OPINION, P8 COMPANIES, P6 STEPHEN S ROACH Trump’s moves can spark a trade war that will hurt the US INTERNATIONAL, P16 EDITORIAL AIRCRAFT LEASING $6.8-BN DEAL NSE, BSE within their rights to snap SGX ties but govt needs to address tax/other issues UK court awards BOC Aviation $90 m against Vijay Mallya Phebe Novakovic-led General Dynamics to buy CSRA NEW DELHI, TUESDAY, FEBRUARY 13, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XLIII NO. 297, 32 PAGES, `5.00 (PATNA `6.00, RAIPUR `7.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 34,300.47 ▲ 294.71 NIFTY: 10,539.75 ▲ 84.80 NIKKEI 225: 21,382.62 ▼ 508.24 HANG SENG: 29,459.63 ▼ 47.79 `/$: 64.32 ▲ 0.08 `/€: 78.90 ▼ 0.03 BRENT: $63.70 ▲ $0.91 GOLD: `30,063.00 ▲ `56.00 20% CROSS-SUBSIDY CAP ● PRE-POLL MOVE Industrial power cost to reduce by 14-20% IN THE NEWS Bank of Baroda to exit South Africa BANK OF Baroda plans to exit South Africa as it faces a probe by regulators about its dealings with the politically connected Gupta family, reports Bloomberg. The state-owned Indian lender is in talks with the South African bank regulator to ensure an orderly withdrawal that won’t disadvantage any depositors, the Pretoriabased registrar said in an emailed statement on Monday. India’s Jan fuel demand climbs over 10% INDIA'S FUEL demand rose 10.3% in January compared with the same month last year, its biggest year-on-year percentage gain since November 2016, reports Reuters. Consumption of fuel totalled 16.92 mt, data from the oil ministry’s Petroleum Planning and Analysis Cell showed on Monday. Rajasthan to take `8k-cr hit on farm loan waiver Move to disallow AT&C losses above 15% in tariff orders threatens to add `32,000 crore per year PRESS TRUST OF INDIA Jaipur, February 12 Pan-India AT&C losses (%) 35 33 30 30.6 29.5 25 27.4 26.8 26 26.6 25.5 22.6 25.7 23.9 20 15 10 5 ANUPAM CHATTERJEE New Delhi, February 12 0 THE POWER MINISTRY’S plan to cap cross-subsidy — additional tariffs paid by industrial and commercial consumers to subsidisehouseholdsandfarmers — at 20%,effective January 2019, could reduce the cost of electricity for businesses by up to 14-20%.At a time when raw materialcostsarehighandpricingpowerissubdued,thiscould help companies increase earnings. Among the states, Tamil Nadukeepsthecross-subsidyat the highest level of 60%,while in Uttar Pradesh it is around 40%,one of the lowest. However, the move will dampen the receipts of cashstrappedelectricitydistribution companies,which,helpedbythe revivalschemeUDAY,arestruggling to cut losses. Besides,the ministry’s decision to compute tariffs assuming aggregate technical and commercial (AT&C) losses of 15% — the actuals are higher; thereportednationalaverageis around23%althoughthereare FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 UDAY aims to cut AT&C losses to 15% by FY19 wide variations across discoms — is also threatening to diminishdiscoms’revenuerealisation by a substantial `32,000 crore annually (assuming, based on industry inputs, the monetary value of every 1 percentage point change in AT&C losses to be around `4,000 crore).To put this in perspective, the aggregatebooklossesofstate-rundiscoms in the country were `50,907 crore in FY16. States with higher AT&C losses (for example, Jharkhand at 39.3% and Biharat 38.4%)would face more problems. Currently, regulators compensate the discoms for bulk of theiractualAT&Closses.Toward offthethreatofdisallowanceof AT&C losses, discoms will have tomakeaggressivereductionin these losses with higher effi- cienciesinbillingandcollection. If states comply with the power minister RK Singh’s direction to limit cross subsidy at20%,commercialandindustrial consumers,who pay hefty power tariffs as high as `8-12 perunit,mightseeratescoming down to around `6.50 perunit. The average cost of power supply at the national level was `5.43aunitinFY16.Therefore, cross-subsidyat 