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Economy 17

Short Takes
Cabinet to Decide on Capping Gas Price Hike
NEW DELHI Cabinet will soon decide on putting

Bumps Ahead for WTO Trade Deal

Member countries, including India, harden positions on key issues of trade facilitation and farm subsidies
DILASHA SETH
NEW DELHI

Port Operators may be Allowed to Exit Projects After 10 Years

YASHODHARA DASGUPTA
NEW DELHI

a cap or limit to which natural gas prices can be increased following a new pricing formula coming into effect from April 1 next year, Oil Secretary Vivek Rae said on Wednesday. The Union Cabinet had in June decided to price all domestically produced natural gas at an average of the price prevailing at international gas trading hubs and the actual cost of importing liquid gas (LNG). The pricing formula will be effective from April 1, 2014 for a period of five years, with the price being revised quarterly.

Deloitte Asked to Submit Report on CIL Rejig by Dec

NEW DELHI Deloitte, which has been selected

to carry out the study on restructuring of stateowned CIL, has been asked by the Coal Ministry to submit its report by next month. Deloitte has been asked by the coal ministry to submit its report by December, a source said. In case Deloitte is unable to submit the report by that period it will surely submit interim report, the source added. The coal ministry had earlier selected Deloitte from among the nine shortlisted companies for a study on Coal India (CIL) restructuring.

ADB Planning to Raise Rupee-Denominated Bonds

NEW DELHI Asian Development Bank (ADB) on

Wednesday said it is planning to raise funds by issuing rupee-denominated bonds. We are looking at that...offshore rupee bonds, said Narhari Rao, officer in-charge ADB India resident mission, at an event here. In 2004, ADB had raised funds by floating ` . 400 crore onshore rupee denominated bonds. Asked about the quantum of rupee bonds, he said, it is at a very initial stage. ADB is yet to take a call on when to issue and when to issue. The funds that would be raised are expected to go to private sector projects, Rao said.

Search on for New Chairman of PFRDA

NEW DELHI The government has started the

search for a successor to Pension Fund Regulatory and Development Authority (PFRDA) Chairman, the post of which fell vacant following the resignation of Yogesh Agarwal. The tenure of the chairperson would be for five years or till the selected candidate attains the age of 65 years, the finance ministry said while inviting applications for the post. The pay and al. 4.5 lowance of the new chairperson will be ` lakh per month without the facility of accommodation and car. The last date for applying for the post is December 27.

global trade deal at World Trade Organizations ministerial meeting in Bali next week faces fresh roadblocks as member countries, including India, have hardened their positions on key issues of trade facilitation and farm subsidies. The Cabinet is likely to take a call on Thursday on Indias stand at the meet. The Doha round of global trade talks, which began in 2001, were stalled due to sharp differences between developing and developed countries due to lack of consensus on farm subsidies and tariff reduction. Several experts see the ninth ministerial round at Bali next week as the last attempt to renew the global trade agreement agenda by focusing on trade facilitation, which is estimated to increase global trade by $1 trillion. However, countries, including India, have raised resistance to the transit clause, leading to breakdown of talks aimed at sealing the first global trade deal since the WTO came into existence in 1995. Several developed and developing countries are against the inclusion of electricity grids and petroleum pipelines in the definition of traffic in transit. India, for instance, will have to allow any member country under this definition to use the countrys infrastructure for supplying petroleum and electricity to a third country. The trade facilitation deal, aimed at smoothening of crossborder trade by removing red tape, improving infrastructure and harmonising customs procedures has therefore hit an impasse. The red lines are clear which havent been resolved at the negotiation level and will be transmitted to the ministers. We can still have a deal on food security and package for the least devel-

