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The Reserve Bank of India said on Wednesday banks can exempt some foreign currency non-resident bank (FCNRB) deposits and non-resident external (NRE) rupee deposits when calculating their cash reserve and statutory liquidity ratios. The RBI said in a statement that starting from the bi-weekly cycle starting on 24 August, incremental three-year foreign FCNRB and NRE deposits with reference base dates of 26 July and above will be exempted from the cash reserve and statutory liquidity ratios. The cash reserve ratio is the proportion of cash deposits banks have to keep with the central bank in cash and the statutory liquidity ratio is the proportion that lenders must buy into government securities. The RBI also said it raised interest rates on longer-term deposits accounts held by non-residents. On foreign currency non-resident bank (FCNRB) accounts with maturities of 3-5 years, the central bank said it raised the interest rate ceiling to LIBOR plus 400 basis points from LIBOR plus 300. The RBI removed the ceiling on interest rates on non-resident external rupee deposits with maturities of three years and above. (Reuters)
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India imposed restrictions on foreign exchange outflows and gold imports on Wednesday, 14 August, in a new attempt to prop up the rupee, as a spike in inflation added pressure on policymakers to curb a crippling external deficit. Finance Minister P. Chidambaram also reiterated his pledge to narrow the current account deficit - the main source of the rupee's weakness - to 3.8 per cent of gross domestic product this fiscal year and said the currency would not be allowed to slide into "free fall". The Reserve Bank of India's latest steps to support the currency, which has plumbed record lows against the dollar, included cutting the amount of overseas direct investments allowed by Indians. Those investments reached $3.2 billion in July, according to central bank data. Separately, the central bank banned imports of gold coins and bars, which constituted about 36 per cent of total billion demand in India last year, and will require domestic buyers to pay cash for the yellow metal, among other measures. "This is obviously an extreme action, but these are extraordinary times and require extraordinary measures," said Sujan Hajra, chief economist of brokerage Anand Rathi in Mumbai. The steps came as data showed the headline inflation rate jumped above the central bank's target range of 4 to 5 per cent in July for the first time since March, making it even harder for the bank to refocus on supporting India's slowing economy. The Indian authorities fear continued falls in the rupee will exacerbate the current account deficit in the short term, deter investment and further curb growth in Asia's third-largest economy. Central bank action to tighten rupee liquidity in mid-July and other steps have failed to halt the slide in the currency, which set new record lows on 6 August. Chidambaram sought to address scepticism in financial markets since he first announced on Monday his target to cut the current account deficit to $70 billion, or 3.8 per cent of GDP, from a record high 4.8 per cent in the year ended in March. Proposals announced on Tuesday to raise duties on gold and silver imports in a bid to curb demand have also failed to convince investors, who believe stronger measures are needed. "I make a commitment on the current account deficit on behalf of the government. We will leave no stone unturned to contain the current account deficit at about $70 billion," Chidambaram told lawmakers on Wednesday. "We cannot allow the rupee to go into a free fall." The partially convertible rupee slipped to 61.45 per dollar on Wednesday. It is down 2.5 per cent since the RBI launched its major support effort on July 15, which included raising short-term interest rates. However, the RBI on Wednesday also sought to ease some of the liquidity constraints at banks by exempting some requirements on the types of cash and government securities lenders must keep with the central bank. Chidambaram also said that the central bank's mandate must include growth and employment, while Arvind Mayaram, economic affairs secretary, told reporters that any measures put in place would not be permanent. "As and when we believe that the speculative pressure on the rupee is easing and the rupee is finding its stable environment, then the Reserve Bank of India and the government of India will revisit these restrictions and take an appropriate decision," Mayaram said. Traders had previously criticised mixed signals from government and central bank officials, saying it raised doubt about their resolve and contributed to the rupee's weakness. Ugly InflationIndia's headline inflation rate, measured by the wholesale price index, accelerated to 5.79 per cent annually in July from 4.86 per cent in June, data showed on Wednesday. With fears growing that India is headed into a phase of slowing growth and high inflation, 10-year bond yields surged to as high as 8.55 per cent, their highest in more than a year. Analysts said the bad news on inflation, particularly on prices for imported oil prices, was due in part to the rupee losing 12 per cent against the dollar since the start of May and higher food prices. "The July print for headline inflation is very ugly," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai. "Despite an acute slowdown in domestic demand, the manufacturing prices have remained elevated due to rising input costs on account of massive depreciation of rupee." The need to bolster confidence has become more pressing. Foreign investors have sold a net $11.6 billion in debt and equities since late May, a bad omen given markets could weaken more when the US Federal Reserve rolls back its monetary stimulus. Ultimately, analysts say Prime Minister Manmohan Singh's minority government will need to implement bolder reforms to restore the economy, notably by improving the investment climate and expediting infrastructure projects. Whether they can do so remains in doubt, given the government faces political gridlock ahead of general elections due to be held by May 2014. (Reuters)
