WEDNESDAY, 18 SEPTEMBER 2019

20 pages in 1 section www.business-standard.com

MUMBAI (CITY)
~8.00
VOLUME XXIV NUMBER 25

THE MARKETS ON TUESDAY Chg#

Sensex 36,481.1 642.2
Nifty 10,817.6 185.9 BACK PAGE P20 BACK PAGE P20
Nifty futures* 10,833.5 15.9
Dollar
Euro
~71.8
~79.1
~71.6**
~79.0** RAJNATH TO FLY IN TEJAS FIGHTER, GOVT SENSITIVE TO INDIA
SPEND NIGHT ON AIRCRAFT CARRIER INC’S CONCERNS: SHAH
Brent crude ($/bbl)## 66 .4## 68.4**
Gold (10 gm)### ~37,817.0 ~33.0
*(Sept.) Premium on Nifty Spot; **Previous close;
# Over previous close; ## At 9 pm IST;
### Market rate exclusive of VAT; Source: IBJA PUBLISHED SIMULTANEOUSLY FROM AHMEDABAD, BENGALURU, BHUBANESWAR, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI (ALSO PRINTED IN BHOPAL), NEW DELHI AND PUNE

MUKESH AMBANI UPS

STAKE IN RIL BY 2.71% Markets plunge on oil Five-star hotels
may see GST
Taking advantage of the low share prices,

jitters, global tension

the promoter entities owned by Mukesh
Ambani, chairman of Reliance Industries
(RIL), raised their stake by 2.71 per cent to

rationalisation
48.87 per cent in RIL. The market value of
RIL on Tuesday was ~7.58 trillion. The
additional stake was
acquired by Reliance
Services and Holdings
Sensex down 642 pts; rupee weakens against dollar; 10-yr bond yield inches up Fitment panel does
(controlled by Petroleum
Trust, part of the not favour rate GST COLLECTION
promoter group). RIL SUNDAR SETHURAMAN & ANUP ROY
India looks to Russia CONCERNS (~ cr)
shares closed at Mumbai, 17 September BEARS IN CONTROL reduction for
for crude oil imports

1,13,865
~1,197 apiece,
SENSEX ~ VS $ vehicles, biscuits
T
down he markets fell for a second day in a row

1,02,083
1,00,289

99,939

98,202
1.12 per cent. on Tuesday on fears that oil prices could INTRA-DAY INTRA-DAY India is looking to diversified crude oil
rise further due to escalating geopolitical sources like Russia amid concerns over DILASHA SETH
tensions and supply disruption following continued supply from Saudi Arabia New Delhi, 17 September
COMPANIES P2 Saturday’s drone attacks on two major oil facil- following a drone attack on the
ities in Saudi Arabia. country’s oil facilities last The Goods and Services Tax (GST)
Altico Capital CEO The benchmark Sensex dropped as much as week. The attack on Council is likely rationalise rates for
Sanjay Grewal quits 700 points in intra-day trade before settling September 14 five-star hotels in its meeting on
642 points, or 1.7 per cent, lower at 36,481, while affected Friday, holding out hopes for a boost
Sanjay Grewal, chief executive officer of the Nifty50 index slipped 186 points, or 1.7 per production of to the tourism industry.
troubled real estate financier Altico Capital, cent, to end at 10,818. (Inverted scale) about 5.7 mn The fitment panel, comprising
resigned on Tuesday. This comes at a time The rupee weakened for a second day barrrels of oil per Central and state officials, recom-
Apr May Jun Jul Aug
2019
when lenders are cobbling up a against the dollar, dropping to a low of 71.98 day. SHINE JACOB writes 18 > mended a rate cut for outdoor cater-
restructuring package for the finance before recovering to end the session at 71.79. BSE SECTORAL INDICES ing and rate rationalisation for match
Source: Finance ministry

Sector Sep 17 1-day chg (%)

company, which defaulted on payments.
No replacement for Grewal has been found
The yield on the 10-year benchmark govern-
ment bond also inched up.
yet. He came on board as CEO in early 2016. Experts said investors were fearing the oil
price surge would further dampen economic
prospects for India, which relies on imports for
ECONOMY P6 over 70 per cent of its oil needs.
Brent crude oil prices, after surging from
RBI wants stricter control $61 a barrel to over $70 a barrel a day earlier,
over e-com pay gateways retreated on Tuesday. However, the situation
remained uncertain, with analysts forecast-
E-commerce marketplaces acting as payment ing the price would surge past the three-dig-
gateways and payment aggregators to other it mark if the attack on Saudi escalated into
merchants shall stop work within three a full-blown crisis.
months unless they separate this business “If there is strong retaliation or more drone
and comply with all regulations, according to attacks, the situation could spiral out of control.
a discussion paper released by the Reserve In the worst case, it could escalate into a full-
Bank of India (RBI) on Tuesday. blown crisis in west Asia and lead to larger and
more permanent oil supply declines. In this sit-
uation, oil prices could surge above $100 a bar-
ECONOMY & PUBLIC AFFAIRS P4 rel,” said Rob Subbaraman, head of global
macro research at Nomura, adding that India
Dipam to get more powers was among the economies that could suffer the
for PSU sale, privatisation most from an oil price surge. A sharp rise in oil
prices may weaken India’s economic growth,
The Union Cabinet, led by Prime Minister widen the current account and fiscal deficit,
Narendra Modi, will soon take up a and fan inflation.
proposal to give more powers to the “The sudden spike in oil prices on account
Department of Investment and Public of drone attacks on Saudi Arabia establish-
Asset Management (Dipam) to carry out ments has disrupted sentiment as it tends to
privatisation and ‘strategic sale’ for
state-owned companies.
Auto 15,783.4 -3.8 SebichieftowooFPIs
sticks in its final agenda circulated to
the council members.
GST COUNCIL DIVIDED
The panel also favoured rate cuts OVER LOTTERY RATES P4
Realty 1,966.5 -3.7
amidbearishstance for small items such as cups and
Metal 8,829.0 -2.7 plates. The council will take up EDIT:
Bankex 30,595.0 -2.6 Sebi Chairman Ajay Tyagi is planning
to meet top foreign portfolio
exempting businesses with an annu-
al turnover of up to ~2 crore from fil-
DON’T CUT GST P9
Infra 174.3 -2.0 investors in the US later ing annual GST returns for 2017-18
Compiled by BS
Research Bureau
this month. The regulator and 2018-19. was out of the question, considering
will apprise them of steps The fitment panel recommended the huge revenue loss it would
taken in areas such as two ways of giving relief to five star entail,” said a government official.
electronic trading hotels — by cutting the rate from 28 A cut for the auto sector would
technology. per cent to 18 per cent, or by way of mean a revenue loss of ~45,000-
SHRIMI CHOUDHARY increasing the threshold. Currently 50,000 crore.
writes 10 > rooms with a tariff of ~7,500 per night Besides, the panel recommended
and above attract a GST rate of 28 per aratecutforoutdoorcateringfrom18
cent.Inanotheroption,thethreshold per cent to 5 per cent, but without
impact the current account and fiscal deficit
adversely, thereby deterring the path of
Broader market could be raised from ~7,500 to
~10,000 per night.
input tax credit. Among other items,
a common rate of 12 per cent has
recovery for an economy that is already
immersed in a slowdown,” Nischal
still richly valued Goa and Rajasthan, among other
states, have pitched for a rate cut for
been recommended for both hand-
made and mechanised match sticks.
Maheshwari, CEO–institutional equities, The broader equity market remains five-star hotels. They pay 5 per cent and 18 per cent,
Centrum Broking, said. richly valued despite recent correction However, the committee did not respectively.
Financial stocks led the declines as investors in stock prices, ruling out a pause in favour rate reduction for vehicles The fitment committee, which
feared the oil situation could put an end to the selling by foreign portfolio investors and biscuits. did not warm up to the auto sector’s
interest rate easing cycle by the Reserve Bank of (FPIs). A broader basket of 864 stocks “Hotels and outdoor catering are demand, posited that such a move
India (RBI). HDFC, HDFC Bank, ICICI Bank, are currently trading at 29.5x their two big items where the fitment pan- would increase the compensation
and Axis Bank alone contributed 281 points to trailing 12-month earnings. el has recommended rate cuts. burden of the Centre, with cess col-
Sensex’s decline. Turn to Page 17 > KRISHNA KANT writes 10 > However, a cut for the auto sector lection under stress. Turn to Page 17 >

ECONOMY & PUBLIC AFFAIRS P4

Centre scraps plans Sebi bans Thapar over CG Power fraud
for PSB ETF this year
The Centre has scrapped its plans to launch
AMRITHA PILLAY
Mumbai, 17 September
an exchange-traded fund (ETF) this year.
This is because there will be no clarity on The Securities and Exchange
which banks’ shares will make up the Board of India (Sebi) on
basket of the ETF till the final round of Tuesday debarred Gautam
bank mergers, multiple officials told Thapar, the ousted chairman
Business Standard. of fraud-hit CG Power and
Industrial Solutions, from
accessing the capital market
COMPANIES P2 for a number of alleged irregu-
Ramamoorthy named larities, including diversion
of money.
Cognizant India CMD The market regulator also
ITmajorCognizanthaspromoted barred the chief financial offi-
RamkumarRamamoorthyaschairmanand cer (CFO) and two directors of
MDofCognizantIndia. Hewillbereportingto the company for their involve-
theCognizant’sexecutivecommittee. ment in dubious transactions.
CognizantCEOBrian Further, Sebi restrained three
HumphriessaidthenewMD entities belonging to Thapar-
hadplayedamajorrolein led Avantha Group from divert-
theIndiabasedportfolios, ing their money or disposing of
suchasmarketingand their assets. It has also directed
communication. CG Power to take necessary
steps to recover the amount
due to it and take legal action to
safeguard the interests of
investors.
The Sebi order comes near-
ly a month after the CG Power
board said the company had
been hit by an accounting scan-
dal and the liabilities of the
group had been understated by
over ~1,600 crore for 2017-18.
Sebi said Thapar-promoted
and -related entities owed
~1,723.19 crore as receivables to
the company, while connected
parties owed another
~462.74 crore.
“Funds diverted from CG
Power were fraudulently trans-
ferred to its promoter company
Avantha Holdings and entities
related/connected with the
company, Avantha
International, Acton, Ballarpur
International, Mirabelle and
Solaris, without the knowledge
of the company and without
any approval from its board,”
REGULATOR'S ACTION
the report said.
After CG Power’s disclosure
of “significant accounting irreg-
ularities”, Sebi met its officials
and studied the preliminary
investigation report submitted
by the company. Sebi's exami-
nation of the report showed
several irregularities and fraud-
ulent transactions being car-
ried out by key officials of the
company including Thapar.
“The transactions were pur-
portedly carried out by certain
| Gautam Thapar
company personnel (both cur-
rent and past) including certain
non–executive directors, etc.
The aforesaid transactions are
prima facie designed to
divert/siphon off money from
the listed company,
which rightfully belongs to its
shareholders. Turn to Page 17 >
| Avantha Group firms
Avantha Holdings,
Acton Global, and
Solaris Industrial
directed to retain fund,
assets to the extent of
receivables shown as
outstanding to CG
Power
| CG Power directed to
take necessary steps
to recover the amounts
due to the company
| BSE asked to appoint
(former chairman), V R auditor to conduct a
Venkatesh (CFO), detailed forensic audit
Madhav Acharya and B at CG Power from FY16
Hariharan (former EDs) onwards
barred from capital | All affected parties
market given 21 days to file
replies
Bain, TPG eye
minority stake
in Tata firm
SURAJEET DAS GUPTA & DEV CHATTERJEE
New Delhi/Mumbai, 17 September
Private equity (PE) firms Bain Capital and TPG
Capital are believed to be in preliminary talks
on acquiring a minority stake in the Tata
group’s Tata Capital Financial Services
(TCFSL).
According to sources in the know, the Tatas
are in discussions with a clutch of PE funds to
gauge their interest and may offer anything
between 10 and 15 per cent, based on the valu-
ation that it could get for such a transaction.
A spokesperson for Bain Capital said “no
comment” when asked about the talks. TPG
declined to comment on the matter. A Tata
Sons spokesperson declined to comment on
“market speculation”.
Bain Capital has been
The Tatas are in an active participant in
discussions investing in financial

Rail coach making gets a helping hand from robots with a clutch of
PE funds to
gauge their
services and banking
with some large deals. In
2017, a Bain-led consor-
tium invested $1.8 billion
interest and
Raebareli's Modern Coach Factory beats expectations with record production of 1,500 rail coaches may offer in Axis Bank, giving the
anything bank a lifeline after it
SHINE JACOB
New Delhi, 17 September
to 2,000 in Raebareli. From welding
to cutting to assembling, robots are Delhi-Katra Vande between 10 and
15 per cent in
was hit by various finan-
cial issues. With this

In 2018-19, when Modern Coach

Factory (MCF) at Raebareli
manufactured about 1,500 rail
coaches against a capacity of a mere
1,000, it surprised many. Apart from
its human workforce, 44 robots are
also being credited for this
stupendous success.
Robots are now being used
increasingly in the integrated-shell
assembly line and robotic bogie-
fabrication line. This is part of the
plans of MCF and its design
consultant, Ircon, to transform the
Raebareli unit into the world's largest
coach factory.
The Railway Board also wants it to
make at least 5,000 coaches annually.
The unit may soon see its phase-II
expansion, which will increase its
capacity to 2,000 coaches.
“In the Railway Coach Factory at
Kapurthala, we have a staff of 7,000.
The introduction of robots by Ircon
has helped bring this number down
used in all major activities,” said S K
Chaudhary, chairman and managing
director, Ircon.
With the existing capacity, MCF
has set a target of building 1,800
coaches in the current financial year
(FY19). These machines were earlier
imported from South Korea, Spain,
and Germany.
Where are robots used in
Raebareli?
The factory has an integrated-shell
assembly line, with a very high level
of robotic application (consisting of
36 robots). According to Ircon, this
unit delivers a minimum of two
coaches in a shift of six hours to meet
the production requirement.
Similarly, the Robotic Bogie
Fabrication Line uses eight robots
and automatic handling of
components to deliver four bogies in
a shift of six hours each.
In addition to this, the Raebareli
unit has an automated wheel-and-
Bharat Express to
begin operations
The second Vande Bharat Express,
which will run on the high traffic Delhi-
Katra route, will begin operations
before the festival season, Railway
Board Chairman Vinod Kumar Yadav
said on Tuesday, adding that 40 such
trains with sleeper class versions will be
ready by 2022. The first Vande Bharat
Express or Train 18 was launched on
the Delhi-Varanasi route. PTI
MCF has set a target of building 1,800 coaches in the current financial year
axle assembly line to produce one manufacturing units as well. welding in comparison to manual
wheel set, assembled every 18 Ircon, which has requested the welding.
minutes. “All these are world-class” Railways to allot the MCF phase-II Robots can be used for multiple
said Chaudhary. Now, the Railway expansion project to it, said the tasks and they guarantee superior
Board is considering introducing average welding time of each part quality than manual wielding.
robotic technology to other drops nearly 70 per cent with robotic Turn to Page 17 >
Tata Capital deal, the consortium will
get around 9 per cent
Financial
Services holding in the company.
Last year, L&T
Finance Holdings, a lead-
ing non-banking financial company (NBFC),
sold 5.27 per cent of the promoters’ stake to
Bain Capital through an issue of preferential
shares and warrants valued at ~708 crore.
TPG, on the other hand, acquired a stake in
Sai Life Services through a secondary share
purchase from Tata Capital. Chennai-based
NBFC Five Star Business Finance
recently raised $50 million from TPG, an
existing investor.
In 2018-19, Tata Sons invested ~2,500 crore
in Tata Capital — the group’s financial serv-
ices holding company — which, in turn, holds
100 per cent equity in TCFSL. The same year,
TCFSL converted compulsorily convertible
preference shares worth ~656 crore into equity
shares of ~10 each at a premium of ~74.09. The
Tatas’ stake sale is in addition to the financial
services arm planning to raise up to $1.5 billion
by way of debt from overseas markets in the
ongoing financial year. Turn to Page 17 >
2 COMPANIES MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019

STOCKS > State Trading Corporation of India

Government plans to
> Hero MotoCorp
Top loser in the
> Kaveri Seed Company
Board meeting on
> CG Power and Industrial Solutions
KKR India bought 10%
> Bank of India
Top loser in the
IN THE NEWS shut operations S&P BSE Sensex September 24 to consider stake for around ~89 cr Nifty PSU Bank index
share buyback proposal through open market

~107.40 CLOSE ~2,570.05 CLOSE ~ 534.15 CLOSE ~15.70 CLOSE ~64.80 CLOSE
* OVER PREVIOUS CLOSE 19.61% DOWN* 6.19% DOWN* 1.06% UP* 5.02% UP* 5.26% DOWN*
> .

IN BRIEF
Air India arm to issue bonds
worth ~15,000 crore soon
Air India Assets Holdings (AIAHL) is
expected to come out with its
second bond offering worth
~15,000 crore in the next 10 to 12
days, according to a senior official.
AIAHL — the special purpose
vehicle of Air India — mopped up
5G spectrum offer may shrink Ramamoorthy
promoted as
Defence ministry refuses to part with its share of 100 MHz spectrum
Cognizant
India CMD
MEGHA MANCHANDA tor (MD) & CEO of India & South
New Delhi, 17 September Jio tops Trai's Asia and executive director Gopal
Vittal had said, in the post earnings
4G broadband
T
he quantum of airwaves to investor call, that at the current T E NARASIMHAN
be offered for the 5G spec-
trum may shrink further as chart in Aug prices recommended by the
Telecom Regulatory Authority of
Chennai,17September

~7,000 crore through bonds on the defence ministry has refused to India (TRAI), 5G spectrum would be IT major Cognizant has
Monday and the issue was part with its share of 100MHz spec- Reliance Jio continued to unaffordable and hoped that the promoted Ramkumar
oversubscribed more than 20 times. A total of ~22,000 crore is to trum, reducing the total 5G airwaves maintain its lead in 4G government would reduce prices. Ramamoorthyaschair-
be raised by sale of bonds by AIAHL and the proceeds would be to 175 Mw. mobile broadband chart “Given that the state of 5G man and managing
used to repay the national carrier's debt, which is estimated to This is nearly 60 per cent of what with an average ecosystem is still nascent, we would director of Cognizant
be over ~58,000 crore. The official said AIAHL would issue was proposed earlier. download speed of 21.3 hope that the government brings India. Hewillbereport-
bonds, guaranteed by the government, to the tune of ~15,000 This may force mobile service megabit per second down the price of the spectrum and ing directly to the par-
crore in September. The bonds, having a ten-year tenure, are companies to stay away from the (mbps) in August, reserve price of the spectrum. That ent company’s execu-
expected to be issued in the next 10-12 days. State-owned LIC bidding process. according to the latest isthestagewhenwewouldlookseri- tive committee.
and EPFO are likely to be among the bidders, the official added. It is learnt that the defence min- report published by ously at 5G,” Vittal had said. In an email to
On Monday, Air India said AIAHL's bond issue with a three-year istry is refusing to let go of its 100 telecom regulator Trai. TRAI had recommended a pan- employees, Cognizant Ramamoorthy
tenure of ~1,000 crore with a green-shoe option of ~6,000 crore MHz spectrum, which was allotted Vodafone, however, Indian base price of ~492 crore per CEO Brian Humphries will establish a
was fully subscribed at 6.99 per cent. PTI< earlier. In that case, the department maintained lead in terms MHz for 5G radiowaves, while low- said Ramamoorthy had management
of telecommunications (DoT) will of upload with 5.5 mbps ering the base price of frequencies played a leading role in committee and
be left with only 175 Mw of 5G spec- speed. The download that remained unsold in the 2016 developing many of the an operating
Ola to hire over Lightbox closes trum of the total 300 MHz. Indian speed helps users access auctions. Airwaves in the 3,300- company's India-based committee
100 from B-schools, third fund at Space Research Organisation (ISRO)
also has 25 MHz airwaves ear-
video online and
messages received by
3,600 MHz 5G band will be auc-
tioned in the block size of 20 MHz.
portfolios, including
marketing and com-
for India

