Repo Rate Unchanged at 7.25 Percent

The Reserve Bank of India (RBI), in its June mid-quarter monetary policy on 17 June 2013, left its key policy, repo rate unchanged at 7.25 percent in line. Cash reserve ratio (CRR), remained at 4 percent. Repo is the rate at which banks borrow from the Central bank. CRR is the portion of deposits that banks are mandated to keep with RBI. Consequently, the reverse repo rate will remain unchanged at 6.25 per cent, and the marginal standing facility (MSF), rate and the Bank Rate at 8.25 per cent.

RBI kept the interest rate stable possibly because despite the fact that the inflation rate has been coming down and manufacturing growth has not been much to speak of, it realised that the interest rate difference between Indian markets and Western market has actually shrunk, which is why the Foreign Institutional Investors, who are playing in our debt market have pulled off about three billion dollars. They would not like to aggravate the situation by reducing interest rate at this point of time and encouraging FII to pull out more from the debt market.

National Mission on Food Processing to be continued

The Cabinet Committee on Economic Affairs on 28 June 2013 approved the continuation of the National Mission on Food Processing (NMFP) for the remainder of 12th Five Year Plan (2013-17) based on detailed proposals submitted by the Ministry of Food Processing Industries (MOFPI). The NMFP outlay for 2012-17 has been kept at 1600 crore rupees consisting of 1250 crore rupees provided by the Government of India (GOI) and corresponding State share of 350 crore rupees. This includes 320 crore rupees already approved for 2012-13, of which 250 crore rupees was the GOI share and 70 crore rupees was the State share.

The following schemes under the NMFP will be implemented by State Governments for the remainder of 12th Five Year Plan in pursuance of today‘s approval:

• Scheme for technology up-gradation / establishment / modernisation of food processing industries.

• Scheme for cold chain, value addition and preservation infrastructure for non- horticulture products.

• Setting up/ modernization/ expansion of abattoirs.

• Scheme for Human Resource Development (HRD).

• Scheme for promotional activities.

• Creating primary processing centres / collection centres in rural areas.

• Modernization of meat shops.

• Reefer vehicles.

• Old Food Parks.

Continuation of NMFP shall help in the decentralization of the implementation of the Ministry‘s schemes, which will lead to substantial participation of State Governments / Union Territories (UTs). Beneficiaries of MOFPI schemes will also find it easier to deal with State Governments.

The continuation of NMFP will also help States / UTs in maintaining requisite synergy between agriculture plans of States and the development of the food processing sector. This in turn would help in the increase in farm productivity, thereby leading to an increase in farmers‘ incomes. It would also help in ensuring an efficient supply chain by bridging infrastructural / institutional gaps.

A National Food Processing Development Council (NFPDC) has been provided for under the chairmanship of the Minister for Agriculture and Food Processing Industries. The NFPDC will have representatives of State Governments, industry associations and related GOI departments. The council will provide guidance to MOFPI relating to the food processing sector, including the NMFP.

The Import Duty on Gold and Platinum hiked

The government hiked the import duty on Gold and Platinum from 6 to 8 per cent on 5 June 2013.The hike is aimed at curbing import of gold, which is mainly responsible for the rise in Current Account Deficit (CAD) impacting on the country’s foreign exchange reserves as well as the rupee value. This is the second hike in the duty in six months as gold imports touched an alarming 162 tonnes in May 2013. The imports touched a staggering figure of 15 billion US dollars in the last two months. The CAD, which is a difference between inflow and outflow of foreign currency, touched a historic high of 6.7 per cent of GDP in the quarter ending December 2012.

