'FULL CAPITAL ACCOUNT CONVERTIBILITY CAN LEAD TO MASSIVE CAPITAL FLIGHTS FROM INDIA'

Thesynergyonline Economic Bureau

NEW DELHI, FEB 06 :
INDIA should carefully measure all pros and cons before it attempts to implement full capital account convertibility (FCAC) as it can destabilise its economy through massive capital flights, warns a Paper jointly brought out by ASSOCHAM and PWC.

The Paper named Capital Account Convertibility: Is India Ready further cautions that not only are there dangerous consequences associated with capital outflow, excessive capital inflow can cause currency appreciation and worsening of the Balance of Trade.

Furthermore, there are overseas credit risks and fears of speculation. In addition, it is observed that FCAC sometime increases short term Foreign Institutional Investment more than long term Foreign Direct Investment, thus leading to volatility in the system, says ASSOCHAM-PWC Paper.

Releasing its findings, ASSOCHAM pointed out that the rising prices and the appreciation of the rupee are adversely affecting India's exports and the Balance of Trade. Moreover, the fiscal deficit has been highly underestimated by ignoring the deficits of individual states and through issuance of oil bonds to the public sector oil companies, making severe losses due to the heavy subsidies on oil.

Therefore India would need to work on sustaining its economic fundamentals over a period of time with a strong banking system over a period of time before going ahead to implement full capital account convertibility, added the Chamber .

According to the Paper, market risks such as interest rate and foreign exchange risks become more complex as financial institutions and corporate gain access to new securities and markets, and foreign participation changes the dynamics of domestic markets. For instance, changes in foreign interest rates will affect banks' interest sensitive assets and liabilities. Foreign participation can also be a channel through which volatility can spill-over from foreign to domestic markets.

Secondly, credit risk will include new dimensions with cross-border transactions. For instance, transfer risk will arise when the currency of obligation becomes unavailable to borrowers. Settlement risk (or Herstatt risk) is typical in foreign exchange operations because several hours can elapse between payments in different currencies due to time zone differences. Cross-border transactions also introduce domestic market participants to country risk, the risk associated with the economic, social, and political environment of the borrower's country, including sovereign risk.

With full capital account convertibility (FCAC) liquidity risk will include the risk from positions in foreign currency denominated assets and liabilities. Potentially large and uneven flows of funds, in different currencies, will expose the banks to greater fluctuations in their liquidity position and complicate their asset-liability management as banks can find it difficult to fund an increase in assets or accommodate decreases in liabilities at a reasonable price and in a timely fashion.

In addition, risk in derivatives transactions becomes more important with capital account convertibility as such instruments are the main tool for hedging risks. Risks in derivatives transactions include both market and credit risks. For instance, OTC derivatives transactions include counterparty credit risk.

In particular, counterparties that have liability positions in OTC derivatives may not be able to meet their obligations, and collateral may not be sufficient to cover that risk. Collecting and analyzing information on all these risks will become more challenging with FCAC because the number of foreign counterparts will increase and their nature change.

It also cautions that Operational risk may increase with FCAC. For instance, legal risk stemming from the difference between domestic and foreign legal rights and obligations and their enforcements becomes important with fuller capital account convertibility. For instance, differences in bankruptcy codes can complicate the assessment of recovery values. Similarly, differences in the legal treatment of secured transactions for repos can lead to unanticipated losses. (editor@thesynergyonline.com)

3-DAY CONFERENCE ON BUSINESS INCUBATION IN CAPITAL FROM FEB 8

Thesynergyonline Economic Bureau

NEW DELHI, FEB 06 :
ISBA (Indian STEP and Business Incubators Association) is organizing the Fourth Conference on Business Incubation, ISBA 2010 Conference, at the India Habitat Centre, New Delhi. This three-day Conference starts on the 8th February, 2010 and its focal theme is 'Innovation through Incubation: way forward for sustained inclusive growth'.

The participants and experts include the who's who of the Indian business incubation fraternity, incubatee companies, government agencies, financial institutions and leading hi-tech industries. ISBA annual conference in the past has witnessed participants and experts not only from India but from more than 30 countries across the globe.

Dr. Rajendra Jagdale, Secretary General of ISBA says, "ISBA 2010 is the largest congregation of Indian Incubators and Science Park community in India. It is the strongest platform that leverages the strength of networking with all the stake holders- ISBA members, incubation managers, investors, mentors, technology providers and the government.

