufacturer and the license is granted after personal inspection of the factory by a BIS official and satisfactory testing of samples in India.

The exporting unit will have to pay one per cent of annual export contract value to BIS as marking fees. This is in addition to a minimum marking fee of $2,000.

Drop prices or you’ll be made to, govt warns pharma firms

Mint reports

India could increase the number of drugs for which it fixes prices under the Drug Price Control Order (DPCO) from 74 to 354—the number of essential drugs according to the government—if pharmaceutical companies did not keep their promise to reduce prices, according to the Union minister for chemicals, petrochemicals and fertilizers, Ram Vilas Paswan.

Last year, the government had fixed the wholesale and retail margins on around 1,000 branded generics (off-patent drugs) at 15% and 35%, respectively.

The prices of these drugs are not determined by the National Pharmaceutical Pricing Authority (NPPA), which enforces DPCO.

The margins on some of these were as high as 1,000% before the government’s order, which was expected to result in a significant reduction in prices of drugs from October onwards.

Some of the companies hadn’t yet complied with this order, said Paswan.

State depts oppose move to centralize drug mfg licensing

Mint reports

The Union government’s proposal to create a Central Drugs Authority that will regulate and monitor the functioning of pharmaceutical companies has run into opposition from the drug departments of state governments, which believe the move will limit their own role.
The government’s move to create CDA—modelled on the Food and Drugs Administration of the US—will expand the powers of the current pharmaceuticals regulator, Drug Controller General of India or DCGI, and set up departments to monitor clinical trials, medical devices, vaccine and other drugs-related businesses. The CDA, awaiting parliamentary nod, will function under the ministry of health and family welfare.

These bureaucrats!

Indian planters urge Thai FTA plan rethink

Mint reports

Fears of concessional import of natural rubber from Thailand under the proposed free trade agreement (FTA) has caused a flutter in the rubber sector with growers and traders requesting the Centre to desist from any such move.

United Planters Association of South India (Upasi) president J.K. Thomas has, in a representation to the government, requested it to reconsider the move to allow cheap import of rubber from Thailand.

Thomas said he feared that the agreement would mean delisting rubber from the sensitive list which would bring down the present import tariff from 20% to 5%.
Indian Rubber Dealers’ Federation vice-president N. Radhakrishnan noted that Thailand is the largest natural rubber producer with an annual production of around 32 lakh tonnes. Both groups claim that the move would seriously affect the livelihood of small and marginal growers who account for 90% of the more than one million growers producing 8.03 lakh tonne of rubber annually.

Brass parts makers strike metal

FE reports

Nearly 3,000 brass part units in Jamnagar, Gujarat, will go on a symbolic one-day strike to protest the substantial surge in the prices of brass scrap, a key raw material used by the industry. Both at the London Metal Exchange (LME) and domestic commodity exchanges, the prices of brass parts have been constantly rising for the past four months.

Attributing speculative trading as the reason for the rise, brass parts manufacturers said that the prices of brass scrap have increased to Rs 270 per kg, from Rs 215 - Rs. 230 four months ago. Surprisingly, the prices were as low as Rs 80 - Rs 100 two years ago.

Govt mails bad news

FE reports

The government wants to reserve the right to carry letters, book post and parcels weighing up to 150 gm for its postal department. Private courier operators may be allowed to service this sector, but they will have to charge five times the postal department’s tariff for the same articles.

In a cabinet note on the proposed Indian Post Office (Amendment) Bill, 2007, the department of posts in the ministry of communications & IT has also said that in the case of urgent or exclusive mail services, courier companies will have to charge 2.5 times the Speedpost or Express Mail Services rates.

Export tax to conserve raw materials

PTI reports

Amid a threat of Chinese boycott of Indian iron ore due to the imposition of a Rs300-per-tonne duty on Indian ore exports, Finance Minister P Chidambaram on 29 March defended the measure saying it will “conserve” the country’s raw materials for domestic steel units.

“There is no controversy. As I said in my budget speech, it (the tax) is intended to conserve raw materials for our own steel industry and at the same time, create some revenues taking note of the fact that the prices are ruling very high,” Chidambaram said here after inaugurating the full-fledged branch of Bank of India, where the Communist giant initiated the Special Economic Zone (SEZ) for the first time.

If this is an argument, where is the end?

Govt plans Rs 550cr ad blitz for flagship progs

BS reports

There may be two years left for the general elections but the United Progressive Alliance (UPA) government is already planning a Rs 550-crore print advertising blitz for its flagship programmes like Bharat Nirman, Sarva Shikhsha Abhiyan and Prarambhik Shikhsha Kosh for this financial year.

This budget is more than five times the Rs 100 crore the BJP-led National Democratic Alliance government spent on its 2004 “India Shining” campaign and accounts for about 8 per cent of the total advertising spend by the corporate sector on the print media last year.

The publicity campaign will be created by the Directorate of Advertising & Visual Publicity (DAVP) under the Ministry of Information and Broadcasting (I&B).

Ads? For whom? Why? To win elections? To replace reality with images?

Reminds me of a passage from Milan Kundera's Immortality.

Communists used to believe that in the course of capitalist development the proletariat would gradually grow poorer and poorer, but when it finally became clear that all over Europe workers were driving to work in their own cars, they felt like shouting that reality was deceiving them. Reality was stronger than ideology. And it is in this sense that imagology surpassed it: imagology is stronger than reality.

Government, private firms and wheat

BS writes in an edit

The large corporations who are participants in the wheat trade have been informally requested by the Central government to not buy wheat from Punjab and Haryana. The context is that last year, firms like Cargill and ITC had bought up roughly 1.3 million tonnes, or 17 per cent, of Punjabs wheat output, by paying Rs 20 per quintal more than the price offered by the government. The legitimacy of the governments request is suspect, and various industries (cement, steel) have demonstrated in recent weeks that they are not about to panic because the government frowns on their pricing or other decisions. Everyone knows that the government has the power to order tight stocking limits for essential commodities thus forcing wheat supplies into the market. Still, can and (perhaps more important) should the government come in the way of a private transaction between two citizens of India?

Govt may ask Reliance to halve Maha Mumbai SEZ

ET reports

THE government may ask Reliance Industries to scale down the size of its proposed multi-product Maha Mumbai SEZ from 10,000 hectares to 5,000 to avoid dislodging farmers and villagers unwilling to relocate. The decision is expected to be taken at the next meeting of the empowered group of ministers (eGoM) on SEZs.

With rising protests from farmer groups, political parties and small businesses intensifying in the state, the government’s proposal could be seen as an attempt to prevent a repeat of the violence in West Bengal’s Nandigram.

“If Reliance scales down its operations by half in Maha Mumbai, the sensitive areas could be excluded from the zone and peace restored,” the official said. The Board of Approval for SEZs, in an earlier meeting in August last year, had observed that land planned for building the Maha Mumbai SEZ was much more than required. With the situation hotting up, the eGoM headed by foreign minister Pranab Mukherjee is expected to ask Reliance to reduce the size of the SEZ, sources said. The date for the eGoM, which will also decide on the future course of the SEZ policy, has not yet been firmed up. It is being widely speculated that the meeting will take place only after the UP assembly elections are over.

I see a paradox in special economic zone. It's supposed to mean less government control on operations of businesses - tax incentives, less stringent labour, environmental laws etc. But, day after day, i only see more government intervention - including land acquisitions by government agencies, police atrocities etc. This is another example. There is a blog that tracks SEZ's and it's so aptly named. Check out.

Imports and fear of abundance

FE reports

The government on Friday said it would consider reducing duties on luxury goods imports without affecting the domestic market.

“If the industry comes up with some items on which duties can be brought down without hurting the local industry, we will be happy to look at it,” commerce and industry minister Kamal Nath said. Defending the high tariff on imports of goods like leather and textile products, the minister said it was to ensure that cheap imports from countries like China does not flood the local market.

He also said that the duty on high value goods can be brought down on the lines of a model which would be adopted in the case of wines and spirits. Nath said, “We recognise that duties on wines is high. We are looking at lowering tariffs. We are in the advanced of negotiations and the issue will be addressed.”

This sentence is so revealing, is it not? "If the industry comes up with some items on which duties can be brought down..."

