Price situation improves, weak monsoon can play spoilsport

Softening prices of some essential food items including vegetables pulled down inflation both at retail as well the wholesale level in June, although the bleak monsoon situation remains a cause for concern.

While retail inflation in June touched its lowest mark at 7.31 per cent since January 2012, the wholesale price based index slid to four-month low of 5.43 per cent mainly because of easing prices of vegetables.

"Against the backdrop of deficient monsoon, the decline in CPI (Consumer Price Index) from 8.28 per cent in May to 7.31 per cent in June is encouraging," said PHD Chamber President Sharad Jaipuria.

According to the Wholesale Price Index (WPI) data , inflation eased mainly on fall in vegetable, fuel, edible oil, sugar and onion prices. However, the kitchen staple, potato, went up by 45.52 per cent.

Prices of vegetables during the month declined by 5.89 per cent from May, edible oils - 0.75 per cent and sugar - 2.09 per cent. Onion prices were down by 10.7 per cent.

In the past few months, however, the prices of onion and potato had been going up. The government has taken various steps including imposing minimum export price of USD 500 a tonne on onion and USD 450 tonne on potatoes to improve domestic supply.

It has also put a stock holding limit on these items and has decided to release 50 lakh tonne of rice in open market to prevent price rise due to poor monsoon.

As for retail inflation, based on the movement of CPI, it fell to 30-month low of 7.31 per cent in June, mainly on account of lower prices of food items, including vegetables, cereals and meat.

Retail inflation was 8.28 per cent in May. Its lowest was 7.65 per cent in January 2012, the month the government started releasing the data in percentage terms.

Also Read: June retail inflation at 29-month low: Experts analyse data

As per the CPI data released by the government, food inflation fell to 7.97 per cent in June against 9.56 per cent in May. During the month, the rate of prise rise in vegetable was 8.73 per cent against 15.27 per cent in May.

"The moderation in inflation together with the rebound in industrial production as per the recently released data, provides a positive signal that the structural bottlenecks afflicting the economy could be gradually showing signs of receding and green shoots of recovery could be around the corner," industry body CII said in a statement.

Among others items that became expensive in June as per WPI data include fruits (up 21.40 per cent), milk (10.82 per cent), egg, meat and fish (10.27 per cent) and rice (10.24 per cent).

The WPI data revealed that food inflation in June was down at 8.14 per cent from 9.5 per cent in May. However, it is likely to remain a cause for concern for the government given the patchy monsoon so far.

The WPI inflation for April was revised upwards at 5.55 per cent, from 5.20 per cent provisionally.

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Was Narendra Modi-govt's maiden Budget ambitious enough?

The Budget is certainly a mixed bag, and both the industry and market appears to be unable to decide what to make of it, s experts.

Finance minister Arun Jaitley on Thursday presented his maiden Union Budget in the Parliament. As the noise around the Budget reduces, investors have been contemplating if this is enough to bring India on an above 8 percent growth trajectory or this simply stands as a missed opportunity.

Experts believe the Budget is certainly a mixed bag, and both the industry and market appears to be unable to decide what to make of it. On a fair note, whatever the announcements in the Budget, the key lies in implementation and the effects will be felt only after a while. As FM too has pointed out, this is just the beginning of the journey and we should expect a lot more reforms from his government.

A panel consisting BJP MP Jayant Sinha, Centre for Policy Research's Economist and Senior Fellow Rajiv Kumar, Congress' Former Minister, I&B and Leader Manish Tewari along with EY's Senior Tax Partner Satya Poddar give their take on Arun Jaitely's maiden Union Budget and their outlook on the road ahead for the Modi government on CNBC-TV18's The Verdict.

For full show, watch the video

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Govt sanctions Rs 8,060 cr for PMEGP during 12th Plan

The scheme provided jobs to over 16 lakh persons during the 11th Plan (2008-2012). "The scheme is to be continued during Twelfth Plan (2012-13 to 2016-17).

The government today allocated Rs 8,060 crore for the Prime Minister's Employment Generation Programme (PMEGP) to create over 27 lakh jobs in the 12th Plan period ending March 2017.

