On the eastern fringes of teeming New Delhi, construction sites criss-cross vast tracts of cleared farmland in Greater Noida as a stampede of developers rush to build cheaper, suburban apartments for India's swelling urban middle class.But this is India, a nation struggling to modernise, and the building boom has become entangled in a lot of the same problems that have often held back the breakneck growth of Asia's third largest economy: corruption, political meddling, haphazard development planning, and a shifting legal landscape.Greater Noida's land woes are also a microcosm of a broader dilemma facing India: balancing the livelihoods of villagers with the need to maintain economic growth, revamp shoddy infrastructure and acquire enough land to build mass housing for urban dwellers.Like in many other parts of India, the development projects in Greater Noida have collided head-on with legal challenges by farmers, and some have succeeded in halting multi-billion dollar projects and regaining land acquired years ago.Urgency ClausesGreater Noida is part of Uttar Pradesh, India's most populous state, and while acquiring the land, the state government invoked so-called "urgency" clauses which allow it to buy the land swiftly and in bulk from the villagers, as long as it would be used for infrastructure or industrial projects.Urgency clauses are contentious at best, and the Uttar Pradesh government made matters worse by selling the land to real estate developers, who would have likely paid more to the villagers than the state did.Scores of villages are now embroiled in land disputes, putting at risk at least 50,000 apartments, developers in Noida say. In addition to the legal petitions, farmers are digging up roads and staging marathon vigils to block projects."We will become a stronger force with the support of more villagers and claim what is ours," said Surender Nagar from Bisrakh village, who won a court case to recover 746 hectares (nearly 2,000 acres).Rajesh Kumar, 38, also won a court case to recover his 156 hectares of land in Sabheri, a village ringed by building sites, many of which have been silenced by court orders."The most important demand by us farmers is to get our land back so we can regain our source of livelihood," he said, his spectacles covered by construction dust.Politics Hijacking Development?Land acquisition has long been a politically charged issue in this country of 1.2 billion, where hundreds of millions of poor farmers are a vital voter base for politicians gearing up for the next national elections in 2014.But in addition to requiring land for industry and infrastructure - protests by villagers have already stalled major projects such as a steel mill by South Korean firm POSCO and halted the development of key highways - India also has a shortage of 26.5 million housing units according to government data, with millions more streaming into cities from the countryside each year, creating a property crunch.A third of India's population live in urban areas versus 17 per cent of China's, according to the World Bank. The number of Indians in cities will almost double to 590 million by 2030 from 340 million in 2008, according to consultancy firm McKinsey.The ruling Congress party has pledged to overhaul archaic land acquisition laws, but a slew of corruption scandals have distracted the government from any broader development goals, and a land reform bill has yet to come up for discussion in an increasingly fractious parliament.With elections in Uttar Pradesh due next year and national polls in 2014, any change in land policy, like any other key policy, is likely to be dictated by the desire for re-election rather than broader development goals."There is an atmosphere that farmers' interests should come first and public interest is not as relevant," said D.H. Pai Panadikar, president of RPG Foundation, a private think tank.Signs of battle for farmers' backing in Uttar Pradesh, which is home to 200 million people - a population bigger than Brazil - are already emerging.India's ruling Congress party wants to wrest support in the state from popular chief minister Mayawati, called the "untouchables' queen" for her championing of poor, low caste Indians.Rahul Gandhi, the scion of India's most prominent political dynasty who is seen as a prime-minister in waiting, has seized on the land disputes to support farmers.Not to be outdone, Mayawati last month unveiled a new land acquisition policy that makes it easier and more lucrative for farmers to sell land directly to developers by removing the government middleman and pricing the land at market rates.In the longer term, experts say India needs to draft more transparent, equitable land management policies if burgeoning satellite cities such Noida can lift and sustain economic growth to a level that could rival fellow Asian powerhouse China.The upside is potentially huge.China, by systematically freeing up vast areas of farmland in special economic zones like the coastal Pearl River Delta for factories and new cities to take root, fostered a "workshop of the world" industrial region and a powerful engine for growth.Property GridlockThe stalling of projects in Noida has raised the risks of major Indian mortgage lenders such as HDFC, who have frozen loans to home buyers, denting investor sentiment in a market already hit by rising prices and mortgage rates."At the macro level you're sending a very confused signal to the outside world and at a micro level, you're shaking the confidence of stakeholders, builders, buyers and investors," said Pranay Vakil of property brokerage firm Knight Frank.So far this