NEW DELHI l TUESDAY l JUNE 12 l 2012 V O L X X X V I I I N O 8 9 2 4 P A G E S I R s 4 . 0 0 READ TO LEAD P 2 12 Calculate your net gains before CCI WON’T INFRINGE ON TURF OF P N E W S P E R S O N A L OTHER SECTORAL REGULATORS, ASSURES VEERAPPA MOILY P U B L I S H E D F R O M : A H M E D A B A D B A N G A L O R E home loan switch C H A N D I G A R H P WORST TIME TO IMPOSE CURBS 6 C O R P O R A T E S F I N A N C E C H E N N A I H Y D E R A B A D ON DIESEL CAR SALES: GM INDIA PRESIDENT & MD PADDOCK K O C H I K O L K A T A L U C K N O W M U M B A I S&P could just ‘junk’ India Will nation be first BRIC fallen angel, asks agency fe Bureau New Delhi, June 11 In the news INDICES BSE Sensex Closing Up/down 16,668.01 ▼ 50.86 S&P CNX Nifty 5,054.10 ▼ 14.25 Defence ministry suspends BEML CMD Natarajan BEML chief VRS Natarajan was on Monday suspended by the defence ministry in connection with the Tatra case on a CBI recommendation after former Army Chief Gen VK Singh levelled allegations that he was offered R14-crore bribe to clear a deal for 600 trucks. ■ Page 3 Videocon, BPCL up on Mozambique Shares of Videocon Industries and BPCL rose 6% and 2.9% (intraday), respectively, after Anadarko Petroleum said it had found significant gas reserves off the coast of Mozambique. BPCL and Videocon own 10% each in the Mozambique block. The Anadarko find is the latest oil and gas find to be made in East African waters. ■ Page 7 Car sales rise just 2.8% in May Car sales rose an annual 2.8% in May, a seventh consecutive monthly increase but far below industry expectations, with demand hit by a hike in excise duty. Automakers sold 163,229 cars in the domestic market in May. Sales of trucks and buses rose 9.1% in May to 62,025 vehicles. ■ P6 EDIT P8 Get diagnosis right If IIP started slowing in 2010 when overnight call rates were 400 bps lower than today, can’t blame RBI for lower GDP Sajjid Chinoy G LOBALratingagency Standard & Poor’s warned on Monday that India could become the first among BRIC nations to lose its investment-grade rating, due to slowing growth and political obstacles to economic reforms. This comes less than two months after the agency downgraded its outlook on the country to negative. “The combination of a weakening political context for further reform, along witheconomicdeceleration, raises the risk that the government may take modest steps backward away from economic liberalisation in the event of unexpected economic shocks. Such potentialbackwardstepscouldreverse India’s liberalisation of the external sector and the financial sector,” S&P’s credit analyst Joydeep Mukerji said in a report titled ‘Will India Be The First BRIC Fallen Angel?’. “Setbacks or reversals in India’s path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality,” the report ■ See Edit: Tense week ahead, Page 8 added. The rating agency had cut its outlook on the country’s sovereign rating of BBB-, the lowest investment-grade rating, to nega- tivefromstableinApril.The BRIC economies comprise Brazil, Russia, India and China. India has the lowest S&P rating among BRIC countries, and is the only one with a negative outlook from the rating agency . Responding to the report, finance secretary RS Gujral said: “The government is takingalotof stepstoensure that CAD (current account deficit) is under control, fiscal deficit is under control.” Thewarningsspookedthe markets, with the Sensex snappingitsbestweeklygain of the year last week and reversing an earlier gain of around1%,insharpcontrast toarallyinsharesgloballyon easing euro zone concerns followingthebailoutpackage toSpain.TheSensexlost0.3% to16,668.01pointsonMonday . The rupee fell to a near one-week low to close at 55.75 against the greenback. Therupeehadgainedforthe first week in 10 in the seven days through June 8, rebounding from the all-timelow of 56.52 on May 31. ■ Continued on Page 2 FY13 TURNAROUND YEAR FOR ECONOMY: FM D ISMISSING concerns that India’s growth rate may drop below 6.5%, finance minister Pranab Mukherjee on Monday said 2012-13 would be the turnaround year for the economy. Addressing income tax officials in New Delhi, Mukherjee said: “We are taking all necessary steps to ensure that we come back to the path of the targeted GDP growth. Of course it will take some time... but from this year, we expect to make a turnaround.” ■ FM to meet honchos on infrastructure M UKHERJEE along with coal, port and petroleum ministers and their departmental secretaries will meet 15 top industrialists, including Mukesh Ambani and Ratan Tata, on June 25 in a follow-up meeting on infrastructure investment. ■ ■ Leading indicator for India showing signs of weakening, warns OECD, Page 2 Details on Page 2 Details on Page 3 Finance minister