Thursday, October 29, 2009
World Bank to partner Centre in urban renewal mission
World Bank to partner Centre in urban renewal mission
The Hindu Business Line, October 29, 2009, Page 21
G. Srinivasan, New Delhi
Buoyed by the tangible success of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in improving civic amenities across the country in urban areas, the World Bank has come forward to partner in the ‘unique urban initiative” of the Government of India.
Disclosing this to Business Line here, the Ministry of Urban Development, Secretary, Dr M. Ramachandran hoped “a $5.2 billion loan from the Bank should work out” soon. He said this would be an additional measure as the Ministry has moved the Planning Commission, seeking more allocation of funds in the backdrop of growing demands from cities. He said as the Plan panel is fully “appreciative” of the huge resources for the tasks on hand, it would be able to signal further resource support sometime during this year itself along with the mid-term appraisal it would be making.
The resources allocated for seven years from 2005 to 2012 would not be sufficient since all of that already stands committed, he said adding that cities were asking for more support. This plea for further scaling up the unique scheme is understandable, given the fact that it has proved to be “a big boon to the cities as the hitherto neglected urban infrastructure.
With the main remit of the implementation of reforms under JNNURM being to foster enabling milieu for the growth of cities by augmenting urban service delivery effectively, land management, financial management and stakeholder participation in governance, Dr Ramachandran said that now cities get used to the much-needed reform agenda, finding additional resources is getting due importance and organised city transport and shift towards use of improved public transport were the notable outcomes of the mission.
He pointed out that when the Mission was approved in 2005 with a provision of Rs 50,000 crore as Central assistance implying thereby about Rs 1 lakh crore of projects would be taken up in the country’s 65 mission cities and some towns out of the total 5161. Now, he said, projects worth Rs 1 lakh crore were under implementation.
Infrastructure projects
As many as 467 infrastructure projects worth Rs 50,339 crore with Additional Central Assistance (ACA) commitment of Rs 23,856 crore with about 81 per cent being in water supply, sewage, drainage and solid waste management were under implementation in mission cities, he said adding another 753 projects worth Rs 12,824 crore with Rs 10,340 crore committed as ACA have been taken up in 636 small towns.
To a specific query about reforms being undertaken under the mission, he said some cities have done well on this. Andhra Pradesh, Gujarat, Kerala figure in this, while cities of Andhra Pradesh, some cities of Gujarat, Maharashtra, Kerala, Tamil Nadu were able to do better compared to other cities. More importantly, he said, 59 out of 65 mission cities have been credit rated, most of them for the first time with as many as 36 having investment grading now.
The Hindu Business Line, October 29, 2009, Page 21
G. Srinivasan, New Delhi
Buoyed by the tangible success of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in improving civic amenities across the country in urban areas, the World Bank has come forward to partner in the ‘unique urban initiative” of the Government of India.
Disclosing this to Business Line here, the Ministry of Urban Development, Secretary, Dr M. Ramachandran hoped “a $5.2 billion loan from the Bank should work out” soon. He said this would be an additional measure as the Ministry has moved the Planning Commission, seeking more allocation of funds in the backdrop of growing demands from cities. He said as the Plan panel is fully “appreciative” of the huge resources for the tasks on hand, it would be able to signal further resource support sometime during this year itself along with the mid-term appraisal it would be making.
The resources allocated for seven years from 2005 to 2012 would not be sufficient since all of that already stands committed, he said adding that cities were asking for more support. This plea for further scaling up the unique scheme is understandable, given the fact that it has proved to be “a big boon to the cities as the hitherto neglected urban infrastructure.
With the main remit of the implementation of reforms under JNNURM being to foster enabling milieu for the growth of cities by augmenting urban service delivery effectively, land management, financial management and stakeholder participation in governance, Dr Ramachandran said that now cities get used to the much-needed reform agenda, finding additional resources is getting due importance and organised city transport and shift towards use of improved public transport were the notable outcomes of the mission.
He pointed out that when the Mission was approved in 2005 with a provision of Rs 50,000 crore as Central assistance implying thereby about Rs 1 lakh crore of projects would be taken up in the country’s 65 mission cities and some towns out of the total 5161. Now, he said, projects worth Rs 1 lakh crore were under implementation.
Infrastructure projects
As many as 467 infrastructure projects worth Rs 50,339 crore with Additional Central Assistance (ACA) commitment of Rs 23,856 crore with about 81 per cent being in water supply, sewage, drainage and solid waste management were under implementation in mission cities, he said adding another 753 projects worth Rs 12,824 crore with Rs 10,340 crore committed as ACA have been taken up in 636 small towns.
To a specific query about reforms being undertaken under the mission, he said some cities have done well on this. Andhra Pradesh, Gujarat, Kerala figure in this, while cities of Andhra Pradesh, some cities of Gujarat, Maharashtra, Kerala, Tamil Nadu were able to do better compared to other cities. More importantly, he said, 59 out of 65 mission cities have been credit rated, most of them for the first time with as many as 36 having investment grading now.