engineering colleges
Ola on Tuesday said it plans to
hire over 100 freshers from top
engineering colleges and
B-schools for roles ranging
from product developers and
research engineers to business
analysts over the next 6-12
months. "The company will be
hiring more than 100 software
developers, research
engineers, business analysts,
product developers,
management graduates,
program managers to its team
over the next 6 to 12 months,"
it added. PTI<
Tata Power arm to
divest 50% stake in
Cennergi for $106 mn
Tata Power on Tuesday said its
arm Khopoli Investments will
divests its entire 50 per cent
stake in South African joint
venture Cennergi for $106
million (around ~761 crore).
According to a company
statement, Cennergi (Pty) is a
50:50 joint venture between
Exxaro Resources and Khopoli
Investments, a 100 per cent
subsidiary of Tata Power.
Exxaro is a leading South
African coal producer. PTI<
Medikabazaar offers
to hire laid-off
Zomato employees
Medikabazaar, online B2B
platform for medical supplies,
on Tuesday said it is looking at
hiring around 200 of the
recently laid-off Zomato
customer support employees,
who have telecalling and
telesales experience. PTI<
$209 million
Mumbai-basedventurecapital
firm,Lightbox,whichhas
backedstart-upssuchasRebel
Foods,DroomandFurlenco,
hascloseditsthirdfundat
$209million,slightlyexceeding
itstargetof$200million.Rebel
Foodsownscloudkitchen
brandssuchasFaasosand
Behrouz.FundIIItakesthetotal
capitalraisedbythefirm,
foundedbySandeepMurthy,
SidTalwarandPrashantMehta,
to$400million. PTI<
PMLA tribunal releases
63 moons’ assets from
ED attachment
63 moons technologies on
Tuesday said the PMLA
Appellate Tribunal has
released the assets of the
company from attachment
by the Enforcement
Directorate. "This order
comes soon after the Bombay
High Court order, which
quashed the attachments of
63 moons assets under the
MPID Act," the company said
in a statement. PTI<
Icra revises outlook
on auto components
sector to negative
ICRAonTuesdaysaidithas
revisedtheoutlookonauto
componentssectortonegative
fromstable,followingdipin
salesoverthepastfewquar-
ters.Aftermarketdemandfor
componentshasalsoslowed
downwithdeclineingoods
movementandtheconse-
quentweaknessinfreight
activity,theagencysaid. PTI<
marked for its use. them, among others,
“We have to now award the spec- while upload speed helps
trum in chunks of 25 MHz, with a users send photo, video
cap of 100 MHz,” a senior official and other documents to
told Business Standard. The cap people online. PTI
essentially means that a single bid-
der cannot get more than 100 MHz
of 5G spectrum.
Industry is clearly unhappy with Operators Association of India price of 5G airwaves.
the development and feels that ear- (COAI). Mathews said the cap of 100 Mathews said majority of the
lier 5G spectrum pricing was steep MHz will ensure there is one more telecom operators have indicated
and now even the quantum has player that stands a chance to buy that 5G spectrum is prohibitively
become a challenge. the spectrum. expensive and that they can’t afford
“There are other bands that DoT
can look at for the defence ministry.
There are alternatives available for
The upcoming 5G spectrum auc-
tions have received a mixed
response from the industry so far.
it. Former Vodafone Idea chief
executive officer (CEO) Balesh
Sharma had also said that the cur-
the defence sector but there is no
alternative for us,” said Rajan
Some players have said they may
not participate in the auctions,
rent reserve price for 5G spectrum
was “exorbitant”.
Mathews, director general, Cellular mainlybecauseofthehigherreserve Bharti Airtel’s managing direc-
CONSUMER CONFIDENCE DOWN, MAY IMPACT FESTIVE BUYING: SURVEY
ALMOST HALF THE CONSUMERS HAVE
CUT DISCRETIONARY SPENDING
(% of respondents)
Spending more 11
Spending same as before 41
Spending less 32
Not spending at all 14
Can’t say 2 Grewal had served as corporate and invest-
ONLY A THIRD ARE READY FOR
REASONABLE/LUXURIOUS FESTIVE
SPENDING (% of respondents)
Festive basics (< ~10,000) 43
Reasonable spending 31
The ongoing slowdown may dampen festive season
sparkles as majority of the consumers are planning to (~10,000-50,000)
spend less than a reasonable amount by October. A Luxurious spending 4 Gadgets
survey conducted by LocalCircles, across 168 cities (> ~50,000)
covering over 22,000 consumers, further reflects that
Not spending at all 17
consumer confidence is low, when it comes to their
own assessment about household financial situation in Can’t say 5 Others
the next few months COMPILED BY ARNAB DUTTA
The reserve price for the premi- munications, market research and intelli-
um 700 MHz spectrum, which went gence, public affairs, and knowledge man-
unsold in the 2016 auctions, was agement.
reduced by more than 40 per cent to Ramamoorthy, during his 21 years of asso-
~6,568 crore per MHz all-India from ciation with the company, also spearheaded its
~11,485 crore in 2016. CSR initiatives through his work at Cognizant
TRAI recommended a base price Foundation and Cognizant Outreach. In the
of~4,651croreforpairedspectrumin coming weeks, Ramamoorthy will establish a
the 800 MHz band covering 19 cir- management committee and an operating
cles, ~1,622 crore per MHz for the committee for India.
900 MHz band covering seven cir-
cles, ~3,399 crore per MHz in the
2,100 MHz band covering 21 circles,
and ~821 crore per MHz in the 2,500
MHz band covering 12 circles.
It also sought ~960 crore per
AlticoCEO
MHz for unpaired spectrum in
the 2,300 MHz band on a pan- Grewalquits
Indian basis.
ABHIJIT LELE
Mumbai,17September
Sanjay Grewal, chief executive officer (CEO) of
troubled real estate financier Altico Capital,
resigned on Tuesday.
LESS THAN A THIRD BELIEVE THEIR This comes at a time when lenders are
FINANCIAL SITUATION WILL IMPROVE cobbling up a restructuring package for the
IN 6 MONTHS (% of respondents) finance company that defaulted on pay-
ments. No replacement for Grewal has been
Will improve 31 found yet. The expectation is that this is the
Will stay the same 31 time when the senior management member
Will worsen 31 should be staying on to tide over the hard
times, a senior banker said.
Can’t say 7 He came on board as CEO in early 2016.
mentbankingheadforIDFCBank.Beforethat,
he was the group co-head of project finance of
WHERE LUXURIOUS CONSUMERS IDFC. On September 3, Naina Lal Kidwai (for-
(BUDGET >~50,000) ARE PLANNING TO mer head of HSBC India & past president of
SPEND THIS SEASON(% of respondents) Federation of Indian Chambers of Commerce
Home renovation 29
& Industry (FICCI)) resigned as chairperson &
independent director from Altico. Lenders to
White goods 18 the troubled real estate financier have started
preliminary work on restructuring debt of over
Automobile 12
~4,000 crore.
12 Altico Capital, backed by private equity
Jewellery 6 investors, missed on payments on external
commercial borrowings (ECBs). It defaulted
Property 3
on interest payment of ~19.97 crore on ECBs it
20 had availed from Mashreqbank PSC. The gross
Source: LocalCircles principal amount was ~347 crore.

No slowdown
in automobile NDDB, Amul oppose Slow recovery in BFSI may hit TCS growth
sector: CAIT
PRESS TRUST OF INDIA
dairy import talks DEBASIS MOHAPATRA
Bengaluru, 17 September

The country’s biggest IT services firm

New Delhi, 17 September
Traders body Confederation
of All India Traders (CAIT)
on Tuesday said there is no
slowdown in the domestic
automobile sector and the
industry was making hue
and cry only to get a pack-
age from the government.
The industry has been
attributing the sales down-
turn to several factors like
high GST (goods and servic-
es tax) rates, farm distress,
stagnant wages and liquidity
constraints.
"There is no slowdown in
the domestic automobile
sector. They are saying this
SANJEEB MUKHERJEE
NewDelhi,17September
Amul, the country’s biggest
milk brand, and its parent,
the National Dairy
Development Board (NDDB),
have reiterated their staunch
opposition to import from
New Zealand and Australia.
This comes prior to an
importantmeetingbetweenthe
commerce ministry and dairy
sector entities on the con-
tentious negotiations regard-
ing the proposed 16-nation
Regional Comprehensive
Economic Partnership (RCEP).
The latter is India’s most
ambitious trade pact under
Mother Dairy loses CARE’s ‘AAA’ rating
Mother Dairy Fruit & Vegetable
(MDFVPL), a unit of National
Dairy Development Board, has
lost its ‘AAA’ credit rating
because of the hit it has taken
for provisions in its account
book for deposits placed with
default-hit IL&FS. It had to
make a impairment provision
of ~190.85 crore from the
investments in IL&FS in the
form of unsecured short-term
inter-corporate deposits.
Further in 2018-19, it reported a
negative profit after taxes, of
dependence,jeopardisingnutri-
~91.8 crore due to the burden
of provisions. The previous year
had shown a (positive) PAT of
nearly ~37 crore. Taking this into
account, CARE Ratings has
revised its grading to ‘AA+’. The
revision factors in the weakness
in MDFVPL’s internal control
systems which led to the IL&FS
deposit, it said. The amount
had to be fully provided for in
the accounts for FY19 on the
default by IL&FS, leading to a 35
per cent erosion of its net
worth, CARE said. ABHIJIT LELE
per cent of New Zealand’s dairy
Tata Consultancy Services (TCS) is likely
to see continued softness in its banking,
financial services and insurance (BFSI)
as well as retail verticals in the current
quarter, impacting its growth numbers.
In a recent investor meet with
brokerage firms such as ICICI Securities
and Sharekhan, among others, the top
management of TCS blamed slow
recovery in these key verticals for the
softness. Company executives said both
macroeconomic and client-specific
factors have had a role to play.
“Given persistence of issues in the
capital markets and European banking
sub-segments, growth in the (BFSI)
vertical is expected to remain subdued SUBDUED SEGMENTS expected to decelerate in Q2,
in Q2 of FY20,” wrote Kuldeep Koul and %YoYgrowth inconstantcurrencyterms considering softness in the US capital
Hardik Sangani, research analysts at BFSI Retail & CPG market and large European banks.
ICICI Securities, in a note after their Similarly, client specific issues in retail
11.6

to get a package from the negotiation. Based on India’s tional security,” goes the letter. export is nearly 10 times India’s meeting with TCS management. They, vertical would impact the TCS growth,”
15.6

10.5

9.9

government," CAIT existing free trade agreement The meeting in question, current import at $28 million. however, noted that the deal pipeline in said Sanjeev Hota, Head of Research at
9.2
12.7

8.6

7.9

Secretary General Praveen with the 10-country bloc of the officials said, is expected to be “In the last five-six months, the BFSI vertical remained strong. Sharekhan.
6.1

Khandelwal said. Association of Southeast attended by senior representa- milk prices have moved up On retail vertical, which had faced "Given the weakness in BFSI and
4.1

Citing an example of new
vehicle launches, he said
companies have received
huge number of bookings,
which do not reflect any
slowdown in the sector.
Talking about recent fes-
tival sales announced by
global e-commerce firms like
Amazon and Flipkart,
Khandelwal demanded
immediate action from the
government to ban these
mega sales.
He claimed that such
firms are violating foreign
direct investment (FDI)
norms in the e-commerce
sector.
Asian Nations (Asean), the
ambit will cover all major
nations with which Asean has
trade deals — China, India,
Japan, South Korea, Australia
and New Zealand.
Sources said NDDB chair-
man Dilip Rath has, in a letter to
Union commerce secretary
Anup Wadhawan and animal
husbandry secretary Atul
Chaturvedi, said any decision
to reduce the tariff barrier
would encourage import of
cheaper milk powder. Which
would put the livelihood of
India’s dairy farmers at peril.
“Our country will be again
pushed into a state of import
tives of domestic and multina-
tional dairy companies in India.
It has been called to solicit their
views on RCEP negotiations
and its implications.
Under RCEP, tariff barriers
on a host of items are expected
to be lowered. The country’s
dairy industry says it directly
and indirectly supports tens of
millions of farmers, the bulk
being small and marginal ones.
New Zealand is the world's
largest exporter of milk and
dairy products, accounting for
a fifth of the global total at $5.4
billion in 2018, according to the
International Trade Centre.
India’s dairy sector says even 5
from ~20-21 a litre to around ~31
a litre in the open market, while
feed costs have risen from ~15 a
kilogram to ~22.
Therefore, the production
cost of milk is ~24-25 a litre,
while the procurement price is
~31, allowing farmers to make
some profits. If at this juncture
cheap imports are allowed, the
market will crash, devastating
the livelihood of millions of
farmers,” a senior industry offi-
cial said. He said skimmed milk
powder prices in international
markets are ~160 a kg; in India,
it is ~280-290 a kg.
More on business-standard.com
several client-specific issues in the first
quarter of this fiscal, the report said TCS
had seen more such problems in the
ongoing quarter.
TCS had expected retail revenues to
see a quick recovery, which now seems
delayed, given the emergence of a few
more client specific issues in the
vertical, ICICI Securities pointed out.
“However, unlike BFSI, where
challenges are more broad-based and
segment specific, issues in the retail
vertical are client specific.”
BFSI is the largest vertical for TCS,
accounting for close to 31 per cent of its
overall revenues, followed by retail and
consumer packaged goods (CPG),
which makes up for around 15 per cent
of the total.
Q1 Q2 Q3 Q4
2018
BFSI: Banking, financial services & insurance
CPG: Consumer packaged goods
In the quarter ended June, TCS
witnessed a revenue growth of 9.2 per
cent year on year (YoY) in constant
currency term in the BFSI vertical,
slower than the 11.6 per cent recorded in
the preceding quarter. However, the
Mumbai-based company’s CEO and MD
Rajesh Gopinathan had defended the
fall saying that given the high base, the
growth remained significant. During the
same period, the company’s retail and
CPG vertical grew 7.9 per cent YoY.
“Growth rate in the BFSI vertical is
retail verticals, achieving double-digit
growth rate in FY20 seems challenging,"
Q1 he added.
2019 However, the brokerage firm noted
that the organic growth for TCS would
remain industry leading among large
peers. In Q1FY20, TCS reported a
revenue growth (YoY) of 10.6 per cent
against Infosys’ 12.4 per cent.
A detailed mail sent to TCS
remained unanswered at the time of
going to press.
Meanwhile, the TCS management
has expressed confidence that the
operating margins would improve in the
coming quarters. It would also get a leg-
up from a falling rupee. In the June
quarter, TCS had reported an operating
margin of 24.2 per cent.
MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019
COMPANIES 3
. <

Three firms show interest

in Emami’s cement arm
AVISHEK RAKSHIT
Kolkata, 17 September

M
onths after ~20,000-
crore Emami Group
started scouting for
a buyer for its group entity,
Emami Cement, at least three
major cement producers have
elicited interest to buy its
assets.
The interest stems from
the fact that the cement arm
of Emami is a low-cost pro-
ducer, its assets are new and
the firm has huge reserves of
limestone, which can boost
expansion. The locational
advantage in east India is an
added incentive.
According to industry
officials, in the near future,
despite capacity additions in
the country’s northern and
eastern regions, the demand
for cement in these parts is
expected to outpace the sup-
ply in the next two-three
years, leading to a shortage.
In turn, prices are expected
to firm up.
Emami Cement is cur-
rently focussed on east India,
with its plants in Risda in
Chhattisgarh, Panagarh in
West Bengal, and Jajpur in
Odisha. It had also acquired
0.60 million tonne per
annum (mtpa) capacity from
Eco Cement in October 2018
in Bhabua, Bihar, and invest-
ed to double the capacity.
“Besides Chhattisgarh, it
also has mining rights in
Rajasthan and Andhra
Pradesh, which can help in
future expansion,” said
Khushbu Lakhotia, associate
director at India Ratings &
Research.
According to Lakhotia, the
mining rights presents the
buyer with an opportunity to
scale up operations as the
need be in other locations.
The strategic mining rights, if
used, can strengthen the pro-
duction capacity of the
acquirer.
Rating agency Acuite Rati-
IN A NUTSHELL
Installed capacity
6 mtpa
Captive power plant
40 Mw
LIMESTONE RESERVES:
Chhattisgarh, Andhra
Pradesh, Rajasthan
ngs & Research, in its report,
noted that Emami Cement’s
limestone reserves in
Chhattisgarh are sufficient
not only to meet the require-
ments of the integrated man-
ufacturing facility at Risda
but can also cater to the
requirements of the plant in
Panagarh and the upcoming
unit in Odisha.
For instance, Birla Corpo-
ration, which intends to bec-
ome a 25-mtpa company, is
also leveraging on Reliance
Cement’s mining rights
(which it acquired) to expand
operations in Maharashtra.
On the other hand, indus-
try officials noted that pro-
duction cost at Emami
Cement is one of the lowest in
the industry, as it is able to
maintain consistent quality
levels. “Its margins have been
Ebitda margin
6.6%
Debt
~2,246.76 crore
INTERESTED BUYERS: Shree
Cement, Dalmia Bharat
Cement, Nuvoco Vistas Corp
low because it is a new player
and thus had lower realisa-
tions, but it would increase
along with increasing vol-
ume... Its profits are also
expected to improve further”,
Lakhotia said.
According to a report
from India Ratings &
Research, the leverage is like-
ly to remain elevated due to
an estimated capex of ~460
crore on the Odisha and the
Bihar projects.
“The net leverage is cur-
rently high as the company
is on a capex mode to expand
its capacity, but additional
Ebitda (earnings before inter-
est, tax, depreciation and
amortization) is likely to
reduce the leverage gradual-
ly”, she added.
The debt-equity position
of the company, according to
Acuite, is estimated to
remain in the range of 3.20
times to 3.00 times because
of the ongoing capex.
When contacted, Aditya
Agarwal, director at the
Emami Group, refused to
comment. Emami Cement
had a total debt of ~2,246.76
crore as on March 31, 2018,
which comprises ~2,093.86
crore as secured term loan
from banks and financial
institutions, and ~152.90 crore
as working capital borrow-
ings from banks.
Acuite noted that its rev-
enues have grown signifi-
cantly to ~989.25 crore in
2017-18 on account of an
increase in cement realisa-
tion due to improved prod-
uct demand.
The operating profit impr-
oved to ~71.81 crore for 2017-
18, as against negative oper-
ating profit in 2016-17 on
account of high discounts
offered to the dealers.
Trade sources stated that
backed by increased sales vol-
ume, Emami Cement’s reali-
sations are expected to
improve the most in West
Bengal and Bihar, where the
company earns better realisa-
tions than in Chhattisgarh.
4 ECONOMY & PUBLIC AFFAIRS MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019

“In politics those who do good work, don't have to “Electricity distribution is an area of concern. There “A person after parting ways with his family
ask for votes as the votes come to them naturally. have been various initiatives taken by the Centre, becomes a sadhu (monk)...and turns to spirituality.
Prime Minister Modi never talks about his caste. I including the UDAY scheme to revive the distribution But today people wearing saffron robes are selling
really appreciate Modiji. Aaj tak Modiji ne kabhi sector, but it has not proved to be effective. It is 'churan' (fake potions). In saffron robes, rapes were
nahi kahaa main backward community se hun” necessary that we take drastic reforms in the sector” taking place. Rapes were taking place in temples”
NITIN GADKARI, Union minister SUBHASH CHANDRA GARG, power secretary DIGVIJAYA SINGH, Congress leader
> .

Centre scraps plans for New proposal in

IN BRIEF
Over 60 mn EPFO subscribers
to get 8.65% interest for FY19 the works to give
LabourMinisterSantosh
Gangwar(pictured)onTuesday
saidmorethan60millionEPFO
accountswouldbecreditedwith
interestamountat8.65percent
bank ETF launch in FY20 Dipam more teeth
Cabinet to discuss
ratefor2018-19aheadofthe No clarity yet on which and Indian Bank will acquire Allahabad
become the administrative
department for all strategic
festivalseason.TheCentral
BoardofTrustees—theapex
PSBs’ shares will Bank.
This will reduce the number of listed
plan on strategic sales. The inter-ministerial
group on strategic sales will
decision-makingbodyofthe make up ETF basket PSBs, which will make up the new finan- sale policy soon be headed by the Dipam
Employees’ProvidentFundOrganisation(EPFO)—hadokayed cial sector ETF. Clarity on which secretary and co-chaired by
8.65percentinterestrateforthelastfiscalonFebruary21,thisyear. till the mergers bank shares the ETF will com- ARUP ROYCHOUDHURY the secretary of the adminis-
Theproposalwassentfortheconcurrenceofthefinanceministry.
Onceokayed,theEPFOwouldcredittheinterestamountat8.65per ARUP ROYCHOUDHURY ROAD prise will only happen once
the merger is completed.
New Delhi, 17 September trative ministry. The move
will make privatisation
centrateinsubscriberaccountsandsettleclaimsonthisrate.At
present,theEPFOissettlingPFwithdrawalclaimsat8.55percent
New Delhi, 17 September
AHEAD The deadline for com-
pleting the integration
The Union Cabinet, led by process much faster,” the
Prime Minister Narendra official said.

interestrate,whichwasapprovedfor2017-18.
Hindalco enters Dow
Jones sustainability
index for 2019
HindalcoIndustrieshasmade
itsentryinthe2019editionof
theS&PDowJonesSustain-
abilityIndices(DJSI).TheAditya
BirlaGroupcompanyisoneof
the12Indianfirmsincludedin
theDowJonesEmerging
MarketsSustainabilityIndex.
TheDJSIistheglobalstandard
formeasuringandadvancing
corporateenvironmental,
social,andgovernance
practices. BSREPORTER<
Fitch Solutions
cuts 2019 average
zinc price
FitchSolutionsMacroResearch
onTuesdayloweredits
averageglobalzincprice
estimatesto$2,500pertonne
for2019fromitsprevious
estimateof$2,600pertonne,
citingcontinueddeterioration
ofinvestorsentimentonthe
backofUS-Chinatradewar.
Globalzincslabproduction
hasdeclinedby1.1percent
yearonyearinJanuaryto
June,whileconsumptionhas
grownby2.3percentYoYin
thesameperiod. BSREPORTER<
PTI<
Bank unions firm
on demand to raise
salary bill to 15%
Bankunionshaverejectedthe
IndianBanks’Association
(IBA's)offertoincreasethe
salarybillto12percent,stating
thatitshouldbemorethan15
percent.CHVenkatachalam,
generalsecretary,AllIndia
BankEmployees'Association
saidonTuesdaythatonemore
roundofbipartitetalkswas
heldbetweenIBAandUnited
ForumofBankUnions,which
consistsofnineunions.Inthe
discussions,IBAimproved
theirofferfrom10percentto
12percentincreaseonthe
payslipcost. BS REPORTER<
Indian Overseas Bank
to offer repo-linked
loans from October 1
IndianOverseasBankon
Tuesdaysaiditwouldoffer
consumerloanslinkedwiththe
RBI’sreporatefromOctober.
Thebankhasdecidedtooffer
repo-linkedlendingratefor
newloanssanctionedunder
retailsegment—housing,
vehicle,educationandclean
loans—andMSMEsfromOcto-
ber1,itsaidinarelease. PTI<
T
he Narendra Modi government | Dipam had of the banks is April Modi, will soon take up a pro- The person added that the
has scrapped plans of launching a planned to 2020. posal to give more power to Cabinet note could be sent for
new financial sector exchange launch a new “The ETF will the Department of Investment approval this week or the
traded fund (ETF), at least for this year. ETF comprising unlikely be and Public Asset Management next. “It will be in Dipam’s
This is because there will be no
PSB stocks launched this (Dipam) to carry out privatisa- interest to make the privati-
clarity on which banks’ shares will make year. We can take tion and “strategic sale” for sation process much faster.
up the ETF basket till the latest round | Latest round another look at it state-owned companies. We have identified some of
of bank mergers is completed, several of PSB mergers after the conclusion According to this plan, the companies we will move
officials said. means ETF basket of the merger,” the offi- once a PSU is cleared for on quickly after getting the
This means that for the current year, cannot be finalised cial said. strategic sale, Dipam will approvals,” he said.
the Department of Investment and Over the years, ETFs have become an become the administrative The new process will not
Public Asset Management (Dipam) will | ETF basket can only be finalised once indispensable component of the Centre’s ministry, irrespective of be applicable for strategic
continue depending on multiple follow- the merger process is complete disinvestment road map. Along with big whichever depart- sale candidates,
on offerings of its existing ETFs — | Govt depends heavily on ETFs to meet mergers of state-owned companies, they ment the relevant Dipam is for which the work
Bharat 22 and CPSE ETF — to help meet divestment targets contribute the biggest chunk of divest- PSU comes under. faced with is already under-
a record divestment target of ~1.05 tril- ment proceeds in any year. Additionally, the its steepest way, like Scooters
lion for 2019-20. | Multiple offerings of CPSE ETF, Bharat 22 There are two ETFs offered by the companies being yearly target India, Pawan
“We are re-evaluating the PSB ETF. It ETF planned for FY20 Centre. The CPSE ETF comprises 11 considered under yet, tasked Hans, Air India,
cannot be done till the latest bank merg- stocks and is heavily skewed towards this plan are not with meeting and others. It will
ers are completed. The banks are busy India, Punjab National Bank, and the energy and commodity sectors. It is just some smaller ~1.05 trillion be in place for
with mergers. So, there will be uncer- Bank of Baroda could be included, as managed by Reliance AMC. The Bharat PSUs staving off a for 2019-20 entirely new can-
tainty about the composi- well as other PSBs. This ETF 22 ETF draws from six sectors and is shutdown, but big- didates. The per-
tion of the proposed new could also include part of managed by ICICI Prudential. ger names such as son said these
ETF,” said a senior govern- According to the Centre’s stake in Axis For 2019-20, the Centre is planning Container Corp, Shipping companies could include
plans so far, the
ment official.
An ETF is a security that banking sector
Bank.
Last month, Finance
multiple follow-on offerings of the two
ETFs. It has already garnered around
Corp, and Bharat Earth marquee PSUs and not just
Movers. loss-making ones, depending
tracks an index, a commod- ETF basket was Minister Nirmala ~11,000 crore from a CPSE ETF in July, “Dipam will have more on political clearance.
ity or a basket of assets like expected to Sitharaman announced a and is soon expected to launch a ~5,000- powers after the new propos- Dipam is faced with its
an index fund, but trades comprise shares mega merger of state- crore offering of Bharat 22. al is cleared. Now, it has to steepest yearly target yet,
like a stock on an exchange. of some of listed owned banks, which will The proceeds from the two ETFs, depend on the line ministry tasked with meeting ~1.05
It provides diversification state-owned reduce the number of PSBs accounted for about 53 per cent of the even to have regular meetings trillion for 2019-20. Apart
to investors and is cheaper banks from 18 to 12. Punjab ~84,972 crore that Dipam earned in 2018- on privatisation proposals. from Air India, the Centre is
than investing in a fund. National Bank is in the 19, going past last year’s target of And not all the line ministries also looking at divesting its
According to the plans process of acquiring ~80,000 crore. From two fund offerings are as keen on strategic sales,” entire 53.29 per cent stake in
so far, the banking sector ETF basket Oriental Bank and United Bank of India, of Bharat 22 in FY19, the Centre garnered said an official with knowl- Bharat Petroleum. The new
was expected to comprise shares of Canara Bank will acquire Syndicate ~18,729.85 crore, while ~26,500 crore edge of the matter. process will help it carry out
some of the listed state-owned banks. Bank, Union Bank of India will buy came from the CPSE ETF, again in “After the approval of the another PSU big sale, offi-
Marquee names such as State Bank of Andhra Bank and Corporation Bank, two tranches. new plan, Dipam will cials said.

