Builder Chandru Raheja, sons in land scam

EOW files charge-sheet on industrialist Wadia complaint

MUMBAI: In a sensational case, the Economic Offences Wing of Mumbai Police has filed a charge sheet against well known builder Chandru Raheja along with his sons in a cheating case involving a land development deal.

The Economic Offences wing of the Police said they filed the case against Chandru Lachmandas Raheja, Neil Chandru Raheja and Ravi Chandru Raheja  in connection with alleged cheating and breach of trust.

The facts of the case as listed in the charge-sheet are: Mr. Nusli N. Wadia, the Administrator of “The Estate and Effects of The Late Eduljee Framroze Dinshaw in India” executed Development Agreement & Power of Attorney dated 02/01/1995 with Chandru Lachmandas Raheja’s “Ivory Properties and Hotels Pvt. Ltd. for development of properties under his possession.

As per the said Development Agreement, the Administrator had handed over possession of land admeasuring 1,70,656 sq ft to the accused as Agent for development of the land.

The Accused were to construct building called as Ivory Tower and give 12% of sale proceeds from the sale of the building to the Administrator. Further, as per the Development Agreement, the accused were to pay sum of Rs. 3.75 crores to the Administrator as minimum guarantee during the year 1997 and sell the units to “third parties”.

The accused, however, misrepresented that the administrator relinquished his rights over the land and prepared 9 release deeds. Thereafter, during the year 2005-2006, the accused constructed Hypercity Mall on the said land and did not disclose with malafide intentions the same to the Administrator.

Thereafter, under a “conducting agreement”, the accused gave the contract for running the Hypercity mall to their own company – Hypercity Retail India Pvt. Ltd. for monthly rental of Rs. 45 lakhs thereby cheating the Administrator for a sum of Rs. 6,87,06,835.

Hence, the accused i.e. Chandru Lachmandas Raheja, Neil Chandru Raheja and Ravi Chandru Raheja have been charged for crimes conducted under sections 406, 409, 420, 120(B) of Indian Penal Code, the charge sheet said.

Inflation on mind, RBI ups repo rate by 25 bps

The Reserve Bank of India has decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.25 per cent to 7.5 per cent with immediate effect.

In its monetary policy review, the first since new Governor Raghuram Rajan assumed office, RBI has also decided to reduce the marginal standing facility (MSF) rate by 75 basis points from 10.25 per cent to 9.5 per cent with immediate effect and to reduce the minimum daily maintenance of the cash reserve ratio (CRR) from 99 per cent of the requirement to 95 per cent effective from the fortnight beginning September 21, 2013, while keeping the CRR unchanged at 4.0 per cent; and  

Consequently, the reverse repo rate under the LAF stands adjusted to 6.5 per cent and the Bank Rate stands reduced to 9.5 per cent with immediate effect. With these changes, the MSF rate and the Bank Rate are recalibrated to 200 basis points above the repo rate.

In its assessment of the monetary situation, RBI said since the First Quarter Review (FQR) in July, a weak recovery has been taking hold in advanced economies, with growth picking up in Japan and the UK and the euro area exiting recession. However, activity has slowed in several emerging economies, buffeted by heightened financial market turbulence on the prospect of tapering of quantitative easing (QE) in the US. The decision by the US Federal Reserve to hold off tapering has buoyed financial markets but tapering is inevitable.

On the domestic front, RBI pointed out, growth has weakened with continuing sluggishness in industrial activity and services. The pace of infrastructure project completion is subdued and new project starts remain muted. Consumption, while relatively firm so far, is starting to weaken even in rural areas, with durable goods consumption hit hard. Consequently, growth is trailing below potential and the output gap is widening. Some pick-up is expected on account of the brightening prospects for agriculture due to kharifoutput and the upturn in exports. Also, as infrastructure investments are expedited, and as projects cleared by the Cabinet Committee on Investment come on stream, growth could pick up in the second half of the year.

Sounding a note of caution on WPI inflation, which had eased in Q1 of 2013-14, RBI said it has started rising again as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices.

The negative output gap will exercise downward pressure on inflation, and the process will be aided as supply side constraints, especially relating to food and infrastructure, ease. However, the current assessment is that in the absence of an appropriate policy response, WPI inflation will be higher than initially projected over the rest of the year. What is equally worrisome is that inflation at the retail level, measured by the CPI, has been high for a number of years, entrenching inflation expectations at elevated levels and eroding consumer and business confidence. Although better prospects of a robust kharif harvest will lead to some moderation in CPI inflation, there is no room for complacency, RBI said.

Turning to the external sector, the central bank said, weakening domestic saving, subdued export demand and the rising value of oil imports - most recently due to geopolitical risks emanating from the Middle East - have led to a larger current account deficit (CAD). Concerns about funding the CAD, amplified by capital outflows precipitated by anticipated tapering of asset purchases by the US Federal Reserve, increased volatility in the foreign exchange market. More recently, as these concerns have been mitigated after steps taken by the Government and the Reserve Bank to contain the CAD and improve the environment for external financing, the focus has turned to internal determinants of the value of the rupee, primarily the fiscal deficit and domestic inflation.