20%,across all categories,wouldroughlytranslate into `1.10 a unit. Kameswara Rao, partner, PwC,said,“Regulators have had a long time to gradually rationalise tariffs to cost-reflective levels but have refrained from doing so, leaving a huge backlog.” Continued on Page 2 ● END OF INDIA TIES SPECIAL FEATURE SGX shares tumble on earnings worries Catering to Indian women: Taking the ‘safe’ route With women’s safety being a matter of paramount importance in the country today, brands have a real opportunity to address these concerns, either via products or ads. The trick is to avoid being gimmicky REUTERS Singapore/Mumbai, February 12 QuickPicks Wheat prices remain subdued WHEAT PRICES have remained depressed as the new crop has started arriving in Gujarat and Madhya Pradesh a little earlier than normal amid expectation of a bumper harvest in the country, reports Prabhudatta Mishra in New Delhi. Traders said wheat is available at around `1,600 a quintal excluding local levies and commission at Rajkot, while the price ranges between `1,650 and `1,700 a quintal in Madhya Pradesh. PAGE 14 CCI nod for RInfra-Adani deal RELIANCE INFRASTRUCTURE (RInfra) on Monday said the Competition Commission of India (CCI) has approved the sale of its integrated Mumbai power business to Adani Transmission in an `18,800-crore deal, reports PTI. The two firms had signed a definitive binding pact for 100% stake sale of the integrated business of generation, transmission and distribution of power for Mumbai in December 2017, RInfra said in a statement. SHARES IN SINGAPORE Exchange (SGX) plummeted as muchas9%onMondayasbrokers cut their earnings estimates after a move by India’s three main bourses to stop licensing their indexes and securitiestoforeignexchanges. The unexpected decision to prevent trading from migrating abroad will especially hurt SGX’s Nifty 50 index futures, which is the exchange’s flagship Indian equity derivatives productandaccountsforabout 12% of its total derivatives tradingvolume. “SGX's edge and key proposition to clients was the ability to invest in multiple Asian derivatives products in one venue,” Goldman Sachs’ analysts said in a report. “Cross-margining and other benefits have kept client flow sticky and fostered incremental demand.With the loss of the Indian product there couldbelowervolumesinother BOURSE BATTLE ■ SGX shares fall up to 9%, biggest move since 2008 ■ Nifty 50 futures account for 12% of SGX's derivatives volume ■ Global futures association says move will alarm global investors ■ Brokers downgrade earnings estimates and ratings on SGX ■ Move to hit SGX's flagship Indian equities derivatives product derivatives products,” Goldman said. It cut its rating on SGX to “sell” from “buy” and reduced earnings estimates by up to 11% for 2018-2020. JPMorgan downgraded its “overweight” rating on SGX and UBS placed its“buy”rating under review. Continued on Page 2 JANUARY NUMBERS Overall auto sales up even as cars tap brakes FE BUREAU Mumbai, February 12 WITH ROBUST SALES across segments in January, the SocietyofIndianAutomobileManufacturers (SIAM) on Monday said it expects demand to be strong during the remaining twomonthsofthefiscal—FebruaryandMarch—whilerevisingitsinitialgrowthestimates. During January, barring cars, where sales declined by1.25% compared with the same month last year, all other segments showed sales growth on expected lines. According to SIAM, car sales showed a Vehicle sales in January Passenger cars Utility vehicles M&HCVs LCVs % chg (y-o-y) 1,86,596 1,84,264 1.25 62,263 85,850 28,770 34,170 (in units) Jan 2017 Jan 2018 32,535 51,490 18.77 58.26 8,19,385 10,54,062 Motorcycles Scooters 37.88 3,73,382 5,53,695 28.64 48.29 Source: SIAM decliningtrendthroughoutthe yearasconsumershavestarted preferring utilityvehicles. The industry body now expects to close the