Flooding the local market is another. Please do have a look at Bastiat quote in this earlier post

Exporting onion

Reuters reports

India on Friday cut by $40 a tonne the minimum price at which onion can be exported from the country, aligning it with the fall in local prices and giving a thrust to exports.

The National Agricultural Cooperative Marketing Federation of India (NAFED), a government agency, had in February raised the minimum export price (MEP) by about 30 percent across regions, to discourage exports amid surging local prices.

"Now, arrivals have improved and prices have fallen across the country. So, we decided to reduce the minimum export price," a senior NAFED official told Reuters from New Delhi.

Tyre manufacturers seek ban on rubber futures

BS reports

Stating that rubber futures are not helping in "price discovery" and "risk management", tyre manufacturers have demanded a ban on forward trading of the commodity.

In a letter to the Commerce, Industry and Department of Industrial Policy and Promotion Secretaries, the Automotive Tyre Manufactuers Association (ATMA) has said the demand for ban on rubber futures is no different from the bar imposed by the Centre on forward trading in urad, tur, rice and wheat. The New Delhi-based ATMA is the apex body of tyre makers in the country.

"The steep increase in the price of rubber has imposed severe financial burden on the tyre industry. Further, since rubber is the prime raw material for the production of items such as chappals, battery boxes, condom, hoses and thousands of other items, the steep price increase has forced hundreds of manufacturers to close shutters and most others are at the verge of closure or facing a difficult time due to exorbitant increase in input costs," ATMA said in the letter.

New semi-conductor policy has place for only 2-3 fabrication units

BL reports

The Government has decided to allow only two or three companies to set up fabrication units in India with incentives specified under the semi-conductor policy.

However, it will permit ten companies to take benefit of the fiscal measures for manufacturing devices that include Liquid Crystal Displays (LCD), solar cells and storage devices, which essentially form part of the eco-system.

An Appraisal Committee comprising high-level officials from the Department of Information Technology and the Ministry of Commerce and Finance will decide on which companies will be given the incentives.

Notifying the semi-conductor policy, which was cleared by the Union Cabinet in January, Mr Dayanidhi Maran, Union Minister for Communication, Information and Technology, said, "We expect to attract investment of Rs 24,000 crore in this sector in the next three years. We are sure that many big players are willing to invest. Since we have the capacity for 2-3 fabrication units, we will have the choice to pick the best."

Can't say i was impressed with semi-conductor policy in first place, and so this is not to complain why restrict these incentives only to three players. It's more to do with the underlying assumptions. Just look at the last line. It's the same attitude that made our government to take it upon itself to decide how much should be produced and what. Todays ministers might talk as if they are for free markets - but their words speak louder ;-)

Privatisation is still relevant

The ever-sensible Ajay Shah writes in BS

But equally, there is no industry in India where the licence-permit raj hinders entry more than in the case of banking. At a time when the Indian economy is booming, and every kind of business is being created, the one industry where we see no new firms starting up is banking. This has surely got to do with government restrictions on entry.

There is absolutely no industry in India where the opening of branch offices by foreign firms and private firms requires permission from the government. When Ford operates in India, it has to obey rules on FDI, but after that, it never has to go back to the government to take permission to open offices. What is worse, all foreign banks—put together—are given permission to open 12 branches per year in the full country. There is no worse instance where contemporary Indian policy-making is animated by ideas from the 1960s.

Left parties up the ante against increase FDI cap in insurance

FE reports

The Left parties, however, re-iterated their stand on the issue saying that they were still opposed to the proposal of raising FDI limit in the sector. “We will not allow the government to raise the FDI limit.

If the government does so on its own, we are free to take a decision on the issue on our own,” CPI MP Gurudas Dasgupta told reporters after the meeting.

And thus unwittingly help the rent-seeking capitalists, they say they are against.

Cost of protectionism

Mint reports

The imposition of export duty of Rs300 per tonne in the recently submitted Union Budget is threatening to put Goa’s barge owners out of business.
Barge owners in the coastal state transport iron ore to ships waiting at Mormugao port that then feed the hungry steel mills in China.
In just 15 days since the duty was announced, the number of trips made by barges has dwindled. From 10-15 trips in a fortnight, it has come down to four to five, according to Atul V. Jadhav, managing director, New Era Shipping Ltd and president of the Goa Barge Owners Association. “Very soon, we will be out of business,” Jadhav says.
Goa exports about 36 million tonnes of iron ore out of India’s total ore exports of 100 million tonnes. The barge owners are paid Rs59 per tonne per trip, by ore exporters such as Sesa Goa, Chowgule, Dempo and Timblo as per an agreement between the Goa Barge Owners Association and the Goa Mineral Ore Exporters Association.

We are so used to read stories about how people lose jobs because an inefficient business is allowed to close, or when consumers are allowed to buy cheaper imports. But we hardly get to read about opportunities lost because of government restrictions.

Steel industry seeks cap on export of iron ore

BS reports

The steel industry today demanded that the government place a quantitative restriction on iron ore export at 90 million tonnes for the current year, in a move to keep more raw material at home.

“Iron ore export needs to be limited because there is a shortage in the supply of iron ore to the domestic steel industry,” Moosa Raza, president, Indian Steel Alliance, said at a press conference organised by industry body Assocham.

The industry has also asked for a 15 per cent reduction in the cap on iron ore export every year until the exports are brought down to zero per cent. India currently exports close to 100 million tonne iron ore, mostly to China.

Restricting exports is a long standing demand of the steel industry which feels that iron ore needs to be preserved to meet the capacity expansion plans of the indigenous steel sector.

Domestic dredging cos get policy support

BL reports

Indian dredging companies will enjoy first right of refusal if their rates are within 10 per cent of the lowest valid offers in bids for major port contracts.

The Shipping Ministry's new dredging policy, which is designed to give Indian companies owning Indian flag dredgers an edge while bidding for contracts, states that all 13 major ports "shall invite open competitive bids for dredging works, and Indian companies owning Indian flag dredgers shall have the right of first refusal if the rate is within 10 per cent of the lowest valid offers."

The policy will take effect on April 1 and remain valid for three years. It will apply to both maintenance and capital dredging works, with the exception of maintenance dredging requirements of the Kolkata port, for which separate instructions will apply.

The move comes on the heels of total exemption from import duty for dredgers in Budget 2007-08.

Indian lawyers and foriegn law firms

BS reports

The Bar Council of India (BCI) has opposed the All-India Bar Association’s declaration in London that the BCI had withdrawn its opposition to the entry of foreign law firms into India.

The council reaffirmed its stand that it was opposed to foreign law firms setting up offices here and foreign lawyers appearing in Indian courts.

BCI Chairman Jagannath Patnaik today said the council, set up under the law, represented the legal profession in this country and no private organisation was authorised to state that foreign law firms could set up offices here.

He indicated that the council might take action against the lawyers who made unauthorised statements in London. The Bar Council of Delhi has initiated action against the lawyers and set up a committee to deal with the matter.

Assocham wants more export deterrents

PTI reports

Complimenting the finance minister on his proposal to impose a Rs300 per tonne duty on exports of iron ore, industry body Assocham has advocated that the government should further discourage such exports to conserve the country’s natural resources.
“Our endeavour should be to discourage export of any raw materials and rather strengthen our manufacturing base to generate employment opportunities and create wealth for Indians,” Assocham president Venugopal N. Dhoot said in a statement.

Centre studying demand to ban corn futures trade

Bloomberg reports

The government is examining demand by domestic poultry farmers to ban futures trading in corn amid a surge in local prices, minister for agriculture Minister Sharad Pawar said.
“We’ve received a request from the poultry industry this week that the futures be banned. We’re studying the request,” Pawar said in the Lok Sabha on Monday. “We will apply our mind take a proper decision.”
India’s government has permitted duty-free imports of corn and banned exports by non-state-run trading companies to fill a production gap that caused local prices to jump 30% last year. Output may fall 15% this year to 12.8 million tonnes, according to the All India Starch Association.
“A ban or some kind of restriction on futures trading will drive out speculators,” said Amol Sheth, president of All India Starch Association. “This will help bring down prices at a time when there’s a shortage.”
Corn prices for March delivery fell as much as Rs17.50 per 100kg or 2.3%, to Rs739 on the Mumbai-based National & Derivatives Exchange. They traded at Rs744 at 3:14 p.m. Prices rose to a record Rs853.50 in November.