Policy Stance and Rationale

Since mid-July, the Reserve Bank has put in place a number of exceptional measures to tighten liquidity with a view to dampening volatility in the foreign exchange market. These measures have raised the effective policy rate for monetary policy operations to 10.25 per cent, aligned to the re-calibrated MSF rate. The intent has been to maintain tight liquidity conditions at the short end of the term structure until the measures designed to alter the path of the CAD and improve prospects for its stable funding take effect. As a number of these measures are now in place and because the external environment has improved, it is now possible for the Reserve Bank to contemplate easing these exceptional measures in a calibrated manner. As a first step, therefore, the MSF rate is reduced by 75 basis points. Furthermore, the minimum daily maintenance of the CRR prescribed by the Reserve Bank is brought down from 99 per cent of the requirement to 95 per cent. The timing and direction of further actions on exceptional measures will be contingent upon exchange market stability, and can be two-way. Further actions need not be announced only on policy dates. However, any further change in the minimum daily maintenance of the CRR is not contemplated.

As the measures are unwound, the objective is to normalise the conduct and operations of monetary policy so as to allow the LAF repo rate to resume its role as the operational policy interest rate. However, inflation is high and household financial saving is lower than desirable. As the inflationary consequences of exchange rate depreciation and hitherto suppressed inflation play out, they will offset some of the disinflationary effects of a better harvest and the negative output gap. The need to anchor inflation and inflation expectations has to be set against the fragile state of the industrial sector and urban demand. Keeping all this in view, bringing down inflation to more tolerable levels warrants raising the LAF repo rate by 25 basis points immediately.

The Reserve Bank will closely and continuously monitor the evolving growth-inflation dynamics with a readiness to act pre-emptively, as necessary. The policy stance and measures set out in this review begins the process of cautious unwinding of the exceptional measures, which will restore normalcy to financial flows. They are also intended to address inflationary pressures so as to provide a stable nominal anchor for the economy, thereby mitigating exchange market pressures and creating a conducive environment for the revitalisation of sustainable growth, RBI explained.

Concept PR forays into CSR consultancy - a 1st in PR industry

·        Sets up Concept CR to work with corporates on customized, focused CSR projects

·        To Ideate, Identity, Initiate, Implement and work on Impact Check and Image Building

Call +919820128332 or +919320048332

MUMBAI: In a first in India’s Public Relation consultancy business, Concept PR has announced the launch of its CSR wing called Concept Community Relations (CR).

“With the new Companies Act making it mandatory for corporates to make CSR spend of at least 2% of their net profits, we expect that the community and social development landscape to witness a sea change. This also offers a huge opportunity for corporates to give back to the society,” Mr. Vivek Suchanti, Chairman and Managing Director of Concept Group, said.

Vivek Suchanti

Said Mr. B N Kumar, Executive Director of Concept PR who heads Concept CR initiative: “We have been advising companies on the need to concentrate on CSR as part of their social obligation rather than looking at it as a tax saver. We are now initiating an entire new division which will advise clients with a 360-degree approach on CSR.”

Concept CR will not only rope in select NGOs after a careful scrutiny, but also work on creative and unique ways of making the CSR spend meaningful. “BNK’s team, with their vast experience can identify the right CSR project or even customize it to suit a particular company’s business,” Mr. Suchanti explained.

Apart from CSR, the bouquet of consultancy services that Concept PR offers include: Corporate Communication, Media Relations, Investor relations, Crisis Management, Media Training, Capital  Market practices, Internal Communication, Sports and Event Communication, Brand and Image Building, Roadshows and the new age Online Reputation Management and Social Media.

As per the new Companies Bill that has received Parliament’s seal of approval, Section 135 stipulates: “Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.”

BNK

The CSR Committee will also have to formulate policy and monitor the implementation and report back to the Board of Directors.

“The Board ….shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy,” the Bill says.

The Act also stipulates that companies will have to give priority to local areas where they operate from, which makes it imperative for them to focus on local needs. The Act, thus, seeks to ensure an all round development of the geographies around a corporate entity.

Over the past decade or so, Concept PR has grown into a pan-India consultancy with ten offices and 40 associates understanding the local centric communication needs – be it linguistic or cultural. “Since we understand the local soil and the social pulse, we are better equipped to design and execute need-based and unique CSR projects,” said Mr. Kumar.

Under its service offerings, Concept CR will Ideate with client’s CSR teams to Identify, Initiate, Implement and Impact Check of the projects, apart from Image Building.  

Since the Boards of Directors are accountable for every rupee that is spent, CSR activities may have to form part of the annual reports, much like the section on Corporate Governance. In the new, emerging transparency regime CSR spend will be most visible investment and the impact will therefore play a major role in a Company’s image, Mr Suchanti explained.

Formulating a CSR policy that fits into a particular company’s scheme of things will be a big challenge as the Companies Bill that has been passed by both the houses of Parliament and will shortly become an Act since the Presidential assent is imminent. 

Concept PR is a leading PR and IR consultancy in the country with major clients spanning sectors like BFSI, infrastructure, real estate, power, aviation, transport, education, retail, tourism, lifestyle, entertainment, sports, textiles, gen and jewelry, health care amongst others. The agency is in a unique position to understand a corporate’s needs, mission and vision and above all the responsibilities of a Corporate Citizen.

