ECONOMY AFFAIRS MAY 2011

ECONOMY AFFAIRS MAY 2011

• The Prime Minister, Dr Manmohan Singh dedicated the world-class, 6-MMTPA Bina Refinery in Madhya Pradesh to the nation.The refinery was set up by Bharat Oman Refineries Ltd (BORL), which is promoted by Bharat Petroleum Corporation Ltd, with equity participation of 26 per cent by Oman Oil Company and about 1 per cent by the Madhya Pradesh Government. The refinery will produce Liquefied Petroleum Gas, Euro III and Euro IV Petrol and Diesel, Aviation Turbine Fuel (ATF) and Light Aromatic Naptha with sulfur as by-product. Also the project involves a crude supply system consisting of a Single Point Mooring system (SPM), Crude Oil Storage Terminal (COT) at Vadinar, District Jamnagar, Gujarat and 935 Km long cross country crude pipeline from Vadinar to Bina for supplying crude. 
• State-run power equipment maker Bharat Heavy Electricals Ltd (BHEL) announced the successful manufacture and testing of India's first turbo generator of 600 MW rating. The new state-of-the-art generator turbo generator will be supplied and installed at the upcoming North Chennai Thermal Power Project of the Tamil Nadu Electricity Board (TNEB). The turbo generators will cater to the requirements of thermal power stations with supercritical turbines of 660 and 700 MW ratings. The facility for assembly and testing of this series of generators has been designed and engineered in-house at BHEL’s Haridwar plant. 
• The Cabinet Committee on Economic Affairs (CCEA) approved the Asian Development Bank (ADB)-assisted North Eastern State Roads Investment Programme (NESRIP). North Eastern State Roads Investment Programme is centrally sponsored scheme of the Ministry of Development of North Eastern Region (MDONER).The CCEA’s approval will enable construction / upgradation/ improvement of a total of 433-km-long roads in six North-Eastern States at an estimated cost of Rs 1353.83 crore to be implemented over a period of five years (2011-2016).The State-wise road lengths are: Assam 74.70 km, Meghalaya 93.40 km and Sikkim 34.20 km in Tranche-I and Assam 62.90 km, Manipur 93.20 km. Mizoram 55.00 km and Tripura 20.30 km in Tranche-II. 
• The Cabinet Committee on Infrastructure approved Neyveli Lignite Corporation's (NLC) Rs 5907.11-crore lignite-based thermal power project in Tamil Nadu. The proposal for the project included installation of 1,000 MW lignite based thermal power project at Neyveli. The power generated from the new thermal power project (2x500MW units) will cater to the demand of the southern States. The project involves setting up of two units of 500 MW each at Neyveli in Tamil Nadu. The foreign exchange component of the power plant is R969.81 crore. NLC which is currently operating three thermal power stations at Neyveli and one at Barsingsar in Rajasthan with a total installed capacity of 2,740 mega watts is also planning to set up a 2x500 MW project in Cuddalore district of the state. 
• The Reserve Bank of India tightened the norms for foreign exchange risk cover. The RBI mentioned that only companies with a net worth of Rs 200 crore can use derivatives to hedge against risk of volatility in currency rates. The RBI had in February 2011 pegged the net worth limit at Rs 100 crore while allowing corporates to hedge against exchange rate risks associated with trade transactions and external borrowings. 
• Public sector oil marketing companies sought Rs 30000 crore from the government as compensation to level up the revenue loss they suffered in 2010-11 by selling fuel at government-fixed cheaper rates. Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation together lost Rs 78,000 crore in 2010-11 by selling diesel, cooking gas and kerosene at subsidised rates, according to industry estimates. The government till date gave these firms only Rs 20,000 crore in compensation, while upstream oil companies have paid another Rs 25,000 crore. The revenue loss, termed as under-recoveries by these companies is expected to be more in the current fiscal 2011-12 because crude prices have jumped to over $120 a barrel in the international market from about $75 a year ago. India imports about 80% of its oil requirement.
• The Annual Monetary Policy for 2011-12 was presented by RBI Governor D.Subbarao on 3 May 2011. The Monetary Policy 2011-12 aim at maintaining an interest rate environment that moderates inflation and anchors inflation expectations. Also the policy targets to foster an environment of price stability that is conducive to sustaining growth in the medium-term, coupled with financial stability. The following are highlights of the Annual Monetary Policy 2011-12: 
  • RBI increased the repo rate under the liquidity adjustment facility (LAF) by 50 basis points from 6.75 per cent to 7.25 per cent with immediate effect.
  • The reverse repo rate under the LAF, determined with a spread of 100 basis point below the repo rate, automatically adjusts to 6.25 per cent with immediate effect.
  • The Marginal Standing Facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, stands calibrated at 8.25 per cent. This rate will come into effect on operationalisation of the MSF.
  • The Bank Rate has been retained at 6.0 per cent.
  • The cash reserve ratio (CRR) of scheduled banks has been retained at 6.0 per cent of their NDTL.
  • Reserve Bank of India (RBI) capped bank investments into liquid schemes to 10 per cent of the bank’s net worth as of 31 March of the previous fiscal.
  • Reserve Bank of India (RBI) in May 2011 decided to accept the broad framework of regulations recommended by the Malegam Committee report on micro finance institutions (MFIs) The Reserve Bank declared that it would adhere to internationally agreed phase-in period (beginning 1 January 2013) for implementation of the Basel III framework. The Reserve Bank declared that it is studying the Basel III reform measures for preparing appropriate guidelines for implementation.
• Industry body Federation of Indian Chambers of Commerce and Industry (FICCI) proposed setting up of National Knowledge Functional Hub (NKFH). FCCI proposed the setting up of this body to engage higher educational institutions with the industry in order to produce quality engineering graduates and meet increasing requirement of skilled hands in the market.NKFH aims at facilitating industry-academia connect in tier-II and tier-III institutions which are the source of bulk engineering graduates for the capital goods industry.