Protectionism and profitability

In a good editorial BS writes

What about creating greater equality of opportunity, so that wealth does not accumulate in the hands of a few? This is the nub of the issue. India has failed to provide basic nutrition, health and education to hundreds of millions of its citizens. At the same time, it has protected too many markets—so those who own assets (like land) find the value of their holdings sky-rocketing, as the new real estate tycoons will admit. The same conclusion of excessive protection is indicated by profitability levels (an average of more than 10 per cent of sales) in the leading companies. This is high by any international yardstick, and suggests that we need more competition in the system (still lower tariffs), and more players in every product or service market (like telecom). If profitability drops as a result, so will share prices and wealth. In other words, the systemic problems that the wealth-poverty divide points to are the lack of attention to the needs of the majority at the bottom, and excessive cosseting of markets.

In another editorial it raises even a more interesting point.

At one level, the government is duty-bound to investigate fully the precise nature of the Ghosh-Singh holdings. At another, this complex arrangement raises questions about the enforceability of sectoral caps in shareholding. The problem in the immediate case has also been caused by lax supervision. The arrangement was made a year ago and disclosures made to the department of telecommunications in April and subsequently to the FIPB. The FIPB then issued a letter confirming the deal to Hutch-Essar in August. It is obvious that the FIPB’s decision now to go afresh into the whole question has been provoked by shareholders who want to put a spoke in the Vodafone wheel. This is reminiscent of government meddling in corporate battles in the eighties. It is true that, unlike such skirmishes as Swraj Paul versus H P Nanda, and M R Chhabria versus Shaw Wallace, government-owned financial institutions (FIs) no longer play a key role in determining the outcome of takeover battles. But as the Hutch-Essar affair shows, the government still has the power to influence corporate battles if it so chooses.

More here

Kerala earmarks Rs 17cr for sick PSUs` revival

BS reports

The public sector enterprises have got a lot to cheer about, finally. The state budget for 2007-08 has earmarked Rs 17 crore for revival of the sick PSUs, while more funds are expected to flow in from the state exchequer for modernisation efforts, estimated to cost around Rs 76 crore.

This apart, the government has lined up a new company, to be christened Infrastructure Kerala Ltd, in a bid to aid industrialisation efforts.

Work on setting up of the company, which will have a paid-up capital of Rs 100 crore, is learnt to be in its final stages. While the government will own 26 per cent in the company, the remaining would be with the non-resident Keralites (NRKs).

Franchisee fee

Did you know there is a 5% cap on franchisee fee. BS reports

The Franchise Association of India (FAI) has demanded removal of the 5 per cent cap on franchise fees.

“We want liberalisation in the area of franchisee fee payment by the franchisee to the franchiser. This is particularly important in the case of foreign franchisers. At present, there is a cap of 5 per cent on payment of franchise fees. This needs to be done away with,” said C Y Pal, national president, FAI, on the sidelines of India Franchise Expo 2007 here

Subsidies: Videocon mulls Rs 1000 crore fab facility

BS reports

The Videocon group, the country’s largest consumer electronics and durables manufacturer, is contemplating setting up a semiconductor facility. The fast moving consumer goods (FMCG) major, which intends to invest upwards of Rs 1,000 crore in the proposed facility, is currently in the process of evaluating various locations such as West Bengal.

“We have already signed an NDA (non-disclosure agreement) with the world’s largest technology patent company for technology partnership and are currently on the lookout for a suitable location. At present, we are looking at opportunities in West Bengal as it is promising better subsidies and infrastructure,” Videocon chairman Venugopal N Dhoot told mediapersons here on Sunday, while declining to disclose the name of the company it had signed the NDA with.

“However, we may consider Andhra Pradesh or any other state if it doles out even more favourable incentives and sops,” he added.

What really surprises me is the righteousness with which these companies demand other people's money. It's almost like a customer asking a shopkeeper, give me a discount, or i will go to next shop. Only in this case, its money that's collected also from poor people.

Cements: Patently cartelised: CCI-backed study

FE reports

A study commissioned by the Competition Commission of India has said that the cement industry was dominated by a few big players and was “patently cartelised”.

The study, undertaken by the School of International Studies, Jawaharlal Nehru University, in January this year to assess the state of competition in the cement industry has said the primary objectives behind cartelisation were to divide the market amongst themselves and also price fixation.

CCI sources told FE that a copy of the study would be sent to the commerce & industry ministry. They, however, qualified that the CCI did not necessarily subscribe to the findings of the study, which was undertaken as part of an academic exercise and for capacity building of the institution, they added.

The study, however, points to three specific aspects of the cement industry and its players, which could be seen as anti-competitive under the country’s Competition Act. One, it says, the market appears to be split amongst companies. It, however, adds more evidence was required to show if the market sharing arrangement was reached by a tacit agreement between companies. Two, while margins for companies varied significantly, sale price was more or less the same. This clearly pointed to price fixation by the companies, either by covert or overt agreement, it said

Three, it points out that the huge difference between retail prices and the ex-factory price was unjustified, again indicating price fixation by companies.

Defending free market weakly

BS editorial on government's recent actions to control prices

The moves are undesirable for a variety of reasons. Most importantly, not allowing free market play distorts price signals. With the economy growing at over 8 per cent for four years on the trot, and 9 per cent in the current year, it should be obvious that prices will go up if fresh capacity does not come up. This applies not just to cement or steel but also to all industries that have been functioning at near capacity for some time. If, however, prices are not allowed to rise, it is not clear how fresh investments will come in, since potential investors will see no upside. As in the case of the ban on commodity futures, there is little evidence that cement exports are the reason for the price rise, or that the price rise is excessive in comparison with the Rs 190 per 50 kg bag of cement, which the FM says is remunerative. For one, exports comprise just about 5 per cent of total supplies; demand is growing much faster. There is also the issue of cyclicality of prices/profits. Many industries accused of profiteering, including cement, are those that were operating on wafer-thin margins not too long ago. Surely, any talk of profiteering should have kept this in mind

It starts by rightly bemoaning how markets are becoming less free. But sadly the reasons it gives are weak.

Take this. "This applies not just to cement or steel but also to all industries that have been functioning at near capacity for some time. If, however, prices are not allowed to rise, it is not clear how fresh investments will come in, since potential investors will see no upside." If prices are not allowed to rise, it's great for exporters, is it not? Probably the writer meant, if businesses are not allowed to set their own prices, it is not....

Take this. "For one, exports comprise just about 5 per cent of total supplies; demand is growing much faster." Even 5% can make a lot of difference to price - when there is limited supply and people think a commodity is essential and have money to pay for it.

DD`s free signals abroad cost Neo Sports dear

BS reports

With about 15 million TV homes in West and East Asia ready to receive un-encrypted sport signals beamed by Prasar Bharati on its direct-to-home (DTH) service, Neo Sports, which has bought for Rs 2,714 crore the rights for all cricket matches in India for five years, stands to lose more than Rs 600 crore in the next three years.

The issue is behind the sport broadcasting company’s ongoing battle with the BCCI on the one hand and the information & broadcasting ministry on the other. The government, through a bill passed today, has made it mandatory for sport broadcasters to share feed with Doordarshan.

But with the state broadcaster beaming un-encrypted signals on its DTH platform which covers the whole of West Asia, East Asia and even the UK, viewers there are getting the feed without paying a penny to Neo or its partners in these countries.

It's amazing how a piece of law can make robbery a right!

Sugar: Working at cross purposes

Mint has two reports, which reminds me of what Milton Friedman said in one of the episodes of Free to Choose - government departments working at cross purposes.

Report one:

Sugar mills prohibited from selling entire production at market rates | Sugar mills prohibited from selling entire production at market rates:
India, the world’s biggest sugar user, has no plans to allow sugar mills to sell their entire production at market rates, farm minister Sharad Pawar said.

“I don’t have any proposal and neither are we thinking about it,” Pawar said.

