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Thalinomics spin on prices

Thalinomics spin on prices

The finance ministry’s chief economic adviser has come out with a novel thali concept to calculate the affordability of a plate of meal at a time spiralling prices of onion and other vegetables are burning holes in the pockets of the common man.

The concept is seen as a defence of the Modi government’s inflation management policies at a time retail inflation has touched about a five-and-half year high of 7.35 per cent in December 2019, surpassing the RBI’s comfort level.

Chief economic adviser Krishnamurthy Subramanian perhaps seems to have taken a cue from his teacher and former RBI governor Raghuram Rajan, who had coined “dosanomics” to explain the relationship between inflation and interest rates.

Calling it Thalinomics, the CEA compared the price of standard veg and non-veg meal plates across the country to prove that affordability as a factor of daily wage has improved overtime, indicating improved welfare of the common person.

The affordability of vegetarian thalis has improved 29 per cent, while that for non-vegetarian thalis by 18 per cent from 2006-07 to 2019-20, the Economic Survey said.

“Across India, we find that the absolute prices of a vegetarian thali have decreased since 2015-16 though it increased during 2019. This is owing to significant moderation in the prices of vegetables and dal from 2015-16 compared with the previous trend of increasing prices,” the survey said.

Taking a swipe at Thalinomics, Congress spokesperson Rajeev Gowda said, “Thali will soon be khali (empty)…Thalinomics is another obfuscation. The claims of affordable thalis are misleading after the NSS consumption survey pointed out how food consumption has reduced. What we have are shrinking thalis…the Thalinomics set the stage for an attack on the poor of India.”

Thalinomics is well placed to catch the fancy of commentators and could become the country’s own Big Mac index, an informal measure of the purchasing power parity of different countries through a price comparison of McDonald’s hamburger in stated geographies. However, it could come under attack from political parties for the government’s insensitivity amid such high inflation.

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Recipe to create 8cr jobs

Recipe to create 8cr jobs

The survey advocated “Assemble in India” as an integral part of the Make in India initiative to create eight crore jobs in 10 years and help the country become a $5-trillion economy by 2025.

“By integrating ‘Assemble in India for the world’ into Make in India, India can create four crore well-paid jobs by 2025 and eight crore by 2030. Exports of network products (computer, electronics, telecom equipment), which is expected to equal $7 trillion worldwide in 2025, can contribute a quarter for the $5-trillion economy by 2025,” the survey said.

Citing that between 2001 and 2006 labour-intensive exports helped China to create 70 million jobs for workers with basic primary education, India hopes to emulate the same.

The Modi government has been under attack for lack of jobs amid falling economic growth. The recent data showed that the country stares at a 45-year high of unemployment rate.

“Creating jobs is crucial to address concerns regarding sustaining consumer demand at the macro level and the survey has addressed this issue by following policies similar to China and specialising in network products,” Rumki Majumdar, economist at Deloitte India, said.

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Proposal to cull food subsidy bill

Proposal to cull food subsidy bill

The economic survey on Friday has proposed the government should scythe food subsidies by “revisiting” the prices of foodgrains at ration shops and scrap the Essential Commodities Act, which is meant to stop hoarding but has long outlived its usefulness.

Foodgrains via ration shops are supplied at highly subsidised rates of Rs 3 per kg for rice, Rs 2 per kg for wheat and Rs 1 per kg for coarse grains through the public distribution system (PDS), according to the National Food Security Act (NFSA).

“With a large share of poor people, maintaining food security is still a challenge. The rates fixed under the NFSA initially for a period of three years have not been revised since 2013, resulting in a burgeoning food subsidy. The rates under NFSA and the coverage need to be revisited,” the survey said.

The food subsidy bill has increased to Rs 1,71,127.5 crore in 2018-19 from Rs 1,13,171.2 crore in 2014-15, it said. While the economic cost has increased, the central issue price (the rate at which grains are sold in ration shops) for NFSA beneficiaries has not been revised from Rs 200 per quintal in the case of wheat and Rs 300 per quintal in the case of rice.