This conference will also host the second ISBA Innovation and Entrepreneurship Awards to recognize the outstanding start-ups and entrepreneurs who gained from the Indian Incubation Network. These awards would be given by Mr. Prithviraj Chavan, Minister for Science & Technology on 8th February, 2010. (editor@thesynergyonline.com)

'ALLOW RE-FINANCE OF INFRASTRUCTURE DEBTS THROUGH ECBs'

Thesynergyonline Economic Bureau

NEW DELHI, FEB 05 :
INDIAN lenders especially for infrastructure sector including Steel should be permitted to refinance their long-term debts through External Commercial Borrowings (ECBs) from 2010-11 onwards so that their long-term working capital requirements are met without any inconvenience, says a Report of The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

In addition, the Chamber has also suggested that commercial banks be permitted to raise long-term bonds from NRI's say for a period of 10 years to garner funds for infrastructure sector.

Besides, it has also mooted a proposal to permit pension funds to invest upto 15 percent of their funds in infrastructure projects as also suggested that refinancing of existing rupee loans through ECB be permitted for such projects based on interest cost advantage.
In a representation forwarded to the Finance Ministry, the ASSOCHAM President Dr. Swati Piramal emphasized that ECB usage should be permitted for utilization against working capital and long-term financing of debts for infrastructure sector especially steel industry.

The debt for various industrial projects in India is currently met by Indian banks. Steel industry projects are typically large and are highly capital intensive and therefore require huge investments. Such projects have economic life of around 30-40 years.

Dr. Piramal pointed out that currently Indian banks are constrained by their own available funds being short term in nature and they usually lend for average period of around 4 to 5 years. This clearly means that project companies face huge debt servicing obligations in initial years of their operation.

This places them in financial hardship, particularly when business faces a normal cyclical downturn. It is therefore necessary to permit corporate to access ECBs to re-finance the loans from Indian banks so that the debt maturity profile matches with economic life and the company has a sustainable debt level.

Similarly, at the time when the projects are in inception/execution stage, accessing ECB is constrained due to inability of ECB lenders to assume project completion risk. However, ECB lenders are comfortable to lend to operating companies which have a proven track record of performance.

Hence, ECB lending meeting working capital requirement and refinancing of debt from Indian lenders is to be permitted. Re-financing debt from Indian banks with ECBs will facilitate freeing up the domestic banks' capability to lend to newer projects thus aiding the economic growth.

The Chamber has also emphasized that earlier policy of allowing Indian banks to guarantee ECBs (vide Master Circular No.07/2008-09 dated July 1, 2008) should be restored to enable corporates to access cheaper source of funds to effectively compete in the export markets.

Thirdly, the Chamber has also suggested that commercial banks be allowed to raise long-term bonds from NRI's as they are well equipped with funds and wants longer investments avenues in developing economy like India to enable it garner funds for infrastructure sector.

As regards to its demand for allowing pension funds to invest 15 per cent of their net worth for infrastructure sector, the Chamber has reiterated that infrastructure since is a low risk, low return but adequately secured sector and therefore pension funds should be encouraged to invest the suggested chunk of their networth in such projects.

In addition, the Chamber has also suggested that refinancing of existing rupee loans through ECBs be permitted for such projects based on interest cost advantage.

Mr.Navin M Raheja, CMD, Raheja Developers :
Housing and real estate is a vital segment of the economy in the sense that it has multiple connectivity with the rest of the economy. Housing and real estate generates demand for steel and cement, consumer durable goods, plastics, sanitary ware, electrical goods and a variety of services. Housing starts are, therefore, regarded as critical indicators of the activity levels of an economy. It is therefore important to push up the housing sector through the following measures:-

" It would be desirable to raise the Interest deduction limit of Rs.1.5 lakhs in the computation of income under section 24 of the Income Tax Act, to Rs.3 lakhs.

" Also, under 80IB section, one of the prescribed conditions is that the built-up area of the shop and other commercial establishments included in the housing projects shall not exceed 5% of the aggregate built-up area of the housing project or 2000 sq. ft., whichever is less. In large housing projects, 2000 sq. ft. may not be adequate, particularly in view of high density as may arise from restriction of maximum built up area of 1000/1500 sq. ft. per residential unit. The absolute limit of 2000 sq. ft. may be deleted.