India may allow mills to sell their entire production at market rates from 1April as the government seeks to decontrol the sugar industry, a leading newspaper reported.
The government may spend more than $225 million (Rs 1001 crore) to sell sugar at below market rates to the poor through ration shops, replacing the so-called quota system, the report said. The levy obligation requires producers to sell 10% of their output to the government at below-market prices for resale to the poor.

Indian sugar producers can sell 90% of their output at market rates, while the government usually fixes the quantity and time of the sale every month.

Report 2:

Govt mulls over sugar export subsidy | The government is considering giving an export subsidy for sugar to mill owners in the wake of fears of glut in the domestic market : The government is now considering giving an export subsidy for sugar to mill owners in the wake of fears of glut in the domestic market.“The matter (of sugar export subsidy) is still under consideration of the government,” Singh said.
Global sugar prices, which stood at over 450 dollars a tonne when its exports were banned in July 2006 to check rising prices in the local market, have since declined to around 335 dollars per tonne.

What! Militants behaving like governments

AXN is back in rest of the country. But look what's happening in Kashmir. Guardian/AP reports:

There will be no more ``Desperate Housewives'' for residents of Indian Kashmir. They will have to do without ``Friends'' reruns, too. Four foreign television channels have been pulled from the air in Indian-controlled Kashmir after Islamic militant groups demanded cable companies stop airing ``obscene'' shows, cable operators said Wednesday.

``As militants have asked us to stop airing obscene channels, we've suspended broadcasting English channels like HBO, Star Movies, Star World and Sony Pix,'' said Muzaffar Ahmed, a TV cable operator in Srinagar, the summer capital of India's Jammu-Kashmir state.

On Sunday, two militant groups in a telephone call to a local news agency, Current News Service, advised TV cable operators to drop channels that the groups say spread obscenity.

Industry against govt's order to use jute bags | BS

Did you know this? BS reports

Domestic sugar industry, which is already incurring losses due to a supply glut, is strongly against the government’s order to compulsorily use jute bags for packaging the commodity, a senior industry official told NewsWire18 today.

“The government’s order to use only jute bags for packaging sugar has been issued to please the Left Front, which rules West Bengal — the major jute-growing state,” said Prakash Naiknavare, managing director, Maharashtra State Cooperative Sugar Factories Federation.

The government earlier issued an order for 100 per cent use of jute bags for packing sugar, but subsequently diluted the same, allowing up to 30 per cent use of polypropylene bags. The industry should be allowed 100 per cent use of PP bag, as it costs half the price of jute bag, said an official of a Kolhapur-based sugar mill.

The industry needs 500 million bags during the current season ending September. While the cost of 500 million jute bags is nearly Rs 1,300 crore, it is just Rs 600-700 crore in the case of PP bags, said the official.

“We are not in a position to bear the additional burden of Rs 600-700 crore, as we are already reeling under heavy debt,” the official added.

Due to the ongoing six-week long strike by jute industry workers, the availability of jute bags is also a problem. Currently, these bags are imported from Bangladesh.

Wine makers want protection because the sector is young

Reuters report

Indian drinks firms do not oppose lower tariffs and taxes on imported wines and spirits, but want some concessions so they can compete with bigger rivals in the country's fast-growing $1.8 billion alcoholic drinks market.

India's basic import duties on wine and spirits are 100 percent and 150 percent, within WTO rules, but some federal and state-level taxes can push tariffs above 500 percent, prompting the European Union to press for cuts.

High tariffs mean most Indians can only afford cheaper local drinks, splashing out on foreign wines and whisky only on special occasions or when travelling abroad.

Faced with sluggish home markets, foreign firms are eyeing India, where rising incomes and more liberal attitudes to drink, especially in urban areas, are fuelling a consumption boom.

"We can go ahead with tariff cuts, but we are against allowing imports of cheap wines," said Arun Shah, a director of wine maker Chateau Indage Ltd..

"We believe the industry needs some protection because it is so young," he said, adding wine makers do not want India to allow imports of wine that cost below $10-$12 a case.

Govt says may ban cement exports

Reuters reports

The government may consider banning cement exports if such a move would help bring down prices, Commerce and Industry Minister Kamal Nath said on Wednesday.

"We will look at that (banning cement exports) if it helps bring down cement prices," Nath told reporters.

Indian cement makers have said they are unwilling to lower prices following a duty increase last week, but have pledged to raise capacity as the government battles to tame inflation.

More

India in dispute over the price of condoms

FT reports

The World Bank and the UK’s Department for International Development have refused to finance the Indian government’s purchase of condoms to fight HIV/Aids because of an alleged lack of transparency in procurement procedures, the Financial Times has learnt.

HIV prevention organisations are angry about the high cost of government-procured condoms, saying that scarce funds are being wasted in India, which has the world’s biggest HIV caseload, according to UNAIDS, with an estimated 5.7m carriers last year.

“Domestic preference is playing a role here that it wouldn’t in other countries, leading to a situation where India is paying 30-40 per cent more than the world average,” said a senior international civil servant running an HIV programme in India. “It is very frustrating but the government says it’s non-negotiable.”

The head of a non-governmental HIV/Aids body said: “Over a billion condoms are being manufactured under government contract every year at a price that is 25-40 per cent above the market price. It all looks very ugly to me.”

----
The government now obtains condoms from local manufacturers such as the state-owned Hindustan Latex, which supplies hundreds of millions of contraceptives required under National Aids Control Program-III, a five-year plan starting next month.

--
full story here

Imports a threat, says Ruia

BS reports

Pawan Kumar Ruia, chairman of Dunlop India, said today that the tyre industry would be hit by the reduction of peak customs duty to 10 per cent as it would intensify competition in the low-margin, high-volume tyre industry.

Cheap imports would flood the market and things would get difficult for the Indian tyre industry because excise duty on tyres had not been reduced despite several representations from the industry.

There had been a steep increase in natural rubber prices in the past three years but customs duty on imported natural rubber had not been reduced.

However, the damage would be partly compensated by lowered import duties on inputs like synthetic rubber, butyl rubber, carbon black, polyester tyre cord and styrene butadiene rubber.

FM tackles inflation

BL reports in a frontpage lead:

Reacting to the CII President, Mr R. Seshasayee's comment that differential taxation on cement is an attempt to influence and control prices, Mr Chidambaram pointed out that a month ago he had asked the industry to hold prices and cautioned that "entrenched core inflation" would work to its disadvantage.

"A month back at a FICCI meeting, I had asked all of you (industry) to moderate and maintain stable prices and ensure that there is no entrenched core inflation. I am thankful to everyone who did so, but the cement manufacturers did not do so," he said. The Finance Minister said that pricing power has returned to the cement industry and prices have gone beyond reasonable levels.

The dual duty was intended to reward those with an inclination to hold price line and tax those who did not. "I don't know if this (differential tax) will work," he said.

And we call him reform minded!

Local insurers say they havent collected enough rent

ET reports

Higher FDI in insurance may have to wait

Local Insurance JV Partners Want To Wait For Some More Time To Get Better Valuation From Stake Sale

THE Left parties may find an unlikely ally in opposing the hike in FDI in insurance — Indian promoters of insurance joint ventures. They may well find themselves on the side of the Left parties, albeit for different reasons. Even as the government is trying hard to push ahead with the hike in FDI in insurance, some of the Indian promoters in these joint ventures are not exactly lapping it up.

Once the FDI hike in insurance is notified, Indian promoters will have to reduce their stake to 51%. Some of the contracts in joint ventures are open where the method of transiting from 26% to 49% is not clearly laid out. Come the hike in FDI, the Indian promoters may not want to divest the 23% in favour of the existing foreign promoter, unless there is an explicit undertaking to this effect in the original agreement. It is also known that some of the foreign promoters have paid a premium for Indian brands.

Big Indian promoters have in the past have approached the government in order to buy time. “They would rather wait till valuation climb further and then get a better return on their equity,” a source in the government said. With a growth of around 150% year-on-year — the valuations of most insurers have silently grown by between 20% and 60%, and are poised to more than double by 2010, according to a recent study by Merrill Lynch.

Businessmen are not actually 'unlikely allies' to left parties when it comes to protectionism, as other entries under this label would show.