Core sector growth runs out of steam, slides to 4%
Core sector growth runs out of steam, slides to 4%
The Financial Express, October 29, 2009, Page 1
fe Bureaus, New Delhi
Growth in infrastructure sector output slipped to 4% in September from an upwardly revised 7.8% in August, data released by the commerce & industry ministry showed on Wednesday.
This would likely result in lower growth in the index of industrial production, which grew in double digits--10.4% in August--after a gap of 22 months. The infrastructure sector—comprising cement, coal, steel, electricity, crude oil and petroleum refinery products—accounts for almost a third of the IIP. Growth in the Core Six stood at 4% in September 2008.
“IIP for September will not be in double digits,” confirmed DK Joshi, principal economist at rating agency Crisil. In the first half of the fiscal, though, infrastructure output growth was at 5%, up from 3.4% in the same period last year.
India’s chief statistician, Pronab Sen, said IIP growth in September is unlikely to match the August pace, which was buoyed by a low base-year growth of 1.7% in the same month last year.
Coal and cement, which topped the charts in August with growth rates of 12.95% and 17.6%, respectively, slipped to 6.5% each in September. Electricity generation grew 7.5%, against 4.4% last September, while petroleum refinery product output expanded by 3.45% against 2.8%.
Finished steel production declined by 0.4%, against 2.1%. Crude oil remained in the negative zone with a 0.5% decline in September, compared with 0.4%. Crude oil production in H1 was -1.25%, compared with 0.8% in the corresponding period last year. Petroleum refinery products slipped to -3.6% from a positive 4.5% in the first six months of last fiscal. Coal production grew 11.6% in the first half of the fiscal, up from 8% in the same period last year.
Electricity generation during April-September grew 6.8%, from 2.6%. However, finished steel production declined by 3% from 3.3%. Cement production grew by 12.3% in the first half of the current financial year vis-à-vis 5.5% in the same period of 2008.
The Financial Express, October 29, 2009, Page 1
fe Bureaus, New Delhi
Growth in infrastructure sector output slipped to 4% in September from an upwardly revised 7.8% in August, data released by the commerce & industry ministry showed on Wednesday.
This would likely result in lower growth in the index of industrial production, which grew in double digits--10.4% in August--after a gap of 22 months. The infrastructure sector—comprising cement, coal, steel, electricity, crude oil and petroleum refinery products—accounts for almost a third of the IIP. Growth in the Core Six stood at 4% in September 2008.
“IIP for September will not be in double digits,” confirmed DK Joshi, principal economist at rating agency Crisil. In the first half of the fiscal, though, infrastructure output growth was at 5%, up from 3.4% in the same period last year.
India’s chief statistician, Pronab Sen, said IIP growth in September is unlikely to match the August pace, which was buoyed by a low base-year growth of 1.7% in the same month last year.
Coal and cement, which topped the charts in August with growth rates of 12.95% and 17.6%, respectively, slipped to 6.5% each in September. Electricity generation grew 7.5%, against 4.4% last September, while petroleum refinery product output expanded by 3.45% against 2.8%.
Finished steel production declined by 0.4%, against 2.1%. Crude oil remained in the negative zone with a 0.5% decline in September, compared with 0.4%. Crude oil production in H1 was -1.25%, compared with 0.8% in the corresponding period last year. Petroleum refinery products slipped to -3.6% from a positive 4.5% in the first six months of last fiscal. Coal production grew 11.6% in the first half of the fiscal, up from 8% in the same period last year.
Electricity generation during April-September grew 6.8%, from 2.6%. However, finished steel production declined by 3% from 3.3%. Cement production grew by 12.3% in the first half of the current financial year vis-à-vis 5.5% in the same period of 2008.
Core grows mere 4%, may pull down IIP
Core grows mere 4%, may pull down IIP
The Economic Times, October 29, 2009, Page 9
Just Petro Refinery Products & Crude Oil Segments Show Yr-On-Yr Rise In Sept
Our Bureau NEW DELHI
THE industrial output growth, as measured by the Index of Industrial Production (IIP), may see a drop in September from the 10.4% growth registered in August as the index of core sector industries, which has a weightage of 26.7%, clocked a 4% growth in September, sharply lower than the 7.8% in the month before.
None of the six core industries captured by the index — crude oil, petroleum refinery products, coal, electricity, cement and finished steel (carbon) — showed a month-on-month uptick in production.
Crude oil and petroleum refinery products were the only two segments that showed a higher annual growth rate in September. Analysts are expecting the growth rate in these two segments to gather momentum as the output from Reliance’s KG basin and Cairn’s oilfield in Rajasthan stabilise. Policymakers pointed that this would have an impact on electricity generation as well.
Planning commission member Saumitra Chaudhari told ET: “The gas output from oil fields, which started production recently, will help in keeping the electricity generation high.” He added this was one of the reasons why the electricity generation was relatively high inspite of reservoir levels being low on account of truant monsoon. With the late revival of monsoon, the reservoirs are also recharged, especially in south.