" The government should provide tax incentives for smaller size of units and accordingly the applicability of section 80IB should be extended upto 31st March 2010. Therefore, income tax exemption will be applicable for projects sanctioned upto 31st March 2009.

" That apart, Stamp duty needs to be brought down further to 4-5% and made uniformly applicable across all states. Also, if stamp duty has already been paid on one transaction, there should be a mechanism to provide concession or a system of credit for any subsequent transactions. This would avoid the resultant cascading effect of Stamp Duty, thereby reducing the cost of a property. The concept of credit for taxes paid on subsequent transactions already exists in other statutes such as CENVAT, VAT, MAT, etc.

" Service tax in relation to construction of residential complexes having more than 12 houses has been imposed. Services in relation to construction of residential bungalows, not forming part of a 'residential complex', are excluded. Taxing the construction of such residential complex will now entail a higher cost of construction. The discriminatory tax treatment is not understandable. Also, what is the sanctity of the threshold of 12 dwelling units in a residential complex? Service Tax should not be imposed in the case of construction industry as the said industry is already paying a number of taxes on different inputs purchased for constructing the houses in addition to taxes such as Works Contract Tax (WCT). Also, Service Tax be not leviable on rental income of commercial premises which has a crippling effect on occupiers of retail premises.

" The definition of "infrastructure" earlier used by the government and all financial institutions allowed for funding of townships and residential / commercial buildings. This seems to have got de-linked and branded as Real Estate during the time when land and property prices were spiraling.

A change in the definition of Real Estate sector resulted in these activities being categorized as "outside of infrastructure sector". The immediate implication of this was that banks could not extend loans to real estate activities on the same norms as they can to infrastructure companies, even though building new townships are similar activities as building infrastructure facilities. In the ongoing sluggish environment of real estate market, it may be desirable to reinstate the definition of Real Estate business as contained in FEMA.

" Presently section 23 of the Income Tax Act provides a standard deduction of 30% from the rental income which should needs to be substantially increased to around 50% of the total income.

" As per Section 54, capital gain arising from transfer of any capital asset is exempt from tax in cases where the sale proceeds are invested in acquiring one residential house. We feels that exemption should be available where the capital gains are re-invested even in more than one house. (editor@thesynergyonline.com)

MULTIPLE REGULATORS FOR OIL AND GAS : REPLICATION OF OLD PROBLEMS?

Thesynergyonline Economic Bureau

NEW DELHI, FEB 04 :
"INSTEAD of creating a parallel regulatory body in the oil and gas sector, the government should strengthen the existing regulatory body, Petroleum and Natural Gas Regulatory Board (PNGRB) to enable the establishment of a sound regulatory environment in the sector" opines CUTS International, a premier economic policy research and advocacy group while reacting to the government's proposal for creating a National Gas Highway Development Authority (NGHDA) for regulating transmission of gas, a function that the existing regulator (PNGRB) was expected to shoulder as per provisions of the PNGRB Act 2006.

"The PNGRB was constituted about two years ago to regulate the mid stream as well as down stream businesses in the oil and gas sectors. However, the government has not notified vital sections of the PNGRB Act as yet including Section 16 that empowers the board to issue authorisation to entities for laying natural gas pipelines" says Mr Pradeep S Mehta, Secretary General of CUTS International and an eminent commentator on regulatory issues.

In a recent judgment by Delhi High Court, it was observed that PNGRB is not authorised to clear pipeline projects but can merely inspect them. Meanwhile, the Ministry of Petroleum and Natural Gas (Mo-PNG) allotted trunk gas pipelines to Reliance Gas Transportation Infrastructure Ltd. (RGTIL) and GAIL India without going though a proper bidding process. This reflects failure in making the regulatory processes transparent and impairs credibility of the existing regulatory agency in the sector.

The above incident exposes the toothless nature and lack of regulatory independence of the PNGRB and the government's seeming accommodation of such aberrations in the functioning of regulators.

From all ominous indications such inefficiency may also afflict the proposed regulator whose establishment is in any case not prudent, given that a regulator (PNGRB) already exists in the oil and gas sector and that too without notification.

