NEW DELHI, MONDAY, OCTOBER 31, 2011 V O L X X X V I I N O 2 0 8 7 0 P A G E S I R s 4 . 0 0 READ TO LEAD P 7 T E C H P 11 N O T E S SONY MULLS PULLING OUT OF LCD JOINT VENTURE WITH SAMSUNG TO CUT COSTS P U B L I S H E D F R O M : A H M E D A B A D BY SPECIAL ARRANGEMENT WITH B A N G A L O R E C H A N D I G A R H Underlining the urgency to fight corruption in public life, Prime Minister Manmohan Singh on Sunday said it is the right time to move decisively in this direction. “Our efforts for rapid progress and development can have full impact only if we curb corruption in public life and improve the processes of governance,” he said. Loss from pharma policy at R1,000 cr Loss to the R58,000-crore domestic pharma industry may not exceed R1,000 crore if the latest national pharma pricing policy draft is implemented in its present form. This is an estimate of the pharma marketing research firm AIOCD AWACs that views the policy to be pragmatic and less detrimental to the domestic drug industry than was earlier expected. Page 18 EDIT P8 Why China should bail out Europe Averting a collapse is in China’s interests, but it needs to ask for a full revamp of the IMF structure Arvind Subramanian K O C H I K O L K A T A Subhash Narayan New Delhi, Oct 30 P Red Bull driver Sebastian Vettel of Germany drinks champagne from the trophy after winning the Indian F1 Grand Prix at the Buddh International Circuit in Noida on Sunday. Home team Sahara Force India earned two points with Adrian Sutil’s ninth-place finish ■ P2 Fare hikes through back door to bail out Railways Praveen Kumar Singh & Nirbhay Kumar New Delhi, Oct 30 C AUGHT on the fast tracktofinancialruin thanks to its reluctance to hike passenger fares in the last eight years, Indian Railways is finally considering the inevitable: A dynamic fare pricing model to nudge fares up when costs rise. The model, currently in use for freight operations, has enabled Railways to raise freight rates over four times in a single year. As per the proposal, passenger fares will have three DYNAMIC FARE PRICING AND ROUNDING OFF TICKET CHARGES WILL AVOID NEED FOR INCREASING BASE FARES components; namely base fare, fuel surcharge and station usage charge. Fuel surcharge and station fee will move in tandem with operational costs, while base fare willbeseldomtinkeredwith. Thenationaltransporter is scraping the bottom of its cash reserves and has pegged hopes on finance ministry doles for its development plans. Its recent request for a R2,100-crore bridge loan was rejected. ■ Continued on Page 2 Savings deposits earn more; loans turn dear fe Bureau Mumbai, Oct 30 A NOTHER round of loan rate hikes appears to have started,robbingsomecheerfrom betterreturnsonsavingsaccounts. Kotak Mahindra Bank raised its base rate by 25 basis points to 10% on Sunday following the Reserve Bank of India's repo rate hike last week. HDFC vice-chairman & CEO Keki Mistry said his firm would soontakeacallonratehikes. “We didn’t increase our ratesthelasttimeRBIraised policy rates,” he said. Moneycouldturncostlier acrosstheboardasnon-bank finance companies and mortgagelendersreviewlending rates.Mahindra&Mahindra Finance CEO Ramesh Iyer saidhiscompanywouldtake a decision early November. “Thelatestratehikeandsavings deposit deregulation may put pressure on our costs of funds and we may havetoraiserates,”saidIyer. Following the deregulation of savings rates, banks ■ Chart on current & savings accounts on Page 2 quickly moved to hike rates. Kotak will offer 6% for deposits over R1 lakh and 5.5% for up to R1 lakh. Yes Bank has already started offering 6%.StateBankof India(SBI) toohashintedataratehike. UntilRBIfreedtherateon savings accounts last Tuesday banks were paying cus, tomersauniformrateof 4%. Now, they must offer a uniform rate for deposits below R1lakhandnotdiscriminate between customers who havedepositedmore. Analysts estimate that on anaverage,a100bpsincrease in the savings deposit rate couldhurtearningsof banks by 8-14%. Mid-tier banks with a smaller share of current and savings accounts are expected to benefit more from the move while larger private sector banks, many of whomhavearelativehigh share of Casa accounts, could see their borrowing costs going up. The bigger state-owned banks, say analysts, are unlikely to be hurt because a fair share of their deposits are sourced from ruralandsemi-urbanareas. ■ Continued on Page 2 SRKfliesintotroubleoverRa.Onead ■ Dish TV sends notice to Khan over use of character G.One for rival Ashish Sinha New Delhi, Oct 30 A CTOR Shahrukh Khan’s marketing blitz to promote his new Hindi film Ra.One could land him in legal troubles aftertheimageof hisfilmcharacter‘G.One’wasusedbyarival DTH brand for its own promotions. Shahrukh Khan, who is the brand ambassador of leading direct-to-home (DTH)brandDishTV ,cannot promote any rival DTH company However, Dish TV has . pointed out that Khan’s appearance in the avatar of ‘G.One’ (the video game character played by Shahrukh in Ra.One) in Videocon's DTH print advertisement has breached his brand endorsement agreement with Dish TV . Khan has been the brand H Y D E R A B A D L U C