NEW DELHI, TUESDAY, JULY 12, 2011 V O L X X X V I I N O 1 1 4 2 0 P A G E S I R s 4 . 0 0 READ TO LEAD P 6 C O R P O R A T E S JUNE CAR SALES GROW AT SLOWER RATE OF 1.6%; GROWTH FORECAST CUT TO 11-13%: SIAM’S GOENKA P U B L I S H E D In the news INDICES BSE Sensex Closing Up/down 18,721.39 ▼136.65 S&P CNX Nifty 5,616.10 ▼ 44.55 Vaswani Industries ordered to give withdrawal option Sebi has ordered Vaswani Industries to give an withdrawal option to all retail and high net-worth investors who had subscribed to its R49-crore IPO. The company has been asked to keep open the withdrawal option for a period of 10 days. Page 13 Infy result to set tone for IT cos The top three software services exporters,Tata Consultancy Services, Infosys and Wipro, are expected to report strong quarterly revenue growth. Infosys will set the tone for the $60-billion outsourcing sector when it kicks off the earnings parade on Tuesday. Page 7 Rly safety steps still not on track Key initiatives of the Indian Railways, like the anti-collision device that would boost safety, are yet to come on track even though hundreds of people are being killed in rail accidents every year, reports Praveen Kumar Singh in New Delhi. P3 AI seeks $900 m but Boeing offers $45 m Boeing has offered an interim compensation of $45 million in cash to Air India on account of the delay in delivery of the B787 Dreamliner. The compensation is a mere 5% of $900 million that AI had demanded. Boeing has offered $10 million in credit in addition to the cash part. Page 6 Essar Oil to raise $1.5 bn in loans Essar Oil, which reported a better-than-expected PAT of Rs 469 crore for the Q1 of FY12, said it will raise $1.5 billion in foreign currency loans, instead of rupee loans. P7 F R O M : EDIT P8 No, we can’t? Or won’t The US failure to create jobs is a choice rationalised by an evershifting set of excuses PAUL KRUGMAN Exclusive! Countdown The row over the debt ceiling is going down to the wire ■ Page 12 BY SPECIAL ARRANGEMENT WITH B A N G A L O R E C H A N D I G A R H Rajat Guha & Subhash Narayan New Delhi, July 11 T HE new mining Bill cleared by a group of ministers last week envisaging direct benefit to people from the minerals underneath the land they own,alsohasaprovisionfor setting up a clutch of ultra mega mining plants (UMMPs) in the country . As per the proposal, state governmentswillidentifylocations for large mines with respect to specific minerals such as iron ore, bauxite, chromeore,copper,diamond and manganese. They will set up special purpose vehicles that will acquire land and obtain necessary clearancesfortheminewhosesize would be above a specified threshold.Thewholefacility would then be put up for bidding. The successful bidder would be the one willing to make the maximum upfront payment and promise royaltyhigherthanothers. According to official sources, the idea is to encourage global mining giantslikeRioTinto,BHPBilliton and Vale to invest in India by removing the has- DIGGING DEEPER ■ States to spot locations for large mines bearing minerals ■ SPVs will secure land and necessary clearances ■ Bids to be decided on upfront payments, royalty ■ Metal companies could themselves apply for UMMPs sles of land acquisition and companies face serious sundry clearances includproblems in securing capingthoserelatedtoenvirontive mineral resources. Ofment. Firms such as Posco, ten the size of mine allocatArcelorMittal, SAIL, Tata ed is not commensurate Steel, Hindalco, Vedanta, with the scale of the downEssar, JSW and stream project. JSPL which are ■ Mine coal or we Theminingsecsetting up large will cancel licences: tor has attracted metal plants in Ministry warns FDI below potenthe country JSPL, GVK Power & tial,thankslargely wouldalsobenefit 3 other cos, P5 to policy uncerfrom the ultra tainties, delays in mega mines as they would obtainingclearancesandthe be more compatible for bar on transferability of lithem to achieve economies cences. The Mines and Minof scale. These companies eral(DevelopmentandRegucould themselves bid for lation) Bill, which would go UMMPs. At present, these totheCabinetsoon,proposes C H E N N A I H Y D E R A B A D tocorrectthesepolicies. “Mining is a sector where a foreign investor is always wary of investing as it is fraught with many land-related and bureaucratic issues. A move to assemble a bouquet of clearances from both the Centre as well as the state will provide a good bedrock for foreign investors,” said Saroj Jha, partner with Delhibased law firm SRGR. The UMMP scheme would broadly be on the lines of the