<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[PRICE DIFFERENCE: Tata Power is offering
lower tariffs to attract customers (Bloomberg)
The Maharashtra Electricity Regulatory Commission’s (MERC) clarification that consumers across Mumbai can switch over to Tata Power Company (TPC), whose power costs 13-14 per cent less than Reliance Infrastructure, may have come as a shock for the Anil Ambani group company. But analysts say that MERC’s remark has only reiterated the Supreme Court ruling that backed the ‘Open Access’ system, which allows consumers to choose their supplier.
In 2008, BSES (later Reliance Energy) had fought in the Supreme Court and lost against TPC’s bid to supply power to consumers in the BSES licence area. The court, ruling on a petition filed in 1998, observed that TPC could distribute power directly to bulk and retail customers.
Despite constraints like higher “wheeling charges” to Reliance, and fresh investments in a distribution network, TPC had begun supplies in a limited manner, which now would get a push from consumers.
This will make Mumbai the only place where open access is operational in letter and spirit.
Girish Mahalingam, associate director of Fitch India, says open access brings in higher competition and sectoral efficiencies. Despite the fact that open access was envisaged way back in 2003 by the Electricity Act, its implementation has been tardy due to vested interests from state electricity boards, which imposed exorbitant cross-subsidy surcharge — the fee for switching over. The Centre may now amend Section 11 of the Electricity Act 2003 that would bring uniformity on these counts and, hopefully, openness in access too.
REAL ESTATE
Sold, Finally!
Will the Finlay Mills prove to be a costly buy for the Lodha Group?
CENTRE OF ATTRACTION: The mill is
centrally located in Mumbai’s Parel
(Pic by Satheesh Nair)
The repeated attempts to auction the 10.4-acre Finlay Mills in central Mumbai by the National Textile Corporation (NTC) in many ways mirror the roller-coaster ride the property market has seen in recent times.
The first round of bidding held in December last year was cancelled as there were no bids to match the reserve price of Rs 1,065 crore. The only bidder, DB Realty, offered just Rs 405 crore. The second round held in March 2009 was also a washout even after NTC reduced the reserve price to Rs 710 crore. In its third attempt in mid-July, NTC got some serious bidders. However, in this round too the highest bidders, the Lodha Group, bid below the reserve price at Rs 657 crore.
After negotiations with NTC, the Lodhas have agreed to up their offer to Rs 710 crore to meet the reserve price, and the sale is now set to go through. While this price is 20-30 per cent lower than the peak prices Mumbai mills have seen in the boom, the Finlay Mill sale still reflects a high price — nearly Rs 16,000 per sq. ft. It shows the builder is confident of the future. However, the risk is obvious. There is a huge glut in commercial property in central Mumbai. It can, of course, wait till demand picks up.
Gurbir SinghJapan seems to be manufacturing its way out of recession. Factory output rose for the fourth straight month in June. Production soared 8.3 per cent in April-June from the previous quarter, surpassing the 1953 record of 7.9 per cent. Japanese firms will keep raising production to meet the demand spurred by the trillion-dollar stimulus packages.
STRICTLY BUSINESS
Japan seems to be manufacturing its way out of recession. Factory output rose for the fourth straight month in June. Production soared 8.3 per cent in April-June from the previous quarter, surpassing the 1953 record of 7.9 per cent. Japanese firms will keep raising production to meet the demand spurred by the trillion-dollar stimulus packages.
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INTERNATIONAL TRADE
Win Some, Lose Some
Last week, the union cabinet approved the free trade agreement (FTA) with the 10-member Association of South-East Asian Nations (Asean). This has paved the way for the final agreement to be signed at the forthcoming Asean meeting likely to be held in October.
Predictably, this has invited sharp criticism from the southern states, especially from Kerala. The tax-free dispensation for 4,000 items of trade including pepper, tea, coffee, spices and rubber could hit farmers, particularly in the plantation and fisheries sectors. Kerala is one of the leading producers of these products, which are protected by heavy import duties.
However, such misgivings have been proven wrong earlier in the 1990s. Liberalisation has helped Indian industry prosper. Likewise, instead of fearing the unknown, domestic plantation and fisheries sectors should take appropriate steps to become globally competitive.
T.K. Vineeth
(Businessworld Issue Dated 4-10 August 2009)