oped countries. However, it is the trade facilitation which may be a stumbling block, said Biswajit Dhar, director general, Research and Information System for Developing Countries. India has got its way on most demands including flexibility on issues such as expediting shipments. The clause has been changed to include only air cargo and perishables at the shortest time possible, against expediting all shipments within three hours. But as WTO director general Roberto Azevedo warned at the pre-Bali meeting on Tuesday , At this point in time we cannot tell the world that we have delivered. Failure in Bali will have grave consequences for the multilateral trading system. India is also opposed to the peace clause that aims to provide protection against penalties for breaching agricultural subsidy limit of 10% of the total production for four years. The riders in the clause such as stiff disclosure norms and no guarantee on a permanent solution to food security issue have met with stiff resistance in the country. Even as the government indicated initial acceptance to the four-year peace clause, a compromise formula to the food security agenda, it hardened its stance after farmer lobbies and opposition parties voiced their resistance. India had been strongly negotiating the food security proposal of the 46 developing countries that aims to remove procurement from poor farmers to support them or to fight hunger from the WTO-prohibited subsidies. We want the peace clause to come with the condition that a permanent solution to the food security agenda will be found. The current draft is ambiguous on that front, a commerce department official said. The peace clause is not in Indias interest, the leader of opposition in Rajya Sabha, BJPs Arun Jaitley said on Wednesday . Our

Corporate India Backs Govt Stance on Food Subsidy at WTO

PRESS TRUST OF INDIA
NEW DELHI

Tough Stance on FTA

WTO negotiators failed to agree on trade facilitation agreement at Geneva Would be discussed at the ministerial level for some conclusion at the Bali ministerial

Backing the governments stance on food subsidy at the WTO, India Inc on Wednesday said it is important to ensure legal entitlement of low-cost ration to the poor in order to achieve all-round development. For us in India, we have to ring-fence the interest of subsistence farmers and poor by procuring grains at MSP and ensuring legal entitlement of low-cost ration to the poor, Assocham President Rana Kapoor said. It is only when Indian farmers and the consumers are protected that the industry and trade can flourish, Kapoor said.

TRADE FACILITATION AGREEMENT AIMS TO

SMOOTHEN cross-border trade by removing red tape, improving infrastructure & harmonising Customs procedures ESTIMATES suggest that TFA will lead to increase in $1 trillion in global trade if countries take a binding commitment on it

INDIA VERSUS THE WORLD

DAYS TAKEN TO
EXPORT 36 IMPORT

32 30

India Has Sought Balance In The Trade Facilitation Agreement

24 21 20

SOME PROVISIONS UNDER TF

EXPEDITING shiopment within 3 hours- India has agreed to air cargo and urgent oens wihtin 6 hours A BINDING obligation on Single Window, which would require harmonisation within all border agencies

16

17 13 11 10 7
6 5

Like their counterparts in the highways sector, port operators may soon have more flexibility to exit public-private partnership projects by divesting full equity in them. The shipping ministry is working on a proposal that would allow private players to sell off their entire stake after an initial 10-year lock-in period, instead of having to hold at least 26% equity as per the current model concession agreement structure. Officials said the ministry is working on a Cabinet note that would propose amendments to the model concession agreement (MCA) to offer more leeway in diluting the shareholding pattern by members of a consortium executing a port project. The current norm for diluting equity is very water-tight. They have to hold a certain level of equity throughout the life of the project, which is usually over 25-30 years. That is a very long period. The Department of Economic Affairs has suggested that we allow full exit after 10 years of commercial operations and we also want

food security programmes would still be exposed during this period to punitive action under the Agreement for Subsidies and Countervailing measures. This may force India to substantially limit the food security programme immediately . Industry lobby Ficcis president Naina Lal Kidwai, however, stressed on the need to work towards a deal. It is important that we do not lose this opportunity to break the stalemate in Doha talks and that we are successful in building on the progress achieved so far in the areas of trade facilitation, agriculture including public stockholding for food security and development issues, Kidwai said.

