Economy & Business
Qatar has agreed to lower the price of gas it sells to India on a long-term contract by about U.S.$6 billion to reflect the slump in global energy rates and also waived the 12,000-crore penalty for ‘short–lifting’ in 2015. Petronet LNG Ltd (PLL), India’s biggest gas importer, signed a revised contract with RasGas of Qatar in December 2015.
The price as per the revised formula will come to U.S.$6–7 per million British thermal unit as against U.S.$12–13 per mmBtu currently, oil minister Dharmendra Pradhan said. He said the reworked formula will apply to 7.5 million tonnes a year of LNG India buys from RasGas on a long-term contract ending in April 2028.
The revised formula will base the price on a three-month average figure of Brent crude oil, replacing a five-year average of a basket of crude imported by Japan, with a rider that PLL buys an additional 1 million tonnes of LNG annually.
The trailing three-month average Brent price is about U.S.$44 a barrel while the average of Japan Crude Cocktail for the 5-year period ended 30 September 2015 was U.S.$94. Mr Pradhan said Qatar will also not seek 12,000 crore from PLL for ‘under-lifting’ LNG from RasGas by 32 per cent. The value of the under-lifted cargoes in 2015 is 12,000 crore and if the change–to–price formula was implemented, it would suggest a U.S.$2.5 billion buyer saving over three years.
Foreign direct investment (FDI) in the country grew by 13 per cent to U.S.$16.63 billion during the April–September period of the current fiscal. The foreign investment was U.S.$14.69 billion during April–September 2014, according to the latest figures of the Department of Industrial Policy and Promotion (DIPP).
During the first half of the financial year, India received maximum FDI of U.S.$6.69 billion from Singapore followed by Mauritius (U.S.$3.66 billion), the Netherlands (U.S.$1.09 billion) and Japan (U.S.$815 million).
Sectors which attracted highest foreign investment in the period includes computer software and hardware (U.S.$3.05 billion), trading (U.S.$2.30 billion), services and automobile (U.S.$1.46 billion each) and telecommunications (U.S.$659 million).
During financial year 2014–15, foreign fund inflows grew at 27 per cent to U.S.$30.93 billion as against U.S.$24.29 billion in 2013–14.
The government has relaxed FDI norms in as many as 15 sectors including defence, single brand retail, construction development, civil aviation and LLPs to boost FDI in the country. Foreign investments are considered crucial for India, which needs around U.S.$1 trillion in the next five years to overhaul its infrastructure sector such as ports, airports and highways to boost growth. Growth in foreign investments helps improve the country’s balance of payments (BoP) situation and strengthen the rupee.
Foreign direct investment into agriculture services stood at U.S.$1,763.57 million (8,747.4 crore), higher than FDI into sectors such as textiles, mining and electronics during April 2000 to June 2015.
“However, FDI inflow in agriculture services during the above period has been lower compared with computer software and hardware, telecommunications, automobiles, etc.,” the Minister of State in Agriculture Mohanbhai Kalyanjibhai Kundaria said in a written reply in Lok Sabha.
In agriculture machinery, FDI inflows during the same period has been U.S.$418.65 million. To attract more foreign funds in the agriculture sector, 100 per cent FDI has been allowed in coffee, rubber, cardamom, palm oil tree and olive oil tree plantations, besides tea plantation in which FDI has already been allowed.
The Union Cabinet chaired by the Prime Minister Narendra Modi has approved the Real Estate (Regulation and Development) Bill, 2015, as reported by the Select Committee of Rajya Sabha. The Bill will now be taken up for consideration and passing by the Parliament.
The Real Estate (Regulation and Development) Bill is a pioneering initiative to protect the interest of consumers, promote fair play in real estate transactions and to ensure timely execution of projects.
The Bill provides uniform regulatory environment to ensure speedy adjudication of disputes and orderly growth of the real estate sector. It will boost domestic and foreign investment in the real estate sector and help achieve the objective of government to provide ‘Housing for All’ by enhanced private participation.
