OPINION, P8 MONEY & MARKETS, P10 RENU KOHLI Higher input costs are crimping India Inc’s profits INTERNATIONAL RECOGNITION WORD OF CAUTION Core inflation has begun to feed itself, MPC must get to its dynamics to respond SHOBHANA SUBRAMANIAN INTERNATIONAL, P14 HDFC Bank's Aditya Puri on Barron's top 30 global CEOs list Soros sees new global financial crisis brewing, EU under threat MUMBAI, WEDNESDAY, MAY 30, 2018 VOLUME XXXXXV NO. 371, 36 PAGES, `7.00 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD 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: 34,949.24 ▼ 216.24 NIFTY: 10,633.30 ▼ 55.35 NIKKEI 225: 22,358.43 ▼ 122.66 HANG SENG: 30,484.58 ▼ 307.68 `/$: 67.87 ▼ 0.45 `/€: 78.33 ▲ 0.13 BRENT: $75.80 ▲ $0.50 GOLD: `31,185.00 ▲ `284.00 FOURTH QUARTER ● BRIBES ALLEGATION Losses at PSBs near `60k cr CBI books AirAsia chief Fernandes, others Only two earn a profit; losses mostly from exposures turning bad BANKING SERVICES are likely to be hit over the next couple of days as employees of public-sector banks (PSBs) have called a two-day nationwide strike from Wednesday to press for a wage revision, reports PTI. As the meeting called by the chief labour commissioner for a reconciliation failed, all the nine constituents of the United Forum of Bank Unions have decided to continue with the strike call, the All India Bank Officers' Confederation said in a statement. WhatsApp payments across India next week FACEBOOK IS set to offer its WhatsApp payment services to the whole of India as early as next week in an attempt to win market share, even though its partners aren't all ready, people familiar with the matter told Bloomberg. The messaging app will partner HDFC Bank, ICICI Bank and Axis Bank to process the transfers, and State Bank of India will join once it has the necessary systems in place, the people said. Q4FY17 Q3FY18 Q4FY18 Q4FY17 7,43,999 Gross NPAs (` crore) 5,84,111 17,126 59,075 Net losses (` crore) Q4FY18 Source: Capitaline Losing share in loans March 2016 34.11 4,000 65.89 3,000 37.52 62.48 2,500 2,940.05 3,500 (%) Private 3,678.80 Source: RBI 2,000 Jan 1, 2018 SHRITAMA BOSE Mumbai, May 29 LOSSES POSTED BYaclutchof state-ownedlendersinthethree monthstoMarcharenudginga staggering `60,000 crore,with justtwobankshavingturnedin a profit so far. The high losses have left some bankswith capital that is barely sufficient to meet the regulatorynorms and consequentlylittle growth capital. This would restrict their lending, especially to high-risk corporate borrowers. Already, banks have realigned their lending strategies to cater to retail clients. Apart from the shortage of capital,anotherreason forthis is the central bank’s move to initiate a prompt corrective action (PCA) plan for 11 stateowned banks; this restricts them from taking an exposure BLOOMBERG New Delhi, May 29 Nifty PSU March 2017 PSBs AirAsia Group CEO Tony Fernandes Q3FY18 Aggregate of 20 PSBs (%) 8,58,421 Rising bad loans hit PSBs bottom lines 3,104 IN THE NEWS PSB staff on two-day strike starting today May 29, 2018 to very high risk-weighted assets. While Dena Bank has been barred from lending altogether, restrictions have been placed on the exposures that Allahabad Bank can take. The share of PSU banks in bank loans fell to 62.5% at the end of March 2017 from 66% attheendofMarch2016;their share of deposits dropped to 65% from 68%. The losses of public sector banks (PSBs) in Q4FY18 have stemmed largely from slippages, or exposures that turned bad during the quarter, for which lenders were required to make provisions. Many of these exposures related to accounts for which lenders had initiated a strategic debt restructuring (SDR) but had failed to implement. Continued on Page 2 On cloud nine Monsoon clouds build up over the horizon on the coast of Kochi on Tuesday. The southwest monsoon hit Kerala three days before its scheduled arrival Report on Page 12 EXPRESS PHOTO: NIRMAL HARINDRAN BID TO CUT COST OF MSP SCHEMES Buying at MSP may be made must Effort to get mills to foot bill for ensuring 50% profit for farmers over production cost PRABHUDATTA MISHRA & BANIKINKAR PATTANAYAK New Delhi, May 29 THE AGRICULTURE MINISTRYisweighing an option to mandatethetextileindustryto buycottonandjutefromfarmers at least at the minimum support prices (MSPs) fixed by the Centre.The move is part of theeffortstomakethegovern- Stitching an unviable plan ■ Cotton MSP has to be raised 28% in 2018-19 if govt promise to offer farmers a 50% profit over costs is to be met ■ CCI had to procure record 8.9 million bales in 2008-09, when