At the reception of Sanchar Bhawan, a stone’s throw from Parliament House, was where it all began. On Thursday, 10 January 2008, the Department of Telecommunications (DoT) issued 122 mobile telecom licences to eight telecom operators in less than two hours. By the end of the day, the government was richer by a neat Rs 12,386 crore. Matters came full circle 49 months later — 4 February 2012 — when Justices J.S. Singhvi and Asok Kumar Ganguly of the Supreme Court quashed the 122 licences, leaving behind a trail of badly bruised telecom companies. The next 18 months were the hardest the telecom industry has faced since inception. The tough times coincided with the slowing down of the Indian economy. That’s when operators, old and new, big and small, national and regional, went all out on reducing costs. The cuts have been maniacal since the industry was saddled with a debt of Rs 250,000 crore ($41.7 billion). One, many free offers were reduced while others were stopped. Some operators did the unthinkable by hiking baseline tariffs. Two, large operators like Bharti Airtel and Reliance Communications (RCom) took measures to retire debt, while newer entrants restricted operations to just a few circles. Three, in the last 18 months, operators cut close to 8,000 jobs, most of which will not be replaced. Four, as voice revenues stagnate, operators have cut data rates — be it 2G or 3G — to woo users. All this fits in to meet the challenge that Mukesh Ambani’s Reliance Jio Telecommunications is likely to pose once it launches operations in 2014. The recent move to allow 100 per cent FDI in the sector could lead to consolidation.The fallout of the licence cancellations was immediate. In less than three months, three operators — Etisalat, Loop Telecom and S Tel — decided to exit. Three others — Uninor, Sistema Shyam Teleservices (SSTL) and Videocon Telecommunications — decided to restrict operations to just a few circles. The subscriber numbers said it all. In the last fiscal, India’s mobile base fell 50 million from 951 million (March 2012) to 898 million (March 2013). While that has resulted in overall teledensity falling from 78.66 per cent to 73.32 per cent, average revenue per user (Arpu) of GSM users has risen from Rs 95.5 in June 2012 to Rs 98 in December 2012, while minutes of usage rose from 346 minutes (March 2012) to 359 (Dec 2012). So is the worst over for the industry? It seems so. Sunil Bharti Mittal, chairman, Bharti Airtel, says: “The telecom industry is on the mend and will get into a strong recovery mode.” Ending Freebies As subscriber numbers fell, operators started by cutting down on freebies. Bharti Airtel reduced discounts and limited the validity of pre-paid cards in January. Idea Cellular and RCom followed suit. While Bharti did not touch tariffs, promotional benefits were reduced and free minutes cut sharply. So, while subscribers pay the same amount, they now get fewer minutes of talk time. Says Hemant Joshi, partner, Deloitte, Haskins & Sells: “What this has done is weed out inefficiencies in the system.” While other operators cut freebies, RCom raised tariffs twice — from 1.2 paise to 1.5 paise a second, and then to 2 paise a second — over the past few months. It’s an indication of a degree of rationality in the industry as it moves from chasing subscribers to improving revenue per minute (RPM) and profitability.That was the easy part. The tough task lay in reducing debt accumulated over the years. Bharti Airtel led with a Rs 63,840-crore ($11.7 billion) debt, followed by RCom with Rs 38,864 crore ($7.15 billion) and Idea Cellular with Rs 11,588 crore ($2.13 billion). The leading operators are highly leveraged. While the net debt/Ebitda (earnings before interest, taxes, depreciation and amortisation) ratio of Idea Cellular is 2.1, it rises to 2.3 for Bharti and 5.4 for RCom, according to a report by financial services firm Axis Capital. Over the past month, both RCom and Bharti Airtel have retired $1 billion of debt each. RCom completed full repayment of two syndicated ECB facilities totalling Rs 6,000 crore ($1 billion) during the quarter ended June 2013. It has also repaid another Rs 1,200 crore ($207 million) of other foreign currency loans during the period. In addition, RCom is looking to leverage land in Navi Mumbai and Delhi. It is believed RCom’s debt/Ebitda ratio could come down to 3 soon. break-page-breakRCom also struck a deal to share its tower infrastructure (45,000 towers) with Reliance Jio Telecom, which will pay RCom at least Rs 12,000 crore ($2.1 billion) over the 15-year licence period. So, RCom is assured of at least Rs 800 crore every year from Reliance Jio. A telecom consultant says: “While it will help RCom pare its debt, it also allows Reliance Jio to launch services