ECONOMY AFFAIRS JANUARY 2014

ECONOMY AFFAIRS JANUARY 2014

• The National Innovation Council (NInC) and the Ministry of Micro, Small and Medium Enterprises (MSME) on 27 January, jointly announced the creation of the India Inclusive Innovation Fund (IIIF) in New Delhi. IIIF approved by the Union Cabinet seeks to combine innovation and the dynamism of enterprise to solve the problems of citizens at the base of the economic pyramid in India. Speaking about the Fund, Sam Pitroda, Chairman of NInCand Advisor to the Prime Minister on Public Information, Infrastructure and Innovation said: “The needs of the people at the base of the economic pyramid are today served by philanthropy and Government grants / subsidies which can never be either adequate or scalable. IIIF seeks to leverage the model of Venture Capital to transform the lives of the less privileged”. The Fund will be registered under SEBI’s Alternative Investment Fund Category I guidelines with an initial corpus of Rs. 500 crore, with the Ministry of MSME committing to 20% (Rs. 100 crore) and the balance being given by Banks, insurance companies, overseas financial and development institutions. The IIIF seeks to create a new class of capital which helps set up and scale entrepreneurial skills and innovation which address the needs of the base of the economic pyramid. The Fund will invest in innovative ventures that are scalable, sustainable and therefore profitable but address social needs of our less privileged citizens in areas such as healthcare, food, nutrition, agriculture, education / skill development, energy, financial inclusion, water, sanitation, employment generation, etc. Lack of Capital is one of the major reasons why ventures and entrepreneurs seeking to address the needs at the base of the economic pyramid have failed to take off. IIIF seeks to address exactly this gap and therefore at least 50% of its investments initially will be to enterprises that fall in the MSME stage. It has been observed globally that new enterprises have the highest potential for job creation and hence IIIF will seek to address this aspect as well.
  
• An Ultra Mega Solar Power Project (UMSPP) with a cumulative capacity of 4,000 MW will be set up in Rajasthan near Jaipur, close to Sambhar Lake. Significantly, with the commissioning of this plant and commercial utilisation of the harvested energy therein, this would become the largest single location solar electricity generation project in the world. A Joint Venture Company (JVC) will develop the Solar Power Project with equity participation from Bharat Heavy Electricals Limited (26%), Solar Energy Corporation of India (23%), Hindustan Salts Limited (16%), POWERGRID (16%), Satluj Jal Vidyut Nigam Limited (16%) and Rajasthan Electronics and Instruments Limited (3%). The project set up on land provided by SSL will have equipment supplied by BHEL, power evacuation by POWERGRID, sale of electricity by SECI, O&M by REIL and project management by SJVNL. To this effect, a Memorandum of Understanding (MoU) was signed in New Delhi on 27 January, among the six companies in the presence of Praful Patel, Minister of Heavy Industries and Public Enterprises, Dr. Farooq Abdullah, Minister of New and Renewable Energy. The plant will be set up in two phases over a period of 7 years with Phase-I comprising 1,000 MW and the balance 3,000 MW in subsequent phases. The JVC will be incorporated as a public limited company under DHI and will have at its registered office in Delhi/NCR.
  
• The Union Finance Minister of India P. Chidambaram visited Kingdom of Saudi Arabia from 27th January to 28th January, 2014 to co-chair the 10th India-Saudi Arabia Joint Commission Meeting (JCM). During the meeting of JCM, the Finance Minister P. Chidambaram and the Commerce & Industry Minister of the Kingdom of Saudi Arabia called for strengthening of cooperation in accordance with the Delhi Declaration and Riyadh Declaration. They called upon the public and private sectors to further enhance cooperation and build real partnerships in a manner that serves the interests of the two countries in different fields. They also reviewed the progress in various sectors including Trade and Investment; Oil and Gas; Pharmaceuticals, Higher Education; Civil Aviation; Tourism and Media and Culture; Security Affairs; Information and Communication Technology, Vocational and Technical Training; Textiles, Engineering Affairs, Health & Family Welfare; Agriculture Research and SMEs. The JCM inter alia agreed on (i) Promoting cooperation in the field of oil, gas and minerals through the Joint Technical Team (India Saudi Energy Consultations); (ii) Encourage Saudi private sector companies to invest in oil and gas sector in India; (iii) Participation of Indian pharmaceutical entities in Saudi Arabia; (iv) Discussions on the mandatory requirement to get ‘classification’ for Indian companies to make them eligible to participate in Saudi projects; (v) Finalization and signing of framework agreement between “SAGIA” and “Invest India”; (vi) Discussions on the modalities in a time bound manner for setting up of India Saudi Investment Fund and identifying nodal points; (vii) More efforts in technical cooperation and exchange of expertise including through early convening of the Joint Working Group on Higher Education; (viii) Organize cultural days in both countries; and (ix) Strengthening cooperation in all security fields and exchange of information, especially in organized crimes, money laundering and drug smuggling.
  