NRI investments in MFs near ~1 trillion

Non-residents’(NRIs’)
investmentsinIndian
mutualfundsareupby
nearlyatenth,andis
nowapproaching
~1trillion.Thevalueof
suchholdingsisnow
over~93,000croreatthe
endofMarchquarter,according
totheReserveBankofIndia’s
‘SurveyofForeignLiabilities
andAssetsofMutualFund
Companies,2018-19’released
onTuesday.Itwas~86,000crore
Global services trade
OPERATIONAL CREDITORS TRIGGER 50% OF CIRPs: IBBI DATA
Almost 50 per cent of corporate insolvency resolution process (CIRP) cases were initiated
ayearago.“Foreignliabilitiesof
by operational creditors, while financial creditors have initiated 40 per cent of the total SECTORAL DISTRIBUTIONS OF
MFcompanies($13.5billion)in
theformofnon-residents’
CIRPs, the data compiled by the Insolvency and Bankruptcy Board of India (IBBI) till June CORPORATE DEBTOR
investmentsintheunits 2019 revealed. Of the 2,162 CIRPs initiated, 1,080 have been by operational creditors and (AS ON JUNE 30, 2019)
substantiallyexceeded 868 are by financial creditors. The remaining 10 per cent or 214 of the CIRPs initiated are Closed Ongoing
theirforeignassetsinthe by the corporate debtors themselves. In terms of sectoral distribution, 41 per cent of
formofoverseasequity the corporate debtors against whom CIRPs have been initiated are from the Manufacturing 382 517
investments(US$0.7billion)in manufacturing sector, 19 per cent from real estate, renting, and other
March2019withbothforeign businesses. Also, corporate debtors from the construction sector make up Real estate, renting,
liabilitiesandforeign for more than 10 per cent of CIRPs. SUBRATA PANDA 164 257
and businesses
assetsrecordingincreases ILLUSTRATION BY
during2018-19,”accordingto AJAY MOHANTY
Construction 74 153
thecentralbank’sdata.
SACHINPMAMPATTA CORPORATE INSOLVENCY RESOLUTION PROCESS INITIATED 21 Total
Initiated by operational creditors Initiated by financial creditors Corporate debtors Wholesale and retail trade 97 117
12
16 178 Hotels and restaurants 23 37
1,292
39
22
18
99
16

84
98 123
Electricity and others 19 36

growth slumps in 14 870

93 84
34 Transport, storage, 25 35
8 64 174 and communication
7 37 161 151
Q2FY20, says WTO 129 141
101 69 89
22 58 Others 86 140
SUBHAYAN CHAKRABORTY toon-trendinJune.Incontrast, Jan–Mar ’17 Apr–Jun’17 Jul–Sep’17 Oct–Dec’17 Jan–Mar’18 Apr–Jun ’18 Jul–Sep’18 Oct–Dec’18 Jan–Mar’19 Apr–Jun ’19 Source: IBBI

New Delhi, 17 September the container shipping index

World trade in commercial
services lost momentum
through the second quarter of
2019, the World Trade
Organization (WTO) has said.
The global body’s new
Services Trade Barometer
(STB), launched on Tuesday,
showed a reading of 98.4, sug-
gesting a further weakening
after services trade growth
slowed during the first quarter
of 2019. Readings of 100 indi-
cate growth in
line with medi-
um-term trends,
while readings
greater than and
below 100 indi-
cate above-trend
and below-trend
growth, respectively. The
direction of change reflects
momentum compared to the
previous month.
Declines in most of the
component indices drove the
second quarter softening, as
they signalled a broad loss of
momentum across various
services sectors. The passen-
ger air travel index (95.6), con-
struction index (97.0), and
global services Purchasing
Managers’ Index (97.2) all fell
below trend in June, accord-
ing to the WTO.
The financial services index
(99.7) also dipped, finishing
slightly below trend. The index
for information and commu-
nication technology services
(100.3), meanwhile, fell from
well above trend in mid-2018
(100.8) was slightly above trend
and rising in June, following a
multi-month slowdown.
Despite the loss of momen-
tum this year, services trade
has held up better than goods
trade since it is more directly
affected by the trade tensions.
Unlike its counterpart for
goods, the fluctuations regis-
tered by the services indicator
coincide with movements in
actual trade flows.
The barometer is part of the
WTO’s efforts to
develop new
insights into serv-
ices trade and will
be released twice
annually.
In July, the
WTO’s mid-year
report underlined that trade
flows hit by new restrictions
continued to be at historically
high levels between mid-
October 2018 and mid-May
2019. Tensions leading to high-
er trade barriers and greater
uncertainty pose downside
risks to trade growth forecasts.
Last month, the WTO’s
similar barometer for goods
trade showed that interna-
tional air freight (91.4) and
electronic components (90.7)
saw the pace of growth falling
by the highest margins. On the
other hand, export orders
(97.5), automobile production
and sales (93.5) and agricul-
tural raw materials (97.1) all
remained below trend,
although they show some
signs of having bottomed out.
GSTCouncilmayheatupoverlotteryrates
Centre will push for single rate; Kerala wants to retain current dual structure
DILASHA SETH
New Delhi, 17 September
The Goods and Services Tax (GST)
Council meeting on Friday is
likely to witness a heated debate
over the levy on lotteries, with
the Centre pushing for one rate
and Kerala batting for the
continuation of the current dual
structure, said official sources.
Inanearliermeeting,the
matterwasreferredtoAttorney
General(AG)KKVenugopal,who
reportedlysaidneitherstructure
violatestheconstitutionalprov-
isionofArticle304onthefreedom
oftrade.HeaskedtheCouncilto
takeacallonthis,saidsources.
“TheGSTrateonlotterieswillbe
takenupbytheCouncilonFriday.
Hopefully,wewillarriveatacons-
ensus,”saidanofficial.Aconse-
nsusseemslikeafarcry,though.
Currently,theGSTrateonstate
governmentlotteriesis12percent;
therateis28percentforthose
authorisedbystategovernments
butrunbyprivateagencies.The
Centreisoftheviewthatthedual
rateisbeingmisusedbyvarious
privateparties.
Iftherateforalllotteriesis
hikedto28percent,itwouldlead
toarevenuegainofabout~1,250
crore,accordingtogovernment
estimates.
imposeonsuchgoodsarateoftax
CLOUD ON CONSENSUS thatisthesameasthatongoods
producedwithinthestate.
If the GST Council resorts to Anofficialawareofthe
voting, the following is the developmentssaidtheGST
power of the Centre, states CouncilwouldhavetheAG’sviews
andalsothegroupofminister’s
| Centre 33.33% (GoM’s)recommendationsofa
uniformrate.TheGoMisledby
| States put together
MaharashtraFMSudhir
66.66% Mungantiwar;itprefersauniform
| Decision can be taken only GSTrateonlotteries,whichcould
with 75% votes beeither18percentor28percent.
Kerala,however,isnotin
| The Centre can favourofeitherincreasingtherate
block any onstatelotteriesordecreasingthe
decision levyonprivateones.Thestate
| Twelve or governmentfearschangingthe
more states ratewouldaffectthousandsof
together can agentsandsellers,besidesthe
revenueofstatesandtheCentre.
also block
KeralaFMThomashassaid
any decision lotterydistributorswanttoenter
Note: The Council has
taken all decisions themarketwithareducedGST
by consensus so far rateand“plunder”thepeople.The
statealsousesmoneyfrom
lotteriesforwelfareschemes.
KeralaFinanceMinister(FM) “Goa,Maharashtra,andAssam
ThomasIsaachadpressedfor are,however,keenonaratecuton
votingintheJunemeeting.Till state-authorisedlotteries,”saida
now,alldecisionsoftheGST centralgovernmentofficial,who
Councilhavebeenarrivedatby didnotwanttobenamed.
consensus.Article304ofthe Assamisastrongadvocateofa
Constitutionempowersthestates uniformtaxrateof18percent,
toimposereasonablerestrictions arguingthattheNortheastern
ongoodsimportedfromother stateslackedtheabilitytooperate
states.Theyalsohavethelibertyto alotteryontheirownandwere
thereforesuffering.
Bylaw,privateplayerscannot
runthelotteries.Entitiessuchas
Sugal&Damani(S&D)andthe
Essselgroupworkas
commissioningagentsforthe
government.Unlikestate-run
lotteries,authorisedlotteriescan
besoldoutsidethestateaswell.
OnlyMaharashtra,Goa,West
Bengal,Punjab,Kerala,Arunachal
Pradesh,Mizoram,Sikkim,and
Assam’sBodolandarearunlott-
eries.Theresthavebannedthem.
Sourcessaidsomeofthe
lotteriesworkedonahybrid
model,runninginthenameofthe
statebutwereeffectivelyprivate
ones.OfficialsourcesattheCentre
saidthedifferenttaxratesletsuch
lotteriesexploitcustomers.
KamleshVijay,groupchief
executiveofficer,S&D,saidthe
differenceinthetaxrateonthe
samecommodityactsasatariff
barrierforsmallerstatessuchas
Goa,Sikkim,andArunachal,when
theirticketsweresoldinWest
BengalorKerala.
Headdedthebusinesshad
sufferedsubstantiallybecauseof
thetwo-ratestructure.
Vijaysaidthereshouldbeno
GSTontheprizecomponent—60
percentofthefacevalueoftickets,
whichalsoincludesmarginsof
retailersandagents.
Centre allows SAIL
to sell 25% iron ore
from captive mines
SHINE JACOB
New Delhi, 17 September
The government has allowed state-run Steel
Authority of India (SAIL) to sell 25 per cent
of its iron ore produced from captive mines
and dispose old stock of 70 million tonnes
(mt) of low-grade iron ore mines and ores
lying at mine heads across the country.
Theministryofsteelhasstatedthatmore
than 162 mt of low-grade iron ore are avail-
able at mine heads in India, as the regula-
tions do not permit SAIL to sell these mate-
rials to domestic
The move is seen end-use companies.
as an effort to The move by the
reduce concerns ministry through two
regarding the separate notifications
expiry of mines on September 16 is
seen as an effort to
reduce concerns regarding the expiry of
mines. Thirty-one working mines of iron
oreareexpiring on March2020.SAILhasthe
capacity to enhance iron ore production
from its captive mines by around 8 mt in
2019-20 and 12 mt by 2021-22.
“The government has given permission
to sell 70 mt of sub-grade minerals in the
captive mines of SAIL,” the ministry of steel
has tweeted. In order to increase evacua-
tion from captive mines, the government
has allowed SAIL to offload in a year, up to
a quantity equivalent to maximum 25 per
cent of total iron ore production in the pre-
vious year. For this, the company will have
to get clearance from state governments.
6 ECONOMY
>
MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019 1

RBI wants stricter rules for ONE YEAR ON, HOW

e-com payments gateways
ANUP ROY
Mumbai, 17 September
-commerce market-
E places acting as pay-
ment gateways and pay-
ment aggregators to other
merchants will stop the activi-
ties in three months unless
they separate this business and
comply with all regulations,
according to a discussion paper
released by the Reserve Bank of
India (RBI) on Tuesday.
Payment gateways and pay-
ment aggregators refer to enti-
ties, which provide technology
infrastructure to route and facil-
itate processing of an online
payment transaction and per-
form other functions without
actually handling the funds.
They also facilitate e-com-
merce sites and merchants to
accept payment instruments
from customers for comple-
tion of their payment obliga-
tions to the merchants. Apart
from handling funds, they get
access to customer data.
"If they desire to pursue this
activity, it shall be separated
from marketplace business
and the separate entity shall
comply with the regulations,"
the discussion paper, which
DOs & DON’Ts
 E-commerce firms should
 These gateways should be
 Payment aggregators should
 If net worth is not managed
also discussed draft guidelines
on such companies, said.
However, as banks are
already regulated by the RBI,
the payment gateway services
provided by them need not
require a separate authorisa-
tion as these activities form
part of regular banking busi-
ness, the RBI said.
The discussion paper noted
that the existing rules have
worked well for payments
gateways and aggregators, and
therefore can be continued.
That, indeed, is the first option
that the discussion paper
offered. There are two other
options - one, to change the
rules somewhat, and another
stop payments gateway for
other merchants
separated from marketplace
business
have a minimum net worth
of ~100 crore
within one year, business
should be closed
an entire set of new guidelines.
Banning payments gate-
ways of e-commerce compa-
nies for other merchants is
part of the third option.
The draft said the payment
aggregators should have a
minimum net worth of ~100
crore and if they don't manage
to arrange that money within
one year of putting out final
guidelines, they should stop
doing their business.
“Existing payment gateways
and payment aggregators shall
apply for authorisation; how-
ever, they shall be given one
financial year (from the date of
issue of guidelines) to comply
with the entry point norms and
other technology, security, stor-
age, etc, norms issued in this
regard," the draft said.
Further, the authorised
payment gateways and pay-
ment aggregators should also,
if required, maintain the funds
received from customers in an
escrow account with a bank.
These entities should be
subjected to both on-site and
off-site monitoring.
The entities should have a
nodal officer responsible for
regulatory and customer griev-
ance handling functions
whose details are prominently
displayed on their websites.
The payment aggregators
should have formal, publicly
disclosed customer grievance
redressal and dispute man-
agement frameworks. This
must mention the escalation
matrix and turn-around times
for complaint resolution.
"The customer and the
merchant complaints shall be
promptly handled/disposed
of by the payment aggregators
and payment gateways as per
their board-approved policy,
within a period of seven work-
ing days of receipt of com-
plaint by the payment aggre-
gator."
AYUSHMAN BHARAT FARED
FRAUDS
 Frauds
at 1,200
 Completed
probe at
 FIRs filed
against 6
hospitals 376 hospitals hospitals
PENALTY, RECOVERIES SOCIAL MEDIA
AFTER CONCLUDING
INVESTIGATION
MONITORING
135 fake mobile apps reported
~1.5 crore penalty levied 128 fake apps removed
or taken down
97 hospitals
As the Pradhan Mantri Jan Arogya Yojana (PMJAY), de-empanelled 135 fake websites reported
or Ayushman Bharat, the flagship health insurance ~1.1 crore recovered from 93 fake websites blocked
scheme of the Narendra Modi government, various agencies or taken down
completes one year of implementation, the Centre
is working to get four more states on board and
tweaking the package rates. The scheme is being
ROLE OF PRIVATE SECTOR
used for secondary care more than the tertiary one. 71% hospitals empanelled went to private sector
Under the scheme, health and wellness centres are have less than 25 beds
53% hospitals empanelled
catering to primary health needs. The government and are offering are in the private sector
has trained 16,000 Ayushman Mitras to help the non-specialised care
beneficiaries at hospitals, while 18,000 hospitals 4 million patients given
have been empanelled by the authority.
60% of 4.5 million cases treatment
VEENA MANI Source: Union health ministry
Bharatiya Kisan Union seeks ban
on e-cigarettes, vaping devices
SUBHAYAN CHAKRABORTY moves on this issue,” said
New Delhi, 17 September Cabinet likely to consider Praveen Rikhy, Convenor
of TRENDS — the trade body
The Bharatiya Kisan Union has
become the latest farmers’
ordinance on ban today representing importers,
distributors and marketers of

Irdai in talks with insurance firms hit by mergers
SUBRATA PANDA Bank. Now, Union Bank has a
Mumbai, 17 September 25.10 per cent stake in Star
Union Dai-Chi Life Insurance,
The Insurance Regulatory and while Andhra Bank has 30 per
Development Authority of cent in IndiaFirst Life
India (Irdai) has started infor- Insurance. The bank will, how-
mal consultations with insur- ever, have to choose between
ance companies whose share- Star Union Dai-Chi and
holding structure is in a fix after IndiaFirst after the merger
the merger of 10 public sector comes into effect.
banks into four, said a source Similarly, Punjab National
aware of the development. Bank (PNB), Oriental Bank of
Insurance regulation Commerce (OBC), and United
doesn’t allow an entity to pro- Bank of India will amalgamate
mote more than one insurance into one, with PNB as the anchor
company. The mergers, how- bank. Now, PNB has a 30 per
ever, have created a problem as cent stake in PNB Metlife and
many of these banks are pro- OBC has 23 per cent in Canara
moters of insurance firms. HSBC OBC Life Insurance.
According to the merger Syndicate Bank will merge into
plan, Union Bank will absorb Canara Bank and Indian Bank
Andhra Bank and Corporation will absorb Allahabad Bank.
The mergers have created
a problem as many of
these banks are promoters
of insurance companies
Canara Bank has 51 per cent in
Canara HSBC OBC Life.
Though informal consulta-
tion has started with the insur-
ance companies, Irdai has not
given any time frame to banks
to bring down their stake in any
of these firms as the banks are
yet to be formally merged, said
the source quoted above.
The banks are to officially
merge form April 1, 2020. A sim-
ilar timeline for merger was fol-
lowed during the merger of
Dena Bank and Vijaya Bank into
Bank of Baroda.
The move was announced
September last year, the swap
ratio was announced in
January, and the merger was
effective from April 1.
Moreover, Irdai has not yet
started consulting with the
banks on this matter. According
to the regulations, an entity can
either be an investor or a pro-
moter in an insurance firm. If an
entity is holding more than 15
per cent stake in an insurance
firm, then it is a promoter. If the
stake is less than 15 per cent,
then it’s an investor.
group to demand a complete
ban on e-cigarettes and
vaping devices.
The ban on electronic nico-
tine delivery systems (ENDS),
commonly known as e-ciga-
rettes, has been pushed by the
health ministry since 2018.
“If e-cigarettes or ENDS are
allowed in India, it will have a
devastating effect on tobacco
farmers. The main reason is that
e-cigarette companies trying to
open shops in India are of for-
eign origin and do not use
Indian tobacco. In fact, the
countries that these e-cigarettes
belong to, such as the US, have
also banned them,” the
Bharatiya Kisan Union said on
Wednesday.
The ban on manufacture,
sale, and trading of e-cigarettes
reportedly includes penal pro-
visions going up to a maximum
PRESS TRUST OF INDIA
New Delhi, 17 September
The Cabinet is likely to
consider an ordinance
seeking to ban production,
import, distribution, and
sale of electronic cigarettes,
and a jail term for violators,
sources said on Tuesday.
The Prohibition of
E-cigarettes Ordinance, 2019,
has been examined by a
Group of Ministers (GoM)
following directions from the
Prime Minister’s Office.
“The GoM had suggested
of three years in jail, and fine up
to ~5 lakh for sale, manufacture,
and even possession.
E-cigarette makers have crit-
icised the move for being too
heavy-handed. “A selective
minor changes and these
have been incorporated. The
draft ordinance is likely to be
put up before the Cabinet
tomorrow (Wednesday),"
a source said.
In the draft, the health
ministry has proposed a
maximum imprisonment of
up to one year along with a
penalty of ~1 lakh against
first time violators. The
ministry has recommended a
maximum of up to three
years of jail and a penalty of
~5 lakh for repeat offenders,
the sources said.
campaign unleashed by the
Ministry of Health, which
refused to afford even five min-
utes of time to our 15 represen-
tations over two months, is
indicative of the pre-meditated
ENDS in India.
Overall, more than 30 coun-
tries have banned these e-ciga-
rettes/ENDS and other coun-
tries are planning to ban them.
Tobacco growing countries like
Thailand, Nepal, Brazil, Mexico,
Sri Lanka have also banned
ENDS to save the livelihoods of
their farmers.
The Federation of All India
Farmer Associations (FAIFA)
has also said not banning e-cig-
arettes would be catastrophic
for local tobacco farmers.
“Extraction of nicotine from
tobacco for products such as
ENDS happens largely outside
India, from tobacco grown in
other countries. It will hugely
impact livelihood of Indian
tobacco farmers if such prod-
ucts are allowed to carry
on business,” FAIFA said
on Tuesday.
8 ISSUES AND INSIGHTS
>
MUMBAI | WEDNESDAY 18 SEPTEMBER 2019

Being a constitutional court

The current trend of hearing high profile cases end to end should
be carried forward
scheduled to start hearing challenges
to the abrogation of Article 370 of the
Constitution related to Jammu and
Kashmir. If this trend of disposing of
constitutionally high profile cases one
after the other is kept up, many dog-
eared files will disappear from the
scores of almirahs that block the corri-
dors of the court building.
The political climate might have
something to do with this expeditious
OUT OF COURT hearing of sensitive cases; some would
M J ANTONY point to the retirement of the Chief
Justice in November. Whatever be the
reason, short hearings of constitutional
cases should be the norm for the future.
the celebrated Kesavananda Bharati
took seven months and the three
Judges Appointments cases took four
months each. The US Supreme Court
allows only half an hour each to oppo-
site sides. Then a red light blinks.
The present judges have the advan-
tages of computers — AI in waiting —
and assistance of interns to deliver
judgments faster. There is a research
wing, in theory. Therefore, constitu-
tional cases should not rumble along
like in the olden times.
When the court was shifted to the
present building in 1958, there were
only eight judges sitting together in one
The task is of course formidable.
There are more than 250 Constitution
matters that have been referred to
benches of five judges. Some of them
were ready for a final hearing since
1992. The questions involved are very
complex, like the right to property after
constitutional amendments going back
to the days of the 1975 Emergency and
definition of industry in the Industrial
Disputes Act. Then there are 11 cases
referred to benches of seven judges
dealing with, among other things, leg-
islative privileges versus freedom of the
media. Benches consisting of nine
judges have to decide 132 issues.
Therefore it is imperative to have a
Constitution bench functioning all the
time. With the present strength of
judges it is not impossible.
There are several jurists who argue
that the Supreme Court should hear
only substantial questions of law
involving interpretation of the statute.
In the last few weeks the judgments
some constitutional amendments.
However, it is not difficult in the pre- > CHINESE WHISPERS
sent circumstances. After all, our
Constitution has been changed about
125 times and is the most amended one Congress' money problems
in the democratic world. Constrained by
One of the advantages of setting up pecuniary
appellate courts, separate from the problems the
Supreme Court, is that such courts Congress party
could be set up in other parts of the has had to
country. It is the persistent grievance reschedule an
of litigants from the south or north-east upcoming anti-
that carrying appeals to the Supreme government
Court is expensive and tedious. Many offensive.
of them abandon their legitimate rights Congress
just because of geographical distances. President Sonia
Judges have consistently rebuffed the Gandhi (pictured) last week chaired a
idea though several Law Commission meeting of senior party leaders and
reports had recommended it. Their officer-bearers posted at the party’s
argument is that the Supreme Court national headquarters in New Delhi and
will lose its unitary character. But tak- also state leaders. She implored them to
ing away the appellate jurisdiction in turn to “agitational” politics to reach
ordinary matters and keeping only con- out to the people. The meeting agreed
stitutional questions to themselves that the party should hit the road and
would improve the performance of the organise protests and demonstrations

T
he last few weeks have given the
Supreme Court of India the aura
of a constitutional court. A five-
judge bench headed by the Chief
Justice is hearing the Ayodhya case in
Court No 1 and a decision is expected
soon. Next month, another bench is
The Ayodhya case has shown that it is
possible to decide complex issues with-
in a time frame. There are nearly
20,000 pages of documents in eight dif-
ferent languages, painstakingly trans-
lated into English. Still the case will
conclude in two months. In contrast,
hall. They decided constitutional cases
without undue delay. Now the sanc-
tioned strength of judges has risen to
34 and 30 of them are sitting in 14 halls.
This is an unprecedented opportunity
to clear some of the old constitution
bench matters.
delivered were mostly in old cases deal-
ing with partition, promotions, tenancy
or common offences like false weights
and measures or food adulteration in
hotels. These could be disposed of by
an appellate court without burdening
the Supreme Court. That would require
court. It will also add to the dignity of
the court. Instead of stalling these
reforms, the judges themselves should
initiate them. Meanwhile, they should
set up a permanent Constitution bench
in the Supreme Court; not when politi-
cal pressure becomes unbearable.
to highlight the economic slowdown. It
announced the party's state units
would organise conventions and
conclaves on the economic slowdown in
their respective states from September
20 to 30, and hold protests from October
15 to 25. However, the first phase of the
programme has been postponed — the
new dates to hold the conclaves on
economic issues is September 28 to 30.