faster.” Meanwhile, Bharti Airtel raised $1.5 billion through bond issues in March. It recently retired around 10 per cent of its debt using the Rs 6,796 crore it received from the proceeds of the preferential allotment of 5 per cent equity shares to Qatar Foundation Endowment. During the earnings call after the 2012-2013 results were announced, Sarvjit Dhillon, group CFO of Bharti Enterprises, said, “We do have a process to diversify the debt portfolio. We did have a maiden bond issue this quarter raising $1.5 billion. It is a 10-year bullet repayment.” Restricting CoverageWhile debt is not a problem for newer operators, they are slashing costs. In the November 2012 spectrum auctions, Uninor bid for only six circles, Videocon for seven and SSTL for eight (in March 2013). That has started showing results. Uninor has achieved break-even in three circles — UP East, UP West and Andhra Pradesh, which account for 53 per cent of its 31.8 million subscribers. Says Yogesh Malik, CEO of Uninor: “We currently cover 40 per cent of the population. We will grow wider and deeper in the circles that we cover initially.” We are working to achieving break-even in all six circles by December. Says Ranjan Banerjee, head of strategy, SSTL: “We are working towards breaking even in all circles by end-2014.” Older operators too are tightening their belts. Tata Teleservices (TTSL) has stopped operations in Assam, Jammu & Kashmir and North-east circles, while Aircel has reduced operations in five. Telecom Regulatory Authority of India data shows that the national RMS (revenue marketshare) of the top seven operators is 96.7 per cent. In UP East, the RMS of new operators is the highest nationally, at 6.5 per cent, followed by UP West (5.7 per cent). Now the big focus is on increasing data revenues. The first signs of a rise in data earnings are already there. According to the Nokia Siemens Networks (NSN) MBit Index that tracks mobile broadband in India, mobile data grew 92 per cent during 2012. Says Neeraj Arora, director, Internet Business Solutions Group, Cisco Systems: “As operators face declining profit growth, the push into data increases. We see video as the key disruptor in 4G services.” While 3G is yet to gain traction, operators have slashed both 2G and 3G data tariffs, trying to cash in on rising demand in small town India. Says Mohammad Chowdhury, leader telecom, PwC India: “The recent data tariff reductions are aimed at stretching usage, since they kick in once a user has exhausted his pre-paid data limit. So rather than a ‘price war’, we see this as a further step towards building usage in data.”Much of the increased data usage is because of the government, which has started putting information online. Says Rajan Mathews, director general, Cellular Operators Association of India (COAI): “Data uptake is expected to rise as it becomes easy to access data on government sites.” Across operators there has been a spike in data usage. In the year ending March 2013, Bharti Airtel recorded a 75 per cent increase in data usage per consumer. The biggest uptake in data has been from Airtel’s recent scheme of watching a video at Re 1. A consultant says, “This scheme has taken small towns by storm. It is providing a lot more data traffic than was initially expected.” Like Mittal says, the signs of a revival are visible. But industry needs regulatory support. And DoT needs to settle many issues including 3G intra-circle roaming, tax claims on operators, prospective licence fees and spectrum prices. The biggest driver could be the policy on mergers and acquisitions. Having 6-7 strong operators is better than a dozen weak operators. That could well be the much-needed shot in the arm the industry needs. anup.jayaram@abp.inanupjayaram@gmail.comtwitter@anupjayaram(This story was published in BW | Businessworld Issue Dated 26-08-2013)
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Last October, turbines for the NTPC plant in Farakka, West Bengal, needed to be transported through National Waterway 1 (Allahabad-Haldia) due to their large dimensions and 300,000 tonne weight. It took 45 days for the two boats to get from Allahabad to Kolkata, a distance which should not have taken more than 10 days at the most. The reason? The shallow draught along parts of the Ganga believed to be navigable by fairly large vessels.India has failed to promote and maintain the cheapest and greenest mode of ferrying goods and people — water transport. Even though in the 1980s, of the 14,500 km of navigable waterways in India, 4,500 km were declared commercially viable, they are still “under development”. Currently, less than 3,000 km are used — constituting a mere 0.4 per cent of the total transport share and an even lower 0.15 per cent of freight movement in the