September 5, 2011

Corporate

IOC Petronas to enrich TN govt coffers by Rs 938 cr over 15 years

Chennai, Sept. 4: Once the LPG importation and storage terminal of IndianOil Petronas Pvt Ltd becomes operational (in December), the Tamil Nadu government will collect Rs 938 crore, over the next 15 year in various taxes, a senior official of the joint venture (of Indian Oil Corporation and the Malaysian oil major, Petronas) told Business Line recently. However, the company now wants sops. In a recent letter to the state's Industries Secretary Dr Sundaradevan, Mr U V Mannur, Chief Executive Officer, IndianOil Petronas, has asked for deferral of tax collected (15 years) and other incentives for the Rs 500-crore project. Case for sops Making out a case for sops, Mr Mannur has argued that Tamil Nadu would benefit immensely. Apart from the revenue inflow, there would be revival of private bottling and parallel marketing of LPG as a result of sustained availability of LPG, the letter says. Importers using the terminal (IOC and BPCL) would have a ready market in private LPG marketers, such as Chennai LPG, Sun LPG, Malabar Gas, Meena LPG and Surya Gas. With the commissioning of our terminal, uninterrupted supply of LPG shall be available to consumers of Tamil Nadu, Mr Mannur says. Some of the potential industrial buyers of LPG are Hyundai, TVS Motor, TI Cycles, Saint Gobain, Nissan Renault and Ashok Leyland. IPPL has been trying to get some sops for nearly two years now, it is learnt. But the company's case was heard only recently. When the company informed the Tamil Nadu government of the incentives it enjoys in West Bengal, where it has a similar facility, it was told that Tamil Nadu could consider only a deferral of valued added tax (VAT). Economy

Ministry pulled up for expenditure shortfall in labour schemes

New Delhi, Sept 4: There is a shortfall in expenditure on almost every scheme implemented by the Labour and Employment Ministry. Pulling up the Ministry, the Standing Committee on Labour (Demand for Grants 2011-12), headed by Mr Hemanand Biswal, has said that overall, there was a shortage of above 33 per cent on the Plan expenditure side.

On the non-Plan side, the shortfall stood at nearly 18 per cent. For instance, the Labour Ministry spent a paltry Rs 407 up to January 2010 on the Rehabilitation of Bonded Labour' scheme out of the allocated Rs 1,326 lakh during the 11th Plan. In its 19th report, tabled in the Lok Sabha last week-end, the panel said targets were not achieved for schemes, some of which had kicked off as far as the Seventh Plan (1985-89). These schemes are now likely to continue into the Twelfth Plan period.

India's inflation pressures among most acute in Asia'

Mr Richard Iley Structural food price issues and strong demand pressures have pushed inflation in India well above the norm for Asia, says Mr Richard Iley, Chief Economist, Asia, BNP Paribas. In a telephone interview with Business Line, Mr Iley explains how the inflation problem is different from its Asian peers and why a period of sustained subpar GDP growth is inevitable. Excerpts: How different is the problem of inflation in India when compared with its Asian peers? Is the Indian inflation more worrying? India's inflation pressures have been among the most acute in Asia for several years now. Inflation performance, as measured by the WPI, has been well above the norm for the region. I think that's essentially a function of two factors. The first is the clear evidence that has emerged over the last 2-3 years that there is an increasingly structural food price issue. More specifically, the price of proteins, led by rising incomes, which in turn has been further accelerated by government policies particularly the NREGA has led to stepped up level of demand for proteins. Given that food is about a quarter in the WPI index, this has been a very significant determinant. It has been very noticeable to me that the average food inflation rate in the last four years has been close to 9 per cent, whereas earlier in the last decade, that is the 5-10 years before the global financial crisis, food price inflation was

running more along the lines of 4-5 per cent, largely in line with the RBI's aspirations for overall inflation. Secondly, I think demand pressures in the Indian economy have been among the strongest in the region. A telltale statistic is that nominal GDP growth exceeded 20 per cent in CY-10, the strongest nominal growth since the early 1970s. A combination of too loose fiscal policy and monetary policy and unsustainably fast rate of demand growth really pushed the economy into overheating territory and this in turn has led to a more generalised demand pull inflation in the last 9 months. So, it is a conjunction of these two issues which have led to India having one of the worst inflation performances in Asia. Do you believe food inflation could remain stubborn for some more time in India, even as food prices are softening globally? Statistically, I thinkfood inflation in India is not very well correlated with global food price development. There is a big contrast there with China; where we find that Chinese CPI food inflation is closely correlated with global developments. Domestic factors are much more important drivers of Indian food price inflation. That leads us back to the structural issues that we discussed and, of course, the annual progress of the monsoon. The latest data show that the monsoon is a bit more favourable than it was several weeks ago but it doesn't appear that we are heading for a bumper harvest. My sense is that food price inflation will slowly, but only slowly, retreat. One helpful factor will be the base effects from last year's spiking onion prices. Other things being equal, this should bring down food price inflation by around December or January assuming the monsoon remains about normal. But food price inflation will not fall back to levels we were used to seeing five years ago. So, from 9 per cent to 6-7 per cent in the first half of next year might be a sensible expectation. Would a slowdown in investments together with capacity constraints seen in some sectors further aggregate the demand-pull situation? There is a risk that tighter monetary policy and financial condition really choke off the investment that will be crucial in allowing the supply side of the economy to grow rapidly; which is the best medium solution for India's inflation problem, be that in agriculture or in manufacturing. But having moved above full capacity, and given the evidence of demand-pull inflation, the RBI has rightly recognised the need to set monetary policy sufficiently restrictive to engineer a period of sustained sub-par growth in the economy to make sure that these demand-pull pressures do abate. I think that implies a period of 7 per cent GDP and maybe several quarters of growth in the high sixes (so below 7 per cent) and then perhaps later a return to sustainable growth of probably 8 per cent. Would more rate hikes become necessary? Whether or not we need a further rate hike to guarantee this outcome remains unclear.