The scheme provided jobs to over 16 lakh persons during the 11th Plan (2008-2012). "The scheme is to be continued during Twelfth Plan (2012-13 to 2016-17).

An outlay of Rs 8,060 crore (Rs 7,800 crore Margin Money subsidy plus Rs 260 crore under Backward and Forward Linkages) has been approved by the Planning Commission for PMEGP in the 12th Five Year Plan to set up about Rs 3.39 lakh projects with creation of about 27.12 lakh employment," an official statement said by MSME Ministry said.

The government provides Margin Money subsidy between 25 to 35 per cent of the Project cost, depending upon the category of the entrepreneur, with the remaining amount being covered by the banks.

Also read: Govt to continue with MNREGA scheme

"The scheme has received very encouraging response from all the stakeholders in the country and is well received by the unemployed youth," according to the statement.

PMEGP is already in operation and completed two years during the 12th Plan period successfully. Therefore, the PMEGP Scheme has been approved for continuation by the micro, small and medium enterprises (MSME) Ministry during the 12th Plan without any change in the broad framework and parameters of the scheme.

For the year 2014-15, the targets have been fixed for setting up of about 1.03 lakh micro units with the margin money subsidy of Rs 1,380 crore to generate employment for 8.25 lakh persons. PMEGP is a central sector scheme launched in 2008-09 to empower first generation entrepreneurs for setting up micro enterprises across the country by merging Prime Minister's Rozgar Yojana (PMRY) and Rural Employment Guarantee Programme (REGP) schemes. Khadi and Village Industries Commission is the nodal agency at national level for implementation of PMEGP.

An evaluation study of PMEGP was conducted by M/s Development & Research Services Pvt Ltd, New Delhi during 2013-14 for the sample units financed during 2008-09 to 2011-12.

The report reveals that 91.7 per cent of the units financed are working and average income of the beneficiaries has increased by 61 per cent which shows the success of the PMEGP scheme for generation of employment opportunities in rural and urban areas of the country.

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Here are some commodity trading ideas from Kunal Shah

Watch the interview of Kunal Shah Nirmal Bang Commodities with Shereen Bhan on CNBC-TV18, in which he shared his reading and outlook on commodity markets and specific commodities.

Watch the interview of Kunal Shah Nirmal Bang Commodities with Shereen Bhan on CNBC-TV18, in which he shared his reading and outlook on commodity markets and specific commodities.

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TRAI to issue spectrum sharing recos in about a week

TRAI Chairman Rahul Khullar today held a meeting with Chief Executive Officers of telecom companies where, as per industry sources, spectrum sharing was also discussed.

Telecom regulator TRAI is likely to issue recommendations on spectrum sharing by early next week, according to a government official.

"There are high chances that TRAI will issue recommendations on spectrum sharing late this week or early next week," the government official told PTI.

TRAI Chairman Rahul Khullar today held a meeting with Chief Executive Officers of telecom companies where, as per industry sources, spectrum sharing was also discussed. The Economic Survey has suggested that there is a need for better policies, like allowing trading and sharing of spectrum, to bring down the cost of radiowaves used for providing mobile communication.

Government has in-principle allowed sharing of spectrum purchased at market rate through auction, barring 3G airwaves, to increase efficient utilisation of the scarce natural resources. However, detailed guidelines are yet to be notified.

An internal panel at the Department of Telecommunications has suggested allowing sharing of 3G spectrum as well. However, the Telecom Regulatory Authority of India (TRAI) suo-motu started a process to come out with recommendations on guidelines for spectrum sharing.

The DoT will place the recommendations of TRAI before inter-ministerial panel Telecom Commission to take a call on spectrum sharing guidelines.

The cost of spectrum has increased multi-fold. In February 2014 auction, the minimum price or base price of spectrum fixed by government was about 5 times more than the price in 2001.

Also, the base price of airwaves in 1800 megahertz band, widely known as 2G spectrum, was fixed at Rs 1,765 crore per megahertz. The final price of Rs 37,572.60 crore received during auction for this band by government was over 100 per cent more than total value of spectrum put for auction at base price.

Allowing spectrum sharing will help telecom firms save costs and in turn may benefit customers if the savings are passed through in form of lower call rates.

