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BUSINESS

HYDERABAD

THE HINDU TUESDAY, DECEMBER 29, 2015

We want to simplify the process by connecting

international brands with the top-performing
sellers on our platform
MANISH MAHESHWARI, Vice-President, Flipkart

SENSEX
28-12-15 26,034
24-12-15 25,839

195

POINTS

GOLD
28-12-15
26-12-15

25,605
25,690

85

/10gm

RUPEE
28-12-15 66.19
23-12-15 66.21

0.02

/$

BRENT OIL
28-12-15 36.98
24-12-15 37.80

0.82
$/bbl

Panel refuses Swiss Challenge; wants changes in corruption law

New measures will spur spending in infrastructure projects and balance risk-sharing between private and public partners
SOMESH JHA AND
TCA SHARAD RAGHAVAN
n expert panel led by former Finance Secretary, Vijay Kelkar, has
called for swift amendments to the
anti-corruption law and an endorsement from the Parliament for a
new policy for public private partnerships or PPPs that balances
risk-sharing between private and
public partners, in order to spur
infrastructure building.
The report, submitted to the
government on Monday, said rebooting PPPs is an urgent priority
to take advantage of the historical
conjunction of the countrys infrastructure needs and the availability of long-term funding, adding it is critical for India to make
the leap from a low-income country to a high-income one in two to
three decades, else
it risks falling into
a middle income
trap. Significantly,
the Kelkar panel
KELKAR
asked the govCOMMITTEE has
ernment to activediscourage the
infrastructure ly
Swiss Challenge
for auctioning infrastructure projects, under which
any bidder can offer to improve
upon a project proposal submitted
by another player. This model has
been adopted by the government
since July to redevelop 400 railway
stations.
Unsolicited proposals (Swiss
Challenge) may be actively discouraged as they bring information asymmetries in the procurement process and result in lack of
transparency and in the fair and
equal treatment of potential bidders in the procurement process,
according to the report.
The report, submitted nearly a
year and a half after the government committed to formulate an
alternative framework for public
private partnerships or PPPs to
build infrastructure and deliver
public services, has strongly endorsed finance minister Arun Jait-

Kelkar chalks out rules for PPP revival

TCA SHARAD RAGHAVAN

leys announcement in Budget

2014-15 to create a new institution
for overseeing PPPs, P3 India. The
Budget had even allocated Rs. 500
crore for the new body.
The panel called for urgent
changes to the Prevention of Corruption Act of 1988 as well as governments vigilance and conduct
rules in order to distinguish
genuine errors in decision-making by public servants from acts of
corruption, the panel has emphasised the need to guard officers
against witch hunt while taking
immediate measures to punish
malafide actions. The government
has introduced amendments to
the law in the Rajya Sabha and the
Bill has been referred to a parliamentary panel this month.
State-owned entities
State-owned entities or public
sector units should not be allowed
to bid for PPP project and authorities should be discouraged from
treating PPPs as off-balance sheet
funding methods and using PPP as
the first delivery mechanism without checking its suitability for a
particular project.
Noting that risk allocations in
Indias PPP projects over the past
15 years are inefficient and inequitable, the panel blamed it on a

Panel calls for changes

inconduct rules in
order to distinguish
genuine errors in
decision-making
one-size-fits-all approach to
model concession agreements or
contracts signed for such projects.
A rational allocation of risks
can only be undertaken in sector
and project-specific contexts.
This arrangement has to only be
developed by the project proponents concerned in collaboration
with other stakeholders, according to the panel.
Importantly, it emphasised upon the need to establish independent sector regulators for faster implementation of infrastructure
projects and swifter dispute resolution mechanisms, including renegotiating terms for projects
mid-way through the contract
term. Over 50 per cent of PPP
projects require some kind of renegotiations across their lifespan
so the point is how can a credible
permanent renegotiation commission be established that has credibility and powers to reset the contracts without any charge of crony
capitalism, said Vinayak Chatter-

India Post payment bank to be

operational by March 2017
About 40 international
financial
conglomerates
including World Bank,
Barclays and ICICI have
shown interest to partner
with the Postal Department
for the payment bank.