“This is not going to be just another spend or a matter of routine communication exercise. Companies will have to take it very seriously and we are happy that we have geared up to meet the new challenge,” Mr. Kumar added.

RSBL: Leading the bullion juggernaut in India

By A Special Correspondent

The bullion market in India is an index that signifies the economic growth of the country. It indicates the amount of wealth the country possesses. Valued by its purity and mass, bullion is the bulk quantity of precious metals comprising gold, silver and platinum that can be assessed by weight and cast as a lump.

India is one of the biggest consumers of gold in the world. People in India buy gold not only for ornamental purpose but also as an investment option. In fact, investment in gold has always been a source of profits to everyone in the long term. People are always willing to invest in gold bullion.

RiddiSiddhi Bullions Limited (RSBL) is a leading company in India which deals in bullion, specialising in bars and coins of various precious metals like gold, silver and platinum. Being a company which facilitates investment in precious metals, RSBL endeavours to combine its technical and market experience with hard work and dedication to provide people the ability to make informed investment decisions.

RSBL holds the largest variety of bullions and coins across India. The company’s commitment to excellence in customer service is evident in all facets of its business. RSBL's success is based on customer trust and respect backed by its highly valued staff and best quality products with modern trading mechanisms.

In a short period of time, RSBL has managed to become one of the leading players in the bullion industry. It has been among the market leaders in providing wholesale and retail level bullion delivery in the spot markets in India. Today, RSBL is India’s largest bullion trading company with a credit rating of SME 1 from CRISIL Ltd – the highest rating on the SME rating scale.

RSBL has successfully launched various products on the back of its expertise, brand equity and vast experience in the market. The company’s flagship product ‘RSBL SPOT’ is India’s first fully electronic over-the-counter (OTC) delivery based bullion-trading system and arguably the most successful in the world. It has more than 3000 online clients and numerous delivery centres across India. Over 90% of its bullion sale takes place through RSBL Spot.

As an extension to RSBL SPOT, RSBL has introduced an eCoins system – ‘RSBL eCoins’. This is a B2B system, wherein which one can buy or sell gold and platinum coins/bars as per competitive market price in Indian rupees. It has created new inroads in online distribution and pricing system for coins in India. This is one of the fastest growing products in the company’s portfolio.

RSBL also continues to run its successful classic model of retail coin distribution and it is a leader in that via ‘RSBL Coins’ - Pure Gold, Silver & Platinum Coins/Bars. Available in different shapes and sizes to meet individual requirements, these coins can also be customised to meet gifting/corporate requirements.

RSBL's ‘Optionally Convertible Debentures (OCDs)’ is a innovative product, which takes advantage of the price differences between gold spot/forward and futures prices of the commodity. The product has consistently provided investors with a return of over 15% per annum since its launch in 2007.

RSBL’s 'Bullion++' is another revolutionary product that provides investors with an opportunity to earn dual income: from an anticipated price appreciation and from lending income. Furthermore, investors need not worry about purity, storage charges, theft and insurance hassles. Investors can also choose non-lease model where the bullion is just stored.

Prithviraj Kothari, Director of RSBL, can be credited for the development of the gold, silver and bullion industry in India. Known as Bullion Man in the bullion market in India, Prithviraj Kothari has played a vital role in the introduction of gold ETFs in India. Under his vision, RSBL has successfully launched India's first and only electronic over the counter bullion trading system, RSBL SPOT.

Under his direction, RSBL has consistently been ranked amongst the top 10 unlisted public companies in India by Business Standard 1000.

Trimax plans IPO, files DRHP with SEBI

MUMBAI, July 31, 2013: Integrated IT services company Trimax Infrastructure 

& Services Limited (‘The Company”) has filed its Draft Red Herring Prospectus (DRHP) with the market regulator SEBI for a public issue of 13,050,000 equity shares of the face value of Rs 10 each through book building process, within a price band to be decided subsequently.

The issue consists of a fresh issue of 6,050,000 Equity Shares and offer for sale of 7,000,000 Equity Shares.

SBI Capital Markets Limited and Anand Rathi Advisors Limited are the book running lead managers to the issue.

Under the offer for sale portion of the issue,  certain shareholders of the Company, namely Aditya Birla Trustee Company Private Limited, trustee of Aditya Birla Private Equity Trust A/c Aditya Birla Private Equity- Fund I, BanyanTree Growth Capital LLC, Pratik Technologies Private Limited, Shrey Technologies Private Limited, ZP India Advisory Private Limited, trustee of ZP II Trimax Co-Investment Trust and ZPII Trimax Limited  have offered Equity shares aggregating to 7,000,000 Equity Shares.

Of the public issue, 6,525,000 Equity Shares will be  available for allocation to  Qualified Institutional Buyers , and not less than 1,957,500 Equity Shares and 4,567,500 Equity Shares, will be available for allocation to Non Institutional Bidders and Retail Individual Bidders, respectively. The company proposes to use the proceeds from the fresh issue for procurement of hardware, software and other equipment and for general corporate purposes

The Company provides a wide range of IT solutions and services including IT infrastructure services and turnkey solutions (coupled with on-site support across India), data centre services and cloud computing services.