International Pepper Conclave 2013

Three kinds of International Pepper Community (IPC) Common Sales Contracts were launched by International Pepper Conclave 2013 in order to standardise the contract terms for export of pepper from various origins. The International Pepper Conclave 2013 was organised with the assistance of Jakarta-based International Pepper Community (IPC), which is an inter-governmental organisation. All these contracts were earlier approved by member countries of International Pepper Community in 2013. IPC explained that the buyers as well as sellers would adopt the terms of these contracts in some time and trading on these terms would also begin. The prices of pepper, at present are a little more than 6 US dollar per kg or 6000 US dollar per tonne. There has been area expansion because of higher prices since the year 2010. Also, it has led to better yields through better agronomy and new origins. This would eventually lead to an increase in the production. It is important to note that the Emirate has become the hub for commodity trade because free trade policies exist there.

SEBI notified Norms for Listing of Preference Shares

Market regulator Sebi in Month of June 2013 notified a new set of regulations to regulate issuing and listing of non-convertible preference. The listing of preference shares is basically meant to bring more transparency in raising of funds through such securities. The listing of privately placed non-convertible redeemable preference shares would require a minimum application size of 10 lakh Rupees for each investor which will safeguard the interest of small investors from high risk securities. The definite structure for issuance and listing of such shares is supposed to make it easier for banks and infrastructure companies to gain funds through this route. There is also a requirement of minimum three year term for the instruments of share besides public issuance of it and also a rating of AA- or equivalent investment grade. The new regulations is applicable to issuing by banks of non-equity instruments such as ‘Perpetual Non-Cumulative Preference Shares’ and ‘Innovative Perpetual Debt Instruments’, which are in according with the specified criteria for inclusion in Additional Tier I Capital.

What is Preference Shares?

Preference share is an equity security which has the properties of both equity and a debt instrument. Preference share usually carries no voting rights but sometimes it may carry a dividend.
There would be a comprehensive regulatory framework as per the new norm for the public issuance of non-convertible redeemable shares also for listing of privately placed redeemable preference shares. It is important here to note that in the last three years, Indian companies have raised over 25000 crore rupees through preference share issuance.

Revival of Nagaland Pulp and Paper Company Limited approved

The Cabinet Committee on Economic Affairs (CCEA) on 4 June 2013 approved the revival of the Nagaland Pulp and Paper Company Limited (NPPC) with the infusion of funds of 309.38 crore, Rupees.

The Committee also approved the regularization of inter se diversion of fund of 54.60 crore, rupees and had increased the authorized capital of NPPC from150 crore rupees to 250 crore Rupees. To avail term loan from commercial banks against government guarantee a sum of around 156.50 crore was also approved by the committee.

About Revival Plan

The revival plan includes rebuilding/re-furbishment of paper machine, pulping mill, new power plant etc.

• The company is supposed to produce both pulp and paper in the first phase but after with the implementation of the revival plan, the net value of the company will become positive and it will start posting profit from the first year after implementation.

• The company will start making profit on continuous basis and its reliance on Government of India for financial assistance for disbursement of salary and wages and statutory dues to employees shall come to an end, it will come out of the purview of the Board of Industrial and Financial Restructuring (BIFR).

India 3rd Most Attractive Destination for Investment

A survey conducted by United Nations Conference on Trade and Development (UNCTAD) revealed on 26 June 2013 that India was the third most attractive destination for investment in the world. The survey by UNCTAD included transnational corporations (TNCs) as the respondents. India was ranked at the third position after china and the United States. The survey was based on the responses given by 159 top global companies of the world. The World Investment Report 2013 by the United Nations Conference on Trade and Development (UNCTAD) revealed that the ranking of top five host economies of the world remained unaltered since 2012. China was still leading the list of top most destinations for investment with 46 percent respondents agreeing on it. This was followed by US, which got 45 percent agreeing votes. Among other top five investment destinations as responded by TNCs, were Indonesia and Brazil. An interesting fact about the survey was that, among top five most attractive destinations for investment in the world, four were the developing countries. Apart from this, six out of top 10 prospective host countries were also from the developing world. Thailand and Mexico appeared in this list for the very first time. As far as the developed countries were concerned, Japan climbed up three positions because of its reconstruction efforts after 2011 tsunami as well as expansionary monetary policies, which led to increased attractiveness of the country for foreign investment in the medium term. In the meanwhile, Australia, Russia and United Kingdom came down the rankings in comparison to 2012 survey, while Germany gained two positions.

