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Shares in Hindalco Industries gain as much as 3 per cent after Prime Minister Manmohan Singh's office says he is satisfied with the outcome of the process of allocating coal blocks to certain companies, dealers say.The comments were the first attributed to Singh since a case was filed this week against three companies in a scandal, dubbed "Coalgate." The scandal surfaced after an auditor's report last year questioning the government's practice of awarding coal mining concessions to companies without competitive bidding.Hindalco said last week it was being investigated in a coal block allocation case and it followed every process required in the coal block allocation.Read more about 'Coalgate' here(Reuters)
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Prime Minister Manmohan Singh is satisfied with the outcome of the process of allocating coal blocks to certain companies, his office said on Saturday, 19 October, as the Central Bureau of Investigations (CBI) proceed with an investigation into the system.The comments were the first attributed to Singh since a case was filed this week against three companies in a scandal, dubbed "Coalgate," which surfaced after an auditor's report last year questioning the government's practice of awarding coal mining concessions to companies without competitive bidding.Critics allege the process has potentially cost the treasury billions of dollars in lost revenues. Opposition parties have called for Singh's resignation because he was in charge of the coal ministry when the allocations took place.The controversy gathered further momentum this week after the CBI filed a case against industrialist Kumar Mangalam Birla and two other companies, saying they flouted rules in coal block allocations."The Prime Minister is satisfied that the final decision taken in this regard was entirely appropriate and is based on the merits of the case placed before him," Singh's office said."No impediment is being placed on the CBI to continue the investigation and seek fresh information which may have a bearing on the case."India's federal auditor alleged that the government's under-priced sale of coal blocks may have cost the exchequer potential revenues of $33 billion, although industry watchers and the government have cast doubt on this figure.The prime minister is alleged to have reversed decisions on allocations in response to recommendations from ministries.Accusations of crony capitalism in allocating India's resources from coal to mobile telephone bandwidth have dogged Singh's government, which is now nearing the end of its second term in office.A general election must be held by May next year.(Reuters)
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Income Tax department has seized Rs 25 crore that was recovered by CBI here during searches at the office of Hindalco Industries, even as the probe agency claimed to have recovered more cash from the company in connection with its investigation in the coal scam."The cash has been seized under Income Tax laws and further proceedings to check the source of the money are on," an official said. Later, a spokesperson of the Aditya Birla group said they were cooperating with the probe agencies."The company is taken aback by the discovery of cash at one of its offices by the investigating agency. It has taken a very serious view of the matter and has instituted an internal team of senior managers to make a thorough investigation and report its findings at the earliest. "In the meantime, the company has reiterated to the Government agencies of their continued cooperation," a statement from the group said.Meanwhile, CBI claimed to have made a fresh recovery from the group which included retail invoice of gold coins totalling to Rs 94 lakh, investments in various schemes to the tune of Rs 17 lakh besides Rs 24 lakh 'petty cash'.The agency was likely to hand over these fresh documents to the Income Tax department, sources said.I-T department will now ask the company to produce documents and validate the source of the recovered cash of Rs 25 crore, sources said. The CBI, during its searches conducted, at the fourth floor office of the UCO Bank building of the firm at Parliament Street in New Delhi, had found unaccounted Rs 25 crore in cash and incriminating documents. The agency had then sounded the I-T department. Soon after registering FIR against former Coal Secretary P.C. Parakh, Aditya Birla Group Chairman Kumar Mangalam Birla and Hindalco Industries for alleged irregularities in allocation of Talabira II and III coal block eight years ago, searches were conducted by CBI at six locations. The searches were carried out in Delhi, Mumbai, Hyderabad and Bhubaneshwar.CBI has registered the 14th FIR in the coal scam in the alleged "undue favours" shown to Birla by the then Coal Secretary. Sources said the probe