Tuesday, February 24, 2009
Centre clears ten SEZs, three petrochem hubs
Centre clears ten SEZs, three petrochem hubs
The Financial Express, February 24, 2009, Page 1
Economy Bureau, New Delhi
The UPA government on Monday cleared a slew of proposals to boost big-ticket investments, even as it sought to play down concerns about the economy and held out the promise of more sops for embattled exporters.
The board of approvals for special economic zones (SEZs), the UPA’s flagship investment idea, cleared ten more zones, including the country’s largest zone to date, while the Cabinet paved the way for three massive petrochemical hubs, an outcome of another pet policy formulated in May 2007.
RBI governor Duvvuri Subbarao has, meanwhile, said he would “take appropriate policy action” (read: rate cuts), at a meeting with finance minister Pranab Mukherjee. “The Bank is constantly monitoring the situation,” an RBI statement said.
Besides the new SEZs, the rate cuts should help spur investments in the three petroleum, chemical & petrochemical investment regions (PCPIRs) in West Bengal’s Haldia, AP’s Visakhapatnam and Gujarat’s Dahej that the Cabinet cleared on Monday. These regions will be set up through the PPP route.
The government’s PCPIR policy envisages faster statutory and environmental clearances, quick approval from the Foreign Investment Promotion Board, with the Central and state governments ensuring better road, rail, port and airport connectivity. The region would be a combination of production units, public utilities, logistics, environmental protection mechanisms, residential areas and administrative services. A PCPIR could also include one or more SEZs, industrial parks, free trade & warehousing zones and export-oriented units.
Among the SEZs approved on Monday was an application to merge three notified SEZs of the Adani group to create a single 6,214-hectare SEZ. The company has two port SEZs of 4,846 hectare and 1,074.17 hectare, along with a 293.88 hectare power SEZ. The total investment proposed is Rs 1 lakh crore and the zone is expected to employ 5 lakh people in the next ten years.
This is the first time after an empowered group of ministers fixed a 5,000-hectare cap on SEZ projects that the Centre has allowed the cap to be breached. The board of approvals nod came as the notified areas of all three SEZs are contiguous and treating them as one SEZ would help prevent duplication of administrative requirements, do away with separate boundaries for each SEZ and also ensure that the developers could build seamless infrastructure connecting all three.
The other SEZs cleared include the Navi Mumbai gems & jewellery SEZ promoted by an aide of Reliance Industries chairman Mukesh Ambani, and L&T’s shipbuilding SEZ. This takes the total number of approved SEZs to 714.
The government has also decided that commerce & industry minister Kamal Nath would unveil an interim foreign trade policy akin to the interim Budget. The policy will do away with many procedural bottlenecks to reduce the transaction costs of exporters and also extend the period of export obligation under various schemes like the export-oriented unit scheme, advance licensing scheme and Export Promotion Capital Goods scheme.
While the interim Budget extended interest subsidy on pre- and post-shipment credit for exporters in labour-intensive sectors like gems & jewellery, the commerce ministry would announce more measures, including procedural simplification, on February 26 to help tide over the global demand slowdown.
Government sources, meanwhile, said total exports are likely to contract on a year-on-year basis to June 2009. They said this was because shipments from India were lying at several godowns abroad due to the drastic fall in demand in major markets like the US and EU.
In a final stock taking of the economy before the polls, finance minister Pranab Mukherjee said despite the financial crisis, the government would collect Rs 6.7 lakh crore in gross tax revenues. “We may not exceed the Budget estimate, but in nominal terms, we will exceed the 2007-08 tax collections,” revenue secretary PV Bhide also said.
Relaxed green norms to speed up projects
Relaxed green norms to speed up projects
The Financial Express, February 24, 2009, Page 1
Sandip Das, Arun S
The government is all set to relax the Environment Impact Assessment (EIA) norms for infrastructure, housing and IT projects to expedite flow of funds and speed up implementation.