A recent note by Citi economist Rohini Malkani points out that the strong coal production in first half of the year may be due to higher cement production, as coal is an input and a source of power in cement production.
“The delayed monsoon has helped the construction industry and will lead to better yearon-year growth in cement and steel,” Mr Chaudhari pointed out.
On a cumulative basis, the core sector index was up 4.8% during first six months of the year, outpacing the 3.4% growth seen during the same period last year. Growth in coal and cement in the first six months of the current fiscal outperformed growth in same period last year.
The Economic Times, October 29, 2009, Page 9
Just Petro Refinery Products & Crude Oil Segments Show Yr-On-Yr Rise In Sept
Our Bureau NEW DELHI
THE industrial output growth, as measured by the Index of Industrial Production (IIP), may see a drop in September from the 10.4% growth registered in August as the index of core sector industries, which has a weightage of 26.7%, clocked a 4% growth in September, sharply lower than the 7.8% in the month before.
None of the six core industries captured by the index — crude oil, petroleum refinery products, coal, electricity, cement and finished steel (carbon) — showed a month-on-month uptick in production.
Crude oil and petroleum refinery products were the only two segments that showed a higher annual growth rate in September. Analysts are expecting the growth rate in these two segments to gather momentum as the output from Reliance’s KG basin and Cairn’s oilfield in Rajasthan stabilise. Policymakers pointed that this would have an impact on electricity generation as well.
Planning commission member Saumitra Chaudhari told ET: “The gas output from oil fields, which started production recently, will help in keeping the electricity generation high.” He added this was one of the reasons why the electricity generation was relatively high inspite of reservoir levels being low on account of truant monsoon. With the late revival of monsoon, the reservoirs are also recharged, especially in south.
A recent note by Citi economist Rohini Malkani points out that the strong coal production in first half of the year may be due to higher cement production, as coal is an input and a source of power in cement production.
“The delayed monsoon has helped the construction industry and will lead to better yearon-year growth in cement and steel,” Mr Chaudhari pointed out.
On a cumulative basis, the core sector index was up 4.8% during first six months of the year, outpacing the 3.4% growth seen during the same period last year. Growth in coal and cement in the first six months of the current fiscal outperformed growth in same period last year.
Centre to scale down infra targets
Centre to scale down infra targets
The Financial Express, October 29, 2009, Page 1
Surabhi, New Delhi
A sharp decline in highway and port sector investments, coupled with the absence of bankable public-private partnership (PPP) projects, has forced the UPA government to scale down its ambitious plan to invest $514 billion to plug the country’s glaring infrastructure deficit in the 11th Five-Year Plan period.
According to a senior government official, the Planning Commission’s mid-term appraisal in December will admit to this failure in no uncertain terms and revise the infrastructure investment target for the current Plan to $420-450 billion, which many analysts think would still be a tall order.
This clearly shows that the decline in private corporate investment caused by the global economic crisis was barely offset by an expansionary fiscal policy, which saw more government money chasing infrastructure projects.
“The final estimate (of investments) will be in by December, when the Planning Commission will complete mid-term appraisals for the 11th Plan, but it’s unlikely to be any higher than $450 billion. Performance hasn’t been up to the mark, largely because of the road sector lagging behind,” said the official on condition of anonymity.
The 11th Plan targets increasing infrastructure investment from 5% of GDP in the base year (2006-07) to 9% by the terminal year (2011-12). In absolute terms, it required investments to be scaled up from $222 billion in the 10 th Plan to $514 billion (Rs 2,056,150 crore) in the 11th Plan.
“Achieving even a reduced target of $400-odd billion would be welcome news, but will be a challenging task given the economic slowdown, coupled with the massive delays in awarding PPP projects in the last two years,” said PwC ED Amrit Pandurangi.
Financing may have proved to be a cause of concern in the last one year as funds dried up because of the global financial crisis. But a lack of feasible projects on the shelf, together with ministerial inefficiencies, contentious clauses in bidding documents and disputes on land acquisition have made potential investors wary.
For marketmen, who have been betting big on infrastructure sector stocks in recent years as the private sector was expected to pitch in about 30% of investments, this is par for the course. “Everyone had already factored in that the target won’t be met. Getting $514 billion in investments over a five-year period is a very tall order. Even if the government was serious in its intentions, the policies just aren’t in place,” said UK Sinha, CMD at UTI Asset Management Company, which manages infrastructure funds of over Rs 4,500 crore.
At the same time, the appraisal is revealing some surprising facts: for instance, the laggard power sector has shown the best performance among core infra sectors so far.
Though the Plan targets 78,577 mw of new power projects, it is going to do much better than the 10 th Plan, with around 60,000-65,000 mw coming on stream by March 2012.