"The government should focus on empowering existing regulatory institutions, rather than merely creating new ones, to ensure that a transparent and credible regulatory environment emerges in such key sectors as oil and gas", asserts Mr Mehta. . (editor@thesynergyonline.com)

SUBDUED GROWTH IN CORE INFRASTRUCTURE TO SHOOT WPI INFLATION TO DOUBLE- DIGITS

Thesynergyonline Economic Bureau

NEW DELHI, FEB 02 :
ADDING to pressure of soaring food prices, the widening output gap between overall industrial production and six core infrastructure industries may firm up inflation further to double digits with prices of key industrial inputs like cement, steel and coal seen hardening due to demand-supply mismatch, according to an ASSOCHAM Eco Pulse Study.

In line with RBI's apprehension about spillover of inflation from food products to other sectors, ASSOCHAM Eco Pulse (AEP) Study titled "Structural Analysis of Industrial Growth & Inflation" revealed that against an average double digit growth (10.6 per cent) in the overall industrial production, the six core infrastructure industries grew by less than half (5 per cent) during the August - November period of fiscal 2009-10.

There is an urgent need for the government to improve agriculture supply chain to prevent the food inflation seeping in the core inflation substantially, pointed out the Chamber.

The six core infrastructure industries including finished steel, cement, coal, crude oil, petroleum refinery products and electricity generation have a combined weight of nearly 27 per cent in the overall industrial production.

"There is a widespread gap between the overall industrial production and the output of core infrastructure industries; which is expanding at a threatening pace. With aggregate demand going strong, there would be substantial pressure on prices due to supply side constraints" says the ASSOCHAM Study.

A stark difference of 5.6 percentage points between the growth rates of IIP and six core infrastructure industries for August - November period owes to the subdued performance of the latter. Although the growth of six core infrastructure sector improved to 6 per cent for December 2009, the better performance was primarily due to the base effect.

Ignoring the demand-supply balance, the dismal growth in production of key industrial inputs like finished steel, cement, crude oil and coal has raised concerns over the price stability of their end products.

Assessing the demand side factors the Study added, Indian cement prices are expected to firm up as demand from state projects and housing sector activity picks up significantly while steel prices would rise on account of increased demand from the auto and construction sector.

Domestic price for coal would go up as increasingly growing demand for power generation is expected to create an acute shortage of coal in the country whereas crude oil prices are likely to harden with demand for fuel going strong.

The Study also cautioned that there are underlying threats in meeting our domestic demand by heavily relying on international markets. The global resurgence in commodity prices like crude oil, coal, steel and cement is bound to shoot inflation going forward. As we import more than 70 per cent of our coking coal and crude oil demand, a turnaround in prices of these commodities does not augurs well for the Indian economy.

As per Study findings, the overall industrial production, indicated by the IIP, recorded an average rise of 5.9 percentage points between the April - July and August - November period (from 4.7 per cent to 10.6 per cent) as against an average increase of a trivial 0.9 per cent in case of six core infrastructure sector (from 4.1 per cent to 5 per cent) between the same period. This nearly stagnant growth in core infrastructure industries is likely to aggravate supply side pressure on prices of manufactured products as industrial inputs like cement, steel, coal, crude oil and electricity forms strong linkages with the overall industrial activity.

The pickup in inflation for these industrial inputs would take the already year high level of Wholesale Price Index based inflation to double digits.

The growth rates for domestic production of coal, cement and crude oil witnessed an average decline of 5.1 percentage points, 3 percentage points and 0.7 percentage points respectively between the August - November and April - July period of FY 2009-10 whereas the growth rates of finished steel and electricity generation increased marginally by 1.5 percentage points and 0.6 percentage points respectively.

Despite the rapid strides of improvement in overall industrial production since August 2009, the above trend for the core infrastructure sector confirms supply side pressure due to the robust build up on the demand side.

At a time when inflation rate is climbing up every month mainly due to spiraling food prices, the firming up of inflation in key industrial inputs would play havoc for a broad based economic recovery, concluded the Study.

PEs IN INDIAN RLYS UNLIKELY OVER US$ 84.8 MILLION AS AGAINST TARGETED US$ 13 BILLION

Thesynergyonline Economic Bureau

NEW DELHI, FEB 02 :
DESPITE the fact that Indian Railways (IR) is pinning all its hopes on private equities (PEs) investments to an extent of US$ 13 billion during 11th Plan period to support its expansion drive including laying of dedicated freight corridors across the country, it has so far raised a meagre US$ 84.8 million through PEs which falls short of expectations by 15 times.