Pranab Mukherjee at the 28th annual conference of chief commissioners & directors general of income tax in New Delhi on Monday. Ports choked with Suzlon Energy gets 45-day breather high coal imports to repay $360-m convertible bonds Company needs to repay close to $700 m worth of debt this year & grain exports ■ Parul Chhaparia & Subhash Narayan New Delhi, June 11 T HE problem of high turnaround time at Indian ports plaguing the country’s foreign trade is set to worsen in coming months, with a surge in imports of commodities like coal and the likelyriseingrainexports. The steep rise in demand for port services comes at a time when the government’s efforts to augment capacity in the sector through the publicprivate partnership (PPP) route have met with limited success. The slow pace of capacity creation is due to procedural hurdles that delay PPP project clearances and implementation. Lack of enough investor interest due to the stifling regulation in the sector, including an absence of freedom for port operators to fix tariffs, has also slowed capacity creation. While world trade growth has slowed in recent years, India’s exports and imports are growing at arelativelyhigherpace.Exportsgrew21%to$303.7billion in 2011-12 and imports grew even faster at 32% to $489billion.Theofficialtarget is to cross exports of $500 billion in 2013-14. As for individual commodities, coal and grain are going to add substantially to bulk cargo volume. India’s coal imports are expected to cross 140 million tonnes (mt) during 2012-13 against around 114 mt in 2011-12. As per Planning Commission’s projection, coal imports will cross the 200-mt mark by 2017. Coal India, the country’s the largest coal miner, is on record saying it plans to import about 30 mt of coal, an alltime high, this year. And given the curbs on iron ore mining, import of this key raw material for the steel industry is also expected to rise. India is aiming to add 2,300 mt to its existing port capacity of about 1,100 mt by 2020, and most of these additional facility would come up at non-major ports (read private). Investments to the tune of COAL IMPORTS LIKELY TO CROSS 140 MT DURING 2012-13 AS AGAINST 114 MT IN FY12. IMPORTS WILL CROSS 200 MT BY 2017, SAYS PLAN PANEL R2.87 lakh crore will be required to create this additional capacity the bulk of , which will come from the private sector or through the PPP route. India has exported more than 4 mt of rice and around 1 mt of wheat since September after lifting a more than threeyear-old ban on the shipment of these commodities. It has also lifted quantitative restrictions on exports of sugar as well as cotton for more than a month now. ■ Continued on Page 2 Geeta Nair Pune, June 11 S UZLON Energy said on Monday that bondholders had allowed the company to reschedule repayments of foreign currencyconvertiblebonds(FCCBs) worth $360 million due for redemption on June 12. Suzlon Group CFO Kirti Vagadiasaidbondholders,who met with the company’s management in London, had agreed to the company’s request for up to a 45 day extension adding that the bonds could now be repaid by July 27. The sum repayable comprises a principal amount of $247 million and the bonds carry a coupon rate of 7.5%. Ninetyseven per cent of bondhold- Tulsi Tanti, Suzlon Energy chairman ers were in favour of giving thecompanyadditionaltime to repay the bonds. The Pune-headquartered Suzlonneedstorepaycloseto $700 million worth of debt this year. The Tulsi Tantipromoted manufacturer of wind turbines had raised the FCCBs in 2008 with the conversion price fixed at R97.26 a share. On Monday the stock , closed at R18.20 on the Bombay Stock Exchange. Another tranche worth $209 million is due in October, makingforatotalrepayment amount of $ 569 million. On May 18, the company had said it was in advanced talks to raise $300 million to refinance the FCCBs. At the time Suzlon had sought 45 days’ extension from bondholders, who allowed it the grace period. The Reserve Bankof Indiahadalsoagreed to the 45-day extension. Vagadia said the company was hoping to borrow money throughhigh-yieldbonds,equity or by selling non-critical assets. Other avenues being explored for funding the FCCB repayment include monetising international assets andareleaseof workingcapital — $200 million of receivables from Edison Mission — though analysts point out that this may not be in Suzlon’scontrol. ■ Continued on Page 2 P U N E Ajit Singh leaves it to AI board to decide on sacking pilots fe Bureau, New Delhi, June 11: Unless they resume duty immediately, the axe could soon fall on the remaining 300 Air India pilots on strike. Civil aviation minister Ajit Singh on Monday clearly hinted at the airline management terminating the services