The Bill ensures mandatory disclosure by promoters to the customers through registration of real estate projects as well as real estate agents with the Real Estate Regulatory Authority. The Bill aims at restoring confidence of consumers in the real estate sector; by institutionalizing transparency and accountability in real estate and housing transactions which will further enable the sector to access capital and financial markets. The Bill will promote orderly growth through consequent efficient project execution, professionalism and standardization.
India’s sugar production rose 24 per cent to 23.60 lakh tonnes in the first two months of the current marketing year on higher output from Maharashtra. Sugar export from India, the world’s second largest producer and biggest consumer, stood at 1.75 lakh tonnes during the October–November period. Sugar marketing year runs from October to September.
Releasing the production and exports data of the first two months, the Indian Sugar Mills Association (ISMA) said the ex-mill sugar prices, which had touched 6–7 year low, have improved by 4–5 per kg, but the rates are still down by 5–6 per kg when compared to the production cost. “Sugar production till November 30 in the current 2015–16 sugar season is 23.60 lakh tonnes, which is 4.62 lakh tonnes more than the production in the last season up to the same corresponding period when 18.98 lakh tonnes of sugar was produced,” the ISMA said.
India is all set to produce surplus sugar for the sixth straight year at 26–27 million tonnes in this marketing year. To liquidate surplus stock, the government has made it mandatory for mills to export 4 million tonnes this season.
According to the data, Maharashtra’s sugar production stood at 12.87 lakh tonnes till November as compared to 11.95 lakh tonnes in the year-ago period. Sugar output of Uttar Pradesh has increased to 1.8 lakh tonnes against one lakh tonne in the corresponding period of the last marketing year. In Karnataka, mills have produced 5.68 lakh tonnes during October–November period against 3.2 lakh tonnes in the year-ago period.
On prices, the ISMA said the sugar rates, which had fallen till July 2015 in the 2014–15 marketing year and had reached the lowest in the 6–7 years, have improved by 4–5 per kg at the mill gate. In November last year, the Centre decided to pay sugarcane growers 4.50 per quintal for the cane they will sell to loss-making millers, a move costing 1,147 crore to the exchequer. The decision was hailed by the ISMA, which said that millers’ cane price liability would reduce by about 1,100 crore, thus partly compensating their losses.
Iran has toppled Kuwait to become India’s fifth largest crude oil supplier in the first half of 2015–16 fiscal year, selling over 6.5 million tonnes of oil.
Iran, which was India’s second biggest supplier of crude oil after Saudi Arabia till 2010–11, sold 6.53 million tonnes of oil to India in April–September as compared to 5.31 million tonnes crude coming from Kuwait. Last fiscal, Iran was India’s seventh largest oil supplier, selling 10.95 million tonnes crude.
India is 80 per cent dependent on imports to meet its oil needs. With prospects of sanctions being eased after a deal with the western powers on curbing its nuclear programme, Iran is now behind only Saudi Arabia (19.56 million tonnes), Iraq (17.01 million tonnes), Nigeria (11.59 million tonnes) and Venezuela (10.89 million tonnes) in oil supplies to India.
Last fiscal, Saudi Arabia was top supplier with 34.99 million tonnes of oil, followed by Iraq at 24.51 million tonnes. Venezuela was a close third with 24.40 million tonnes of oil exports to India. Kuwait supplied 17.85 million tonnes, Nigeria 17.82 million tonnes and UAE 16.11 million tonnes. Iran supplied 10.95 million tonnes in 2014–15 fiscal, almost the same as 11 million tonnes it sold in 2013–14.
The Persian Gulf nation had in 2009–10 supplied 21.2 million tonnes to India which came down to 18.5 million tonnes in 2010–11 and to 18.1 million tonnes in the year after. After the west imposed sanctions, India brought down the purchases to 13.14 million tonnes in 2012–13 and had limited them in the years thereafter.
