OPINION, P8 M&M, P10 INTERNATIONAL, P14 SEBI NOD HARLEY-DAVIDSON ROW Rana Kapoor-led Yes Bank gets approval for mutual fund foray Working to bring other motorcycle companies to US: Trump EDITORIAL Costly pro-farmer move will hike inflation, hit exports SC does well to say Delhi can't be a state but LG can't ride rough-shod over CM NEW DELHI, THURSDAY, JULY 5, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 107, 20 PAGES, `6.00 (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: 35,645.40 ▲ 266.80 NIFTY: 10,769.90 ▲ 70.00 NIKKEI 225: 21,717.04 ▼ 68.50 HANG SENG: 28,241.67 ▼ 303.90 `/$: 68.74 ▼ 0.17 `/€: 79.98 ▼ 0.06 BRENT: $77.80 ▲ $0.04 GOLD: `30,510.00 ▲ `228.00 KHARIF CROP 2018-19 THE RESERVE BANK of India has issued licence to Bank of China to launch operations in India, official sources said on Wednesday, reports PTI. "The RBI has issued licence to Bank of China to set up its first branch in India," said a source. Prime Minister Narendra Modi had made a commitment to Chinese President Xi Jinping to allow Bank of China to set up branches in India when they met in China’s Qingdao last month. Bank of China is one of the very few state-owned commercial banks in China. 5,150 4,020 3,860 3,800 Soyabean yellow 5,450 5,050 4,625 1,700 1,425 1,365 1,325 1,750 3,399 3,050 WITH AN EYE on the general elections next year in the runup to which it wants the rural incomes to be robust, the Narendra Modi government on Wednesday announced 452% increases in the minimumsupportprices(MSPs)for 14 kharif crops for the 201819 season and flagged the new MSPs being 50-97% higher than the full paid-out costs (A2+FL) as unprecedented and historic. While the sharp increases in the support prices would themselves jack up the government’s expenditure, its plan to ensure that farmers actually realise the MSPs (by ramping up procurement and/or putting in place a 1,550 1,470 1,410 FE BUREAU New Delhi, July 4 Tur Maize Kharif MSP (`/quintal) 2015-16 2016-17 2017-18 2018-19 Cotton medium as last year, the higher MSPs would cost the government about `11,500 crore,” said DK Joshi,chief economist at Crisil. But the actual cost incurred could be substantially higher as procurement was set to increase,he added. India Ratings and Research’s chief economist Devendra Pant said that the latest MSP hikes will impact wholesale inflation by38 basis points year-on-year and retail inflation by 70 basis points. FE recently reported that the government’s plan to raise MSPs forcrops to 1.5 times the A2+FL costs is likely to cost around `1,75,000 crore in a full year if market prices are lower than the MSP by 20%. The estimate was based on the assumption that market arrivals might tend to be close to 100% of production if the assured-MSP plan is implemented. Of course, the latest MSP increases are one of the steepest ever, but there were years (like 2008-09) when many crops saw similar or even sharper increases. mechanism to compensate farmers at the MSPs if procurement fails) could potentially increase the costs to the exchequer manifold. Also, it could drive up food inflation — and thereby cause a more generalised inflationary pressure — and make industrial goods like garments costlier. The latest hike in MSPs will cost the exchequer over `15,000 crore,home minister Rajnath Singh said. “The weighted average MSP increase (crop weights being the quantity procured last year) comes to around 13%. Assuming the procurement of kharif crops would be as much We will ensure that each grain is bought at MSP. We have fulfilled the promise of (MSPs at 1.5 times the cost). If higher MSPs push domestic prices to levels above global prices, exports will be hit. The country should be ready to hold more rice, cotton stocks ADMINISTERING DELHI Real power with elected government, SC rules Says LG lacks independent power, can’t be obstructionist; adds Delhi not a pure ‘state’ A recent spike in yarn prices is already deeply worrying us. Now, if the cotton prices are to be raised, it will hit our export competitiveness. former chairman, CACP Aam Aadmi Party workers celebrate the Supreme Court verdict on power sharing between the Delhi government and the Centre outside the party office in New Delhi on Wednesday Matrix Clothing MD FE BUREAU New Delhi, July 4 IN A VICTORY for the Arvind Kejriwal-led Aam Aadmi Party (AAP) government in Delhi, a five-judge Constitution bench of the Supreme Court on Wednesday clarified that the “real power lies with the elected government of Delhi” and the lieutenant governor (LG) is not superior to the elected chief minister