The strength in exports that the Indian economy has seen over the last year is most certainly going to moderate and that should be an important factor in reducing capacity utilisation in manufacturing and reducing demand pull inflationary pressures. I think we are very close to the peak of the rate cycle: it is touch and go whether we have one more quarter point of interest rate hike by the RBI. But, the bigger point for me is that it is going to be difficult for the RBI to ease the monetary policy any time soon. While food inflation may gently recede and we also expect manufacturing inflation to slowly come off, there remain a number of upside inflation risks lurking in the next 3-6 months, which would be an impediment for easing the policy. Monetary policy is beginning to tighten India and there is little prospect of that changing over the next year. We find contradicting signals between IIP numbers and PMI with the latter showing more weakness. What should be relied upon for a trend? I think there is an industrial slowdown in train now which, from the RBI's perspective, to some extent, will be welcomed as it ultimately reduces demand-pull pressures. Between the IIP index and PMI survey, I think the signal from the PMI Manufacturing Survey would be a more reliable one. The official IIP with the capital goods output has been exceptionally volatile over the last couple of years with very significant month on month swings, reflecting the relatively poor quality of this segment of the index. While I attach importance to the IIP index, I strip out the volatile capital goods number and look at the index excluding that. When you do that, the message is that it is more or less in line with the PMI Manufacturing survey. Until a quarter or so ago, developments have been rather robust but, in the last 2-3 months, there has been genuine weakness beginning to set in. That interpretation is also supported by other indicators of demand in the economy vehicle sales is a key indicator. So, I think PMI gives the cleanest signal. While exports marginally lost its momentum, it continues to be strong. Would the slowdown in US or Europe begin to hurt Indian exports or would it derive strength from other markets? I think the developments in the US and Euro zone are inevitably going to dent India's export performance over the next 6-12 months. India's trade is relatively well diversified with exports to the G3 the US, Euro zone and Japan accounting for 30 per cent of goods exported. The West Asia is obviously an important market and China has been inevitably growing in importance as an export market as well. But developments in the biggest economies, the US and the Euro zone will affect India's exports. A double-dip recession in the US now looks likely given the recent very disappointing data flow. It won't be a deep recession as the economy is still recovering from the aftermath of what was the harshest recession since the 1930s but it looks like the US economy has stalled and this will inevitably slow India's export growth. As I said earlier, the strength of exports has been a genuine bright spot for Indian economy thus far this year.

While domestic demand, particularly investment, has been cooling off, export growth has stayed brisk and has been keeping up the rate of capacity utilisation in the industrial sector. The prospect of a sharp export slowdown should be a key factor in the demand pull inflationary

President lays stress on skilled manpower

Kochi, Sept. 4: The President, Ms Pratibha Devisingh Patil, has stressed the need to make India a Talent Hub' for the world through quality training, that meets global standards and fulfil the requirements of the 21st century. Presenting the national awards for excellence to the successful Micro, Small & Medium Enterprises (MSME) sector, including coir industry, and also to the banks for excellence in MSME lending at Vigyan Bhawan, in New Delhi, she said India's demographic dividend needs to be nurtured to create a vast pool of skilled manpower. The MSME sector, she said, makes a significant contribution to domestic production and exports and enables about 60 million people to earn their livelihood. The President said goods made from coir, especially geo-textiles, are eco-friendly products that hold a special appeal in an environmentally-conscious world. The function was organised by the Office of the Development Commissioner, Khadi and Village Industries Commission, Coir Board and National Small Industries Corporation.