The largest deficit is expected in the highways sector, which will not meet targets even if work speeds up to the extent promised by UPA-II surface transport minister Kamal Nath. Just about 4,000 km of national highways have been awarded in the three years of the Plan, against a target of six-laning 6,500 km of the Golden Quadrilateral, 1,000 km of expressways and four-laning 20,000 km of highways.
Efforts to upgrade port infrastructure to keep up with India’s growing global trade have largely remained on paper. Few projects were awarded under UPA-I shipping minister TR Baalu and a recent embargo by the environment ministry has further impeded progress. Capacity upgrades underway at the JNPT and Tuticorin ports have been hit by litigation. The Plan envisages new capacity of 485 million metric tonne (mmt) in major ports and 345 mmt in minor ports.
The railways, despite shying away from aggressively using the PPP route, has seen sufficient investments, be it in gauge conversion or building new lines. It has also managed to secure crucial funding from the Japanese government for the dedicated freight corridor. The only delay is seen in modernising railway stations. Of the 22 stations to be modernised under the 11 th Plan, construction hasn’t begun on even one.
The Economic Survey 2008-09 has also highlighted the difficulty in meeting the $514-billion target for investments. “Achieving it is a challenging task. In recent years, tangible progress has been made in attracting private investment in infrastructure. However, such public initiatives are constrained by factors like inadequate shelf of bankable projects and lack of long-term finance,” it said.
The Financial Express, October 29, 2009, Page 1
Surabhi, New Delhi
A sharp decline in highway and port sector investments, coupled with the absence of bankable public-private partnership (PPP) projects, has forced the UPA government to scale down its ambitious plan to invest $514 billion to plug the country’s glaring infrastructure deficit in the 11th Five-Year Plan period.
According to a senior government official, the Planning Commission’s mid-term appraisal in December will admit to this failure in no uncertain terms and revise the infrastructure investment target for the current Plan to $420-450 billion, which many analysts think would still be a tall order.
This clearly shows that the decline in private corporate investment caused by the global economic crisis was barely offset by an expansionary fiscal policy, which saw more government money chasing infrastructure projects.
“The final estimate (of investments) will be in by December, when the Planning Commission will complete mid-term appraisals for the 11th Plan, but it’s unlikely to be any higher than $450 billion. Performance hasn’t been up to the mark, largely because of the road sector lagging behind,” said the official on condition of anonymity.
The 11th Plan targets increasing infrastructure investment from 5% of GDP in the base year (2006-07) to 9% by the terminal year (2011-12). In absolute terms, it required investments to be scaled up from $222 billion in the 10 th Plan to $514 billion (Rs 2,056,150 crore) in the 11th Plan.
“Achieving even a reduced target of $400-odd billion would be welcome news, but will be a challenging task given the economic slowdown, coupled with the massive delays in awarding PPP projects in the last two years,” said PwC ED Amrit Pandurangi.
Financing may have proved to be a cause of concern in the last one year as funds dried up because of the global financial crisis. But a lack of feasible projects on the shelf, together with ministerial inefficiencies, contentious clauses in bidding documents and disputes on land acquisition have made potential investors wary.
For marketmen, who have been betting big on infrastructure sector stocks in recent years as the private sector was expected to pitch in about 30% of investments, this is par for the course. “Everyone had already factored in that the target won’t be met. Getting $514 billion in investments over a five-year period is a very tall order. Even if the government was serious in its intentions, the policies just aren’t in place,” said UK Sinha, CMD at UTI Asset Management Company, which manages infrastructure funds of over Rs 4,500 crore.
At the same time, the appraisal is revealing some surprising facts: for instance, the laggard power sector has shown the best performance among core infra sectors so far.
Though the Plan targets 78,577 mw of new power projects, it is going to do much better than the 10 th Plan, with around 60,000-65,000 mw coming on stream by March 2012.
The largest deficit is expected in the highways sector, which will not meet targets even if work speeds up to the extent promised by UPA-II surface transport minister Kamal Nath. Just about 4,000 km of national highways have been awarded in the three years of the Plan, against a target of six-laning 6,500 km of the Golden Quadrilateral, 1,000 km of expressways and four-laning 20,000 km of highways.
Efforts to upgrade port infrastructure to keep up with India’s growing global trade have largely remained on paper. Few projects were awarded under UPA-I shipping minister TR Baalu and a recent embargo by the environment ministry has further impeded progress. Capacity upgrades underway at the JNPT and Tuticorin ports have been hit by litigation. The Plan envisages new capacity of 485 million metric tonne (mmt) in major ports and 345 mmt in minor ports.
The railways, despite shying away from aggressively using the PPP route, has seen sufficient investments, be it in gauge conversion or building new lines. It has also managed to secure crucial funding from the Japanese government for the dedicated freight corridor. The only delay is seen in modernising railway stations. Of the 22 stations to be modernised under the 11 th Plan, construction hasn’t begun on even one.
The Economic Survey 2008-09 has also highlighted the difficulty in meeting the $514-billion target for investments. “Achieving it is a challenging task. In recent years, tangible progress has been made in attracting private investment in infrastructure. However, such public initiatives are constrained by factors like inadequate shelf of bankable projects and lack of long-term finance,” it said.