ultra mega power projects scheme. The details of the scheme would be spelt out as part of the rules and regulations to be laid downaftertheMMDRBillis enacted by the Parliament. The mining project associated with Posco’s proposed 12-million-tonne steel project in Orissa is stuck in litigation and has faced stiff opposition from locals. Other large projects of companies like ArcelorMittal have failed to take off due to lack of clarity over captive iron ore resources. The new mining Bill has proposed bidding of all major mineral blockstoensuretransparency and better valuation. ■ Continued on Page 2 Coal blocks for losing captive mines Discoms could levy extra surcharge ■ The government will soon provide alternative coal blocks to ■ Power distribution companies might soon get to levy an additional surcharge on commercial and industrial customers to mop up revenue to finance their purchase of renewable energy, reports Noor Mohammad in New Delhi. In a recent meeting of the Forum of Regulators, which comprises chairpersons of state and central electricity regulatory commissions, it was decided that discoms should be allowed to recover an additional renewable energy charge. Page 4 companies that lose captive coal mining rights midway through their project cycle because of environmental and other policy issues, thereby clearing a major irritant that had threatened to slow down several development projects worth billions of dollars, reports Subhash Narayan in New Delhi. The environment ministry’s recent ‘go and no-go’ categorisation had put over 200 coal blocks out of bounds for mining. Page 4 PMO wants to know why DIAL costs rose Nirbhay Kumar New Delhi, July 11 HE Prime Minister’s Office has asked the civil aviation ministry to explain why the cost of building the Capital’s Indira Gandhi International Airport rose 42%, although the project was commissionedontime.ThePMOaction follows a Parliament member’s complaint that the Delhi International Airport Ltd (DIAL) project, built as a public-private partnership,sawacostescalation from R8,975 crore to R12,718crore. Further, a KPMG audit report has said the ministry andtheAirportAuthorityof India (AAI) were not informedof theincreasedcost on a regular and proactive basis. AAI, which has nominees on the DIAL board, holds 26% in DIAL, while GMR holds 54%. Malaysia Airports Holdings and FraportAGhold10%each. Thehighercostmeansthe government will have to spend more for a viable rate of return.Italsoledtoadecision to levy airport development charges, which were, however, dropped after a courtorder. Sources said that Davinder PS Sandhu, director in the PMO, wrote to the ministry seeking its explanation. An aviation ministry official confirmed the receipt of the letter, adding, “Wearepreparingareply .” PROJECTED AND ACTUAL COST Initial cost Final cost Description as per DIAL as per DIAL T1, T2 and initial CWIP 762 754 Runway/taxiway/apron/lighting 1,765 2,634 Terminal3 and associated building 4,669 6,836 Airport services construction & airport connecting building — 160 Preliminary, preoperative & IDC 1,279 1,320 Metro 350 350 Upfront fee paid to AAI 150 150 Rehabilitation of runway 10-28 110 Delhi Jal Board infrastructure funding 54 New ATC tower with equipment 350 Security capex* 139 Total project cost 8,975 12,857 All figures in R crore; * later addition, not part of escalation Two consultants — KPMGandEngineersIndiaLtd engaged by the Airport Economic Regulatory Authorityof Indiatomakefinancial and technical audits respectively of the project — have reported that DIAL overshotitstargetandbuiltadditional floor area, costing R700croremore. “Dial had engaged reputed consultants like Parsons Brinkerhoff International to monitor project cost. Besides, top global players in airport development such as Fraport and Malaysia Airports were their partners. Given these facts, the project cost should not have goneuptothisextent,”anindustryanalystsaid. A GMR spokesperson saidcostsrosemainlydueto additional works like building an ATC tower, securityrelated expenses and reha- bilitationof runway . Another expert said DIAL revenue was protected by the state-support agreement between the government and the private party . Hesaidincasethedeveloper was not allowed to collect user development fee calculated on the basis of total project cost and a fair rate of return,DIALhastherightto approachtheregulator. “We don’t think DIAL deliberately inflated the project cost. Such projects are audited by multiple agencies. Also, airport development on the PPP model is a new