FDI in coal: Mine over matter

absence of a mechanism to ensure that
the price of coal is such that the biggest
coal user — the power sector, which Present please
works on the lowest tariff benchmarking
— is able to honour power purchase
agreements. Whether commercially
Attracting foreign interest in commercial coal mining requires addressing several critical mined coal available of the shelf from
operators offering the highest revenue
questions about pricing, logistics and regulation first share can generate power for cash-
strapped distribution companies
JYOTI MUKUL Infra Ltd, Sainik Mining & Allied Services SUPPLY GAP remains an unanswered question.
Ltd, Sical Logistics and Ambey Mining, Total production n Coal India n SCCL n Captive and Others n Demand (Figures in mn tonne) Assuming that some commercial coal

T
he Union Cabinet’s approval on are likely to be the major bidders for com- blocks are given out to private companies
August 28 for opening commer- mercial mining contracts. The entry of
Shortfall by March 2020 and they are able to start
68
cial coal mining to the 100 per foreign companies would depend on the 608 58 production without issues of environ-
cent foreign direct investment (FDI) gave bidding conditions. (235) ment clearance and land acquisition in Absenteeism among teachers in
FY19
the impression of major reform in a sec- What are these conditions? The 969 the next two years, will such mining be government schools is the stuff of
tor dominated by state-owned Coal India methodology was set out in a February 67 viable given that no new coal power modern folklore. Uttar Pradesh is no
Ltd (CIL). Closer inspection suggests that 2018 announcement, in which the coal 660 83 plants are being planned and the man- exception. To curb the menace,
the announcement was part of a contin- ministry stated that the opening up of FY20 (190) ufacturing sector can barely sustain especially in rural schools, the
uum of creeping reform in the sector, commercial coal mining for the private 1,000 itself? Conversely, if demand outstrips Adityanath government has introduced
which began with the auction of captive sector is “the most ambitious coal sector 70 supply, as at present where there an esti- an app-based attendance system for
mines in 2014. That was the upshot of a reform since the nationalisation of this 710 101 mated 90 mt shortfall, it is also impor- teachers to ensure their “physical”
FY21 (171)
Supreme Court decision to de-allocate sector in 1973”. 1,052 tant that a parallel effort is made for reg- presence at stipulated time slots. Not
these mines, the result of a controversy Under the Cabinet-approved ulations so that there is both a level surprisingly, teachers are up in arms
under the previous United Progressive methodology, the auction will be in an 75 playing field for all categories of coal pro- against the change, with some
Alliance. ascending forward auction
765 124 ducers and greater transparency in the enterprising ones even claiming breach
FY22 (190)
Strictly speaking, there under which the bid param- 1,111 pricing of domestic coal. of privacy, thanks to the new app. The
has been no bar on FDI eter will be the price offer for Besides, in the move towards commer- government is in no mood to relent and
before. The Cabinet every tonne paid to the state
80 cial mining and a vibrant market for coal, has drawn up a list of education
822 138
announcement merely clar- government on volumes pro- FY23 (132) there has been no discussion on environ- department officials who have allegedly
ified matters. But this was duced. Simply put, whichever 1,172 ment and safety related challenges, both stoked the teachers’ resistance to keep
needed since even after the bidder offers a higher share 85 of which are seen as hurdles rather than their own coffers ringing.
new law Coal Mines
(Special Provision) Act,
TAKE of revenue per tonne gets the
block. FY24
880 154
(118)
prerequisites that need attention.
In 2012 when Coal India could not
2015, mining rights contin- TWO How far this plan will 1,237 meet industry’s demand, a presidential
A long weekend of strike
ued to be given out for des- ANALYSIS BEHIND progress remains an open Source: Five Year Coal Vision directive was issued to the company stat-
ignated end-use purposes, THE HEADLINES question. Since the January ing the company must meet 80 per cent Bank labour unions plan their strikes
such as power generation, 2016 enabling provision, cent of total production or 154 million defer. It, therefore, suggested all con- of the requirements of power producers. so well that they invariably coincide
steel production, only. there has been little progress tonne from captive miners and others. tracts be shifted to commercial mining Since then, the Union government has with a long weekend. The next bank
In January 2016, the government had on commercial mining auctions. In fact, Compare this to 880 mt production esti- in one year’s time. been mediating between the coal users strike has been called on September
come out with an enabling provision to the ministry of coal’s five-year vision mated to come from CIL plus 85 mt from This major policy shift, then, intends and suppliers to get the equation right. 26 and 27. The next day, September
allow commercial mining without any plan for FY19-24 has not accounted for Singareni Collieries, a joint venture to introduce greater efficiency in coal Despite the new legal framework, the 28, is a fourth Saturday and a holiday.
end-use restriction. Currently, only CIL any production from commercial min- between the Telangana state govern- mining by ending CIL’s monopoly and sector continues to rely on CIL matching After Sunday, September 30 is half-
and its subsidiaries mine coal commer- ers. It can be argued that since FY24 is ment and the Union government. In fact, attracting best-in-class technology. demand expectations even as private yearly closing and October 2 is a
cially though there are also Mining less than five years away and the gov- a report from a high-level committee What, however, is missing is a vibrant miners go in for the safer MDO route, national holiday on account of Gandhi
Developer and Operators (MDOs) ernment is yet to hold an auction for under Rajiv Kumar, vice-chairman, NITI coal evacuation infrastructure such as leaving the Union government to look at Jayanti. Some experienced bank
appointed by state and central govern- commercial mining, it is realistic to esti- Aayog, recently noted that captive min- railway lines, modernised washeries and ways to bridge the gap between demand officials are mulling taking an off on
ment entities to mine coal on their behalf. mate no or very small production from ing leads to sub-optimal utilisation of the private sector’s capability to operate and supply. This state of affairs is ironic October 1 so that they can treat this as
These MDOs, which include names this category of blocks. mines since production and require- transparently. in a country with the fifth largest coal a mini holiday.
like Adani Enterprises, BGR Mining & All the vision plan envisions is 14 per ment of coal by the end-use plant could The biggest gap in the policy is the reserves in the world.

INSIGHT > LETTERS

Nips ‘n’ tucks to fix cyclical slowdown
JIGAR MISTRY
is set to add over 200 mn to the working
age population (UN World Population
Prospects 2019 edition). Clearly, the
number of people available to work is
rising. Regarding point (b), the creation
of hard (roads and electricity infras-
tructure) and soft (mobile telephony
and data networks) assets should boost
efficiency. To us, India appears to be
on a sound structural footing.
Let us overlay credit on this hypo-
thetical economy. People borrow more
when economic activity is booming,
eventually going overboard such that
Over-ambitious target Cause for anxiety
report). The IL&FS default resulted in This refers to “Oil price surges; Govt
a freeze in credit markets and NBFC plays down concerns” (September 17).
were forced to scale back, triggering An anticipated fall in oil supply from
an unprecedented liquidity crunch. Saudi Arabia in the wake of the drone
Systemwide credit has been in surplus attack on Saudi Aramco is a cause for
for over four months now, but banks concern to India, which is already expe-
have been wary of lending it and NBFC riencing economic slowdown. It is also en due to higher goods and services tax
are unable to do so. This has depressed not trading with Iran. However, despite (GST) being levied on them. The indus-
asset prices and created negative the assurance provided by the govern- try wants 5 per cent and not 18 per cent.
wealth effect, which is further impact- ment of adequate availability of oil and I am writing to say that such demand
ing consumption. of adequate inventory of oil by Saudi should not be agreed to. The problem
The bigger question is, what will Arabia, pricing is of equal concern as an with the industry of all goods is that they
pull India out of the current logjam? excess of demand over supply will keep on asking for exemptions and at
We believe, the ongoing resolutions increase the prices. the same time, they ask for a “seamless

I
t’s become common practice
nowadays to tom-tom the latest
high frequency economic indica-
tors as proof of the structural slow-
down in India’s economy. According
to naysayers, in a developing economy
like India, there’s no room for auto or
consumer discretionary goods’ sales
to slump into negative territory.
“India’s economy has a structural
problem and the government must
stimulate the economy” or so the
rhetoric goes.
The Federal Reserve Bank distin-
guishes between structural and cyclical
changes based on whether monetary
and fiscal policies can offset the decline
in output and employment (FRBSF
Economic Letter dated June 11, 2012).
In India what we are currently facing
is a crisis of confidence perpetuated by
a variety of factors. In our view, the
country’s structural fabric is intact and
a mix of measures -- partly from ongo-
ing resolutions and partly guided by
government action -- can help arrest
the current cyclical slowdown.
Now let us consider a hypothetical
economy where credit does not exist
and the only way to grow income is
when (a) a higher number of people
work; and (b) when people work more
efficiently. Let’s call it the structural
fabric of that nation. Extrapolating
these in India’s context we see that
labour force participation is about 500
mn and over the next three decades, it
debt outpaces income. They essentially
borrow from their future self and unless
credit is put to productive use, future
consumption must be pruned to repay
the loans. This deleveraging cycle is
accompanied by spending cuts, deflat-
ed asset prices and fall in incomes. This
is where it gets interesting for India.
Over the past 13 years, India’s end-
use of credit has been extremely non-
productive. Between 2006 and 2019,
its total system credit jumped by about
9x to over ~100 trillion. (Total system
credit is banking system plus NBFC
minus bank lending to NBFC). During
the same period, non-performing
loans (NPA) catapulted by Rs 11.5 tril-
lion. In a steady-state, banks earn
about 2.5 per cent return on assets
(pre-tax and pre-provisioning) by
deploying 12 per cent of loans as capi-
tal. The rise in NPA has wiped off 70
per cent of all banking sector’s earn-
ings for these years or nearly the entire
banking system’s capital. This clearly
is unproductive use of credit.
The problem has been accentuated
by the phenomenal rise and subse-
quent collapse of non-banking finance
companies (NBFC). Between 2014 and
2019, NBFC accounted for 33 per cent
of credit growth (13 per cent of system
credit in 2014). In 2019, they accounted
for 40 per cent of new retail loans and
had 56 per cent share of retail loans to
new-to-credit customers (FIBAC 2019
annual benchmarking and insights
at NCLT and outside it should bring
back confidence; banks could start
lending to a broader borrower base.
Ideally, the government should have
accelerated capital spending, but lim-
ited fiscal room (taxes may not rise the
budgeted 18 per cent risking 3.3 per
cent gross fiscal deficit), even after
accounting for higher dividend from
the RBI, prevents it from doing so.
The good part is that borrowing
rates for top corporates have fallen by
over 100bps over the past three
months despite limited transmission
of rate cuts by banks. Also, the govern-
ment’s recent demand-boosting move
for autos, promise of measures in
housing sector and a general ‘we-care’
attitude will definitely help.
Besides these demand-boosting
measures, a lot of feel-good announce-
ments could also help. For example: (i)
commitment to fill all vacant govern-
ment jobs, over say the next one year;
(ii) withdrawing litigation outstanding
for more than a decade where the gov-
ernment has lost at the tribunal level;
and (iii) quickly releasing arrears out-
standing at all levels of government/
quasi-government institutions.
A crisis of confidence does not
always need more money thrown at it;
an assurance that ‘we are here to help’
will go a long way.
The author is a co-founder of Buoyant
Capital; tweets @BuoyantCap
This refers to “LIC equity portfolio takes
~57,000 Cr hit’ (September 17) by Jash
Kripalani. Prior to the recommendations
of the Sukhamoy Chakravarty
Committee report in the 1980s, the gov-
ernment of India was in the habit of fre-
quently inserting its hand into the
Reserve Bank of India’s ‘cookie jar’,
resulting in automatic monetisation of
fiscal deficit leading to double digit infla-
tion for decades.
The governments in the 21st century
in India discovered a new way to finance
their fiscal deficits, that is, using the Life
Insurance Corporation of India (LIC) to
invest, switch, buy, rescue and act as
white knight with respect to the govern-
ment’s ambitious disinvestment targets
and saving IDBI Bank from going kaput.
The funds available to the LIC are not
‘sovereign funds’ but hard earned sav-
ings of the people of India. Even
sovereign funds like Temasek of
Singapore do not conduct their financial
dealings as unprofessionally and as irre-
sponsibly as has been done by the LIC
in the last couple of years.
One single misstep in the Budget
forced foreign portfolio investors to take
billions of dollars out of India resulting
in massive erosion of shareholder
wealth. The government has also lost its
share of wealth in public sector under-
takings. In this scenario, will it be possi-
ble for the government to meet its over-
ambitious disinvestment targets?
Ganga Nayan Rath Hyderabad
Intra-day price fluctuations for Brent
crude oil is also a cause for anxiety. Time
is crucial for the market and economic
confidence to be restored. The need,
therefore, is to tread with caution to off-
set the crisis. This may have a domino
effect. If the cost of imports increase, the
cost of production will go up leading to
lower productivity, a fall in revenue
inflow both from domestic and export
markets, inflation, and finally retrench-
ment of labour and increase in unem-
ployment. This impact might be felt
across the economy starting with agri-
culture, small, medium and village
industry, and retail trade adversely
impacting the gross domestic product.
C Gopinath Nair Kochi
Bogus lobbies
This refers to "Top biscuit makers seek
GST cut for below Rs 100/kg segment"
(September 16). It is being argued that
sales of cheaper biscuit packets have fall-
>
HAMBONE
system” of tariff mechanism and GST
system. This is a self-contradictory
demand. The difference is 13 per cent,
which is nominal and can be easily
absorbed in the total cost of all biscuits
of higher and lower price. The same lame
logic the industry uses for footwear of
cheaper and costlier variety and for
cigarettes. Once the government impos-
es the same duty on cigarettes on the
basis of size, these industries will have
to adjust themselves to this same rate.
So the government should straightaway
refuse the demand for exemption for
cheap biscuits. GST must not be ruined
by such bogus lobbies.
Sukumar Mukhopadhyay
via email
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201 · E-mail: letters@bsmail.in
All letters must have a postal address and telephone
number
 >
OPINION 9
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Volume XXIV Number 25

MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019 BUOYANCY OF TAX DIRECT AND INDIRECT TAX AS
REVENUE PER CENT OF TAX REVENUE
Don’t cut GST Figures in (%) Figures in (%)

The Council should instead focus on compliance

T
he Goods and Services Tax (GST) Council will meet later this week
and is expected to deliberate on the possibility of cutting rates.
While the Monetary Policy Committee of the Reserve Bank of
India (RBI) will take a call on the policy interest rate next month,
at the moment, industry is looking at the GST Council for relief. But with a
and reflect the ephemeral impact of tax pressure by
slowdown sharper than expected, a decision to cut GST rates will not be
the administration.
easy. Theoretically, it can be argued that a reduction in rates will help revive Figure 2 demonstrates a “double” scissors pattern
demand, which itself will partly compensate for the revenue loss. There are with direct tax steadily gaining and then overtaking
vocal demands from sections of industry, particularly the auto sector, for indirect tax in share of total revenue from 2007-08
reducing the rates. The sector has seen a severe decline in sales in recent but, after achieving the highest difference in 2009-
months. However, the council would be well advised to not cut rates at this 10, the gap narrowed until 2015-16. And, in 2016-17,
the share of indirect tax once again exceeded that of
stage for a variety of reasons. *provisional
direct tax, with indirect tax accounting for 50.3 per
For one, any sector-specific rate reduction will further distort the system cent of tax revenue. But in 2017-18, direct tax again
and lead to more such demands from other segments. Aside from the auto overtook indirect tax, representing 52.3 per cent of
sector, businesses in the area of biscuits and cement are also looking for
relief. If the council starts giving sector-specific relief, the list will only grow.
Second, it is extremely important at this stage to protect tax revenues. As
reported by this newspaper, till August, the gap between cess collection and
Analysing new tax revenue. The interim period of indirect tax being
higher than direct tax reflected a return to customs
duties and domestic excise. In the prevailing global
taxation scenario, where the US is imposing barriers

the compensation disbursed to the states reached around ~24,000 crore.
Lower than expected collection of the GST will disproportionately affect the
Union government because it has to compensate the states for the shortfall.
The Union government, in any case, is likely to fall short of its revenue target
by a significant margin and needs a revenue growth rate of 18 per cent for the
year to meet the Budget target. However, the trend so far suggests that it
could fall short by over ~2 trillion.
revenue information
on trading partners that it deems to levy high customs
duties, India needs to examine its customs and excise
duty regimes.
A question arises as to why, in 2017-18, direct tax
overtook indirect tax in its contribution to overall
Increased buoyancy is welcome, though it needs tax revenue: Is it exclusively expansion in taxpayer
base—indeed there has been steady growth in the
examination of causes number of taxpayers — or is it also an increase in tax
pressure? Or is it as well a reflection of revenue damp-

T
While the excess capital transfer from the RBI worth about ~58,000 crore here is new revenue data available that is answer should ideally reflect an increasing number ening from GST due to high input tax credit in the
will help, it will not be enough to bridge the gap. So the government will either revealing in terms of revenue trends and, of income taxpayers, which would be an achieve- economy as a whole, and due to larger refunds in
have to reduce expenditure or increase borrowings. Both will negatively affect therefore, worth analysing (Time Series Data ment. It could arise as outcomes of efforts made by particular in the export sector? In turn, they would
2000-01 to 2017-18, Income Tax Department).To the tax administration in bringing tax evaders and cause GST to be unable to yield its expected or pro-
the economy. Since the government cannot cut most of its revenue expenditure,
begin, on the statistics itself, the 2017-18 numbers fence-sitters into the tax net. On the other hand, jected revenue.
such as interest payments and salaries, it will have to cut capital expenditure. are provisional and estimates for 2016-17 are the first additional revenue may be obtained by pursuing a Is it also due to the many changes in GST rates in
Higher borrowing, on the other hand, will increase the government’s claim revised estimates with base year 2011-12. From 2014- revenue goal. This puts pressure on bad and good the post-introduction period that continues present-
on savings in the economy and affect private sector activity. Further, it has 15, the GDP base year used is 2011-12. The GDP series taxpayers alike but it could also reflect pressure on ly? Indeed rate reductions may be needed from a
been reported that the government is trying to cut off-Budget borrowing and for 2004-05 to 2013-14 used 2004- officers to collect tax irrespective structural perspective in sectors where the rates have
expenditure. This should be welcomed. It will increase transparency and make 05 as base year. These are clubbed of the state of the economy. caused build-up of excess input tax credit—creditable
together. Though the impact on The challenge of policymakers inputs have higher tax rates than outputs. But a policy
the Budget numbers more credible. But if the revenues fall short, the govern-
buoyancy calculations may not be is to expand the taxpayer base challenge remains not to change other rates in cases
ment may not be able to make much headway in this direction. high, consistency is warranted (see while eschewing unjustified rev- where build-up of input tax credit is not an issue,
Therefore, instead of listening to sectoral demands for reducing rates, a my column dated June 5, 2016). enue pressure on taxpayers and rather, rate reductions reflect political expediency
sensible strategy in the long run would be to combine the moves to reduce the Buoyancy is the percentage on tax officers alike. The revenue in India’s fiscal federal state in which Centre-state
number of goods and services taxed at 28 per cent and move some to the 18 response in tax revenue to a 1 per goal has been replaced by give and take may reign supreme.
per cent rate with those to increase the rates for a host of other items placed at cent increase in GDP. Clearly the advanced tax administrations In any event, after post-tax rate reductions, the
2017-18 data reveals a pretty high with revenue monitoring systems burden on suppliers to prove that they have not “undu-
lower slabs. This would help the council to gradually reduce the number of
buoyancy of 1.8 (see Figure 1), on that are linked to the ongoing busi- ly enriched” themselves (by not passing on the accom-
tax slabs to two or three categories. This will not only help push the GST a steadily increasing path from PARTHASARATHI SHOME ness cycle. To bring Indian indus- panying benefit to consumers) before refunds are giv-
reforms agenda but also reduce the collection shortfall. The council would 2015-16. The earlier period during try back on track, such an en, has to be minimised. Absence of undue enrichment
also do well to look at the ease of filing and increasing compliance. Cases of which such steadily rising buoy- approach is now needed. Between is difficult to prove, leads to complaints if not litigation,
large-scale fraud and fake invoices have been reported. The council’s priority ancy manifested itself was between 2004-05 and the two — reducing tax rates through more tax incen- corroding GST’s advantages. Further, if export refunds
should be to address these issues urgently. 2006-07, when buoyancy shot up from 1.5 to 2.4. tives for flagging sectors and reducing tax pressure increase, as long as they are legitimate, they should
That was a period of exceptional private business — the latter would be more effective in raising the be granted quickly rather than protecting the need for
sector growth so that its tax revenue contribution economy back to its fundamental growth path. revenue as a binding constraint. Government’s effec-

Democratise New Delhi was also on a sharply rising trend. Admittedly, this is not easy to achieve but this strat-
Statistics of prevailing times do not reveal the egy has had success in economies in which it has
same kind of growth in the private business sector been implemented. Policymakers need to look into
tive guidance to the field, indicating refunds should
be quick as evidenced in the Central Board of Indirect
Taxes and Customs Chair’s weekly reports, is reassur-
Redevelopment plans for Lutyens’ Delhi should go far enough which faces challenges in growth in its various sub- the mores and practices of tax administration at the ing. Field level reform has to be monitored in both
sectors. The question, therefore, arises where from field level. If so, buoyancy could rise even beyond direct and indirect taxes, intensifying improvements