country.Waterways in the Netherlands amount to just 5,200 km, but account for 60 per cent of the freight movement in the country. Germany has 56 of its 74 metropolitan regions connected by waterways and has 100 inland ports, whereas India — with a landmass and coastline many times that of Germany’s — has only 190 ports in all, with not even a handful that are inland ports. Again, while the US uses over 19,000 km of commercially navigable inland and coastal waterways to transport 8.3 per cent of the country’s freight, in China that number stands at 8.7 per cent.Proposals intended to promote waterways in India rarely take off, like the Mumbai transport department’s attempts to run a ferry service between Borivili and Nariman Point. First proposed in 1983, the project cost is estimated at around Rs 1,000 crore today. It has been discussed several times, been cleared by the Union environment ministry and the Maharashtra State Road Development Corporation has even gone to the extent of issuing tenders twice over the past four years — but it is nowhere close to starting.At the national level, in the 1980s the Union government had announced six national waterways (NW) — three of which are operational, two are stuck in bureaucratic processes and one’s future is uncertain. Of the three operational NWs, the one on the Ganga is the most popular for cargo and river tourism, largely on account of its proximity to existing or proposed industries, thermal power plants and shrines. Government officials believe this is the best developed and maintained waterway in the country.It’s All PotentialAcross the globe, water transport is recognised as the most fuel- and cost-efficient and the least damaging to the environment. It is largely used to ferry cargo because it makes economic sense. One litre of fuel can move 24 tonne over a distance of one km by road, 85 tonne by rail and 105 tonne by water. Similarly, one horsepower of energy can move 150 kg by road, 500 kg by rail and 4,000 kg by water. “The horsepower-load ratio in water transport is far more viable than any other mode of transport,” says R.P. Khare, chief engineer, Inland Waterways Authority of India (IWAI). On the cost side, he says it takes around Rs 6 crore to develop and maintain one km tonne of waterway, 1.5 to 2 times that for rail and 2 to 3 times that for roads.Water transport, for the most part, is nonexistent in India even after 25 years of the passage of the Inland Water Transport Act. In 1986, the Act was implemented, IWAI was set up and the Ganga-Bhagirathi-Hooghly system became the first NW. Yet, it is hard to name even half a dozen companies utilising water transport for goods or people. According to K.J. Sohan, former Kochi mayor and member, standing committee on town planning, Kochi Corporation, the neglect of waterways can be blamed on the lack of a “godfather” and the economics of patronage. “The most coveted mode of transport is road transport — and the exponential growth of this sector has been largely due to the automobile industry. Unfortunately, there is no boat-making industry.” Sohan says he submitted a proposal to the Centre for the revamp of Kochi’s waterways under the Jawaharlal Nehru National Urban Renewal Mission. “I never got any response and today the city is plagued with congested roads and many diversions with the upcoming metro project,” he adds.Incidentally, Kochi’s ferry service, operating from 50 jetties and used by thousands of people for going to work, shop or school, has boats that are noisy, rickety and polluting, in the absence of a policy and funding to improve services.Within the IWAI — the nodal agency on waterways set up under the ministry of shipping — there is more talk of potential than actual utilisation. As per the authority’s estimates, NW 1 is located close to 15 sanctioned and proposed coal-based power plants that could provide 25 million metric tonnes of cargo per annum (mmtpa). Fertilisers from the existing plants amounting to around 10 mmtpa can be moved on waterways as, of the 25 mmtpa consumed in India as a whole, Uttar Pradesh, Bihar and West Bengal use up 10 mmtpa. In 2010-11, around 33 million tonne (mt) of foodgrain was transported using rail and road networks, of which 30 mt was inter-state transportation. IWAI says waterways could supplement rail and road networks as in 2010-11 around 3 mt of grain could not be transported.The authority recently released a report on the development of waterways over the next two decades, which suggests NW 1 has a potential of 10 mt of coal by 2019-20, 1 mt of fertilisers, 2.5 mt of fly ash, 2 mt of foodgrain, over-dimensional cargo (ODC) of 2 mt and other commodities to the tune of 0.49 mt. During the same period, the estimate for NW 2 is around 2.6 mt of coal, 0.2 mt of