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APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM VOLUME XLIII NO. 302, 14 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 QUESTION OF PRUDENCE FY18 deficit: States may cross 3% limit Among 7 states that released budgets recently, 3 have reported fiscal slippages, 4 have deficits above 3%; farm loan waivers, pay hikes to cost them in FY19 IN THE NEWS Rotomac owner ‘flees’ after `800-cr default AFTER BILLIONAIRE diamantaire Nirav Modi, another defaulter Vikram Kothari, the promoter of Rotomac, has also allegedly gone abroad after swindling `800 crore from various public-sector banks including Allahabad Bank, Bank of India and Union Bank of India, sources told PTI. The Kanpur-based company's owner had taken a loan of more than `800 crore from over five stateowned banks. Allahabad Bank, Bank of India, Bank of Baroda, IOB, and Union Bank of India compromised their rules to sanction loans to Rotomac, sources said. eFE P8 Centre 49.4 50.1 23.9 24.1 FY18 3.3 Centre 3.5 2.69 2.63 3.0 States 2.5 FY15 FY16 FY17 FY18* FY19BE *FY18: BE for states and RE for the Centre Of 7 states which presented budget for FY19, 3 reported fiscal slippages for FY18 BE Debt to GDP RE 3.46 3.0 2.99 2.5 2.7 1.95 W Bengal Rajasthan The FRBM panel has suggested a ceiling on debt-GDP ratio at 40% for the Centre and 20% for the states by 2022-23. Karnataka revert to below 3% target of deficit in FY18,” but as seven states have released theirFY19 budgets recently, two — West Bengal and Rajasthan — have revised their FY18 fiscal deficit estimates considerably upwards; the former by over 1 percentagepointandthelatter byclose to 50 basis points.Karnataka, too, has allowed the deficit to widen by 20 basis pointsfromthebudgetedlevel, mainly because its revenue expenditure shot up. Except Uttar Pradesh, which cut revenue spending by7% from the budgetedlevel—itstucktothe deficit estimate of 3% forboth this year and next — the states that have presented new budgetshavebeenslackincontaining such expenditure of a recurring variety. Bengal’s higher deficit is primarily necessitated by a 8.2% fall in“own revenue”and 5.8% rise in capex, whereas Rajasthan’s fiscal slippage is despitea6%capexcut.Among the other states, Chhattisgarh and Kerala have kept revised estimatesofFY18fiscaldeficits more or less on a parwith budgetestimates,buttheirdeficits are still above 3%. Continued on Page 2 Corporate earnings FE BUREAU India Inc reported decent earnings during the Oct-Dec quarter, suggesting a modest recovery. Though there were some disappointments, consumer companies saw steady growth trends along with passenger & commercial vehicles and industrial firms Q3 FY18 Q4 Q1 FY17 37.16 Q2 Sample of 2,179 companies (excluding banks, financials & OMCs ) QuickPicks Modi opens `7,900-crore fourth terminal at JNPT PRIME MINISTER Narendra Modi on Sunday dedicated the first phase of the `7,900-crore fourth terminal project of JNPT to the nation, which will raise the cargo handling capacity of the nation’s largest container port by 50%, reports PTI. The fourth terminal project seeks to double JNPT’s capacity to nearly 10 million standard container units and will make it the 33rd biggest port globally. In contrast, global export powerhouse China already has 15 ports with over 20 million TEUs capacity. 349 infra projects show cost overrun of `2 lakh crore AS MANY AS 349 infrastructure projects, each worth `150 crore and above, have shown cost overruns to the tune of `2 lakh crore owing to delays and other reasons, a government report has said, reports PTI. The ministry of statistics and programme implementation monitors infrastructure projects worth `150 crore and above. Of these 1,283 projects in question, 349 reported cost overruns and 302 time escalation. PAGE 3 SFIO faces severe staff crunch; nearly half of posts vacant THE SERIOUS Fraud Investigation Office (SFIO) continues to grapple with staff crunch with nearly half of the sanctioned posts remaining vacant even as efforts are on to bolster its manpower strength, a senior official told PTI. The white-collar crime probe agency, which comes under the corporate affairs ministry, has a total of 133 sanctioned positions. Out these, only around 64 positions are filled. The agency is looking to hire more people, the official said. 87.80 40.85 40.85 Q4 Q1 FY17 Q3 FY18 119.42 Q2 15.29 Q1 (bps, chg y-o-y) -11.74 Q4 FY17 -10.34 Q3 FY18 -85.67 Q2 (% chg y-o-y) 18.80 154.90 10.76 -175.01 Q4 Q1 FY17 RM to sales Net profit 196.77 OPM (bps, chg y-o-y) 7.81 7.18 9.08 Oracle’s Reggie Bradford says in an economy like India, start-ups are going to be a huge leapfrog because of mobility and some of the advancements in technology Net sales (% chg y-o-y) Q2 Q3 FY18 Source: Capitaline UDAY’S DUBIOUS EFFICACY Discoms’AT&C losses rise again ANUPAM CHATTERJEE New Delhi, February 18 DEFYING THE INTENT of the Ujwal Discom Assurance Yojana (UDAY) aimed at improving the financial health of debt-laden electricitydistribution companies (discoms), the aggregate technical and commercial (AT&C) losses of these entities have shot up over the past year after a gradual drop achieved since FY15. AccordingtotheUDAYportal,AT&C losses reported by24 states were 23% at Q3FY18, compared with 