MSPs for most varieties were raised 39% ■ Extra annual outgo of `45,000 cr needed to run price support scheme for 23 crops ■ Forcing industry to buy raw materials at state-fixed prices has already had disastrous impact on sugar sector ment’s promise of ensuring a 50% profit to farmers over their cost of production a reality,withoutlettingtheCentre’s STERLITE SMELTER CLOSURE Special Feature Four points to consider before investing in corporate FDs While most risk-averse investors prefer to invest in bank fixed deposits with low risk and low gain, one must also look at corporate FDs after weighing their merits and demerits ■ Personal Finance, P13 QuickPicks GST refunds worth `20,000 cr are pending, says FIEO EXPORTERS ARE awaiting the release of as much as `20,000 crore of goods and services tax (GST) refunds, which has created a liquidity crisis for exporters, the Federation of Indian Export Organisations (FIEO) said on Tuesday, reports fe Bureau in New Delhi. Refund claims of over `7,000 crore were cleared by the finance ministry in March, and the clearance in April has been a tad over `1,000 crore. PAGE 2 Trai proposes use of blockchain tech to curb pesky calls, SMSes THE TELECOM Regulatory Authority of India (Trai) on Tuesday proposed the use of blockchain technology for safeguarding personal information of consumers as well as for better compliance of unsolicited commercial calls, reports fe Bureau in New Delhi. Trai also mooted stricter regulations for telemarketers for seeking consent from the customers for commercial calls and messages. PAGE 3 IndiGo takes lead, announces up to `400 fuel surcharge INDIGO ON Tuesday announced levying fuel surcharge of up to `400 per passenger on domestic routes to offset rising oil prices, reports fe Bureau in New Delhi. It is the first local carrier to announce passing on the burden of rising jet fuel prices to passengers. "Because of a sharp uptick in the oil price and the cost of aviation turbine fuel, it has been decided to reintroduce fuel surcharges effective May 30," the airline said. PAGE 6 procurement expenses spiral out of control. Inter-ministerial consultations are currently being held on procurement- ● UNPAID DUES based price support schemes for agricultural crops. The ministry’s proposal — fraught as it is with serious implementation challenges — could spell trouble for the labour-intensivetextileandgarment industry by inflating the cost of cotton, a key input.The saleofrawmaterialstoindustry at state-fixed prices is currently adopted in cane where sugar millsarebleedingwhilefooting the bill for the profligacy of states and the Centre. MSPforcottonwillincrease by at least 28% for 2018-19 from the current level if the government’s promise to farmers is to be met. Continued on Page 2 NCLAT pushes Ericsson, RCom to settle BLOOMBERG Mumbai/Chennai, May 29 FE BUREAU, New Delhi, May 29 REUTERS Bengaluru, May 29 before deciding on a course of action,the companysaid. “If the closure is permanent,thenwhatweexpectedto happen two years down the line will happen with immediate effect,” said Jayanta Roy, seniorvice-president at Icra. THE NATIONAL COMPANY LawAppellateTribunalonTuesday suggested Reliance Communications and its operational creditor Ericsson resolve their dispute over the latter’s unpaid dues mutually by 3 pm onWednesday.This suggestion was proffered by the NCLAT benchwheninthecourseofthe hearing RCom offered to make an upfront payment of `500 crore to Ericsson against the total claim of `1,600 crore.The NCLATwillfurtherhearthecase on Wednesday on RCom’s prayer to stay the National Company Law Tribunal’s order directing to start insolvency proceedings against the companyoverEricsson’s plea. Continued on Page 2 Continued on Page 2 FORTIS HEALTHCARE LAID outplansonTuesdayforafresh biddingprocess,afteritbecame the subject of a bidding war by suitors seeking to cash in on an expected boom in India’s private healthcare market. Fivelocalandoverseassuitorsbecameengagedinaraceto eithertakeoverorbuyastakein FortisHealthcare,forcingthem to revise their initial offers. On Tuesday, Fortis invited three of those suitors to participate in a new bidding process — the Hero-Burman group, a consortium of TPG and Manipal Health Enterprises, and Malaysia’s IHH Healthcare — as well as any other parties interested in bidding. Fortis’ board this month approved an investment offer INDIA FACES A copper supply shock after the Tamil Nadu government ordered billionaire Anil Agarwal’s Vedanta to shut down a plant permanently following deadly protests in