The Company is proposing, subject to receipt of requisite approvals, market conditions and other considerations, to make an initial public offering of its equity shares and has filed a DRHP with the SEBI. The DRHP is available on SEBI website at www.sebi.gov.in as well as on the website of the book running lead managers at www.sbicaps.com and www.rathi.com. Investors should note that investment in equity shares involves a high degree of risk and for details relating to the same, see the section titled “Risk Factors” of the offer document.  Investors should not rely on the DRHP filed with the SEBI.

“This communication is not an offer to sell or a solicitation of any offer to buy the shares (the “Securities”) of Trimax IT Infrastructure & Services Limited (the “Company”) in the United States. The Securities are not being registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and may not be offered or sold in the United States (as such term is defined in Regulation S under the Securities Act) unless registered under the Securities Act or pursuant to an exemption from such registration. The Company does not intend to register the Securities under the Securities Act. Any offer of the Securities in the United States will only be made by means of an offering circular that will contain detailed information about the Company and the Securities, as well as financial information.”

IDBI Federal breaks even in Five years

• Posts maiden profit of Rs 9.24 crore

IDBI Federal Life Insurance has achieved break-even in 2012-13, its fifth year of operations. The company has reported a maiden profit of Rs 9.24 crore in 2012-13, thus making it one of the fastest to break-even in the Life Insurance industry. In an industry challenged by falling margins, shrinking new business volumes, high cost ratios and low profitability, this is a significant achievement.

IDBI Federal started its operations in March 2008 and is amongst the most successful start-ups in the Indian Life Insurance market. A pioneer in product innovation, IDBI Federal’s approach is very innovative and reflects a fresh way of looking at and thinking about life insurance. The Company’s innovative products with trademarked names such as WealthsuranceTM, IncomesuranceTM, RetiresuranceTM, etc have been well-received by its customers and have been an important contributing factor to its success.

IDBI Federal’s New Business Premium (APE) grew by 23% in 2012-13, which compares with the negative growth of -15% posted by the industry. The company also witnessed a 44% increase in the number of new business policies sold as compared to the previous year. IDBI Federal has also been driving profitability through the right product mix.

Mr Aneesh Khanna, Head Marketing & Product Management (right) congratulates
Mr G V Nageswara Rao, Company's MD & CEO on crossing the unique milestone

The product mix has continuously been shifted to long-term, traditional products. Share of traditional products in the new business premium increased to 83% as compared to 67% in the previous year. Share of regular premium products increased to 78% as compared to 69% in the previous year.

Mr. G V Nageswara Rao, Managing Director & CEO, IDBI Federal Life Insurance, said, “I am extremely happy to announce that IDBI Federal has recorded its maiden profit of Rs 9.24 crore in 2012-13. Achieving break-even in the fifth year is a significant landmark. We have pursued profitable growth as our company strategy. Our new business premium growth of 23% compares with negative growth of -15% reported by the industry. Our growth rate is one of the highest in the industry, with a large number of companies posting negative growth. What is even more satisfying is the fact that this achievement comes at a time when the entire Life Insurance industry is facing many challenges and growth is hard to come by.”

IDBI Federal has a healthy solvency ratio at 491% as against the regulatory requirement of 150%. Mr. Rao said, “I am delighted to say that IDBI Federal enjoys a comfortable solvency ratio to take care of its next phase of growth. As we have reached the profit-making state, we will not require any further capital infusion. Our AUM has moved up by 24% from Rs. 2,208 crores to Rs 2,732 crores during the current year.” IDBI Federal has paid-up share capital of Rs 800 crore.

The company recorded a 13th month persistency rate of 76% which is among the top 5 in the industry. In terms of 25th, 37th and 49th month persistency rates, IDBI Federal is among the top 3. IDBI Federal’s strong persistency record is testimony to the quality of its sales and the confidence the customers have shown in the company’s products and its investment performance. For the calendar year 2012, IDBI Federal’s Equity Fund raked No 1 in its investment performance among the 72 ulip funds in the industry against which it is benchmarked internally. IDBI Federal’s customer complaints, as reported by IRDA, is among the lowest in the industry.

A strong focus on cost discipline ensured a drop in IDBI Federal’s cost ratio from 26% in 2011-12 to 24% in 2012-13, which is among the lowest expense ratios in the industry.

IDBI Federal Life Insurance’s performance has been a result of its better than industry business growth, better persistency experience, more profitable product-mix, robust investment performance as well as lower cost ratio. In a fast-changing industry landscape, IDBI Federal was quick to realize the challenges and act on them. Today’s announcement validates its success in meeting these challenges.

“A customer centric approach is at the heart of IDBI Federal. We have introduced various measures to ensure that the policyholder’s interests are upheld at all times. We recognize the role of long term planning through life insurance and thus focus our efforts in selling regular premium long term products. Pre-Issuance calling to confirm all sales ensures that the customer is being sold the right product as per his needs. All this has resulted in value creation for the customer and is reflected in our high persistency rates. In fact, as a result, our customer complaints are also much lower than the industry average,” Mr. Rao said.