fertiliser, 1 mt of foodgrain, 2 mt of cement, 1.8 mt of ODC and 0.5 mt of other cargo. For NW 3, the estimates add up to a total of 4.73 mt.A Deluge Of ProblemsThe reasons cited for poor development of water transport are lack of industrialisation along river banks, shortage of manpower in IWAI, lack of political will, poor technology, lack of incentives and an income assurance to attract investment. The lack of development of the water sector can also be blamed on the nature of Indian rivers and slow-moving vessels. Rivers in India carry a heavy silt load and are prone to flash floods. The fact that most water transport is slow moving does not appeal to business enterprises, says S. Sriraman, a professor of transport economics, Mumbai University.“A major drawback in Indian waterways transport is the lack of integration with other modes of transport,” he says. Explaining the need for integrated transport systems, the professor cites the National Transport Policy’s emphasis on the need for multi-modal integrated transport systems in urban India to reduce congestion — a fact rarely taken into account when planning roads, railways or metro systems, as evident from the ever-increasing congestion.Funds crunch has been the main hurdle for water transport. For 2013-14, it was allocated Rs 300 crore, but by June the sum was reduced to Rs 200 crore. Before the 11th and 12th Five-Year Plans, the total budgetary allocation for IWAI did not exceed Rs 100 crore for a five-year period. The National Transport Development Policy Committee (NTDPC) report notes that since IWAI’s inception in 1986, until 2012, Rs 886 crore was spent on NW 1, 2 and 3 and Rs 150 crore on schemes and subsidies. But with the 11th Plan’s increased allocation, IWAI spent Rs 560 crore, bringing the total spend over 25 years to around Rs 1,500 crore.Asked about why water transport has not moved forward despite many factors in its favour, IWAI vice-chairperson Jayshree Mukherjee says, “We are hoping with the example of NW 1, things will look up and more investors will come forward.” NTDPC, IWAI and logistics firm JITF Vector have signed an agreement to transport 330 mt of coal on NW 1 from Haldia to the Farakka plant. If the project is successful, NTPC and Jindal will look to expand the same to two more power plants — Barh and Kahalgaon in Bihar.Officials at IWAI inject a note of caution. They say private investment will only come in if there is a guaranteed load to be carried. “An assurance of sorts is needed,” says Khare. Citing the example of Goa where barely 80 km of waterway is used to carry over 55 mt of iron ore, he says water is used wherever there is a promised load as it is the cheapest form of transport.With the increasing interest of investors, officials and even tour operators, things are looking up. “We will be able to improve the waterway facilities to ensure private investment,” says Khare. He adds that in the 12th Plan, IWAI proposes to spend Rs 1,500 crore — around what it has managed to spend over 25 years. But, at present, waterways in India transport only 100,000 people and 4.5 mt of cargo annually. If projects in the pipeline materialise, investors come forward and the IWAI does not disappoint, India could boast of one of the largest and greenest transport networks in the world. mmatbworld@gmail.com(This story was published in BW | Businessworld Issue Dated 26-08-2013)
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The number of people out of a job in the euro zone has fallen for the first time since April 2011, the latest sign that the bloc may make a muted recovery from recession later this year. Falling spending in June by shoppers in Germany, France and Spain, however, will dampen any early celebrations, but low annual inflation — stable at 1.6 per cent in July — means the European Central Bank is able to act if the recovery falters. In June, more than 19 million people were unemployed, 24,000 fewer compared with May, European Union statistics agency Eurostat said. Predictions of a rebound have so far proved illusory as Europe tries to overcome more than three years of crisis. Indeed, the fall in euro zone joblessness was not enough to bring down the overall unemployment reading for the bloc, which remained at a record 12.1 per cent for the fourth straight month.Joining ForcesFrance’s Schneider Electric is to buy British engineering firm Invensys for £3.4 billion to strengthen its high-margin industrial automation business and win more custom in the fast-growing energy sector. The deal, Schneider’s biggest since its $6.1 billion purchase of American Power Conversion Corp in 2006, will combine Invensys’s automation software that helps run power stations, oil refineries and chemical plants with Schneider’s automation products for