Official sources told FE this is being done as it has come to light that problems relating to land acquisition and the difficulties in obtaining an environment clearance were the main reasons that delay projects in these sectors. Reacting to this, the ministry of environment and forest, in a draft notification, has proposed to change certain norms concerning EIA notification, which was issued in 2006.
Under the draft notification, issued on January 19, 2009, the ministry has proposed that there is no need for EIA if ‘modernisation or expansion proposals without any increase in pollution load and or without any additional water and or land requirement are exempted from the provision of EIA’.
However, in case of expansion of projects involving enhancement of production by more than 50%, holding of public consultation shall be essential and no exemption in this regard shall be provided. But the notification points out that all state highway projects and state highway expansion projects in hilly terrain or in ecologically sensitive areas will come to EIA ambit.
The draft notification, for which the environment ministry has sought comments from public, would be taken up for final nod after expiry of sixty days from the date of notification.
The draft notification also states that in case of air strips, which do not involve refuelling facility or air traffic-control, are exempted from EIA.
The ministry move comes at a time when many builders have told the government that getting environment clearance for each small apartment and IT park have made it difficult for them to complete the projects on time.
The first stimulus package announced by the government in December 2008 authorised India Infrastructure Finance Company Limited to raise Rs 10,000 crore to refinance bank lending for infrastructure projects and another Rs 4,000 crore to National Housing Banks for taking up refinancing.
The scheme for housing also had an interest subsidy for houses below Rs 20 lakh. The government’s aim was to ensure that in the next three months at least 10-20 lakh houses are built across the country, including under the Indira Awas Yojana. This will, in turn, spur demand for steel, cement, bricks, furniture, wood and several items needed for the construction of the houses.
But a majority of these measures are yet to take-off as each infrastructure project has to get an EIA prior to the launch.
EIA certification has been a contentious issue, as most of the infrastructure projects need to get a mandatory certification from the environment ministry prior to its launch. NGOs and activists have been stating that environment ministry does not have expertise to judge the environment impact of each and every project while many project developers have been stating that due to delay in awarding EIA certification, the small projects like IT or housing get delayed.
Growth rate may come down to 6%, says Sen
Growth rate may come down to 6%, says Sen
The Financial Express, February 24, 2009, Page 2
fe Bureau
KolkataThe growth rate in India could come down to even 6%, said Nobel laureate and noted economist, Amartya Sen, at a lecture organised by Pratichi (India) Trust. “In China and in India, the growth rate has not fallen so much. I think the growth rate will fall a little more, soon. But it won’t go down to around 12% as in Japan ,” he said. “I cannot speculate to what extent growth rates would go down but it could go down to 6%,” Sen said.
He added that raising the internal demand is a way out to tackle the situation, but there are limits to this. “To some extent that’s what is happening. The government was committed towards reducing the fiscal deficit and they have now decided not to do that. That is actually a stimulus package in American terminology,” he said. “Internal demand expansion is a way out. But you know, some sectors like IT and pharmaceuticals are dependent on foreign sales,” Sen added. Sen said India and China are two countries with economies of their own; “almost like a world of their own. India was very isolated (from the world economy earlier); China was very isolated too, but had been much longer in the global frame, so is much more integrated than India is,” he said. Sen added the main crisis has come from the financial sector and the main problem has been, especially for America , the removal of financial control. “But India has not removed (financial control), nor has China . For that, it has not been susceptible to the same type of fragility that affected the American economy and to a slightly lesser extent, the economies in Europe and Japan ,” he said.
‘US economy seen starting recovery in H2 of 2009’
‘US economy seen starting recovery in H2 of 2009’
The Financial Express, February 24, 2009, Page 12
Washington: The US economy is set to contract sharply in the first quarter, with the current cyclical downturn on track to rival the 1973-75 slump as soaring unemployment depresses demand, a survey showed.
However, a survey of 47 professional forecasters released by the National Association of Business Economists on Monday predicted the recession-hit economy would begin to recover in the second half of this year, returning to a potential growth trend in 2010. The recovery was seen driven by the Obama administration's $787 billion economic stimulus plan, the group said.