T
he government is seriously considering a far-reaching overhaul of a high tax revenue buoyancy of 1.8 emerges. The 1.8 on a secular basis. Otherwise it will be temporary that are occurring.
New Delhi’s “Central Vista”, the ceremonial and official area leading
from India Gate to the Rashtrapati Bhavan on Raisina Hill. This area
includes not just the old princes’ buildings around the India Gate
hexagon, but also the heritage buildings of the Central Secretariat, Sir Herbert
Baker’s Parliament House, and the post-Independence “general purpose office
accommodations” such as Udyog Bhavan and Shastri Bhavan. The area also
Let’s manage risks, not disasters
A
includes barracks converted into permanent office buildings, some dating from year ago, flash floods created havoc in hillslopes, riverbeds, lakebeds and seafronts. to assess their local risks better, and get access to
the Second World War. The government’s aim, according to reports quoting a Kerala. As the nation responded to the dis- Whatever buffers we had in the form of natural accurate and easy to understand early warning.
proposal from the Central Public Works Department, is to upgrade public facilities, aster, an ugly truth emerged — that of fast vegetation that held slopes together and kept inun- Notable disaster risk reduction efforts today are
amenities, parking, and green space to make the area a world-class tourist des- changing patterns of rainfall in South Asia. As dation in check, have also been lost to the new helping village communities in Bihar monitor their
floods across the country rule the headlines again development pattern. While we revel in our suc- rivers and translate warning data into local action-
tination by November 2020, and to create “new iconic structures” that would be this year, a look at the last decade shows that rain- cesses on such development, nature does finally able information; enabling tribal families in North
“a legacy for 150 to 200 years” and represent “the values and aspirations for a fall variability has caused floods and water short- strike to reclaim these lands. Kerala figure out nature-based solutions to secure
New India ... rooted in the Indian culture and social milieu”. ages across the country, including in the most Furthermore, we continue to use 19th century themselves against landslides; teaching school
The Indian government has not had a great record with building new and unlikely of locations. There have been devastating models to respond to 21st century disasters. These children in Uttarakhand how to assess and address
aesthetically pleasing offices, so there is naturally some concern at this proposal. floods in the deserts of Rajasthan and Ladakh, methods follow an archaic system, where disasters risks within their school environments; and help-
Will any new developments indeed be harmonious additions to the skyline of while rain-rich areas such as the North-East have are expected to follow a “season” and hit only in ing children in Sikkim operate a weather station
faced water stress and lake-cities such as Chennai known geographies. Water released in dams, for and climate-lab within their school.
Raisina Hill? While the historical environs of South and North Block as well as have run completely dry. A report by the United example, is based on a manual system of measure- Long-term resilience in response to the new
Parliament should surely be preserved, given that they are treasures not just of Nation’s Intergovernmental Panel ment and prediction. Planning of risks identified was missing from fundamental
India but the world, the Secretariat buildings can be turned into a museum of on Climate Change predicts such our cities may be getting smarter approach to disaster recovery. The job of the
modern Indian history. Parliament might need a new wing, as an extension of changes are irreversible, and will from a technological point of view, humanitarian world should be to provide resources
the old one, which could be used only for occasions of ceremonial importance continue to result in extreme but the fundamentals remain root- and begin reconstruction in affected areas from
weather conditions. ed in a narrow view of the econo- day one, that is, to help faster recovery for affected
such as opening debates and Budget speeches. And certainly, there can be no
As a nation we pay attention to my, instead of expanding into an families and build better and safer communities.
objection to repurposing the socialist-era structures such as Shastri Bhavan. these phenomena only once they ecosystem-based perspective. All
The best practices for accountability and urban rejuvenation suggest that turn into disasters, taking lives and of these directly or indirectly con- What our ancestors did right
government offices be spread across a large area to make them easier to access destroying property on a large tribute to the kind of disaster we One of the ways ahead is to understand how our
and to provide ancillary benefits to the largest possible number of people. But scale. Nature is, however, making are witnessing, which we then previous generations had learnt to live with nature
the question is whether any such redesign plans indeed go far enough. They do a case for drawing our attention to respond to with increasing bewil- and risks. How land was selected for construction,
risks, which need to be addressed derment and enhanced focus on water was harvested, courtyards kept houses well
not challenge the fundamental assumptions underlying Sir Edwin Lutyens’ city
in advance, well before disasters MANU GUPTA & ANSHU SHARMA rescue and relief actions and lit and ventilated, and at comfortable temperatures
of government. Those assumptions — that the rulers are separated from the strike. This calls for improved risk investments. through the summers and winters. How nurturing
ruled, and live in imperial pomp and suburban comfort in the middle of the city assessments, preventing invest- All in all, we are still managing native vegetation and wildlife around the houses
— are more suited to a colonial power than to the capital of a liberal republic ments in known hazard-prone zones, and building disasters, not risks. Given the conditions we now and habitats kept things in balance. Recent expe-
with a rich democratic past and present. It is not just the Central Vista that needs capacity to be able to take pre-emptive action. see all around us, both our preparedness and riences in Assam, Rajasthan, Ladakh and else-
a redesign but the Lutyens Bungalow Zone itself, which perpetuates the sepa- response need a serious revisit. where have shown that reconstruction using local
Understanding nature’s wrath materials, traditional techniques and measured
rateness of the people and their government, and insulates politicians and
Today, across the country, there are flood-and- A future-proof response technological upgrades can lead to houses and set-
bureaucrats from the real world. A new Gujarat Bhavan over multiple storeys drought-affected pockets next to one another. This The floods we have been witnessing have triggered tlements that are more environment-friendly and
has shown that the taboo about piercing New Delhi’s tree line can be broken. At is the new normal, and it will do us good to an outpouring of support from all quarters, which safe from future threats.
the very least, more buildings can be built on existing plots by subdividing them. acknowledge and adjust to it quickly. is heart-warming . The onus is now on disaster There are signs all around that we urgently need
Some of the new buildings like the Ambedkar Bhawan or the Comptroller and The impact of this new normal will also be managers to channel this into long-term invest- to shift our focus from rescue and relief to long
Auditor General headquarters on Deen Dayal Upadhyaya Marg do not inspire worse than what we have ever seen, because ments for safety from future risks. Such invest- term risk-management. Nature is sending us loud-
besides the natural climate, our economic and ments may include greater engagement of local er reminders each year. It is time to listen to nature
much confidence about the architectural intentions of the government. Besides
social climate has also changed drastically over communities, improved hyper-local risk assess- and while doing so remind ourselves that our past
being examples of inefficient usage of space, they raise a fundamental question: the last few decades. We have moved from living ment, training on emergency response, crowd- holds the key to a safer future.
Are they symbols of a super-powerful Central government or of an open demo- with nature, the way the homes of our grandpar- sourcing disaster-information and rebuilding dev-
cratic society? An answer to this question should be the next step towards ents reflected, to a far more affluent and arrogant astated areas with local material and with respect The writers are co-founders of SEEDS, a humanitarian
democratising New Delhi. lifestyle where we love to dare nature by construct- for the environment. organisation with a focus on building disaster-resilient and
ing on the most hazard-prone lands, including Those living in vulnerable areas need the ability sustainable communities across Asia

The insurrection next door

co-existing with its abundant resources.
Balochistan is also a festering wound on
Pakistan’s body politic, stoked by a deep
and persistent alienation of its tribal com-
munities which has also nurtured a long-
standing armed insurgency, which repeated
BOOK REVIEW and brutal military reprisals have been
unable to snuff out.
SHYAM SARAN Mr Devasher has done extensive
research for his book. This is reflected in
complimented for sponsoring studies such
as this, which enable a deeper and more
rounded discourse on our neighbours.
The author has structured the book into
six thematic sections each with three chap-
ters. The first two sections, entitled “An
Ancient Civilization” and “Times Gone By”,
respectively, focus on the geography of
Balochistan, the ethnic make-up of its peo-
ple, their religious and cultural particulari-
sown in the cynical and violent incorpora-
tion of a hitherto independent state into
Pakistan in 1948. Thereafter, the Pakistani
state treated the province mainly as a source
of rich resources such as natural gas and
coal, to be exploited for the benefit of the
Punjabi majority with almost complete
neglect of the local population.
The final section, “Enduring
Insurrection,” explores the likelihood that
the threat of secession may materialise. The
author’s conclusion is that given the tribal
divisions that persist, the sparse and widely
distributed population and the overwhelm-
19th century that the British as the imperial
power, drew boundaries that split the Baloch
and Pushtun tribes, with portions incorpo-
rated into Iran and Afghanistan, and anoth-
er ruled directly by the British. A rump
Khanate of Kalat survived as an indepen-
dent state right up to its forcible annexation
in 1948. Kalat was never included among
the Indian princely states. It was recognised
as an independent country in the same cat-
egory as the kingdoms of Nepal and Bhutan.
Jinnah appeared to recognise this status in
1947 but there is ample evidence to show
that it was the British who urged him to
Mr Devasher has an informative chapter
on the port of Gwadar on the Baloch coast
currently being managed by the Chinese
and another on the China-Pakistan
Economic Corridor (CPEC), which traverses
Balochistan, north to south. His cogent anal-
ysis indicates that the economic and com-
mercial promise of these projects is exag-
gerated. They do make sense from the
security perspective. If CPEC is described
by Pakistan as a game-changer it is mainly
in terms of the security potential not
because it is likely to transform the country’s
economic prospects. While the book is com-

T
ilak Devasher has already established
his reputation as one of India’s more
knowledgeable and perceptive
observers of Pakistan, thanks to his two ear-
lier widely-acclaimed books, Pakistan:
Courting the Abyss and Pakistan: At the
Helm. His latest book, Pakistan: The
Balochistan Conundrum, is about Pakistan’s
largest but one of the least-known provinces,
Balochistan. Few in India are aware of its
chequered history, its complex ethnic mosa-
ic and the paradox of its pervasive poverty
the several pages of notes and references.
He has used both Pakistani and interna-
tional sources and this lends credibility to
his assessments. Despite declaring that our
neighbourhood enjoys the highest priority
in our foreign policy, we have not really
devoted much attention to our understand-
ing of the underlying economic, social and
cultural factors that drive the political
dynamics of countries with which we share
our common sub-continental space. The
Indian Council of World Affairs should be
ties and their ancient and more recent his-
tory. The province is populated by Baloch
tribes but also by the Brahvi ethnic group
that, curiously, is of Dravidian origin. In the
north there is a substantial Pushtun popu-
lation. The subsequent sections on “The
Roots of Alienation” and “Relentless
Persecution” contain a detailed analysis of
the wellsprings of the endemic violence that
has ravaged the province in an action-reac-
tion process with which we in India are
familiar. The seeds of disaffection were
ing firepower that the Pakistani Army is able
to deploy, Balochistan is unlikely to emerge,
like Bangladesh, as an independent entity.
Iran next door also has a significant Baloch
population, while neighbouring Afghanistan
shares a substantial Pushtun population
with Balochistan. Neither would like to sup-
port secessionist tendencies, which may
impact their own ethnic communities.
The most interesting parts of Mr
Devasher’s book relate to the fascinating
history of Balochistan. It was during the
annex it by force for their own perceived
security interests. This has a parallel in
British officers raising the Pakistani flag in
Gilgit, claiming for their adopted country
the strategically important part of Jammu
& Kashmir, destined to play an important
role in the Cold War that followed. Was Kalat
interested in association with India? A rep-
resentative of Kalat was a participant in the
Constituent Assembly, which had begun
meeting from December 1946, though this
does not figure in the book.
prehensive in its coverage there is some
avoidable duplication across chapters. I
would have liked to see some discussion of
India’s posture towards Balochistan.
The reviewer is a former foreign secretary and is
currently Senior Fellow CPR
THE BALOCHISTAN CONUNDRUM
Tilak Devasher
Harper Collins, ~899, 357 pages
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MUMBAI | India would be seen so negatively
cement companies as they expect earnings
WEDNESDAY, 18 SEPTEMBER 2019 after such a huge mandate?”
to come under pressure on weak demand
and lack of pricing discipline SANDIP SABHARWAL
Investment advisor
WWW.SMARTINVESTOR.IN FOR INFORMED DECISION MAKING <

Broader market pricey on historical basis TOP MFS BULK UP ON CASH

Analysts cite record RICH VALUATIONS
On price-to-book basis, NBFCs are
trading at 2.7x right now, against the
valuation of top Trend in the price-to-earnings’ historical average of around 2x.
multiple of the broader market The current valuation in the bank-
index stocks despite ing space is in line with the historical
average, but analysts attribute this to
correction as reason record low m-cap of loss-making public
sector banks rather than a general
KRISHNA KANT derating of the sector. Banking stocks
Mumbai, 17 September are currently trading at 1.6x their book
value (or net worth per share) in
Five of the top 10 mutual funds by equity value are
holding cash in the range of 8-11 per cent, a reasonably
high number. Equity funds typically hold cash
amounting to 1-5 per cent of the scheme’s assets, and
raise their cash exposure when they expect the market to
fall, or when the risk-reward situation is not favourable.
It might go against the fundamental tenet of staying
invested at all times, but is a strategy employed by fund
managers to either protect the downside in the event of a
market fall or to avoid paying a high price for a stock. This
means that if stocks are not available at reasonable

T
he broader equity market
remains richly valued despite
recent correction in stock
prices, ruling out a pause in selling by
foreign portfolio investors (FPIs).
A broader basket of 864 stocks —
either part of the BSE500, BSE MidCap,
or BSE SmallCap — are currently trad-
ing at 29.5x their trailing 12-month
earnings, against the 10-year average
earnings multiple of 19.5x. The valua-
tions are down marginally from
all-time high earnings multiple of
31.2x at the end of March this year.
In comparison, these stocks were
trading at 15.6x their trailing 12-month
earnings at the end of March 2014. The
valuation gap is most elevated in
the NBFC space, followed by the
non-financial sector (see chart).
Analysts attribute this to record
valuation of the top index stocks, even
though price has corrected significantly
in the broader market. “If you exclude
the top 15 stocks that are part of the
Nifty50, most of the smaller stocks
(in terms of market capitalisation, or
m-cap) look reasonably valued,
based on historical averages,” says
G Chokkalingam, founder and
managing director of Equinomics
Research & Advisory Services.
This, he says, rules out an across-
the-board selling by FPIs. It could be
restricted to stocks in the sector, where
valuations remain on the higher side
and is over-owned by foreign investors.
However, even selective selling in
the top stocks would bring down the
overall market, as the top 10 stocks now
account for little over a third of the
combined m-cap of all listed stocks,
while the top 23 listed firms now bring
in half of the m-cap.
Valuations remain elevated in most
segments of the market, including non-
financial firms and non-bank lenders.
Note: Based on a common sample of 864 companies
from BSE 500, BSE MidCap and BSE SmallCap indices
Compiled by BS Research Bureau Source: Capitaline
For example, non-financial firms are
trading at 25.5x their trailing 12-month
earnings, against the 10-year average
earnings multiple of 20.1x. These were
trading at 17.2x their trailing earnings
on average at the end of March 2014.
Non-banking financial companies
(NBFCs), however, look most expensive
on a historical basis. The sector is
currently trading at record high 19.6x
its trailing 12-month earnings, against
the 10-year average of 12.4x.
2018-19, similar to their average valuations, fund managers may decide to raise their
valuation in the last 10 years. cash holdings. This number can also fluctuate,
Analysts say that this could be
depending upon the scheme mandate. It has become
because 15 of the 34 listed banks have
reported net loss on trailing 12-months tougher to stay fully invested in the current market
— one the worst showing by the indus- environment, with money chasing select names and
try in recent memory. pushing up valuations. Holding a high percentage of
Nearly 59 per cent of the industry’s assets in cash, however, can backfire in a rising market.
combined m-cap is accounted for by ASHLEY COUTINHO
the top three private banks — HDFC
Bank, Kotak Mahindra Bank, and ICICI
Bank — which remain expensive on a
historical basis. Others say the
historical valuation is no guide to the
future as India Inc stares at an earnings
downgrade. “We see earnings pressure,
especially in the banking space, as
interest rate rise is leading to lower
margins for lenders. This could bring
down the earnings per share for the
broader market, putting pressure on
SAFETY FIRST
stock prices,” says Dhananjay Sinha, Average cash holding at top 10 MFs is nearly 7%
chief economist, IDFC Securities. Cash
Assets (~crore) holding (%)

Sebi chairman to woo FPIs amid bearish sentiment SBI MF

HDFC MF
160,400

142,800
8.3

SHRIMI CHOUDHARY
New Delhi, 17 September
Securities and Exchange Board
of India (Sebi) Chairman
Ajay Tyagi is planning to meet
top foreign portfolio investors
(FPIs) in the US this month. He
will meet other investors too.
The meeting comes at a
time when FPIs have pulled out
$5 billion from the domestic
markets this quarter.
“A full-fledged event is
being planned in the US and
the Indian Embassy is coordi-
nating it. The purpose of the
visit is to have first-hand inter-
action with FPIs to understand
their point of view on emerging
markets (EMs) and India.
Further, the regulator will
address concerns of overseas
investors over various issues,
including know-your-customer
(KYC) norms and taxation,” said
a person in the know.
Sebi recently made changes
to the FPI framework to ease
the investment process for
overseas investors. A direct
meeting between FPIs and Sebi
is to help gather feedback on
recent changes and iron out
irritants, said sources.
“Such an exercise is neces-
sary to understand the ground
reality and issues faced by FPIs.
Further, the meeting will give
an opportunity to Sebi to
5.1
explain the policy changes to their India exposure. NET INVESTMENT ~ crore ICICI Pru MF 126,100 10.7
global investors,” a source said. These developments come
The regulator will apprise at a time when India is per-
foreign investors of the steps it ceived as highly regulated and Reliance MF 96,300 3.4
took in areas such as electronic one with the steepest taxes.
trading, enhancing the accura- FPIs have been requesting the Aditya Birla Sun Life MF 77,600 6.0
cy as well as the reliability of government to do away with
the market and reference data, the long-term capital gains tax. UTI MF 67,200 3.3
and a comprehensive risk Experts say the latest
management framework. outflows have more to do with Kotak MF 58,600 8.7
Sebi had last month global factors. “The stress
simplified the framework for between China and the US is
FPIs by easing compliance and making investors nervous and
Axis MF 47,600 9.7
regulatory constraints. It did most of them want to sit on
away with the broad-based cash. Further, the stimulus Franklin Templeton MF 45,400 8.3
Equity Debt
eligibility criteria for FPIs. packages announced by
The escalation of the US- Finance Minister Nirmala
CY2019 46,417 30,282 L&T MF 34,700 5.4
China trade war and domestic Sitharaman do not seem to be FY2020 -1,523 26,822
concerns over slowdown have sufficient,” said Bhavin Shah, Data up to September 16 Source: NSDL Source: Motilal Oswal Financial Services
Compiled by BS Research Bureau
prompted foreign funds to trim partner, PwC.

THE COMPASS WeWork delays IPO after frosty response

SAIL: Open market iron ore sale gives breather
Merchant sales UJJVAL JAUHARI
not seen as a The Steel Authority of India (SAIL) stock
received a major boost on Tuesday, jumping
game changer; over 8 per cent in intra-day trade. This
gains likely to followed reports that the government has
given its nod to the firm for selling a fourth
be temporary of its iron ore produce from captive mines
to third parties (open market).
The initial reaction isn’t surprising,
given that the development comes at a
time when domestic steel demand and
realisations remain under pressure,
thereby weighing on SAIL’s profitability and
share price.
SAIL has seen its market value nearly
halve in the past five months; the stock hit
its 15-year low last month. Global trade war
concerns, too, have kept the Street cautious.
Hence, the firm being allowed merchant
iron ore sales for part of its produce — even
if for just two years — can help revenues
and earnings in the interim. The move
also comes at a time when global iron
ore prices remain firm on the back of
supply constraints.
However, the stock gave up most of its
intra-day gains and closed only 0.15 per cent
up. While some of it could be attributed to
the fall in Sensex and the BSE Metal indices
— which were down 1.7 per cent and 2.7 per
cent, respectively — the rest can be attribut-
JOSHUA FRANKLIN & ANIRBAN SEN
New York/Bengaluru, 17 September
achieved in January.
“The We Company is look-
ing forward to our upcoming
Crunchbase. This would have
been a blow to its biggest
backer SoftBank Group at a
ed to the Street’s inability to quantify the
gains for SAIL.
WeWork owner The We
Company has postponed its
IPO, which we expect to be
completed by the end of the
time when it is trying to amass
$108 billion from investors for
Although analysts look at the develop- initial public offering (IPO), year. We want to thank all of its second Vision Fund.
ment in a positive light, they are not sure walking away from prepara- our employees, members and SoftBank was discussing
of the exact gains for SAIL. Consider this: tions to launch it this month partners for their ongoing supporting the IPO by
the decision allowing merchant sales by
SAIL is looked at addressing any potential
following lacklustre response
from investors to its plans.
commitment,” the company
said in a short statement.
snapping up shares worth
between $750 million and
iron ore supply situation in the country. The US office-sharing Had the firm proceeded $1 billion, the sources said.
Most of the Odisha-based merchant start-up was getting ready to with the IPO at such a low val- However, We Company
miners will see their mining licences launch an investor road show corporate governance uation, it would have repre- decided on Monday that even
expire, therefore, the move is aimed at for its IPO this week, before standards, as well as the sented a major turning point with SoftBank’s support, the
taking care of any ore shortage for domestic making the last-minute deci- sustainability of its business in the growth of the venture IPO would have raised a little
steel producers, in case of a delay in the sion on Monday to stand model, which relies on a mix capital industry over the last over than $2 billion, short of
bidding process. down, people familiar with of long-term liabilities and decade. The VC universe has its target of at least $3 billion.
In case of the bidding process facing a the matter said. The company short-term revenue, and how led to the rise of start-ups such This target is tied to a
delay, analysts estimate an annual shortfall has been under pressure to such a model would weather as Uber, Snap, and Airbnb. $6-billion credit line that
of 30–35 million tonnes. If SAIL manages proceed with the stock mar- an economic downturn. It would have meant that We Company secured from
to ramp up production, it could end up ket flotation to secure funding Reuters reported last week We Company would be valued banks last month, that calls
gaining more than what is estimated by for its operations. that We Company might seek at below the $12.8 billion in for an IPO to take place by the
analysts at present. In the run-up to the IPO a valuation of $10-12 billion, equity that it had raised since end of the year and raise at
However, for larger gains to materialise, launch, We Company has a dramatic discount to the it was founded in 2010, least $3 billion, one of the
there is need for requisite infrastructure for faced concerns over its $47-billion valuation it according to data provider sources said. REUTERS
evacuation and sales, which analysts are
not sure about given there could be
beneficiation issues (process to enhance
economic value of low-grade iron ore).
Therefore, analysts at Edelweiss say net
gains could be fairly limited for SAIL.
Even though they see some relief for the
stock, they don’t expect merchant ore
sales to be a game changer for the public
sector steelmaker.