year property stocks in the financial capital Mumbai have underperformed the broader stock market index, while poor market sentiment has frozen $4 billion dollars worth of real-estate IPOs.Anil Kumar Sharma, the chairman of Amrapali Developers, a major developer in Noida, says court orders have put at risk capital outlays of at least 15 billion Indian rupees ($340 million) by developers so far."Buying land from the government was seen as the safest bet, but the court order has changed that," said Sharma.It is not only the villagers who are complaining.Hundreds of disgruntled middle class homeowners recently held a protest near Sabheri village, brandishing banners with slogans such as "Where will we get affordable homes now?" and chanting "We want justice"."We hope that the court can provide us with the right solution so that nobody has to face any losses," said Shanta Rana, 51, a buyer of a flat in Supertech's Ecovillage, a gated complex of landscaped gardens.Ultimately, the resolution of Greater Noida will boil down to money, some say.Many of the farmers, whose villages are little more than warrens of dingy homes linked by rutted roads, bordered by fetid gutters and garbage heaps, have spent their initial compensation money and now want more."Farmers want higher compensation and we are trying to mediate between farmers and the government so that projects can be saved," said R. K. Arora, chairman of Supertech, which has around 1,000 half-built apartments in Greater Noida. (Reuters)
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Oil explorer Cairn India reported a jump in quarterly profit and said it would seek shareholder approval on the conditions set by the Indian government for its deal with Vedanta Resources.Last month, India gave conditional approval to Vedanta Resources to buy a 40 per cent stake in Cairn India from its British parent Cairn Energy, in a deal valued at around $6 billion.Cairn India said net profit jumped to 27.27 billion rupees ($617 million) for its fiscal first quarter ended June, from 2.8 billion rupees in the year-ago quarter.Revenue surged more than four times to 37.13 billion rupees.India's oil ministry has been pushing Cairn India to share royalty payments with state-run Oil and Natural Gas Corp, which has a 30-per cent holding in the Cairn-operated fields in western India but pays 100 per cent of the royalties.Treating royalty as a cost for developing the field was one of the conditions set by the government to clear the deal with Vedanta.Cairn India said in a statement late on Tuesday if royalty were to be cost recoverable it would lead to a decline in revenue and profit for the June quarter by 12.92 billion rupees.Cairn India said it would hold a postal ballot of all the shareholders to consider the conditions imposed by the Indian government. (Reuters)
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When DP World was vying to build a fourth container terminal at Mumbai's main port this year, the Dubai-owned giant made what it thought was a solid bid, proposing to share one-fifth of the terminal's income with the government.Then a rival came along with a bid that beat all-comers, offering to hand over 51 per cent of the port's takings to New Delhi to secure the project estimated to cost 67 billion rupees ($1.4 billion).Such generous terms are part of an emerging pattern of companies making ambitious - some say unrealistic - bids in a race to cash in on a massive push by Prime Minister Manmohan Singh's government to lure private funding into infrastructure."The bid competitiveness is increasing to the extent that the projects will become unviable," said Devang Mankodi, finance director for South Asia at DP World ."There is a lot of hype about India's growth story and probably that is pushing some of the entrepreneurs to bid aggressively," he said. "No one wants to miss the bus."PSA International, the Singapore state company that is the preferred bidder for the Mumbai port deal, declined comment.While India hopes that half its targeted $1 trillion in infrastructure spending over five years is privately built, attractive projects are scarce, making for fierce bidding.That means the government may get an attractive deal in the near-term, but it puts heavy pressure on companies and poses a longer term risk if such projects are delayed or derailed due to over-optimistic assumptions on costs or revenue.Winning bids can sometimes be ten times the second place offer, said S. Nandakumar, a sector specialist at Fitch Ratings. Some projects attract dozens of bids.Such aggression has prompted major Indian firms such as Reliance Infrastructure, owned by tycoon Anil Ambani, to focus on bigger projects such as expressways."In small projects the competition intensity is completely crazy," said Lalit Jalan, chief executive of Reliance."So we will focus on the large projects where we will have fewer and more rational competitors," said Jalan, whose company built a slick high-speed rail link to Delhi airport, the first of its kind in India.Irrational CompetitorsStrapped for cash, New Delhi is pushing a model known as build-operate-transfer (BOT). Firms bid to build a road or a metro and operate it for a fixed period, collecting toll or ticket fares before handing it over to the government.To win, bidders compete to maximise the government's share of revenue or minimise the contribution New Delhi must cough up to ensure projects are viable."Today you have four or five players who are aggressively fighting for a project. So basically they have no choice but to try and increase the financial revenue share ... as high as they can to win