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State utility NTPC will seek another 4 million tonnes of thermal coal shipments in this financial year, following its current tender to import 5 million tonnes of the dry fuel to bridge an expected shortfall in local supplies.NTPC, India's top power producer with an installed capacity of 41,184 megawatts, has an annual import need of 16 million tonnes of coal in the year to March 2014, up 65 per cent from a year ago, when delays in awarding contracts trimmed shipments.NTPC could not import its estimated 16 million tonnes of coal last fiscal year "because of some procedural problem," said an NTPC official, who did not wish to be identified.It is, however, open to importing more if there is a compelling opportunity in this fiscal year, the official said."If we are able to get a good price, if everything is fine, if it goes our way, may be we will import more. Why not?"Coal fuels more than half of India's power generation, but domestic production has not kept up with demand from the power sector, leading to power cuts that crimp growth and result in costlier imports.The power producer is seeking a total of 5 million tonnes of thermal coal through seven tenders for supplying its various power stations spanning the country, for which last date for submission of bids is 6 September, the official said.These are on top of the 7 million tonnes of the fuel that is being delivered to the power producer since April.Shortfall"We plan to import 16 million tonnes of coal in 2013-14, which works out to around 28 million tonnes equivalent after adjusting for the higher energy value of imported coal," said the official.India produces mostly low-grade thermal coal with high ash content. About 70 per cent of the fuel Coal India produces has an energy value of 4,300 Kcal/kg or lower.NTPC requires 178 million tonnes of coal this fiscal year to fuel its generators, said the official. Of this, it expects to source 145 million tonnes locally, signing agreements with Coal India, which produces around 80 per cent of the country's coal.This along with the 16 million tonnes of imported fuel - equivalent to 28 million tonnes of local coal - leaves a fuel shortfall of 5 million tonnes for the power producer."We plan to get the balance 5 million tonnes from e-auction and from our own mine in Pakri Barwadih in this financial year," the official said, referring to Coal India's spot sales and NTPC's captive coal block in the North Karanpura Coalfields in the northeastern Jharkhand state.For the current tender, only shipments with below 32 per cent moisture, 20 per cent ash and 0.90 per cent sulphur, with gross calorific value in the range of 5,300-5,800 Kcal/kg would be considered, the tender document on its website showed.Successful bidders will need to deliver the coal from port to several NTPC power stations across India, the official said.NTPC said it expected the successful bidders to supply the coal within four months of it issuing the delivery schedule.India's coal imports in this fiscal year could hit 165 million tonnes to meet the local supply shortfall, another record after total imports crossed 135 million tonnes in 2012-13.(Reuters)
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Indian Oil Corp will start work on its first liquefied natural gas (LNG) plant at Ennore in the east coast by the end of this year, its chairman said on Tuesday, as it sees a gradual rise in local acceptance of the costly imported fuel.State refiners IOC, Hindustan Petroleum Corp and Bharat Petroleum, also major gas users, have all unveiled plans to build LNG plants as local gas output falls, which will increase the share of the costly imported fuel in India's energy mix.India's gas demand will rise to 466 million cubic metres a day (mcmd) in 2016-17 from 286 mcmd in 2012/2013, according to the government estimates, while its supply will be only half that.IOC, India's biggest retailer of fuel for transport and industrial uses accounting for half of demand, aims to supply clients who want to replace fuel oil and naphtha with gas, R.S. Butola told a news conference."When it comes to a fully-grown (mature) market, who has got better spread than Indian Oil? ... In the long term there should be much wider acceptance of market prices for gas," Butola said.The government in June took the unpopular step of raising domestic gas prices from April and linking them to global LNG benchmarks after keeping them frozen for three years.IOC is in process of tying up customers for the Ennore LNG terminal, which is likely to be ready in 2016/17, said its head of business development, A.M.K. Sinha. IOC is in talks with global firms including Russia's Gazprom to source gas for the Ennore plant, he added."We are in discussion with potential customers like Madras Fertiliser, Chennai Petroleum and some auto industries in the region. Day by day we are increasing our list," Sinha said.IOC has also signed an initial deal with Dhamra Port Ltd to build a 5 million tonne/year LNG plant in eastern Orissa state.It could annually use 2.5 million tonnes of LNG from the Orissa terminal for its planned 300,000 barrels per day Paradip refinery and its existing Haldia and Barauni refineries, Sinha said.IOC along with subsidiary Chennai Petroleum Corp controls about 31 per cent of the national refining capacity of 4.3 million bpd.HPCL's head of finance, K.V. Rao, also said his firm would replace naphtha and fuel oil at its two refineries with gas from its planned terminal in western Gujarat state.(Reuters)
