ECONOMY, P2 INTERNATIONAL, P4 EDITORIAL FMSPEAK NEW HEALTHCARE BILL Amending antigraft law to shield bankers will help NPA resolution Give primacy to views of developing nations, Jaitley tells ADB Buffett: Obamacare overhaul ‘a huge tax cut for guys like me’ OPINION, P6 ASHOK GULATI & SMRITI VERMA Shivraj lessons for Yogi Adityanath to boost agri growth NEW DELHI, MONDAY, MAY 8, 2017 VOLUME XLIII NO. 57, 14 PAGES, `5.00 PUBLISHED FROM: AHMEDABAD, BENGALURU, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI, NEW DELHI, PUNE FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM STOCKTAKING Discoms’ UDAY results hardly impressive Of 27 UDAY states, only 10 revised electricity tariffs for FY18 THE INDIAN cricket team will participate in next month’s Champions Trophy after the BCCI gave its all-clear to the move in a special general meeting on Sunday, a massive climbdown from its initial aggressive stance, reports PTI. The board announced that the squad for the eight-team event, starting June 1 in England, will be picked on Monday. It was decided that no legal recourse will be taken against the ICC as per the diktat of the Committee Of Administrators (COA). NPCI to launch RuPay credit cards NATIONAL PAYMENTS Corporation of India (NPCI), the nodal agency for digital payment systems in the country, will soon launch its RuPay credit cards for which it has roped in a few banks, reports PTI. "Our RuPay credit cards will be launched soon. A pilot is going on with five banks," NPCI MD & CEO A P Hota said. Snapdeal-Flipkart merger could be struck next week REUTERS Mumbai, May 7 AFTER PLOUGHING ABOUT $2 billion into minoritystakes in Indian e-commerce businesses over the past few years, Japan’s SoftBank is upping the stakes, looking to play consolidator and take a more active role at a trio of leading start-ups. According to sourceswith direct knowledge of the matter, the solar-to-tech conglomerate is seeking to secure a piece of India’s industry leaders in everything,from payment systems to online shopping and groceries, in a series of deals that would GRAND PLANS ■ The conglomerate looks to play consolidator and take a more active role at a trio of top e-commerce start-ups ■ Among the most high-profile plans is its push to merge Snapdeal and Flipkart ■ It is close to finalising a cash infusion of more than $1 billion into digital payments firm Paytm shake up the $65-billion sector. Among the most high-profile plans is SoftBank’s push to engineer a merger between Snapdeal,the No.3 player in one of the world’s most competitive online markets and one of its biggest Indian investments to date,and market leaderFlipkart. The deal could be finalised as soon as next week, one of the sources said. SoftBank has poured roughly $1 billion into Snapdeal since 2014,but competition in e-commerce has risen dramatically with US giant Amazon cranking up its presence and taking the No.2 spot from Snapdeal. Besides Snapdeal,SoftBank is also close to finalising a cash infusion of more than $1 billion into Alibaba-backed digital payments firm Paytm — another leader in a highly competitive sector — giving it a more direct say in that group too, according to one source familiar with discussions. Continued on Page 2 Special Feature Distress gauge Bulk hiring in infotech sector moves to niche Farmers not top suicide victims With focus on automation and growth slowing down, the IT industry is now looking at strategic hiring of professionals with differentiated skills, especially digital skills ■ eFE, P8 Quick Picks Little reprieve for FCI as food subsidy dues mount WITH THE Centre’s outstanding dues to the Food Corporation of India (FCI) touching `58,000 crore by FY17-end, the state-run entity may continue to face woes in the current fiscal as well and be forced to seek expensive short-term loan from banks, reports Sandip Das in New Delhi. Sources told FE the finance ministry has released `49,000 crore under the food subsidy allocation for FY18 to the FCI recently. Also, it is likely to release the balance amount form the current year’s total food subsidy budget of `1.07 lakh crore over the next couple of months. However, this will not suffice for the corporation to carry out its activities uninterruptedly. What worries the corporation is that the finance ministry has not made special provisions for clearing the accumulated dues. PAGE 2 OVL output touches record 12.57 million tonnes in FY17 ONGC VIDESH, the overseas arm of state-owned Oil and Natural Gas Corp, produced a record 12.57 million tonnes of crude oil and equivalent gas from its assets abroad in 2016-17, report PTI. The output was up from 8.92 million tonnes of oil and oil equivalent gas in the previous fiscal 2015-16, OVL managing director Narendra K Verma said. In its over five-decade existence, which began in 1965 with a venture in Iran, OVL has seen a peak production of 9.45 million tonnes in 2010-11. “Production in 2016-17 was higher on account of acquisition of stake in Russia’s Vankor oil field," Verma said in New Delhi. 