YUTHIKA BHARGAVA
NEW DELHI: India Post, which
was among the eleven applicants to have received approval from RBI for payment
banks in August, will start its
service by March 2017, Telecom Minister Ravi Shankar
Prasad said.
About 40 international financial conglomerates including World Bank, Barclays
and ICICI have shown interest to partner with the Postal
Department for the payment
bank, the minister said.
The
Department
has
1,55,015 post offices across the
country, of which 1,39,144 are
in rural areas.
It plans to float a whollyowned subsidiary to open
payment bank.
MTNL will offer free incoming to all its users when
on roaming starting next year,

Exchange Rates
Indicative direct rates in rupees a unit
except yen at 4 p.m on December 28

Currencies
U.S. Dollar
Euro
Pound Sterling
Jap Yen (100 Units)
Chinese Yuan
Swiss Franc
Singapore Dollar
Australian Dollar
Canadian Dollar
Swedish Kroner
Danish Kroner
New Zealand Dollar
Hongkong Dollar
Malaysian Ringitt
Kuwaiti Dinar
UAE Dirham
Bahraini Dinar
Qatari Riyal
Saudi Riyal
Omani Riyal

TT
TT
Buying Selling
65.99
66.31
72.51 72.86
98.42
98.91
54.76 55.04
10.15
10.24
66.83
67.18
46.86
47.11
47.92
48.17
47.52
47.76
7.88
7.92
9.72
9.76
45.08 45.32
8.51
8.56
15.31
15.53
217.26 219.03
17.96 18.06
173.75 177.14
18.16 18.20
17.64
17.64
170.79 172.84

Source: Indian Bank

Bullion Rates
December 28 rates in rupees with
previous rates in brackets

Chennai
Bar Silver (1 kg)
Retail (1 g)
24 ct gold (10 g)
22 ct gold (1 g)
Delhi
Silver
Standard gold
Sovereign

33,670
36.00
25,560
2,390

(34,055)
(36.40)
(25,650)
(2,398)

33,980 (34,300)
25,605 (25,690)
22,200 (22,200)

CM
YK

Ravi Shankar Prasad,

Telecom Minister
he said. The other state-run
operator BSNL already offers
free roaming for its users.
Asked about the controversial Free Basics initiative by
Facebook in partnership with
Reliance Communication, the
Minister said he is awaiting
the report of Telecom Regulatory Authority of India on the
subject of net neutrality.
He was speaking at an event

organised by Department of
Electronic and Information
Technology to celebrate good
governance week, where he
launched 23 products and eservices including wi-fi hotspots at Har ki Pauri in Haridwar and Dargah Sharif in
Ajmer, e-payment portal, online labs for students, mobile
app of digital locker and BPO
promotion scheme.

jee, Chairman of Feedback Infra

told The Hindu, reacting to the
PPP recommendations.
The panel led by Mr. Kelkar has
mooted umbrella guidelines for
dealing with stalled projects and
even suggested cancelling projects dont achieve a prescribed
progress threshold on the ground.
Re-bid such projects once issues
have been resolved or complete
them through public funds and if
viable, bid out for Operations and
Maintenance, according to the
report.
On the issue of PPP developers
account books being open to government audit and the Right To Information law, the Kelkar panel
has asked for comprehensive guidelines to be framed, adding that
the private sector must be protected against the loss of bargaining
power over time. While stopping
short of recommending an overarching PPP law, the panel has suggested formulating a national PPP
policy and seeking Parliaments
backing for it to be effective. The
policy should lay down how the
infrastructure market should
evolve with respect to other countries, how to allocate resources for
better value addition, a rigorous
framework for project selection,
development and monitoring.

Flipkart unveils
global brand
licensing for
Indian sellers
BENGALURU: E-commerce giant
Flipkart on Monday came out
with a new brand licensing
initiative to ease the process
for international brands entering India and offering consumers more authentic and
branded merchandise.
In a first-of-its-kind arrangement in the industry,
Flipkart has tied up with Viacom 18 for the licensing of
three large brands Teenage
Mutant Ninja Turtles, Spongebob Squarepants and Peanutsfor sellers.
Global brands are constantly looking to partner with the
most competent manufacturers across categories and Flipkart wants to become the licensing
platform
that
connects these brands to the
most deserving sellers in India, it said. PTI

