OPINION, P6 ECONOMY, P2 SUNIL JAIN Bad govt policy hits telco revenues, puts govt take at risk INTERNATIONAL, P4 A GULATI & S SAINI PNB SCAM BREXIT PLAN Maharashtra forcing traders to buy at MSP may leave farmers in the lurch Choksi's properties are money laundering assets: PMLA PM May says Britain will not compromise with Brussels NEW DELHI, MONDAY, SEPTEMBER 3, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 158, 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 AUDIT TRAILS ● BIGGEST TILL DATE More than note ban, GST boosts tax base While bottled water is a need-based purchase, the functional and flavoured water category is trying to grow in India ■ eFE, P8 Intel, Philips on AI-led healthcare The two tech multinationals are taking the lead in developing healthcare solutions, powered by Artificial Intelligence ■ INVESTOR, P9 Cash flows/monetisation to be key Expected recovery in L&T’s infra segment margin behind 2-3% rise in core E&C estimates; ‘Buy’ retained ■ INFRASTRUCTURE, P11 Rail subsidy makes power dearer Unit cost of electricity goes up by an average 10 paise owing to high freight rates of Indian Railways, a study has revealed ■ SCIENCE & TECH, P12 A different approach to AI Beyond just learning from information fed, a sense of curiosity is helpful for artificial intelligence QuickPicks Centre halts disinvestment of NMDC Chhattisgarh unit NEARLYTWO years after giving its go-ahead for strategic disinvestment of NMDC's underconstruction steel plant in Chhattisgarh, the Centre has put the plan in abeyance, reports Surya Sarathi Ray in New Delhi. NMDC had requested the PMO to put it on hold till the 3 million tonne per annum steel plant gets commissioned by March next year. PAGE 2 343 infra projects show cost overrun of `2.23 lakh crore AS MANY as 343 infrastructure projects, each worth `150 crore or above, have shown cost overrun of `2.23 lakh crore, reports PTI. According to a report, the expenditure incurred on these projects till April 2018 is `6,63,109.75 crore, which is 35.85% of the anticipated cost of the projects. PAGE 3 5.93 Continued on Page 2 Continued on Page 2 12.9** of production (A2+FL).Sowing of kharif crops beginswith the onset of monsoon, normally on June 1. Farmers in Rajasthan, whichisthelargestproducerof bajra, have shifted to pulses like moong as the state received good rainfall in JuneJuly. The state’s sowing area under bajra was 6.26% lower than last year’s at 39.71 lakh hectaresasonAugust31,while moong acreage was up 22%. The closing march PIT collections As % of GDP 2.63 3.0 2.5 2.0 1.5 1.0 0.5 0 IT SERVICES MAJOR Wipro said on Sunday it has won an over $1.5-billion engagement from Alight Solutions, its biggest deal till date. Under the 10-year deal, Wipro will provide a comprehensive suite of solutions and services to the US-basedAlight Solutions that provides technology-enabledhealth,wealth, HR and finance solutions. “This dealwill result in revenues of $1.5-1.6 billion for Wipro over the tenure. This is Wipro’s largest win to date,” Wipro said in a statement. This engagement will enable the digital transformation of Alight’s offerings and enhance the employee experienceofAlight’sclientsbyleveragingWipro’s strengths in digital technologies, cognitive automation and data analytics,it added. “Our industry-leading partnershipwithWiprowillenhance our client experience by drawing on Wipro’s leading position in automation and innovation, whileallowingAlighttoinvestin its health, wealth and cloudbased solutions to meet the needsofourclients,”AlightSolutions chief executive officer Chris Michalak said. Wipro’s larger peer Tata ConsultancyServices(TCS) has bagged three large multi-year large deals totalling over $5 billion in revenue since December 2017. The current deal will come asashotinthearmfortheBengaluru-based firm, which saw its first quarter profits this fiscal grow over 2% to `2,120 crore and revenue rising 4.72% to `14,307 crore as compared to the previousyear. Wipro CEO and executive director Abidali Z Neemuchwala said the deal reflects the capabilities the company has built through strategic investments in Wipro Digital, cloud platforms and cognitive platform Wipro HOLMES. AY19 (FY18) 5.78 AY17 (FY16) 7.78# 5.4 AY16 (FY15) AY18 (FY17) 4.98 AY15 (FY14) # Estimate based on total direct tax base at 8.47 crore (as stated in FY19 budget speech), individuals are roughly 94% of direct tax payers ^Returns filed plus cases of TDS deductions of non-filers,** FE estimate The Indian contingent during the closing ceremony of the 18th Asian Games 2018, in Jakarta, Indonesia, on Sunday PTI KHARIF 2018 FY01 ‘03 ‘06 ‘09 Personal income tax (PIT) collections