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."

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."

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.

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'.

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 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

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.

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.

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

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.