Bharti Airtel stock price

On July 14, 2014, Bharti Airtel closed at Rs 332.05, down Rs 3.35, or 1 percent. The 52-week high of the share was Rs 373.50 and the 52-week low was Rs 279.25.

The company's trailing 12-month (TTM) EPS was at Rs 16.51 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 20.11. The latest book value of the company is Rs 152.21 per share. At current value, the price-to-book value of the company is 2.18.

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RBI Liberalizes Foreign Entry/Exit

Published on Mon, Jul 14,2014 | 20:13, Updated at Mon, Jul 14 at 20:55Source : Moneycontrol.com |   Watch Video :

It's a landmark change in India's foreign investment policy. After decades of prescribing the valuation formula based on which foreign investors can buy unlisted shares in India, the RBI has now adopted a more liberal stance. CNBC-TV18's Menaka Doshi reports on the details and if this is good news for India Inc?

It is great news! That's because it cleans up and simplifies the entire process of foreign investment coming and going out of India. And as you know, no foreign investor wants ambiguity on the potential price at which he can exit. So this is very good news. Now let me tell you what has happened so far.

When it came to foreign investment in India - first there was the CCI formula, then DCF and now RBI has finally shifted to internationally accepted pricing methodologies.Its latest notification, effective July 8^th , says- 'in case of equity shares, preference shares or debentures of unlisted company, at a price not exceeding that arrived at as per any internationally accepted pricing methodology for valuation of shares on arm's length basis, duly certified by a chartered accountant or a sebi registered merchant banker.'

So here's how it works

Entry

1. Issue of shares to non-resident: At price more than price arrived at via internationally accepted pricing methods
2. Transfer of shares to non-resident: Awaiting RBI circular, expect same norm

Exit

1. Transfer from non-resident to resident: At price less than price arrived at via internationally accepted pricing methods
2. Expected that same norms will apply to warrants & partly paid equity shares pricing. But this is by implication, no explicit clarification.

That brings us to Call & Put options!

Earlier this year, RBI had said the while a foreign investor must exit unlisted shares at a DCF-based price, if the exit is linked to an option, then it must not be ata price more than an Return on Equity price!

Now it says: 'the guiding principle would be that the non-resident investor is  not guaranteed any assured exit price at the time of making such investment/agreements and shall exit at the price prevailing at the time of exit, subject to lock-in period requirement.'

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TVS Motor to ride on new launches

The first quarter has brought some cheer for the Chennai-based two wheeler firm TVS Motor Company  with market share increase. It said while it would aim towards third position in the two wheeler market, it hopes to boost overall market share to 14 percent by the end of this fiscal from 12 per cent in FY14, aided by new launches.

"Despite a challenging economic environment, TVS Motor sold 19.9 lakh two wheelers in 2013-2014. We to launch a new product every three-four months," Venu Srinivasan, Chairman and MD, TVS Motor said.

Also read:  Seeing early signs of demand revival for auto sector: SIAM

Admitting that there was delay in the new launches, he said: "unless we master the consumer led engineering and quality, we don't want to launch a product. Some of the launches have been postponed due to the success of previous launches." It may be noted that Scooty Zest was scheduled to launch in June this year but it has been postponed to August.

The company, now the 4th big 2 Wheeler firm in India, aims to reach the third position soon. "Competition is going to be very fierce. We are at fourth position. Our target is be in the top three and with a series of launches, we will strengthen our position" he added. This year, it hopes to increase its market share from 12 percent to 14 percent. This is the first time in two years, we have seen an uptake in the market share", Srinivasan added. He estimated that total two-wheeler industry in India is expected to grow by around 11 per cent compared to around 7.4 percent last year.

With poor monsoons this year, the company hopes it will see good improvement between July and August. KN Radhakrishnan, President and CEO, TVS Motors said, "We are hoping that July to August it will revive and will be able to see improvement in monsoon and reservoirs. Definitely, sentiments are low, but I hope the nature will support us with good monsoon.In terms of volume, we will maintain the same kind of gaining of market share."