City growth:When big is not beautiful
City growth:When big is not beautiful
The Economic Times, October 29, 2009, Page 13
INCREASING CITY SIZE COMES WITH ITS PITFALLS — HIGH COST OF LIVING, CRIME, POLLUTION & CONGESTION
KALA SEETHARAM SRIDHAR
INDIA has 35 cities with million-plus population, with Mumbai leading the pack with a population of about 17 million. The question arises —can individual cities grow forever and whether there is an optimum city size? This is an important question as development plans of cities frequently follow the direction of development rather than guiding them. Is the current size of cities justifiable in terms of greater efficiencies in the production of goods, services and amenities offered to their residents? General equilibrium models of city growth refer to the drawbacks of increasing city size — high cost of living, crime, pollution and congestion costs. For example, in Bangalore, the one-way commute time to work increased from about 24 minutes in 1991 to 40 minutes in 2001. Thus, city population can grow, but the city may or may not grow economically. This happens as a city will experience congestion and decline in its economic output if its population grows beyond a certain limit.
One manifestation of excessive city growth is the suburbanisation and urban sprawl we see in India’s cities. With decentralisation of population and jobs from the dense core of cities to less densely developed suburbs, monocentric cities have evolved into polycentric cities. While such decentralisation is caused by rising incomes, rising land costs at the city centre and problems with the central city (high taxes, poor public services, high crime rates), recent research also attributes urban sprawl to strong land use controls in India’s cities. A research shows that the maximum floor area ratio (FAR) — which refers to the ratio of built area to plot area — permissible in India’s cities is not even five whereas cities across the world have FARs ranging from well above 10. A higher FAR implies vertical city growth. Vertical city growth is more efficient if the infrastructure necessary to support it is in place — it would be poor public economics not to use fully-serviced plots of land with water and sewer networks, roads in the centre of the city. Low FARs lead to inefficient cities.
Efficiency of cities is partly determined by the mobility and access needs of the population as it has a direct relationship with the city’s economic activity such as commute to school, jobs and shopping trips. While Indian cities’ decentralisation has been caused by rising incomes and the use of the automobile, one direct outcome of the urban sprawl has been that Indian cities have become automobileoriented with little space for pedestrians and cyclists. For instance, Indians bought 1.5 million cars in 2007, more than double than that in 2003.
Delhi, Mumbai, Kolkata and Bangalore have 5% of India’s population but 14% of its registered vehicles. Pedestrians and cyclists account for a substantial part of urban population. In Delhi, pedestrians and cyclists account for around 55% of the population. Pedestrian accessibility in Indian cities is poor – there are no sidewalks, and where they exist, they are taken over by parked vehicles, uncollected garbage, or encroachment by local businesses.
Rightly, a recent research points out that policymaking related to urban transport has focused predominantly on road infrastructure development such as the construction of flyovers. However, given the fact that pedestrians and cyclists are the most vulnerable road users, budgets for the provision of infrastructure for them have been minuscule. This is not consistent with their number. A 3.5 metre lane has a carrying capacity of 1,800 cars per hour while it can carry 5,400 bicycles per hour. Providing segregated infrastructure for pedestrians and cyclists would not cost much, but would greatly improve the efficiency of cities by facilitating the mobility of masses.
The above does not imply that we do not need highways or expressways of international standards. We need them for long distances and for facilitating movement of public transport that is affordable, convenient and safe to use. Highways are efficient if they are used for high occupancy vehicles such as public transport as compared to cars.
What the above implies is that decentralisation and sprawl have occurred in India’s cities, with economic growth, rising incomes, rising land costs, and land use regulation playing a role. With rising incomes, the sprawl has also brought about increased usage of cars with poor access for pedestrians and cyclists. We have to consciously decide what kind of cities we want. Only innovative city planning and better infrastructure to support them, better space and planning for pedestrians, cyclists and public transport will ensure that we have efficient and equitable cities whose costs do not outweigh their benefits.
(The author is senior research fellow, Public Affairs Centre. Views are personal)
The Economic Times, October 29, 2009, Page 13
INCREASING CITY SIZE COMES WITH ITS PITFALLS — HIGH COST OF LIVING, CRIME, POLLUTION & CONGESTION
KALA SEETHARAM SRIDHAR
INDIA has 35 cities with million-plus population, with Mumbai leading the pack with a population of about 17 million. The question arises —can individual cities grow forever and whether there is an optimum city size? This is an important question as development plans of cities frequently follow the direction of development rather than guiding them. Is the current size of cities justifiable in terms of greater efficiencies in the production of goods, services and amenities offered to their residents? General equilibrium models of city growth refer to the drawbacks of increasing city size — high cost of living, crime, pollution and congestion costs. For example, in Bangalore, the one-way commute time to work increased from about 24 minutes in 1991 to 40 minutes in 2001. Thus, city population can grow, but the city may or may not grow economically. This happens as a city will experience congestion and decline in its economic output if its population grows beyond a certain limit.