Mr. Rao added, “This performance is testimony to our constant focus towards innovation, offering tailor-made financial solutions that create value for our customers and help them to realize their dreams and aspirations. We entered as the 18th player in the industry and differentiation was the key to our success. Our approach of product branding is unique in the industry and has helped us achieve a strong mindshare among target audiences.”

Just Dial IPO aims to cash in on 10% retail discount, safety net

Huge discount to retail investors for the first time in any IPO

NEW DELHI, May 20: On the back of the largest discount of 10% for retain investors and the growing internet penetration in the country, local search engine Just Dial Limited hits the capital markets on today with its public offering targeting to raise Rs950 crores.

“This is for the first time that any company is offering such a huge discount of 10% at the lower price band,” said Mr Arun Kejriwal, director of KRIS. “What is also notable is the fact that Just Dial has set aside only 10% for retail subscribers, coupled with a safety net and this is bound to enhance retail investor interest in the issue,” he said.

Just Dial has already raised over Rs 208 crore through issue of shares to anchor investors, including Goldman Sachs and HSBC, by allocating 39.37 lakh shares to anchor investors at a price of Rs 530 per piece.

The anchor investors include Goldman Sachs India Fund, HSBC Bank (Mauritius) Ltd, Birla Sunlife Trustee Company Pvt Ltd, DSP Blackrock Opportunities Fund and Deutsche Securities Mauritius Ltd, the filing said.

The IPO would see promoters and other investors selling 17.49 million shares or 25.2 per cent of the paid up equity capital.

Post issue the promoters would have 33 per cent and the issue does not involve the company issuing fresh shares.

As per McKinsey & Company, India’s middle class, generally comprising people with  annual income range of Rs 200,000 to Rs 1,000,000, is expected to grow by over 10 times to approximately 583  million people by 2025.

According to Internet World Stats, as of June 30, 2012, Internet penetration was at 11.4% in India, compared to over 78.1% in the United States. There were approximately 137 million Internet users in India, making it the third largest population of Internet users after China and the United States. According to TRAI, the number of mobile subscribers in India is expected to exceed 1,000 million by 2014. With the growth projected for India’s middle class and for Internet and mobile usage in India, we believe our potential user base remains largely untapped and offers significant potential for growth.

Analysts say these augur well for search engines like Just Dial which also plans to expand its bouquet of services.

Citigroup and Morgan Stanley are the book-running lead managers to the issue and Justdial plans to list on the BSE, NSE and MCX-SX.

Recommending subscription to the IPO, GEPL Capital said, with its unique, un parallel business model & strong brand recognition Just Dial Is expected to maintain its dominant position in the local search market.

The company’s business model is “efficient as it promotes continuity in subscriptions and cash flows”, GEPL said and remarked: “It is also noticeable that such kind of model is difficult to be replicated due to the challenge of establishing the requisite credibility and relationship with paid advertisers.”

As of December 31, 2012, Just Dial had no long-term borrowings which are a competitive advantage for the company and a platform to grow operations without being constrained by significant reliance on external financing sources, GEPL said.

HDFC Securities notes in its analysis that Just Dial search service bridges the gap between its users and businesses by helping users find relevant providers of products and services quickly while helping businesses listed in its database to market their offerings. “Its search service is particularly relevant to SMEs, which currently, do not have many other cost effective options to access and advertise to such a large number of potential consumers,” HDFC Securities says.

In its offer document Just Dial says it intends to keep up with the latest in mobile Internet technology to provide its search services. In collaboration with service providers and vendors, the company is in the process of developing the ability for users to complete a number of bookings and purchases which are integrated in the search results from our website, mobile Internet WAP site and our Master App, including reservations at restaurants, home delivery of, ordering groceries, booking doctors’ appointments and even taxi bookings.

The company is also in the process of developing a car listings website in which users can research and rate car models being offered for sale, list their cars for sale and receive price quotes from vendors of both new and used cars.

Another new application called “Quick Quotes” will provide prospective buyers with a price quote from multiple vendors and which will be available 24x7.

Just Dial’s consolidated total revenue from continuing operations increased from Rs716.0 million in fiscal 2008 to Rs 2,770.2 million in fiscal 2012, representing a CAGR of 40.2%. 

Direction for budget? RBI calls for investment boost

Highlights of RBI Governor D Subba Rao's statement on Q3 Monetary policy review:

• What the economy needs most of all and most urgently is new investment.
• This will step up currently flagging aggregate demand and also ease the supply constraints so that existing capacity is fully utilised and new capacity is built up.
• A strong and effective supply response is particularly important for bridging the infrastructure gaps and correcting structural imbalances in other segments of the economy, including key food articles.
• Critical to this effort are a credible and comprehensive fiscal adjustment by the Government, implementation of structural reforms, hastening the approval process, and improving governance to inspire the trust and confidence of potential investors. 

The full text: 

"First of all, on behalf of the Reserve Bank, a warm welcome to you all to this Third Quarter Review of Monetary Policy for 2012-13.

2. Earlier this morning, we put out the Policy Review document. Based on an assessment of the current macroeconomic situation, we have decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent.