• With the number of telephone subscribers in the country increasing to 910.14 million at the end of November 2013, the overall Teledensity of India has increased from 73.32 at the end of October, 2013 to 73.69 at the end of November, 2013. This shows a monthly growth of 0.62%. As per the latest data released by TRAI on 30 January, the share of urban subscribers has declined from 60.26% to 60.06% whereas share of rural subscribers has increased from 39.74% to 39.94% in the month of November 2013.As per the latest data, subscription in the urban areas increased from 545.09 million in October, 2013 to 546.64 million at the end of November, 2013. Subscription in rural areas increased from 359.48 million to 363.50 million during the same period. The monthly growth rate of urban and rural subscription is 0.28% and 1.12% respectively. The overall urban Tele-density has increased from 144.28 to 144.46 and Rural Tele-density increased from 42.00to 42.43 in November 2013.
  
• A Memorandum of Understanding (MoU) for establishment of Hydrocarbon Sector Skill Council (HSSC) was signed in New Delhion 31st January, 2014, between Oil Industry Development Board (OIDB) and Petroleum Federation of India (PetroFed). Speaking on the occasion Petroleum Secretary Mr. Rae said that this initiative will be of great importance to Indian oil and gas sector in augmenting availability of skilled manpower. He lauded the efforts of OIDB and Petrofed for taking up this significant task. HSSC will focus on short-term training for persons / workmen who possess the minimum essential qualifications required by the Oil & Gas Industry. The main role envisaged for HSSC is to impart in a phased manner training for approximately 200 trades already identified based on the feedback of the industry to about 19 lakh persons over a period of 10 years through training institutes to be identified by HSSC. The functions of HSSC would inter-alia, include conducting skill gap studies, developing National Occupational Standards, imparting accreditation/affiliation of training providers, setting-up an effective Labour Market Information System, facilitating training of trainers and training of assessors, identifying training institutes, etc. The revenue model may be based on an initial grant from the National Skill Development Council and thereafter by certification fee from learners, accreditation fees, etc. besides CSR funds of various organizations.
  
• The Union Cabinet on 20 January, gave its approval for setting up of an electric locomotive factory at Madhepura, Bihar and a diesel locomotive factory at Marhowra, Bihar at an estimated cost of Rs. 1293.57 crore and Rs. 2052.58 crore respectively, with limited equity contribution by the Ministry of Railways. Over a ten year period, the factories will provide the Indian Railways with 800 electric locomotives of 12,000 horse power (h.p.) each and a mix of 1,000 diesel locomotives of 4,500 and 6,000 h.p. with high level performance guarantees similar to international practices. The locomotive factories are likely to attract significant foreign investment with concomitant availability of internally generated resources for other important railway projects. Locomotives manufactured by these factories will be of international class energy/fuel efficiency and will become an important instrument of India`s response to global efforts towards mitigation of adverse impacts on climate due to emission of green- house gases.
  