the car, aerospace, food and beverage industries. It will bolster the French group against larger players such as Switzerland’s ABB and Germany’s Siemens and give it the opportunity to cross-sell its energy-efficiency products to Invensys’s high energy-using customers.Rescue Act PSA Peugeot Citroen won EU approval for a €7 billion state-backed debt rescue, keeping the French automaker afloat as it struggles to rein in losses. The European Commission said it had approved the financing aid, granted last year, on condition that Peugeot keeps debt in check and pays a higher rate as its financing business improves. “This is a balanced result which offers the PSA group the chance to make a new start on a sound basis,” EU Competition Commissioner Joaquin Almunia said. Peugeot, the carmaker worst hit by Europe’s five-year auto market slump, made a loss of €5 billion last year and is still burning through more than €100 million each month. The Paris-based company was forced to negotiate the three-year state guarantee for its car loans arm, Banque PSA Finance, after a series of credit downgrades swelled borrowing costs.Shock AbsorberBarclays is raising £5.8 billion from its shareholders to help plug a larger-than-expected capital shortfall identified by Britain’s financial regulator at the bank. The Bank of England’s Prudential Regulation Authority (PRA) said Barclays needed an extra £12.8 billion to strengthen its capital reserves against potential market shocks. That was higher than an estimate of about £7 billion a month ago, mainly due to tougher European rules on the way banks measure risks. The PRA gave the 320-year-old bank a year to fill the gap, requiring it to turn to shareholders to speed up its plan to rebuild capital.Green Stand France took formal steps to outlaw the sales of several Mercedes models, upping the stakes in a stand-off over parent company Daimler’s use of an air-conditioning coolant banned by the EU. Registrations on the Mercedes A- and B-Class, and CLA “will remain forbidden in France as long as the company does not conform to European regulations”, the environment ministry said, after the German luxury carmaker contested the move in court.Tough Call Miner BHP Billiton is weighing in on the fate of a $14-billion Canadian potash project just as the collapse of a dominant potash cartel puts more pressure on already weak prices. The Jansen project in Canada’s Saskatchewan province was a tough call for BHP CEO Andrew Mackenzie, with mining investors reluctant to spend on big-ticket projects and most also cool on an oversupplied potash market. But Russian potash giant Uralkali’s decision to break out of its venture with Belaruskali, a move that could slash the nutrient’s prices by 25 per cent, could leave Mackenzie with an even tougher choice — that of cancelling it.Upward Swing US economic growth unexpectedly accelerated in the second quarter, laying a firmer foundation for the rest of the year that could bring the Federal Reserve a step closer to cutting back its monetary stimulus. Gross domestic product grew at a 1.7 per cent annual rate, the Commerce Department said, stepping up from the first quarter’s downwardly revised 1.1 per cent expansion pace. The economic picture was further brightened by the ADP National Employment Report, which showed private employers added 200,000 jobs in July, maintaining June’s pace.All In A NameMicrosoft is changing the name of Skydrive, its cloud storage service, after a legal challenge by broadcaster BSkyB. A US high court ruled that the name infringed its trademark. The judge had said there was evidence Skydrive’s name had caused confusion among customers having problems with Microsoft’s product, who would end up calling the BSkyB helpline in the mistaken belief that it was responsible for the service. This is the second time in recent months that BSkyB has successfully defended its trademark against a tech company.Time-BoundTwo former Apple employees have accused the iPhone maker in a lawsuit of subjecting hourly store workers to daily searches while they were off-the-clock, arguing they should be compensated. The ‘screenings’ or bag searches, designed to discourage theft, are conducted every time sales reps leave the store, including for meal breaks, the plaintiffs alleged in a lawsuit. They are seeking unpaid wages, overtime compensation and other penalties.Trade Spat China and the European Union (EU) defused their biggest trade dispute by far with a deal to regulate Chinese solar panel imports and avoid a wider war over goods from wine to steel. After six weeks of talks, EU’s trade chief and his Chinese counterpart sealed the deal, setting a minimum price for panels from China that are near spot market prices. EU solar panel makers accuse China of benefitting