The acquisition and distribution costs of foodgrains for the central pool together constitute the economic cost. The difference between the per-quintal economic cost and the per-quintal central issue price gives the amount of food subsidy.

“While the interests of the vulnerable sections of the population need to be safeguarded, for sustainability of food security operations, the issue of burgeoning food subsidy bill needs to be addressed,” the survey added.

Commodities Act

The survey pitched for the scrapping of the Essential Commodities Act, saying the law is “anachronistic” that leads to harassment and is of no help in checking price volatility.The survey also favoured a “dynamic” foodgrain policy that allows switching from procurement and distribution of grains to cash transfers, but disfavoured loan waiver to farmers .

“The consumer affairs ministry and its related arms must examine whether the anachronistic ECA, which was passed in 1955 in an India worried about famines and shortages, is relevant in today’s India,” it observed.

Stating that around 76,000 raids under the ECA were conducted last year, the survey said considerable administrative effort goes into the enforcement of this law assuming a minimum of five persons involved in a raid.

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Telco dues hearing on February 3

Telco dues hearing on February 3

The Supreme Court will hear on Monday a plea of the telecom operators to set a fresh schedule to pay the adjusted gross revenue worth Rs 1.47 lakh crore to the department of telecom.

The court has listed the hearing of the modification pleas filed by the operators for February 3.

A bench headed by Chief Justice S. A. Bobde had last week taken note of the submissions by a battery of senior lawyers, including A. M. Singhvi and C. A. Sundaram, and said it would list the fresh pleas before the same bench which had heard the earlier petition. This gave the telecom operators some breather from the January 23 deadline.

The officials of the Licensing Finance Policy Wing of the telecom department later directed all the departments concerned to not take any coercive action against the operators if they fail to clear their AGR dues till further orders by the Supreme Court.

Apart from the telecom operators, several non-telecom PSUs such as Oil India, GAIL India and PowerGrid have AGR dues worth Rs 3 lakh crore.

They have also moved the apex court filing a clarificatory/modificatory petition.

Vodafone Idea and Airtel are worst hit by the top court’s order, facing statutory dues of Rs 53,039 crore and Rs 35,586 crore, respectively. Tata Teleservices faces dues of Rs 13,823 crore. Including the three, around 15 telcos need to pay over Rs1.47 lakh crore to the government.

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RBI blinks in Kotak tiff

RBI blinks in Kotak tiff

Uday Kotak has reasons to be happy over the vexed issue of promoter shareholding in Kotak Mahindra Bank (Kotak Bank), over which he was engaged in a running feud with the RBI that had spilled out on to the courts.

The RBI has relaxed its earlier order to bring down his stake in the bank to 15 per cent by March 31, 2020. The promoters of Kotak Mahindra Bank currently hold around 30 per cent.

Kotak Bank in December 2018 had hauled the RBI to the courts over an apex bank order in August 2017 that mandated promoter shareholding in a bank be brought down to 20 per cent of paid-up voting equity capital by December 31, 2018 and to 15 per cent by March 31, 2020.

In a regulatory filing to the stock exchanges, Kotak Bank said that following a proposal made by the bank to the RBI in August last year and on January 10, the RBI has conveyed its in-principle acceptance to a framework to reduce the promoter stake. Sources close to the bank said the RBI had accepted its offer of separating voting rights from economic interest.

Firstly, Uday Kotak will not have to reduce his stake to 15 per cent by March. The central bank has said promoters’ shareholding in the bank will have to be reduced to 26 per cent of the paid-up voting equity share capital (PUVESC). This should be done within six months from the date of final approval from the RBI. Market circles said Kotak would now have to sell only 4 per cent in the bank.

Second, promoters voting rights will be capped to 20 per cent of PUVESC until March 31, 2020. From April 1, 2020, the voting rights will be capped at 15 per cent of PUVESC.