• The Union Cabinet on 20th January gave its approval for setting up the Amritsar-Kolkata Industrial Corridor (AKIC) and formation of the AKIC Development Corporation (AKICDC). The AKIC is proposed to be developed in a band of 150-200 kms on either side of Eastern Dedicated Freight Corridor (EDFC), in a phased manner, and would therefore comprise a belt of at least 5.5 lakh square kms in the seven States of Punjab, Haryana, Uttarakhand, Uttar Pradesh, Bihar, Jharkhand, and West Bengal. Phase-1 will be in the nature of a pilot project, during which at least one Integrated Manufacturing Cluster (IMC) of 10 square kms each, in each of the seven States would be set up, as identified by State Governments. The States would however, be free to set up more than one IMC, if they choose to do so. Uttarakhand, being a hill state would be given flexibility with regard to the size of the cluster. Both brown field as well as green field IMCs can be set up. At least 40 percent of the land in each IMC will be permanently earmarked for manufacturing and agro-processing, considering that substantial part of the area in these States, except Jharkhand, is under agriculture. The IMCs envisaged under the project would be entitled to all the benefits available under the National Manufacturing Policy (NMP), 2011, provided they are organized as envisioned in the NMP. For infrastructure development, a Public Private Partnership (PPP) mode would be encouraged. While viability gap funding would be available for infrastructure amenable to PPP, trunk infrastructure not amenable to PPP will be developed through grant-in-aid from the Central Government. The Union Cabinet also approved that AKICDC will be set up immediately with a total equity base of Rs. 100 crore, with 49 percent stake of the Central Government, with balance equity to be taken by stakeholder State Governments as per option and willingness, and HUDCO. The Central Government will also provide Rs 100 crore as project development fund to AKICDC.
  
• The Cabinet Committee on Economic Affairs on 20th January, approved a proposal to provide financial support of Rs. 2727.10 crore to Nalanda University over a period of 12 years from 2010-11 to 2021-22.
  The salient features of the financial support are: - 
  1. Rs. 1749.65 crore will be spent towards capital cost of the project.
  2. Rs. 977.45 crore has been provided to meet the University`s recurring expenditure for eight years from 2014-15 to 2021-22.
  3. The main campus, including residences of teaching and non-teaching staff is being built on a plot measuring 455 acres, provided free of cost by the Government of Bihar on a 99-year lease.
  4. The University has already received US$ 11.55 lakh as voluntary contribution from China, Thailand and Laos. Singapore has offered to build a library at a cost of US$ 5 million. Australia has committed Australian $ 1 million for a Chair in the School of Ecology and Environment Studies. Japan has pledged assistance for the renovation of highways leading to the University. Other participating countries will contribute as the University progresses.
  5. An Endowments Committee has been constituted to raise funds through public-private partnerships.
  6. The University will also start generating its own revenues to meet a part of its recurring expenditure when teaching commences in phases. 
  The establishment of Nalanda University will benefit 2450 Indian and foreign students by the end of 2021-22. The funding by the Government of India would enable the University to establish itself as an international institution of excellence. Construction in the first phase is expected to begin this year. Teaching in the first two Schools is expected to begin from leased premises in September, 2014. Teaching in all the seven Schools will commence in the academic year 2017-18. An Inter-governmental Memorandum of Understanding came into force in October, 2013 to further reinforce the international status of the University. At the 4th East Asia Summit (EAS), held in Thailand on October 25, 2009, the EAS Member States issued a Joint Press Statement which supported the establishment of Nalanda University (at Rajgir in Bihar, near the ancient Nalanda) as a non-state, non-profit, secular and self- governing international institution. The university came into existence in November, 2010 after notification of the Nalanda University Act, 2010.The University was established under the Nalanda University Act, 2010, which came into force on November 25, 2010, The President of India, Shri Pranab Mukherjee, is the Visitor Professor, Amartya Sen is the Chancellor and Chairman of the Governing Board. Dr. Gopa Sabharwal is the Vice-Chancellor.
  
• Empowered Group of Ministers (EGoM) headed by Union Minister of Finance P Chidambaram approved on 16 January 2014, the sale of 10 percent government stake in Indian Oil Corporation (IOC) to Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL). ONGC and OIL will buy a part of the government's stake in Indian Oil Corp for a total of 4700 crore rupees to 5000 crore rupees. It will help the government meet part of its disinvestment target of 40000 crore rupees set for the financial year 2013-14. The government opted to sell the 10% stake in IOC through block deal on stock exchange. The Securities and Exchange Board of India (SEBI) rule for block deal says that the rate should be one per cent higher or lower than previous day's closing price. At present, Union Government of India holds78.92 percent stake in IOC whereas ONGC already holds 8.77 per cent stake in IOC. The 10% disinvestment in IOC was approved by the Cabinet last year.
  