3. Consequent to this, the reverse repo rate under the LAF, determined with a spread of 100 basis points below the repo rate, gets calibrated to 6.75 per cent. Similarly, the marginal standing facility (MSF) rate, determined with a spread of 100 basis points above the repo rate, and also the Bank Rate stand adjusted to 8.75 per cent.

4. These changes have since come into effect immediately after the announcement.

5. We have also decided to reduce the cash reserve ratio (CRR) of scheduled banks by 25 basis points from 4.25 per cent to 4.0 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning February 9, 2013.

6. This reduction in the CRR will inject primary liquidity of around `180 billion into the banking system.

Considerations Behind the Policy Move

7. Today’s decision to further ease the monetary policy stance was informed by three considerations.

8. First, both headline wholesale price inflation and its core component, non-food manufactured products inflation, have softened through the third quarter. This provided some relief from the persistence that dominated the first half of the year. Several indicators such as the weaker pricing power of corporates, excess capacity in some sectors, the possibility of international commodity prices stabilising as well as inflation momentum measures suggest that inflationary pressures have peaked. However, further moderation in inflation going into the next fiscal year is likely to be muted as the correction of under-pricing of administered items is still incomplete and food inflation remains elevated. Accordingly, the setting of monetary policy has to remain sensitive to these conflicting pressures and attendant risks.

9. Second, growth has decelerated significantly below trend through the last fiscal year and through this year so far, and overall economic activity remains subdued. On the demand side, investment activity has been way below desired levels and consumption demand too has started to decelerate. External demand has also weakened due to languid global growth. On the supply side, constraints in the availability of key raw materials and intermediates are becoming binding. While the series of policy measures announced by the Government has boosted market sentiment, the investment outlook is still lacklustre, especially in terms of demand for new projects.

10. The third consideration that informed our decision is that liquidity conditions have remained tight. Although the Reserve Bank lowered the cash reserve ratio, CRR, successively in September and October 2012, and carried out open market operations (OMO) injecting systemic liquidity of `470 billion during December and January to augment liquidity, the average net LAF borrowings at `910 billion in January have been above the Reserve Bank’s comfort level. This tightness could potentially hurt credit flow to productive sectors of the economy. The structural deficit in the system provided a strong case for injecting permanent primary liquidity into the system.

Monetary Policy Stance

11. The policy document also spells out  the three broad contours of our  monetary policy stance. These are:

• first, to provide an appropriate interest rate environment to support growth as inflation risks moderate;
• second, to contain inflation and anchor inflation expectations; and
• third, to continue to manage liquidity to ensure adequate flow of credit to the productive sectors of the economy.

Guidance

12. As has become standard practice by now, we have also given the following guidance for the period forward:

13. With headline inflation likely to have peaked and non-food manufactured products inflation declining steadily over the last few months, there is an increasing likelihood that going into 2013-14, inflation will remain range-bound around the current levels. This provides space, albeit limited, for monetary policy to give greater emphasis to growth risks. This policy guidance will, however, be conditioned by the evolving growth-inflation dynamic and the management of risks from the twin deficits.

Expected Outcomes

14. We expect that today’s policy actions, and the guidance that we have given, will result in the following three outcomes:

• first, investment will be encouraged, thereby supporting growth;
• second, medium-term inflation expectations will remain anchored on the basis of a credible commitment to low and stable inflation;
• and, finally, there will be an improvement in liquidity conditions to support credit flow.

Global and Domestic Developments

15. Our policy decisions have been based on a detailed assessment of the global and domestic macroeconomic situation. Let me comment first on the global outlook.

Global Economy

16. Since the Reserve Bank’s last quarterly Policy Review in October 2012, headwinds holding back the global economy have begun to abate gradually, although sluggish conditions prevail. In the US, activity gathered momentum in the third quarter of 2012 but this is unlikely to have been sustained in the fourth quarter. While a political consensus to avert the ‘fiscal cliff’ has calmed financial markets, how the debt ceiling is managed will be crucial in shaping the market sentiment on the way forward. The euro area economy is threatened by continuing contraction, notwithstanding the liquidity firewall of the European Central Bank (ECB) and the EU’s commitment to act collectively to backstop the union. Overall, however, apprehensions that the sovereign debt crisis will disrupt the global financial system have ebbed. 

17. A pick-up in the pace of growth of China is likely. But growth in other emerging and developing economies has slowed owing to a combination of a slump in external demand and domestic structural bottlenecks. Furthermore, inflationary pressures persist in some of them. Overall, global economic prospects have improved modestly since the Reserve Bank’s last review in October 2012 even as significant risks remain.

Indian Economy

18. Moving on to the domestic economy, GDP growth slowed significantly this year, dropping to 5.5 per cent in the first quarter, and dropping even further to 5.3 per cent in the second quarter. The decline in the GDP growth rate became more broad based, with consumption demand also slowing alongside stalling investment and declining exports.

