OPINION, P8 COMPANIES, P6 TEJINDER NARANG Cheaper imports, not just DeMo caused farm crisis INTERNATIONAL, P16 SUNIL JAIN NITI AAYOG RECOMMENDATION IN HIGH SPIRITS Centre focussed on MSP for cereals, does little for fruits/veggies whose output is more AI debt unsustainable, should go to private hands: Panagariya Clooney agrees to sell tequila brand to Diageo for $1 billion NEW DELHI, FRIDAY, JUNE 23, 2017 VOLUME XLIII NO. 97, 20 PAGES, `5.00 PUBLISHED FROM: AHMEDABAD, BENGALURU, CHANDIGARH, CHENNAI, HYDERABAD, KOCHI, KOLKATA, LUCKNOW, MUMBAI, NEW DELHI, PUNE WWW.FINANCIALEXPRESS.COM FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE SENSEX: 31,290.74 ▲ 7.1 NIFTY: 9,630 ▼ 3.6 NIKKEI 225: 20,110.51 ▼ 28.28 HANG SENG: 25,674.53 ▼ 20.05 `/$: 64.6 ▼ 0.07 `/€: 72.12 ▲ 0.22 BRENT: $45.23 ▲ $0.41 GOLD: `28,702 ▼ `135 8 9 2.6 1.4 2.0 CBI BoM 0.8 Punjab Sind Bank 0.4 Union Bank 1.5 5/25 (N) SDR (N) 2.0 Dena Bank ICICI Bank 1.4 S4A (N) PNB 0.9 5/25 (S) IOB SDR (S) 2.4 S4A (S) Bank of Baroda 0.8 SDR (S) = Standard SDR accounts, SDR (N) = SDR accounts classified as NPA the country’s top corporates are financially fragile, it was former RBI governor Raghuram Rajan who first forced banks to accept the reality and classify assets correctly in December 2015. Bankers have been given a fortnight within which to move the tribunal. Among the other companies that have been refereed to the NCLT are Jyoti Structures, Lanco Infratech, Monnet Ispat and JP Infratech. The 12 accounts identified by the central bank are those to which banks have an exposure of more than Rs 5,000 crore, more than 60% of which has been recognised as NPAs. Once these cases are with the NCLT, the lenders need to set up a committee of creditors thatwill come up with a plan on howthe assetwill be tackled. If the committee is Source: ICRA unable to find a solution within 180 days — this can be extended to 270 days — the borrowing entitywill go into liquidation. The three steelcos — Essar, Bhushan and Electrosteel — togetherhave a manufacturing capacity of close to 18 million tonnes per annum. The total debt of the Essar Group is estimated at `1.17 lakh crore. Most private banks have sold off their Essar Steel exposure to asset reconstruction companies, taking a haircut of more than 50%; most PSU banks have declared Essar Steel an NPA. Essar Steel, promoted by the Ruias, had at a meeting last year requested banks to convert `12,200 crore of loans into preference capital and equityshares. -1500 VIKAS SRIVASTAVA & ANUPAM CHATTERJEE Mumbai/New Delhi, June 22 TO SALVAGE ITS debt-laden Mundra power project, pushed to a corner after the Supreme Court inApril ruled out compensatory tariff of 40 paise per unit, Tata Power has offered a 51% stake in the project fora nominal `1 to Gujarat’s state-run power utility GUVNL. This is subject to the rider that it agrees to payfull fuel cost during the remainder of the 25-year power purchase agreement (PPA).The agreement was signed in 2007. The additional 40 paise variable tariff will ensure there is no loss on account of fuel costs.The plant’s existing capacity charge of 90 paise per unit — right now, the variable charge is 140 paise — is enough to take care of ser- -2000 Income tax: Get prepared to file your returns From linking your PAN to Aadhaar to collecting all relevant documents to reporting cash deposits during demonetisation, know the rules for filing your I-T returns correctly ■ Personal Finance, P15 QuickPicks Rail PSU buybacks to be lower on capital expenditure plans THREE CASH-RICH rail PSUs — Ircon International, Rail Vikas Nigam and Rites — are likely to undertake buyback of their own shares before their initial public offerings (IPOs) hit the market later this year, report Saurabh Kumar and Prasanta Sahu in New Delhi. The PSUs, however, are understood to have managed to lower buyback obligations after these units flagged significant capex plans for 2017-18 in a meeting with the department of investment and public asset management (DIPAM) recently. PAGE 2 FE BUREAU New Delhi, June 22 THE GOODS AND Services Tax (GST) Council might take a lenient