OPINION, P6 NATION, P3 MADAN SABNAVIS Just 45% of all claims paid, PMFBY needs fixing `14,000-CR FRAUD TRADE WAR AVERTED Under Prompt Corrective Action, banks will earn much less from their funds SUNIL JAIN INTERNATIONAL, P4 Sebi to consider penal action against PNB, Gitanjali Gems China pledges to 'significantly' increase buying of US goods MUMBAI, MONDAY, MAY 21, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XXXXXV NO. 363, 22 PAGES, `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 CROPPED INSURANCE PMFBY payouts crash as states don’t pay premium The reason for the low payout ratios is that very few state governments have made payments for the premium due fromthem—typically,farmers pay around 20% of the cost of insurance and the balance is equally split between the state and the central government; till the state government pays its share, the Centre does not pay its share either. Some states like Bihar and Odisha have not paid their full premium for 2016-17 as well. SUNIL JAIN New Delhi, May 20 AGAINST CLAIMS OF `14,453 crore made by farmers for crop losses in kharif 2017 under the Pradhan Mantri Fasal Bima Yojana (PMFBY),insurance firms have paid a mere `733 crore so far, apayoutratioofjust5%.Ayear ago,in kharif 2016,the payout ratio was a much higher 95% across both PSU and private sector insurance firms. IN THE NEWS Petrol, diesel hit all-time highs as oil cos hike rates CLAIMS SOAR, PAYOUTS CRASH PSUs have higher claim ratios* 150 % PSU 60 60 40 30 20 Kharif 2016 Rabi 2016-17 Kharif 2017 Q1 Q2 Q3 Q4 FY18 199.50 179.30 43.22 192.24 Q1 Q2 Q3 Q4 FY18 Source: Capitaline ` could take a while to recover whichiswhyneitherthetopline rise nor the earnings growth is much better than it was in the December2017 quarter. Continued on Page 2 COMPETITION LAW Special Features Regulatory conflicts to ease in redrafting Fuelling innovative ideas at Microsoft Garage The Microsoft Garage, with its latest 8,000 sq ft centre in Hyderabad, is a resource for its employees, supporting experimentation and encouraging problemsolving in new ways ■ EFE, P8 BANIKINKAR PATTANAYAK New Delhi, May 20 THE GOVERNMENT IS planning a major overhaul of the competition law, likely bringing in a framework to ensure greatersynergybetweensector regulators,including RBI,Sebi, Trai and Irdai,and the Competition Commission of India (CCI), a senior official told FE. The idea is to remove anyoverlappingroleamongwatchdogs on regulating competition in a relevant market to ensure faster clearances to large merger & acquisition (M&A) dealsandbettercurtailmentof anti-market behaviour. A review — if not another hike — of thresholds beyond Should you invest in a growth stock? Investing in a growth stock has high upside potential and vice versa. If you invest in it, consistently monitor the same for any hidden weakness ■ Personal Finance, P9 BIG DEAL ■ To ensure greater synergy between sector regulators and CCI ■ Idea is to remove any overlapping role among watchdogs ■ A review of thresholds beyond which deals require CCI nod likely which all M&A deals require the CCI approval and of“deterrent penalties” on anti-competitive practices is also expected,analysts said. Continued on Page 2 PUBLIC BOOSTER CPSE capex grew 16% in FY18, went past target PRASANTA SAHU New Delhi, May 20 Capex EVEN THOUGH THE Centre’s budgetary capital expenditure declinedanannual7%inFY18, companies owned by it and other public-sector undertakings like NHAI and the Indian Railways have sustained their robust capex pace during the year,contributingingoodmeasure to fixed assets creation in theeconomyamidslowlyreviving private investments.These entities have exceeded their ambitious capex targets set at the beginning of the year, improving upon the accelerated pace gathered in FY17. As many as 35 central public sector enterprises (CPSEs) 2.42 (FY18, ` lakh crore) CPSEs* ` 111% Actuals against target 4.41 CPSEs and departmental bodies such as NHAI, Indian Railways Overall capex by these entities^ 3.07 (` lakh cr) FY16 3.81 4.41 FY17 FY18 ^About 20% of funds came from Union Budget. Budget capex in FY18 was `2.67 lakh crore, down 2% from RE Top investors (FY18, ` crore) 120,000 Target Actuals 90,000 60,000 102% 30,000 Actuals against target C AI C* id NH ONG NTP e rGr ow *Boosted by HPCL acquisition P *35 CPSEs with capex above `500 crore and five departmental undertakings (DUs) with annual capex plans of `500 crore and 0 s ay ilw Ra above invested `4.41 lakh crore in FY18.That was 102% of the year’s target and a solid 16% annual increase. More than 80% of the capex by these entities are fromtheirownsurpluseswhile the balance comes from the UnionBudget.FEreportedearlier that the budget capex was curbed moderately from the revised estimate (RE) level to `2.67lakhcrore,onefactorthe Centre could keep the fiscal deficit below the RE (3.5% of GDP) at about 3.42%. India’s gross fixed capital formation (GFCF) is expected to grow an annual 7.6% this fiscal,comparedwith a growth of 10.1% last year, according to the latest Central Statistics Office (CSO) forecast. Continued on Page 2 