as a share of the nominal gross domestic product (GDP) had risen from 2.09% in FY16 to 2.43% in FY17, the year in which specifiedhigh-valuebanknoteswere demonetised. If that itself was probably unprecedented or at least the highest in recent history (FE has reviewed the fig- ‘12 ‘15 FY18 ures since FY01), in FY18 (GST was launched in July, 2017, quiteearlyintheyear),theratio increased further to 2.63%. Despitetherelativelylarger expansion in tax base in FY18 than FY17, the growth in PIT revenue in FY18 (19%) was lowerthan that in FY17 (29%). Continued on Page 2 LANGUISHING LEASES DGH asks ONGC to show work plans, may get tougher 337 Number of petroleum-mining leases with ONGC from nomination era 22 Such leases with Oil India, fellow PSU 66 Such leases with private players/JVs including ONGC/OIL SAURABH KUMAR New Delhi, September 2 CONCERNED OVER THE continuousfallincrudeoilproduction by ONGC,the government hasaskedthestate-runexplorer for detailed, time-bound work plans regarding as many as 86 petroleum mining lease (PML) areas awarded to it,where production is yet to commence. While ONGC is learnt to have agreed to submit the work plans,sourcessaidthatthemissive from the Directorate General of Hydrocarbons (DGH) indicates the government may haveplanstoasktheexplorerto relinquish the PMLs if the regulator is not satisfied with the ONGC 's oil production declining (million tonne) 26.1 25.9 25.7 25.5 25.3 25.1 FY14 FY16 25.43 Water, now ‘healthy’ 66 25.53 ■ BRANDWAGON, P10 PRESS TRUST OF INDIA New Delhi, September 2 2.5 30.3 25.93 FE SPECIALS 7 25.94 THE CENTRE PLANS to have examinations for individuals who want to become independent directors to bolster corporate governance, reports PTI. Despite stringent provisions in place, the roles of independent directors has come under the scanner in certain instances of corporate misdoings. IF DEMONETISATION'S IMPACT on tax base has been below the high expectations, the goods and services tax (GST) seems to have done far better. As the comprehensive indirect tax has opened new channels of audit trails,crores of new taxpayers have turned up. According to an FE estimate, the number of income tax assessees (all categories including individuals and corporates) in FY18 could turn out to be 13.76 crore or thereabouts, up 66% over the previous year. And the numberof individual I-T assesees would be 12.9 crore, showing roughly the same level of annual increase as in the combined base. 12.4 8.4 25.99 Exam for post of independent director SUMIT JHA New Delhi, September 2 Growth (%, yoy) 1.46 MAURITIUS REMAINED THE top source of foreign direct investment into India in 201718 followed by Singapore, reports PTI. Total FDI stood at $37.36 billion in FY18, a marginal rise over the $36.31 billion in FY17. While FDI from Mauritius totalled $13.41 billion, inflows from Singapore rose to $9.27 billion. Individual taxpayers^ (crore) AY14 (FY13) IN THE NEWS Mauritius tops India's FDI charts again in FY18 I-T base up 60% in FY18, revenue increase not as sharp since most new assessees show little taxable income, larger tax net to yield future dividends Wipro wins $1.5-billion contract from Alight Solutions FY18 progressmadebythecompany. “Our view is that if no work is happening on PMLs, these should not be kept by ONGC.It has to either work on them or relinquish the areas,” said a source,requesting anonymity. During the nomination era (pre-NELP),explorerswereprovided petroleum exploration licences for specified contract areas. Once a licence period expired, the firms would relinquish the area, except the discoveries made by it. After appraising the discoveries, PMLs were given for development of the area and production of oil and gas. Continued on Page 2 Steeper increases in MSPs don’t expand crop area As sowing is complete, bajra and ragi areas down, despite MSP hikes being the steepest PRABHUDATTA MISHRA New Delhi, September 2 HOWFAR DOESahikeinminimum support price (MSP) determine the farmers’choice of crop? As the kharif 2018 sowing is almost complete, acreages of bajra and ragi have dropped from last year’s levels even though their MSP hikes were the steepest among all crops for the season. Cotton also saw a sharp MSP increase but its area also is still to catch up with last year’s (see chart). Rather than the quantum of MSP increase, several factors like the expected rate of return on a crop relative to viable alternatives, weather/rainfall and the prevailing market prices influence farm- Higher MSPs don't necessarily boost sowing MSP Kharif sowing (% increase y-o-y) Bajra Ragi Urad Cotton Paddy Tur Maize Soyabean (rise/fall in % as of Aug 31, y-o-y) 36.84 52.47 3.7 