This, according to a Report brought out by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) on PEs Investments Towards IR, goes to prove that railways has yet to roll out investment friendly models to support it's diversification drive on lines anticipated by

PEs and also ensure reasonable return on capital deployed. Since 11th Plan began in 2007-08 and close to 3 years have already elapsed, the railways received limited PEs participation until now as only 2 deals so far announced for it. One that of Patil Infrastructure - a company focusing on railway track engineering, received US$ 56.7 million funding from one equity partner.

In the second one, Harish Chandra , a railway line manufacture, attracted investment worth US$ 28.1 million from Axis Pvt. equity, adds the Chamber .

According to official estimates, both public and private investment planned for modification, expansion drive of railways including laying of part of freight corridors during the 11th five year plan should be around US$ 65.5 billion. Of which close to 19 percent is expected to be generated through private participation.

The report also highlights that over the past few years, the growth of rail network has not kept pace with the increasing traffic requirements. For instance, between financial year 2001 and 2008, the goods traffic increased at a CAGR of 8.3 percent while the rail network increased only at a CAGR of 0.08 percent.

Releasing findings of the Chamber's report, its president Dr. Swati Piramal said that significant private sector participation would be required in the sector.

Apart from projects to be developed on PPP basis, large projects in Indian railways such as dedicated freight corridor and the outlays of railways tracks to improve connectivity will offer opportunities for the private sector on an equipment, procurement and construction (EPC) basis.

This is expected to increase the scope of PEs investments in this segment provided a transparent investment charter is laid out for private investments in timely execution of railway projects such as dedicated freight corridors and it's diversification and modernization drive.

However, in the short to medium term, the PE opportunities in railways will be restricted to the EPC players as it is unlikely that any meaningful number of railways PPP projects will be available in the market in near future.

Further, numerous issues such as capacity constraints, increasing freight rates and a lack of modern freight terminals continued to impact the rail sector. These infrastructure bottlenecks coupled with poor customer orientation resulted in transit delays of both passengers and goods, resulting in an increased customer preference towards roads.

Rail projects in India have generally been a part of the public sector domain. However, based on success of PPP in other infrastructure sectors such as highways, Indian railway has begun to take a small measures to explore the PPP route which can be profitable provided reforms and transparency is strictly observed in awarding rail projects for private equities including private investments, said Dr. Piramal.

With a total network 63,332 km spread across 8000 stations, the Indian railways forms the second-largest rail network in the world under a single management. Indian railways involved in a number of activities including freight and passenger operations, infrastructure development, manufacturing and other ancillary businesses such as catering and tourism.

The freight segment accounts for about 70 percent of the overall revenues. Indian railways carries approx. 40 percent of the freight traffic and 20 percent of the passenger traffic of the country. (editor@thesynergyonline.com)

DELHI-BASED SATYA PRAKASH CONFERRED PRESIDENTIAL AWARD

Thesynergyonline Economic Bureau

NEW DELHI, JAN 27 :
ON the occasion of Republic Day, 2010, two officers Mr Satya Parkash, Enforcement Officer, New Delhi and Mr S.Ravindranath , Enforcement, Hyderabad of the Directorate of Enforcement, Under Ministry of Finance have been conferred the Presitigious Presidential Award for ‘Speciality Distinguished Record of Service’ .

Mr Satya Parkash has has played key role in investigation and solving various important cases against economic offenders. He has helped in implementing the special Acts of Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (FEMA) .

His work has been lauded in each organization he has worked including Central Vigilance Commission (CVC), Dircetorate of Enforcement and As Chief Vigilance Officer of GAIL (India).

Mr RAvinder NAth has played prominent role in investigation of cases against economic offenders including use of DEPB scheme by exporters and seizures of smuggled goods and Narcotics. (editor@thesynergyonline.com)
 

'EXTEND SEZ TAX INCENTIVES IN NEW DIRECT TAX CODE

Thesynergyonline Economic Bureau

NEW DELHI, JAN 25 :
THE Associated Chambers of Commerce and Industry of India (ASSOCHAM) has sought continuation of existing tax benefits, incentives and holidays scheme currently available to Special Economic Zones (SEZs) under the new Direct Tax Code (DTC) regime also.

The Chamber in a note to the government has underlined the need for the tax benefits in the new Direct Tax Code regime due to the apprehension that these may be discontinued.

In a representation sent to the Finance Minister, Mr. Pranab Mukherjee by ASSOCHAM, it is argued that the draft tax code which will lead to overhaul of the Income-Tax Act has created uncertainty for both present and potential investors, who do not know whether their investments would get the returns that they have calculated based on the existing tax laws.