view of minor compliance issues during the first six months after the new tax is rolled out and refrain from slapping penalties on taxpayers,revenue secretary Hasmukh Adhia said on Thursday. However, he added that the benign approach would be restricted to “genuine cases”and based on the authenticity of the problems cited by the assessees in complying with the rules. EPF members to get `2-lakh subsidy via Hudco tie-up RETIREMENT FUND body EPFO on Thursday joined hands with Housing and Urban Development Corp (Hudco) to enable its members avail credit-linked subsidy of up to `2.67 lakh for buying affordable homes under PMAY, reports PTI. The memorandum of understanding was inked on Thursday by the Employees’ Provident Fund Organisation’s central provident fund commissioner VP Joy and Hudco CMD M Ravi Kanth. The pact was inked in the presence of Union ministers M Venkaiah Naidu and Bandaru Dattatreya. Continued on Page 2 ❝ Our intention is to have a smooth landing of GST. Intention is not to harass everyone in the first month Govt assessing feasibility of different time zones in India THE Department of science and technology (DST) is conducting a study to assess the feasibility of having different time zones in the country, reports PTI. The study is being conducted to give "scientific inputs" on the matter, DST secretary Ashutosh Sharma said. Recently, Arunachal Pradesh chief minister Pema Khandu had demanded a separate time zone for the northeast. “The DST has been conducting studies on this, looking at what is the potential of energy saving if you have two different time zones,” Sharma said. Allaying the fears of increased compliance burden in the GST regime, Adhia said that this was rather a “myth” as just the software used by businesses for the interface with the taxman needed a one-time tweaking. “There would be no requirement of employing more people to file returns,” he said. On the dreaded anti-profiteering rules,whichwas notified by the government on Tuesday, Adhia said it would be used as a “brahmastra”or last resort. — HASMUKH ADHIA, revenue secretary GSTN floats tender for testing its system now! FINANCE MINISTER ARUN Jaitley may have given users a grace period for filing their GST returns as they were not fully ready, but it appears the GST Network itself needs some more time to get ready.GSTN floated a tenderlastweek — June 15 — for ‘hiring of agency for user acceptance testing’,reports Sumit Jha in New Delhi. The pre-bid meeting for the tender was on June 21, the last dateforsubmittingtechnicaland financial bids is July 7, and the technicalbidwillbeopenedonthe same day.No date has been given foropening the financial bid. The testing period is from August 2017 to July2018,and is to test the system on 15 parameters in real time. These include assessment & adjudication, recovery, refund and data warehousing & predictive analyses. GSTN is expected to receive 300 crore invoices a month. While such testing is a necessary part of any system, the fact that it is being done so late is worrying. Continued on Page 2 -849 -999 0.6 0.4 0.3 0.6 2.6 2.5 2.3 2.51 2.39 FY13 Realisations `/unit 0.5 FY14 FY15 FY16 FY17 *Company made `1,800-cr provision vicing the debt. While itwas not immediately known if GUVNL would accept the offer,Tata Power said: “If the procurers take over 51% equity on a back-to-back basis they would have the advantage of competitive power for full life of theplant,thatis40years,andcan have unrestricted generation evenbeyond80%availabilityata very competitive price.” Electricity from the plant underthe formulawould still be one of the cheapest available to the MEET WITH TELCO CEOs Minister Sinha assures of ‘corrective steps’ Source: Reliance Securities SEB, the company claimed, attributing the solution to the bankers.GUVNLbuys 48% of the powerfromTata’s Mundra plant. In the letter, copies of which were marked to Nripendra Misra, principal secretary to the prime minister, and the Union power secretary,the Mundra unit’s CEO Krishna Kumar Sharma said the 4,000MWplanthasaccumulated losses of `6,457 crore against a paid-up equityof `6,083 crore. Continued on Page 2 NFSA sops to continue for one more year SANDIP DAS New Delhi, June 22 Continued on Page 2 Adhia vows soft touch at onset -896 Under recovery paise/unit GST ROLL-OUT Special Feature FY17 (From left) Sunil Mittal of Bharti Enterprises, GopalVittal of BhartiAirtel, and Himanshu Kapania of Idea Cellular in discussions at a meeting with telecom minister Manoj Sinha onThursday PHOTO: RENUKA PURI FE BUREAU New Delhi, June 22 TELECOM MINISTER MANOJ Sinha on Thursday assured the telecomindustrybigwigsthatthe government would take corrective steps to ensure orderly growth in the sector.“The report of the inter-ministerial group (IMG)willcomesoon...Corrective stepswill be taken bythe governmentforensuringorderlygrowth in this sector in terms of services to the common man,” Sinha said after a two-hour meeting with promoters and senior executives of telecom firms. Sinha’s assurance came after the operators stressed on the points they had earlier made at their meetings with the IMG, whichunderlinedthedivisionbetween the incumbents like Bharti Industry revenue (` crore) 54,961 47,661 50,036 43,509 48,137 51,877 ?? Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 Industry declined by 20%+ in 3 quarters AirtelandIdeaCellularononeside and Reliance Jio on the other.The incumbents highlighted that the government should immediately look at fixing the termination rates,whichwould fix the issue of predatory pricing that has been affectingthesectorsinceQ3FY17. They said termination charges should be raised from the current 14 paise per minute to reflect the full cost,which is around 30-35 paise,since networks are not created to service others.This was a pointer to asymmetric call traffic fromJio’snetwork—92%outgoing and only8% incoming. They also urged for increasing the moratorium on spectrum payment as well as the tenure of instalments. Jio, on its part, strongly batted for zero termination rates while stressing that therewas no stress in the sector and even if there was some stress, it was because the incumbents have grown more through debt rather than equity. Continued on Page 2 THE GOVERNMENT HAS decided to retain the generous subsidies being given to two-thirds of the country’s population under the National Food Security Act (NFSA) for another year,that is, until June 2018. The move is despite the steadyincrease in the Centre’s food budget after the Act came into force in 2013. Sources told FE that each beneficiary will continue to get 5 kg of grains a month for the next one year too; the subsidised price of rice, wheat and coarse cereals will be retained at `3, `2 and `1 per kg. respectively. A notification to this effect would issued by the food ministry shortly. Continued on Page 2 Centre’s annual food subsidy budget (` crore) R R R R 1,45,138 7 FY16 2-17-18* 6 FY15 1,30.672 SBI Capital Markets (SBI Cap) has been roped in as the transaction adviser for the divestment process of three units of SAIL and Luthra & Luthra has been engaged as the legal adviser for stake sale, reports PTI. “SBI Cap is the transaction adviser while Luthra and Luthra Law Offices is the legal adviser,” a source privy to the development said. Protocol Insurance Surveyors & Loss Assessors is the assets valuer for the stake sale, the source said. Steel Authority of India (SAIL) had in February invited proposal for engagement of the transaction officer. 5 ❝ ❝ IN THE NEWS SBI Cap roped in as transaction adviser by SAIL THE FATE OF three near-bankrupt steel companies — Essar Steel, Bhushan Steel and Electrosteel Steels — which together owe lenders nearly `1 lakh crore will now be decided by the National Company Law Tribunal (NCLT). Having failed to recover their dues or rope in either strategic or financial investors, lenders to these companies finally agreed on Thursday to resort to the Insolvency and Bankruptcy Code (IBC), bankers familiar with the development said. The decision follows a directive by Reserve Bank of India (RBI) on June 13 to banks asking them to refer a dozen troubled companies — with a combined debt of close to `2.4 lakh crore — to