Consistent margins key for Tata Communications

Street will look RAM PRASAD SAHU
at profitability in The Tata Communications
stock hit the upper circuit,
data business gaining 5 per cent, as the
with uncertainty uncertainty over the surplus
land demerger ended with
over land the company transferring
773 acres valued at
now behind about ~12,000 crore into a
new entity — Hemisphere
Properties India (HPIL).
All shareholders of Tata
Communications will get
shares in the demerged
entity in the ratio of 1:1, with
the record date set at
November 18. The demerged
entity needs to be listed
within two months and the
government, which owns
51 per cent, is expected to
start the process.
The surplus land was
skewing the process of valu-
ing Tata Communications
as it formed a large part of
the stock price even after
factoring in the discount to
its asset value.
The stock is now expect-
ed to trade on its fundamen-
tals rather than on the value
attributed to the surplus
land. There could be more
upside, though.
Rohit Chordia and
Aniket Sethi of Kotak
Institutional Equities
Research said there is sur-
plus real estate (excluding
the demerged land) on the
firm’s books that is owned
by the company.
This could be contiguous
to the land demerged
into HPIL. Any change in
the land use clause for
HPIL land parcels
could unlock value for
Tata Communications.
While analysts have not
included the same in their
estimates of fair value, any
move on this front would be
positive for shareholders.
Investors will look at the
performance of its two key
segments of data and voice.
The data portfolio, which
accounts for 78 per cent of
revenues, reported 12.2 per
cent year-on-year growth in
the June quarter.
This was led by
traditional services, which
is the largest segment of the
data business.
Margins for the business
were up 490 basis points
over the year-ago quarter on
lower customer churn, high-
er productivity gain, and
lower other expenses.
Analysts at ICICI
Securities believe margin
gains, driven by improve-
ment in growth services
business of the data
segment, are key for the
stock performance.
Revenue and profit
growth in the voice business
is also a key trigger as
margin for this part is half
that of the company’s.
Investors should await
consistent growth and
margins in the data busi-
ness, as well as the impact
from any new entrant such
as Reliance Jio, before
considering the stock.
.
MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019 THE SMART INVESTOR 11 <

Recovery in H2 key to hotel stocks MF industry improves

Expectations of muted show factored in, but any miss in H2FY20 estimates could hurt valuations further
SHREEPAD S AUTE The down risk to ARR growth
global ranking on fees
Mumbai, 17 September could stem from competitive intensi- JASH KRIPLANI EXPENSE MANAGEMENT
ty from local players with availability Mumbai, 17 September
Countries that have most and least favourable
fter outperforming leading of online platforms such as OYO.

A indices such as the S&P BSE

Sensex until the start of
2019-20 (FY20), hotel stocks have been
Larger players such as EIH though are
likely to focus on ARRs, thereby aiding
the overall pricing scenario. According
The recent regulatory changes
introduced by the Securities
and Exchange Board of India
fee and expense structure
Top
Australia
Above average
NewZealand
Average
China
Belowaverage Bottom
Germany Italy
laggards in recent months, thanks to to Nirmal Bang’s report, EIH has been (Sebi) have improved the global
demand pressure amid the economic known to be the price-setter rather ranking of the country’s Netherlands Thailand India Hong Kong Taiwan
slowdown. The stocks of EIH, Indian than a price-taker. mutual fund (MF) industry in USA United Kingdom Korea Singapore
Hotels Company (IHCL), and In the June 2019 quarter, many list- terms of the overall cost of Note: Countries in ’top’ grade indicate markets with lowest asset-weighted
Lemon Tree Hotels are down by up to ed hotel players had to face slower or investing, even as the cost of median expense ratios, followed by other grades Source: Morningstar
9 per cent over the past three months. muted growth in occupancy due to the investing in equities remains
Business headwinds, mainly due impact of the general election, slow high, according to the Global the study said. that India’s grade on fees and
to the ongoing economic slowdown, consumer spending, and shutting Investor Experience Study The study also noted expenses has improved from
are likely to weigh on September 2018 down of Jet Airways. The major impact conducted by Morningstar. that investors opting for the ‘below average’ in 2017 to
quarter numbers of most of the hotels. was seen on corporate travels and The Morningstar’s biennial distributor-led mode of invest- ‘average’ in 2019. This has made
With a likely muted growth in the first meetings, incentives, conferences, study noted that the cost of ing could be one of the reasons India’s fees and expense struc-
half (April-September) of FY20, their exhibitions (MICE) revenue. However, investing in debt (fixed-income) for the relatively higher tures favourable. Countries in
growth in the second half (H2) of FY20
(October-March) would be key to
VALUATION improvement in ARR for some players
helped their top line.
funds was much cheaper than
equity funds. The asset-weight-
asset-weighted medians.
“Assets in direct share class-
the ‘below average’ grade
include Germany, France,
hotel stocks. VIEW The corporate segment, including ed median for fixed-income es have been rising gradually Belgium, and Canada. The oth-
Hotel companies failing to meet ROOM FOR MORE Revenue growth (%) EIH MICE, approximately accounts for funds was relatively lower at among investors who have part- er countries on the list include
growth expectations in H2 could see  FY19  FY20E  FY21E 25 50-60 per cent of the overall room 0.54 per cent, while those for nered with fee-based advisors. Hong Kong and Singapore. Italy
further decline in their valuation/stock Lemon Tree Hotels revenue (room revenue is around equity and allocation funds Still, the majority of individual and Taiwan are in the ‘bottom’
prices, suggest analysts. Already FY20 36.1 50 per cent of the overall revenue) for were 1.78 per cent and 1.93 per investors seek the services of grade. The study pointed out
16
revenue growth estimates for many 23.0 24.1 the hotel sector. This also shows the cent, respectively. mutual fund distributors and that India had been among the
hotel stocks are lower, compared to
Indian Hotels Co. degree of downside risk to the hotel The lower expenses in debt thus invest through a commis- most expensive geographies
2018-19 (FY19).
14.3 14.3 13.5 12.8 14 industry’s growth if slowdown fails funds could be attributed to sion embedded plan, resulting when it came to expense ratios,
10.0 7.9 8.7 7.5 Chalet Hotels
Amit Agarwal, analyst at Nirmal to recoup. investors preferring the direct in India’s relatively higher asset- especially for equity and allo-
Bang, says “H2 is a seasonally strong -1.7 14 The current geopolitical situation, route for investing in debt funds. weighted medians,” the study cation funds. However, ‘with
period for hotels. Nearly 70-75 per Figures represent EV/Ebitda (x) following the attack on crude oil instal- Direct plans typically have low- read. However, Jeffrey Ptak, the recent expense cap reduc-
cent of yearly profits of the hotel EIH Lemon Indian Chalet FY21 estimated
lations of the world’s largest oil pro- er total expense ratios (TERs) head of global manager tions, India has seen a mean-
EV/Ebitda: Enterprise value to
sector come in H2 and the December Tree Hotels Hotels Co Hotels Earnings before interest, tax, ducer, Saudi Arabia, isn’t good news than regular plans, in which dis- research, Morningstar Research ingful decrease in asset-weight-
depreciation, and amortisation
2019 quarter would be an early E: Estimated Sources: Capitaline, Bloomberg Source: Bloomberg either. Nor are the expectations of tribution commissions are Services, clarified that focus of ed medians in this study’.
indication of that. Even a small miss slower global growth. In India, too, eco- embedded within the TER. the study is not to show distri- In September last year, Sebi
on growth expectations during H2 nomic growth hit a multi-year low However, India was among bution in any negative light, but capped the maximum limit on
could hurt valuations.” improvement in revenue per avail- hope of an improvement in the recently. So, unless the government’s the four most expensive mar- focus on the modes of compen- TERs to 2.25 per cent, from
Currently, larger hotel players are able room (RevPAR) is possible. average room rate (ARR). RevPAR is measures to revive the economy fruc- kets for investing in equity sation. “We have been propo- 2.5 per cent earlier, which
trading at 14-25x their respective A likely improvement in demand arrived at by multiplying a hotel’s tifies, the near-term outlook appears funds. Lack of retail investors’ nents of ‘unbundled’ structures, was applicable on equity funds.
2020-21 estimated enterprise value scenario, coupled with the festive and ARR by its occupancy rate. cloudy for the sector, for now. appetite towards passive funds, wherein advisors can be com- The regulator also scrapped
to earnings before interest, tax, holiday seasons, should help get more “The current supply situation in Overall, investors are recommend- ‘which tend to be much cheap- pensated through fee-based upfronting of commissions.
depreciation, and amortisation. footfalls for hotels in H2, compared to the industry remains stable, with ARR ed to wait until some revival signs er than their active counter- models. Advisors play a critical While the move to cut TER has
“The expected muted performance the first six months of the current hikes expected to sustain,” Nihal regarding the December 2019 quarter parts’ can be one of the con- role in ensuring investors stick been welcomed by industry
during the September quarter seems to financial year. Jham, analyst at Edelweiss Securities, performance emerge. For now, IHCL is tributing factors. “The most to their long-term plans and participants, MF distributors
have factored in the stocks,” adds However, growth may still be said in a recent note on Lemon Tree. the top pick of analysts in the hotel expensive four markets for they should be compensated for have expressed their misgivings
Agarwal. Some fundamental factors lower, compared to H2FY19. On the While demand is growing at 5-6 per space, mainly due to its focus on equity investment have almost it. Fee-based models is a more with larger fund houses for
though seem to be in support of the supply side, room additions are cent, supply addition is less than 4 per asset-light model and an improving no assets invested in passive transparent way to do this,” said passing on the bulk of these cuts
hotel industry, suggesting an expected to be lower, and hence the cent, estimate analysts. cash flow position. open-end vehicles, on average,” Ptak. The study highlighted to them.

Small towns
How gains from different forms of gold are taxed comprise 15.3%
If you hold gold bonds until maturity, the capital gains are exempt from tax When it comes to SGBs, the taxation will
vary depending on whether the individual of MF asset base
TINESH BHASIN als are not aware that such a transaction holds the bonds until maturity or sells them
could be taxable, depending on the invoice,” TAXATION VARIES WITH INSTRUMENT midway. SGBs come with a maturity period Small towns or B30 (beyond
When you give old ornaments to a jeweller says Naveen Wadhwa, a chartered Instrument Taxability on gains/sale of eight years, with an exit option from the top 30 cities) cities contributed
to buy new ones, you might need to pay accountant with Taxmann. fifth year. SGBs are also traded on stock 15.3 per cent to mutual fund
> Sold within 3 years of purchase, added to income
capital gains tax depending on how the Today, an individual can buy gold in Physical or digital gold exchanges, offering an early exit option for industry’s assets under manage-
> Sold after 3 years, 20% with indexation
transaction is structured. Such many forms — physical, digital, investors. The bondholder also earns an ment of ~25.64 trillion as of
a transaction can happen in two exchange-traded fund (ETF), and > Sold within 3 years of purchase, added to income annual interest. August-end, and Maharashtra
Gold ETF or mutual funds
ways. One, the jeweller uses the sovereign gold bonds (SGBs). The > Sold after 3 years, 20% with indexation The interest on gold bonds is taxable. It remained the biggest contribu-
existing gold from the customer taxation of such instruments could Gold monetisation scheme The interest income is tax-free is added to the income of the bondholder. tor to the assets base.
to make new jewellery and bills vary. In the case of physical gold, > Interest earned is added to income The capital gain arising on redemption of Over the past few years, mar-
the individual only for the for example, if a person has held Sovereign gold bonds > No tax on gains if held until maturity these bonds to an individual is not tax- kets regulator Sebi has been push-
making charges. Second, the the gold for over three years, and > If sold before maturity, taxed as physical gold able, according to the regulations. “The ing asset management companies
jeweller will value the jewellery. then sells it, he would need to pay benefit, however, is not available if the to reach out to small towns for
The customer can then purchase
a new set of the same value or
YOUR long-term capital gains (LTCG) tax,
which is chargeable at 20 per cent purchase, short-term capital gains (STCG) buying and selling of the yellow metal.
bonds are transferred from one person to
another before maturity. In such a case, the
increasing their assets base.
According to the Association of
pay the difference between new MONEY after taking indexation benefit. tax can apply. The gains are added to The taxation of digital gold is the same as gains will be considered as capital gains. Mutual Fund Industry data collat-
and old jewellery. “If the jewellery sold was the income and taxed according to the that of physical gold. Gold ETFs invest in The long-term capital gain arising on such ed by rating agency ICRA, B30
In the second case, where the bought before April 1, 2001, then individual’s tax slab. physical gold, and gold mutual funds a transfer will be chargeable at 20 per cent accounted for 15.30 per cent of the
jeweller would issue a new bill for a fresh the taxpayer can use the gold price as on Digital gold is the latest way to accu- invest in gold ETFs. Both mirror the price with indexation, and short-term capital total industry AAUM in August
purchase, the consumer will need to pay April 1, 2001. For 24-carat gold, the price mulate gold. Many mobile wallets such as movement of physical gold. The taxation gain is added to the income of the this year, as against 15.49 per cent
tax. “This is akin to a person selling old gold was ~4,190 per 10 grams,” says Wadhwa. If Paytm, MobiKwik, and PhonePe have tied and exemption rules for them are the same bondholder,” said Suresh Surana, founder, in July and 14.48 per cent in
jewellery and buying anew. Most individu- physical gold is sold within three years of up with MMTC-PAMP or Safe Gold for as for physical gold. RSM Astute Consulting Group. August 2018. PTI

COMMODITIES1
>

Sebi seeks hedging by firms on Panna ‘roughs’ to be

up for bidding in Surat
exchanges; approaches RBI
DILIP KUMAR JHA
Mumbai, 17 September
TRADING GAMES issues of thin liquidity on
many contracts and several
Daily average turnover for the month (in ~ crore)
commodities are still not
orporates have largely Total available for hedging.

C
BSE ICEX MCX NCDEX NSE
> PRICE CARD stayed away from hedg- January ‘19 284 158 26,473 1,809 20 28,744 However, the market regulator
ing price risk of raw is of the view that once hedgers
materials on domestic February ‘19 186 267 27,023 1,448 24 28,948 comes, financiers and
As on Sep 17 International Domestic March ‘19 211 232 27,498 1,557 20 29,519 exchanges will be ready.
------------------------------------------------------------------------------ ------------------------------------------------------------------------------
exchanges. To bring them on
Price %Chg# Price %Chg# board, the Securities and Apart from corporate par-
April ‘19 250 223 26,356 2,378 24 29,230
METALS ($/tonne) Exchange Board of India (Sebi) May ‘19 242 209 27,252 2,104 23 29,830 ticipation on commodity
is seeking help from the exchanges, the CDAC meeting
Aluminium 1,770.5 3.0 1,964.1 -1.9 Reserve Bank of India (RBI). June ‘19 215 130 28,845 1,998 21 31,209 discussed issues like enhanced
Copper 5,877.0 2.1 6,170.8 -5.8 The markets regulator, July ‘19 208 102 31,471 1,909 22 33,712 disclosures with respect to
along with members of August ‘19 236 125 34,964 1,814 69 37,209 exchange accredited ware-
Zinc 2,389.0 -6.3 2,590.9 -12.5 the Commodity Derivatives houses and lean-month policy
September ‘19 190 77 39,577 1,464 55 41,363
Advisory Committee (CDAC), for derivatives contracts on VINAY UMARJI & T E NARASIMHAN
Gold ($/ounce) 1,504.3* 12.3 1,638.4 12.4
is planning to meet RBI
Note: Turnover excludes options contracts; data up to September 16
Compiled by BS Research Bureau Source: Exchanges agricultural commodities. The Ahmedabad/Chennai, 17 September
SEE THE SPARKLE
Silver($/ounce) 17.8* 20.1 20.0 21.67 officials who can ask banks to CDAC delegation is set to meet | Roughs of 24,000 carats worth
advise corporates (borrowers) Wadhwa, president, corporate hedging on com- RBI officials by the end of Rough diamonds (‘roughs’ in ~25 crore to be displayed at Surat
ENERGY from September 24-27
to hedge their commodity Commodity Participants modity exchanges, that would September. industry parlance) mined in this
Crude Oil ($/bbl) 68.4* 11.8 65.1 6.5 price risk on the domestic Association of India (CPAI). protect banks lending also,” Wadhwa, however, said country will be on display in Surat | India imported 16.5 million carats
exchanges. Meanwhile, Sebi has said the source. even the RBI cannot impose for auction by state-run NMDC, in of roughs valued at $15.7 billion
Natural Gas ($/mmBtu) 2.7* 12.6 2.7 12.8
The mandatory hedging of already tried to attract corpo- Sebi, however, cannot business decision on banks or association with the Gems & (~1.1 trillion) in 2018-19
AGRI COMMODITIES ($/tonne) commodity risk on domestic rate participation. Through a direct corporates on their busi- change the banking regulation Jewellery Export Promotion | Annual production by NMDC
exchanges is set to serve the recent circular, the regulator ness decisions. Hedging of to force corporates hedge their Council (GJEPC). pegged at 40,000 carats
Wheat 167.6 -9.5 284.4 1.3
dual purpose and protect the asked exchange-listed entities commodities — either raw commodity risk on domestic Roughs were so displayed at
Sugar 321.3* -3.5 485.0 3.0 interest of both buyers as well to disclose their hedging materials or finished products exchanges. “The concerned Surat till 1998. After that, they were | Sale value to depend on NMDC’s
as sellers from price volatility. details in the annual — should be done by the lenders can only advise their auctioned online but displayed at reserve prices and market scenario
Palm oil 532.5 6.5 870.6 6.8
This will eventually lead report. Corporates, in their respective corporate entities clients. Beyond advise, even Panna, Madhya Pradesh, from
Rubber 1,594.1* -27.0 1,852.6 -15.4 to a surge in trading volumes respective annual reports, have only. Lenders can advise their banks cannot do anything,” where they are mined. Now,these e-auction sale.
Cotton 1,344.8 -7.1 1,624.8 -11.0 on commodity exchanges. disclosed minimal hedging corporate clients to hedge their he added. are to be displayed at the newly India imported 16.5 million
Unfortunately, commodity on the domestic commodity risks wherever they have Meanwhile, commodity built Surat International Diatrade carats of roughs, valued at
* As on Sep 5, 19 1800 hrs IST, # Change Over 3 Months
Conversion rate 1 USD = 71.9 & 1 Ounce = 31.1032316 grams. exchanges failed to grab cor- exchanges. commodity exposure. They exchanges have witnessed 44 Centre (SIDC). $15.7 billion (~1.1 trillion), in 2018-19.
Notes: porate hedging opportunity in “Except in a few commodi- can do so especially with their per cent increase in their “The Centre has state-of-the- Only a small quantity is mined in
1) International metals, Indian basket crude, Malaysia Palm oil, Wheat LIFFE and
Coffee Karnataka robusta pertains to previous days price.
the 17 years of their launch ties, corporate hedgers have borrowers who have placed cumulative daily average art facilities with regard to grad- India. Sources peg production of
2) International metal are LME Spot prices and domestic metal are Mumbai local (since 2002). stayed away and that has posed commodities as collateral or turnover (DAT) to ~41,363 crore ing and certification,” Dinesh roughs by NMDC at about 40,000
spot prices except for Steel.
3) International Crude oil is Brent crude and Domestic Crude oil is Indian basket.
“In the last CDAC meeting, a severe threat on businesses have taken loan for manufac- for September from ~28,744 Navadiya, regional chairman of carats annually.
4) International Natural gas is Nymex near month future & domestic natural gas it was discussed that Sebi will that are exposed to highly turing them. crore crore in January. GJEPC, told Business Standard. NMDC switched from physical
is MCX near month futures.
5) International Wheat, White sugar & Coffee Robusta are LIFF E future prices of lead a delegation of the com- volatile commodity prices. “Hedging should be a deci- The Multi Commodity The SIDC, he added, could also to e-auction or online modes of sale
near month contract. modity value chain and other Lack of hedging has eroded sion of an individual corporate Exchange recorded 50 per cent facilitate the hosting of more and since 2015-16.
6) International Maize is MATIF near month future, Rubber is Tokyo-TOCOM near
month future and Palm oil is Malaysia FOB spot price. committee members and meet profits in the high-risk com- to protect itself from commod- growth in its DAT this more international buyers. Display before every e-auction
7) Domestic Wheat & Maize are NCDEX future prices of near month contract, Palm RBI officials with a request for modity business. Companies ity price volatility,” said calendar year to ~39,577 crore To begin with, say market was being conducted at Panna.
oil & Rubber are NCDEX spot prices.
8) Domestic Coffee is Karnataka robusta and Sugar is M30 Mumbai local spot banks to advise their clients to on their own are not hedging. Kishore Narne, associate direc- in September compared to sources, roughs of about 24,000 The upcoming sale value would
price. make corporate hedging If on RBI’s instructions, banks tor, Motilal Oswal Financial ~26,473 crore January. Other carats, worth ~25 crore, will be dis- depend on NMDC’s reserve prices
9) International cotton is Cotton no.2-NYBOT near month future & domestic
cotton is MCX Future prices near month futures. mandatory on domestic that are lending money to Services. exchanges posted a decline in played at Surat on September and the market scenario, said people
Source: Bloomberg Compiled by BS Research Bureau exchanges,” said Narinder these borrowers insist on Sources, however, raise their DAT this calendar year. 24-27 for buyers, ahead of an in the know.
.
MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019 BRAND WORLD 17
<

Social media turns red as

MMRDA trips green wires
Using every trick in the digital marketing playbook, have responded on their own
to our social media attempts,”
citizen groups and activists take on Mumbai Metro she adds.