and can’t act independently of the state government. It further said that the LG is bound to act on the aid and advice of the council of ministers and can’t act as an “obstructionist”. However, it ruled that the NCTof Delhi does not have the status of a “state” but “it is a class apart”. LG Anil Baijal and his predecessor Najeeb Jung and the Delhi government have been locked in a bitter power tussle ever since the AAP swept to power in Delhi in 2015. The AAP government had alleged that his administration was repeatedly impugned upon by the LG, who acted as the representa- Continued on Page 2 FIRST TAKE This decision, taken after careful thought, will send a positive message to farmers, boost their confidence and end farm distress. Rajnath Singh, home minister Ram Vilas Paswan, minister for food and consumer affairs Ashok Gulati, CLASS ACT Special Feature Cisco aims to continue reinventing the network India has the potential to lead in the new era of digitalisation, says Cisco’s Sameer Garde. The company aims to grow its client base in India to 1.5 lakh customers in 3-5 years ■ eFE, P13 QuickPicks Sensex rallies 267 points; bank, auto stocks in limelight THE SENSEX on Wednesday rose by nearly 267 points to hit a near-two-week high of 35,645.40 on bouts of buying towards the fag end of the session, mainly in bank and auto shares, after the Centre hiked the MSP for most kharif crops, reports PTI. The Sensex moved in a narrow range for most part of the day due to weak global cues amid concerns related to trade tariff spat and macroeconomic conditions, but late buying in some key sector stocks helped it come out of range-bound trading. PAGE 11 Maruti to add 7.5 lakh units capacity in Gujarat by 2020 INDIA'S LARGEST carmaker Maruti plans to add another 7.5 lakh units manufacturing capacity from three production lines in Gujarat plant by 2020, taking the total capacity to over 22.5 lakh units a year, MD and CEO Kenichi Ayukawa said on Wednesday, reports PTI. The company, which already has a market share of over 50% in the domestic passenger vehicle segment, is also initiating a process to study ways to further expand production capacity beyond 22.5 lakh units a year after 2020. PAGE 5 PNB puts up three loan accounts worth `300 crore for sale PUNJAB NATIONAL Bank (PNB) has put on sale loans worth `300 crore to three different entities and sought bids from asset reconstruction companies (ARCs) on a cash basis or through a mix of cash and security receipts (SRs), according to a sale document, reports Shritama Bose in Mumbai. Bidding will be held on the bank's e-auction platform. PAGE 10 Gautam Nair, ● CABINET DECISION HEFA gets hefty funding boost RRB recap scheme extended FE BUREAU New Delhi, July 4 FE BUREAU New Delhi, July 4 IN A BOOST to higher education,theCabinetonWednesday allowed the Higher Education FinancingAgency(HEFA)toborrow`1lakhcrorefromthemarket by2022 to scale up funding of infrastructure development in higher educational institutionssuchasAllIndiaInstitutes ofMedicalSciences(AIIMS)and centraluniversities.Themodalities for raising funds via governmentguaranteedbondsand commercial borrowings would be decided in consultationwith the department of economic affairs,the government said. To enable HEFA to leverage equity to mobilise additional resources, its authorised share capital was raised to `10,000 crore and approved infusion of additional government equity TO HELP REGIONAL rural banks (RRBs) maintain minimum regulatory capital adequacy ratio of 9%, the Cabinet onWednesday extended recapitalisation of RRBs up to FY20. The scheme of recapitalisation ofRRBsstartedinFY11andwas extendeduptoMarch31,2017. Ofitstotalshareof`1,450crore, the Centre has released `1,107 croreintheperiod.Theremainingamountof`343crorewillbe utilised to provide recapitalisationsupporttoRRBswhosecapital adequacyratio is below9%. RRBs are jointly owned by the Centre, the state government concerned and sponsor banks,with the issued capital shared in the proportion of 50%, 15% and 35%, respectively. INFRA PUSH `1 lakh cr To be raised from market by HEFA in 4 years to fund higher education infra `5,000 cr Additional equity to be infused by the Centre in HEFA of`5,000crore,overthe`1,000 crore alreadyprovided. Continued on Page 2 tive of the Centre in Delhi.The situation has recentlyreached a flashpoint when chief minister Kejriwal and three of his cabinet colleagues resorted to a days-long sit-in protest inside the LG’s office, demanding that latter order IAS officers posted in the Delhi government to call off an