the tribunal. Corporate watchers said a new chapter was unfolding for India Inc, traditionally unfamiliar with insolvencies and, more often than not, able to wrangle concessions and bailouts, often with the help of those in power. Both the RBI and the government are attempting a speedy resolution to the problem of non-performing assets (NPAs) that is paralysing banks and stymieing investments. While it has been known for several years now that many of 4 -500 -1000 FY14 2016-17 SHAYAN GHOSH Mumbai, June 22 3 2.4 UCO Bank Allahabad Bank 2 FY13 1,34,919 Corporation Bank 1 FY12 2015-16 0 0 1,13,171 (in %) PAT/(loss), ` crore 2014-15 As % of net advances - March 2017 DAYS AHEAD OF Prime Minister Narendra Modi’s visit, the US has cleared the sale of the state-of-the-art Guardian UAV technology to India to further mutual security interests to protect the Indian Ocean, reports Huma Siddiqui in New Delhi. This is the first significant progress after India gained membership of the exclusive Missile Technology Control Regime and the US named India as a major defence partner. The Indian Navy has been pressing for the transfer of this technology since last year. The efforts have intensified in recent months as New Delhi reckoned that clinching a deal on the purchase of 22 unarmed drones would be a litmus test on the Trump administration’s approach to India-US defence ties that flourished under Barack Obama. Sources said the deal would pave the way for other key technology sales to India. Tata Power Mundra 89,740 THE DEBT TRAP If GUVNL buys this, it will pay full price for fuel but benefit as it will own plant for operational life 2013-14 Lenders to refer Essar, Electrosteel, Bhushan to NCLT in a fortnight under bankruptcy code GUVNL can buy 51% at `1 -1,492 Three steel firms face liquidation India to get Guardian UAV tech in boost to ties TATA OFFER FOR MUNDRA -1,602 ● DRONE DEAL -2,180* RED LETTER DAY *budget estimate DOWNBEAT Nasscom lowers guidance for current fiscal FE BUREAU Hyderabad, June 22 IT INDUSTRY BODY National AssociationofSoftwareandServices Companies (Nasscom) on Thursday lowered its guidance for the sector in the current fiscal to 78%against8.6%revenuegrowth the industry posted in FY17.The guidanceinFY17wasintherange of8-10%afterNasscomhadlowered it from the initial 10-12%. Citing political and macroeconomic factors, Nasscom had for the first time in 25 years deferred its annual revenue guidance in February this year. The latest update reflects the growth pangs of large Indian IT companies such as Tata Consul- tancyServices,InfosysandWipro, allofwhichhadrecordedasingledigit rise in revenues for FY17.In fact Infosys, once considered the sector’s bellwether, has provided arevenuegrowthguidanceofjust 6.5-8.5% for FY18. The Indian IT industry had reached a size of $154 billion in FY17 which includes exports, domestic and hardware. Export revenue,which forms the major component of the overall revenues touched $116 billion in FY17 and is expected to reach $124-125 billion at the end of the current fiscal. According to Nasscom,export growth has started to pick up slowly with improvements in financial services and the high po- IT-BPM revenue break-up $ bn Exports e-comm 108 13 26 39 69 7 FY12 Domestic Hardware 154 143 13 35 14 38 24 22 116 108 28 FY16 33 FY17 tential in digital businesses.It expects a revival in spending from the financial services industry and increased automation-based projects driving deals in future. Nasscom president R Chandrashekhar said,“There is a need tofocusonre-skillingabout2million workforce in the next four to five years.Considering the evolution that the industryis undergoing due to the adoption of new technologies,it is imperative that weasanindustrydrivetheskilling andre-skillingofnewandexisting talent,soastoensuretherequirement that will be created in the form of newjob roles.” Given the industry’s singledigit growth rate, there were reports that companies such as Infosys,Wipro and Tech Mahindra were taking steps to lay off their employees. Continued on Page 2
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