SEZ issue: Govt calls for ideas

New Delhi, Sept. 4: The Commerce Ministry has called for suggestions from all stakeholders to comprehensively address the policy framework and operational issues of Special Economic Zones (SEZ). This, the Ministry said, is to accelerate the growth of SEZs. Suggestions may be sent in the linked format at the official Web site for SEZ (www.sezindia.nic.in), it added. According to official sources, the Government has decided to eject non-serious players from SEZ. They said the Government does not want any developer sitting idle on the approvals. It wants the developers to either start work on the ground faster or surrender their applications and apply afresh when they are ready. However, it understands that the imposition of the Minimum Alternate Tax and Dividend Distribution Tax on SEZs as well as the economic slowdown have hit the development . Also, the Direct Taxes Code proposes to withdraw profit-linked incentives for SEZs.

In short span of about five years since the SEZs Act and Rules were notified in February 2006, of the 585 SEZs approved, 381 have been notified of which 143 SEZs are already exporting, the Ministry said. SEZs now export in excess of Rs 3,00,000 crore accounting for over 28 per cent of the country's total exports, it said, adding that with an investment of Rs 2,00,000 crore, SEZs today provide direct employment to over 7,00,000 persons.

CAG calls for toning up duty drawback scheme

New Delhi, Sept 4: The Comptroller and Auditor General of India (CAG) has detected instances of procedural deficiencies and absence of clear provisions in the duty drawback scheme, aimed at promoting exports by neutralising all duties/taxes embedded in the cost of manufacture of exported products. importance The CAG report on duty drawback, recently tabled in Parliament, assumes importance as the Government is set to wind up another popular export promotion scheme, the Duty Entitlement Passbook (DEPB) scheme by the end of this month by replacing it with a reinforced duty drawback scheme. But, exporters had clearly voiced their reservations that the new duty drawback rates would not be attractive enough as the DEPB scheme since the DEPB credit was tradable. Drawback is payable on manufactured articles when exported and is also granted on re-export of duty paid imported goods. Besides, drawback is also available on deemed exports' in which goods do not leave the country and payment for such supplies is received either in Indian rupees or in free foreign exchange. Re-exports Stating that the total financial implication of this audit intervention was Rs 120.25 crore out of the total payment of drawback of Rs 36,000 crore between April 2006 and March 2011 the audit study covered, the CAG observed that no supplementary rules have been framed under Section 74(3) of the Customs Act 1963, laying down the parameters for identification of goods in case of re-exports. Hence, it urged the Revenue Department to issue requisite instructions or frame rules indicating parameters for identification of re-exported goods with the originally imported items. It said physical properties of goods placed for re-export, along with documentary declarations, should be cross-verified with particulars of related imports on the basis of instructions issued. Goods used after import

The CAG has also urged the Department to issue suitable instructions to clarify the typical conditions under which goods are to be treated as used after import because, in case of used goods, drawback is to be sanctioned on depreciated value at the rate specified. This is particularly so because according to the provisions, when any goods capable of being easily identified have been imported and duty has been paid on drawback, duty drawback at the rate of 98 per cent of duty paid at the time of import is to be repaid if the goods are re-exported without being put to use. Claim process Referring to unconscionable delays in claims processing, a common complaint widely voiced by exporting community, the CAG asked the department to streamline the verification procedures to enable faster processing of claims. Where the documents filed are found to be deficient, these should be communicated to the applicant in clear, unambiguous terms within the stipulated timeframe of ten days, it added. The CAG also said the process of rate fixation by the Drawback Committee should be fully documented so that independent assurance could be derived on methodology of rate fixation. This is an area where exporters have sought transparency and factoring in other cost disabilities they suffer from. The CAG has also drawn attention to instances of non-compliance to rules and provisions on processing of time barred claims, delays in fixation of brand rates, sanction of drawback on products not specified in brand rate letters and excess payment of drawback due to misclassification. It said the department might consider creation of standard industry norms to enable meaningful verification of information and ensure uniformity in fixation of brand rates.

Govt urged to look beyond monetary policy to tame inflation

Credible India project: (From left) Mr Harsh Mariwala, President, FICCI; Mr P. Murari, Adviser to FICCI President, and Mr Rajiv Kumar, Secretary General, at a press conference, in Chennai on Sunday. Bijoy Ghosh Chennai, Sept. 4: If the Government continues to rely only on monetary policy to tame inflation, the growth rate would come down to unpalatable' levels, by the time the inflation is

