OPINION, P8 MONEY, P10 RAISING CONCERNS RBI slipped up, but as owner, govt must share blame for PNB Rapid collapse of CAD partly due to DeMo & GST but need big reforms to fix this MARKET DEBUT Uday Kotak warns of BFSI fleeing India over high operational cost EDITORIAL INTERNATIONAL, P16 SoftBank working with Nomura on $19-bn mobile IPO NEW DELHI, WEDNESDAY, FEBRUARY 21, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XLIII NO. 304, 24 PAGES, `5.00 (PATNA `6.00, RAIPUR `7.00) P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 33,703.59 ▼ 71.07 NIFTY: 10,360.40 ▼ 18 NIKKEI 225: 21,925.10 ▼ 224.11 HANG SENG: 30,873.63 ▼ 241.80 `/$: 64.79 ▼ 0.58 `/€: 79.95 ▲ 0.25 BRENT: $64.95 ▼ $0.72 GOLD: `30,567 ▼ `68 DE-NATIONALISATION Coal black future for miners In key reform, CCEA okays methodology for auction of coal blocks to private players for commercial use FE BUREAU New Delhi, February 20 IN THE NEWS Rupee tanks 58 paise to fresh 3-month low THE RUPEE ON Tuesday tumbled by 58 paise to end at a fresh three-month low of 64.79 against the dollar on the back of consistent demand for the greenback from state-run banks and importers, reports PTI. This is the biggest single-day fall for the local currency so far this year. Reeling under intense dollar pressure, the local unit plunged sharply to hit a low of 64.86 in later afternoon deals before ending at 64.79. This is the lowest closing for the rupee since November 22 last year, when it had closed at 64.92. Reversing an eight-week uptrend, India's forex reserves dipped to $419.76 billion during the week ended February 9. IN WHAT MARKED the culmination of the government’s effortsoverthelastfewyearsto populate the coal mining sector, promote investments in high-end mining technology andhaveacompetitivedomestic coal market, the Cabinet Committee on Economic Affairs (CCEA) on Tuesday set the ball rolling for auction of coalminestoprivatepartiesfor commercial use by approving the relevant methodology.The keyreformwillvirtuallyupend the Coal Mines (Nationalisation) Act, 1973, (CMNA) which has kept the sector largely a preserve of public-sector monolith Coal India (CIL). TheCCEAdecisionwillpave the way for global mining giants such as BHPBilliton,Rio Tinto and Glencore to invest in India's coal mining sector, apart from local/homegrown Opening the coal sector for private players will usher in much needed competition, increase domestic and FDI investment in the sector, and drive in efficiencies. — ANIL AGARWAL CHAIRMAN, VEDANTA GROUP ment to CMNA) by a veritable cross-section of industries, public and private, but only commercial coal mining by the private sector was to bring a transformative change in the sector. WhileaCMNAamendment to de-nationalise coal mining is yet to materialise, the legal routeforcommercialcoalmining by private companies was cleared by the Narendra Modi government in March 2015, with the Coal Mines (Special Provisions) Act. According to coal minister Piyush Goyal, under the methodology cleared by the CCEA,coal mineswill be transferred to the private sector through forward auctions; the company that quotes the highest commission (`/tonne) to state governments will win the blocks.The move,the minister said, would be economicallybeneficial to coal-bearing eastern Indian states such as Bihar, Jharkhand,West Bengal and Odisha as all royalties would be passed on to the state governments. When asked how the decision would affect CIL and its arms, the minister said the PSU would become more competent as “greater competition would lead to improved efficiency”. FUEL FACTS CIL SCCL Captive (mt, FY17) India's coal production: 652 554 61 37 2022 target :1,500 1,000 400 100 Coal import (mt) 212 168 146 204 191 FY13 FY14 FY15 FY16 FY17 players like Vedanta, Adani Group,Tata,GMR and JSPL Despite the increasing share of non-fossil fuels in India’s energymix,the market forcoalisprojectedtogrowata solid pace for several more years as this high-emitting fuel will continue to be the mainstay for the country’s power generation. Also, coal exports are a potentiallylucrative business for India. Recent years have seen other state-run entities too establishing a presence in commercial coal mining and a jump in captive coal production (thanks to a 1993 amend- Continued on Page 2 It will provide flexibility over the usage of coal. We are willing to participate in auctions for anything between 2-4 million tonne capacity mine. FE BUREAU New Delhi, February 20 TO BOOST RAILWAY connectivity and ease congestion in eastern and central India, the CCEA on Tuesday approved doubling,new-line and electrificationprojectsworth`11,662 crorethatareexpectedtocreate 211.74 lakh persondays of work.These projects will likely ease commuting in states such as Bihar,Odisha,UttarPradesh, Madhya Pradesh,Chhattisgarh and West Bengal, apart from northeast. The Cabinet also approved the setting up of a `60,000 crore,four-year National Urban Housing Fund that would finance the Pradhan Mantri Awas Yojana (Urban).