K N O W M U M B A I Mandatory R-LNG to up power costs Falling share prices slow conversion of warrants Right time to move decisively against corruption: PM C H E N N A I EXPENSIVE IMPORTS TO BRIDGE DEFICIT In the news Falling share prices have made many Indian promoters wary of converting preferential warrants into shares as they prefer to buy shares cheaper from the market to hike stake. Roughly, a third of the 26 companies, that issued warrants in January 2010, has not converted these warrants into shares even after the 18-month window, stipulated by Sebi, expired in June 2011. Page 5 PC prices to rise as P THERE IS A CLOUD SOLUTION 13 e F E cost of Thai floods FOR EVERY VERTICAL IN INDIA, SAYS VMWARE’S DUTTON is passed to buyers Shahrukh Khan at a Bangalore event to promote his film Ra.One ambassador for Dish TV for thelastfouryears. DishTVtermedtheuseof Khan’s image in a Videocon d2h ad as “ambush marketing”andservedhimanotice last week saying the use of theimageintheprintadwas a case for “breach of agreement”,which,if unchecked, will have a huge impact on business and goodwill of Dish TV . Sources said that Khan who was not in the country , will'resolve'thematterupon his return. “SRK has contactedusandtheissuewillbe resolvedamiably ,”saidaperson familiar with the matter. The said print ad uses the image of Shahrukh Khan in theavatarof G.Onewhilethe body copy asks readers to move to the next generation of entertainment.Thead,asa whole, is for Videocon d2h, the DTH service of the company while the specifics of , the advertisement are on the launchof satellite3DLEDTV . Inthenotice,DishTVsaid: “We have come across a print ad wherein your picture has been used for promoting the brand of a competitor – Videocon d2h. Your presence in the said ad is not with the branding of the competitor but the advertisement is no less than direct promotion of the brand Videocon d2h, which is in direct competition with Dish TV The ad ... clearly shows or indicates youasthebrandambassador by a competing brand which is clearly prohibited under ouragreement.” ■ Continued on Page 2 OWER tariffs are clearly on their way up.Ontopof electricity regulators’ resolve to hike tariffs annually even if the distribution companies don’t agree, the government is considering a proposal to restrict allocation of domestic gas to power projects at 60% of theirratedcapacity .Power firmswillhavetomandatorily use expensive liquefied natural gas to meet the balancefuelrequirement. The move has been prompted by the widening demand-supply mismatch for gas in India. It is estimatedthatLNGimportswillrise fromthepresent46mmscmd to 103 mmscmd by 2016-17. The proposal, if implemented, will force gas-based power projects to source at least 25% of their fuel requirement as regassified LNG (RLNG) from abroad. The changes, while addressing theshortageof domesticgas, will also raise the cost of fuel forpowerprojectsandleadto higherelectricitytariffs. SHOCK THERAPY ■ Saumitra Choudhuri panel feels cos will have to rely more on R-LNG ■ Gas-based power plants may have to meet 25% of fuel needs from abroad ■ Domestic gas costs $4.2-55/mmBtu while imports cost $10-14 The current policy requires gas-based plants to have power purchase agreements(PPA)for85%of their generation. Under the proposed changes, PPAs will factorinthefuelpricebased on 60% domestic gas and 25% R-LNG. While domestic gas costs $4.2-5.5 per million British thermal unit (mmBtu) ex- cluding pipeline charges and taxes, imported fuel in liquid form costs $10-14 per mmBtu, excluding pipeline charges and taxes. “Power ministry has indicated that taking R-LNG beyond 25% will be difficult keeping in mind the economics of electricity distribution. So, it is likely that this level is maintained in the form of a policy for all existing and future gasbased power projects,” said an official in the inter-ministerial committee on pooling natural gas prices. The committee headed by Planning Commission member Saumitra Choudhurialsofeelsthepowersector would need to source some of their fuel from RLNG. A final decision will be taken by the Prime Minister’s Office (PMO) after consulting the ministry . Fertiliser and power sectors have priority to get domestic gas. Out of the gross domestic gas availability of about 132 mmscmd, more than 88 mmscmd has to be allocated to the two sectors. ■ Continued on Page 2 P U N E NGOs to get aid to fight corp excesses Veerappa Moily, corporate affairs minister Ronojoy Banerjee New Delhi, Oct 30: In a move which has few parallels in the world, the ministry of corporate affairs is set to provide financial assistance to consumer groups and nongovernmental organisations fighting big corporates going delinquent. The move is aimed at strengthening and institutionalising a mechanism of checks and balances for India Inc and encouraging external consumerforumstokeeptabs on corporate corruption and malfeasance. The development comes less than a week after Prime Minister Manmohan Singh voiced concern over the growingincidenceof private sector corruption. ■ Continued on Page 2
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