NEW DELHI: The Kelkar panel

has come out with clear-cut
norms on resolving issues
and clarifying norms on
re-negotiation of contracts.
The Ministry of Statistics
and Programme
Implementation (MOSPI)
says that 40 per cent of all
central government
infrastructure projects are
behind schedule or have
overshot their original cost
estimates.
Towards mitigating this,
the report urges other
ministries to follow the
example of the Ministry of
Road Transport and
Highways, which, along
with the NHAI, has taken
several successful steps in
reducing the number of
stalled projects in the sector.
Infrastructure
investments worth around
Rs 12 lakh crore remained
stuck at different stages as of
end-December 2014 due to a
variety of issues such as
land acquisition, lack of
clearances, unfavourable
market conditions, and
costly finances, according to
a Assocham study quoted in
the report. This puts stress
on banks and the
developers balance sheet.
The Kelkar report has
drawn up extensive
guidelines regarding the
re-negotiation of the terms
of concession agreement,
stipulating the reasons that
form the basis for renegotiation and those that
should not be entertained as
valid reasons.
For example, if the
distress in the project is not
caused by the private party
and is likely to adversely

Infrastructure
investments of
about Rs.12 lakh cr
remained stuck as
of end-Dec. 2014.
affect the government or
users, then that forms the
basis for re-negotiation.
Similarly, if the project
distress is due to material
reasons and may result in
default under the existing
concession agreement, then
the pact itself can be renegotiated.
However, if the distress is
due to reasons that were
foreseeable at the time of
signing the agreement, then
no re-negotiation will take
place.
Also, if there has been a
detrimental impact on the
viability of the project due
to the assumptions made or
risks taken by the private
player at the time of signing
the agreement, then this
does not constitute grounds
for re-negotiation.
This latter point will
affect several
concessionaires of highway
projects who have seen their
toll collections falling well
short of the estimated
amount.
However, clauses such as
these only lead to increased
subjectivity and distortions,
says Mr Hemant Sahai,
Managing Partner, HSA
Advocates.
These are very
subjective. How does one
show some action or effect
can be blamed on the
concessionaire? The
moment subjective
decisions have to be made, it
leads to huge distortions,

Mr Sahai said.
The Kelkar Committee
report has recommended
the creation of multidisciplinary expert
institutions to address the
problem of stalled PPP
projects and legacy issues
plaguing the projects.
The report says that an
Infrastructure PPP Project
Review Committee (IPRC)
be constituted comprising at
least one expert in finance
and economics, law, and one
or more sectoral experts,
preferably engineers with a
minimum of 15 years of
experience in the industry
in question.
It also recommends the
creation of an Infrastructure
PPP Adjudication Tribunal
(IPAT) which is to be
chaired by a former
Supreme Court Judge or
former High Court Chief
Justice, with at least one
technical and financial
member.
The benches of IPAT are
to be constituted by the
chairperson as needed for
the matter and sector in
question.
It is advisable that a
statute is enacted under
Article 323B of the
Constitution of India and
should provide for
constitution of a two-tier
mechanism comprising the
IPRC and the IPAT.
These steps, however, do
not address the systemic
problems afflicting PPPs in
India, HSA Advocates Mr
Sahai said..
The problem is not the
structure, but that there
were too many aggressive
bids coupled with lax
financial oversight by banks
themselves, Mr Sahai said.

Oil slips to near 11-year low due to excess supply

LONDON: Oil fell to around $37 a

barrel on Monday, trading

within sight of an 11-year low,
pressured by excess supply
that has led to prices more
than halving since the downturn began in mid-2014.
U.S. crude was trading
above global benchmark
Brent, having earlier in December risen to a premium
for the first time in about a
year following the lifting of a
40-year-old ban on most U.S.
crude exports.
.
We expect both prices to
rise next year, said Eugen
Weinberg, an analyst at Commerzbank. A short-term slide
cant be excluded due to persisting over-supplies, negative sentiment and stronger
downside momentum.
Figures from the Organization of the Petroleum Exporting Countries imply a glut of
more than two million barrels
per day, equal to over two percent of world demand. Oversupply is expected to persist

Figures from the Organization of the Petroleum Exporting

Countries imply a glut of more than two million barrels per day,
equal to over two percent of world demand. Oversupply is
expected to persist into the earlier part of next year.

into the earlier part of next

year.
The global supply and demand tables are still showing
a heavy picture for the first
half of 2016, said Olivier Jakob,
oil
analyst
at
Petromatrix.
Signs on Monday that a fur-

ther demand stimulus from

low crude prices may be limited also added pressure.
In Japan, total oil product
sales in November fell to a 46year low. In Europe, demand
growth for oil products turned negative in October, analysts at JBC Energy said in a re-

port, citing figures from the

Joint Organisations Data Initiative-the first year-on-year
decline this year, JBC said.
The drop in prices gained
impetus after OPEC, led by
top exporter Saudi Arabia, a
year ago dropped its longstanding policy of cutting output to support prices in favour of defending market
share.
While the price collapse
has partly achieved OPEC's
goals by curbing growth of
competing supplies, it has put
finances in producing nations
under more strain even in the
relatively wealthy Gulf states.
Saudi Arabia on Monday
announced plans to shrink a
record state budget deficit
with spending cuts and a
drive to raise revenues from
sources other than oil.
The government of the
worlds top oil exporter ran a
deficit of 367 billion riyals
($97.9 billion) in 2015. Its 2016
budget plan aims to cut that to
326 billion riyals. Reuters