“The steady drumbeat of weak economic and financial market data have made business economists decidedly more pessimistic on the economic outlook for the next several quarters,” said NABE President Chris Varvares. “The good news is that economic activity is expected to turn up in the second half of the year and 2010 is expected to see modestly above-trend growth of 3.1 %,” Varvares said.
The survey, conducted between January 29 and February 12, forecast real gross domestic product would shrink by an annualized rate of 5.0 % in the first quarter, moderating to a 1.7 % contraction in the second quarter. The economy was expected to expand by 1.0 % in the third quarter, with growth quickening to 2.1 % in the final three months of the year, the poll respondents said.
Advance government estimates showed GDP shrank at a 3.8 % annual rate in the fourth quarter, but this figure is likely to be revised to show a bigger contraction when preliminary figures are released on Friday. In November, the NABE survey had forecast first-quarter GDP sliding at an annual rate of 1.3 %, before rising by an anemic 0.5 % in the second quarter.
The US economy tipped into recession in December 2007, triggered by the collapse of the domestic housing market and the accompanying global credit crisis. With real estate and stock market prices crumbling, household wealth is declining and their spending capacity has been severely eroded. The resulting slump in demand is forcing companies to lay off workers in huge numbers, exacerbating the severity of the 13-month-old downturn.
“Cumulatively, the cyclical downturn will rival that of 1973-75. In the current downturn, real GDP is predicted to decline 2.8 % -- slightly less than the 3.1 % during the early '70s,” the NABE said.
The survey forecast the unemployment rate peaking at 9.0 % in the fourth quarter, before edging lower from the second quarter of 2010.
The US jobless rate is currently at 7.6%, a 16-year high. “Job losses are expected to persist through 2009, though steadily diminishing over the course of the year. Average monthly payroll losses of 421,000 through the first half of the year will taper to 114,000 during the second half,” the NABE said.
House prices, as measured by the Federal Housing Finance Agency, were predicted to fall 5.3 % this year, while declining home sales were seen reaching a bottom by mid-2009. Restoring stability to the housing market is widely seen as crucial to reviving the economy.
The slump in consumer demand was expected to suppress inflation pressures, with the consumer price index forecast to fall 0.8 % in 2009, before rebounding to 1.9 % in 2010.
Despite the pessimistic near-term outlook, the survey forecast the economy expanding at a rate of 3.1 % in 2010, largely driven by the government's massive stimulus plan.
—Bloomberg
The Financial Express, February 24, 2009, Page 12
Washington: The US economy is set to contract sharply in the first quarter, with the current cyclical downturn on track to rival the 1973-75 slump as soaring unemployment depresses demand, a survey showed.
However, a survey of 47 professional forecasters released by the National Association of Business Economists on Monday predicted the recession-hit economy would begin to recover in the second half of this year, returning to a potential growth trend in 2010. The recovery was seen driven by the Obama administration's $787 billion economic stimulus plan, the group said.
“The steady drumbeat of weak economic and financial market data have made business economists decidedly more pessimistic on the economic outlook for the next several quarters,” said NABE President Chris Varvares. “The good news is that economic activity is expected to turn up in the second half of the year and 2010 is expected to see modestly above-trend growth of 3.1 %,” Varvares said.
The survey, conducted between January 29 and February 12, forecast real gross domestic product would shrink by an annualized rate of 5.0 % in the first quarter, moderating to a 1.7 % contraction in the second quarter. The economy was expected to expand by 1.0 % in the third quarter, with growth quickening to 2.1 % in the final three months of the year, the poll respondents said.
Advance government estimates showed GDP shrank at a 3.8 % annual rate in the fourth quarter, but this figure is likely to be revised to show a bigger contraction when preliminary figures are released on Friday. In November, the NABE survey had forecast first-quarter GDP sliding at an annual rate of 1.3 %, before rising by an anemic 0.5 % in the second quarter.