“
While celebrities have come
AMRITHA PILLAY out strongly, brands have not
Mumbai, 17 September BATTLE LINES been as vocal except Amul.
GCMMF says that Amul’s is a

R
arely has the green lob-
by found much success
in a city that unabashed-
ly sets business above every-
thing else. But with the Bombay
High Court granting a tempo-
rary reprieve (no tree to be cut
till September 30, it ruled on
Tuesday) and agree-
ing to review the
environmentalists’
arguments, Mumbai’s
fabled business—first
attitude appears to
have been breached
over the upcoming
~23,136 crore metro line.
And environmentalists
and citizen-activists have
demonstrated remarkable per-
suasion skills as they have used
the formidable power of social
media to win followers and
influence public opinion.
At stake is the choice of a
site for the proposed metro
car-shed. The Mumbai
Metropolitan Region
neutral and nuanced stand
261,000 metric tonne of CO2 will that should not be framed
be reduced every year as the within a binary framework.
comprehensive public transport “Those ads are topical. It is not
connectivity improves and modal Amul taking a stand, but
shift happens#AAREYAIKANA depicting what is going on in
ASHWINI BHIDE @AshwiniBhide (Chief, Mumbai Metro Rail Corp) the city,” said R S Sodhi, man-
aging director, GCMMF.
Friend of mine had a medical However even a single
emergency, decided to take brand standing shakily by their
METRO instead of his car, side is enough for the social
came back very impressed, said media savvy band of conserva-
was faster, convenient and tionists. Several members from
most efficient, Solution for the group tweeted, “It’s so rare
Pollution… Grow more trees. I to see a big brand like
did in my garden... have you? @Amul_Coop standing against
government for a cause.”
AMITABH BACHCHAN @SrBachchan Forced to retaliate, city
planners have stepped on to
It’s not only about 2,700 trees, the social media minefield as
it’s about an ecosystem... From well. Ashwini Bhide, the
endangered species to endemic Mumbai Metro Rail
species. It can’t be about one Corporation (MMRC) chief has
agency’s ego. been tweeting via her person-
AADITYA THACKERAY al account, countering asser-
@AUThackeray tions made by celebrities and
clarifying the stand on the
https://twitter.com/Amul project. Plus there are full page

Development Authority
(MMRDA) has chosen a por-
tion of the 3,180-acre Aarey
Milk Colony and said that
while this involves chopping
down around 2,700 trees, it is
the minimum collateral dam-
age for a city choked by traffic
and pollution. Development is
as important as the environ-
ment, it has said, framing the
issue in binaries. Amitabh
Bachchan has pitched in with
his voice and social media
clout in their favour.
The activists say this is not
a development versus envi-
ronment debate, but an
attempt to save the city from
the grubby hands of corrupt
politicians. With them are the
golden-voiced Lata
Mangeshkar, actors Raveena
_Coop/status/11691966851
31751424/photo/1
Tandon, Dia Mirza, Shraddha
Kapoor and others. Shiv Sena
leader Uddhav Thackeray and
son, Aditya have also chimed
in with their support.
The Gujarat Co-operative
Milk Marketing Federation
(Amul) is the only corporate
entity on the green line so far.
The iconic Amul girl is on
hoardings saying, “Do not
make them histree. Cut yellow
(Butter), not greens.” K V
Sridhar, founder and chief cre-
ative officer for Hyper
Collective believes that Amul’s
stand is a good move. “Good
brands take a stand, whether
it is protecting trees or favour-
”
ing development. They can’t
fence-sit anymore,” he adds.
The support has surprised
activists. “Protest groups come
up spontaneously; sometimes
we don’t even know who is
protesting where,” said Amrita
Bhattacharjee, a representative
of the Aarey conservation
group. Formed in 2015, shortly
after the site was selected for
the metro shed, the group is an
informal citizens’ collective.
On social media, it is repre-
sented by college students and
fresh graduates with aggressive
handles, buzzing 24x7. “We are
common citizens and have no
network with celebrities. They
ads in mainline print publica-
tions and a short film on the
benefits of the metro, with
Amitabh Bachchan using his
baritone to drive the message
home. MMRC is the nodal
agency for the Metro-line 3
project, which is a part of the
larger Metro network.
The pro-Metro team has
also launched a hashtag
#AareyAikaNa, which in
Marathi translates to ‘hey lis-
ten’. But the other side has been
quick to push back with
#AareyAiklaNa, which in
Marathi translates to ‘yeah,
we’ve heard you’. In the run-
up to the state polls, the battle
will get more shrill. But even if
that is all that the conserva-
tionists gain from this battle, it
would still be victory.

the Nifty and the Sensex have corrected Thapar and others before the forensic
FROM PAGE 1 9.4 per cent and 10.5 per cent, respectively. audit is complete to safeguard investors.
The markets have been volatile since the “At this stage, it is necessary to adopt some

Markets plunge...
The fall in the market also comes a day
after RBI Governor Shaktikanta Das said
easing of growth in the first quarter of the
fiscal to 5 per cent came as a surprise.
Currency dealers said the RBI inter-
beginning of the year due to a bunch of
issues, including liquidity crunch at
NBFCs, rising instances of corporate
default and sluggish earnings growth.
Globally, trade tensions between the US
and China and fears of recession have
added to investors woes.
urgent measures to safeguard the inter-
ests of shareholders of CG Power and pro-
tect the integrity of the securities market,
by securing any further erosion of the fun-
damentals of the listed company.”
Sebi has directed the BSE to appoint an
independent auditor for conducting a
detailed forensic audit of the books of

vened in the currency market to ensure
that the rupee didn’t cross the 72 a dollar
mark. Besides oil prices, the weakness in
the Chinese currency is acting as a head-
wind for the rupee.
“The primary concern continues to be
the Chinese yuan devaluation. Weak equi-
ties on oil concerns are damaging the sen-
timent further,” said Ritesh Bhansali, vice
president at Mecklai Financial Services.
Foreign portfolio investors (FPIs) sold
shares worth more ~808 crore, while their
domestic counterparts remained only
marginal buyers on Tuesday. FPIs’ sell-
ing rally has neared the $5 billion mark for
the ongoing quarter. This is one of the
highest pull-out by overseas investors for
a three-month period.
After the latest fall in the market, the
year-to-date returns for the benchmark
Five-star hotels...
According to the data accessed by Business
Standard, there is a gap of around ~24,000
crore between cess collection till August
and the compensation disbursed to the
states. A slowdown in the auto sector has
contributed to the bleak picture.
Around ~41,000 crore has been collect-
ed till August, as against ~65,000 crore dis-
bursed. The shortfall is being met by the
surplus pool of the previous fiscal year.
The states were promised compen-
sation for five years since the GST came
into effect to make up for their revenue
shortfall because they lost autonomy
over indirect taxes.
Facing a deepening slowdown, the
auto sector was pinning hopes on a cut
accounts of CG Power from the 2015-16
onwards. Even before the company made
disclosures on the accounting fraud,
shares of CG Power had hit a downward
trend, triggering invocation of promoter
pledged shares by lenders. At the end of
last year, the promoter shareholding in
CG Power was 34 per cent, which has now
come down to 0.01 per cent since the
pledge by promoters (of their entire share-
holding) has been invoked by the lenders
due to non-payment of dues. Some of the
large non-promoter shareholders are now
lenders including YES Bank, HDFC
Mutual Fund and Aditya Birla MF. Shares
of CG Power and Industrial Solutions on
Tuesday climbed 5 per cent after private
equity giant KKR India picked up nearly
10 per cent in the company.

Nifty once again slipped into negative ter-
ritory, while that of the Sensex were mar-
ginally positive.
All the 19 sectoral indices compiled by
the BSE ended with losses. The BSE Auto
index fell the most at nearly 4 per cent.
The index is down 24 per cent this year
due to a sharp fall in demand amid sluggish
economic growth.
From their all-time highs in early June,
> BS SUDOKU
from 28 per cent to 18 per cent. However,
states including Bihar, Kerala, West
Bengal, and Punjab are of the view that a
slowdown in the auto sector cannot be
attributed to the GST rate but on struc-
tural issues in the economy.
The cess on the auto sector ranges
from 1 per cent to 22 per cent of 28 per
cent GST rate.
Subdued GST collection poses a chal-
lenge with a growth target of 16
per cent for the central GST in
2019-20. GST collection will need
# 2846 to grow to at least ~1.17 trillion a
month to achieve the target for
the overall GST collection in the
current financial year.
Bain, TPG...
In line with the rest of the NBFC sector
facing a liquidity crisis, TCFSL’s net inter-
est margin declined to 4.62 per cent in
FY19 from 4.92 per cent the year ago. But
its loan book rose 21 per cent to ~44,022
crore as of March 31, 2019, from ~36,319
crore reported a year earlier. After clean-
ing up its books of bad debt due to infra-
structure debt given earlier, the company
reported a net profit of ~437 crore on an
asset base of ~47,836 crore in FY19, as
against ~402.89 crore in FY18.
Top Tata Sons officials have said the
financial services business would remain a
priority for the group for investments in
the coming years.

Sebi bans... Rail coach...

Some of the outgoing fund trans-
fers do not appear to be support-
ed by any comprehensible
underlying transactions raising
doubts on the bona fides and
leaving gaps between various
transactions,” wrote G always kept in motion saving nearly 80
Mahalingam, whole-time mem-
ber, Sebi, in his order.
According to Sebi’s exami-
nation of the preliminary inves-
tigation report, some of the
SOLUTION TO #2845 Very Easy
dubious transactions conduct-
ed by CG Power include sale of
Solution properties at Nashik and
tomorrow Mumbai to Blue Garden Estate
and overseas remittance to
HOW TO PLAY some Avantha Group entities.
Fill in the grid so Sebi said a more detailed foren-
that every row, sic audit could bring out the
every column “complete picture and the
and every 3x3 extent of the misappropriation”.
box contains The market regulator said
the digits 1 to 9 action was warranted against
“As a work piece is replaced on one side,
the robot welds on the other, and vice-
versa. The operator simply replaces fin-
ished product with the component to
be welded next. In doing so, the robot is
per cent of the time needed,” said a sen-
ior MCF official.
Road ahead for Raebareli
Chaudhary said the unit will be able to
make aluminium coaches and even
coaches for the Vande Bharat express
which would be of export quality. “Sri
Lanka and Bangladesh are always in
need of coaches. Hence, expansion of
the unit will help us in getting bulk
orders from abroad,” he added.
MCF will be manufacturing bullet train
coaches too. Based on its production plan,
at least 240 mainline electric multiple unit
(Memu) coaches will be made in FY20 and
264 each in FY21 and FY22.
18 ECONOMY & PUBLIC AFFAIRS
>
MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019 1

Saudi Aramco assures full oil India looks to Russia for

crude after Saudi attacks
supply to 3 Indian refineries SHINE JACOB
New Delhi, 17 September “There is enough
diversity in our
CRUDE OIL
IMPORTS
Informs IOC of a partial grade switch from Arab mix to Arab heavy India is looking to diversified
crude oil sources, such as
crude oil sources.
I met Rosneft’s
Quantity (million tonne)
Russia, amid concerns over 233
Chief Executive
NIDHI VERMA & SHU ZHANG
NewDelhi/Singapore,17September
WHAT IS AT STAKE continued supply from Saudi
Arabia, following drone Officer Igor Sechin 227
India’s oil imports from Saudi Arabia ($ billion)
attacks on the country’s oil today (Tuesday)

S
audi Aramco has informed at least
six refiners in Asia that it will sup-
ply full allocated volumes of crude
oil in October despite attacks on Saudi
oil facilities on the weekend, although at
least one has been told of a grade switch
partially.
One other refiner has been told of
delays to cargoes though volumes and
grade will remain the same in October.
Saudi Arabia has said it would be
able to meet oil customers' demand
from its ample storage. But this is the
first indication that its supply to top con-
sumers in Asia — which consume more
than 70 per cent of total Saudi crude
exports — will largely remain stable.
Three state-owned refineries in
India — Indian Oil, Bharat Petroleum
and Mangalore Refinery and
Petrochemicals — will receive full
allocated volumes of crude oil from
Saudi Arabia in October, three indus-
try sources told Reuters.
But Aramco has informed India's top
refiner, IOC, that it would give some vol-
umes of Arab heavy instead of Arab mix
oil,saidoneofthesources,whodeclined
to be identified as he is not authorised to
speak to media.
This indicates that the kingdom is
offering heavy crude instead of light
crude as Arab Mix is a combination of
Arab light and heavy. No immediate
comment was available from IOC.
The key Abqaiq processing plant was
one of the facilities hit on the weekend.
It processes crude from the Ghawar,
Shaybah and Khurais fields that pro-
duce Arab Light or Arab Extra Light.
BPCL'S head of refineries, R
Ramachandran, told Reuters that his
company would get full volumes from
Aramco for September and October
without any change in the crude grade.
Two refiners, in China and Taiwan,
also said Saudi Aramco had told them
that there was no change to the loading
schedule in September and October.
"Saudi has confirmed (to us) that our
refinery will fully get its requested load-
ing in September and October. We have
not been asked to switch or delay," one
of the sources said.
Saudi Aramco informed PetroChina
on Tuesday that some of its loadings of
lightcrudeoilforOctoberwillbedelayed
by up to about 10 days, though it will still
21.80
13.49
FY15 FY16
Compiled by BS Research Bureau; Source: Ministry of Commerce
supply the same grades and volumes of
light crude oil requested for October
nominations, a senior Chinese state oil
source with knowledge of the matter
said. State-owned Bangladesh
Petroleum Corp (BPC) will receive the
full volume allocated for October, a sen-
ior BPC official said.
"Yesterday, we had a discussion
about the next shipment and they
assured us that there will be no delay,"
the official said.
Some 100,000 tonnes of Arab Light
crude oil is scheduled to be loaded on
Sept. 28. BPC imports 700,000 tonnes of
Arab Light from Saudi Aramco annual-
ly for its sole refinery.
In the Asia market, refineries in
Japan, South Korea, India and Thailand
are main buyers of Saudi's Arab Light
and Arab Extra Light, according to one
21.38
15.26
13.67
6.91
FY17 FY18 FY19 FY20
(Apr-Jul)
of the sources. In South Korea, there has
been no indication of disruptions to
term supply, a Seoul-based source said.
Officials from Japan's JXTG
Holdings, Idemitsu Kosan and Cosmo
Energy Holdings said they were collect-
ing information but declined to com-
ment further on Saudi Arabian oil or
alternative supplies.
While refineries are able to source
for alternative crude grades from the
UnitedStates,WestAfricaandSoutheast
Asia should there by a disruption to sup-
ply, spot premiums for light crude are
expected to rise, two trade sources said.
"Heavier condensate, the middle dis-
tillate-rich grades such as deodorised
field condensate (DFC), can also be used
asalternativeforlightcrudeiflightcrude
gets very expensive," a trade source said.
REUTERS
facilities last week.
The attack on September
14 affected production of
about 5.7 million barrels of
oil per day (mbpd), which is
half of Saudi Arabia’s exports
and about 5 per cent of the
global supply. During 2018-
19 financial year, around 40.3
million tonne (mt) of the 227
mt crude oil imports worth
~7.83 trillion by India came
from Saudi Arabia.
Petroleum Minister
Dharmendra Pradhan indi-
cated on Tuesday the coun-
try was now looking to Russia
as an alternative source as
part of a strategy to have a
diversified oil basket. “There
is enough diversity in our
crude oil sources. I met
Rosneft’s Chief Executive
Officer (CEO) Igor Sechin
today (on Tuesday) and we
discussed in detail about
crude oil imports from
Russia,” Pradhan added.
In the previous financial
year, India’s crude oil imports
from Russia were a mere 2
mt. Experts indicate that it
may not be possible for the
country to take Saudi’s posi-
tion immediately, but the
government may be mulling
long-term deals.
The minister said volatility
in international pricing was a
and we discussed in
detail about crude
oil imports from
Russia”
DHARMENDRA
PRADHAN
Petroleum Minister
ensured its suppliers on
Monday that there would be
no supply shortage as it had
higher inventories in place.
According to the ministry
of petroleum, Rosneft CEO
has indicated the company’s
readiness to intensify coop-
eration aimed at the
strengthening of energy
security in India and in sup-
plying of high-quality feed-
stock and crude oil. A gov-
ernment official said a
consortium of four Indian
companies — Indian Oil
Corporation (IOC), Bharat
Petro Resources (BPRL),
ONGC Videsh (OVL) and Oil
India (OIL) — are likely to
increase their investments in
Russia, which was one of the
key talking points in
2018-19 2019-20
(expected)
Value (~trillion)
83
8
2018-19 2019-20
(expected)
Source: PPAC
tor undertakings and
Rosneft, including Sakhalin-
1, Taas-Yuryakh and Vankor
fields, were also reviewed.
Early this month, Prime
Minister Narendra Modi had
issued a joint statement with
Russian President Vladimir
Putin, ensuring increased
hydrocarbon co-operation
between 2019 and 2024.
Another area of discussion
was the plan of the consor-
tium of foreign investors,
including Rosneft, for the
further development of
Nayara Energy.
The consortium is review-
ing an option of a twofold
increase of the refining
throughput at the Vadinar
Refinery. The first stage con-
sortium commits to an

Policing the skies: India takes stock of rogue drones
YUVRAJ MALIK, ARINDAM MAJUMDER
& SHINE JACOB
Bengaluru/New Delhi, 17 September
Following drone attacks on
Saudi Arabian oil installations
last week, Indian defence
forces and the private sector
are taking stock of counter-
drone preparedness.
On September 14, Yemen’s
rebel Houthis targeted two oil
plants operated by Saudi
Arabia’s Aramco in the Gulf
nation. The strike disrupted
half of the kingdom’s oil and
gas production and sent global
oil prices spiralling.
The Border Security Force
in New Delhi recently invited
some experts to present solu-
tions to track and neutralise
drones, the Delhi-based
founder of a drone technology
company told Business
Standard. Private companies,
especially oil refiners, and key
government bodies like the
Airports Authority of India
(AAI) are also said to be review-
ing preparedness.
In New Delhi, a newly
formed inter-ministerial com-
mitteeistestinganti-dronesolu-
tions and will soon release a for-
mal tender. The committee,
under the Ministry of Civil
Aviation, has representation
from the Directorate General of
Civil Aviation (DGCA), the
Bureau of Civil Aviation Secu-
rity, the AAI, the home ministry,
and the Indian Air Force.
“Nine companies have giv-
en live trials of their technology
to counter rogue drones in the
sky. Two stages of pilot were
held. We will soon finalise the
contract,” said a government
official involved in the process.
According to sources, firms
that took part in initial demon-
strations included ideaForge
Technology, Israel Aerospace
Industries, Tractors India,
French aerospace major
Thales, and Israeli defence
company Rafael Advanced
Defense Systems.
While the aerial strikes have
brought the focus back on anti-
drone measures, caution stems
from the fact that India has a
number of large oil refining
assets close to the Pakistan bor-
der. These include Reliance’s
mega oil plant at Jamnagar,
HPCL-Mittal’s refinery in
Bhatinda, Nayara Energy’s
Vadinar facility, and Indian
Oil’s Panipat, Mathura and
Koyali. The physical security at
these sites is being managed
by the Central Industrial
Security Force.
Anti-drone solutions
Counter-dronetechnologycom-
prises two parts — detection
and neutralisation — explained
Abhishek Burman, director and
CEO of General Aeronautics, a
Bengaluru-based drone engi-
neering company.
A drone can be detected
using traditional radar systems,
or radio frequency-based solu-
tions. However, drones flying
too low or too fast, or if they are
too small, may go undetected.
This raises requirement for spe-
cialised radar systems.
To neutralise them, the most
prevalent solution is a jammer.
Drones communicate (with its
pilot) typicallyover 2.4 gigahertz
band and a jammer sends high-
frequency ‘noise’ in this fre-
quency, causing drone to lose
contact and fly astray. However,
jammers may not work with
autonomous drones, which are
pre-programmed for a specific
target location.
In such cases, the counter
measure is Global Positioning
System (GPS) spoofing, which
maliciously infects the GPS on a
drone, causing it to lose sight of
the target.
AccordingtoBurman,amix-
ture of multiple technologies —
high frequency cameras across
the perimeter, multiple radar
systems with varied ranges, and
the neutralising mechanism —
is needed to ensure complete
preparedness. “If making a dr-
one is 1x technology, anti-drone
is 3x,” he said, adding that some
of the apparatus is expensive
and high-energy consuming.
Dronepolicy
Last December, DGCA released
a unified drone policy for flying
drones for commercial and per-
sonal use. Under the new regu-
lations, every unmanned aerial
vehicle that weighs above 250
gm has to register on digital sky
platform and take prior permis-
sion before every flight.
The aviation ministry has
also mapped the entire Indian
airspace into flying and no-fly-
ing zones. Any DGCA compli-
ant drone is programmed such
that it cannot fly into the no-fly-
ing zone. This, however, will not
work for ‘rogue’ drones.
cause of concern for con-
sumers like India. At one
point on Tuesday, Brent crude
prices were seen $68.02 a bar-
rel. The minister said Indian
companies had continued to
lift crude oil from Saudi on
Monday and Tuesday. The
Middle East nation had
Fuel prices see steepest
hike since Union Budget
PRESS TRUST OF INDIA
New Delhi, 17 September
Petrol and diesel prices on
Tuesday saw the biggest hike
since the Budget as India
voiced concern over spike in
global oil prices following
attacks on Saudi Arabian
crude oil facilities.
The Petrol price increased
by 14 paisa per litre to ~72.17 and
diesel by 15 paisa to ~65.58 per
litre in the national capital,
according to price information
available from state-owned
oil companies.
This increase is the biggest
single-day hike since the July 5
maiden Budget of Finance
Tuesday’s high-level meet-
ing. The companies and
Rosneft have exchanged a
investment of $850 million
towards the building of a
petrochemical unit in
non-binding cooperation Vadinar within two years.
agreement showing interest The consortium is also
in the Eastern Cluster proj- planning to expand Nayara
ect. The ongoing joint proj- Energy’s retail presence,
ects in Russia between which has over 5,300 retail
Indian oil and gas public sec- outlets across the country.
Minister Nirmala Sitharaman to the attacks. Brent crude was
that raised rates by almost ~2.50 down 36 cents, or 0.50 per cent,
a litre due to an increase in at $68.66 a barrel.
excise duty on fuel. Oil Minister Dharmendra
The increase in retail prices Pradhan said India, the world's
on Tuesday fol- third-largest oil con-
lowed nearly 20 per Petrol price was sumer, is keeping a
cent surge in inter- hiked by 14 paisa close watch on the
national oil prices in a litre to ~72.17 developing situation.
intraday trading — and diesel by 15 “Certainly when
the biggest jump in paisa to ~65.58 a there is a spike in
almost 30 years — litre in New Delhi prices, it creates anx-
in response to iety,” he said. “The
attacks halving Saudi Arabia’s eventssinceSaturday(whenthe
output, before closing 15 per Saudi oil facilities were
cent higher at four-month attacked) are a matter of con-
highs. On Tuesday, global oil cerns to us.” He, however, said
prices slid, though the market oil supplies from Saudi Arabia,
remains on tenterhooks over India’s second-biggest source,
the threat of a military response had not been disrupted.