the project," DP's Mankodi said."The risk associated with that is that once the long term sustainability of the project is being tested, you will have issues," he said.The risk of that happening hasn't deterred a slew of companies pitching for infrastructure projects, however.GMR Infrastructure Ltd, which built Delhi's swanky airport and will soon build India's biggest highway, for example, bid on 25 projects last year and won exactly one, according to a spokesman."Earlier we were looking at around 6-10 people getting qualified for a bid. Now around 40 normally get qualified," the spokesman said.Newcomers to the BOT model are creating problems, said Shashank Shekhar, vice president for business development at KMC Constructions."Novice players means very new guys who don't have experience of BOT, they are getting into the BOT, which is actually spoiling the market today," he said.Optimism And ScarcityBuilders of roads, power plants and other big projects are bidding in part because of optimism over the sheer demand in an economy growing at roughly 8 per cent a year with a severe infrastructure deficit.New Delhi expects an annual average of $100 billion of private investment in infrastructure between 2012 and 2017, although the government has consistently missed its targets for both funding and construction.A slump in India's real estate sector and a drying up of work in parts of the Middle East amid unrest in several countries, means Indian builders are turning to domestic infrastructure.A dearth of attractive projects is another factor. The fallout from a spate of corruption scandals, red tape and land acquisition hassles have slowed the award of bids and subsequent construction work.In roads, for example, India managed to build about 5 kms (3 miles) a day in the last fiscal year, far short of New Delhi's target of 20 kms a day.The Indian government, which unlike China is not flush with government funds to spend on big projects, welcomes the competition.For its part, China has much larger state resources and a much better record of execution on infrastructure projects, although now Beijing appears to face a different sort of headache.The state has accumulated a mountain of bad loans for infrastructure projects - part of a stimulus package during the economic slowdown - leaving a clutch of redundant works."We want an aggressive bidding climate," Montek Singh Ahluwalia, a top adviser to the government, told Reuters. "It's the job of the private sector to make intelligent bids."Some builders have called on the government to shut out bids that look outlandish and end a mentality in New Delhi that they say is more keen on getting things done cheaply than done well."We need to move out of the syndrome that the cheapest is the best. It's rarely the best," Shahzad Nasim, Singapore-based global CEO of the engineering firm Meinhardt, told Reuters.(Reuters)
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The Central Bureau of Investigation (CBI) is considering filing a case or multiple cases against Reliance Industries over its operations of its gas block in the Krishna Godavari (KG) basin, the Mint reported on Tuesday.The CBI is likely to name officials in the country's upstream regulator and the petroleum ministry in the case, the newspaper said, citing officials at the CBI who declined to be named.Earlier this month, Reliance Industries said there was no evidence to suggest that costs in development of the country's key natural gas field in the KG basin were overstated.A Reliance Industries spokesman in Mumbai and a spokeswoman for the CBI in New Delhi declined to comment on the newspaper report, when reached by Reuters on Tuesday."The preliminary inquiry against RIL and others is in final stages and very soon a case will be registered," one of the officials at the investigative agency told the Mint newspaper, referring to Reliance Industries.The CAG has criticised Reliance Industries and the government over development of a key natural gas field in the KG basin and called for revamping profit sharing arrangements from oil and gas blocks.The offshore KG basin was expected to contribute up to one-quarter the gas supply for India, but lower-than-expected output has left the energy-hungry nation more dependent on expensive, imported LNG to fuel power and fertiliser plants.(Reuters)
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Indian Power Minister Sushilkumar Shinde made a strong pitch for US investment in the growing power sector in India on Tuesday, asserting that lucrative opportunities were available to investors.He was speaking at the US-India Economic Opportunities and Synergies Summit in Chicago organised by FICCI in association with The Executive Club Of Chicago at the Fairmont Hotel in Chicago.Shinde said the average plant load factor (PLF) of Indian generation units improved to 77.5 per cent during 2009-10 from 73.6 per cent in 2006.The contribution of the private sector to India's electricity output has grown from 11.6 per cent in 2006 and further to 30 per cent as of date and is likely to go up by about 60 per cent in the 12th plan (2012-2017), he said.Shinde told reporters at a press conference that during 2010-11, 15,795 MW of power got synchronized and 12,161 MW commissioned, which was the highest-ever capacity addition achieved in a single year since Independence."80,000 MW is under construction as of now - such a huge amount," Shinde said."Per capita consumption of electricity has grown from 600 kwh to 785 kwh in a span of five years," FICCI Senior Vice-President R V Kanoria told reporters.However, while "Infrastructure has not grown, India