S Africa

Inclusion of electricity grids and petroleum pipelines in the definition of traffic in transit CUSTOMS COOPERATION A multilateral mechanism for exchange of information on Customs matters in identified cases of import/export, where there is a reason to doubt truth & accuracy of the declaration file by a trader

Any investment made should be liquid. Investors want flexibility to move on and invest in new projects. It is a good move since investors would feel more comfortable and this would improve investment in the sector
RAJIV AGARWAL
MD & CEO, Essar Ports

Russia

WHAT INDIA WANTS FROM TF

INFORMING the importer in case of detention of imported goods for inspection OPTION to return rejected goods

Japan

Brazil

China

India

US

UK

PSU Oilcos may Cut Petrol Prices Before Delhi Polls

RAJEEV JAYASWAL
NEW DELHI

CAD Likely to be 2.5-2.7% This Fiscal: Ahluwalia

PRESS TRUST OF INDIA
HYDERABAD

PowerGrid Seeks Nod for Hiking FII Limit to 30%

NEW DELHI PowerGrid, which will soon hit the

market with a follow-on public offer, will seek shareholders' approval to hike shareholding limit for FIIs in the company to 30% from existing 24%. PoweGrid Corporation of India Ltd has said that increasing the limit would provide more headroom for investments by foreign institutional investors (FIIs) in the company.

Finmin Lowers Limit for e-payment of Excise Duty

NEW DELHI The finance ministry has lowered

the limit for e-payment of excise duty as well as service tax from ` . 10 lakh to ` . 1 lakh with effect from January 1, 2014. Thus, a manufacturer or a service tax payer who has paid a . 1 lakh in the previous duty or tax of more than ` financial year shall be required to pay duty or tax through internet banking. Currently, a manufacturer is required to pay central excise through internet banking (i.e. e- payment) if the total duty paid by the manufacturer exceeds ` . 10 lakh in the previous financial year as per rule 8 of the Central Excise Rules, 2002.

State oil firms may cut petrol prices days before Delhis election scheduled on December 4, but company executives are waiting for a signal from the petroleum ministry before taking a decision. State firms review prices every fortnight but in mid-November, they did not change prices even though the changes in rupee cost of imported gasoline the benchmark for domestic pricing allowed them to cut fuel rates by about one rupee. Since the last price revision of October 31, when . 1.38 in Delhi, internapetrol rates were cut by ` tional prices are slightly softer, while the rupee is slightly weaker. However, industry officials say that if the trend remains favourable in the remaining days of the month, the price may be cut, particularly because consumers were denied the relief in the middle of November. Government officials, however, remain optimistic, particularly after the partial easing of Western sanctions against Iran, and are anxiously watching the movement of exchange rates and international oil prices. Company executives have a different view despite pressure to reduce petrol prices. A price cut in the midst of assembly elections may be termed as the violation of election code of conduct, a company executive said. But oil ministry officials said oil companies are free to revise petrol prices,

which is a deregulated item and it would be their commercial decision. On November 15, the benchmark international petrol price had fallen by $2.40 per barrel and the rupee depreciated only marginally . But, since then, gasoline rates have climbed up by about $2 although they are still lower than the level when prices were last revised.Since the last price revision, the average international petrol price is 111.57 per barrel and exchange rate is ` . 62.56 for one dollar. The gain in petrol is wiped out because of marginal depreciation in the rupee since the last price cut, an executive of Indian Oil Corp (IOC) said requesting anonymity . Fuel re. 1.38 per litre in tailers had slashed petrol price by ` Delhi on Oct 31 when average international gasoline rate was $112 per barrel and the exchange rate was ` . 62 for one dollar.