from huge state subsidies, allowing them to dump about €21 billion worth of below-cost panels in Europe last year, putting European firms out of business. EU had planned to impose hefty tariffs, but will no longer do so.Past To Present TenseJapanese firms can’t seem to put the past behind them. A South Korean court ordered Japan’s Mitsubishi Heavy Industries to pay a total of 400 million Korean won ($360,200) in compensation to five South Koreans (all deceased) for forced labour during Japan’s colonial rule till 1945. Mitsubishi said it would appeal the decision. The Busan High Court’s decision followed a separate ruling ordering Nippon Steel and Sumitomo Metal Corp to pay compensation to four South Koreans for forced labour during the 35-year colonial rule. The Seoul High Court ruled against Nippon Steel and Sumitomo, ordering them to pay 100 million won to each of the four plaintiffs. Nippon Steel has also said it will appeal.(This story was published in BW | Businessworld Issue Dated 26-08-2013)
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India has relaxed restrictions on the export of cotton by the state-run Cotton Corporation of India (CCI) in the current season to end-September as the world's second-biggest cotton grower expects a better crop in 2013-2014. Hefty monsoon rains have encouraged farmers to plant more, and the area sown with cotton has risen to 10.85 million hectares as of 1 August from 10.11 million a year earlier. CCI has exported 3,000 bales so far this season, the maximum allowed under current rules. It sought permission to ship more to reduce its stocks ahead of the start of the new-season harvest from 1 October, Chairman B. K. Mishra said. "This season CCI has sold its stocks mostly into the local market, and if they are exporting, it means they are expecting a huge crop next season and want to clear the old stock," Prerana Desai, vice-president of research at Kotak Commodities, said. The government earlier on Friday, 2 August, issued a notification allowing CCI to export cotton under relaxed norms. It did not relax the restrictions for private traders. Mishra said CCI had not received any official confirmation about the quantity to be exported in the current and the coming seasons. "We had in the past sought permission from the government to export 50,000 bales of cotton in the current season with relaxed norms," he said. The Indian government, through the CCI and farmers' cooperative Nafed, has bought 2.5-3.0 million bales of cotton in the current crop year. CCI has a stockpile of around 900,000 bales. India's production is estimated to be 34 million bales in 2012-13. In April, the government allowed the state agencies to sell cotton into the domestic market from state reserves. "We will see the market conditions and the international price and then decide on exports. As of now it does not look viable because domestic prices are higher," Mishra said. CCI is selling cotton into the domestic market at an average price of 43,000 rupees per candy of 356 kg, equivalent to 90.65 US cents per lb. Overseas it will get around 87-89 cents for the same variety, two traders said. In New York, the December cotton contract on the Intercontinental Exchange was at 85.16 cents per lb at 1436 GMT. (Reuters)
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Indian government figures showing that poverty has been cut by a third since 2004 has set off a row between the country's main political parties on whether the data is accurate, and a slanging match between two of the world's best-known economists on the implications for policy. The debate boils down to what path India should take in coming years as slower growth puts further poverty reduction at risk in the world's second-most populous nation. The opposition Bharatiya Janata Party (BJP) backs growth-oriented reforms that would include a curb on public spending, while the ruling Congress party believes subsidies and a range of social welfare projects have lifted millions out of penury. Neither of these parties has a commanding lead in opinion polls ahead of general elections due by next May, so they will be competing fiercely for the votes of the poor. India's Planning Commission said last week that 138 million people - more than the combined population of Britain, Spain and Australia - had climbed out of poverty between fiscal 2004-05 (March-April) and 2011-12. That left the official number of poor among a population of 1.2 billion at 269 million. "The reduction of the poverty level across the country is a clear manifestation and endorsement of the pro-poor policies and the policy of inclusiveness of the UPA regime," said Bhakta Charan Das, a spokesman of Congress and its United Progressive Alliance (UPA) coalition that has been in