One manifestation of excessive city growth is the suburbanisation and urban sprawl we see in India’s cities. With decentralisation of population and jobs from the dense core of cities to less densely developed suburbs, monocentric cities have evolved into polycentric cities. While such decentralisation is caused by rising incomes, rising land costs at the city centre and problems with the central city (high taxes, poor public services, high crime rates), recent research also attributes urban sprawl to strong land use controls in India’s cities. A research shows that the maximum floor area ratio (FAR) — which refers to the ratio of built area to plot area — permissible in India’s cities is not even five whereas cities across the world have FARs ranging from well above 10. A higher FAR implies vertical city growth. Vertical city growth is more efficient if the infrastructure necessary to support it is in place — it would be poor public economics not to use fully-serviced plots of land with water and sewer networks, roads in the centre of the city. Low FARs lead to inefficient cities.
Efficiency of cities is partly determined by the mobility and access needs of the population as it has a direct relationship with the city’s economic activity such as commute to school, jobs and shopping trips. While Indian cities’ decentralisation has been caused by rising incomes and the use of the automobile, one direct outcome of the urban sprawl has been that Indian cities have become automobileoriented with little space for pedestrians and cyclists. For instance, Indians bought 1.5 million cars in 2007, more than double than that in 2003.
Delhi, Mumbai, Kolkata and Bangalore have 5% of India’s population but 14% of its registered vehicles. Pedestrians and cyclists account for a substantial part of urban population. In Delhi, pedestrians and cyclists account for around 55% of the population. Pedestrian accessibility in Indian cities is poor – there are no sidewalks, and where they exist, they are taken over by parked vehicles, uncollected garbage, or encroachment by local businesses.
Rightly, a recent research points out that policymaking related to urban transport has focused predominantly on road infrastructure development such as the construction of flyovers. However, given the fact that pedestrians and cyclists are the most vulnerable road users, budgets for the provision of infrastructure for them have been minuscule. This is not consistent with their number. A 3.5 metre lane has a carrying capacity of 1,800 cars per hour while it can carry 5,400 bicycles per hour. Providing segregated infrastructure for pedestrians and cyclists would not cost much, but would greatly improve the efficiency of cities by facilitating the mobility of masses.
The above does not imply that we do not need highways or expressways of international standards. We need them for long distances and for facilitating movement of public transport that is affordable, convenient and safe to use. Highways are efficient if they are used for high occupancy vehicles such as public transport as compared to cars.
What the above implies is that decentralisation and sprawl have occurred in India’s cities, with economic growth, rising incomes, rising land costs, and land use regulation playing a role. With rising incomes, the sprawl has also brought about increased usage of cars with poor access for pedestrians and cyclists. We have to consciously decide what kind of cities we want. Only innovative city planning and better infrastructure to support them, better space and planning for pedestrians, cyclists and public transport will ensure that we have efficient and equitable cities whose costs do not outweigh their benefits.
(The author is senior research fellow, Public Affairs Centre. Views are personal)
India moves up, turns world’s third-largest steel producer
India moves up, turns world’s third-largest steel producer
Hindustan Times, October 29, 2009, Page 25
The country has consolidated its position as the third-largest steelmaker in the world behind Asian rivals China and Japan, jumping three spots in the pecking order for steel producers in the first nine months of this year.
With the global downturn still impacting the steel industry worldwide, United States and Germany are the two biggest victims of the downturn, with the former slipping two positions.
China and India were the only two countries to report growth in the sector this year so far. All others — including developing countries like Brazil and Ukraine — have declined in high double digits. The extent of the downturn is such that of the 66 countries that together make up for over 98 per cent of world's steel production and consumption, only 8 have been able to grow.
"It shows the strength of the economy that we are now the third largest steelmaker in the world even as most other countries are still fighting the downturn," said steel minister Virbhadra Singh. "Our per capita consumption of steel is still very low and vast chunks of rural market is still untapped. It is my endeavour to increase the penetration of steel in rural markets and have urged the private sector to open up more steel processing units in those areas."
Further, this may not be the end of the Indian fairytale as industry experts are of the opinion that India would overtake Japan eventually.
"There are clear indications that China and India are the countries that have come out of the recession the fastest and there is an uptake in demand in construction related industries and automobiles in India," said Bishwanath Bhattacharya, Associate Director (KPMG Advisory). "Though Japan is still ahead of India, there is no disputing the fact that it is not likely to grow much further while India is definitely on an upward trajectory. In around 6-7 years time India would be only behind China."
Realty back in reckoning as FIIs cut blue-chip stake
Realty back in reckoning as FIIs cut blue-chip stake
The Economic Times, October 29, 2009, Page 15
Attractive Valuations A Big Pull Factor; Agrochem, Breweries & Mining Also Shine
Vijay Gurav MUMBAI
DLF, Unitech and HDIL are the latest darlings of foreign funds expecting a quick buck, even as they slash holdings in companies such as Infosys Technologies and infrastructure builders due to concerns about order flows and high valuations, a study of latest filings shows.