a move that will slash nationwide output and stoke demand forimports.The company’s shares fell. Tamil Nadu directed the state’s pollution control board to sealVedanta subsidiarySterlite’s 400,000-tonne-per-year smelter in Tuticorin in the interestsofthepeople,itsaidon Monday.About 13 people died at the site last week after police opened fire as locals protested against alleged pollution. Theordertoshutthesmelter will reduce India’s production by about half,spurring imports Intra-day on BSE (`) Prev. close: 253.10 253.10 260 255 250 245 240 235 242 Open as industrialisation and increased consumption of cars and appliances fan demand. Vedanta had suspended output from the plant in March for maintenance, and the closure was extended as the protests mounted.The shutdown is an “unfortunate development”, andVedantawillstudytheorder Close Continued on Page 2 ■ Tony Fernandes finds himself in air pocket, Page 6 HEALTHY COMPETITION India to be net copper importer much earlier than anticipated Vedanta TONYFERNANDES,THE chief of AirAsia Group, is being investigated by the Central Bureau of Investigation (CBI) for allegedly paying bribes to influence local policy, an Indian official told reporters. The CBI has named Fernandes and other officials from AirAsia and its Indian unit in its probe,theofficialtoldreporters on Tuesday in New Delhi. Fernandes and an AirAsia India spokeswomandidn’trespondto requests forcomments. The probe is a setback to AirAsia’s expansion, with its India unit planning more domestic flights and a January start to international operations. Fernandes has identified India as one of the main pillars of his pan-Asian dream as he seeks to capture a share of a market dominated by Gulfbased carriers and the national carrierAirIndia. The charges laid out by the CBIallegeFernandesandothers bribed Indian officials through middlemen to influence policies,includingobtainingaflying permit and approvals to fly internationally,theofficialsaid. Fortis launches new bidding process ■ Five local & overseas suitors were in race to either take over or buy a stake in Fortis ■ Three invited to take part in new bidding process — Hero-Burman group, a consortium of TPG and Manipal Health, and Malaysia's IHH Healthcare, as well as other interested parties for `1,800 crore from the Hero Enterprise Investment Office and the Burman Family Office consortium, but shareholders were lukewarm to the plan whichwaived due diligence. Continued on Page 2 ■ Fortis arm told to pay DGHS `503 cr within a month, P4 GST ENFORCEMENT Tax authorities get industry to comply, with ‘soft’ approach SUMIT JHA New Delhi, May 29 TAXPAYERS’ FEAR OF the enforcement mechanisms under the goods and services tax (GST) seem to be exaggerated. In what showed the tax administration’s pragmatic and non-intrusive approach, the once-dreaded anti-profiteering mechanism hasn’t produced orders with a drastic adverse effect on businesses so far; in fact, the first two National Anti-profiteer- ing Authority (NAA) orders have freed the businesses concerned of the allegations of not passing on the GST benefits by way of lower tax rates and/or input tax credit to consumers. Similarly,two months after the roll-out of the electronic way bill or e-way bill, few incidents have been reported of the merchandise in transit being intercepted forverification. While the fears of “inspector raj” have been found to be unfounded, some ILLUSTRATION: ROHNIT PHORE analysts caution that such issues could still surface as the tax department intensifies enforcement actions. The feedback on the working of the e-way bill system, which was made operational for interstate movement of goods fromApril 1 and is being implemented in intrastate trade in a phased manner, has largely been uneventful as the taxdepartmenthasfocusedon hand-holding businesses in the earlystage to ensure a suitable settling-in time. “We have been handling the transporters with a ‘light touch’ and even correcting bona fide mistakes made in generating e-way bill without imposing fines. Besides, there is no widespread checking of bills in the state,” a Bihar government official told FE on condition of anonymity. He denied therewere instructions to go easy on defaulters but admittedthatitwasimplicitin the department’s working. Continued on Page 2
The Financial Express (FE) is a business paper that’s closest to the people who are in the business of business. From business policies to market trends to new developments, The Financial Express comes packed with incisive news on every relevant issue.