38.7% Bankruptcy/indebtedness as cause of farmer suicides, versus 3.3% of entire population 19.5% Farmer suicides caused by ‘farming-related issues,’ half of such suicides in Maharashtra Suicide victims by profession in 2015 Persons Others engaged in the 9.4 farming sector 9.1 23.4 Self-employed (%) 7.9 persons 6.7 16.7 Professionals/ 8.2 17.8 salaried persons Students 0.8 Retired Daily wages Unemployed persons earner Housewives persons 12,602 persons earning a living from farming ended their own lives in 2015, which included 8,007 farmers and 4,595 farm labourers; total suicide victims in the year were 1,33,623 MP 3.5 Karnataka 6 6.5 5.72 4.27 Assam UK *With state govt subsidy, hike for end consumer ~ 28% States with highest AT&C losses^ AT&C loss (%) J&K Bihar Manipur Jharkhand 28.27 33.24 28.42 33.47 42.58 UDAY target (%) UP ^for April-December 2016 coms, the tariff increase to the consumerswill be 28%.Discoms in Uttar Pradesh have not even filedpetitionsfortariffrevisionto the state regulator so far. The dismal performance in achieving the UDAY objectives can be terribly costly for the states. They have taken huge fiscal burdens to salvage the lossmaking, heavily indebted discoms.A recent JP Morgan report said the states’ fiscal deficit, ex- cluding UDAY, is expected to touch a 13-year high of 3.4% of their gross domestic product (GDP) in FY17,threatening to reverse gains from the Centre’s restraint in recent years.The fiscal spotlight is back on finances of states,whichhadadheredtostrict fiscal discipline in the aftermath oftheglobalfinancialcrisiswhen theCentrehadtoresorttobailout packages to spur the economy. However, between FY13 and GST roll-out a $1-billion business for IT firms Going through a bad patch, sector looks to make the most out of the new tax regime Research by FE bureau Among the self-employed and daily wage earners, the incidence of suicides is much higher than among farmers. Suicides were more often caused by family problems (27.6%) and illness (15.8%) than bankruptcy or indebtedness (3.3%) in 2015. Although the suicide rate among farmers is far lower than that of even the population as a whole, ‘bankruptcy or indebtedness’ and ‘farming-related issues’ have relatively higher shares as causes of suicides among the former. 8 5 28.96 SoftBank takes driving seat in Indian online shake-up 9.42 36.45 AP Bihar UDAY target ( %) 45.75 IN THE NEWS India to be part of Champions Trophy French independent centrist presidential candidate Emmanuel Macron casts his ballot in the presidential election in Le Touquet, France, on Sunday. Voters are choosing a new president in an unusually tense and important election that could decide Europe’s future, making a stark choice between pro-business progressive candidate Emmanuel Macron and far-right populist Marine Le Pen. Report on Page 4 15 69.95 The last lap ACS-ARR gaps widened for discoms in at least 8 states Average tariff hike for FY18 (%) 55 ANUPAM CHATTERJEE New Delhi, May 7 BY DECEMBER LASTyear,staterun power distribution companies (discoms) saved close to `12,000 crore in interest costs, thanks to the Ujwal Discom Assurance Yojana (UDAY),but they have had a less than creditable record so far in meeting the crucial efficiency parameters set under the scheme. According to official data reviewed by FE, of the 27 states that have adopted UDAY,only10 revised the power tariffs for FY18, with the increases below what was mandated for six of them.Worse,the aggregate technical and commercial (AT&C) losses slipped further in case of discoms in 12 UDAY states from the levels in March 2016.Among the remaining states, the AT&C loss reduction was below UDAY targets in twelve. Among these 10 states that raised tariffs for FY18, the average tariff hikewas the highest for Bihar(55%),followedbyMadhya Pradesh (9.4%) and Karnataka (8%). However, net of the Bihar government’s subsidy to its dis- AT&C losses slipped further from pre-UDAY levels in 12 states Five states that effected steepest tariff hikes 46.0 They save `12,000 crore in interest cost, thanks to the scheme, but largely fail to meet the operational goals DARLINGTON JOSE HECTOR Bengaluru, May 7 THE INDIAN IT industry is chasing a $1-billion opportunity with the advent of the GST regime,at a timewhen the sector is going through a bad patch with a slowing demand environment. Industry observers feel that the GSTroll-outwill provide the sectoran opportunityakin to the Y2K phenomenon, at the turn of the millennium. “It is a `6,000 crore opportunity,”said Mohandas Pai,former board member of IT major Infosys, sizing up the potential market.“This is a billion-dollar opportunity that will present itself repeatedly for the next two years and then go on to become an annuity business,”he told FE. GST is probably the biggest indirect tax reform India has seen, that is looking to ease the OPPORTUNITIES GALORE ■ ERP packages that help SMEs record GST transactions, upload invoices and file returns ■ POS billing software, payment solutions and e-signing products ■ Storage, security services and data analytics ■ Close to 9 million returns to be filed in the first month of GST roll-out ■ Of 51 million small businesses in India, only a fifth digitally-enabled process of doing business in the country. GST returns have to filed on a monthly basis, and this calls for a robust accounting software that can enable error free filings. GST Network is the nodal agency for