The US economy tipped into recession in December 2007, triggered by the collapse of the domestic housing market and the accompanying global credit crisis. With real estate and stock market prices crumbling, household wealth is declining and their spending capacity has been severely eroded. The resulting slump in demand is forcing companies to lay off workers in huge numbers, exacerbating the severity of the 13-month-old downturn.
“Cumulatively, the cyclical downturn will rival that of 1973-75. In the current downturn, real GDP is predicted to decline 2.8 % -- slightly less than the 3.1 % during the early '70s,” the NABE said.
The survey forecast the unemployment rate peaking at 9.0 % in the fourth quarter, before edging lower from the second quarter of 2010.
The US jobless rate is currently at 7.6%, a 16-year high. “Job losses are expected to persist through 2009, though steadily diminishing over the course of the year. Average monthly payroll losses of 421,000 through the first half of the year will taper to 114,000 during the second half,” the NABE said.
House prices, as measured by the Federal Housing Finance Agency, were predicted to fall 5.3 % this year, while declining home sales were seen reaching a bottom by mid-2009. Restoring stability to the housing market is widely seen as crucial to reviving the economy.
The slump in consumer demand was expected to suppress inflation pressures, with the consumer price index forecast to fall 0.8 % in 2009, before rebounding to 1.9 % in 2010.
Despite the pessimistic near-term outlook, the survey forecast the economy expanding at a rate of 3.1 % in 2010, largely driven by the government's massive stimulus plan.
—Bloomberg
Steel prices, margins under pressure as output grows
Steel prices, margins under pressure as output grows
Hindustan Times, February 24, 2009, Page 27
When the steel production in the country looks to inch upwards, consumption of the commodity continues to remain sluggish. It is just reversal of the first half of the last year when consumption had outgrown production. While the mismatch then had led to all time high steel prices, the current gap is likely to put prices and margins of steel companies under even more pressure.
In the April-January 2008-09 period, finished steel production grew by 1.1 per cent even as consumption declined by 2 per cent largely on account of slow off take by infrastructure and real estate sectors. During the period, both exports and imports declined by 25 and 16 per cent and the stock almost tripled to 1.3 million tonne to 0.3 mt last year.
“In the short term scenario, profitability and prices will be under pressure,” said Naveen Vohra, partner, Ernst and Young. “Though production has stabilised, there will not be any growth in the first half of this year. There has been a price correction over July-August 2008 levels, but there may be some more correction in the offing.”
Prices of major varieties of steel — hot rolled and cold rolled coils — have fallen by over 30 per cent between July and December 2008. HR coil prices at Rs 34,944 per tonne have in fact fallen below the December 2007 level of Rs 35,100 per tonne.
Falling prices have also hit profitability of steel companies with Steel Authority of India Ltd and Tata Steel registering a 56 per cent dip in profits in the Sept-December 2008 period, while Jindal South West incurred a loss during the same period.
“Currently there is some demand in products used in the real estate and infrastructure, but not much demand for flat products used in consumer durables and automobiles,” said PK Rastogi, steel secretary. “The mismatch is such that while between April-Sept 2008, production grew at 4.3 per cent, consumption grew at 5.6 per cent, while between Oct-Dec production declined by 8 per cent but consumption went down by 13 per cent.”
Hindustan Times, February 24, 2009, Page 27
When the steel production in the country looks to inch upwards, consumption of the commodity continues to remain sluggish. It is just reversal of the first half of the last year when consumption had outgrown production. While the mismatch then had led to all time high steel prices, the current gap is likely to put prices and margins of steel companies under even more pressure.
In the April-January 2008-09 period, finished steel production grew by 1.1 per cent even as consumption declined by 2 per cent largely on account of slow off take by infrastructure and real estate sectors. During the period, both exports and imports declined by 25 and 16 per cent and the stock almost tripled to 1.3 million tonne to 0.3 mt last year.