squeezed out, says the Federation of Indian Chambers of Commerce and Industry (FICCI). Credible india Addressing a press conference, organised by the Federation here to announce its initiative to push Process and procedural reforms in States' through its Credible India' project, Mr Rajiv Kumar, Secretary-General of FICCI, expressed concern about the weakening macro economic conditions and said, at this rate, GDP growth mayeven decline to 7.5 per cent. He said the 7.7 per cent GDP growth rate, announced by the Government for the first quarter of the current financial year, is the result of the revision of GDP growth in the first quarter of 2010-11. While the manufacturing sector is already slowing down and the monsoon forecast is not favourable for the agriculture sector, the services sector, particularly software exports, too is likely to suffer on account of slowdown in the export markets. The Government can perhaps take resort to supply-side measures to tame inflation instead of relying on monetary policy alone. The current inflation is predominantly driven by food inflation and, hence, the Government must reform the Agricultural Produce Market Committee and allow free movement of commodities by permitting farmers to sell their produce, even outside the APMC mechanism. He said, the FICCI is also for FDI multi-brand retail as it would bring in sufficient investments to modernise logistics and other back-end requirements. Speaking about the other aspect of the macro economy, he said fiscal deficit during April-July is already 55 per cent of the annual budget estimate, against 24 per cent in the same period last year. We are very well on the verge of breaching the fiscal deficit target for the current year. And, there is a slippage in the revenues side too, he cautioned. Earlier, referring to the World Bank's Doing Business' report of 2011, Mr Harsh Mariwala, President, FICCI and Chairman and Managing Director of Marico Industries Ltd, said India is ranked 134th amongst 183 countries in terms of ease of doing business. For a country that aspires to be a global economic powerhouse, such a ranking will be a big impediment. Elaborating on the Federation's Credible India' project, Mr Mariwala said the FICCI proposes to help State Governments in identifying indicators that are important from the point of view of facilitating investments as well as improving the business environment, mapping the progress of various States across these select indicators and, in all, to ensure all States adopt best practices.

FICCI will evaluate the procedures and processes of the indicators that have a direct bearing on investment decisions, such as land acquisition package, single window clearance system, enforcing contracts and labour laws, besides pushing for GST. AGRI-BIZ & COMMODITY

Gold, silver make solid gains; may move higher

Washington DC, Sept. 4: Because global commodity markets demonstrated divergent trends last week in the wake of macroeconomic concerns once again drawing attention, it was least surprising that precious metals, and in particular gold, turned out to be star performers. While the crude markets were buoyant over the week, most base metals remained largely flat. On Friday, base metals fell across the board as the US jobs data for August came in worse than already subdued expectations, showing zero growth for the month with a downgrade to June and July figures. Interestingly, gold has gained as much as 11.4 per cent month-on-month in August to an average of $1,752 an ounce, a new high and as much as 44.1 per cent year-on-year. The rising gold tide has lifted silver prices admirably as the metal has gained as much as 119 per cent year-on-year, and 6 per cent month-on-month in August. With gold and platinum trading on par currently, experts see a greater upside potential for platinum in the next 3-4 quarters. But one must hasten to add that gold will retain its sheen and has the potential to shine even brighter so long as the global economy continues to struggle and investors turn averse to risk in other markets. At the global level, industrial production is just about catching up with levels seen before the Japan disasters and was up 5.5 per cent year-on-year in June. Growth in global IP has been surprisingly in line with movements in the OECD leading indicators over the past few months, despite the impact of the Japanese disasters, remarked an expert. Although the sentiment may be brightening from time to time depending on the nature of data, the commodity markets, especially growth commodities such as energy and base metals remain sensitive to the macro picture. Despite constructive fundamentals in some cases, if the worst fears of the markets debt worries and slowing demand are realised, then prices may experience erosion.

Gold: All precious metals were the big beneficiaries of continuing macroeconomic concerns and investor interest. Gold with a 4.9 per cent price rise and silver following suit with 3.5 per cent rise did well. It must be emphasised that gold prices have traded within a tighter range last few days, but consolidated above $1,800 an ounce. On Friday, in London, gold PM Fix was at $1,875/oz, a smart rise of 3 per cent over previous day's $1,821/oz. Silver rose by 2.5 per cent to Friday AM Fix of $42.50/oz versus previous day's $41.47/oz. In the coming weeks, in the absence of sustained positive signals for global economic recovery and continuing strong investor interest, gold prices are likely to venture into unchartered territory. According to information from IMF, central banks continue to be net buyers of gold. Additionally, beginning September, seasonal demand for the yellow metal is likely to grow stronger in markets such as India. Silver is sure to follow suit, despite weak fundamentals. According to technical analysis, gold broke above 1867 to signal an earlier-thanexpected move towards the 1912 all-time high. Above would confirm resumption of the greater uptrend. Silver is testing resistance near 43 and the risk is a move towards the 44.23 peak. The medium term outlook is bullish. Base metals: The complex continues to be spooked by global growth concerns. Although there has been a year-on-year increase in prices, on a month-on-month basis almost all base metals lost value in August. For instance, copper gained as much as 24 per cent year-on-year, but lost 6 per cent of value in August. On the LME on Friday, the metal closed at $9,057 a tonne. As always, China is the market to be watched closely. Those commodities where China sets the market price, prices have the potential to stay solid. According to technical analysts, copper may correct lower in the range with a move below 9000 signalling a deeper fall towards 8830 before looking to base. Aluminium has also turned lower and a move towards 2380 should be seen as a buying opportunity. Range-bound trading can be expected in the medium term. Crude: The markets were slightly buoyant over the week. Demand numbers coming out of major economies (USA, Japan, China, and India) all appear positive. On the supply side, there are geopolitical, structural and technical issues to be sorted out. The market fundamentals are constructive. However, macroeconomic concerns and fear of demand slowdown through worsening sentiment continues to haunt the market.