The sudden fancy for real estate among those overseas funds were probably due to the surge in fund raisings by those debt-ridden companies in the recent bull run when most of them sold shares at less than a third of their peak 2007-08 valuations which overseas investors found attractive. “With interest rates expected to remain benign and stable, some dedicated funds might have bought on hopes of a significant upswing in high-beta sectors like realty,” said Tata Asset Management CEO Ved Prakash Chaturvedi. High beta stocks are those which rise or fall more than the benchmark indexes.
As of September 30, 2009, FIIs owned 25% of the aggregate equity capital of 36 realty companies, including industry leaders like DLF, Unitech, Indiabulls Real Estate and HDIL. That is higher than the previous year’s 9.6% and the year before’s 10.3%. Indian companies, including Unitech and DLF, have so far raised $12.3 billion through share sale this year and another $17.4 billion may be raised by fiscal year-end exploiting a record stock market rally which saw the benchmark indices more than double from their troughs earlier this year.
It was not just one sector that foreign funds who have invested $14.4 billion in the current calendar year so far have favoured, but also raised stakes in sectors such as agrochemical, a key beneficiary in an agrarian economy like India, breweries which benefit from rising incomes in urban centres, and mining. Last year they pulled out $12 billion.
Overseas funds own 25.6%, 18.6% and 17.9%, respectively, in agrochemical, breweries and mining sectors. Companies such as United Phosphorus, United Spirits, Gujarat NRE Coke and Sesa Goa have large foreign holdings.
But the once that were favoured in the last bull rally — technology, capital goods, cement and retail — aren’t lucky this time. Combined FII holdings in all the listed IT companies fell to 12.1% as on September 30, 2009, compared to 15.6% as on September 30, 2008. Their exposure in capital good sector fell to 9.9% from 12.1% and to 15.1% from 18.5% in retail space. “FIIs have been underweight on IT companies due to outsourcing concerns,” said Centrum Broking MD Devesh Kumar. “Cement companies are adding new capacities and investors would wait for demand to pick up, which would also depend on the pace of infrastructure development in the country.”
International companies stung by the economic slowdown have been cutting their spend on technology which the Indian companies depend upon. SAP, Europe’s biggest business software producer, on Wednesday cut revenue forecast for the year as companies held on to purse strings.
Indian infrastructure companies are also showing delays in executing orders and their valuations at more than 25 times in some cases such as Larsen & Toubro, seem to have run ahead of themselves.
The Economic Times, October 29, 2009, Page 15
Attractive Valuations A Big Pull Factor; Agrochem, Breweries & Mining Also Shine
Vijay Gurav MUMBAI
DLF, Unitech and HDIL are the latest darlings of foreign funds expecting a quick buck, even as they slash holdings in companies such as Infosys Technologies and infrastructure builders due to concerns about order flows and high valuations, a study of latest filings shows.
The sudden fancy for real estate among those overseas funds were probably due to the surge in fund raisings by those debt-ridden companies in the recent bull run when most of them sold shares at less than a third of their peak 2007-08 valuations which overseas investors found attractive. “With interest rates expected to remain benign and stable, some dedicated funds might have bought on hopes of a significant upswing in high-beta sectors like realty,” said Tata Asset Management CEO Ved Prakash Chaturvedi. High beta stocks are those which rise or fall more than the benchmark indexes.
As of September 30, 2009, FIIs owned 25% of the aggregate equity capital of 36 realty companies, including industry leaders like DLF, Unitech, Indiabulls Real Estate and HDIL. That is higher than the previous year’s 9.6% and the year before’s 10.3%. Indian companies, including Unitech and DLF, have so far raised $12.3 billion through share sale this year and another $17.4 billion may be raised by fiscal year-end exploiting a record stock market rally which saw the benchmark indices more than double from their troughs earlier this year.
It was not just one sector that foreign funds who have invested $14.4 billion in the current calendar year so far have favoured, but also raised stakes in sectors such as agrochemical, a key beneficiary in an agrarian economy like India, breweries which benefit from rising incomes in urban centres, and mining. Last year they pulled out $12 billion.
Overseas funds own 25.6%, 18.6% and 17.9%, respectively, in agrochemical, breweries and mining sectors. Companies such as United Phosphorus, United Spirits, Gujarat NRE Coke and Sesa Goa have large foreign holdings.
But the once that were favoured in the last bull rally — technology, capital goods, cement and retail — aren’t lucky this time. Combined FII holdings in all the listed IT companies fell to 12.1% as on September 30, 2009, compared to 15.6% as on September 30, 2008. Their exposure in capital good sector fell to 9.9% from 12.1% and to 15.1% from 18.5% in retail space. “FIIs have been underweight on IT companies due to outsourcing concerns,” said Centrum Broking MD Devesh Kumar. “Cement companies are adding new capacities and investors would wait for demand to pick up, which would also depend on the pace of infrastructure development in the country.”