year with passengervehicle(PV)segment registering a growth of around 9%againstitsinitialprojection of7-9%.Similarly,commercial vehicles sales growth during the year is projected to be around 13% from the earlier estimate of 4-6%; and twowheelers 12% against the previous forecast of 9-11%. SIAM said that with rural demand picking up and with the start of mining operations and preference for high-tonnage truck,sales of two-wheelers and commercial vehicles, respectively, would grow and, therefore, the projections for the next fiscal would be on the higher side. Continued on Page 2 RAJASTHAN CHIEF MINISTERVasundhara Raje on Monday announced a one-time crop loan waiver of up to `50,000 for small and marginal farmers, and land revenue exemption. The loan waiver is for marginal farmers in the overdue and outstanding category of short loans provided by cooperative banks. This move will cost the state exchequer `8,000 crore. Raje also announced the constitution of a farmers’debt relief commission that will work as a permanent institution. Farmers would be able to get relief on merit basis after presenting their case before the commission. She also announced land revenueexemptionthatwould benefit 40-50 lakh farmers. Interest subsidy for women, disabled, SC/ST and entrepreneurs who are bona fideresidentsofRajasthanand are up to 40 years of age was enhanced to 6% from 5%. Infrastructuresupportsubsidy with a maximum limit of `5 crore was also proposed for the first unit established in a most backward area investing more than `50 crore under each sector of agro-processing and agri-marketing, biotechnology and IT. In rural areas, valuation of agriculture land up to 1,000 square metres will be done at the rate of agricultural land instead of at the rate of residential land to help farmers sell or buy the land for agricultural purposes. Continued on Page 2 REVIVAL PLANS Two bids received for debt-hit Essar Steel Other expected contenders understood to have kept away on Monday, the last day for submitting bids Essar Steel FINANCIALS As of February 09, 2018 (in ` cr) Consolidated debt Amount claimed by financial creditors 37,284 FE BUREAU Mumbai, February 12 ARCELORMITTAL AND NUMETALMauritiusareunderstoodtohaveputinbindingbids to acquire the debt-laden Essar Steel.Theseareunderstoodtobe the only two bids made for the Ruias-ownedsteelmaker,facing insolvency resolution proceedings under the Insolvency and BankruptcyCode,2016. The other expected contenders — JSW Steel,Tata Steel and Vedanta — are understood to have stayed away from makinganoffer.Mondaywasthelast CLAIMS At the end of FY16 (in ` cr) 54,857 Net loss 5,795 Amount admitted 49,213 Revenue 14,381 Source: Capitaline dayforsubmitting bids. FE was not able to immediatelyascertaintheshareholding pattern of Numetal.The principal shareholders of the company are understood to be Russia’s VTB Capital while some members of the Ruia familyare believed to be minority stakeholders. The Lakshmi Mittal-led ArcelorMittal on Monday said its subsidiary ArcelorMittal India Private Limited (AMIPL) hassubmittedanofferforEssar Steel India,in line with the corporate insolvency resolution process. Continued on Page 2 Industrial recovery FE BUREAU More evidence, though not yet conclusive Industrial production recorded good performance for the second straight month in December aided by a favourable base. Analysts are still cautious about a sustained rebound. Retail inflation eased a bit in January but oil prices and MSPs for foodgrains pose a risk to its trajectory. IIP strong, for the second month in row Retail inflation slows a tad (% rise, y-o-y) (% rise, y-o-y) 12 9 6 Manufacturing Overall IIP 2.4 3 0 -3 8.4 Dec 2016 5 4 2 7.1 0 -2 0.6 Source: MoSPI 6 Dec 2017 -4 5.1 CPI core 4.7 3.17 CPI 5.07 0.61 CPI food Jan 2017 Jan 2018
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