September 6, 2011

MARKETS

PG Electroplast fixes IPO price band at Rs 190-210

Mumbai, Sept. 5: The price band of PG Electroplast's IPO of Rs 120 crore (at the upper end of the price band) has been fixed at Rs 190-210 a share. The company is issuing 57.45 lakh equity shares. The issue opens on September 7 and closes on September 12. The promoters' stake in the company after the issue will be 65 per cent. The company plans to utilise the IPO proceeds for pre-payment of term loans, towards expansion of its manufacturing facilities at Greater Noida and at Ahmednagar, and for meeting long term working capital requirements. Almondz Global Securities is the Book Running Lead Manager and Karvy Computershare Private Ltd is the Registrar to the issue.

Corporate news
Coimbatore, Sept. 5: Moser-Baer (I) Ltd's board of directors has approved issue of Foreign Currency Convertible Bonds (FCCBs) that are convertible into equity shares, ADRs, GDRs reflected by underlying equity shares or other securities convertible into equity shares for an aggregate value of up to $125 million. NCC Ltd has secured new orders aggregating Rs 629 crore, which includes an order valued at Rs 399 crore from the Water Resources Division, Raigarh, Chhattisgarh, for construction of Saradih Barrage with vertical lift gates, to be completed over a period of 24 months. Other orders include one worth Rs 159 crore from the Maharashtra State Electricity Distribution Co Ltd. (MSEDCL), Mumbai, for turnkey contracts for Single Phasing Scheme to be completed over a period of 12 months and an order valued at Rs 71 crore from Bharat Coking Coal Ltd, Dhanbad, for removal of OB, extraction and transportation of coal to be completed over a period of 20 months. Reliance Power Ltd has said that the implementation of Sasan Ultra Mega Power Project (UMPP) is on schedule. The coal production from the mines associated with the Sasan UMPP will be on time to meet the requirements of the project. The land referred to in news reports was predominantly non-coal bearing area and was required for stocking overburden removed from the coal mine area.

Mutual funds turn big buyers of equity in Aug

But get worst monthly returns since January Mumbai, Sept. 5: According to a report by Morningstar Research, domestic mutual funds made a net investment of Rs 2,524 crore in equities in August, the highest in a month for over three years. The highest that these funds had earlier invested (in the net) was Rs 3,179 crore, in June 2008. However, in August, domestic equity funds also saw the worst monthly returns since January 2011. The mid- and the small-cap category stocks lost more than the large-cap stocks in August. The benchmark sensitive index lost 8.4 per cent in August, while the BSE Mid-Cap and BSE Small-Cap indices lost 9.3 per cent and 14.1 per cent respectively. The Morningstar India Large Cap Category delivered negative returns of 7.8 per cent, while the Morningstar India Small/Mid-cap Category gave negative 7.6 per cent. In January 2011, the same categories returned -9.7 per cent and -10.5 per cent respectively. Worst performers Among sector funds, banking and technology funds were the worst performers in August with these categories falling by more than 12 per cent during the month. Technology stocks were battered on the back of concerns of a global economic slowdown, while banking stocks also took it on their chin with inflation and rate-hike fears still looming large, said the report. The Morningstar FMCG category fell by 3.1 per cent as compared to the BSE FMCG index which fell by 3.5 per cent in August. Of the mid- and small-cap equity funds, about a quarter of them underperformed the category benchmark index. These funds, which are benchmarked to the CNX Midcap index, saw a sharp decline in August. ETFs' good show With gold prices rising touching an all-time high in August, gold ETFs also registered the highest ever monthly return of 15.2 per cent on an average during the month. This is the highest monthly return delivered by these funds since their inception in early 2007, and even topped the return of 14.2 per cent delivered by the category in the month of September 2008, amidst the financial crisis, added the report. Gold prices touched an all-time high of Rs 28,230 per 10 grams on August 20, 2011. A slight decline in headline inflation from 9.44 per cent in June to 9.22 per cent in July led to the 10-year bond yield falling by 12 basis points in August.

The decline in US treasury yields would have also had downward pressure on bond yields in India said the report. The Morningstar India Long Term Government and Intermediate Government categories delivered returns of 1.1 per cent each in August, while the Morningstar India Intermediate Bond category followed close behind with a return of 0.9 per cent. The report also said that the average maturity across all bond fund categories rose in the month of July, with mid- and long-term bond / gilt funds seeing a higher increase. The average maturity of long term gilt funds increased to 7.1 years at the end of July 2011, from 4.1 years at the end of the previous month. Similarly, for intermediate bond funds, the average maturity rose to 3.6 years at the end of July 2011, from 2.9 years in the previous month. ECONOMY

Singur case: Bengal Govt says Tatas interested only in compensation

Kolkata, Sept. 5: The State Government on Monday told the Calcutta High Court that Tata Motors had no interest in Singur land. Their only interest was in obtaining compensation. Pointing out that the auto major has not sought for restoration of land, Mr Shaktinath Mukherjee, counsel for Principal Secretary of the State Land and Land Reforms Department, said that Tatas were asking that the Singur Land Rehabilitation and Development Act, 2011, be declared illegal and nothing more. He was arguing on Tata Motors petition challenging the constitutional validity of the Singur Act. Meanwhile, Mr Justice I.P. Mukerji, who was hearing the matter, remarked that Tata Motors had asked for restoration of land and had wanted to defend their lease. Speaking on issues relating to compensation, the State Government counsel argued that adequacy of compensation can only be questioned when the amount is illusory.