is monitored by Supreme Court and CBI will inform the apex court of all developments that have taken place in its status report to be filed on 25 October.They said they have strong evidence to buttress their claims in connection with the case and the allegations would be probed further during their probe in the case.CBI sources said they have slapped charges of criminal misconduct on the part of the government official and that stands even if there is no quid pro quo.The sources claimed that alleged favours shown to Birla in awarding Talabira II and III resulted in notional loss to the exchequer which are enough to book Parakh and Birla for criminal conspiracy.Parakh and Hindalco have both refuted the allegations and claimed no wrong doing was involved in the decision.(PTI)
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Consensus may be hard to find in Washington these days, but many corporate executives and economists seem to agree on one point: the biggest risk to the world's largest economy may be its own elected representatives.Down-to-the-wire budget and debt crises, indiscriminate spending cuts and a 16-day government shutdown may not be enough to push the U.S. economy back into recession.But Washington's policy blunders in recent years have significantly slowed economic growth and kept roughly 2 million people out of work, according to recent estimates.Steep spending cuts are a big reason. But the governance-by-crisis also may be prompting businesses to sit on their cash rather than building new factories, buying more equipment and hiring more workers, some economists say."Increasingly I'm of the view that the reason why our economy can't kick into a higher gear is because of the uncertainty created by Washington," said Mark Zandi, chief economist of Moody's Analytics.Congress on Wednesday voted to re-open the government and extend its borrowing authority through February of next year. But the deal did nothing to resolve the underlying disputes that led to the crisis in the first place - leading many to fear that the standoff may play out again in a few months. The plan sets up a forum to try to forge a more permanent budget deal, but few expect it to succeed."We have crisis after crisis after crisis and it has a corrosive impact on the economy," said Greg Valliere, an analyst with Potomac Research Group. "If you're a business, how do you make plans in this environment?"Leading chief executives agree."Most CEOs I speak to in the United States say they're seeing a slowdown in business because of this," said Laurence Fink, the CEO of giant asset manager BlackRock Inc, in an interview on Wednesday. "I was on a conference call with many of them, and I heard across the board, a slowdown from the American consumer because of this narrative, so it's having an impact on our economy already - and it's going to have an impact on job creation at a time when we need more job creation.Not all economists agree that the political circus in Washington is hurting the economy in a measurable sense. While worries over the debt ceiling have pushed up the government's borrowing costs over the past week, those increases are minimal, and the S&P 500 stock index remains near its all-time high.Slow RecoveryBut the pace of recovery since the 2008-2009 recession has been unusually slow.While America's total economic output is now higher than it was before the recession, the level of private investment remains lower than it was in 2007. Employers also continue to hire workers at a slower pace than before the recession.Since the financial crisis eased, Washington has sent out one jolt after another. Democrats passed sweeping reforms of the healthcare system and the financial sector in 2010 which, whatever their merits, imposed wrenching changes on two pillars of the United States' post-industrial economy.Public unease with the healthcare law helped Republicans win control of the House of Representatives in 2010, ushering in an era of divided government that has led to repeated standoffs over taxes and spending. A near-shutdown in April 2011 led to the debt-ceiling impasse in July and August of that year, which took the country to the edge of default and prompted the country's first-ever debt downgrade.Like this most recent crisis, Congress averted disaster at the last possible moment. But the brinkmanship pushed consumer confidence to rock-bottom levels, where it remained for months. The S&P 500 tumbled 17 percent and took more than six months to recover its gains.That debt-ceiling deal called for steep cuts to national defense, highway construction, scientific research and other forms of discretionary spending that Congress must approve annually.Another budget deal, reached in January of this year after another round of brinkmanship, included tax increases to help narrow budget deficits further.Neither of those deals addressed the health