• The Union Government on 16th January, unveiled new policy guidelines for major ports, aimed at helping them leverages their land resources for commercial advantage. Participating in the `Ports in India` annual conference in Mumbai, Shipping Secretary Vishwapati Trivedi said the new guidelines provide necessary regulatory framework for land allotment by major ports. Mr.Trivedi said these guidelines have been drawn to help the ports to carry out leasing and licensing of port land in a transparent manner. Discretionary powers have been reduced and tender-cum-auction has been prescribed as the most preferred method of allotment, he added. Major ports in India have between them 2.64 lakh acres of land, which is a major resource. So far, the land utilization has not been optimum and often yielded lesser returns. The thrust of the new policy has been on linking the value of land with prevailing market rates. Under the new policy guidelines, land can be allotted only through licensing in custom bond areas by inviting competitive bidding, while land outside custom bond areas can be leased through tender-cum-auction. There is also a provision to license land outside custom bond areas, but it should be only for port related activities. The Boards of respective ports can approve leasing of land for a period up to 30 years. For leasing of land beyond 30 years and up to 99 years, approval of the Government has to be obtained through the mechanism of Empowered Committee. All the 12 major ports of the country are required to draw land use plan covering all land owned or managed by them. The new guidelines are applicable to all major ports in India except for the land relating to township areas in Mumbai, Kolkata and Kandla. The new policy guidelines for land management are part of the on going process of port reforms and liberalization. While Major Ports, owned by the Centre operate in a comparatively more regulated environment, the non-major ports, comprising state ports and private ports enjoy substantial degree of flexibility. The government has been working towards creating a level playing field for major and non-major ports. Earlier, in 2013, as a part of reform process in the Ports sector tariff setting in major ports was liberalized and indexed to inflation and minimum efficiency standards were prescribed for cargo terminals. The 12 major ports in India – Kandla, Mumbai, JNPT, Marmugao, New Managlore, Cochin, Chennai, Ennore, V O Chidambarnar, Visakhapatnam, Paradip and Kolkata (including Haldia) handle approximately 61% of cargo traffic. The Government is committed to further augmenting the port capacity in the major ports sector.
  
• The Indian Institute of Corporate Affairs (IICA) signed MoUs with FICCI on 17th January 2014. MoUs were signed to collaborate in the areas of Corporate Social Responsibility Competition Law, Corporate Laws, Corporate Governance, Inclusive Growth and Sustainable Development of the industry and the economy. The two institutions have agreed on the following points
  
  • To organize awareness programmes to promote various aspects of the new Companies Act 2013, especially Corporate Social Responsibility, across major cities in India; and
  • To undertake capacity building measures in the endeavor to mainstream the adoption of CSR and responsible governance practices by the industry and any other corresponding activity.
  • IICA and FICCI will also collaborate to:
  1. Conceptualise and develop agenda, course content and modules and
  2. Organise short term courses and training
  IICA functions under the aegis of the Ministry of Corporate Affairs, also works with the Thomson Reuters to raise awareness on corporate regulations and governance for firms in India. Through this alliance the two will deliver a range of orientation programmes aimed at company Board Members, other senior officers from the corporate sector as well as officials from government, statutory and regulatory bodies. These programmes will be sector-specific and will cover range of topics including Corporate Governance, Board effectiveness and industry trends, opportunities and risk. The first orientation programme is being planned for the pharma sector.
  
• India Infrastructure Finance Company Ltd (IIFCL) on 17th January 2014 signed an agreement with the Export-Import Bank of Korea (K-EXIM) for infrastructure finance. As per the IIFC’s statement the signed MoU covers cooperation in project and investment financing related to infrastructure as well as other finance areas of mutual interest.The Union government has already drawn up plans to make huge investments in infrastructure sector. The Korean government has also shown its keen interest in development of infrastructure in India as it has a variety of overseas experience. The MoU was exchanged between the S.B. Nayar, Chairman and Managing Director of IIFCL and Kim Yong-hwan, Chairman and President, K-EXIM. This MoU between the IIFCL and K-EXIM has been signed at the time of India visit of the South Korean President Park Geun-hye. IIFCL was incorporated under the Companies Act as a wholly-owned Government of India company in January 2006 and commenced operations from April 2006. It basically provides long term finance to viable infrastructure projects through the Scheme for Financing Viable Infrastructure Projects through a Special Purpose Vehicle called India Infrastructure Finance Company Ltd (IIFCL), broadly referred to as SIFTI.
  