Promoters will not purchase any further paid-up voting equity shares of the bank till the percentage of promoters’ shareholding reaches 15 per cent of PUVESC or such higher percentage as may be permitted by the RBI from time to time, Kotak Bank said. In other words, the promoters stake can fall to 15 per cent — through mergers or acquisition or stake sale. But, here, too, no timeline has been set by the RBI for such an event. The promoters cannot buy equity shares.

The RBI also gave in-principle approval that the promoters will be entitled to purchase paid-up voting equity shares up to 15 per cent of PUVESC of the bank or such higher percentage as may be permitted in the future, and exercise voting rights on such shares.

With the RBI acceptance, Kotak Bank said it would withdraw the case filed against the regulator in the Bombay high court. “Our board of directors has resolved to abide by the above. The bank is withdrawing writ petition No. 3542 of 2018 filed by it in the High Court of Bombay,” the bank said.

Speaking to The Telegraph, Shriram Subramanian, founder of proxy advisory firm InGovern, said while one has to wait for the final order from the RBI, the promoters have less pressure to sell their stake and the central bank has given more time to Kotak to meet its rules.

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Economic Survey 2020 theme is wealth creation: CEA

Economic Survey 2020 theme is wealth creation: CEA

The theme of this year’s Economic Survey is wealth creation, Chief Economic Advisor (CEA) Krishnamurthy Subramanian said in his presentation of the survey.

The Economic Survey 2020, prepared by CEA Subramanian, was tabled by finance minister Nirmala Sitharaman on Friday. The Survey projected the country’s economic growth at 6-6.5% for the next fiscal year.

India currently faces its worst economic slowdown in a decade. The growth rate fell to 4.5% in the July-September quarter of the year 2019-20.

The survey placed the current fiscal growth at 5% from the projected 7% in the Economic Survey presented in July last year.

“It seems like we’ve sort of hit a trough and therefore there should be an uptick in growth. Notice here we haven’t gone and said it’s 7.5% and actually kept it to 6-6.5%,” said Subramanian.

Citing a globalised economy, Subramanian blamed a slowdown affecting a group of countries which has had an effect on India too. He said the long period of time it took for the Sensex to reach 40,000 from 35,000 is reflective of the slowdown.

The CEA said that the latest Economic Survey is a “synthesis of old and new”. He said the lavender colour of the survey’s cover was inspired by the new hundred rupee note.

Talking about the theme of wealth creation, he also mentioned that wealth creators should be respected.

“Those who create wealth are indeed India’s wealth,” Subramanian said, while mentioning that this is what the finance minister believes.

In his presentation, he revealed that the government could have spent “almost double the amount” on social sectors, if wealth had not been eroded by willful defaulters.

The survey suggested further work on three fronts: sluggish household spending, embattled non-banking financial companies (NBFCs) and lower tax revenue collections, while keeping an eye on the wobbly world economy.

The CEA introduced 10 new ideas in this Economic Survey for boosting wealth creation. These included pro-business policies, removing anachronistic government interventions, job creation by “assemble in India for the world”, ease of doing business and improving the banking sector.

According to him, India’s aspiration to become a $5 trillion economy depends critically on two factors — strengthening the invisible hand of the market and supporting it with the hand of trust.

Subramanian said that there is no change in the deadline set for achieving a $5 trillion economy. In her budget speech in July last year, finance minister Nirmala Sitharaman had said that India will become a $5 trillion economy by 2024.

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Bajaj Finance beats odds

Bajaj Finance beats odds

At a time some non-banking finance companies continue to face a tough time, Bajaj Finance Ltd on Wednesday reported its highest quarterly consolidated net profit following a robust growth in its core income.

Net profits of the non-banking finance company came in at Rs 1,614 crore, a 52 per cent jump over Rs 1,060 crore in the year-ago quarter. This came on the back of a 42 per cent growth in its net interest income (NII) at Rs 4,537 crore against Rs 3,206 crore in the same quarter of the previous fiscal. Fees and commission income also contributed to the good performance as it rose to Rs 687.36 crore from Rs 466.38 crore in the year-ago period.