The Real Estate Bill 2013 Approved

The Union Cabinet of India on 4 June 2013 approved the Real Estate (Regulation and Development) Bill 2013 to set up a regulator for the real estate sector in the country. This was done with the objective of protecting home buyers from dishonest builders. The bill seeks to make it mandatory for developers to launch projects only after acquiring all the statutory clearances from relevant authorities.

It also has provisions under which all relevant clearances for real estate projects would have to be submitted to the regulator and also displayed on a website before starting construction work. A real estate regulator will be set up in every state. It will ensure that private developers get all their projects registered with it before sale and only after obtaining all necessary clearances. The commercial real estate is not covered under the purview of the proposed bill. However, it will apply to residential buildings. The bill has a provision for mandatory public disclosure of all project details such as lay out plan, land status and credentials of promoters etc. An adjudicating officer in the state will be appointed by the authority for fast tracking settlement of disputes. There will be Real Estate Appellate Tribunal as per the bill. It will hear appeals from orders, decisions or directions of regulator and adjudicating officer.

Mineral Production during April 2013

The index of mineral production of mining and quarrying sector in April 2013 was lower by 16.9 percent compared to March 2013 as per the data released by ministry of mines. The mineral sector has shown a negative growth of 3.1 percent during April 2013 as compared to that of the April 2012. The total value of mineral production (excluding atomic & minor minerals) in India during April 2013 was 17772 crore rupees. The contribution of coal was the highest at 5673 crore rupees (32 percent). Next in the order of importance were: petroleum (crude) 5671 crore rupees, iron ore 2712 crore rupees, natural gas (utilized) 1883 crore rupees, lignite 490 crore rupees and limestone 382 crore rupees.

These six minerals together contributed about 95 percent of the total value of mineral production in April 2013. Production level of important minerals in April 2013 were: coal 435 lakh tonnes, lignite 39 lakh tonnes, natural gas (utilized) 2942 million cu. m., petroleum (crude) 31 lakh tonnes, bauxite 2035 thousand tonnes, chromite 242 thousand tonnes, copper conc. 10 thousand tonnes, gold 120 kg., iron ore 119 lakh tonnes, lead conc. 16 thousand tonnes, manganese ore 194 thousand tonnes, zinc conc. 124 thousand tonnes, apatite & phosphorite 198 thousand tonnes, dolomite 520 thousand tonnes, limestone 242 lakh tonnes, magnesite 16 thousand tonnes and diamond 2928 carat. In April 2013, the output of apatite & phosphorite increased by 33.6 percent, bauxite 14.7 percent and iron ore 1.3 percent. However the production of petroleum (crude) decreased by 3.7 percent, natural gas (utilized) 5.5 percent, limestone 5.9 percent, lead conc. 8.9 percent, gold 11.1 percent, dolomite 15.0 percent, manganese ore 18.1 percent, copper conc. 18.6 percent, magnesite 20.3 percent, zinc conc. 23.0 percent, lignite 27.9 percent, chromite 30.3 percent, coal 33.0 percent and diamond 33.6 percent.

India’s Food grain Production registered 30 % Growth

India’s foodgrain production registered an impressive growth of over 30 percent in the last nine years. It went up to 259 million tonnes in 2012-13 from 198.36 million tonnes in 2004-05. This is result of government initiatives like National Food Security Mission, NFSM, and Rashtriya Krishi Vikas Yojana.

While NFSM is an area and crop specific scheme, RKVY is a highly flexible mega scheme to incentivise states for investment in agriculture. The flow of agricultural credit was raised from 86981 crore rupees in 2003-04 to 5.75 lakh crore in 2012-13.

The Minimum Support Price of major crops also increased by more than hundred per cent during the period. India has now become food surplus and exports of agriculture and allied products have increased from 29.8 billion Dollars in 2011-12 to 33.54 billion Dollars in 2012-13.