20.3% in FY17. With this, meeting the key UDAY target of reducing the AT&C losses to 15% by FY19 now looks very unlikely. Apart from the usual suspects such as Jharkhand, Bihar and Uttar Pradesh, the major states with high AT&C losses now include Punjab, traditionallyknownforlowpilferageand theft.Its AT&C losses have shot up dramatically from 17.6% in FY17to32.6%inQ3,FY18.The jump was mainly because of non-receiptofsubsidyfromthe stategovernmentbutthetransmission and distribution losses alsostoodatahighlevelof13%. Continued on Page 2 Major states where AT&C losses have worsened from FY17 levels (%) FY17 Q3FY18 39.3 18.9 Jharkhand 25.2 22.8 Maharashtra 32.6 31.8 30.2 31.4 29.9 19.3 Uttar Pradesh HOW SOME PSBs RESPONDED ■ Loan accounts of Modi, Choksi ● RAIDS CONTINUE 4.0 Modest recovery You don’t have to be in Silicon Valley to build a great start-up BANIKINKAR PATTANAYAK New Delhi, February 18 States 4.1 (% of GSDP) WHILE THE CENTRE reported a slippage from its fiscal deficit target in FY18, there are early indications that the state governments’ combined fiscal deficit in FY18 could be more than the estimated (BE) 2.69% of the GDP; it might even cross the 3% threshold, prescribed under their Fiscal Responsibility and Budget Management (FRBM) Acts and mandated by the 14th Finance Commission. Thepotentialslippageisdespite the burden — and the extra fiscal flexibility allowed — under theUDAYschemeforthepower sectorhaving petered out. The prospect for FY19 is not bright either as at least six states are implementing farm loan waivers and most are to factor in Pay Commissioninduced salary increases for their staff. An NIPFP paper released in December had said,“states in aggregate are expected to As PNB firefights, others tie loose ends FY17 4.5 PRASANTA SAHU New Delhi, February 18 FRAUD FALLOUT FOR MOST SENIOR bankers, February 12 was just like any other day at office until they got a “cautionary message” fromthePunjabNationalBank (PNB), revealing the singlebiggest fraud in the country’s banking history. Without waiting for any specific directive from either the government or the central bank to act,hectic parleyswere arranged at headquarters of some public-sector banks and the first thing the banks did was to scan their individual exposure to the key accused in the $1.77-billion scandal — celebrity jeweller Nirav Modi and his uncle and chief of Gitanjali Gems,Mehul Choksi. Fiscal deficit (% of GDP) Madhya Pradesh 21.6 Chhattisgarh 17.6 Punjab READ TO LEAD scanned vigorously ■ SWIFT system scrutiny tightened; some set up centralised system, with checking at various levels ■ Exposure to large gems and jewellery firms scanned; repayment enquiries sent ■ HR depts asked to check tenure of employees in sensitive posts/branches ■ Vigilance officers asked to submit report on preparedness to check fraud Then started a more stringent scrutiny of their SWIFT interbank messaging system — which was manipulated in the PNB fraud — to detect anysign of wrong-doing, senior bankers with three PSBs confirmed to FE. PSBs — from State Bank of India to Bank of Baroda — are learnt to have further strengthened their systems since the PNB fraud came to light. Somebankssoughttosetup a“structured,centralisedtracking system” to monitor SWIFT messages and created multiple layersofchecking,astheSWIFT mechanismisn’tlinkedtotheir core banking system. Some sent advisory to their HRdepartments to check if any employee is retained in a sensitive post or branch, without strong reasons or formal approval,atanyplaceforlongerthan-the-stipulatedperiod.(The former PNB employee who bypassedlaid-downprocedures to cause the fraud was retained in the same branch for around seven years when he was supposed to have been transferred in threeyears at most). Continued on Page 2 ● EXTENDED LoU TENURE 200 shell firms and benami Officials at other banks’ assets under ED, I-T scanner branches may face probe PRESS TRUST OF INDIA New Delhi, February 18 AT LEAST 200 shell firms and ‘benami’ assets have come under the scanner of investigating agencies that are probing the `11,400-crore fraud at the Punjab National Bank (PNB), allegedly involving diamond czar Nirav Modi, his relative and business partner Mehul Choksi and others. The Enforcement Directorate(ED),whichcontinuedits searches against Modi, Choksi and their companies for the fourth day on Sunday, is also moving to attach at least two dozen immovable properties underthePreventionofMoney LaunderingAct (PMLA). The ED raided at least 45 premises across the country. Details on Page 2 PRESS TRUST OF INDIA New Delhi, February 18 AS INVESTIGATIONS INTO the `11,400-crore scam at PNB gather momentum,officials at overseas branches of other banks,where the fraudulently issued letters of undertaking (LoUs)were encashed,are under scanner,sources said.Officials of the Hong Kong branches of Indian lenders including Alla- habad Bank, SBI, Union Bank, UCO Bank and Axis Bank are allegedly part of the fraud. Asperguidelines,thetenure for encashment of LoUs for the jewellery sector is usually 90 days and not 365 days,sources said, adding that the deviation should have raised alarm in the minds of officials at the Hong Kong branch of otherlenders. Details on Page 2
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