experiment. There are bound to be some errors till the time it fully evolves like in highways and power,” a Mumbai-based executive of a consultancy firm said adding that unnecessary questioning of costs would deterinvestors. P IIFCL TO LAUNCH R5K CR INFRA 18 Insight on US monetary policy sought DraftBillclearsdecksfor ultramegamineprojects T A SMART SERVE A H M E D A B A D P 11 CVC to probe Trai’s pricing proposal for 2G spectrum AnanditaSinghMankotia New Delhi, July 11: The Central Vigilance Commission(CVC)hasstarted an inquiry into telecom regulatorTrai’sFebruary 2011recommendationson pricing 2G mobile spectrum.TheCVCalsowants to know from the Department of Telecommunications (DoT) why it has still not recovered charges for excess spectrum held by some operators, which has led to losses for the exchequer. TheCVChassoughtall related files in the DoT which are being considered for processing Trai's recommendations. The commission has directed DoTtosubmitallrelevant files to it by July 15. The inquiry assumes significance since CVC has consistently questioned the decision not to auction licences in 2008 when A Raja was telecom minister. Instead, licences were given away to applicants at prices set in 2001. Not satisfied with DoT's replies and after scrutinising the relevant files, it was the CVC which found a prima facie case of corruption and asked the CBI to register a case. ■ Continued on Page 2 ■ No SC order in petition against Kapil Sibal on RCom issue, Page 2 M O N E Y & B A N K I N G DEBT FUND WITH FOREIGN PARTNERS: CMD SK GOEL 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 GoM takes the middle path in food security KV Thomas, food minister Sandip Das New Delhi, July 11 A n Empowered Group of Ministers on Food on Monday approvedtheFoodSecurityBill which seeks to provide legal entitlement for subsidised food grains to more sections of thepopulation,apartfrom thosebelowthepovertyline. According to official sources, 75% of rural households will get subsidised grain under the epochal law. Of these, 46% would be consideredas'priority'category , and each person in these households will get 7 kg of grains a month at heavily subsidised prices – R2 per kg for rice, R3 for wheat and R1 for coarse grains. In case of urban centres, out of the 50% of the total households to be covered under the scheme, 28% would get 'priority'status. With the introduction of the Bill, the government's annual food subsidy bill is expected to increase to R94,987 crore from R74,231 crore in 2010-11. The food 75% OF RURAL HOMES WILL GET SUBSIDISED GRAIN. OF THESE, 46% WILL BE IN 'PRIORITY' CATEGORY, WITH EACH PERSON IN THESE HOMES GETTING 7 KG OF GRAIN A MONTH grains required for this expansion of subsidy cover would be above 61 million tonne (mt), as against 50 mt at present. The Bill, as approved by the EGoM, would now be vetted by the finance minister and would go to the Cabinet. The plan is to introducetheBillintheforthcomingsessionof Parliament. The EGoM has opted to tread the middle path between the National Advisory Council and Prime Minister’s Economic Advisory Coucil (PMEAC). The NAC wanted legal entitlement extended to 90% of rural households and 75% of urban households. The Rangarajan Committee had raised concerns over the availability of grainforsuchalargecover. The PMEAC was in favour of providing legal entitlement only to “priority” households. Currently, the government supplies 35 kg of rice and wheat every monthatsubsidisedratesto 6.52 crore BPL families through ration shops. ■ Non-basmati exports, P2 P U N E Union Cabinet recast at 5 PM today; expect no radical changes still fe Bureau New Delhi, July 11: A reshuffle of the Union cabinetwilltakeplaceonTuesday at 5 PM, an attempt by Prime Minister Manmohan Singh to bring some semblance of purpose to a government increasingly perceived as lethargic and lurching from one crisis to another. The Prime Minister, sources said, has not really had his way with the Congress high command and so, the reshuffle may see some new faces but no radical Manmohan Singh, Prime Minister change. The top four in the government, ministers for home, finance, defence and external affairs will remain untouched. Sources confirm that those getting a promotion in this reshuffle include Trinamool Congress minister DineshTrivedi,whoistipped to become Cabinet minister for railways, Uttar Pradesh MP and minister of state (independent charge) for steel Beni Prasad Verma, who will be made Cabinet minister. ■ Continued on Page 2
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