• Oil-rich Sudan offered two oil and gas blocks to ONGC Videsh Limited (OVL) on the sidelines of Petrotech 2014 on 14 January 2014. Sudan offered the on land Block 8 and Block 15 to the OVL on a nomination basis. Block 8 will have an oil discovery while Block 15 will have exploration acreage. OVL will evaluate the data and take 100 percent rights if it finds them feasible for investment. OVL, the overseas arm of Oil and Natural Gas Corp, has been present in Sudan since 2003. In 2003, it acquired 25 percent stake in the Block 1, 2 and 4 of the Greater Nile Project (GNOP) and Sudan Crude Transport System.Greater Nile Oil Project (GNOP) is spread over an area of 49500 square kilometres in the Muglad Basin, located about 700 km southwest of the capital city of Khartoum. It also owns a 1504 km crude oil pipeline from the oilfield in Heglig to Port Sudan at Red Sea.Union Minister of Oil and Natural Gas, Veerapa Moily welcoming the offer from Sudan also held talks with his Azerbaijan counterpart Natig Aliyev on the sidelines of Petrotech 2014. The Azerbaijan minister welcomed Indian participation in both upstream and downstream projects.
  
• The Reserve Bank of India relaxed the rules of Foreign Direct Investment on 9 January 2014. The decision is aimed at providing exit option to the foreign investors. The investors can exit their investments by selling their holding of equity or debt. The relaxation was expected to facilitate higher foreign direct investment (FDI) inflows into India. India saw a drop of 15 percent in FDI inflows from April 2013 to October 2013.The exit option given to the foreign investors is subject to the condition that any FDI will have a minimum lock-in period without any assured return. The lock-in period for defense and construction sector has been kept at three years and for all other sectors it will be at least a year. For a listed company the non-resident investor can exit at the market price prevailing at the stock exchanges. In case of unlisted company an investor can exit from equity shares at a price not exceeding the price arrived at on the basis of return on equity.
  
• The Cabinet Committee on Economic Affairs on 9 January, has approved the proposal of the Ministry of Health and Family Welfare relating to the centrally sponsored scheme for up-gradation of existing State Government/Central Government medical colleges to increase the Bachelor of Medicine and Bachelor of Surgery (MBBS) seats in the country. This will result in the increase of about 10,000 seats at a total cost of Rs.10, 000 crore, with a proposed central assistance share of Rs.7,500 crore and State/Union Territory share of Rs.2,500 crore. The funding pattern will be 90:10 by Central and State Governments respectively for North Eastern States and special category States and in the ratio of 70:30 for other States. The total cost of one MBBS seat is approximately Rs.1.20 crore.
  
• The Loan Agreements for World Bank (IDA) assistance of US$ 250 million for Uttarakhand Disaster Recovery Project were signed between the Government of India and the World Bank in New Delhi on 9 January. The Loan Agreement was signed by Nilaya Mitash,Joint Secretary, Department of Economic Affairs, Ministry of Finance on behalf of the Government of India and Mr Onno Ruhl, Country Director (India) of World Bank on behalf of the World Bank. The Project Agreement was also signed by Rakesh Sharma, Additional Chief Secretary, Uttarakhand on behalf of the Government of Uttarakhand. The objective of the project is to restore housing, rural connectivity and build resilience of communities in Uttarakhand and increase the technical capacity of the State entities to respond promptly and effectively to an eligible crisis or emergency. The primary beneficiaries of the project would be the communities in the State that would benefit from the restoration of housing, rural connectivity, and risk mitigation infrastructures. By strengthening disaster risk management systems and institutions, the Project has the potential to benefit the entire State of Uttarakhand. The project will have six components which are (i) Resilient Infrastructure Reconstruction, (ii) Rural Road Connectivity, (iii) Technical Assistance and Capacity Building for Disaster Risk Management, (iv) Financing Disaster Response Expenses, (v) Project Implementation Support, and (vi) Contingency Emergency Response. It is a loan for an implementation period of four (4) years. Government of Uttarakhand is the implementing agency.
  