The numbers led to its stock rising almost five per cent, or Rs 208.70, to Rs 4,421.75 on the BSE.

The lender has an exposure to Karvy Stock Broking through its securities lending business, Without naming Karvy, Bajaj Finance said in an investor presentation that the securities lending business has a “delinquent broker account” with principal outstanding of Rs 303 crore on which it has taken an accelerated provision of Rs 85 crore.

Despite a quarter marked by continued slowdown, a wide product offering played a role behind the good performance. The non-bank lender’s asset under management (AUM) as on December 31, 2019, rose to Rs 1,45,092 crore, up 35 per cent from Rs 1,07,507 crore. Of this, the largest gain came from the rural lending business which showed a growth of 49 per cent. This was followed by mortgage lending at 44 per cent and the consumer B2C business at 43 per cent.

According to Bajaj Finance, new loans booked in terms of volume increased 13 per cent to 76.7 lakh from 67.7 lakh. Existing customers contributed to 68 per cent of the new loans booked during the period.

According to the company, trends on its large portfolios across loan and consumption categories (electronics, mobile, furniture, apparel) showed a significant demand slowdown in the third quarter.

However, it added that there was some uptick in the consumption categories since December, which has continued in January so far.

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Probe heat on CG Power

Probe heat on CG Power

Fraud enmeshed CG Power and Industrial Solutions (CG Power) on Wednesday sank deeper into the red for the three months ended September 30, 2019, even as the management warned the numbers could be subject to significant revisions in the wake of a welter of investigations being conducted by the company itself as well as a number of government and regulatory agencies.

The company further said the financial statements for the year ended March 31, 2019 do not reflect true and fair view. It said “Phase 2 investigation” has been initiated which is expected to be completed by the fourth quarter of this fiscal.

The much delayed second-quarter results show losses of Rs 1,595.21 crore against a loss of Rs 101.83 crore a year ago. The company said it had made an impairment provision of Rs 1,251.38 crore on its Belgium operations.

In August 2019, the company said its investigations have revealed a massive fraud in the company, including an understatement of liabilities and advances to related and unrelated parties of the group that subsequently led to the ouster of Gautam Thapar as chairman in September.

The new management under Pradeep Mathur on Wednesday gave some indication of the massive restatements of numbers that may have to be made on the basis of the investigations into the company.

The board has proposed to reopen the accounts of the previous three financial years for the “preparation and submission of true and fair financial statements under section 131 of the companies Act 2013”.

SR Batliboi & Co, the audit firm, has also raised red flags on certain related party transactions at CG Power in its audit report.

The existing management is seeking a reclassification of Gautam Thapar, Avnatha and their affiliates from promoters to public shareholders, according to the the SR Batliboi report.

Other investigations

Government agencies have also tightened the screws on the company.

Subsequent to the quarter ended June 30, 2019, the ministry of corporate affairs has filed an application before the NCLT for the reopening of the books of accounts of the company and its subsidiary companies tor the past five years from 2014-15 to 2018-19. On January 23, 2020, the NCLT has reserved the matter for passing the orders. The Serious Fraud Investigation Office (SFIO) has issued notices to the company to investigate its affairs.

The capital market regulator has also opened investigations. In an interim order in September 2019, it had ordered a forensic audit and banned Thapar from the markets. A final order is now pending on the matter.

Following Sebi’s interim order, the BSE is doing a forensic audit for the period 2015-16 till the date of the interim order.

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IndiGo meet turns stormy

IndiGo meet turns stormy

The InterGlobe Aviation EGM turned into a stormy affair on Wednesday as the shareholders created a ruckus over Rakesh Gangwal’s absence even though he had pressed for the meeting to move a special resolution seeking to amend the articles of association of IndiGo Airlines’ parent. Co-founder Rahul Bhatia attended the meeting.

Gangwal has been locked in a bruising battle with Rahul Bhatia for over a year, alleging shortcomings in corporate governance practices and dodgy related-party transactions between Bhatia’s firms and the country’s largest airline.