Would nature too do a double dip' act on US?

Thiruvananthapuram, Sept. 5: It is not often that economy and weather watchers see eye to eye on matters straddling each other's sphere of activity. One does not go farther than India Meteorological Department (IMD) whose predictions are at best blown to pieces by a flare of the weather-beaten economists' nostrils or at worst don't get into the latter's scheme of things. Not entirely without reason, given the none-too-spectacular history that the country's official forecaster can boast with respect to crucial weather forecasts.

But things are happening differently in the US, where a combination of economic and atmospheric factors has lead many to wonder if the economy is dying' to mimic nature, or vice versa. The fact is that they're both exhibiting patterns very similar to those seen in 2008, says Dr Tony Barnston, Chief Forecaster, International Research Institute for Climate and Society at Columbia University. Double dip' is the operative word, if one were to go by the actual expression of the sentiment. DOUBLE DIPS A double-dip recession is in the air for the larger US economy as many an economist have warned, while there's a double dip' La Nina in the making over the east equatorial Pacific. Both of 2008 vintage if only one cared to look back and ruminate. Just as a double-dip recession can take the wind out of the sails of the economy, a double-dip La Nina can exacerbate weather patterns in the US and beyond. Collateral damage to the economy from increased Atlantic hurricane activity and volatile weather from tornados over land are a possibility. AFRICAN CRISIS On August 4, the Climate Prediction Centre of the US National Weather Services issued a La Nina Watch. But the International Research Institute's forecast is slightly more conservative. Should it occur, a double dip La Nina can worsen the current humanitarian crisis in the Horn of Africa (east Africa), says a worried Dr Barnston. That is because the region's short rain season, which runs from October to December, is negatively influenced by La Nina. If the rains were to fail, it would be the third failed season in a row for the region.

Mining industry hails Reddy's arrest

Bangalore, Sept. 5: Whatever has happened is a change for the better, and will send a strong message to people involved in illegal mining, said Mr R.K. Sharma, Secretary-General, Federation of Indian Mineral Industries, the apex body for the mining industry. The mining industry was tarnished. The CBI must have analysed all wrong-doings, and it will definitely improve the image of the industry. FIMI is against illegal mining, and supports the government and its actions, he added. Few traditional mining company owners told Business Line that sanity would now return to the industry. Although it should have happened earlier, a good thing has happened now. Hailing it as an important event in the history of the mining

industry, Mr Tapal Ganesh, a mine-owner from Bellary, said that people like him were fighting against this since 2004, when they took away his ancestral lands near Vittalapura. We finally got justice for our fight. The arrest is just a preliminary step and the government should take over all their properties,'' he added. Another mine owner from Bellary-Hospet area said with the arrest of Mr Janardhan Reddy the mining industry had reached a depth and now the image should improve. Transparency has set in by way of e-permit from commercial tax and transport department but e-permits from forest department is pending.

Draft land Bill is a retrograde' step: CREDAI

Concern over private acquisition; land costs may shoot up The Confederation of Real Estate Developers Association of India (CREDAI) has expressed concern on some of the provisions of the draft National Land Acquisition and Rehabilitation & Resettlement Bill, 2011. Reacting to reports of the Cabinet approval accorded to the Bill earlier today, the real estate developers' organisation reiterated its concerns on the provisions relating to the valuation of land and bringing private acquisition of land under the ambit of this law. Mr Lalit Kumar Jain, National President, CREDAI, said the proposed law is a huge setback' for industrial development and urbanisation. Private developers Bringing private acquisition of land under the ambit of this law which covers rehabilitation and resettlement is disastrous' and creates opportunity for more legal complication. For instance, private developers who purchase land for development after negotiations with land owners to mutual satisfaction simply cannot afford the provisions of rehabilitation and annuity. This provision only creates permanent land encumbrance and enable unlimited claims that will make township development unviable. Simply ruling out agriculture land from development is also unviable in terms of industrialisation and urbanisation. Both these happen only as an expansion of developed areas and in river basins. The Government should look at creating irrigation infrastructure to expand agriculture land. It should abandon its populist, please-all approach for more pragmatic policies, Mr Jain said. Mr Prakash Challa, Managing Director, SSPDL Ltd and Chairman, Finance and Taxation Committee, CREDAI, said the proposed law in its present form will result in