and retirement spending that poses the greatest threat to the country's long-term fiscal health. A failure to cut back these programs or find savings elsewhere prompted a round of deliberately disruptive across-the-board spending cuts - the so-called "sequester" - to take effect in March.Along with an improving economy, those steps helped U.S. budget deficits fall from 8.7 percent of GDP in the 2011 fiscal year to an anticipated 3.9 percent of GDP for the fiscal year that ended on September 30.But this has all come at a steep cost.Jobs Not CreatedIn a report released on Monday, Macroeconomic Advisers estimated that 1.2 million more Americans would be working today if Congress had kept discretionary spending at the levels that were in place in 2010.The forecasting firm estimated that Washington's erratic behavior had also driven up unemployment by a further 900,000 jobs.Zandi estimates the fiscal austerity has cost 2.25 million jobs. Without those measures, the unemployment rate wold stand at 6.3 percent now rather than 7.7 per cent, he says.Even many of those who disagree with the notion that policy uncertainty has hurt the economy agree that the spending cuts and tax increases should have been phased in more gradually."Fiscal consolidation has been a big drag on the economy," said Paul Ashworth, an economist with Capital Economics.The International Monetary Fund called the United States' deficit-reduction efforts "excessively rapid and ill-designed" in June and said the sequester cuts would nearly halve U.S. economic growth this year.Meanwhile, Congress has punted on other important legislation like immigration reform that could boost the economy.Construction firms have seen federal work plummet over the past several years. With the government shut down, they have been unable to use the federal E-Verify system to check workers' immigration status or get permits to build in environmentally sensitive areas, said Ken Simonson, chief economist of the Associated General Contractors of America.The delays could be more than an inconvenience for builders trying to line up financing for a new project, he said."You never know when the market's going to turn and ... for some reason you may have missed the boat," he said.There's more turbulence on the horizon. Simonson said lawmakers may not have the stomach to avoid further cuts on transportation spending when they take up the issue next year.Though Washington may be responsible for lackluster business on Main Street, it may not have much of an impact on Wall Street.Many economists had expected the Federal Reserve to begin scaling back its massive monetary stimulus program last month. The chaos in Congress means it now probably won't begin pulling back its bond purchases until next year."I think the markets are beginning to learn how to live with Washington dysfunction," said Valliere.(Reuters)
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India’s power industry is one that has always been dogged by controversy and crises, and the last fiscal was no different. NTPC was no exception, and had to battle fuel shortages and delayed payments. But, despite the adverse environment, the public sector company managed to achieve the highest ever capacity addition in a single year of 4,170 MW — backed largely by the momentum it had gained over the past two years — and made it to the No. 8 slot in the BW 500 list. India’s largest power generator, along with its 22 joint venture and five subsidiary firms, accounted for 27 per cent of the total power generated in the country.In FY13, NTPC’s profit after tax (PAT) rose 28 per cent over the previous year. “The additional revenues we generate over the regulatory norms are due to our efficiency, experience and strength of specialised manpower, and our corporate and financial management,” says NTPC CMD Arup Roy Choudhury. Among the handful of Maharatna firms, NTPC remains among the cheapest power producers, with a generation capacity touching 41,187 MW. It also has 20,064 MW of capacity under construction. The fact that NTPC (by virtue of being a public sector unit) is paid on the basis of its installed capacity and not on the power generated/sold — like its private counterparts — explains its 5 per cent increase in revenues over the previous year. This, after it suffered a near 10 per cent drop in generation due to the unwillingness of distribution companies to buy power (on account of increased costs) and fuel shortages. According to Roy Choudhury, currently there “is a lull because states are working on this (cost restructuring)... and demand will increase” soon.Things are also looking up with respect to its primary fuel provider, Coal India (CIL). Roy Choudhary says, “We have a foolproof fuel procurement plan to meet coal requirements.” This year, NTPC was allotted four new coal blocks in addition to the six under development. Three blocks that were earlier de-allocated were re-allotted to it in FY13. The firm awarded contracts for 8,521 MW of capacity this year, taking its capex to Rs 19,925.53 crore — up almost 25 per cent over last year. Its assets went up by 15 per cent, largely on account of its entry into the solar power sector. Looking to expand its footprint, the thermal power company is entering the hydropower segment — with its first plant scheduled for the coming financial year. It has also been appointed the nodal agency for providing power to Bhutan, while it has already started selling power to Bangladesh. NTPC has targeted 128 GW capacity by 2032, having already surpassed the 11th Five-Year Plan target by 390 MW.