has grown," Kanoria added.Shinde said while the present installed generation capacity in India is more than 1,81,000 MW, over 80,000 MW of new power capacity is under construction.He added that during the forthcoming 12th Five-Year Plan (2012-2017), the funding requirement of the Indian power sector has been estimated at USD 230 billion. Stating that the 12th Plan aims at capacity addition of nearly 100,000 MW, Shinde emphasised that such a gigantic task can be successful only with strong support from the private sector.Highlighting the reforms in the power sector in India, Shinde said the Electricity Act, 2003, allows the sector to align itself with market dynamics and clears roadblocks in the way of greater participation by the private sector.He said an independent regulatory framework in India now provides business confidence to power companies and a fairly lucrative rate of return on equity of 15.5 per cent per annum.Underlining that the share of the private sector in capacity expansion has gone up substantially in the 11th Plan, with 33 per cent of total incremental capacity expected to come from the private sector, the minister said that in the 12th Plan, this share is expected to further increase to about 50 per cent.He said 100 per cent FDI is permitted to facilitate private investment under the automatic route for power generation, transmission and distribution projects.Giving an outline of the power projects in India that are to be implemented under a public-private partnership model Shinde said 16 ultra-mega power projects (UMPPs) and 14 inter-state transmission schemes have been identified for development by the private sector on the basis of competitive bidding.He said while the bidding for 4 ultra-mega power projects and six transmission project has been completed, more than five UMPPs are in the pipeline and offer unique opportunities for investment.Each UMPP is of 4,000 MW capacity and requires an estimated USD 4.5 billion investment.Regarding hydro power, Shinde said the estimated potential in the hydro sector in India is 1,50,000 MW, out of which only 30,000 MW has been harnessed.The remaining capacity needs to be developed, which offers investors a lucrative opportunity.He said the new Hydro Policy, 2008, goes a long way in balancing developer's concerns and the needs of the people.The minister added that to enable project developers in the hydro sector to reasonable and quick returns on their investment, merchant sale of up to 40 per cent of the saleable energy without any regulatory interference has been allowed, making investments in hydropower projects more attractive.Stating that India is actively pursuing a low carbon growth strategy, Shinde highlighted India's focus on super critical technology in thermal plants, the rapid induction of clean coal technologies and a sharper focus on renewables.He said that international majors like Mitsubishi, Toshiba, Hitachi, Alstom and Ansaldo have already started the process of partnering with Indian manufacturers to set up super critical manufacturing facilities.On the renewable energy front, Shinde said that India has launched the Jawaharlal Nehru National Solar Mission and is committed to adding 20,000 MW of solar power by 2022.He said State Electricity Regulatory Commissions (SERCs) are mandating minimum Renewable Purchase Obligations (RPOs) for Discoms and a mechanism for trading renewable energy certificates (RECs) through power exchanges has been operationalised in India.Addressing the concerns of investors on the financial health of distribution companies, the minister said an "Accelerated Power Distribution and Reforms Programme (APDRP)" has been launched in urban areas, the main objective of which is to bring down the aggregate technical and commercial (AT&C) losses by around 15 per cent.He said the budget for the R-APDRP programme during 2007-2012 is about USD 11 billion.With regard to energy efficiency, Shinde said the Indian government has given due emphasis on this issue.Stating that 37 energy service companies (ESCOs) have been accredited by the Bureau of Energy Efficiency (BEE), he said tremendous opportunities exist for Foreign ESCOs operating either independently or in JVs for taking up energy efficiency projects.He said it is estimated that an investment of USD 15 billion is required on energy efficiency initiatives in India.Shinde said that in order to improve confidence among the financial institutions, a robust energy audit system has been created.He added that a Partial Risk Guarantee Fund and Venture Capital Fund are being created for boosting investments in the area of energy efficiency and a National Mission on Enhanced Energy Efficiency has been approved.Shinde is on a five-day visit to the USA, which aims at enhancing cooperation between the two countries in the power sector.He will also go to New York, where besides addressing the press conference organised by the Counsel General of India, he will meet Chief Executive Officers of various organisations, organised by the United States-India Business Council (USIBC).He will also deliver the keynote closing address at the 8th Annual India Investment Forum.(PTI)