“This will provide an added momentum to the pace of implementation (of the yojana),” minister of housing and urban affairs ministerHardeep Singh Puri said. The rail projects include doubling and electrification of the Muzaffarpur-Sagauli, Sagauli-Valmiki Nagar,JhansiManikpur, Bhimsen-Khairar and Bhatni-Aurnihar lines. Arcelor,VTB hit a snag in pursuit of Essar Steel Advisers reviewing bids recommend disqualification; lenders’ committee to meet this week to discuss eligibility BLOOMBERG Mumbai, February 20 ARCELORMITTAL AND RUSSIA’S state-controlled VTB Group have hit a fresh snag in their pursuit of Essar Steel India, an insolvent producer that could fetch at least $6 billion. Advisers evaluating the offersforEssarSteelarerecommendingthatallthebidsbedisqualified, according to people with knowledge of the matter. A committee of Essar Steel lenderswillmeetlaterthisweek to discuss the eligibility of the proposals,the people said,askingnottobeidentifiedbecause the information is private. Legal and accounting advisers expressed concerns to the interim resolution professional overseeing the sale about the eligibility of the offers from bothArcelorMittal and the VTB consortium, the Essar Steel India, an insolvent producer, could fetch at least $6 billion; ArcelorMittal submitted a higher offer than VTB investor group ■ Advisers based their opinions on new bankruptcy rules aimed at making it difficult for founders of firms with longterm bad loans from bidding for assets in insolvency proceedings ArcelorMittal considered ineligible because it held a stake in Uttam Galva Steels, which is classified as a delinquent borrower, when it made its offer ■ people said.The advisers’opinion is meant as a guide, and there’s no certainty the bids will be blocked, according to the people. Any final decision will involve the lenders’ committee and India’s National Company Law Tribunal, the people said. ArcelorMittal, the world’s biggest producer of the alloy, submitted a higher offer than the VTB investor group,which is backed by the son of a billionaire founder of Essar Steel, Looking for regular cash flow? Go for SWP When you park your cash flow needs in a liquid fund and then execute SWP, chances of capital erosion due to market volaitility is reduced even as cash flow needs are met ■ Personal Finance, P15 — A SUBBARAO ED, FIN & STRATEGY, CLP INDIA QuickPicks RBI sets up panel on frauds, tells banks to meet SWIFT norms IN THE wake of the PNB fraud case, the RBI has constituted an expert committee to look into factors leading to an increasing incidence of frauds in banks, and measures needed to curb and prevent it, reports fe Bureau in Mumbai. It will also analyse the reasons for high divergence observed in asset classification and provisioning by banks vis-à-vis the RBI’s supervisory assessment, and the steps needed to prevent it. It is also tasked with looking into the role and effectiveness of various types of audits conducted in banks in mitigating the incidence of such divergence and frauds. NPPA: Margins on drugs as high as 1,192% in 4 private hospitals NON-SCHEDULED DRUGS and diagnostic services constituted major components of charges billed to patients in four private hospitals with margins as high as 1,192%, drug pricing regulator NPPA said on Tuesday, reports PTI. For consumables, the margins were even higher. The purchase price of the device for the hospital was `5.77 and a 1,737% margin on procurement price was charged, it added. PAGE 3 Sterlite Power sells 3 assets to IndiGrid for `1,410 crore INDIA GRID Trust (IndiGrid), the country's first infrastructure investment trust, acquired three transmission assets from its sponsor Sterlite Power Grid Ventures for `1,410 crore, reports PTI. The acquisitions include RAPP Transmission Company, Purulia, Kharagpur Transmission Company, and Maheshwaram Transmission. The move has helped increase its assets under management to `5,300 crore. PAGE 6 IT INDUSTRY BODY National Association of Software and ServicesCompanies(Nasscom) onTuesdayprojected a growth rate of 7-9% in fiscal year 2018-19, slightly higher than the 7-8% expected in the current fiscal, while hiring is expected to remain muted. In its outlook for the forthcoming fiscal, the industry body said that the sector continued to face various headwinds like increased protectionism, tax impact issues in US and sluggishness in technology spending. “We estimate a 7-9% growth in IT and IT-enabled services for FY19. The domestic revenue may grow at a slightly higher pitch of 1012% while exports, the mainstay, may lag in FY19,” Nass- com president R Chandrashekharsaidwhileaddressing a press conference at the World Congress on Information Technology (WCIT). Nasscom had projected a growth rate of 7-8% for FY18,and the industry is expected to close theyearwithagrowthof7.8%. On the hiring front too, there is unlikely to be any significant uptick as the sector is likely to absorb around 1 lakh people in FY19. “Hiring is expected to be similar to FY 2018 with technology jobs in non-technology sectors expected to grow faster,”Nasscom said. In the years prior to FY18, the industry added around 2 lakh people in a year. According to Nasscom, exports are projected to touch $137 billion in FY19, up from $126 billion in FY18. Continued on Page 2 IT industry revenue break-up ($ bn) 143 13 22 154 14 24 35 38 38.5 33 FY16 Exports FY17 Domestic FY18 Hardware Growth of 7-9%* India IT industry export revenues* ($ bn) 135-137 126 FY18 *In constant currency FY19P IN CONVERSATION: Actor Tabu with The Indian Express deputy editor Seema Chishti at the Express