This is because the code does not mention anything about units inside SEZs, but has a separate chapter on proposed guidelines that specify how developers of the tax free industrial enclaves will be treated in the new tax regime.

If the provisions of the code get translated into the new Income-Tax Act,  it is clear that SEZ units set up after the new law is implemented will not enjoy any direct exemption. Such provisions will be a major roadblock in the development and growth of SEZs in India, pointed out the Chamber.

“Schemes like SEZs are special schemes with defined objectives of enhancing India’s share in global trade, attracting foreign and domestic investment, creating world class business and social infrastructure, generating employment and last but not the least, providing a hassle free business environment to entrepreneurs”, holds the Chamber.

According to it, the phenomenal performance of the SEZs during last three years is an evidence to support that given the laissez faire regime, the business will deliver and it is therefore requested that tax incentives should continue for SEZs and their developers after the new DTC is rolled out for execution.

Some of the tax incentives which should go on for SEZs and their developers and promoters include 100% income-tax reduction under Section 80-IAB for any consecutive 10 years out of first 15 years from the date of notification of SEZ.  The government is likely to make a tinkering in this against the desire of those that have plans for SEZs.

Secondly, SEZ units should continue to get Income-tax exemption under Section 10AA of the Act for a complete tax holiday to SEZ units for a period of  5 years.  This should be applicable from the year in which the unit begins it’s manufacture or production.

Thirdly, 2 per cent Minimum Alternate Tax (MAT) being proposed by the government on SEZs in the new DTC is uncalled for and is against the spirit and interest of SEZ Act.  This is expected to discourage capital formation in the SEZ and in the economy as  a whole.

The ASSOCHAM has reiterated that levy of MAT would be against the very spirit of SEZ scheme which seeks to exempt the export income of the units.  Since SEZ units are not eligible to income-tax on export profits, there is no question of levying MAT.   (editor@thesynergyonline.com)
 

GOVT PURCHASES LIKELY TO TOUCH RS10 LAKH CRORE BY 2012

Thesynergyonline Economic Bureau

NEW DELHI, JAN 23 :
THE Associated Chambers of Commerce and Industry of India (ASSOCHAM) expects government procurement to go up by close to 30% and reach Rs.10 lakh crore by terminal year of 11th five year plan period, i.e. 2012 from an estimated current levels of Rs.7,50,000 crore.

The Chamber’s optimism in this regard is based on assumption that the government purchases would multiply as it aims at recording a growth rate of about 9% by the time the 11th five year plan period terminates, which would seek it to considerably increase it’s spending on government purchases.

However, resources for it would have to be generated through public investments as well as higher budgetary allocations to different Ministries, especially so in case of Defence, Railways, Ministry of Shipping & Transport, Power, Telecommunication and Petroleum & Natural Gas.

According to the Chamber estimates, the way the government has declared it’s intentions to harness sources of non-conventional energy like solar, wind, tidal, biomass etc. would compel it to go in for higher purchases both from domestic industry as well as overseas companies in the field.

The government intends to make capacity addition of 22,000 mw of energy through harnessing of these sources to the optimal capacity for which huge purchases would have to be made not only from domestic industries but overseas countries such as Germany, France, Sweden and Norway.

The Chamber expects that equipment and components and even project imports for the sector of non-conventional areas would require government spending to an extent of Rs.15,000 crore in next 2-3 years since these are highly expensive and made of the applications of latest technologies.

Releasing the Chamber estimates on government procurements, it’s president Dr. Swati Piramal said that defence and railways which are the largest procurer of not only project imports but various equipment component and services are jointly expected to release government orders to an extent of Rs.90,000 crore in next 2 years.

Currently, railways annual procurements stand close to Rs.35,000 crore per annum and in case of defence, it’s procurement estimated Rs.55,000 crore, added Dr. Piramal.

Power and oil and gas have huge capacity expansion plans which would require government and it’s public sector entities to make huge purchases estimates for which could exceed close to Rs.1,20,000 crore in next 2-3 years. It may be clarified here that estimates of government purchases are brought forward also as in one fiscal year sometimes the government does not spend the projected amount in one fiscal because of variety of reasons.

The Chamber feels that in the past 2-3 years not much of government procurement happened because Indian economy remained under attack of global meltdown as it had to abandoned most of it’s capacity expansion in power, oil & gas, ports and roads.