19. In July 2012, the Reserve Bank projected GDP growth for the current year, 2012-13, of 6.5 per cent. In the October Review, we revised this downwards to 5.8 per cent, signalling increasing global risks as well as accentuated domestic risks. As part of this review, we revisited this growth projection taking into account developments over the last three months. During this period, industrial activity has remained subdued. Sluggish external demand continues to inhibit improvement in services. While the coverage of rabi sowing has picked up, severe winter in certain parts of the country could affect crop prospects. New investment demand, which should be the key driver of an upturn, continues to be weak. While the series of recent policy initiatives by the Government has boosted market sentiment, it will take some time to reverse the investment slowdown and reinvigorate growth.

20. Accordingly, we have revised downwards our baseline projection of GDP growth for the current year from 5.8 per cent to 5.5 per cent.

Inflation

21. Let me now turn to inflation. Headline WPI inflation eased significantly from 8.1 per cent in September 2012 to 7.2 per cent by December. Notably, inflation on account of non-food manufactured products, which have a weight of 55 per cent in the WPI, fell sharply in November-December as input price pressures eased. The momentum indicators too suggest a moderation in headline as well as non-food manufactured products inflation. The Reserve Bank’s industrial outlook survey also points to a softening of the rate of increase of output prices, suggesting that the pricing power of corporates has weakened. Fuel group inflation moderated in December, mainly reflecting the tempering of inflation of non-administered petroleum products as well as the range-bound exchange rate of the rupee.

22. Food inflation, on the other hand, showed a contrarian behaviour, moving into double digits in December, reflecting both cyclical and structural factors.

23. In contrast to WPI inflation, CPI inflation as measured by the new consumer price index, rose to 10.6 per cent in December, largely reflecting the surge in food inflation. Excluding food and fuel groups, CPI inflation remained unchanged at 8.4 per cent during the third quarter.

24. In the October Review, the Reserve Bank made a baseline projection of inflation for March 2013 of 7.5 per cent. An environment of slower growth and excess capacity in some sectors suggests that inflation has come off its peak. However, it is expected to be range-bound around the current levels due to persisting food inflation, the pass-through of diesel price adjustments over the next several months and the possibility of adjustment in other administered prices. If international commodity prices, including the price of crude, further decline, they should cushion the phased increase in diesel prices, to the extent they are not offset by exchange rate movements. A sustained reduction in inflation pressure is, however, contingent upon alleviation of supply constraints and progress on fiscal consolidation. This will also help mitigate the cost-push pressures stemming from the surge in wages.

25. Keeping in view the expected moderation in non-food manufactured products inflation, domestic supply-demand balances and global trends in commodity prices, we revised downwards the baseline WPI inflation projection for March 2013 from 7.5 per cent to 6.8 per cent.

Monetary and Liquidity Conditions

26. Let me now turn to monetary and liquidity conditions. Money supply remained below the indicative trajectory of the Reserve Bank. This essentially reflected the deceleration of growth in aggregate deposits and moderation in economic activity. On the other hand, the overall non-food credit growth was around the indicative trajectory. However, bank credit to industry showed a significant deceleration while credit to agriculture registered an increase.

27. Keeping in view the seasonal pattern for the last quarter, M₃ growth projection for the current year has been scaled down to 13.0 per cent while non-food credit growth projection is retained at 16.0 per cent.

28. Liquidity conditions tightened from the second week of November on account of a build-up in the Centre’s cash balances, festival-related lumpy increase in currency demand, and structural pressures brought on by the widening wedge between deposit growth and credit growth. Anticipating liquidity pressures, the Reserve Bank lowered the CRR and conducted open market operations. Despite these measures, the liquidity deficit in the system remained above the Reserve Bank’s comfort level.

Risk Factors

29. Macroeconomic management going forward is subject to a number of risks. Let me briefly address them.

• First, the widening of the current account deficit (CAD) to historically high levels, especially in the context of a large fiscal deficit and slowing growth, exposes the economy to the twin deficit risk.  Financing the CAD with increasingly risky and volatile flows increases the economy’s vulnerability to sudden shifts in risk appetite and liquidity preference, potentially threatening macroeconomic and exchange rate stability. Large fiscal deficits will accentuate the CAD risk, further crowd out private investment and stunt growth impulses.
• Second, despite the recent calm, global risks remain elevated, with the potential for spillover into the Indian economy through trade, finance and confidence channels. In the US, the risk of political inaction to manage the debt ceiling or even a sudden onset of fiscal austerity can lead to a turmoil in financial markets, followed by a downturn in economic activity. Escalation of the euro area sovereign debt stress in view of the continuing absence of credible and comprehensive policy responses remains a contingent global risk. Risks also stem from geopolitical tensions that can adversely impact supplies and prices of key commodities, particularly of crude oil. Furthermore, these forces can potentially increase global risk aversion with implications for financing of our CAD.
• Third, inflation over the last three years has been a result of demand pressures as well as supply constraints. With demand pressures now on the ebb, the supply constraints need to be urgently addressed. In the absence of an effective supply response, inflationary pressures may return and persist with adverse implications for macroeconomic stability.
• Fourth, the key to stimulating growth is a vigorous and sustained revival in investment. Achieving this will, however, depend on a number of factors such as bridging the infrastructure gaps, and resolute pursuit of structural and governance reforms.
• Finally, risk aversion in the banking system stemming from concerns relating to growing non-performing assets (NPAs) is constraining credit flow. Notwithstanding the importance of repairing asset quality, banks should be discerning in their loan decisions and ensure adequate credit flow to productive sectors of the economy.