(This story was published in BW | Businessworld Issue Dated 04-11-2013)
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It’s been a good year for R.K. Singh, who stepped down recently as chairman and managing director of Bharat Petroleum Corporation (BPCL), handing over the reins to S. Varadarajan. In 2012-13, BPCL achieved its highest ever profit after tax (PAT) in a financial year — Rs 1,936 crore, which was nearly double of the Rs 851 crore PAT in the previous year. Powered by higher refinery throughput and sales, BPCL reported 14 per cent growth in gross revenue from Rs 2,13,596 crore in 2011-12. Its consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda) margin improved to 3.4 per cent from 3 per cent. The performance was helped by better gross refining margins — $4.97 a barrel against $2.29 a barrel a year ago. In FY13, BPCL incurred under-recoveries of Rs 3,900 crore, most of which was reimbursed. BPCL’s refinery throughput was the highest in five years — 23.21 million metric tonnes (mmt) — as was the production of petroleum products — 21.84 mmt. Market sales volumes were 33.30 mmt, 6.4 per cent higher than the previous year. “All six major businesses continued to deliver strong results. Marketing of petroleum products remained the core strength,” said Singh to shareholders about the 2012-13 performance. Except for the Assam refinery, all others — at Mumbai and Kochi and the joint venture Bharat Oman Refineries — set new benchmarks in production. With a capacity utilisation of 109 per cent, the Mumbai refinery had a throughput of 13.10 mmt. Its gross refining margin improved to $4.67 per barrel from just $1.73 per barrel the previous year; and the overall gross margin to Rs 2,499 crore, from Rs 831 crore a year ago (partly due to the high rupee-dollar exchange rate).The Kochi refinery achieved a throughput of 10.1 mmt in 2012-13, compared to 9.56 mmt a year ago. The gross refining margin was $5.36 per barrel, amounting to Rs 2,211 crore in gross margins — the highest it has achieved in a single fiscal.BPCL’s retail sales volume climbed 9.6 per cent — the most among oil marketing companies. Higher retail diesel prices helped reduce under-recoveries. The company reported a throughput of 188 kilolitres per month — its best till now, and 20 per cent higher than the industry average. The loyalty programmes generated an all-time-high turnover of over Rs 18,000 crore. BPCL’s total LPG sales for the year stood at 3,884 thousand metric tonne, giving it a marketshare of 25.9 per cent. It enrolled 3.06 million new domestic customers, taking the customer base to 37.38 million by the end of the year. Varadarajan can surely look forward to a comfortable ride next year. (This story was published in BW | Businessworld Issue Dated 04-11-2013)
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Oil And Natural Gas Corporation (ONGC) keeps its No. 3 slot in the BW Real 500 rankings. This, despite a fall in profits, no major domestic discovery, a higher subsidy burden and the steep depreciation in the rupee vis-a-vis the dollar. “The factors which are in our control are far fewer than the factors which affect us. Crude oil prices fluctuate and our fortunes get affected. And, it is a paradoxical situation that when crude oil prices increase and we should be getting more, we worry that our subsidy burden will increase. And, when oil prices go down, we again worry because we have to shell out $56 per barrel in terms of subsidy; so, if oil prices go down and $56 is deducted, our net realisation reduces. However, even in this environment of uncertainty, we have done very well,” says Sudhir Vasudeva, chairman and managing director, ONGC.ONGC’s Enhanced Oil Recovery (EOR) and Improved Oil Recovery (IOR) schemes have helped it produce 79 million tonnes (mt) of oil and oil equivalent so far. Nearly 8 mt out of the total production of 58.71 mt last year came from EOR and IOR efforts. Another 110 mt was from marginal fields which the company is developing at a cost of Rs 26,000 crore. These marginal fields are expected to maintain production levels in the absence of any new discoveries.The PSU has its eyes trained on overseas assets. Its subsidiary ONCG