Planning Commission deputy chairman Montek Singh Ahluwalia on Wednesday said the current account deficit may remain between 2.5% and 2.7% of the GDP this fiscal. He also indicated that the current position of the rupee is competitive against world currencies. It is my view that it (CAD) would be significantly below 3%... That time, the finance ministry said that it is going to be much better and I think he used the number like 3.7%. But the good news is it is going to be below 3%...significantly below 3%. If I have to give a number, (I will put) somewhere between 2.5% and 2.7%, Ahluwalia told reporters on the sidelines of an event at Indian School of Business (ISB). CAD is a difference between outflow and inflow of foreign exchange. It was at $88.2 billion or 4.8% of GDP in the last fiscal. The finance ministry expects it to be at $56 billion or less this financial year. Last year 2012-13 it was 4.8%. On rupees depreciation

against global currencies, he said the present position of rupee is not bad for the country when compared with the situation a few months ago. I don't regard the present position of the rupee as bad for the Indian economy. Exports are doing well. At the earlier exchange rate that prevailed, we had become uncompetitive. At the present whatever 62-63, we are really quite competitive, he explained. Rupee plunged to a new record low of nearly 68.85 against the dollar in August and is currently hovering between 62 and 63. On the projected target of 8% GDP growth in the 12th Plan, he said it is achievable once the country overcomes the short term short-term problems. I think India can sustain is around 8 per cent growth. The fundamentals as far as we are concerned are strong... that we can easily sustain an investment rate of something like 3637%, with a 2.5% of CAD, the domestic savings required will be 34.5%. These are not difficult targets for us to achieve, he added.

to go ahead with that, a senior shipping ministry official said. Currently , companies have to hold the managerial control and 51% of paid-up equity capital up to three years after commercial operations (COD) begin and can then off-load up to 74% equity. However, they would have to hold the remaining 26% until the concession period comes to an end. The proposal suggests that companies hold 51% for five years after COD, 26% for the next five years, after which they would be free to dilute up to 100% equity. Essentially , this translates to a 10year lock-in period after which the private player can sell full equity in the project. Any investment made should be liquid. Investors want flexibility to move on and invest in new projects. It is a good move since investors would feel more comfortable and this would improve investment in the sector, said Rajiv Agarwal, MD & CEO at Essar Ports. Abhaya Agarwal, partner and leader of PPP at audit and accounts firm EY, said an exit policy is fundamentally required. Providing liquidity is always a good idea and institutional money, both long term and foreign, can come in. Like the roads sector, the ports sector has seen projects get single or no bids. There are multiple problems on the shelf but issues like connectivity are problems. This, too, needs to be looked at, he said. But not all agree. The lock-in ensures that serious bidders go in for investment. If you dilute this, other players without sufficient expertise would get encouraged to come in. The move has both pros and cons. The ultimate objective is to run ports, not just construct them, said Pradip K Agrawal, CEO at APM Terminals Mumbai.

More Tech Firms may Stand to Benefit from Sop Scheme

J SRIKANT
NEW DELHI

The government will relax eligibility criteria to allow more firms to take advan. 10,000-crore intage of a ` centive programme that offers refund of up to a quarter of the money spent on expanding electronic manufacturing facilities. An earlier requirement that the factories must be located within government-notified areas may be done away with as it is preventing a lot of companies from applying for these benefits, a senior government official told ET. There was growing discontent among the hardware makers about not being able to apply for the scheme as there are only 18 such government notified areas brownfield clusters and notification of new clusters is going at a snails pace. We are asking companies to apply and not worry whether they are present in a notified brownfield cluster or not, said a senior official in the Department of Information Technology who did not want to

be identified. Notifying (more) clusters is governments responsibility and we are in the process. The Modified Special Incentive Package Scheme offers different forms of financial sops for setting up a new electronics manufacturing factory or for expanding by more than 25% the capacity of an existing facility. This is an important scheme but it is very tough to apply as many of the manufacturing facilities are not based in a notified cluster, said Umesh Anandani, additional secretary at interest group Electronics Industries Association of India or Elcina. The capital expenditure that will be counted while deciding refunds include spending on plant, machinery and equipment, tools, R&D, and cost of intellectual property rights. The industrys biggest worry is that the process of notifying new brownfield clusters is very slow and that there might not be enough clusters in the country, even as the July 2015 deadline for applying for the refund scheme is fast approaching.