But henceforth, especially from year 2009-10, the economy has started picking up and recovery started returning.  It is therefore hoped that most of the public sector undertakings would aggressively work for capacity expansion and since lot of focus is being given on upgrdation of infrastructure, the ASSOCHAM expects over Rs.40,000 crore of public investments in infrastructure.  One can imagine the amount of investment that would go in rebuilding India’s infrastructure through government procurements.

The Chamber is also of the view that government agencies should adopt innovative procurement method such as “Green Purchasing” and e-procurement, in tune with modern procurement methods adopted in developed western countries.  The purchase officers in western countries are called chartered professionals and in our country also, these professional should be offered chartership by the concerned government authorities. (editor@thesynergyonline.com) . 

TOP 10 OEMs ACCOUNT FOR $77.3 BILLION OF SEMICONDUCTORS PURCHASED IN 2009

Thesynergyonline Economic Bureau

NEW DELHI, JAN 22 :
WORLDWIDE semiconductor device revenue reached $226 billion in 2009, down 11.4 percent from 2008, according to preliminary estimates by Gartner, Inc. Even in severe market conditions, leading-brand electronic equipment and design manufacturers remained at the center of the semiconductor world, accounting for $77.3 billion of semiconductors on a design total available market (TAM) basis in 2009.

"The supply chains of the electronics industry have become more complicated, and, thus, the importance of original design manufacturer (ODM) businesses has risen," said Masatsune Yamaji, senior research analyst at Gartner. "As such, the top 10 branded OEM/ODM companies accounted for a third of all semiconductor demand in 2009, as they did in 2008."

HP remained the leading OEM worldwide for semiconductor consumption in 2009. It succeeded in gaining market share in all the PC market segments such as desktop PCs, mobile PCs and mini-notebook PCs.

HP also maintained a strong position in printer, server and storage markets, though the total market size of servers and storage shrunk sharply in 2009. Samsung accounted for the second-largest demand for semiconductors in 2009 and is the most successful vertically integrated manufacturer, while Nokia ranked third, after losing business worldwide, especially in the U.S.

Apple and Acer were the only electronic equipment manufacturers among the top 10 companies to increase their semiconductor demand in 2009. Apple grew against the background of the demand trend shifting from hardware-oriented to service-oriented markets to become one of the most successful market players and one of the most attractive customers for chip vendors in PC, mobile handset and consumer markets, in terms of growth potential.

Acer succeeded not just in increasing its shipments of mini-notebook PCs, but also in gaining market share in the desktop PC and mobile PC markets. Gartner analysts said consumer demand is shifting from high performance to portability and affordability, and this trend accelerated Acer's growth in 2009. As a result, Acer increased its semiconductor demand and was ranked ninth in 2009, up from 11th in 2008.

"Overall, results are better than could have been predicted a year ago," said Mr. Yamaji. "Electronic equipment manufacturers made huge efforts to adjust their production and inventory in the first half of 2009 in order to deal with the economic downturn that set in at the end of 2008. Semiconductor demand has been gradually recovering since the second half of 2009, when the inventory adjustment was almost completed, but the pace of recovery differs by market segment."

Gartner's preliminary results reveal that semiconductor demand for PCs has shown a firm recovery, as mini-notebook PCs have sold well not just in emerging countries, but also in developed countries. DRAM pricing also stabilized in the latter half of 2009, and the new operating system (OS), Windows 7, also drove market demand.

However, semiconductor demand for mobile handsets saw large declines, especially for enhanced phones, while the demand for smartphones grew. The semiconductor demand for smartphones, which had accounted for 19.8 percent of the demand for total mobile handsets in 2008, grew to 28.6 percent in 2009.

"Though the importance of ODM business has been increasing for the past 10 years, the leading brand companies are still the most important customers for semiconductor device vendors," Mr. Yamaji said. "Semiconductor vendors should pay much more attention to the leading electronic equipment manufacturers and their customers, who are catching up with the market trends and who will survive in the future." (editor@thesynergyonline.com) .