28.11 12.9 4.13 19.3 11.44 ers’decisions. Uncertainty over the chances of actual purchases at MSPs may have also had an impact. Analysts, however, note that an earlierannouncement of MSPs could have prompted farmers to expand the sowing areas of the two coarse cereals,bajra and ragi. The Cabinet on July 4 announced 4-52% hikes in MSPs of 14 kharif crops,in line with a new policy of keeping these benchmark rates at a minimum of 150% of the cost -7.78 -17.15 -12.8 -1.85 0.57 -0.51 -0.14 6.24 TALKS ON TRADE PACKAGE US insists on removal of price caps on stents BANIKINKAR PATTANAYAK New Delhi, September 2 THE US IS learnt to have renewed its demand for the removal of price controls imposed by India on certain medical devices, as part of a broader trade package the two countries are currentlynegotiating,sources told FE. Commerce secretary Anup Wadhawan held talks with American trade officials recently in the US on the trade package,as the deadline set by New Delhi to retaliate against the Trump administration’s extra tariff on Indian steel and aluminium approaches. It was the first such highlevel meeting after India last month deferred its $235-million retaliation plan against 29American goods by45 days to September 18. The move was aimed at giving more time toWashington for a meaningful outcome to the ongoing bilateral trade negotiations. While a waiver from the extra duties on the metals is still being pushed hard byNew Delhi, among others, the US is vigorously pursuing the med- SHRINKING SURPLUS $22.9 bn India's goods trade surplus with US in 2017, down 6% from 2016 $8.53 bn India's imports from US in Q1FY19, up 38% from a year ago, while exports grew only 11.7% ical devices matter.It is particularly interested in India removing price cap on biore- sorbable stents.India is a large market for stent makers and it imported medical instruments,including stents,worth around $1.6 billion from the US in the last fiscal, up 10% from a year earlier. To carry forward the negotiations and set the stage for the annual trade policy forum meeting between the two countries later this year, deputy US Trade Representative Jeffrey D Gerrish will soon visit New Delhi,said one of the sources. Continued on Page 2 MEALTIME E-retail could give brick and mortar grocers the break they need JHARNA MAZUMDAR Mumbai, September 2 EVEN AFTER HAVING been aroundforadecade,mostbrick and mortar grocery chains are struggling to be profitable. While the local kiranas retain their supremacy, e-retailers such as Bigbasket and Grofers havebecomeincreasinglypopularwithconsumers.However, with soon-to-be grocers Amazon and Flipkart looking for partners on the ground, the fortunes of brick and mortar chains could get a boost. Having rolled out stores at ablisteringpace—thenumber of grocery outlets rose fourfold between 2003 and 2008 — retailers realised they needed to shut down most of the outlets as they losing money.Spencer’s,forinstance, has shut more than 200 stores inthelastfiveyears.Acoupleof months ago,Trent Hypermarket,ajointventurebetweenthe Tata Group and Tesco, announced it was shutting down all its Star Daily stores. Reliance Retail too has shut down around 100 Reliance Fresh stores in the last two years while Future Group No. of grocery outlets rose 4-fold between 2003 and 2008 Several hundreds of stores (around 400) have been closed down in the last five years Chains struggling to make money – Spencer's Retail yet to turn profitable, Ebitda breakeven achieved in FY18 for the first time Amazon believed to be scouting for partners; may buy stakes in More and Spencer's Retail, Future Retail Star Bazaar shut all its 20 Star Daily stores in FY18 decided to move its KBFP format stores out of Bengaluru couple of years ago. Anil Talreja, partner, Deloitte India, believes that while most grocery retailers have figured out the right format,Star Dailywas not able to get its locations and pricing right.“High rentals of around 15% to 20% of costs could be impacting the retailer,”Talreja said. D’Mart,the country’s most successful retailer, owns most of its stores but is able to cover costs because it clocks a better turnover. In 2017-18, for instance, D’Mart’s revenues grew 26% while those at Future Retail grew 8.2%; Spencer’sRetailreportedarevenue growth of 2.5%. Indeed, Spencer’s, which has been around for ten years now,managed to break even at the ebitda level for the first time in FY18 after the parent company took over its debt of `280 crore. The smaller debt helped the companyto narrow its net loss to `30 crore compared with a net loss of `108 crore in FY17. Continued on Page 2
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