Time again to quote Raghuram Rajan, who said in an interview to IE sometime back: "We have allowed foreign entry. But we still keep making conditions. Foreign entry only if you have tie-ups with local entrepreneur. Sometime it is beneficial since local skills are needed. Sometime, it just holds up the foreign investor and forces him to share 26-30 per cent with the local incumbent. Three years down the line, with the local incumbent providing nothing, he buys out the local incumbent. The guy has got rent, and walks off with a pile of money. We have to figure out where it makes sense."

Mandatory grading of IPOs

Some days back there were reports on SEBI deferring decision on mandatory grading of IPOs. BL report here

The Board of the Securities and Exchange Board of India (SEBI) on Saturday deferred a decision on mandatory grading of initial public offers (IPOs) pending presentation of a credit rating agency's experiences on this issue.

"Factoring in whatever inputs of the rating agency that are relevant for decision making, the SEBI Board will make a final call on grading of IPOs and whether there ought to be any time limit as recommended by the Primary Market Advisory Committee (PMAC)," Mr M. Damodaran, SEBI Chairman, told newspersons here.

He said that "a credit rating agency" had sought an opportunity to make presentation before the Board on the experiences gained by it in IPO grading in the recent months.

ET today has a report on industry reactions, in which i found one sensible observation that too from an unnamed head of investment banking at a US-based firm (in bold in the extract below).

IPO grading is fine, but with conditions, say marketmen: SEBI’S decision to defer mandatory grading for companies going public has evoked a mixed response. While a section of market watchers feels that the process is biased against the smaller firms, another section feels that making the grading mandatory would lead to fine tuning of the grading parameters so as to provide a level-playing field.
“As the grading process is not compulsory, it is only the small companies that are forced by the exchanges or Sebi to go for IPO grading. However, I think that it (grading) should be made mandatory so that all companies go for it. I think the process has led to better companies hitting the primary market and even the investment bankers are selective in their approach. Making it mandatory would result in more transparency and the criteria of grading. This will make everybody more comfortable with the process,” says an investment banker who does not wish to be named.
Ajay Dwivedi, CEO, Crisil Research and Information Services, does not feel that the grading parameters discriminate against the smaller companies. “It was a pilot project and we have learnt a lot from this. The current exercise of fundamental assessment of the company is correct and it should not be tailored in a way that weak companies get high grade, in spite of what the critics say,” Mr Dwivedi says.
The biggest argument against IPO grading is since it does not comment on the pricing aspect, prospective buyers are unable to decide if it makes sense to subscribe to the issue at that price. “Grading is done at the draft prospectus stage and as such there is no connection with the price of the issue,” said the head of investment banking at a US-based firm.
“Moreover, rating of equities does not make sense. It is a risky asset. Somebody, who does not understand, should invest through MF rather than relying on grading. The grading without price comparison is irrelevant and makes no sense. Mandatory grading is out of question as it would not serve any purpose,” he said.

To grade equity is to fool investors into believing that equity is somewhat like bond.

More than chipping in

On the recent fab policy, a BL edit rightly asks

The policy does not address a basic question: Why it is necessary to subsidise their local manufacture merely because there is a growing appetite for these consumer goods? A country's choice of what it would produce and what it would source from outside depends on the evaluation of comparative advantages in making versus buying. If chip fabrication does not make economic sense, then providing fiscal sops to tilt the scales would set a dangerous precedent where drawing a line on denial of such benefits elsewhere can become virtually impossible.

Looked at from another perspective, India does not also produce all the gold and diamond (indeed practically nothing) that it needs as raw material for the gem and jewellery industry. But that has not prevented the country from virtually cornering the global market for cut and polished precious stones or making serious inroads into jewellery making. Indeed no economy can boast of such an insular existence that it sources everything that it needs from within its shores. No doubt we live in a world where nations compete with one another to attract investments. The chip fabrication industry is merely a manifestation of this trend. But if India must enter this race, then the Government has to make out a valid case for extending these fiscal benefits.

When a government runs a business

Sunil Jain writes in BS

When BSNL launched its cellular services in October 2002, few thought it would become one of the biggest mobile phone service companies in the country, matching market leader Bharti every step of the way when it comes to acquisition of new subscribers. Being a PSU, however, BSNL has to follow time-consuming and archaic tender procedures—while a Bharti or a Hutch can order equipment within a couple of months after private discussions with vendors, BSNL has to go through an elaborate public tender.

So, almost two years ago, the PSU began inviting vendors to discuss/plan for a next generation (3G) network. An eminent panel of experts was even constituted to vet its Request for Proposal, and this was then reviewed by BSNL’s board, which has nominees of the government on it. A year ago, the $5 bn tender was floated, and a committee with independent members was set up to evaluate the bids. This in turn set up five sub-committees to examine different sections of the tender (to reduce the chance of bias) … the committee’s recommendation then went back to the board for approval.

Last year, in October, the board rejected two bidders on technical grounds, and opened the bids of the others. A rejected bidder went to court, and the case has been there for more than four months, after 12-13 adjournments. The way things are it could well go on for another year or more.

Before we come to who’s to blame and possible solutions, what will this cost BSNL? BSNL is woefully short of capacity and its ability to attract new customers is now determined by whether it can give small “expansion orders” to vendors on the basis of existing contracts—while this helps somewhat, it is nowhere near enough. In 2005, BSNL was able to get around 30 per cent of all new GSM cellular subscribers in the country and 22-23 per cent for all mobiles including the CDMA ones. This has fallen steadily and, last month, BSNL got just 16 per cent of the new GSM subscribers—it was 12 per cent for all mobiles.

If you assume BSNL’s new network is delayed by a year and it is able to stumble along with “expansion orders”, this means the PSU will “lose” at least 6 million potential subscribers to competitors like Bharti and Reliance, assuming conservatively that the industry adds just 5 million subscribers each month. Based on the valuations Vodafone paid Hutch, this means BSNL stands to lose over $3 bn in terms of capital values. At an Average Revenue Per User of Rs 300 or so per month, a year’s delay also means BSNL loses a whopping Rs 2,190 crore of top line revenue.

On the face of it, there is little the government could have done to prevent this. But an active government would be trying to persuade the courts to hear the matter at the earliest, and that the tender be awarded subject to the court case—both these things happened in the case of the Delhi and Mumbai airports since the government had made them a prestige issue. And there is the larger issue of whether PSUs should be going through such elaborate tendering procedures when no private company follows the same procedures. In today’s ultra-competitive world, it does seem an invitation to disaster.

Kerala government to take on Reliance

Indian Express reports

The Left government in Kerala has decided to do a Reliance to Reliance and back it up with a major subsidy splurge, to meet the retail behemoth’s “threat” to the state. “Reliance is a big challenge. It’s large enough to control the market and decide prices. We will take it head on,” Agriculture minister Mullakkara Ratnakaran told The Indian Express......

So the Left government will now mimic Reliance itself, and have its own Kerala Horticulture Development Corporation (Horticorp) set up procurement centres all over the state, cutting off middlemen the way Reliance does. And to take on the Reliance Retail outlets, vends across the state. This is while very few of the over 900 set up by the then Left regime in the 1990s have survived. Besides, to cope with the expected brand pull of Reliance’s sophisticated supermarkets, the government will mimic those too. “We have decided to set up our own state-of-the-art, world-class supermarkets in Thiruvananthapuram, Kochi and Kozhikode,” says Ratnakaran.

For good measure, the comrades will also go for large-scale contract farming — something Reliance officials say they are not considering yet. The government model distinctly mirrors what yet another Left bete noire, Pepsi, had been successfully doing in Punjab and elsewhere — Pepsi had to shelve tentative plans for contract-farming ginger in Kerala in the 1990s, during the Left government of E K Nayanar.

In fact, it could tackle Reliance better if it gets support from people who know retailing business. It should let THEM take on Reliance - and can expect even better results. And, for the government itself, there are better and more important things to do.

Sugar industry wants to Indian tax payers to subsidize foriegn consumers

FE reports

The crisis-ridden Indian sugar industry has appealed to the Centre to provide a slew of sops for enabling it to export 7.5 lakh tonne especially when the global prices are at the rockbottom. The industry has called for reimbursement of expenditure on internal transport (13 paise per quintal per kilometre), ocean freight at Rs 350 per tonne and marketing & handling expenditure at Rs 500 per tonne.