CALL FOR IMMEDIATE NOTIFICATION FOR WITHDRAWING ANTI-DUTY ON IMPORT OF HIGH GRADE SIAINLESS STEEL

Thesynergyonline Economic Bureau

NEW DELHI, JAN 22 :
THE end- user industry of high grade stainless steel in the country including pesticides and chemicals , refinery, auto components, utensil  manufacturers, plant and machinery manufacturers, kitchen equipment makers and refineries presently  importing stainless steel  for their respective industries have urged the prime minister and the Union Finance Ministry to immediately issue the pending notification for withdrawing of  Anti dumping duty on import of certain category of cold rolled stainless steel as highly recommended by Ministry of Commerce.

The various end users and importer industries associations including  have shot letters to the Prime Minister, Union Finance and Commerce Ministers and  Secretary Revenue , Ministry of Finance for immediate  issuing the notification of Final DGAD Findings No. 14/06/2008-DGAD dated 24 November 2009 in the Anti-dumping Investigation concerning imports of Cold Rolled Flat Products of Stainless Steel (CRSS) from China PR, Japan, Korea, European Union, South Africa, Taiwan (Chinese Taipei), Thailand and USA .

“Ministry of Commerce had initiated Anti Dumping Investigations  on import of stainless steel at behest of Single manufacturer Jindal Stainless steel in April 2009 and imposed Anti dumping duty and all category of stainless steel including bnot manufactured in India. 

Directorate General of Anti-Dumping and Allied Duties (DGAD)  after conducting a thorough investigation, on 24 November 2009 concluded that Cold Rolled Stainless Steel not produced in India should be excluded from the scope of product under consideration. 

This decision of the DGAD is in line with the comprehensive submissions made by the end user industries including our association which comprises of thousands of SME exporters employing lakhs of workmen and getting forex in thousands of crores every year.” Said Mr V.P.Ramachandran, Secretary, Process, Plant and Machinery Association of India (PPMAI) .

“In our written submissions we had highlighted that the domestic industry does not have the capacity to manufacture certain types of Cold Rolled Stainless Steel . Despite recommendations by DGAD, Ministry of Finance has still not issued the much awaited Customs notification withdrawing  duty from several grades of stainless steel not manufactured in India.
 

 “More than 5000 stainless steel utensil and Cutlery manufacturing and exporting units employing about three lakh workers across the country are facing closure as they have been adversary hit by the recession and the proposed Anti Dumping duty hike on stainless steel , the basic raw material will work as the last nail in the coffin of ailing industry.

Unnecessary delay in issuing the notification by Ministry of Finance has further hurt the industry” said Mr Paresh Mehta President, All India Stainless Steel Industries Association (AISSIA). (editor@thesynergyonline.com) .

CONSUMER ORGANISATIONS SHOULD TAKE FORWARD POSITIVE MESSAGES FROM GST

Thesynergyonline Economic Bureau

NEW DELHI, JAN 22 :
"THE implementation of a single, unified goods and services tax regime in India will have huge positive impact on the Indian economy. Other than an increase in tax revenue and other benefits to the economy, there will be significant gain in respect of consumer welfare.

Consumer organisations should be empowered to take forward these positive messages,” said Pradeep S. Mehta, Secretary General of CUTS International while submitting a memorandum to the Finance Minister of India in the run-up to the 2010-11 Union Budget.

This memorandum has looked at various priority areas and commitments made by the UPA government to take the country forward to a sustained high growth path along with a gradual reduction in carbon intensity.

Given the crucial role that small and medium enterprises play in sustaining India ’s growth, it recommended that “there should be a special purpose vehicle through public-private partnership mode to enable micro, small and medium enterprises to access easy finance, particularly for acquiring low-carbon technologies.”

The memorandum also recommended that while implementing the proposed National Food Security Act, all existing food-based welfare schemes of the government should converge into a single programme and that should include coarse cereals such as millets. “There should be a mechanism for enhancing the food entitlement of those who are excluded from the existing schemes,” Mehta added.

It lauded the government’s efforts to increase electricity production from renewable sources. It urged the government to reform its procurement policy so as to encourage the production and consumption of products with low carbon intensity.

It supported the government’s efforts on disinvestment and said that such an initiative should be a part of an overarching National Competition Policy. It called upon the government to initiate effective labour reforms and related legislation so as to generate a better political buy-in for disinvestment.

CUTS, a non-governmental organisation working on consumer and other public interest issues in India and other countries, is celebrating 25 years of its establishment. It is at the forefront of the consumer movement in India and at the global level. CUTS is conducting evidence-based policy advocacy on regulatory reforms, international trade and development and on governance issues.(editor@thesynergyonline.com) .