International companies stung by the economic slowdown have been cutting their spend on technology which the Indian companies depend upon. SAP, Europe’s biggest business software producer, on Wednesday cut revenue forecast for the year as companies held on to purse strings.
Indian infrastructure companies are also showing delays in executing orders and their valuations at more than 25 times in some cases such as Larsen & Toubro, seem to have run ahead of themselves.
Commercial real estate loans may cost more
Commercial real estate loans may cost more
The Hindu Business Line, October 29, 2009, Page 7
Provisioning norms for advances raised to prevent NPAs.
Our Bureau, Mumbai
Interest rates on loans to commercial real estate sector may move up with the Reserve Bank of India increasing the provisioning requirement for advances to this sector from the present level of 0.4 per cent to 1 per cent.
The RBI has expressed concern that loans to commercial real estate sector have the potential to become NPAs as this sector has witnessed large-scale restructuring of advances.
In its Second Quarter Review of Monetary Policy 2009-10, the central bank said, “In view of the large increase in credit to the commercial real estate sector over the last one year and the extent of restructured advances in this sector, it would be prudent to build cushion against likely non-performing assets (NPAs).”
In his address, the RBI Governor, Dr D. Subbarao, said while at an aggregate level, the amount of non-food bank credit going to the commercial real estate is small, at about 3.7 per cent, the rate of credit growth has been accelerating.
Second, the restructuring proportion of bank loans to this sector is 14 per cent, against 4 per cent at an aggregate level. These were the reasons that prompted the RBI to increase the provisioning requirement.
Asked about the impact of this move on lending by banks to this sector, Dr Subbarao said: “I am sure that banks are going to make judgements in their best interests. This (increasing the provisioning) will certainly make banks to look at or revisit their lending to the real estate sector. It will also drive the necessary correction in prices.” When asked if banks will pass on the increase in provisioning to their customers, the Chairman and Managing Director, Canara Bank, Mr A .C. Mahajan, said that when pricing products, banks do not pass all the expenditure incurred. The loan is related to the benchmark prime lending rate and the move will not have much impact.
The State Bank of India Chairman, Mr O. P. Bhatt, said that the move could push up the rates on loans to the commercial real estate sector by 2-3 basis points.
However, according to the Bank of Baroda Chairman and Managing Director, Mr M. D. Mallya, the 0.6 per cent increase in standard provisioning does not amount to much and is unlikely to have an impact on interest rates. In the case of Bank of Baroda, the total exposure to commercial real estate is around Rs 4,000 crore, he added.
By restoring the provisioning for commercial real estate to old levels, the RBI is indicating that it is happy with the recovery. But the step will make banks more cautious while lending to realty sector, said the UCO Bank Chairman and Managing Director, Mr S. K. Goel,
No asset bubble issue
The ICICI Bank Managing Director and CEO, Ms Chanda Kochhar, said it is not an issue of asset bubble.
“In between, there was not much credit flow to the commercial real estate sector. So the relaxation in the provisioning norms was to increase the flow of credit to the sector. Now that there is sufficient credit flow to the sector and activity has picked up , the standard asset provisioning has been restored,” she said.
Puravankara Projects net up at Rs 60 cr
Puravankara Projects net up at Rs 60 cr
The Hindu Business Line, October 29, 2009, Page 17
Our Bureau, Bangalore
Puravankara Projects has posted a net profit to Rs 60.86 crore during the second quarter of the fiscal, against Rs 50.47 crore recorded during the corresponding period last year.
The company attributed the improved performance to the good response to projects launched by subsidiary Provident Housing, sale of land and available flats.
Revenues increased 62 per cent to Rs 226.39 crore (Rs 139.37 crore).
During the quarter, the company sold about eight acres in Kochi for about Rs 145 crore, “as this land was not intended to be developed in the near term,” said Mr Ravi Ramu, Director, Puravankara Projects. The company also acquired 27.7 acres in Coimbatore, though plans for its use have not been finalised.
Mr Ramu said Provident Housing projects at Chennai and Bangalore have received a good response. These projects have units in the price range of Rs 15 lakh to Rs 20 lakh. “During the recession, we neither increased nor decreased our prices. But don’t expect this to continue,” said Mr Ramu.
There were possibilities of real estate prices in Bangalore going up in the next two quarters, he said. “There is a lot of demand for good-quality products that are correctly priced.”
The company, Mr Ramu said, was looking at new launches. “This is an opportune time to actively look at new launches.”
On the company’s plans to raise funds, he said, “We have kept our plans to dilute shareholding at bay. We will go to the market when valuations improve.”
The company said that joint developments would be the way forward for Provident Housing. “We used the slowdown period to seal deals,” said Mr Ramu.
Provident Housing has put its hospitality plans on the back-burner, though it has identified land for the projects from its land bank and tied up with hospitality partners.
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