The industry has approached the government as the sugar price has dipped to Rs 1,220 per quintal ex-mill and it stood at $319 (FOB) per tonne in the international market.

Prakash Naik Navre, managing director of Federation of Cooperative Sugar Mills in Maharashtra told FE, “After the announcement of lifting of ban imposed on sugar export, sugar mills have started exploring available export opportunities in the market. However, record sugar production world-wide in general and particularly in India have affected the prices in the global market. Sugar mills have received sugar prices (ex-factory) ranging from Rs 1275-Rs 1330 per quintal during January-February 2007. As the season progresses, prices are sliding on the domestic and export front. Prevailing sugar prices in the market are below the cost of production which is Rs 1,434 per quintal and also lower than the levy price of Rs 1,334 per quintal. Thus the above mentioned sops are quite essential.”

More measures sought to curb arecanut import

BL reports

The notification issued by the Director General of Foreign Trade (DGFT) on Wednesday allowing only one port in the country - New Mangalore Port - to import arecanut will help the sector monitoring imports of the commodity and its movement better.

Though the measure to curb the import of the commodity has been well received in the arecanut industry, there is a need to speed up the appointment of a nodal agency to check the quality of the imported commodity and to fix a tariff rate (or floor rate) for imported arecanut. These two measures will help control the import to a great extent and boost domestic market, according officials in the sector.

Inflation

Everyone seems to be concerned, rightly, about inflation. BL has a table giving prices of consumer goods over the last three years - where price changes look less threatening.



Reason. BL reports:

A combination of several factors has helped keep consumer goods prices under check over the past three years.

As Mr R. Subramaniam, Managing Director of discount retail chain Subhiksha explains, most categories have been inflation resistant due to stiff competition be it in shampoos or tea. "Combined with excise and income tax sops offered for manufacture in certain locations such as Uttaranchal, the North-East and Himachal, there has been significant cost savings for manufacturers also — so it is not as though their bottomlines have suffered. Also in specific categories emergence of new competition, for example in biscuits a reinvigorated Parle and a rampaging ITC have also been an issue."

Food prices are still a major concern, and everyday you see reports of government trying to do something about it by banning exports, lowering important prices, forcing people to sell them at certain prices, trying to ban future trading etc... BL has another piece - an interview with Mr Ramkishen S. Rajan, Associate Professor, School of Public Policy at the George Mason University, US - suggesting that targeted subsidies could be better solution here - but distribution infrastructure and fiscal deficit might come in the way.

On how inflation is supply-driven.

Inflation in India is also supply-driven in the sense of rising food prices. However, conventional monetary policy instruments are best used for demand-side inflation. Developing countries tend to use direct measures such as price controls, prohibiting exports of foodstuffs or reducing import tariffs on such items.

On the effectiveness of these measures.None of these are advisable policy options as they have distorting effects on the macro economy.

What are the options, therefore?

Directed and targeted subsidies to the least well-off would be preferable, though admittedly in the Indian context it is unclear that such a policy option will work effectively both because of the inefficiencies in delivery as well as the large consolidated fiscal deficit (which in turn highlights the need to take action on this front). Over the long term, focus must also be on systemic reforms to agriculture so as to overcome inefficiencies and reduce vulnerability to monsoon conditions.

More

Cement exports to be banned?

BS reports

The market value of cement shares fell by 3 to 5 per cent today on fears that the government might ban exports of the building material in the next week’s Budget, analysts said.

Cement companies exported 6.88 million tonne in the first nine months of 2006-07 compared with 9.19 million tonne in the previous financial year.

Subsidies for semi-conductors

BS reports

In a move that is perceived as a partial victory for the high-tech manufacturing sector in India and expected to attract investments of over $10 billion, besides generating employment, the central government has announced a host of incentives in its much-awaited semiconductor policy, to buoy the semiconductor ecosystem.

The government will bear 20 per cent of the capital expenditure in the first 10 years if a unit is located inside Special Economic Zones (SEZs) and 25 per cent in case of other units. The countervailing duty (CVD) on capital goods would also be exempted in case of units outside SEZs.

For semiconductor manufacturing (wafer fabs) plants, the threshold Net Present Value (NPV) of investments would be Rs 2,500 crore and the NPV of investments for manufacturing other products would be Rs 1,000 crore.

Assuming the projects have a 1:1 debt to equity ratio, the government is likely to restrict its participation to around 26 per cent of the equity.

The remaining “will be in the form of interest-free loans, tax subsidies, and concessions,” according to Union Minister for IT and Communications Dayanidhi Maran, who announced the semiconductor policy here today.

“It is up to state governments to provide additional incentives,” he added.

Export ban on chana goes; betel nut imports curbed

BL reports

The Centre has lifted the ban on export of `dollar gram' or kabuli chana, following reports of a crash in market prices.

The Directorate General of Foreign Trade (DGFT), in a notification issued on Tuesday, has said the general ban on pulses export, effective since June 27 last, shall henceforth "not apply to export of dollar gram (Chana) executed under the specific permission granted by DGFT." .......

Meanwhile, in a separate notification dated the same day, the DGFT has also announced canalisation of betel nut imports. Imports of betel nuts in whole, split, ground and other forms would from now on be allowed only through Mangalore port.

Ban on mineral exports sought

BL reports

In a communication to the Ministry of Commerce and Industry, Finance and Planning Commission, the Chamber has asked for an immediate ban on mineral exports to help domestic industry make finished products at competitive rates and for saving mineral wealth of the country.

As per the existing mineral policy, Government gets royalties between Rs 10 and Rs 27 per tonne of iron ore extracted depending upon grades. During 2005-06, the contribution from mining companies to the national exchequer was around Rs 300 crore whereas the Government earned around Rs 15,000 crore from the steel sector for the same period.

This included excise duty, sales tax/VAT and the applicable royalty on iron ore. The differential speaks of the fact that few mining companies held by the private sector are accumulating personal wealth by means of profiteering without any benefit to the Government and to the people, the chamber argues.

Sports commentary on FM soon

FE reports

Private FM radio stations may soon be allowed to air sports commentary, although the ban on news broadcasts by non-government FM channels would take a while to be lifted, information & broadcasting minister Priya Ranjan Dasmunsi said at the Express Group’s Idea Exchange programme on Wednesday.

“I will soon go to Parliament with a proposal to allow sports commentary in the private FM radio sector as it is not news,” Dasmunsi said. The Centre is likely to qualify sports commentary as entertainment to make this possible.

How generous of our government!

I think we need not go as far as China to laugh at or worry about restrictions on information flow, when we have so much here.

Atleast, this is giving a good excuse to quote Bhagwati. He writes in New York Times

China has an authoritarian regime, it cannot fully profit from the information revolution, thus inhibiting the technology that is at the heart of growth today. The PC (personal computer) is incompatible with the C.P. (Communist Party). So India, with its robust and chaotic democracy — what V. S. Naipaul has called a “million mutinies” — has moved dramatically ahead of China in computer technology. Hutton points out that from 1981 to 1995 China had 537 scientists and engineers doing research and development per one million people while India had only 151, and that China had three times as many personal computers as India and a 4-to-1 lead in Internet usage. Yet by 2001, India was producing one-fourth more software, and exporting most of it. “So despite massive investment,” Hutton writes, China “trailed far behind India.” He points out, too, that China damages itself by seeking to control and stifle what its citizens can learn and disseminate. “Yahoo, Microsoft and Google are part of the cultural yeast of globalization,” he says, “yet each has been at the receiving end of China’s Internet firewall of censorship.”

120 Orissa state outlets to sell onions

BS reports

Worried over the sudden rise in prices of the onion in the open market in Berhampur, the Ganjam district administration has forced traders to sell this commodity through the government retail outlets in the city.

The selling of onion at the rate of Rs 14 per kilo started in 120 government retail outlets in the city from Sunday.

"We have directed all 133 government retailers to sell onion at the rate of Rs 14 for the time being", said the district civil supply officer Saroj Kumar Biswal.

The decision to sell onion at the government retail outlets was taken at a high level meeting after chief minister Naveen Patnaik directed the district administrations to take steps to check the souring price of onion.