TVS Motors' exports increased by 14 percent in 2013-14 and hopes to increase it to 25 per cent in 2014-15. Srinivasan said, "Company will focus on emerging markets, especially Africa, South America and Indonesia"

On Indonesian venture, Srinivasan said while the company lost money in its Indonesian arms, TVS Motors is positive about future outlook. "It is a long term strategic investment. We have lost money, yes it is true. But the quality of the product, kind of engineering our company learnt by competing in Indonesia is what created the turnaround of the company in the last three years. Today we are seeing excellent result in India and it is because Indonesia is the outpost from which we are able to gather the trends be it technologies, aspirational styling and that will continue to be true. We are also confident in the next 12-18 months the subsidiary will reach cash break-even," he added

TVS Motors' tock rose 6% today

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Non-life insurance premium up 8% in May at Rs 6,118cr

Among the six public sector non-life insurance companies, New India Life Insurance collected premium of Rs 886.06 crore (up 13.8 per cent year on year) in May; National Insurance Company Rs 867.79 crore (up 15.1 per cent); United India Rs 870.50 crore (up 3.6 per cent); Oriental Insurance Rs 615.52 crore (up 1.2 per cent).

Non-life insurance premium increased 8.1 per cent year-on-year to Rs 6,118.11 crore in May 2014, data from Insurance Regulatory and Development Authority shows.

Of the total premium collected by non-life insurers during May, 55.3 per cent was contributed by public sector entities at Rs 3,381.86 crore, while rest 44.7 per cent came from private sector companies (Rs 2,736.25 crore).

Among the six public sector non-life insurance companies, New India Life Insurance collected premium of Rs 886.06 crore (up 13.8 per cent year on year) in May; National Insurance Company Rs 867.79 crore (up 15.1 per cent); United India Rs 870.50 crore (up 3.6 per cent); Oriental Insurance Rs 615.52 crore (up 1.2 per cent).

Export Credit Guarantee Corporation Rs 102.41 crore (down 1.3 per cent) and AIC collected Rs 39.58 crore premium (down 19.9 per cent).

Among the private players, non-life insurance premium mopped up by Reliance General increased by 10.9 per cent from a year ago to Rs 220.37 crore; IFFCO-Tokio Rs 234.78 crore (up 5.7 per cent); ICICI-Lombard Rs 516.46 crore (up 12.3 per cent) and Bajaj Allianz Rs 356.97 crore (up 1.6 per cent).

HDFC ERGO General's premium income stood at Rs 201.65 crore during the month (up 12 per cent); Bharti AXA General Rs 121.85 crore (up 14.7 per cent) and SBI General Rs 102.21 crore (up 20.3 per cent).

During the first two months of 2014-15, the total premium collected by non-life insurance firms rose by 7.28 per cent to Rs 14,539.55 crore.

Premium collected by public sector insurers during April-May rose by 8.2 per cent to Rs 7,984.37 crore and that of private companies by 6.19 per cent to Rs 6,555.17 crore.

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Gold drops as 4-month high spurs investors to sell

Gold slid 1.71 per cent to USD 1,316.10 an ounce. It rose the past six weeks and reached USD 1,345.17 on July 10, the highest since March 19.

Gold drops as advance to 4-month high spurs investors to sell Gold today dropped as some traders deemed an advance to an almost four-month high as excessive and as investors awaited clues on when US policy makers may begin raising interest rates.

Gold slid 1.71 per cent to USD 1,316.10 an ounce. It rose the past six weeks and reached USD 1,345.17 on July 10, the highest since March 19.

Also read: Expect gold to continue its rally: Fat Prophets  

Silver also dropped 2.03 per cent to USD 21.01 an ounce. It reached USD 21.582 on July 10, the highest since March 17. Bullion rose 1.04 per cent last week, capping the longest run of weekly gains since March, partly as a parent company of Portugal's second-biggest bank missed debt payments, renewing concern that Europe hasn't resolved its debt problems.

 The advance sent gold above a level that signals to some traders that prices may fall. Federal Reserve Chair Janet Yellen will deliver testimony to Congress this week.

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Govt slaps $579m additional penalty on RIL

The government has slapped an additional penalty of USD 579 million on  Reliance Industries for producing less than targeted natural gas from its KG-D6 block, Oil Minister Dharmendra Pradhan said today.