India imported 99.36 million tonnes of crude oil in April–September this fiscal, 57 per cent of which came from the Middle East region. Africa supplied a third of that volume while South America accounted for a little less than 16 per cent.
India spent U.S.$38.6 billion or 2,47,341 crore on crude oil imports during the first half. It had spent U.S.$112.7 billion (6,87,416 crore) on import of 189.44 million tonnes in 2014–15 and U.S.$143 billion (8,64,875 crore) on buying similar quantity in 2013–14.
With the Central Government taking steps to improve ease of doing business and attract investments, FDI inflows into the services sector grew by about 20 per cent to U.S.$1.46 billion (9,404 crore) in the first six months of the current fiscal.
The services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, had received foreign direct investment (FDI) worth U.S.$1.22 billion (7,366 crore) in the same period last fiscal, according to the Department of Industrial Policy and Promotion (DIPP) data.
It is believed that the measures announced by the government are helping these sectors attract more investments. The latest reforms in areas like banking and insurance have resulted in the higher FDI inflows. Earlier in 2015, the government hiked the FDI cap in insurance sector to 49 per cent.
In banking sector also, the government has eased the norms and permitted portfolio investors to buy up to 74 per cent stake in local private banks with full fungibility.
Other sectors which have attracted healthy foreign inflows during the first half of this fiscal include computer software and hardware (U.S.$3.05 billion), trading (U.S.$2.3 billion) and automobile (U.S.$1.46 billion). Strong inflows in these sectors propelled the overall FDI into the country by 13 per cent to U.S.$16.63 billion during April–September 2015.
The government has announced a series of steps like fixing timeliness for approvals to improve the ease of doing business in the country. The services sector contributes about 60 per cent to India’s GDP and receives high foreign inflows.
Foreign investments are considered crucial for India, which needs around U.S.$1 trillion in the next five years to overhaul its infrastructure sector such as ports, airports and highways, to boost growth. Growth in foreign investments helps improve the country’s balance of payments (BoP) situation and strengthens the rupee.
The Central Government declared that consumers with taxable income above 10 lakh per year will not get LPG subsidy from January 2016. The benefit of the LPG subsidy will not be available for LPG consumers if the consumer or his/her spouse had taxable income of more than 10 lakh during the previous financial year computed as per the Income Tax Act, 1961, the Union Oil Ministry said.
In keeping with the approach of trusting the citizens, this will be given effect to initially on self-declaration basis while booking cylinders from January 2016 onwards. At present, all households are entitled to get 12 cylinders of 14.2-kg each at subsidised rate of 419.26, while the market price is 608.
The government had earlier asked well-off people to voluntarily give up using subsidised LPG and instead buy cooking fuel at market price. So far, over 57.5 lakh LPG consumers, out of nearly 15 crore customers, have given up subsidies. The subsidy saved from the ‘GiveitUp’ campaign is being utilized for providing new connections to the BPL families under the ‘Giveback’ campaign. This enables provision of LPG, a clean fuel, to poor households by replacing the conventional fuels such as kerosene, coal, fuel wood, cow dung, etc., relieving the poor of the hardships and health hazards from such fuels.
“While many consumers have given up subsidy voluntarily, it is felt that consumers in the higher income bracket should get LPG cylinders at the market price,” the statement said. To cut subsidy bill and reduce fiscal deficit, the previous UPA government had restricted the number of subsidized domestic cylinders per household to six every year in September 2012, revising it to nine the following January. The cap was revised in January 2014 to 12 cylinders a year, starting April 1. The subsidy for 12 cylinders in a year is paid directly in the bank account of consumers which they use to buy LPG at market rate.
The subsidy payout on LPG in 2014–15 was 40,551 crore, which this fiscal will be less than half as oil prices have slumped to six year low. During April–September, the subsidy outgo was 8,814 crore. There are no estimates of how many LPG customers would have a taxable income of 10 lakh or more.