Govt planning another Govt waives three-year lock-in period
economic booster dose on investments made by NRIs in IDFs
PRESS TRUST OF INDIA
New Delhi, 17 September
The finance ministry is
working on one more boost-
er dose to give a leg-up to the
economy after GDP growth
hit a six-year low of 5 per
cent, a senior finance min-
istry official said.
The blueprint for the
stimulus is ready and would
be announced by Finance
Minister Nirmala
Sitharaman in the next few
days, the official said with-
out giving further details.
The government
announced a slew of meas-
ures in three dosages which
include a special window for
real estate, export incentives,
bank consolidation and sops
for micro, small and medi-
um enterprises (MSMEs) and
the automobile sector.
Earlier this week, RBI
Governor Shaktikanta Das
had said the government has
taken a number of measures
to boost the economy in
three phases and indicated
that more steps are likely.
"I think with right meas-
ures taken, things should
improve. It's a positive trend
that the government is
responding fast and I don't
think we have heard the last
from the government with
regard to dealing with the
current economic situation...
My expectation is that it will
be a continuous process and
The blueprint for the
stimulus is ready and would
be announced by Finance
Minister Nirmala Sitharaman
in the next few days
they would definitely be
dealing with other chal-
lenges," he had said. The first
set of announcements was
made on August 23 that
included rollback of the
enhanced surcharge
imposed on foreign portfo-
lio and domestic investors in
Budget 2019-20.
Sitharaman had in her
maiden Budget raised the
surcharge on income tax paid
by super-rich individuals.
The surcharge, levied on
top of the applicable income
tax rate, was hiked from 15
per cent to 25 per cent for
those with a taxable income
of ~2-5 crore, and to 37 per
cent for those earning more
than ~5 crore.
The government has waived
the three-year lock-in period
on investments made by non-
residents in infrastructure debt
funds (IDFs), to promote
funding in the infrastructure
sector. A notification had been
issued by the Central Board of
Direct Taxes (CBDT).
With an aim to accelerate
and enhance flow of long-
term debt in infrastructure
projects, amendments in the
MoD spells out five-point plan for arms industry
Defence production targeted to reach
$26 billion annually by 2025
AJAI SHUKLA
New Delhi, 17 September
Defence Minister Rajnath Singh and
his officials, addressing a defence
industry gathering in New Delhi on
Tuesday, spelt out a five-point plan
for raising India’s annual defence
production from ~80,000 crore
currently to ~1.82 trillion
($26 billion) by 2025.
“Forthis,theIndiandefence
industryneedstogrowattherateof
15percentperannum,”saidSingh.
Withgrowthlikelytocome
mainlyfromtheprivatesector,Singh
revealedthatofthecurrentannual
armsproductionof~80,000crore,
theprivateindustrycurrently
accountsfor~16,000crore.Besides,
thepublicsectoroutsourcesabout
tax laws were made to
provide exemption from
income tax to infrastructure
debt funds (IDFs) in 2011.
To attract off-shore
investments into IDFs, any
amount of interest received by
non-resident or foreign
company from investment in
such IDFs is charged at a
reduced tax rate of 5 per cent,
said Taxmann Deputy General
Manager Naveen Wadhwa.
40percentofitsproductionto
privatefirms.
Withthedefencebudgetlimited
inhowmuchitcouldspend,the
defenceministerunderlinedexport
asamajordriver.Overthelastfive
years,defenceexportshave
witnessedasubstantialrise,
reaching~10,745crore($1.5billion)
lastyear.TheDefenceProduction
Policy(DPrP)setsanannualtargetof
$5billionby2025. Thedefence
ministeralsostatedthathis
ministry’snew“end-to-endonline
offsetprocessingportal”has
facilitatedoffsetstothetuneof$1.5
billion.
SanjayJaju,jointSecretaryinthe
defenceministry,speltoutthe
government’sproposedfive-point
actionplanforachievingtheDPrP’s
NGOs receiving substantial financing
from govt come under RTI Act, says SC
IDFs are investment vehicles Non-governmental discountedratearealsobound fortherequisitepurposeornot.”
to accelerate the flow of long- organisations(NGOs)receiving togiveinformationtothe ThetopcourtsaidtheRTIActwas
term debt to the sector. substantialfinancingfromthe citizensundertheRTIAct. enactedwiththepurposeof
Wadhwa said if a non- governmentareboundtogive ABenchofJusticeDeepak bringingtransparencyinpublic
resident transfers rupee- informationtothepublicunder GuptaandJusticeAniruddha dealingsandprobityinpublic
denominated bonds of IDF to theRTIAct,theSupremeCourt Bosesaid,“IfNGOsorother life.“Wehavenohesitationin
another non-resident outside heldonTuesday. bodiesgetsubstantialfinance holdingthatanNGO
India, such transfer is not Thetopcourtsaid fromtheGovernment,wefind substantiallyfinanced,directly
regarded as transfer for the institutionssuchasschools, noreasonwhyanycitizen orindirectly,byfundsprovided
purpose of capital gain, and no collegesandhospitalswhich cannotaskforinformationto bytheappropriategovernment
capital gain tax is charged on receivesubstantialaidfromthe findoutwhetherhis/hermoney wouldbeapublicauthority
such transfer. governmentbothdirectlyor whichhasbeengiventoanNGO amenabletotheprovisionsof
PTI indirectlyintheformoflandat oranyotherbodyisbeingused theAct,”itsaid. PTI
thenewliberalisedbusinesseco-
system,whichisbeingtransformed
byreformslikeGST.“Indianowhasa
one-country,one-taxenvironment.
Thiscreateshugeopportunitiesfor
improvingoursupplychainsand
logistics,"saidJaju.
Thefourthreformisthenew
opennessamongpolicymakers
towardsthedefenceindustry,
enhancingfeedbackandtheeaseof
doingbusiness.Finally,thereisa
drivetocreatetheskillsetsneededto
Defence Minister Rajnath Singh at the Society of Indian Defence producenewproducts,services,and
Manufacturers Annual Session 2019 in New Delhi, on Tuesday PHOTO:PTI technologies.Singhalsounderlined
thattheDefenceResearchand
ambitioustargets.“Thiswillbea driver,with44start-upsmoving DevelopmentOrganisation (DRDO)
publicdocument.Wehavealready towardsproduction.“Wemustmove wouldactasatechnologyenginefor
carriedoutconsultationswiththe fromaproductionmindsettothe theprivatesector.“Thegovernment
industry,”hesaid. generationofintellectualproperty,” isworkingonanewpolicytofacili-
Thefirstpointisafocuson saidJaju. tatetransferoftechnologies(ToT)
developingentrepreneursand Theseconddriverwillbeafocus developedbytheDRDO,”hesaid.
empoweringthemtotakerisks.The oncutting-edgetechnologies,such HesaidtheDRDOhassigned
ministry’s“InnovationsforDefence asartificialintelligence,dronesand morethan900technologytransfer
Excellence(iDEX)”initiativeisakey relatedproducts.Thethirddriveris agreementswiththeindustrysofar.
.
MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019 COMPANIES 19 <

Amazon gears up for festive Srei knocks Sebi door

for buyback of NCDs
Hero Cycles
ties up with
Yamaha Motor

rush with higher capacity

ROMITA MAJUMDAR announced its commitment
Mumbai, 17 September to eliminate single-use plastic
from its packaging by June
from retail investors
NAMRATA ACHARYA
Kolkata, 17 September
to launch
e-cycle
PRESS TRUST OF INDIA
New Delhi, 17 September
Srei Infrastructure has req-
uested the Securities and Hero Cycles on Tuesday said

A
mazon.in, the Indian
arm of the world’s
largest retailer, launc-
hed its largest fulfilment cen-
tre in Maharashtra (third
largest in the country) ahead
of the festive season.
The ecommerce platform
is pushing its sustainability
initiatives through the ‘Maha-
rashtra first’ operations as it
seeks to reduce packaging
waste. The company has also
increased outreach with
logistics partners ahead of
festive sales.
The new centre, which is
located near Bhiwandi (where
Amazon has three existing
warehouses) near Mumbai,
has added more than 1.5 mil-
lion cubic feet of storage
space and 2.7 million square
feet footprint.
It will enable faster deliv-
ery of customer orders within
the region and neighbouring
states.
“Almost 65 per cent of our
orders come from tier 2 and 3
cities. More than half our sell-
ers are from the same regions
and 85 per cent of our traffic
is for mobile phones. So, our
demographics are changing
as a result of which we are
spreading deeper into the
country,” said Akhil Saxena,
vice-president, India cus-
2020. It is replacing plastic Exchange Board of India it has partnered with Japan’s
dunnage like air pillows and (Sebi) and the Reserve Bank Yamaha Motor Co to launch
bubble wraps with recyclable of India (RBI) to allow buy- Lectro e-cycle series.
‘paper cushions’ across its ful- back of its non-convertible Priced at ~1.30 lakh,
filment centres in India to debentures (NCDs) from retail Lectro EHX20 is a high per-
protect products in transit. investors. formance e-cycle powered by
This solution has already In a letter written by Yamaha, the company said.
been launched in select ful- Hemant Kanoria, chairman, The cycle plans this product
filment centres and will be Srei, to both RBI and Sebi, he mainly for the metro mar-
extended across all such cen- said, “At Srei, we would be kets, and target the high dis-
tres of Amazon in the country happy to on tap buy back our posable income group, which
by the end of the year. NCDs from retail investors as are spending on healthy
According to the India it would prevent interested lifestyle and physical fitness.
Warehousing Market Report parties from gaming the sys- Hero Cycles plans to add
2019, by Knight Frank, 68 mil- tem at the expense of more models in 'Lectro e-
lion square metres was the investors; offer investors a cycle powered by Yamaha'
estimated warehousing space simple exit route, which series and will adopt multi-
requirement in India in 2019. would make NCDs more pop- channel retail strategy to
The projected warehouse ular among retail investors.” and ~2,167 crore Srei reach the customers through
Amazon now has storage capacity of over 6 million cubic feet spread across 14 fulfillment centres space requirement is expect- Sources said, “The compa- Equipment Finance. its own sales network, multi-
in Maharashtra PHOTO: KAMLESH PEDNEKAR ed to be 86 million square ny was apprehensive that a sec- Srei's last NCD was in April- brand stores and the online
metres by 2024. tion of market operators has May, when it raised ~106 crore, sales channels.
tomer fulfilment, Amazon the delivery network signifi- The new centre has the The company has ensured been trying to approach retail with coupon rates of about 10- Lectro EHX20 is the out-
India. cantly over the past year (fes- capacity for up to 2,000 that its packaging material in investors to sell their existing 11 per cent. Also, Srei shelved come of a three-way strate-
Amazon already has its tive season). We have a Hindi employees during the festive the form of corrugate boxes NCDs in deep discount, which its most recent NCD, which gic partnership between
largest India fulfillment cen- platform now and language season. and paper cushions contains has prompted Srei to write to was supposed to be open from Hero Cycles, Yamaha Motor
tre in Hyderabad. The centre support for both sellers and With this infrastructure, 100 per cent recycled content the market regulators.” August 19 to September 18, Co, and Mitsui & Co, which
is spread over four customers,” added Amazon.in now has storage and is also fully recyclable. Recently, Brickwork Rat- with interest rates up to was initiated last year, the
lakh square feet Launches largest Saxena. The plat- capacity of more than 6.5 mil- “We are working with local ings had downgraded the Srei’s 10.65 per cent. company said. “The alliance,
and will be ex- fulfillment centre form has cus- lion cubic feet spread across suppliers across the country NCDs, perpetual debt instru- The company had said the brought together by Mitsui &
panded to 5.8 lakh in Maharashtra tomised the website 14 fulfilment centres in to develop sustainable alter- ment and commercial paper overall NCD programme as Co is aimed at creating tech-
square feet. All of with sustainable into a lighter plat- Maharashtra. natives for packaging mail- programme aggregating to covered by the shelf prospec- nologically superior high per-
these are leased packaging focus form. Fulfillment Amazon India will exit ers, bubble bags, stretch wrap ~5,327.07 crore. tus was to raise ~1,700 crore. formance products through
premises. capacity has been 2019 with more than 50 ful- and tape used in packaging. In case of buyback of Inthistranche,however,the collaboration between Hero
Rival Flipkart also recent- increased significantly and filment centres in 13 states This will help the company shares, the Sebi doesn't dis- company was seeking to raise Cycles and Yamaha Motor
ly announced expansion of the 1.5 times more flight across the country with a eliminate all forms of plastic criminate among different sets ~100 crore from the issue with electric drive units, with go-
its supply chain ahead of the capacity will support faster combined storage space of used in its packaging and of investors. Since 2012, Srei an option to retain another to-market sales, distribution
festive sales. delivery through the festive close to 25 million cubic feet. reduce carbon footprint,” said has raised close to ~2,148 crore ~400 crore in case of over-sub- & marketing support by
“We have also expanded season, said Saxena. Amazon India also Saxena. in Srei Infrastructure Finance scription. Mitsui & Co,” it said.

Apollo Hospitals launches
AI-based programme
Apollo Hospitals has launched
a preventive health care
programme with the support
of artificial intelligence (AI)
through its 370 centres in the
country, including hospitals
and clinics.
The company is expected
to expand this business in a
tie-up with nursing homes
and hospitals across the
country, senior officials of the
company said.
The programme, designed
for three years now, would
offer health check-ups,
directions and health
mentoring, based on the test
results and free consultations
to the customers to prevent
health care issues proactively
with the use of an app and
wearables.
The company will be
charging ~6,000 in the first
year, ~5,000 in second while
~4,000 in the third year.
Apollo Hospitals Chairman
Prathap C Reddy said the
company would be looking at
expanding the offer through
nursing homes and other
hospitals across the country in
a later stage.
The company has tied up
with UK-based DXC
Technology to work on the
artificial intelligence based on
20 million health checks
conducted by Apollo
Hospitals.
Speaking to the reporters,
Reddy commented on the
economic slowdown stating
while there is a hiccup in
terms of economic growth,
Indians are strong from within
and the determinent leader
will help the country to grow
better. The company will work
with the government on its
health care programmes to
offer services to the people,
Reddy said. GIREESH BABU
IT firms’ growth to remain Lenovo India entering end-to-end IT solutions business
6-8% in FY20, says ICRA
ICRA on Tuesday said growth of
IT services firms was expected
to be in 6-8 per cent in the US
dollar in 2019-20, even as the
profitability of these firms
declined in the first quarter on
account of higher employee
expenses.
The profitability of IT
services companies declined
during Q1 FY20, on account of
higher employee expenses,
especially onsite, led by fresh
hiring, sub-contracting cost
and cross currency move-
ments, ICRA said. Employee
expense increased to 61.7 per
cent in the first quarter of FY20
from 59.8 per cent in the year-
ago period for ICRA's sample of
13 companies, it added.
“During Q1FY20, ICRA sample
companies grew by 10.3 per
cent in rupee terms while in
dollar terms, it grew by 7.4 per
cent. During the quarter, the
rupee depreciated by 3.7 per
PC maker Lenovo India on
Tuesday said it was expanding
its business into end-to-end IT
ny to a device-plus-solution
firm. Our current sales team
cannot handle this. We have
Agarwal said.
The company has now
divided its business in three
approach,” Agarwal said.
The company has started
expansion on the similar lines
cent year on year versus USD solutions for enterprises. onboarded two new people for segments — smarter devices, in some of the leading mar-
and appreciated 1.9 per cent The company, which is the new vertical and will grad- smart workplace and smarter kets, including the US, China,
and 2.1 per cent versus number one PC and tablet sell- ually build the team. We are businesses. “New leg, smarter Germany and some other
GBP/EUR, respectively,” it said. er in India, said it would start not looking to bag 100 deals businesses, has nothing to do parts of Europe.
TheUSandEuropecollec- providing internet of things but we are looking for few with PCs (personal comput- He said Lenovo will now
tivelycontribute85percentof (IoT) solutions also, apart from installations to prove ourself ers). They will provide vertical approach manufacturing com-
ICRA’ssamplesetrevenues. the existing business of per- to begin with," Lenovo India solutions. Under this, we will panies and give them technol-
“FY20ITservicesgrowthtore- sonal computers. “We are Chief Executive Officer and offer an end-to-end solution. ogy solutions to improve effi-
mainat6-8percentdollar moving from a device compa- Managing Director Rahul This will be solution-centric ciency. PTI
(terms),”itnoted.Demandis
beingdrivenbyscalingupof
solutionsbuiltarounddigital
technologies(mobility,social,
cloud,analyticsandautoma-
tion),ICRAVice-president(Corp-
orateRatings)GauravJainsaid.
“The hitherto traditional
outsourcing services such as
custom application mainte-
nance face pricing pressure
and ERP (enterprise resource
planning) applications are
increasingly becoming cons-
umer oriented, with applica-
tion delivery mechanism
shifting to cloud based envi-
ronments,” he added. PTI

Spooked by Modi’s plastics ban,

India Inc seeks clarity, exemptions
ADITYA KALRA
New Delhi, 17 September

Indian companies will seek exemp-

tions from the government’s planned
ban on certain plastic items, fearing
the move will disrupt supply chains
and raise costs ahead of a festive sea-
son, according to sources and an
industry document seen by Reuters.
India is likely to impose a nation-
wide ban on plastic bags, cups, small
bottles, straws and some types of
sachets next month as part of Prime
Minister Narendra Modi’s efforts to
reduce use of pollution-causing, sin-
gle-use plastic.
But the plans have stoked fears
among consumer firms, which, use
plastic in packaging for everything
from sodas and biscuits to ketchup
and shampoo. “This has created an
existential issue for multiple sectors,”
said the Confederation of Indian
Industry (CII), a lobby group, in a two- Environmentalists say move will help battle plastics pollution
page draft note, seen by Reuters,
which is likely to be finalised and sent government agencies to “take the been part of industry delegations that
to the government in the coming days. first big step” on October 2 towards met government officials to express
The CII will ask the government to freeing India of single-use plastic. concerns and discuss alternate pack-
consult industry executives and India lacks a system for manage- aging solutions, according to a person
define what will be categorized as ment of plastic waste, but environ- with direct knowledge.
single-use plastics, while also pitch- mentalists have hailed Modi’s move, Coca-Cola said in a statement that
ing for some exemptions, according saying it will help combat plastic all its primary packaging does not
to the note. waste that chokes rivers and drains. consist of single-use plastic. Pepsi
It says small-sized plastic bottles A ban on certain plastics from said its target was to make 100 per-
used for pharmaceutical or health October 2, however, will come just cent of its packaging recyclable, com-
products should be exempted as there weeks ahead of big festivals for which postable, or biodegradable by 2025.
is no alternate available. Sachets business plans are laid out far in Hindustan Unilever did not respond
made from so-called multi-layered advance because they typically see a to a request for comment.
packaging should also not be banned, sharp rise in consumer purchases. Amazon did not respond, but has
as that could disrupt supplies of key Two industry sources said Ama- previously said that it plans to
products such as biscuits, salt and zon.com, which uses plastics in its replace single-use plastic in its pack-
milk, the CII draft says. A senior packaging, has been concerned that a aging by June 2020. “The ban has
Indian government official said sever- possible ban could disrupt its opera- ramifications for all sectors like food
al industry representations were tions ahead of festivities, and during processing, dairy, garments, toys,”
being reviewed, but the aim was to its mega annual discount sale that said Jayesh Rambhia of All India
“get rid of the menace of plastic pollu- starts September 29. Plastic Manufacturers Association,
tion” without causing disruption. In recent weeks, executives from which has 22,000 companies as mem-
In an Independence Day speech Coca-Cola Co, PepsiCo and consumer bers. “People, and companies, are
on August 15, Modi urged people and goods seller Hindustan Unilever have pulling their hair today.” REUTERS
20
>
MUMBAI | WEDNESDAY, 18 SEPTEMBER 2019 1

Sensitive to industry concerns: Shah

Fiscal puritanism must not be allowed to
sacrifice growth, caution experts
INDIVJAL DHASMANA & NEHA ALAWADHI
New Delhi, 17 September
economic growth driven by expanding
“I UNDERSTAND fiscal deficit would not be sustainable.
ALL OF YOURS He was of the view that fiscal deficit
was much higher than shown by the
come up with suggestions to give DIFFICULTIES, government. He cited a report by the
industries a boost. “India has to be a $5- APPREHENSIONS. Comptroller and Auditor General,

In a bid to allay apprehensions of India

Inc, Home Minister Amit Shah on
Tuesdaysaidthegovernmentwaslook-
ing into the “difficulties” faced by
industries, even as several experts sug-
gested pumping in more money into
the sagging economy. “I understand
your difficulties, your apprehensions.
There may be uncertainties. But it is a
sensitive and non-corrupt govern-
ment,” Shah said at an All India
Management Association (AIMA)
event here. He also attributed some of
the challenges faced by businesses to
the global economic slowdown.
Speaking on the reforms initiatives
, Shah said the initial difficulties faced
in systems like the goods and services
tax regime would smoothen out soon.
“...at the end reforms bring the larger
good,”theministersaid,asheaskedthe
AIMA and other industry bodies to
trillion economy by 2024 and it is a cer-
tainty,” he said, urging business leaders
to build national confidence.
‘Pump in more money’
Later, experts deliberated on the need
for fiscal expansionary policy at a time
when the GDP growth rate has hit a
six-year low of 5.5 per cent. “Banks are
not short of funds, but NBFCs (non-
banking financial companies) are.
Liquidity should be infused there to
increase consumer lending, even if it
means widening of fiscal deficit,” sug-
gested Akhil Bansal, deputy CEO at
KPMG in India, at the panel
discussion.
Ajit Ranade, group executive presi-
dent and chief economist at Aditya
Birla Group, said he would support fis-
cal expansion as the economy has a
problem of low aggregate demand. He
quoted Hindustan Unilever chairman
Sanjiv Mehta as saying that “you can’t
say FMCG is recession-proof but it is
recession-resistant” to support his
argument. Whether fiscal deficit be
widened to 3.5 per cent from the budg-
etary projection of 3.3 per cent for the
current fiscal year is a matter of dis-
cussion, he said. The Centre will any-
way get ~1.76 trillion from the Reserve
Bank of India, Ranade said.
THERE MAY BE
UNCERTAINTIES.
BUT IT (OURS) IS A
SENSITIVE AND
NON-CORRUPT
GOVERNMENT”
AMIT SHAH,
Home Minister
Vikram Singh Mehta, chairman of
Brookings India & senior fellow at
Brookings Institution, said the fiscal
space should be expanded to perk up
demand and drive investments. He
said the government should disburse
the entire amount (~75,000 crore) ear-
marked for the PM-KISAN in this year’s
Budget.
A panellist, however, cautioned that
pointing out that the Centre's fiscal
deficit actually worked out to be 5.85
per cent in 2017-18, as against 3.46 per
cent shown by the government. If one
adds states' fiscal deficit of 3.1 per cent,
the country's fiscal deficit would come
to close to 9 per cent.
Higher borrowings by the govern-
ment to finance fiscal deficit would not
Iran may be behind attack, but
let interest rates to go down, he said. US wants to avoid war: Trump
On whether policymakers settle for
ahighgrowth-highinflationscenarioor RICHARD PÉREZ-PEÑA, DAVID D and played down the attack’s
a low growth-low inflation scenario, KIRKPATRICK & MICHAEL CROWLEY jolt to the global oil market.
Ranade said he does not think there is 17 September Asked at the White House
a trade-off between the two. Mehta, on whether Iran was behind the
the other hand, said growth is absolute- US President Donald Trump strikes on Saturday that crip-
lynecessaryandifinthatprocess,infla- said that Iran appeared to have pled much of Saudi Arabia’s oil
tion rises a bit, it should be allowed. been responsible for the week- output, Trump said, “It’s look-
At the event, Principal Economic end attack on Saudi Arabian oil ing that way.” But he stopped
Adviser Sanjeev Sanyal said there is facilities. But he also said he short of a definitive confirma-
far more space on the monetary side would “like to avoid” a military tion, adding, “That’s being
than the fiscal front for lifting the conflict with Tehran, empha- checked out right now.”
economy. sised his interest in diplomacy ©2019 The New York Times News Service

Rajnath to fly in
Tejas, spend night
on aircraft carrier
AJAI SHUKLA
New Delhi, 17 September
On September 28, Defence
Minister Rajnath Singh is
planning a close viewing of
two of India’s biggest indi-
genisation successes.
According to defence min-
istry sources, he will take a
flight in the Tejas light
combat aircraft (LCA) in
Bengaluru, and then travel
to Mumbai for milestones
in India’s shipbuilding pro-
gramme.
In what the Navy’s vice
chief Vice-Admiral G Ashok
Kumar describes as “The
Raksha Mantri’s day at sea”,
Singh will launch the first
Project 17A frigate, INS
Nilgiri at Mazagon Dock
Ltd, Mumbai (MDL); and
commission the second
Project 75 Scorpene subma-
rine, INS Khanderi. He will
also inaugurate a massive
dry dock in Mumbai Port,
large enough to accommo-
date aircraft carriers. After
that, the defence minister
will sail out on the Navy’s
aircraft carrier, INS
Vikramaditya. At night he
will witness naval opera-
tions at sea, returning to
Mumbai the next day.
The launch of INS Nilgiri
sets the stage for building
seven frigates for a total
cost of ~45,000 crore. With
Mazagon Dock Ltd,
Mumbai (MDL) building
four and Garden Reach
Shipbuilders and
Engineers, Kolkata (GRSE)
building three frigates, all
seven are scheduled to join
the Navy’s fleet between
2022 and 2025. The Navy
has decided to name
Project 17A warships after
the six frigates of the
Leander class — the first
warships built entirely in
India. Following INS
Nilgiri, which MDL deliv-
ered in 1972, the Navy com-
missioned the Himgiri,
Dunagiri, Taragiri, Udaygiri
and Vindhyagiri. All these
are now decommissioned.
Nilgiri was sunk on April
1997 by a Sea Eagle missile
fired by a Sea Harrier fight-
er, operating off the aircraft
carrier INS Viraat.
However, these six
frigates will be reborn in
the Navy through Project
17A. The seventh and last
frigate will get a brand new
name: INS Mahendragiri.
The Project 17A frigates
will be 6,500 tonnes each,
and amongst the most
heavily armed frigates any-
where. Each will carry eight
BrahMos supersonic anti-
ship missiles to destroy
enemy ships and land tar-
gets at ranges of up to 300
kilometres. A complement
of 32 Long Range Surface to
Air Missiles (LR-SAM) will
protect them from enemy
aircraft and anti-ship mis-
siles. They will mount the
Mark 45, 127-millimetre
Naval Gun System to
engage surface targets out
to 36 kilometres. And they
will also carry torpedoes to
sink enemy submarines
and surface ships.