“In the short term scenario, profitability and prices will be under pressure,” said Naveen Vohra, partner, Ernst and Young. “Though production has stabilised, there will not be any growth in the first half of this year. There has been a price correction over July-August 2008 levels, but there may be some more correction in the offing.”
Prices of major varieties of steel — hot rolled and cold rolled coils — have fallen by over 30 per cent between July and December 2008. HR coil prices at Rs 34,944 per tonne have in fact fallen below the December 2007 level of Rs 35,100 per tonne.
Falling prices have also hit profitability of steel companies with Steel Authority of India Ltd and Tata Steel registering a 56 per cent dip in profits in the Sept-December 2008 period, while Jindal South West incurred a loss during the same period.
“Currently there is some demand in products used in the real estate and infrastructure, but not much demand for flat products used in consumer durables and automobiles,” said PK Rastogi, steel secretary. “The mismatch is such that while between April-Sept 2008, production grew at 4.3 per cent, consumption grew at 5.6 per cent, while between Oct-Dec production declined by 8 per cent but consumption went down by 13 per cent.”
Home loan frauds haunting public sector banks
Home loan frauds haunting public sector banks
The Hindu Business Line, February 24, 2009, Page 1
HITTING THE ROOF.
--------------------------------------------------------------------------------
Humongous amount
Bankers say that if one considers the PSBs home loan push in 2007, 2008 and 2009, the home loan fraud could now be in the region of Rs 1,000 crore.
--------------------------------------------------------------------------------
K. Ram Kumar, Mumbai, Feb. 23
When the economy is in fine fettle, banks develop the proclivity to let their guard down.
The proof: between 2002 and 2006, when the Indian economy was shining bright, 28 public sector banks (PSBs), according to Reserve Bank of India’s reply to an application made under the Right to Information Act, cumulatively reported home loan frauds amounting to Rs 599 crore.
This figure, however, does not reveal the full picture as details pertaining home loan frauds in the new generation private sector banks are not available. The rot in these banks could be deeper considering that they went overboard during the period; peddling home loans to all and sundry with the promise of soft interest rates and high loan-to-value ratio, which sometimes exceeded 100 per cent of the property value.
Bankers say that if one considers the PSBs home loan push in 2007, 2008 and 2009, the home loan fraud could now be in the region of Rs 1,000 crore. The situation would be worse in the case of private sector banks, which of late are going slow on home loans.
Banks have reported that frauds have been committed in home/mortgage loans using fake title deeds/inflated valuation reports.
Builder-borrower-advocate-chartered accountant nexus is believed to be the root cause of banks falling prey to home loan frauds. In view of this problem, the Indian Banks’ Association has come out with a procedure for lodging complaints with the Institute of Chartered Accountants of India and State Bar Councils on malpractices/professional misconduct committed by erring chartered accountants/advocates in their dealing with banks.
What is baffling bankers is that the same flat is sold by some unscrupulous builders many times over, with the banks left holding the empty bag. For instance, a flat in Navi Mumbai was financed by around 20 banks involving a fraud of Rs 1 crore. Then, there is the case of a single borrower duping 27 banks to the tune of Rs 8 crore for buying flats across Mumbai.
“Bank officers are facing the music on the home loan front because of the dereliction of duty by some advocates and chartered accountants. Officers strictly go by their advice while sanctioning/disbursing loans. When a fraud comes to light, bank officials are either chargesheeted or summarily dismissed or put behind bars. However, no action is taken against the professionals,” said Mr. S Nagarajan, Deputy General Secretary, All India Bank Officers’ Association.
The sub-registrar’s office, according to Mr. Rajan Chandorkar, President, AIBOA (Maharashtra), registers ‘sale agreements’ without even verifying whether the property in question has been sold earlier. In 2006, the number of fraud cases reported was 620 aggregating Rs.167.43 crore.
“6th International Exhibition on Building Materials and Construction Technologies”
FICCI and Builders Association of India organizes “6th International Exhibition on Building Materials and Construction Technologies” between Feb 25 – 27 at Pragati Maidan, New Delhi.
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