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?

"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.

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!

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.

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 ;-)

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.

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.