Presently, there are 16.35 crore LPG consumers in the country. This number fell to 14.78 crore after the start of Direct Benefit Transfer on LPG (DBTL) scheme which eliminated duplicate and inactive customers.
Foreign direct investment in the insurance sector more than doubled to U.S.$341.43 million during March–September this year, Parliament was informed.
During March–September 2014, the sector had received FDI worth U.S.$135.30 million, Commerce and Industry Minister Nirmala Sitharaman said in a written reply to the Rajya Sabha. She also said that FDI in Railway infrastructure was opened in August 2014 and “data on FDI inflows on this sector is not separately maintained”. She said FDI directly supplements the domestic capital and brings technology and skill in the sectors of direct entry. “It has indirect multiplier effects on other related sectors also thereby stimulating economic growth leading to increased production, exports and employment generation,” she said.
Replying to a separate question, the minister said foreign investments made by NRIs which also includes investments by Persons of Indian Origin and Overseas Citizens of India during July 2014 and June 2015 increased to 796 crore as against 732 crore in the same period last year.
A committee on reviving PPP model has suggested the Central Government should encourage development of infrastructure sectors, including airports, ports and railways under the public private partnership (PPP) mode by ensuring easier funding for projects with long gestation period.
The host of recommendations suggested by the Vijay Kelkar Committee include review of the model concession agreements, raising of funds through zero coupon bonds and setting up of independent sectoral regulators.
“PPPs are an important policy instrument that will enable India to compress time in this journey towards economic growth and development. A successful and growing stream of PPPs in infrastructure will go a long way in accelerating the country’s development process,” said the report, which was made public by the Finance Ministry.
The report was submitted by Mr Kelkar to Finance Minister Arun Jaitley in November 2015. With regard to stalled PPP projects, the committee said it needs to be kick started. “There is an urgent need to evolve a suitable mechanism that evaluates and addresses actionable stress. Sector specific institutional frameworks should be developed to address these stalled infrastructure projects,” it said. The report said there should be a better identification and allocations of risks between the stakeholders and the contracts for the PPP projects should focus more on service delivery instead of fiscal benefits. The government, it said, “must move the PPP model to the next level of maturity and sophistication” and foster trust between private sector and public sector partners in implementing the PPP projects.
As regards the funding of PPP projects, it said “the finance ministry should allow banks and financial institutions to issue zero coupon bonds, which will also help to achieve soft lending for user charges in infrastructure sector”. The other suggestions include restrictions on number of banks in a consortium, building up of risk assessment and appraisal capabilities by banks and specific RBI guidelines to lenders for encashment of bank guarantees. It also suggested there should be a provision for monetisation of viable projects that have stable revenue flows after engineering, procurement and construction delivery. The report also underlined the need for reviewing the Model Concession Agreement (MCA) and ensuring speedier resolution of disputes.
As regards airports, it said the government should encourage PPP model in greenfield as well as brownfield projects. It suggested an independent tariff regulatory authority for railways to help it tap PPP opportunities.
India’s manufacturing sector grew at its weakest pace in over two years in November as demand and output continued to soften, Nikkei’s Manufacturing Purchasing Managers’ Index, compiled by Markit business survey showed.
The index fell to a 25-month low of 50.3 in November from October’s 50.7. A reading above 50 indicates expansion. The output sub-index fell to 50.4 from 51.2 the previous month as domestic demand remained weak. The subdued domestic demand and competitive pressure appeared to slow new orders, whose sub-index fell to a 25-month low of 50.5, from 51.2 in October. “Signs of the sector slowing have been building up, as growth of both new orders and output has eased in each of the past four months,” said Pollyanna De Lima, economist at Markit.
India’s economic growth picked up in the July–September quarter, outpacing China on improving domestic demand and manufacturing activity, so the latest survey will make disappointing reading for the government and central bank.