escalation of land costs. It also provides a window for the influential to manipulate land availability by unhealthy cornering of land' by a few. While CREDAI is for providing adequate compensation and protecting the livelihood of the land owners, the Bill does not adequately address the valuation of land. Simply providing for multiple times the market value as compensation will only contribute to driving up prices. While the Bill provides for land acquisition for public good, driving up land cost will have an adverse impact in the long run, he said. Reacting to the Cabinet decision, the Chairman-cum-Managing Director of Raheja Developers, Mr Navin M. Raheja, apprehended that the formulae proposed in the draft Bill would increase the cost of projects. Mr Raheja, who is also the Chairman of the Real Estate Committee of industry chamber, Assocham, felt that this could also lead to a lot of speculation by investors. Industry chamber FICCI did not seem to be happy either with the broad contours of the Bill. The main concern is implementation of the proposed Act from retrospective affect, it said. It is going to be a big issue as many existing projects will have to spend a big amount on rehabilitation and resettlement, the chamber added. Mr Niranjan Hiranandani, Chairman, Hiranandani Group, said now the pendulum had swung to the other end. I think certain aspects will be considered by the Parliament, he felt. There is concern over the issue of government getting into acquisition mode even in private acquisition. Similarly, relief and rehabilitation measures called for beyond 100 acres acquisitions were difficult as it was not assessable in any project such as the number of farm labour who had worked. (With inputs from Chennai, Delhi and Mumbai)

Govt's apparel data leave exporters worried

Mumbai, Sept. 5: Mr Premal Udani, Chairman, Apparel Export Promotion Council, said: We have raised this issue with the Government and they have acknowledged our concern. The Government itself has agreed that apparel exports will not match to its expectations in next couple of months.

The Council is seeking Government intervention in terms of introduction of interest subvention to boost exports and support its attempt to bring in buyers from nonconventional markets to create fresh demand, he said. With the conventional markets such as the US and Europe almost saturated, the AEPC is looking to create fresh demand from countries such as Russia, Turkey, Japan and South America. The move will also insulate the industry from slowdown being witness in the developed market, said Mr Udani. Apparel exports increased by 42 per cent year-on-year to $1.2 billion in June against $853 million recorded in the same period last year. The Government has set a target of $14 billion for this fiscal against $11 billion recorded in 2010-11. DOMESTIC CHALLENGES With the slowdown in the export market, the textile sector has shifted its focus on the domestic market which almost withstood turbulent times. The Council has expressed shock over the Government's proposal to remove 48 textile items from the list of protected goods that India maintains under its free trade agreement with SAARC countries. The textile industry was willing to offer 14 items to be removed from the negative list. An abrupt removal of 48 items, which comprise nearly 85 per cent of India's present imports from Bangladesh, will severely dent apparel manufacturing activity within the country, said Mr Udani. India has been losing out to Bangladesh in apparel exports since 2009. Bangladesh apparel exports grew 16 per cent while India's exports were up by just 4 per cent in 2010-11. Removal of import duties on knitwear will hit the textile belts in Ludhiana and Tirupur which provide employment to lakhs of people. Bangladesh commands a major advantage with minimum labour wage of just Rs 1,700, while it is Rs 5,000 in India, he said.

Gold to shine brighter in 2012

Washington DC, Sept. 5: Gold's fascinating rise in recent months has got almost everyone hooked. Averse to risks in other markets, investors have flocked to the eternal safe haven asset that the yellow metal is. No wonder gold's general performance of the last one year and of the last few weeks in particular has been phenomenal. After breaching the record $1,900 an ounce level recently, the metal faced some selloff. However, prices have consolidated above $1,800/oz. As luck would have it, weaker-than-expected US non-farm payrolls last week boosted prices. Considering global growth prospects, negative sentiment, and limited investment opportunities in many markets, experts have been revising their gold price forecasts upwards.

Flip side factors So, what does the picture look like? Three solid factors support the expectation that there is more upside left for gold. Macroeconomic environment, investment flows and fundamentals are all positive for the yellow metal to rise further, according to Barclays Capital. Far from pretty, the global macroeconomic picture is a cause for concern. Continued high levels of unemployment, especially in the US, prospects of easy money policy continuing several quarters into the future, hesitant growth in many developed economies, tightening credit in many emerging economies and unresolved sovereign debt issues in Europe are a potent combination to depress the sentiment in financial markets. Haven status As a result of the enervated macroeconomic situation, investor interest in safe haven assets is on the rise. Gold ETP holdings are at record levels and are currently estimated at close to 2,200 tonnes. Despite long liquidation from time to time, as is the market's wont, speculative positions remain firmly in the positive territory and the market is not over-extended, experts assert. Additionally, at 112,000 ounces, gold coin sales by the US Mint in August were the strongest since January and the number of coins sold has been the highest since February. Supply-demand scenario An interesting feature of the gold market is the changing dynamics of demand and supply. To be sure, the physical balance continues to remain in the positive territory with estimated physical surplus of about 1,400-1,500 tonnes. However, European central bank sales have been rather subdued. On the other hand, new central bank demand has been emerging from countries that desire to boost their gold reserves. In our view, the swing to the demand side represents a structural shift in the market, and only outright open market sales from the larger holders of gold reserves, rather than the smaller central banks, would indicate a change in sentiment, Barclays said in its latest precious metals flash. Additionally, although physical demand may have slowed down as a result of rapidly rising prices and volatility, the underlying appetite for consumption of the metal remains largely intact. For instance, physical demand in China remains robust despite record prices, with price dips being viewed as buying opportunity for investment demand. Forecast Barclays Capital has forecast the third quarter prices at an average of $1,725/oz and for Q4, the forecast is $1,875/oz. The annual average for 2012 is placed at a breathtaking $2,000/oz.