Small businesses protest Wal-Mart's India entry

BS reports

Wal-Mart’s high-powered delegation’s visit to India sparked a stormy protest by a state-wide federation of small businesses. They were protesting against the entry of the retail giant into the country.

The Federation of Associations of Maharashtra said the entry of the retail giant would have a negative impact on the local retailers and their livelihood.

Addressing a news conference, Mohan Gurnani, president of FAM said, “Wal-Mart is forcing its entry into the retail market through the backdoor. This company has driven out thousands of local businesses in the US and other countries”.

India is in the midst of a retail revolution that could replace many of the small kirana stores with a multi-billion dollar industry of air-conditioned supermarkets offering booming middle classes convenience buying.

When government runs a business

BL reports

The Centre has informally told the top corporates in the country's wheat business to refrain from purchasing the grain in major growing regions during the upcoming procurement season, according to sources in the wheat trade.

Large-scale purchases by the private sector last season at prices higher than the minimum support price were widely believed to have lifted the wheat market and reduced the Government's procurement through Food Corporation of India (FCI) to less than 10 million tonnes against the usual 14-16 mt.

New Delhi does not want the fiasco repeated this time, as the political price could be too onerous.

Marine exporters lobby hard against US anti-dumping

BS reports

The country’s exporters to the US have decided to strongly put up their case before the US Commerce Department in its second anti-dumping review of shrimp exports for the February 2006-January 2007 period.

In a meeting in Vizag recently, 75 exporters have resolved to apply for the review and engage New Delhi-based law firm Lakshmi Kumaran & Sreedharan for presenting their case before the US authority.

The US department on February 1 initiated the process of the second administrative review of shrimp exporters to the US and the last date for filing application for the voluntary review is February 28. The department will shortlist only a few of the 75 exporters for the review. The US Federal Register has also already published the schedule of the review.

Some actually believe that criticizing US is same as making a case against globalisation / free markets. But politicians, bureaucrats and businessmen are same everywhere - and are driven by same motivation to make markets less free. The one above is just one of the many examples. At the same time, we shouldn't forget that India lags behind US. India is ranked 104 (among 157 countries) in WSJ/Heritage Foundation's latest economic freedom index, scoring 55.6 points indicating that the country is mostly unfree (against the topper Hong Kong's 89.3). More. In ease of doing business, published earlier by World Bank, India is ranked 134 among 175 economies.

If US is one, 'dumping' is another. The word has a strong connotation. No one complains when a business offers something that we want at a lower price. In fact, we ask for it; rush to those who offer them at a discount. Yet, when a country does that, and when businessmen who can't compete complain about dumping, we are only to ready to buy their arguments - and deny ourselves the opportunity to buy something at a lower cost.

Sugar most controlled sector: Pawar

BS reports

Pawar said sugar was the most controlled sector. There were curbs on the sale of sugar in domestic as well as export markets. Besides, there were levy obligations and restrictions on setting up new sugar factories in the 15 km radius of old mills. Our sugar policies needed to change in tune with the changing world economy.

One of the members of the consultative committee suggested that the government should have a long-term sugar policy instead of taking short-term and ad hoc policy decisions. He also advised against banning forward trading in sugar though the flaws in this mode of marketing needed to be removed.

Responding to these remarks, the minister indicated that he could convene a meeting of the Members of Parliament to remove their misgivings concerning futures trading.

Yes much misgivings exist. In another piece Ajaj Shah writes

The political class is in a tizzy about commodity futures trading. Much of this fear is an archaic mistrust of markets, and the losses that incumbents suffer when competition and transparency come about. These fears do not hold up to careful scrutiny. The sensible strategy is to address the genuine difficulties of market design, regulation and supervision, so that futures trading is able to play its full role in a mature market economy. This requires breaking with policy decisions made in the 1950s.

More on controls in sugar sector from Businessline. Sharad Joshi writes

Even as there is call for the government to exit businesses, it remains interested in many, often for reasons political. The most regulated sector in agriculture is `sugar'. From licensing of mills to the specifications of gunny bags to be used for packaging, every thing is dictated by the Sugarcane Control Order, 1966. The government's 1998 decision to de-licence the sugar industry is pending before the Supreme Court. A number of matters relating to levy sugar, the Statutory Minimum Price (SMP) and the State Advised Price (SAP) are pending before various courts. Now, sugar mills have also been co-opted for co-generation as also ethanol production. And, under the new United Nations' norms for co-generation, the industry is also to take up Clean Development Mechanism (CDM) projects.

In this context, every aspect of the sugar policy needs to be reviewed.

RBI: Law on foreign funds may hit banks

BS reports

The Reserve Bank of India has opposed the government’s move to bring in a law to introduce a new reporting system for inward flow of foreign contributions.

The RBI has contended that the inclusion of all foreign inward remittances in the proposed new reporting system will substantially expand the scope of transactions monitored and may place a heavy reporting burden on the banks.

The Union Cabinet had cleared the Foreign Contribution Regulation Bill last year. The Bill proposes to mandate banks to report all foreign inward personal remittances to the Financial Intelligence Unit-India.

Inclusion of personal remittances in the category of foreign contribution transactions for reporting may discourage non-resident Indians and the expatriate work force to send money home through banking channels.

Further, it may make them send money through other channels like hawala and hundi, the RBI has added.

In view of the present scenario of liberalised current account convertibility, this kind of change would mean that a large number of transactions, which have no relevance, will be reported, the RBI said.

Protest against `e-ticketing'

MADURAI: The Southern Railway Mazdoor Union (SRMU) held a demonstration against the concept of `e-ticketing' and `I-ticketing' here on Monday.

Led by the SRMU divisional secretary, R. Kesavan, the agitators, including enquiry-cum-reservation clerks, raised slogans against the move by senior railway officials to introduce temporary counters at the reservation complex to popularise `e-ticketing.'

In his address, Mr. Kesavan said that `e-ticketing' would enable affluent passengers to book tickets with the help of credit/debit cards through Internet. The facility would be available between 4 a.m. and 11 p.m. whereas the counters functioned between 8 a.m. and 8 p.m. "When the counters open at 8 a.m., all tickets will be blocked. The common passenger will be affected."

The assistant divisional secretary, J.M. Rafiq, also spoke.

here

the forces against the march of technology are many but this is one of the worst examples i have seen!

Drug companies fleeced patients of Rs 738 cr: NPPA

FE reports

Nearly 120 pharmaceuticals companies, including some of the largest operating in India, have “overcharged” patients to the extent of Rs 738 crore between 2003 and 2006, according to the National Pharmaceutical Pricing Authority (NPPA). But the companies -- including Ranbaxy Laboratories, Dr Reddy’s, Cipla, Glaxo, US Vitamins, and Johnson & Johnson -- have challenged the regulator in as many as 69 cases involving Rs 688 crore. The total number of cases is 395.

The amount of money involved in the remaining 326 cases stands at Rs 50 crore for which the process of recovery is on and NPPA has, so far, recovered Rs 19 crore. Drug companies, when contacted, said they would refrain from making comments as the matter is sub-judice.

Between January 2003 and December 31, 2006, NPPA sent notices to over 120 companies. Some of the drugs the companies are alleged to have overcharged on are: ciprofloxacin, norfloaxacin and salbutamol. Overcharging means selling at a price over and above the one set by the NPPA. The regulator sets drug prices based on the cost of production. For indigenously manufactured formulations, the maximum allowable post-manufacturing expenses (MAPE) are 100% of the cost of production. For imported formulations, it is up to 50% of landed cost.

This is filed under Ministers of Business Administration, but I don't know if it should be under SCFC.

Coffee growers' financial aid likely before March

BS reports

The agriculture and finance ministries are likely to decide on the financial relief package being sought by domestic coffee growers before March, coffee traders said.

The decision will come before March, as banks would like to clean up their balance sheets before the financial year-end, they said.

According to estimates given by them, around 1.4 lakh growers, who had taken loans under the ‘special coffee term loan’ are likely to come under the purview of this package. Growers who took loan on July 1, 2006, would also be covered under the scheme, officials said.

Coffee growers had sought a financial package for waiver of interest on overdue loans as on July 1, 2006, and also rescheduling of the principal amount.