• NABARD has initiated a number of measures for improving rural credit and rural infrastructure particularly warehousing as decided at the 198th Meeting of the Board of Directors chaired by Dr Harsh Kumar Bhanwala, Chairman, NABARD, held in New Delhi on 9 January. The Board has approved the launch of three crop specific Pilot Projects with production and post-production interventions to be implemented through Primary Agriculture Co-operative Society (PACS). The three Pilot Projects include business models for potato in Hooghly district, West Bengal, tomato in Karnal district, Haryana, and onion in Nasik district, Maharashtra. The total outlay for the projects is Rs 37.20 crore, comprising loan and grant support from NABARD of Rs 18.43 crore and Rs 2.43 crore respectively and a subsidy support of Rs 16.34 crore from the Central/State Governments. The Pilot Projects envisage crop-specific market surveys, identification of specific market players and marketing support through establishment of Project Market Facilitation Centres (PMFCs). The Projects will provide for productivity enhancing measures and post-harvest interventions. NABARD has sanctioned 548 warehousing projects in seven states amounting to Rs 1,046 crore under the NABARD Warehousing Scheme (NWS). These projects on completion will create an additional storage scientific space of 11.30 lakh MT for agriculture commodities and also help in better price discovery for farmers. NABARD Warehousing Scheme 2013-14 has been formulated as per the announcement made in the Union Budget with a corpus of Rs 5,000 crore. The scheme envisages financial support for construction of warehouses, godowns, silos, cold storages and cold chain infrastructure to store agriculture produce, both in public and private sectors. As decided by its ALCO, NABARD has revised the rate of interest on refinance provided to banks for investment credit with effect from January 7, 2014. The refinance rate has been reduced by 20 basis points, and the revised rate of interest on refinance for a period of five years for Commercial Banks, State Cooperative Banks, Regional Rural Banks and Primary Urban Cooperative Banks will be 9.70%. The revised rate of interest for refinance for a period of three to five years will be 9.90%. Further, banks drawing refinance of Rs 500 crore and more in a single drawal will be allowed further reduction of 10 basis points, making the effective rate 9.60% and 9.80% respectively.These measures are expected to give a boost to banks for extending investment credit and creation of much-needed warehousing infrastructure for agricultural commodities in the country.
  
• Amid a slowing economy, gross direct tax collections rose 12.33 per cent to Rs 4.81 lakh crore during the first nine months of this financial year. Direct tax collections totaled Rs 4.29 lakh crore during the April-December period in 2012-13. Net direct tax collections rose 12.53 per cent to Rs 4.15 lakh crore during the period this year, compared with Rs 3.69 lakh crore in the year-ago period, the Finance Ministry said in a statement today. The government had set a direct tax collection target of over Rs 6.68 lakh crore for 2013-14, envisaging a growth of 19 per cent from Rs 5.65 lakh crore in 2012-13. The gross collection of corporate taxes increased 9.35 per cent to Rs 3.1 lakh crore from Rs 2.84 lakh crore, the Finance Ministry said on 5 January. Gross collection of personal income tax was up 18.53 per cent to Rs 1.67 lakh crore in the first nine months from Rs 1.41 lakh crore. Securities Transaction Tax mop-up stood at Rs 3,427 crore. Wealth tax collection posted a growth of 11.92 per cent to Rs 742 crore from Rs 663 crore.
  
• State-owned petroleum companies on 1 January hiked the price of non-subsidized cooking gas cylinders by Rs. 220 a piece. A cylinder will now cost Rs. 1,241 in Delhi. The government subsidizes nine cylinders a year for each household. Families requiring more cylinders will have to buy them at market rates. This is the third time in a month the price of non-subsidized cooking gas cylinders is being increased. The decision to go ahead with the hike was taken as international prices are on an uptrend. On December 11, the government also increased by Rs. 3.51 per cylinder the commission for LPG dealers and distributors. The state-owned petroleum companies revise prices of cooking gas cylinders on the 1st of every month, based on the average imported cost and the rupee-dollar exchange rate during the previous month.