power since 2004. Critics say the numbers have been massaged to look good and any gains are pitiful compared to countries like China or Indonesia. Congress party policies, which include guaranteed employment for 100 days a year and plans to provide subsidised grain to 800 million people, are also a huge financial drain. India's budget deficit is already around 5 per cent of GDP and is seen as a major contributor in drooping investor sentiment. "It is certainly an achievement," said Nobel laureate Amartya Sen of the reduction in poverty. "Is it a fantastic achievement? No, because the poverty line is low." A Harvard University professor of economics and a confidant of Prime Minister Manmohan Singh, Sen is widely seen as a major influence on the Congress party's jobs and food programmes. Jagdish Bhagwati, professor of economics and law at Columbia University, says Sen is an apologist for Congress and its brand of welfare spending at the cost of reforms. "Sen is not simply wrong; he also poses a serious danger to economic policy in India," Bhagwati wrote in a newspaper column. "The UPA government is now poised to damage the economy, and to harm the poor ... because its near-paralysis on track I reforms has meant that revenue growth has slowed too, making it more difficult to finance the track II reforms on health, education and PDS (public distribution system) expansion for the poor. "At the same time, owing to electoral pressures and with the populist rationales provided by the likes of Sen, the expenditures on such track II policies are set to go up this year." Sen, Bhagwati and Prime Minister Singh all studied economics at Britain's Cambridge University in the 1950s. Empowerment, Not AlleviationMany economists say the Congress party-led government has delayed decisions on opening up the insurance and pension sectors for foreign investment, tax and other reforms and that the inertia has squandered gains of high growth before the 2008 global crisis. The BJP, which pursued high-growth policies when it was in power from 1998 to 2004, says the Planning Commission's figures on poverty are fixed, and aimed at giving Congress a pre-election boost. "The government only wants to showcase their achievements with artificial figures before elections," BJP spokesman Prakash Javedkar said. "So far as the BJP is concerned we want a decent living for the poor. We want their empowerment, not simply alleviation of poverty." According to the World Bank, about one in three Indians were poor, or living on less than $1.25 a day, in 2009-10 compared to 41.6 per cent in 2004-2005. In absolute terms, its estimates show the number of poor dropped to 359 million from 419 million. The government, by contrast, says the number of poor dropped to 269 million in 2012 from 407 million in 2005. However, it uses about 5,000 rupees ($83) per month for a five-member family as its poverty line for urban areas, an amount critics say would barely cover food costs, let alone shelter, clothing and other necessities. Many international economists agree that India has reduced poverty, but it still has a long way to go. "Our analysis shows that while targeted poverty-programmes are important for reducing poverty, a good investment climate is very useful," said Rana Hasan, principal economist at the Asian Development Bank. "Good investment climate is not only good for business, it is also an important means for making growth more pro-poor in India." India's achievements, however, compare poorly with other Asian nations. In China, for instance, poverty levels fell to 12 per cent in 2010 from 60 per cent in 1990, according to the World Bank. Many of India's poor scoff at the idea that they are better off than they were in 2004. "In the past five years, nothing has changed in my life," says Nitai Karmakar, a resident of the eastern city of Kolkata. The 31-year-old, who makes about $84 a month washing cars of residents in a housing colony, says he is not able to marry because he cannot feed another person. Palani, a security guard in the southern city of Chennai, says he takes care of his wife, two children and an 80-year-old mother on an income of $67 a month. "We just about manage our expenses and sometimes borrow to make ends meet," said the 49-year-old. "But we cannot budget for times when kids fall sick and we unexpectedly end up spending on doctors' visits and medicines." ($1=61.10 Indian rupees) (Reuters)