implementing its IT backbone and Infosys has already won a 5-year contract in this regard. In 2015, the Centre had awarded a contract worth `1,380 crore to Infosys to build and maintain the technology network for implementing the goods and services tax (GST) system across the country. But this is only a part of the opportunity. Developing enterprise resource planning (ERP) packages that help SMEs record GST transactions is a big opportunity to start with. SMBs need to record the GSTtransactions,upload invoices and do the return filing. Software companies have also realised the opportunities in the challenges that SMBs will face while transitioning to GST, as the government expects close to nine million returns to be filed in the first month of its roll-out. Theotheropportunitiesarein creating POS billing software and developing payment solutions ande-signingproducts.“Software product companies will have a field daywith the GSTroll-out. THIS IS PERHAPS the best time to buy a house from the point of view of affordability in the last decade or so. According to a CLSA report,income growth in the last three years has overtaken housing prices and affordability in the current fiscal is the best since 2005. Mortgage rates have come down by 150 basis points in the last two years bringing them down to 12-year lows,and this is gradually improving affordability.Every 100 basis points mort- average price of unsold apartments — across 8 cities — fell by 1.67% sequentially over the December quarter to Affordable house: More for less (` m) Income Loan limit House price FY12 Property rate (`/sqft) FY18 0.5 0.8 1.5 2.4 2.1 3.4 Source: CLSA 10% income CAGR Assume at 3x annual income Implied as above 3,200 4,000 About 25% higher; c.5% CAGR `6,185 per sq ft. Property prices in seven of the country’s top eight cities fell in the three months to March ■ Homes in the `2m-3.5m segment have become 1015% cheaper since Jan 2017... ■ ...due to central government’s expanded interest-subsidy scheme, providing up to `2,35,000 loan-principal reduction for non-home owners with annual income up of to `1.8m ■ ... and mortgage cut by 50bps ● DEALING WITH BITCOIN Regulations on virtual currencies on cards Virtual reality 2 $24 billion Size of global Bitcoin market ~$1,500 1 Current global price of one Bitcoin ~`1,00,000 Rupee price of Bitcoin apiece, after more than tripling in a year PRASANTA SAHU New Delhi, May 7 with builders eager to liquidate inventory in a market badly hit by demonetisation. The price of a mass-premium quality house located in a metro city suburb having a ticket price of `60 lakh has remained flat on a year-on-year basis. However, the post-tax household income has gone up by 7.5% y-o-y, in FY18 to `13 lakh per annum, while the loan-to-value (LTV) is at 70%, and the mortgage rate at 8.5% — increasing the affordability much more than in the past. Continued on Page 2 Continued on Page 2 Continued on Page 2 It’s the best time in a decade to purchase a home gage-rate cut is equal to 5-6% price cut,CLSA has noted. Data from research firm PropEquity shows the weighted Continued on Page 2 ENDING YEARS OF wait-andwatch policy, the government is set to take steps soon to regulate the use of virtual currencies (VCs) like Bitcoin in India. A government panel, formed on April 12 to suggest measures to deal with VCs, are veering towards a consensus that “it is not something which needs to be promoted”, said an official aware of the matter. Before finalising its report, the panel is also likely to seek views from the public as well as from the cryptocurrency start-ups. The panel, however, may not recommend a blanket ban on digital currencies,as it is difficult to implement. Bitcoin essentially operates on a peer-to-peer basis.It is both a digital asset and payment system, the users of which can transact directly among themselves without a banking intermediary. AFFORDABILITY YARDSTICK FE BUREAU Mumbai, May 7 FY17,while the Centre has cut its fiscaldeficitfrom4.9%ofGDPto 3.5%, states’ deficit has gone up from 2% of their GDPto the projected 3.4% in FY17. Under UDAY, state governments are required to take over 75% of the short-term liabilities of their respective discoms (as in September-end 2015), 50% in the first year (FY16) and the balance in FY17. The accumulated losses of discoms stood at a staggering `3.8 lakh crore at the launch of UDAY.Their outstanding debt then stood at `4.3 lakh crore.Theschemewaslaunchedin March 2015. It was thought that operational benefits of UDAY would not onlyimprove the discoms’financial positions but also ultimately get translated into lower tariffs for consumers. Goa, Rajasthan and Gujarat are the only three states which could achieve their respective AT&C loss reduction targets for April-December, 2016. Though the targets were not met, Haryana, Jharkhand and Manipur achieved reasonable success in reducing theAT&C losses. According to a person privy to the dynamics of how discoms are implementing UDAY,the real situation of the AT&C losses will be clear only after the state discoms prepare their financial accounts for FY17.AT&C losses are calculated on the basis of the available financial data.
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