30. Let me conclude by summarising our macroeconomic concerns. Inflation has come off from its peak, but its further downward movement is going to be slow and gradual. On the other hand, economic activity has slowed, trailing well below its potential and opening up a negative output gap. What the economy needs most of all and most urgently is new investment. This will step up currently flagging aggregate demand and also ease the supply constraints so that existing capacity is fully utilised and new capacity is built up. A strong and effective supply response is particularly important for bridging the infrastructure gaps and correcting structural imbalances in other segments of the economy, including key food articles. Critical to this effort are a credible and comprehensive fiscal adjustment by the Government, implementation of structural reforms, hastening the approval process, and improving governance to inspire the trust and confidence of potential investors. The Reserve Bank, on its part, will have to calibrate monetary policy to the evolving growth-inflation dynamic and the management of the twin deficits risks.

All is well with Sikkim's Teesta-III Hydel project

• Should go on stream from June

GANGTOK:  With the ending of the long standing dispute between the Sikkim Government and Teesta Urja Limited over the state government’s share holding in one of the largest hydel projects, Teesta-III is all set to on stream from June this year.

Men and machines are racing against time to ensure that project work is completed as per current schedule and provide virtually free power to Sikkim and supply to four northern States – Delhi, UP, Haryana and Rajasthan - which reel under chronic power shortages.

The Sikkim Government, through Sikkim Power Investment Corporation Limited, obtained 26% share holding in the SPV that is executing the 1200 MW Teesta-III hydro power project – the largest in the six cascade projects on the Teesta river run, a person associated with the development said.

Teesta Urja’s Board of Directors has already approved the transfer of 29,64,00,000 partly paid shares held by Athena Projects Private Limited in favour of SPICL.

The state government has, meanwhile, withdrawn its case against TUL following the amicable settlement paving the way for taking the project back on track.

The first unit will begin to produce power by June. As much as 99.2% of Tunneling Works was already completed (around 34.4 Km out of total 34.6 Km). The Excavation of 13.824 Km of Head Race Tunnel is also complete.

REC and PTC are among the big lenders to the project while a consortium of six PE players led by Morgan Stanley have pumped in Rs 750 crores signaling the FDI into country’s hydro power projects.

This was considered to be the largest PE transaction in the country’s power sector. Besides Morgan Stanley, the group of investors includes Everstone Capital, General Atlantic, Goldman Sachs Investment Management and Norwest Venture Partners.

Experts say Sikkim sets the new trend for developing hydel projects as the country is blessed with bounty of rivers flowing from Himalayan glaciers during summer when the power consumption is at its peak. Development of hydro power projects along the Himalayan river course, thus, could be a win-win situation for the people and the governments.

Leading analyst Mr. Sudip  Bandyopadhyay, MD and CEO of Destimony Securities, said: “With potential FDI availability, including possible World Bank support, many similar projects can be successfully established along the Himalayan rivers.”

Mr. Nilesh H Karani, Head of Research at Magnum Equity Broking, pointed out: “Himalayan glaciers melt in summer and the rivers supply adequate water for hydel projects in the region. Teesta stands out as good example of harnessing the hydro power.”

Mr Bandyopadhyay explained that “Hydro-electricity is one of the leading sources of clean energy.  For an energy starved nation like India which has been blessed with enough rivers, the potential of generating hydro-electricity in a cost effective manner is significant.

“At present with only 40% of Hydel power potential being tapped, India as a country has a huge scope of exponentially increasing hydel power capacity and reducing pollution through this clean and green power,” he pointed out

Power produced to be transmitted till Kishenganj through 400 KV DC line to be constructed by Teesta valley Power Transmission, a JV between Teesta Urja Ltd and Power grid Corporation of India Limited (PGCIL). PGCIL is to wheel the power to the beneficiary states in the northern region beyond Kishenganj.

A World Bank report notes that severe power shortage is one of the greatest obstacles to India’s development.

Over 40 percent of the people -- most living in the rural areas -- do not have access to electricity and one-third of Indian businesses cite expensive and unreliable power as one of their main business constraints, it says.

Poor electricity supply thus stifles economic growth by increasing the costs of doing business in India, reducing productivity, and hampering the development of industry and commerce which are the major creators of employment in the country, it says.

Power sector analysts say hydro power projects are zero pollutant, as compared to thermal projects which reportedly contribute to half of global carbon emissions and India relies on thermal power to the extent of 60% of its consumption today. Even the cost of raw material – water – is nil.

Some may even call it Water Gold! Look at this HSBC Global Research that says increasing hydro power generation capacity would help in strengthening India's energy security. "Given India's tight domestic coal supply and increasing reliance on imported coal, hydro capacity provides the country with greater energy security,” the report says.

The government admits India’s failure to tap hydel power. In a written reply to a question in Lok Sabha, the Minister of State for Power Mr K.C. Venugopal said out of the identified capacity, 33320.8 MW i.e. 22.93% has so far been developed and another 15130 MW i.e.10.41% of is under development. He said that about 66.66% of the identified potential is yet to be developed