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Inviting investments from South Korea and other countries into the infrastructure sector, President Pratibha Patil on Tuesay said nearly $1 trillion will be spent in the coming years to improve India's roads, ports, railways and other core sectors."India attaches great importance to improving its infrastructure, for which about 1 trillion US Dollars will be required in the coming years."This provides a great investment opportunity for foreign companies, including those from Korea," Patil, who is on a three-day visit to South Korea said."In expanding and modernising our roads, highways, airports, sea ports and railways, we will require investment from foreign entities and firms."We look forward to greater participation in this endeavour by Korean companies," she said inaugurating a business interaction organised by Korea Chambers of Commerce."To us, in India, the Korean economic miracle is inspiring. It was the hard work of the people of this country, coupled with the successful business model that was adopted, which has created the incredible economic success that the Republic of Korea today represents."In India too, you spotted the economic opportunities long before others, and this first-mover advantage has enabled Korean companies to reap great profits in our country."Hyundai, Samsung and LG are household names in India today," the President said. Patil said that both India and Korea are exploring the possibility of upgrading the Comprehensive Economic Partnership Agreement (CEPA), implemented since January 2010, to boost trade between them.A high-level discussion in this regard is to begin in late September."Korean companies have adjusted extremely well to conditions in India. You are also making India the manufacturing hub for exports to third countries in South Asia, the Middle East and even Eastern Europe."Our bilateral trade rose by 40 percent last year, and by current projections is slated to reach 21 billion US Dollars during the current calendar year, and would comfortably reach the level of 30 billion US Dollars by 2014, the target we have set for ourselves."President Lee and I discussed the possibility of further upgrading our CEPA," the President said adding that ?expert level discussions will commence from late-September this year."The Indian President asked the North-East nation to further facilitate exchange of expertise between the two countries in industry and service sectors."Our IT companies are among the best in the world, and will be able to help Korean businesses in reducing costs and enhancing competitiveness."Similarly, Indian pharmaceuticals are of high quality coupled with low prices, and will be beneficial to Korean consumers," Patil said.The function was attended by members of Korean Chambers of Commerce and a delegation of about 30-members led by Deep Kapuria, Chairman, CII, National Committee on Automatation and Robotics.(PTI)
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Reliance Industries, India's largest listed firm, posted a 16.7 per cent rise to its highest ever quarterly net profit, but just missed analysts' estimates as slowing gas production weighed on results.Reliance, with interests in refining, petrochemicals, oil and gas exploration and retail, said strong refining margins drove the growth but was offset by lower oil and gas production, which analysts have said may cloud its growth outlook in coming quarters."The street may be disappointed with the lower-than-expected core profit numbers. Profitability from now on will largely be a function of the petrochemicals and refining margins," said Deepak Pareek, oil and gas sector analyst at brokerage Prabhudas Lilladher.In May, India's upstream regulator said Reliance was producing 48 mscmd (million standard cubic metres per day of gas) from its main D6 block in the KG basin off India's east coast, lower than the 60 mscmd it produced last year, and far off the planned peak capacity of 80 mscmd.Reliance has been under fire over the past few months from the upstream regulator, investors and analysts over the slowing gas output, and its shares have been under pressure.On Friday, India's cabinet approved Reliance's plan to sell a 30 percent stake in 21 oil and gas blocks, instead of the 23 originally planned, to BP as part of a $7.2 billion deal.Reliance, controlled by billionaire Mukesh Ambani, the world's ninth-richest man, is looking to expand beyond its core businesses into telecom and financial services, and last month said it planned to invest aggressively in retail.The company said April-June net profit rose to 56.61 billion rupees ($1.28 billion) from 48.51 billion rupees a year ago.This included other income of 10.78 billion rupees in the latest fiscal first quarter.A Reuters poll of brokerages had forecast quarterly net profit of 57.2 billion rupees.Reliance, which operates the world's biggest refining complex in western India, saw gross refining margins in its fiscal first quarter rise to $10.3 per barrel from $7.3 a year ago, and $9.2 in the previous quarter.Shares in Reliance, valued by the market at $64.4 billion, have declined nearly 17 percent so far in 2011, contributing significantly to the comparative 8 percent fall in the main index, in which the stock has the heaviest weight. (Reuters)
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Coal India, the world's largest coal miner, is seeking approval from the Indian government to buy a 30 per cent stake in a coal asset in Indonesia, its chairman said on Monday, but declined to give specific details on the possible investment.The company has been in advanced talks with Indonesia's Golden Energy Mines to buy stake in its assets in a deal that could be worth as much as $1 billion, sources had told Reuters in May."In foreign investments, IRR (internal rate of return) of 12 per cent is not feasible. So we have sought to know whether this guideline for domestic investments still holds for foreign investment," Coal India Chairman N C Jha told reporters.(Reuters)
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