Rabi 2016-17 Kharif 2017 **Claims paid as % of claims raised FE BUREAU Mumbai, May 20 RM to sales Kharif 2016 UltraTech to buy Century Textiles' cement business 12.68 8.24 3.97 Q1 Q2 Q3 Q4 FY18 0 ● CONCRETE DEAL (bps, chg y-o-y) 322.63 Net profit (% chg y-o-y) Sample of 571 companies (excluding banks,financials, MRPL) packs seem to be back on track after the disruptions from demonetisation and GST. Hindustan Unilever reported a strong set of numbers with the volumes up 11% y-o-y. However, the infrastructure sector Total *Claims raised as % of total premium 15.76 -22.09 -5.59 15.38 14.14 Q1 Q2 Q3 Q4 FY18 INDIA INC HAS put up a satisfactory show so far in the Q4FY18 earnings season with elevated commodity prices helping producers but hurting users. Most companies have reported numbers in line with expectations and while there have been no big disappointments there haven’t been any bigsurpriseseither.Theresults mustbereadinthecontextofa favourable base effect — Q4FY17was the first full quarter post-demonetisation. The auto and FMCG staples BHARTI AIRTEL HAS threatened to take legal action against Jio for alleging that the telco violated universal licence norms relating to setting up of network infrastructure for pairing Apple’s Watch Series 3 with iPhone inside the country, reports fe Bureau in New Delhi. 12.02 10.62 FE BUREAU Mumbai, May 20 Apple Watch: Bharti threatens to drag Jio to court OPM (bps, chg y-o-y) -104.24 billionaire jewellers Nirav Modi and Mehul Choksi, reports PTI. The two are allegedly the brains behind the over $2-billion PNB scam. Net sales (% chg y-o-y) Private 80 90 0 PSU 100 120 India Inc getting back on track Without Tata Steel CBI may approach and Vedanta, the increase in net Interpol against profits would be Modi, Choksi 12.6% y-o-y, much THE CBI IS likely to approach the same as the Interpol for a Red Corner 12.3% in Q3FY18 Notice against absconding 120 % Private Q4FY18 EARNINGS PETROL PRICES ON Sunday touched a record high of `76.24 per litre and diesel climbed to its highest ever level of `67.57 as the oil PSUs passed on four weeks of relentless rise in international oil prices to consumers, reports PTI. Petrol price rose by 33 paisa a litre in Delhi — the highest since the daily price revision came into force in mid-June 2017, and diesel by 26 paisa. But payout ratios have collapsed** ULTRATECH CEMENT SAID on Sundayitwould acquire the cement business of BK Birla Group company Century Textiles and Industries through a share swap deal,a move which would further consolidate its position as market leader in the segment. The company’s board approved a scheme of arrangement amongst Century Textiles and Industries and its respective shareholders and creditors, the Aditya Birla Groupfirmsaidinastatement. Detailed report on Page 5 Apart from the low payouts ratio,insurance firms are making losses in the second full year of the scheme.While the claims ratio — claims made as a share of premium —was a healthy68% in kharif 2016, this rose to 88% in kharif 2017, and can go up a bit more since not all claims have been processed. Once you add in the profit margins of insurance companies, they are running at a loss. The claims ratio for PSU firms rose from 64% in kharif 2016 to 96% in kharif 2017 and from 72% to 75% for private insurance firms.The total claims ratio for PSU firms was 90% in the first three crop seasons (data for rabi 201718 is not available at an aggregated level) and 74% for private sector insurers. While around 30% of the country’s Gross CroppedArea is covered by PMFBY right now, the target is to raise this to 50% in 2018-19. GOING CLEAN Eight states/UTs ‘kerosene-free’, fuel’s use on rapid decline SAURABH KUMAR New Delhi, May 20 FOUR MORE STATES/UNION territories around the national capital region have become ‘kerosene-free’,inwhatshowed thesuccessofthegovernment’s drive to minimise usage of this fuel.According to official data, Andhra Pradesh, Dadar-Nagar Haveli, Daman-Diu and Puducherry haven’t lifted PDS kerosene forthe first quarterof FY19.Allocation of kerosene to Chandigarh, Delhi, Haryana andPunjabhadstoppedearlier. The overall allocation of kerosene by the Centre for the public distribution system has PDS kerosene release by Centre (lakh litres) <44 87 70 50 FY16 FY17 FY18 FY19* *Annualised, based on Q1FY19 offtake of 11 lakh litres States/UTs that haven't lifted PDS kerosene in Q1FY19 ■ Andhra Pradesh ■ Chandigarh ■ Dadar & Nagar Haveli ■ Daman & Diu ■ Delhi ■ Haryana ■ Puducherry ■ Punjab been falling overtheyears,with the pace of decline getting sharper in the recent years (see chart). The Pradhan Mantri UjjwalaYojanaunderwhichBPL households are given LPG connectionshasacceleratedthefall in consumption of kerosene, alongwithcashincentivesgiven to the states on reduced keroseneoff-take.Thedeclining kerosene use has also brought downtheoilmarketingcompanies’ under-recoveries on the fuel,whichalongwithLPGisstill getting subsidy support from the Centre while the auto fuel prices are decontrolled. Continued on Page 2
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