The shareholders’ agreement between Gangwal and Bhatia ended last November (which required them to act in concert at all times) but Gangwal is unable to sell his stake or negotiate a fair deal with Bhatia for his shares as the AoA contains a proviso that confers the right of first refusal to either of the founders when the other party wishes to sell his stake.

Shareholders turned livid when they did not get the opportunity to grill Gangwal to determine why he was pushing for an amendment of the AoA, believing that this presaged his desire to sell his stake.

They were also angry over the falling stock price of InterGlobe Aviation, precipitated by the very public battle between the two founders.

“The fight between the promoters has led to a fall in share prices, which is affecting our returns, and Bhatia did not even say anything to calm nerves,” some minority shareholders said.

They rejected a special resolution of co-promoter Gangwal to amend the company’s Articles of Association (AoA), which would have done away with the other co-promoter Rahul Bhatia-led group’s powers over appointment of key managerial personnel.

“The Special Resolution has not been passed as the votes cast in favour (48.55 per cent) of the resolution are less than three times the number of votes cast against (51.44 per cent) the resolution,” InterGlobe Aviation said in a BSE filing after the extraordinary general meeting.

For the special resolution to pass, Gangwal and his promoter entities, which had called an extraordinary general meeting (EGM), needed 75 per cent of the votes.

Bhatia and affiliates — InterGlobe Enterprises (IGE) Group — has around 38 per cent stake in the company and Gangwal and his related entities own around 36.64 per cent stake.

The shareholders’ agreement also contained the tag-along clause that allowed a minority shareholder to exit along with a major shareholder who is selling his stake.

Gangwal also wanted to remove an article that restricts either of the co-founders from purchasing publicly-listed shares in InterGlobe and the tag-along right. While these changes could potentially trigger an open offer for the rest of the company, more importantly, they would allow Gangwal or Bhatia to increase or reduce their shareholdings in IndiGo.

A section of shareholders sought clarity on what would be the future course of action for the equity held by Gangwal, to which, IndiGo board chairman M. Damodaran said it is for the promoter to decide what he wants.

Chief executive officer and whole-time director Ronojoy Dutta, co-founder Rahul Bhatia, his wife Rohini Bhatia, chief financial officer Aditya Pande, M. Damodaran, company secretary Sanjay Gupta and non-executive director Anil Parashar were present at the EGM. Non-executive independent director Pallavi Shardul Shroff was not present.

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Coal India to clear backlog

Coal India to clear backlog

Coal India hopes to clear its supply backlog to some sectors by March, with power plants stocked adequately with the fuel.

The public sector miner in 2017-18 and 2018-19 had diverted coal from the non-regulated sectors such as aluminium, iron and steel and cement to meet the demand of the power plants, creating a backlog.

According to Coal India officials, the arrears to the non-power sector at the start of 2019-20 was around 5,143 rakes. “It has been brought down to 1,116 and we are hopeful of clearing the rest by the end of the current fiscal,” a Coal India official said. A rake can carry around 3,800 tonnes of coal. Coal India has stepped up production after the monsoon season and has increased the supply to the power sector.

A total of 65.66 million tonnes (mt) is currently available that includes 31.41mt at the Coal India pitheads and 34.25mt at the power plants (as of January 26), sufficient for 19 days consumption. The number is expected to rise to 22 days next month.

“Better management of supply logistics meant that the coal stock at the power stations was maintained throughout the year and the number of critical power plants never touched double digits during the fiscal,” the official said.

There has also been an overall lack of demand with thermal power generation falling short of targets by nearly 9 per cent in this fiscal till January 19, 2020.

With the power plants sufficiently stocked up, Coal India has the leeway to clear the backlog of over two years.

Coal India has clocked a double digit growth in January with production at 54.17mt till January 27, growing 10.7 per cent over the corresponding period previous year. The miner expects to add another 8mt by the end of the month, averaging around 2 million tonnes per day output during the month.

“With abundant resource capacity, Coal India can meet the country’s coal demand to a considerable extent.

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