NEW DELHI l MONDAY l JULY 15 l 2013 VOL XXXIX NO 116 14PAGES I Rs 4.00 READ TO LEAD P 2 P 9 E C O N O M Y IMPROVING DISTRIBUTION SYSTEM CRITICAL TO FOOD SECURITY LAW: KV THOMAS For firms across India, location is just FinancialExpress.com A private tinge for coal sector via equity tieups Noor Mohammad New Delhi, July 14 YOU care THE INDIAN EXPRESS CITIZENS’ INITIATIVE The flash floods and landslides in Uttarakhand have devastated entire towns and villages, destroyed roads, bridges and communication links, and severely damaged the Kedarnath shrine. The number of dead is uncertain, and it may be months before the full magnitude of the tragedy becomes clear. To help the people in the disaster zone pick up the pieces, The Indian Express has set up a Relief Fund. EXPRESS CITIZENS’ RELIEF FUND All contributions are eligible for tax deduction under Section 80G. Please mention your address, including PIN code, phone number and Permanent Account Number (PAN) so that we can send you your tax-exemption certificates. We will keep you posted on how your contribution is making a difference. YOU MAY SEND YOUR CHEQUES PAYABLE TO: The Indian Express Citizens’ Relief Fund, The Indian Express, Express Building, 9 &10 Bahadur Shah Zafar Marg, New Delhi 110002 I EDIT P6 How to solve the euro crisis Hugo Dixon Exclusive! Deep pockets BP asks a judge to apply some common sense to Deepwater claims ■ P4 amended to allow private players entry into captive coal mining 1996: EMTA ( formerly Eastern Mineral and Trading Agency) bags first MDO contract in West Bengal Feb 2013: Union budget 2013-14 promises PPP policy framework for coal mining with CIL March: Inter-ministerial committee (IMC) constituted to work out PPP policy April: IMC holds its first meeting Source: Industry firm. The risk of mining operations(exceptthoseof uncontrollable costs) will, in greatpart,beassignedtothe private players, which means they also stand to gain from efficiency . The new PPP framework will be discussed by the inter-ministerial group on the subject on Monday . Analysts said this could attractglobalmininggiants rathertheextantMDOmodel sans equity partnership by them. Earlier, the plan was to buttress the MDO model by providing longer —say ,30years,tenureof the service contract. The current thinking in the govern- ment, after receiving informal feedback from the likes of Rio Tinto, BHP Billition is that along with the longer MDO tenure, equity-sharing option could also be given to them. The intent is to develop a host of big greenfield ventures, enabled by technology, human resources and finance from the mining giants. “An equity sharing model is more efficient than the pure MDO model as it gives similar incentives to both — the government and the private sector. Further, because of equity ownership, the private player will be in a better position to raise fi- H YDRO-POWER company NHPC has been asked to pick minority equity stakes in hydro-power projects awarded to private firms and languishing due to either paucity of funds, technical expertise or regulatory issues, reports Subhash Narayan in New Delhi. The state-owned firm could pick up to 49% stake in such ventures and help revive the projects. The PSU will also be able to exercise control over the JVs with powers to nominate managing directors. ■ Page 2 Kudankulam nuclear power plant reaches criticality Land-rich corporates line up development plans UDANKULAM Nuclear Power Plant (KNPP) achieved its first milestone by achieving criticality late on Saturday night even as protesters renewed their agitation, reports fe Bureau in Chennai. Activists said fishermen will stop work for a day and keep shops closed on Monday. The milestone was achieved after the ‘Boron dilution process’ allowed neutron concentration to go up and start nuclear fission, thus generating heat. ■ Page 2 ELIANCE Communications, Adani Enterprises and Gammon India, which are among corporate houses sitting on substantial land assets, are hoping to monetise them by developing townships, commercial properties and hotels instead of selling the plot, reports Shubhra Tandon in Mumbai. Some are opting to develop the land themselves while some others prefer JVs that fetch better realisations. ■ Page 2 K BOSE Corporation, the audio technology major founded by late IndianAmerican acoustics pioneer Amar Gopal Bose, will remain privately held, the company said. Founder Bose died on Friday. “Bose Corporation will remain privately held, and stay true to his ideals,” Bose Corp’s president, Bob Maresca said. ■ Page 4 Key milestones 1993: Coal Nationalisation Act of 1973 NHPC may buy into stalled private hydro-power projects In the news Firm to stay private after Bose’s death Timeline of pvt participation in coal ALL IN A DAY: POWERING UP www. indianexpress.com/ citizenrelieffund. Petrol price hiked by R1.55 per litre THE ROLL COAL NDIA may still be far from fully privatised operations in its coal industry but the government, , eager to augment the fuel’s domestic production, intends to widen the scope of public private partnership (PPP) model in the sector by treading the fine line of legality In line with finance . minister P Chidambaram’s Budget promise of a PPP policy framework involving Coal India, the government plans to expand the scope of contract mining by enlarging the private firms’ role as mine developer-cum-operator (MDO), said coal ministry sources. The idea, these sources said, is to give the private players greater development roles by making them minority equity partners in jointventureswithCIL.The ownership of assets and the produce as also the right to commercial sale of the fuel willremainwiththePSU(so that the Coal Mines Nationalisation Act is not violated) but practically all investments, mining technology and human resources will be provided by the private DONATIONS CAN ALSO BE MADE ONLINE. VISIT I N V E S T O R INDIA MAY HAVE PERMANENTLY LOST SOME FUND FLOW TO THAILAND & PHILIPPINES, SAYS RBS CIO DUGAN a state of mind P U B L