of these pilots. Since May 7, the airline has sacked a total of 101 pilots who had gone on strike over issues of their career progression. Terming the strike illegal, Singh said: “How long do they (pilots) expect us to wait for them to resume duty? If the situation remains the same, then the rest (300) of the pilots may also be terminated. But this decision will be taken by the Air India management.” The statement comes within days of the minister’s recent announcement that the carrier will hire new pilots to fill the gap caused by the current crisis. “We have requested them again and again to come back to work. So it is for the management to decide for how long can they keep them on their payroll when they were not working,” Singh told reporters. Sources said the Air India management will soon decide the fate of striking pilots. The pilots have of late softened their stand and agreed to to return to work on the condition that terminated pilots were taken back into service. The strike has crippled Air India’s international operations, with the airline operating only 38 international flights from the original 45 services. Meanwhile, the carrier has set up a committee to review its global operations to find out how many pilots are required to operate flights. The committee would advise the management on the actual number of pilots needed to runAirIndia’sinternational operations,anairlineofficial said, adding that it was felt that the carrier had far more pilots than it needed. Taxes make Indian airfares 200-300% higher than China, curb growth, says Jet Airways chairman Naresh Goyal ■ IATA forecast for 2012 says airline industry’s profits will fall steeply to $3 billion from $7.9 billion last year, Page 10 ■ Spain bailout cheers commodities Banikinkar Pattanayak New Delhi, June 11 A FTER the sharpest weekly loss through Friday, commodity prices advanced on Monday as Europe over the weekend promised a massive bailout package for debt-trapped Spain and Chinese imports staged a rebound, suggesting fears of a slump in raw material demand due to the global slowdown may have been exaggerated. The Thomson Reuters-Jefferies CRB index gained 0.46% to 274.13 on Monday . For India, which is facing the double whammy of high fiscal and current account deficits, any rise in prices of commodities—of whichitis anetimporter—isbadnews. Worried over persistently high inflation, the country’s policymakers have been pin- ning hopes on a likely prolonged dip in global commodity prices. BrentoilfuturesforJulydelivery gained more than 2% to $102.21 a barrel initially on Monday as investors wagered on European finance ministers' plan to offer a higherthan-expected 100-billion-euro package to Spain to save its banks. China, the world’s second-largest energy consumer, imported a record 25.48 milliontonnesof crudeoilinMay , up 18.2% from a year earlier, while its purchases of copper rose65%to419,741tonnes. However, concerns about the pace of economic recovery, polls in debt-hit Greece on Sunday, apprehensions that the generous deal to Spain may attract criticism from other crisis-hit European nations and fears over UPWARD BOUND Brent Copper Aluminium Gold Silver Cotton Corn Sugar HIGH (in 2012) 126.22 8,737.50 2,312.25 1,784.25 36.92 97.28 673.75 24.72 Date Mar 13 Feb 9 Mar 1 Feb 28 Feb 28 Jun 2 Jan 3 Mar 22 LOW (in 2012) 98.43 7,283.00 1,934.50 1,539.75 27.22 65.36 551.50 18.90 Date Jun 1 Jun 8 Jun 1 May 16 May 16 Jun 5 Jun 1 Jun 4 (Prices in $; volumes of Brent in barrels, copper and aluminium in tonnes, gold and silver in troy ounces, cotton and sugar in lb and corn in bushels) fresh supplies after a breakdown in talks between the United Nations and Iran bridled excessive optimism. Brent pared some initial gains and eased to $100.30 by 1120 GMT. US crude, too, gained $0.85 to $86.60. Copper rebounded from a near six-month low last week, and the three-month contract on the London Metal Exchange gained around 3% to a session high of $7,506.75 a tonne. Goldman Sachs said it expected a 29% return from S&P’s GSCI Enhanced CommodityIndexoverthenextone year, with energy and base metals leading the pack. Returns on energy investments will likely be 41% in one year, compared with 23% in base metals and 18% in precious metals, while agriculture is predictedtolose14%intheperiod. European policymakers will be able to contain the debt crisis, while recovery in the US and China is set to continue, Bloomberg quoted Jeffrey Currie, the head of commodities research at Goldman SachsinNewYork,assaying. Commodities, according to theS&PGSCIEnhancedCommodity Index, shed 13% in May and have dipped 9.1% sincethestartof theyear. ■ Continued on Page 2
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