alleged strike. A five-judge bench led by Chief Justice Dipak Misra in three separate but concurring judgments said no independent authority was vested with the LG to take independent decisions. All decisions of the council of ministers, elected representatives of the people of Delhi, must be communicated to the LG but that does not mean the latter's concurrence is required, the court stated. “There is no room for absolutism and there is no room for anarchism also,”it stated. “The states should enjoy freedom without unsolicited interference from the Centre... Popular will cannot be allowed to lose its purpose,” the SC said. Continued on Page 2 PMI FE BUREAU Services activity rebounds After a contraction in May, the services sector returned to growth in June by registering the fastest rate of expansion in a year, supported by robust increase in new business orders. 55 53 Manufacturing PMI Services PMI 53.1 49 47 45 52.6 46.8 June 2018 Source: Nikkei, IHS Markit The AAP and... Kejriwal should stop raising the full statehood demand. Praveen Shankar Kapoor , Delhi BJP spokesperson We hope that development, which has been stalled ever since the Congress was voted out of power over four years ago, will start again. Ajay Maken, Delhi Congress chief ● CURIOUS QUOTA UP gets to sell less sugar than Maharashtra A tale of two states Sugar output Cane arrears* Sales quota^ Maharashtra UP 33 37 8.5 59.8 42.1 30.9 BANIKINKAR PATTANAYAK New Delhi, July 4 expected to produce a modest communique, which affirms the commitment of both sides to the multilateral trading systemandpromisestosetupa workinggrouponmodernising theWTO,EU officials said. Vice-premierLiuHehassaid privately that China is ready to set out for the first time what sectors it can open to European investment at the annual meet, expectedtobeattendedbyPresidentXiJinping,China’sPremier Li Keqiang and top EU officials. Continued on Page 2 Continued on Page 2 China presses Europe for anti-US alliance on trade CHINAISPUTTINGpressureon the European Union to issue a strong joint statement against US President Donald Trump’s trade policies at a summit later this month but is facing resistance,European officials said. In meetings in Brussels, Berlin and Beijing, senior Chineseofficials,includingvicepremier Liu He and the Chinese government’s top diplomat, state councillor Wang Yi, have proposed an alliance between Delhi chief minister MILLS IN UTTARPradesh—the largest sugar producing state and also the one with an overwhelmingly large share in cane arrears—havegotamuchlower quota to offload sugar than those in Maharashtra since the government reintroduced control on sales last month. The directorate of sugar under the foodministryhasallocatedtotal salesquotaof11.60lakhtonnes tomillsinUttarPradeshforJune andJuly,whileMaharashtrahas got 15.77 lakh tonnes for these twomonths,leavingthemillsin the largest producerbefuddled. Ironically, Uttar Pradesh alone accounted for almost 60% of the country’s total cane arrears as of May 15, while Maharashtra made up for just 8.5%. AWKWARD EMBRACE the two economic powers and offeredtoopenmoreoftheChinesemarketinagestureofgoodwill.One proposal has been for China and the European Union to launch joint action against the US at the World Trade Organisation (WTO). ButtheEuropeanUnion,the world’s largest trading bloc,has rejected the idea of allying with BeijingagainstWashington,five EU officials and diplomats told Reuters, ahead of a Sino-European summit in Beijing on July 16-17. Instead, the summit is Arvind Kejriwal, *As of May 15 ^For June and July Dec 2016 Note: Reading below 50 suggests contraction and above it indicates expansion REUTERS Brussels/Berlin, July 4 A big victory for the people of Delhi... a big victory for democracy... (Share in %) 49.6 51 ILLUSTRATION: SHYAM RBI grants licence to Bank of China for India branch Paddy common 2,775 THE INSOLVENCY and Bankruptcy Board of India (IBBI) on Wednesday issued revised norms to initiate an insolvency resolution process, paving the way for home-buyers to seek relief as financial creditors and allowing conditional withdrawal of insolvency applications, among other key changes, reports fe Bureau in New Delhi. The regulator put in place timeframes to be adopted by resolution professionals. PRICE TRACK 2,600 IN THE NEWS IBBI issues revised insolvency regulations To cost `15,000 cr, says govt; food inflation to rise 70 bps: analysts; cost may jump under assured-MSP plan 5,675 Government announces hikes of 4-52% in MSPs
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