Videsh (OVL) has picked up assets over the past year and ONGC expects that by 2030 more than 45 per cent of its production will come from OVL. The subsidiary contributes around 15 per cent of total production. The increasing subsidy burden is eating into the company’s profits. “Last year, our profit would have been Rs 49,400 crore but for the subsidy paid out. The total impact of this was close to Rs 28,000 crore on our net profit. This is now hurting us,” says Vasudeva. The company’s profit after tax fell from Rs 28,428.91 in FY12 to Rs 23,990.26 in FY13. The systematic deregulation of diesel prices has not helped reduce under-recoveries. It was around Rs 9.20 per litre in January. While the gap came down to Rs 3.20 in April, the rupee’s slide and problems in the Sudan and Syria have widened it again. The company is trying to contain costs to improve profitability. Almost 75 per cent of ONGC’s production comes from 15 fields which are old and where the cost of production is rising. “Our cost of production was about $38 a barrel last year and this is expected to go beyond $41 this year. However, through our efforts we have been able to contain this at $40 per barrel,” points out Vasudeva. The company will have to continue its balancing act and look overseas for assets if it wants to put up another good show next year. (This story was published in BW | Businessworld Issue Dated 04-11-2013)
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The World Bank sharply lowered its forecast for India's economic growth to 4.7 per cent from 6.1 per cent for the current fiscal year, citing a sharp slowdown in manufacturing and investment as well as negative business confidence.In a report released on Wednesday, the bank said "high headline inflation, an elevated current account deficit, and rising pressure on fiscal balances from the depreciation of the rupee" were factors that could impede the country's growth."Economic activity is expected to pick up in the second half of FY2014, although the speed of economic recovery could be impacted by the country's present vulnerabilities," the World Bank said in its India Development Update report.In a report published six months ago the bank had expected an acceleration in India's growth, driven by a pick-up in domestic activity, but that did not materialise.The latest report forecasts economic growth will pick up further to 6.2 per cent in the 2014-15 fiscal year that begins next April.Last week, the International Monetary Fund (IMF) slashed the growth forecast for Asia's third-largest economy to 3.8 per cent in calendar 2013 year and forecast 5.1 per cent growth for 2014.The World Bank's expectation of a pick-up later in the year tallies with the views of India's central bank chief, who expects the start-up of billions of dollars worth of stalled resource projects and a good monsoon season to bolster agricultural output and speed domestic growth.The Indian economy has slowed sharply from growth of around 8 percent per year between 2002 and 2012 to about 5 per cent in 2012-13.In the last fiscal year India posted a whopping $88 billion deficit on the current account, the third largest in the world, raising fears of a balance of payments crisis. The rupee crashed as much as 20 per cent between May and August.(Reuters)
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Heralding an end to its banking secrecy wall, Switzerland will now share bank account and other details with foreign countries, including India, even without prior intimation to concerned persons and on the basis of queries emanating from stolen data.The move comes as a shot in the arm for foreign authorities, including from India, who have been trying hard for years to get information about suspected illicit funds parked in Swiss banks.The Swiss Federal Council's detailed statement on sharing tax information comes a day after the country inked the OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The signing of the pact allows for automatic exchange of information and mutual administrative assistance in tax matters with overseas authorities.Known for its banking secrecy, Swiss government's proposal of deferred notification of taxpayers in "exceptional cases" would soon be discussed by (Swiss) Parliament.Under the existing law, taxpayers had to be notified without exception before data concerning them was transmitted to the requesting state."Based on the results of the consultation procedure, the Federal Council has specified in its draft that deferred notification of taxpayers is possible only in exceptional cases," the Swiss government said today.Besides, the country which is putting forward the request would have to substantiate the same."The requesting state will also have to substantiate its request, e.g. by claiming the investigation would risk being compromised in the event of prior notification," it said.Noting that group requests are already possible under the existing law, the Federal Council said that in order to improve efficiency, the revision provides for a notification procedure that is tailored to group requests.(PTI)