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Gold edged between gains and losses on Wednesday as investors fretted over the timing of the US Federal Reserve's stimulus tapering. The choppy trade followed a 1 per cent fall on Tuesday, 13 August, which ended a four-day winning streak. The drop was caused by strong US economic data and further import curbs in top buyer India.Uncertainty over when the Fed would begin scaling back its massive bond purchases has pushed gold down more than 20 per cent this year after 12 annual gains."What would be extremely welcome is some clarity," said analyst Dominic Schnider of UBS Wealth Management in Singapore. "And I think September would be the ideal time to provide clarity. Some market expectations are shifting towards a December tapering."The US economic performance remains too mixed for Fed policymakers to lay out a detailed path for reducing and eventually halting their asset-purchasing next month, Atlanta Fed President Dennis Lockhart said on Tuesday.But he appeared open to at least a modest pullback in monetary stimulus from its current pace of $85 billion per month."Once the taper is out, it will hit gold once more," said Schnider, though likely not to the same extent as drops earlier this year.Spot gold inched up 0.06 per cent to $1,321.42 an ounce by 0304 GMT.The next Fed meeting is scheduled for September 17-18. Until then, markets will scrutinise data to gauge the strength of economic recovery.US retail sales rose in July, data showed on Tuesday, pointing to an acceleration in consumer spending that could bolster the case for a Fed tapering.India CurbsIndia hiked the import duty on gold yet again on Tuesday to a record 10 per cent and also raised excise duty on the metal, after imports jumped in July despite attempts to strangle supply and curb demand as the government tries to rein in dollar spending.Gold prices in India are likely to rise this week, extending gains past their highest level in four months, due to the import duty hike and dollar weakness.Read Also: Import Duty Hiked On Gold, Silver To 10 Per Cent"Despite the expectations that gold imports may fall, India's appetite for bullion is anticipated to pick-up later in the year due to seasonal demand," HSBC analysts wrote in a note.Analysts say this could increase further illegal gold supply into India.(Reuters)
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GVK Power and Infrastructure posted a net loss in its June quarter, weighed down by sluggish investments on infrastructure in a slowing economy and higher interest payments on outstanding debt.The company posted a net loss of Rs 30.59 crore in the quarter, compared with a loss of Rs 64.30 crore a year earlier. Net sales fell 14.5 per cent to roughly Rs 700 crore.The company had been expected to post a loss of Rs 110 crore, according to an estimate of two analysts tracking the company.Like its peers in the power sector, GVK has grappled with fuel shortages for its power plants, while its highway construction business has been hit by environmental clearance hurdles.Overseas, GVK's $10 billion coal mining project, which is a joint venture with Australian mining magnate Gina Rinehart's Hancock Coal, has been delayed to 2016.(Reuters)
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Stepped up efforts by Indian Finance Ministry to check revenue leakage have resulted in a detection of evasion of over Rs 2,158 crore in direct and indirect taxes in the last quarter of 2012-13.The detection came through a unique initiative of online monitoring system of suspicious transactions, named 'Virtual Office', which was set up by the ministry earlier this year for real-time coordination among revenue intelligence agencies and dissemination of various inputs pertaining to movement of illegal funds.The Central Board of Direct Taxes (CBDT) has detected unaccounted income and assets of Rs 1,408 crore using this platform.The Directorate General of Central Excise Intelligence (DGCEI) and Directorate General of Revenue Intelligence (DGRI)--two leading agencies under the Central Board of Excise and Custom (CBEC)--have together detected indirect tax evasion of at least Rs 750 crore, according to an official document.These agencies, which are part of the Virtual Office programme, detected the evasion after following up the leads in form of Suspicious Transaction Reports (STRs) passed on to them by Financial Intelligence Unit (FIU)--an agency tasked with analysing and disseminating information relating to dubious financial exchanges.Both DGCEI and DGRI have also effected a recovery of Rs 46.71 crore, on the basis of the STRs generated by the FIU, through Virtual Office. The CBDT has seized assets worth Rs 21 crore, the document said.An STR is a transaction of Rs 10 lakh and above believed to be proceeds of crimes including drug trafficking and black money.The Virtual Office was set up in January to monitor the feedback on the STRs disseminated by FIU-Ind, which is also providing administrative support to it.(PTI)