With the kind of bull-run the yellow metal has witnessed and expectations of more price increases to come, there is sure to be frenzied trading in the commodity. Surely, it is not going to be a smooth movement upwards. Along the way there will be bumps and price corrections through long liquidation are imminent. All the factors are highly supportive on current reckoning.

Textile sector against concessional tariff for Bangladesh

PM starts Bangladesh visit today

Dr Manmohan Singh New Delhi, Sept. 5: There is disquiet in the Indian textile industry about the proposed decision to provide Bangladesh concessional exports of garments to India. An agreement could be signed during the forthcoming visit of the Prime Minister, Dr Manmohan Singh, to Bangladesh that begins on Tuesday. Briefing newspersons, the Foreign Secretary, Mr Ranjan Mathai, said that India was expected to give Bangladesh concessional tariff for 61 items, a majority of which are in the textiles sector. The President, Confederation of Indian Textiles Industry (CITI), Mr Shishir Jaipuria, has written to Dr Singh, protesting against the proposed move. Our country has to take seriously the consequence for our textile industry if we intend to give duty-free access to Bangladesh in garments. We suggest that the policy decision of allowing duty-free quota imports from Bangladesh should not be taken in a hurry, Mr Jaipuria has said. In a press statement, the CITI has suggested that a committee of experts from various textile research associations and experts from ICRIER, Government and industry representatives may be formed to examine the consequences of taking such a decision about exports from Bangladesh. Based on the reports of the Committee of Experts, the Government may deliberate on the possibility of tweaking the existing policy. Till then, any policy decision leading to change in current status quo should be kept in abeyance, CITI has said. The statement adds that the inability of the Indian garment industry to face up to Bangladesh import stems from the absence of level playing field caused by structural

deficiencies in India, including high cost of labour and lower size and scale of domestic garment industry. The statement points out that Bangladesh is dependent on China for fabric supplies. Hence, access to India will indirectly provide access to Chinese textiles to the Indian market through Bangladesh, it adds.

Govt targets 2,400 MW of wind power

New Delhi, Sept.5: The Government is targeting wind power capacity of 2,400 MW during the current year. This information was given by the Minister of New and Renewable Energy, Dr Farooq Abdullah, to the Rajya Sabha on Monday. Responding to a query on the estimated potential of wind energy in the country, the Minister said Wind Atlas, published by the Centre for Wind Energy Technology, shows the estimated wind power potential in the country to be 49,130 MW. Gujarat accounts for almost 22 per cent of the total with 10,609 MW. Karnataka follows with a potential of 8,591 MW. Our Bureau AGRI-BIZ & COMMODITY

Pepper futures end mixed amidst volatile trade

Kochi, Sept. 5: Pepper futures witnessed high volatility on Monday with September contracts closing higher, while others ending marginally lower. The market opened firm and traded lower in the forenoon. It was volatile in the afternoon and in the closing session it hit the highest and lowest prices of the day, as the bull operators were trying to push up while bears were trying to pull down. Consequently, turnover was higher during the closing session and this kind of trading in this session for making gains from higher volume is not a good sign, market sources told Business Line. Actual trading was limited. On the spot, transactions were also negligible. Buyers from Erode, who were engaged in turmeric trade, are said to have entered the pepper market following the decline in turmeric prices. They were covering good quantity of pepper from Kodagu, Karnataka for catering to upcountry markets such as Jharkhand, Bihar etc, trade sources claimed. Despite additional purchases, October contract dropped. There was good liquidation in September, they said. September contract moved up by Rs 72 to close at Rs 33,406 a quintal while October and November declined by Rs 219 and Rs 68 respectively to close at Rs 33,815 and Rs 34,216 a quintal. Total turnover dropped by 66 tonnes to 6,849 tonnes. Total open interest dropped by 187 tonnes to close at 11,643 tonnes. September open interest fell by 333 tonnes to 5,915 tonnes while October increased by 159 tonnes to 5,147 tonnes

and November declined by 14 tonnes to 390 tonnes. Spot prices remained unchanged on limited activities at Rs 30,400 (ungarbled) and Rs 31,400 (MG 1) a quintal.