I S H E D F R O M : A H M E DA B A D, B A N G A LO R E , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D, KO C H I , KO L K ATA , LU C K N OW, M U M B A I , N E W D E L H I , P U N E BECAUSE P 10 e F E R GAIL targets Pak LNG pact with lower prices ■ Talks under way for 5-year, 5-mmscmd deal Pranav Nambiar New Delhi, July 14 I MPROVING India’s trade ties with Islamabad has been a case of one-step-forward-twosteps-back.WhilePakistan is yet to give the promised most-favoured nation benefit to New Delhi, the latter has skipped talks on the 2,700-km Iran-Pakistan-India gas pipeline despite its obvious economic gains. Butthatwon’tpreventpublic sector GAIL India from sellingaportionof imported LNG to industrial consumersinLahore. According to Prabhat Singh, director marketing at GAIL, the company is in talks with the Pakistani government to supply LNG to the gas-starved neighbour. The two sides are negotiating a five-year contract for supplying 5 millionstandardcubicmetres per day (mmscmd) of gas to consumers in Pakistan.Thismakesbusiness PAKISTAN HAS CONSIDERABLE DEPENDENCY ON GAS, WHICH ACCOUNTS FOR ABOUT 32% OF THE COUNTRY’S ENERGY MIX sense for the public sector gas marketer because it haslong-termLNGimport contractswithfirmsinUS, Russia, Australia and Qatar. Also, the LNG is received at its Dabhol terminal can be re-gassified thereandtransportedcosteffectively to Lahore units by connecting its Dadri Bawana Nangal (DBN) pipeline with them. “We already have the DBN pipeline quite close to Amritsar. From Amritsar, the Pakistan border is hardly 25-30 km and from there, Lahore is not too far,” Singh said. He said the proposed pipeline is a win-winsituationforboth sides. For GAIL, the gas supply to Pakistan could increase utlisation levels of the pipeline which currently stands at about 510% for the lack of readiness of many Indian consumers to lift gas. The DBN pipeline has a capacity of 31 mmsmcmd, of whichonly2-3mmscmd is being utilised as some power plants ans SEZ projects in adjoining areas have failed to take off. Pakistan currently has considerable dependency on gas, which accounts for about 32% of the country’s energy mix. ■ Continued on Page 2 nances and invest in the mines,” said Kameswara Rao, leader, energy utilities & mining, PwC. The option will need to be vetted by the law ministry . The new model is being considered at a time when the government is worried about the 22% annual rise in coal imparts and its adverse impact on the current account. Globally too, such liberal PPP models are increasingly being adopted by mineral-rich countries to increase production, while fully privatised operations also co-exist in some countries. India meets about 60% of its electricity requirement from coal. While the domestic coal production is growing at 3-4% annually, demand is rising by 6-7%. “The gap between demand and availability of coal in India is expected to rise every year. As per the 12th Plan, the estimated demand for coal will rise to 980 MT by 2016-17 and 1,373 MT by 2016-17, while the supply of domestic coal is expected to be 7,95 MT by 2016-17 and 1,102 MT by 2021-22,” PwC said in a recent report. ■ Continued on Page 2 twitter.com/FinancialXpress facebook.com/TheFinancialExpress FinancialExpress/Apps India loses as Big Auto drives to Asian rivals ■ Indonesia & Thailand gain from fresh investments FALLING BEHIND Auto expansion plans in India, Thailand & Indonesia till 2016 India By 2014 Indonesia Thailand New car plants: Ford, Honda New car plants: Isuzu, Honda, Volkswagen Capacity expansion: Toyota, Nissan/Datsun, General Motors New component plant: Toyota New car plants: Nissan (second) Capacity expansion: Honda, Suzuki New car plants/ By 2015 expansion Renault-Nissan* By 2016 New car plants: Maruti Suzuki, Hyundai* New car plants: Honda, Ford, Great Wall Motors (China) New car plants: Mitsubishi Capacity expansion: Toyota Capacity expansion: Nissan New transmission plant: Mazda APPROX TOTAL AUTO SECTOR INVESTMENTS BY 2016 (R crore) 12,000 *Expected Roudra Bhattacharya New Delhi, July 14 D ESPITE being a big market and home to several global auto majors for decades, India is now under threat of losing a large chunk of fresh investments from the likes of Honda, Toyota, Nissan and Ford to regional competitors Indonesia and Thailand. With a large part of the new capacity focussed on exports,theshiftof automakers towards the two countries comesonthebackof sluggish market growth in India, high interest rates and a lack of government incentives to 24,000 10,000 Source: IHS Automotive, industry sources stimulate sales, say industry executives and consultants. In comparison, Thailand and Indonesia are pushing auto sales through a slew of incentives for new car buyers, while maintaining interest rates in the low single-digits. By 2016, around R24,000 crore will be invested by companies like Toyota, Nissan, Honda and Volkswagen in Indonesia for capacity expansion, while firms like Ford and Honda have committed an additional R10,000-crore investment in Thailand. In comparison, India will get only about R12,000 crore worth of investments from companies like Maruti Suzu- ki, Ford and Renault-Nissan. Global auto majors opting toinvestmoreinIndia’sSoutheast Asian rivals is alarming, especially since India is a much bigger market. In fact, India’s 3.28 million light vehicle market size in 2012 was three-and- a-half times bigger thanIndonesia’s(0.98million), and two-and-a-half times bigger than Thailand’s (1.30 million), according to IHS Automotive. This makes India the sixth largest market, while Thailand and Indonesia are the 13th and 17th, respectively . By 2017, India is expected to jump three spots to the third positionbehindUSandChina. ■ Continued on Page 2
The Financial Express (FE) is a business paper that’s closest to the people who are in the business of business. From business policies to market trends to new developments, The Financial Express comes packed with incisive news on every relevant issue.