With this, the total penalty on RIL for missing the target in four fiscal years beginning April 1, 2010 now stands at a cumulative USD 2.376 billion, the Minister informed the Lok Sabha today.

The penalty is in the form of disallowing costs incurred. The Production Sharing Contract (PSC) allows RIL and its partners BP Plc and Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government.

Disallowing costs will result in government's profit share rising by USD 195 million from 2010-11 to 2013-14, he said.

In a written reply to a question, Pradhan said gas output from the Dhirubhai-1 and 3 gas field in the eastern offshore KG-D6 block was supposed to be 80 million standard cubic meters per day but actual production was only 35.33 mmscmd in 2011-12, 20.88 mmscmd in 2012-13 and 9.77 mmscmd in 2013-14.

This year the output has been only 8.05 mmscmd.

His ministry on July 10 issued a notice disallowing USD 579 million in cost for output lagging targets in 2013-14.

The government had previously issued a notice to RIL disallowing a total of USD 1.797 billion in costs for falling short of production during 2010-11 (USD 457 million), 2011-12 (USD 548 million) and 2012-13 (USD 792 million). Pradhan said the issue is currently under arbitration.

"The Ministry of Petroleum and Natural Gas has also raised a claim of additional profit petroleum to the tune of USD 115 million to be paid by the contractor, on account of disallowance of cumulative contract costs of USD 1.797 billion, till 2012-13," he said.

After including cost disallowance in 2013-14, the total additional profit petroleum claimed from RIL comes to USD 195 million, he said.

"GAIL and Chennai Petroleum (who buy oil and gas produced from KG-D6 block) have been directed to remit the sale proceed of crude oil/condensate/natural gas from KG-DWN-98/3 (KG-D6) block which falls due immediately into the Government account so as to recover an amount of USD 115,263,612 at the rate of 50 per cent by each company and deposit the same with the government," he said.

The Minister said RIL had put up production facilities to produce 80 mmscmd of gas but "has failed to adhere to the approved field development plan in terms of drilling and putting on stream the required number of wells." His ministry and its technical arm DGH blames non-drilling of committed wells for the production lagging targets while RIL and its partners say unexpected geological complexities like sand and water ingress led to output fall.

Pradhan said his ministry has issued notices to RIL on May 2, 2012, November 14, 2013, February 2, 2014, and July 10, 2014, and advised it to comply with the approved USD 8.8 billion investment plan for D1&D3 fields to meet the targets of gas production.

It has also been asked to "forthwith remedy the default and to remit the additional profit petroleum of USD 195 million cumulative up to 2013-14," he said.

"The contractor of the block KG-DWN-98/3, RIL, has invoked arbitration against the action of the Ministry of disallowing the cumulative development costs. The government has also appointed its arbitrator and the issue is currently under arbitration," he said.

Stating that RIL had not adhered to the PSC provisions, the Minister said actual gas production has been less than capacities created at huge cost, resulting in under-utilisation of facilities and creation of surplus inventories.

"The government has issued notice for proportionate disallowance of cost of production facilities based on the cumulative shortfall in gas production vis-a-vis Addendum to the Initial Development Plan (AIDP)," he said.

In the AIDP, RIL had committed to invest USD 8.8 billion in developing D1&D3 field and producing 80 mmscmd of gas. "The contractor (RIL) was repeatedly asked to adhere to the approved AIDP," Pradhan added.

The PSC allows RIL and its partners BP Plc and Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government.

The creation of excess or unutilised infrastructure impacts the government's profit share and this is sought to be corrected by disallowing part of the expenses incurred.

The move to ask Chennai Petroleum, which buys crude oil from the KG-D6 block, and GAIL India, which purchases KG-D6 gas, to deduct USD 115 million from payments due to RIL, comes after the company not agreeing to deduct the disallowed costs from total expenses incurred before calculating the government's share of profit petroleum.

The government's profit share would rise by USD 195 million if all of the USD 2.376 billion of disallowed costs is deducted from expenses incurred.

Disclosure: Network 18, which publishes moneycontrol.com, is now part of the Reliance Group

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