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The rupee gained modestly on Monday, 12 August after another salvo from the Reserve Bank of India (RBI) to support it by tightening the money supply, but it is seen stuck near record lows unless there are genuine efforts to cut the current account deficit. The RBI will auction Rs 11,000 crore in cash management bills on Monday, part of its new plan to auction a total of Rs 22,000 crore of bills every week to drain funds from money markets. The idea is if the supply of rupees tightens it will create demand for the currency, which fell to a record low of 61.80 per dollar last week. That would also buy some time for the government to try to address some long-term pressures. Expectations are high that Finance Minister P. Chidambaram will announce measures to draw in foreign inflows as early as Monday, geared towards narrowing a record current account deficit that is the key source of pressure on the rupee. The steps could include raising money from Indians abroad, easing overseas borrowing rules for companies, or spurring state-run companies and lenders to raise money overseas. "It takes two to tango," said Jyotheesh Kumar, an executive vice president at HDFC Securities in a note to clients. "Both the Reserve Bank of India and the government of India are likely to act in tandem this week to shore up the ailing rupee," he added. Trade, industrial output and consumer prices data are due on 12 August as well, and are expected to reinforce concerns about growth running at its weakest in a decade at a time of high inflation. Bond Yields RiseThe partially convertible rupee rose to as much as 60.45 per dollar on Monday, 12 August compared to its close of 60.88/89 on Thursday, although it was last trading at 60.72. Financial markets were closed on Friday, 9 August for a holiday. The modest gains follow the RBI's announcement of the sales of cash management bills after the market close on Thursday (8 August) -- its third set of measures over the past month which have also included raising short-term interest rates. But investors want India to tackle longer-term fiscal and economic reforms, such as raising fuel prices, and are yet to be convinced that the central bank's strategy is sustainable, raising the prospect of higher borrowing costs in the near term. The benchmark 10-year bond yield was up 8 basis points to 8.20 per cent on Monday, and is up about 70 basis points since the RBI's first round of action on 15 July. Bringing in foreign flows will be key to stabilising market confidence in the near term, analysts said. India has traditionally restricted foreign-currency borrowings to prevent a build-up in foreign-exchange liabilities, and a more relaxed approach may trigger a dramatic spike in overseas bond offerings. (Reuters)
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Ireland's CRH, one of the world's largest building materials providers, is set to buy a controlling stake in India's Sree Jayajothi Cements Ltd for about $250-$300 million, two sources with direct knowledge of the matter told Reuters.Sree Jayajothi Cements, a unit of the Shriram Group, has a 3.2 million-tonne cement plant in Andhra Pradesh. The deal could be announced as early as on Monday, 12 August, said the sources, who declined to be named.CRH will buy Sree Jayajothi Cements through its Indian unit, My Home Industries, the sources said.Shriram Group, which has interests in the financial, power, infrastructure, construction and real estate sectors, did not have an immediate comment, while officials at My Home Industries were not available.Indian boutique investment bank Mape Advisory advised Shriram Group on the transaction, one of the sources said.Shriram Group was said to have had talks earlier with investors including Blackstone Group and KKR for selling its stake in the cement business.(Reuters)
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Mexico is pushing to double crude oil exports to China next year and boost India-bound shipments, the next stage of a long-term plan to diversify oil sales away from an increasingly energy-independent United States.Mexico is also open to importing light crude supplies from the United States, the country's top oil trade executive said in an interview, a sign that the world's No. 10 oil producer may be ready to give up decades of total crude oil self-sufficiency in order to take advantage of a growing glut of U.S. shale oil."We expect to market increasing volumes of our crudes" to both China and India, said Luis Felipe Luna, CEO of P.M.I. Comercio Internacional, the international oil trading arm of Mexico's state oil monopoly Pemex.Crude oil shipments to China, which have risen from zero in 2010 to more than 20,000 bpd so far this year, will reach a yearly average of 30,000 barrels per day (bpd) but could more than double in 2014, said Luna.Exports to India already stand at nearly 100,000 bpd but are likely to increase in the short and medium term, he said in a rare interview this week. In total, Asia could be taking as much as a fifth of Mexico's 1.1 million bpd of exports.The United States is still by far Mexico's largest oil export partner, but shipments have halved since 2006 to less than 850,000 bpd this year, according to US government data, the lowest rate in two decades due to both declining Mexican production and rising US output.(Reuters)
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