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India's multi-billion dollar plan to give cheap grain to 67 per cent of its population bypasses some of the needy and does not tackle malnutrition, said Raman Singh, the chief minister of Chhattisgarh, which gives 90 per cent of its people low-cost food. With an eye to elections which are due by May 2014, the Congress-led government last month sidestepped parliament by launching its $22 billion food subsidy plan with an ordinance, which brings it into law immediately. Singh, a member of the main opposition Bharatiya Janata Party (BJP), told Reuters the ordinance should have broadened the range of beneficiaries and distribute protein-based foods as well as rice and wheat. "If you have to end malnutrition, infant and maternal mortality, you have to give proper, balanced and nutritious food as we have been doing (in Chhattisgarh)," said Singh, who was in New Delhi to address a seminar on food security. The National Food Security Ordinance aims to give five kg (11 lb) of cheap rice and wheat every month to 800 million people, more than doubling the reach of the existing subsidised food system. Despite being the world's second-biggest producer of rice and wheat and sitting on huge mountains of grains, India is home to a quarter of the world's hungry poor and every day some 3,000 children die of illness related to malnutrition. "We give iodised salt, pulses and chick pea. We demand the same for the National Food Security Ordinance. We also ask them to broaden the list of beneficiaries," Singh said. A government source involved in food decision making said that rice and wheat were staples for the poor and the government was taking care of those needs. "The ordinance makes subsidised food a legal entitlement for beneficiaries and that shows our commitment. Since India imports pulses, we cannot distribute them," the source said. Singh said his state government's investment in irrigation, free electricity to farmers, interest-free farm loans and better seeds have helped Chhattisgarh raise rice production to 7.1 million tonnes from 1.7 million tonnes in 2005/06. "If we can do it, the government of India has a bigger budget," he said, adding that a debate in parliament would have allowed these issues to be raised. Chhattisgarh's farm sector is growing at about 6 per cent per year, more than double the national average, while the state's total GDP has grown at 8-9 per cent against India's economic growth of about 5 per cent. "You don't get growth by fixing a target. You need to invest in micro irrigation, seed replacement, power to farmers, interest-free loans for agriculture to cut input costs. Slogans do not help," Singh said. (Reuters)
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Indian Oil Corp Ltd (IOC), the country's biggest refiner, said it would raise petrol prices by 1.2 per cent and diesel by 1.1 per cent from Thursday after global prices of the fuels have risen.India's three state-run fuel retailers - IOC, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd - tend to move their prices together. India deregulated fuel prices in June 2010.In January, India allowed fuel retailers to raise the price of subsidised diesel by around 50 paise a litre every month and asked bulk buyers to pay market rates.(Reuters)
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The UPA Government's proposed Food Security Bill carries a slew of "economic consequences", including pressures on fiscal deficit, growth and inflation, Reserve Bank Governor D Subbarao said on 30 July."There are going to be lots of economic consequences of the Food Security Bill (FSB), which at the RBI, we will study further," Subbarao said at the customary post-policy interaction with journalists in Mumbai. "There will be pressure on procurement, there will be pressure of subsidy, there will be pressure of fiscal deficit that will have implications for growth and for inflation, implications for surplus income that beneficiaries of food security might have and how they might spend that and what implications they will have for inflation," he said.However, he added that the central bank is still studying the Bill's proposals and is yet to quantify the implications of the ambitious programme."At the moment, the fiscal consequences and the macroeconomic backdrop that will change on account of the FSB is a bit premature to discuss because the numbers are still being worked out," RBI Deputy Governor Urijit Patel said.Early this month, the Union Cabinet decided to take the Ordinance route to implement the FSB, which aims to give nation's two-thirds population the right to 5 kg of foodgrain every month at highly subsidised rates of Rs 1-3 per kg.India will join a select league of countries in the world that guarantee food security to majority of its population. At Rs 1,25,000 crore of Government support, the food programme will be the largest in the world.Analysts have said the programme will put a strain on Government finances and pointed to the excess investments required in the warehousing space.(PTI)
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