The package was sought in early 2000 since coffee growers could not fulfil their loan obligations due to higher incidence of white stem borer disease, which resulted in drop in productivity, severe shortage of work force, and rise in cost of production.

Rubber replantation subsidy may be hiked to Rs 24,500/ha

BS reports

The Central subsidy for replanting rubber is likely to be enhanced to Rs 24,500 a hectare in the 11th Plan period against Rs 20,000 in the previous Plan.

The finance committee of the government is yet to approve the hike in subsidy and an announcement to this effect is expected soon. The subsidy, when enhanced, would work out to 25 per cent of the per hectare development cost.

Earlier, the Rubber Board had proposed a rise in the subsidy to Rs 30,000 a hectare, but the government had asked to reduce it to the lowest because of a spurt in prices in the last couple of years.

The board had also proposed to enhance the subsidy for new plants to Rs 24,500 a hectare. But, it is not likely to happen and the subsidy for new plants is set to remain at Rs 12,000 a hectare.

The government considers that the recent spurt in prices are an encouraging factor for growers and sees no justification in a steep increase in the subsidy.

Semiconductor companies want more subsidies

BS reports

Last month, the Union Cabinet gave in-principle approval to the policy, which included a combined 25 per cent subsidy and tax incentives on the capital expenditure in the first 10 years of a fabrication plant.

However, the subsidy component is now being examined by a Group of Ministers owing to the huge financial implications involved. The Centre has announced that the policy will be out before the budget.

“We are seeking one-time investment to support semiconductor manufacturing. We are urging the government to set aside Rs 10,000 crore for this purpose. Three years down the line, this sector will pay back Rs 40,000 crore through revenue and employment opportunities,” Khare contends.

He pitches for semiconductor manufacturing strongly based on three factors — the demand for electronic products in the country, the ecosystem and international market dynamics.

Cartels, entry barriers & limited players spoil Indian banking: CCI | FE

FE reports:

According to government sources, in a presentation made suo motu to three deputy governors of the central bank recently, the CCI pointed out that during the last 10 years, the RBI had given licences to only two private banks - Yes Bank in May 2004 and Kotak Mahindra Bank in February 2003. During the same period, however, other sub-sectors like insurance and mutual funds had seen 24 and 14 new players, respectively.........

Strict licensing norms for branches and automated teller machines and restrictions on locations had created high entry barriers, the CCI pointed out. Further, it hinted at banks working as a cartel under the Indian Banks’ Association banner in setting interest rates for savings account deposits at 3.5%.

Walmart, Reliance and Kirana shops

Surjit S Bhalla writes in BS

Thankfully, technology changed and the world became flat. Which meant that politicians, across the world, had less and less influence on the activities of individuals in the service of themselves (aam aurat is too aam to be selfless like the Gods). So the economies started to grow, and this further diminished the size, and the effectiveness, of the Bombay Club.

But old habits die hard; most likely because people are loath to let go of “unearned” profits. It is in this context that some of the major initiatives of the UPA government have to be viewed. Let us start with the most blatant of them all—the recent missive by Ms Sonia Gandhi, the political leader of the government. She has been “reading in the media about Wal-Mart’s proposed entry into India … the desirability to first study the possible impact of ‘transnational supermarkets’ on the livelihood security of those engaged in small-scale retail operations … you may consider having the relevant issues properly examined before further decisions are taken” (emphasis in the original Sonia Gandhi letter to the PM). This gentle reminder to the PM has put protection of the poor aam fruit- and vegetable-selling aurat as the top concern of this government. Economic reforms (globalisation) have only helped the rich. Time for aam aurat to have her day. Such a nice government you say. Let us elect them again (provided they have electorally correct sleeping partners).

But wait a minute. Nowhere in this high command directive is mention made about big Indian businesses entering the retail trade of selling “fruits, vegetables and the like”. Last I heard Reliance had entered the fruit- and vegetable-selling market, and even by international standards, Reliance is Big Time Big. So how does the Reliance entry into the retail trade not hurt your kirana shopkeeper but Wal-Mart does? Sorry, one never gained an answer by asking logical questions from our “in the name of the poor” politicians.

Government unlikely to accept South Indian tea growers’ plea

FE reports

The Central government is unlikely to consider the demand of the South Indian tea growers seeking higher amount for tea replantation and rejuvenation on par with Darjeeling, jeopardising the proposed replanting exercise under the Special Purpose Tea Fund expected to take off from April.

Union minister of state for commerce Jairam Ramesh told FE he had received requests from some quarters in the South, including United Planters Association of South India (Upasi), for hiking the present subsidy limit and also raising the amount from Rs 2.73 lakh per hectare as proposed for Darjeeling. But the centre was unlikely to make changes in the present plan and things would go ahead as proposed, he said.

Sick fertiliser units to get Rs 1k crore | FE

FE reports

Board for Reconstruction of Public Sector Enterprises (BRPSE) has given its nod to revive closed fertiliser units of Fertiliser Corporation of India (FCI) and Hindustan Fertiliser Corporation (HFC).

The proposal will be forwarded to the Cabinet within a fortnight. A senior official at the Department of Fertilisers (DOF), however, said efforts would be made to bring back eight plants of the two companies through public sector participation if the present plan does not work. Expression of interest would also be invited from private sector players, he added.

Orissa to set up venture capital fund for IT firms

BS reports

Taking a leaf out of Karnataka, Orissa is exploring the possibility of setting up a Venture Capital Fund (VCF) for small and medium IT enterprises in the state.

This is in line with plans to set up a National Venture Capital Fund (NVCF) for IT SMEs, which is currently pending with the Planning Commission.

The Karnataka government has already set up a VCF with the Small Industries Development Bank of India (SIDBI) with a corpus of Rs 15 crore to promote the Software Technology Parks of India (STPI). Known as the country's silicon valley, Karnataka is the first state to accept the NVCF proposal and has become a role model for other states.

Currently, Orissa STPI has a catalogue of 100 registered IT/ITeS companies, of which only five per cent are in the big league and the remaining are IT SMEs. State STPI officials said they were aware of the NVCF formation proposal and are already making efforts to establish a state venture capital fund (SVCF).

With whose money? Why?

Curbs put on onion exports | BS

BS reports

The government has swung into action to curb onion exports and check the rise in prices in the domestic market by effecting an 8 per cent hike in its minimum export price (MEP).

The MEP has been increased by $25 per tonne to $330, with effect from February 12. Also, export canalising agencies have been directed to go slow on exports.

“Measures have been taken to make exports less lucrative and augment the domestic availability of the commodity,” said Alok Ranjan, managing director, National Agricultural Cooperative Marketing Federation (Nafed), which revises the MEP every month.

Centre mulls fund to check food prices

FE reports

The government is considering setting up a price stabilisation fund along with a market intervention plan for all agriculture products. This is part of the Centre’s larger gambit to rein in the rising prices of agricultural products.

A proposal to this effect is under the consideration of the agriculture ministry. Officials said a concrete plan to this effect would be firmed up after consulting the ministry of finance.

The move comes at a time when inflation has spiked to a two-year high of 6.58%, mainly on account of dearer food and agriculture products.

Update
FE rightly criticizes the move - here:

Sadly, many of the UPA’s policies illustrate a price control mindset. Instead of intervening only when there is demonstrated market failure, it wants to dictate prices.

Besides, what does price stabilisation mean? Does it mean procurement by the government, as with foodgrains? Other than distortions in resource allocation, such intervention will strain scarce public resources. Even if there is no procurement, it is unlikely that farmers will contribute to the fund in boom years, as quid pro quo for compensation in lean years. The fund will, therefore, not be financially viable, apart from the administrative problem of delivering across 90 million small holdings.

Govt to help India Inc keep on buying

Mint reports

The government has decided it needs to help Indian companies with their global acquisitions.
The finance ministry plans to come up with an ‘outward investment policy’ in the April-June fiscal quarter and will specify the criteria on which companies will be eligible for the incentives.
The policy will offer a slew of incentives, including concessional finance, to assist domestic companies expand the global footprint. “We are hoping to be able to begin work on the policy after the budget,” a senior government official, who did not wish to be identified said.