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Former Coal Secretary P C Parakh, facing a CBI probe into alleged irregularities in coal block allocation, today triggered a storm by stating that Prime Minister Manmohan Singh had taken the final decision as head of the coal ministry and should also be named as a "conspirator" and made "accused" in the case."...if there is a conspiracy, then there are different members in this conspiracy. There is K M Birla who made the representation, he is one conspirator. I, who examined the case and made a recommendation, I can be another conspirator and the Prime Minister, who as the Coal Minister, took the final decision, is the third conspirator," Parakh told reporters here.""Therefore, if there is a conspiracy, all of us should be made accused," he addedAsked whether the PM should be named as the 'first conspirator', he said, "Must be. He is the final decision maker...responsibility lies with the Prime Minister as he could have overruled me. It was ultimately his responsibility as the Coal Minister."He said if the CBI thinks there is a conspiracy, "why did they choose and select Birla and me and not the PM. If conspiracy is there, then everyone is part of the conspiracy."CBI has registered FIR against industrialist Kumar Mangalam Birla, Parakh and others on charges of criminal conspiracy and under the provisions of the Prevention of Corruption Act in connection with alleged irregularities in the allocation of two coal blocks in Odisha eight years back.Terming the allocation to Hindalco of the Aditya Birla Group as a "fair decision", Parakh said Hindalco and PSU Neyveli Lignite Corporation had applied for a coal block.He explained that Screening Committee under the Coal Ministry decided that it should be allocated to Neyveli as it was a PSU and was also eligible for the allocation. But after the decision, Birla made a representation to the PM that Hindalco should have been given the block as they were equally competent and were the first applicant.Latching on to comments by Parakh, BJP and Left parties targeted the Prime Minister, saying he cannot escape responsibility in the controversial allocations as he held the charge of the Coal Ministry at that time.They demanded a fair and transparent probe into the issue."I found merit in the representation and suggested that Hindalco and Neyveli form a joint venture. My recommendation was approved by the Prime Minister," Parakh said.Asked if CBI omitted Prime Minister's name purposely, the former bureaucrat said, "This question should be asked to CBI on why his name is omitted."After registering the fresh FIR with a CBI court here, agency teams carried out coordinated searches at nearly six locations in Mumbai, Delhi, Hyderabad and Bhubaneshwar which included offices of Hindalco and residence of Parakh.Dubbing the allegation against him as baseless, Parakh said he saw nothing wrong in the government decision."There is absolutely nothing wrong with the decision. It was a very fair and correct decision that we took. I don't know why CBI thought that there is a conspiracy," he said.He also said then Minister of State in the Coal Ministry Darasi Narayana Rao must be named by the CBI as the files went through him.In reply to a poser, Parakh said he never faced any pressure from the Prime Minister's Office (PMO) over the issue of allocation of coal blocks Talabira II and Talabira III coal blocks in Odisha. "Lobbying by MPs, yes, but there was no pressure from the PMO," he said.Claiming that the CBI has failed to distinguish between "a fair and correct decision and a wrong decision", he said the agency has not appreciated the issues involved in the case."If CBI behaves like this, then people will find it difficult to take decisions, especially young officers. It should have a relook at the entire case and scrap it," he said.He said as Coal Secretary he had tried to make the coal block allocation process more transparent by recommending open auction and e-auction by amending the relevant Act.He claimed then Coal Minister Shibu Soren was opposed to the idea. But when he resigned from the government, the Prime Minister approved the idea and asked him to prepare a note for the Union Cabinet.Parakh said the PMO was opposed to bringing an ordinance to change the law and preferred bringing a bill in Parliament.CBI named 46-year-old Birla, Chairman of Aditya Birla Group, along with Parekh and unknown persons and officials of Hindalco and Coal Ministry in the FIR, the 14th in the multi-crore scandal, for alleged criminal conspiracy and under provisions of the Prevention of Corruption Act.(PTI)
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