Adda in New Delhi on Tuesday EXPRESS PHOTO: NEERAJ PRIYADARSHI PNB FRAUD Agencies must take steps to avoid banking scams: FM FE BUREAU New Delhi, February 20 IN HIS FIRSTofficialstatement after the `11,400-crore fraud at Punjab National Bank (PNB), finance minister Arun Jaitley on Tuesday said banking supervisory agencies need to assess what new systems have to be put in place to avoid such scandals in future. The minister posed some tough questions to both auditors and the management of PSBs and asked them to introspect as to why they failed to detect the fraud,the single biggest in the FMSPEAK ■ It is incumbent on us as a state to chase those who cheat banks ■ You (PNB manage- ment) are found lacking when you are unable to check unscrupulous employees ■ Both internal and external auditors seemed to have looked the other way when fraud happened country’s banking history. Jaitley's statement came afterthe finance ministrysent a letter to the Reserve Bank of India (RBI), asking whether there were any supervisory or regulatorylapsesbythecentral bank in the fraud at PNB. “The first important question is with regard to lack of ethics that a section of Indian business follows and, therefore, it is incumbent on us as a state to chase these people to make sure the country is not cheated,”Jaitley said. Continued on Page 2 SIT probe: SC Moody's, Fitch warn PNB to hear PIL of rating downgrades 126 116 28 41 25 16 11 108 167 15 26 Continued on Page 2 FE BUREAU New Delhi, February 20 Nasscom sees 7-9% growth in FY19 FE BUREAU Hyderabad, February 20 the people said. There were onlytwobidsforthesteelcompany,which could fetch avaluation of at least $6 billion,people with knowledge of the matter said earlier. EssarSteelwasownedbybillionaire brothers Shashi and Ravi Ruia before being brought under a new insolvency resolution process that was designed to clear out distressed companies through asset sales. Modi recommits to doubling agricultural incomes FLAT OUTLOOK Special Feature VTB investor group was deemed ineligible because its backers include Rewant Ruia, the son of former Essar Steel owner Ravi Ruia ■ ● FARM FOCUS Lot of players will participate in this as people have been waiting for it. If resources are available in India people would like to use it rather than source it from abroad. — SHARAD MAHENDRA HEAD, MINING, JSW ENERGY Nod for also for rail lines, housing fund ELIGIBILITY FACTOR Digital e-comm Growth of 10-12%* Domestic revenues* (excluding hardware) ($ bn) 28-29 26 FY18 FY19P Source: Nasscom A PIL filed in the Supreme Court on Tuesday has sought a direction to the Centre to ensure Nirav Modi is deported to India within two months, reports fe Bureau in New Delhi. It has also sought a SIT probe into the scam involving Gitanjali Gems’Mehul Choksi. The SC has accepted counsel JP Dhanda’s petition and posted the matter for hearing on Wednesday. PAGE 2 INTERNATIONAL RATING agencies Moody’s Investors Service and Fitch Ratings on Tuesday warned PNB of rating downgrades, citing likely networth erosion and widening lossesatthelender,reportsPTI. The`11,400-crorefraud— the biggest in the country’s banking history — has raised questions on both internal and external risk controls at PNB as well as the quality of manage- ment supervision at the regulatory level considering that the fraud went undetected for severalyears,theagenciessaid. Moody’ssaidthereviewwill focus on: (1)Timing and quantum of the financial impact of thefraudulenttransactions,(2) any management actions taken to improve the capitalisationprofile,and(3)anypunitive actions taken by the regulator on the bank.PAGE 10 PRIME MINISTER NARENDRA Modi on Tuesday reiterated that the government will take all necessary steps to double the income of farmers by 2022.Addressing a conference here,he said as manyas 99 irrigation schemes that had been stuck for two to three decades would be completed within a specified time frame (`80,000 crorehasbeenallocatedforthe same). Modi added that 22,000ruralmarketswouldbe upgraded so as to provide a market for farm produce within 5-15 km distance of production points. On the first day of the twoday conference, seven groups constituted undervarious topics such as trade policy and exportpromotion,agricultural policy to sustain farmers' income, marketing, science and technology,capital investment and credit made presentations before the prime minister. The panel on trade, coordinated by IIM Ahmedabad’s Vasant Gandhi, suggested that since a small rise or fall in prices of agricultural producemakesabigdifference in relation to exports and imports, there is a need to ensure Indian products are competitive globally by abolishing mandi taxes and other local levies. He also said like their US counterparts, Indian farmers also need to get price forecast of their produce. Modi said he has been flagging the issue of barriers to India’s farm trade with other countries.Agroup on trade has suggested that all global import standards be mapped and made available in one portal in regional languages so that farmers can read that information.Italsohasrecommended the consumer behaviour in each country to a specific produce be supplied to farmers so that they prepare their crops accordingly. Continued on Page 2
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