Interest subvention should be phased out: central bank panel

MANOJIT SAHA

MUMBAI: The government

must do away with the interest subvention scheme and
plough back the subsidy into
a universal crop insurance
scheme for small and marginal farmers, according to a recommendation from a panel
constituted by the Reserve
Bank of India (RBI).
The move can transform
the agriculture sector and
promote financial inclusion,
according to the panel headed by Deepak Mohanty, executive director, RBI, said digitisation of land records for
clear titles and credit linkage
are necessary to establish evidence of cultivation. The
committee. A universal crop
insurance scheme covering
all crops should be introduced starting with small and
marginal farmers with a monetary ceiling say of Rs
200,000. The insurance
should be mandatory for all
agricultural loans, according
to the report.
The panel cited the example of fertiliser subsidies,
which increased from around
Rs. 18,500 crore billion in
2005-06 to Rs. 73,000 crore in

2015-16. While fertiliser subsidy has succeeded in achieving its objective of increasing
fertiliser consumption in
agriculture, it has also led to
some distortions and may not
be financially sustainable in
the long run, for example, rich
households could benefit
more from the subsidisation
than
their
poorer
counterparts.
Analysts differ
Replacing the interest rate
subvention scheme with a
subsidy for insurance may
not be appropriate, said Madan Sabnavis, chief economist, CARE Ratings.
There is a specific purpose of subvention where
farmers receive loans at a
lower cost with the government paying the balance. By
changing the same to insurance, the purpose is lot. Besides, an insurance works for
the farmer when the crop
fails, while subvention helps
even under normal circumstance, he said.
In order to ensure actual
credit supply to the agricultural sector, the committee recommended introduction of
Aadhaar-linked mechanism

Financial exclusion
continue to persists
in India's eastern,
north-eastern, and
central states
for Credit Eligibility Certificates. Women were being excluded from the scheme and
banks should make special efforts for opening of accounts
of women, according to the
report.
Given the governments
emphasis on the welfare of
the girl child, the Committee
suggests that the government
can consider a welfare schemeSukanya Shiksha that
can be jointly funded by the
central and state governments. The scheme will link
education with banking habits by crediting a nominal
amount, in the name of each
girl child belonging to the
lower income group who enrols in middle school and
make it incumbent on the
school and the lead bank and
its designated branch to open
a bank account for social cash
transfer.
This scheme can also have
the benefit of lowering school

dropout rates and empower

the girl child, according to the
central bank panel.
While the committee recognised that substantial progress has been made in terms
of access of financial products and services especially
after the launch of the Jan
Dhan Yojana, there were significant gaps in terms of usage, inadequate last mile service delivery, and exclusion
of women as well as small and
marginal farmers and very
low formal link for micro and
small enterprises.
Mobile technology
The Mohanty panel also
noted significant financial
exclusion continue to persists in the north-eastern,
eastern and central states to
achieve near-universal access.
It has asked for a change in
the banks traditional business model through greater
reliance on mobile technology for last mile service delivery, given the challenges of
topography and security issues in some areas.
The committee reviewed
flow of credit to the micro,
small and medium enterpris-

es and suggested ways to

bridge the information gaps
that plague these entities. It
recommended a system of
unique identification for all
MSME borrowers and the
sharing of information with
credit bureaus.
Multiple guarantee agencies, both public and private,
that can provide credit guarantees in niche areas need to
be encouraged and the role of
counter guarantee and re-insurance companies should be
explored in order to deepen
the credit guarantee market.
Giving guarantees and
counter guarantees for loans
to MSMEs are a good step that
will improve the flow of
funds, we should realize that
to enable the same we already
have a subsidy scheme for
MSMEs to provide guidance
to banks on creditworthiness
of MSMEs. This has been
rolled back sharply this year
by the government. This
should also be revived to improve flow of funds to
MSMEs. While creating new
products is welcome we
should not disband old structures which have worked
well, said Mr. Sabnavis of
CARE Ratings.
HY-TG