National Textile Corporation Inaugurated

The Union Minister of Textiles, K Sambasiva Rao on 22 July 2013 inaugurated the New Bhopal Textile Mills of National Textile Corporation (NTC) in Bhopal. The mill was taken for the purpose of revival as well as modernisation along with the BurhanpurTapti Mills in Burhanpur.

It is important to note that textiles sector is the second biggest employment generator in India after agriculture. According to the approved scheme of Board for Industrial and Financial Reconstruction (BIFR), in the first phase, National Textile Corporation Limited replaced 16848 spindles and commissioned 25200 new spindles in the year 2008 at the cost of 26.42 Crores Rupees. This led to an increase in the monthly production from 1800 kilograms per day to 5000 kilograms per day. This meant that despite providing Modified Voluntary Retirement Scheme (MVRS) to surplus workers, around 380 workers started getting wages every day. The National Textile Corporation Limited (New Delhi) also approved the second phase of modernisation for the New Bhopal Textile Mill.

In its second phase, the Head Office approved sanction of 81 crore Rupees, which will help in modernisation of the machines. This would eventually help in increasing the production from 5000 kilograms per day to 14000 kilograms per day. This implies that from present sustenance of 380 workers, the mill will be able to sustain the 650 workers every day. The mill has also obtained ISO Certification.

Background

Under Nationalisation Act 1974, National Textile Corporation Limited (Madhya Pradesh) took over seven mills which were making losses. The Bhopal Textile Mills was one of these. Because of high labour cost as well as old machinery, all these mills were running into losses continuously. The seven mills were registered under BIFR. Under approved scheme of BIFR, five of these seven mills were closed as unviable units and the remaining two mills i.e. New Bhopal Textile Mills in Bhopal and BurhanpurTapti Mills in Burhanpur were scheduled for modernisation as well as revival.

Disinvestment of State Trading Corporation and ITDC

The Cabinet Committee on Economic Affairs (CCEA) on 11 July 2013 approved the disinvestment of government stake in State Trading Corporation (STC) and ITDC. The disinvestment is supposed to bring around 30 crore Rupees to the exchequer. The disinvestment is required through Cabinet nod to divest 5 per cent stake in India Tourism Development Corporation (ITDC) and 1.02 per cent in STC through the Offer for Sale (OFS) route.

The government is expecting the sale of 5 per cent stake or 42.88 crore shares in ITDC to fetch 23.58 crore Rupees. The Government is also planning to acquire about 10 crore rupees through disinvestment of 1.02 per cent, or 6.13 crore shares, in STC. It is important here to note that the government currently holds 92.11 per cent stake in ITDC and 91.02 per cent stake in STC. The stake is meant to help both the companies meet the minimum 10 per cent public holding norm of market regulator SEBI.

It is mandated for the government to bring down its stake in STC and ITDC to 90 per cent by 8 August2013. Shares of STC were trading 5.75 per cent lower at Rs 99.20 on the BSE in afternoon trade.
SEBI gets more Powers

The Union government on 17 July 2013 approved a proposal to amend SEBI Act for providing more powers to the market regulator to crack down on Ponzi schemes. As per the approval, SEBI will be given powers to conduct search and seizure operations and access call data records. Amendments to the Sebi Act and other relevant regulations were finalised after detailed consultations with the Securities and Exchange Board of India (SEBI).

Power to be given to SEBI with the approval

• • SEBI regulator will get direct powers to carry out search and seizure operations and for attachment of assets, as part of efforts to crackdown on ponzi schemes.

• • The SEBI would have powers to seek information, such as telephone call data records, from any persons or entities in respect to any securities transaction being probed by it.

SEBI since many years has been seeking a revamp of regulations as well as consent for a long time, given the changing nature of the securities market in general, and newer tools being used by manipulators to take gullible investors for a ride, in particular.

Review of Monetary Policy for 2013-14 released

RBI released the First Quarter Review of Monetary Policy for 2013-14 on 30 July 2013. The highlights are as following:

• The repo rate was kept unchanged at 7.25 percent.

• Reverse repo remains at 6.25 percent.

• Cash reserve ratio unchanged at 4.00 percent

• Keeps Marginal Standing Facility rate at 10.25 percent.

• Bank rate stands at 10.25 percent.

Considerations behind the Policy Move

• The policy stance in this review was informed by two considerations.

• First, the need for continuous vigil and preparedness to pro-actively respond to risks to the economy from external developments, especially those stemming from global financial markets.

• Second, managing the trade-off posed by increased downside risks to growth and continuing risks to inflation and inflation expectations.

Monetary Policy Stance

Accordingly, the four broad contours of RBI’s monetary policy stance are as following:

• First, to address the risks to macroeconomic stability from external shocks;

• Second, to continue to address the heightened risks to growth;

• Third, to guard against re-emergence of inflation pressures; and

• Fourth, to manage liquidity conditions to ensure adequate credit flow to the productive sectors of the economy.

Securities Laws (Amendment) Ordinance 2013 promulgated

Pranab Mukherjee, the President of India on 18 July 2013 promulgated the Securities Law Amendment Ordinance 2013. The ordinance would grant Securities and Exchange Board of India (SEBI), the powers to regulate any pooling of funds under an investment contract involving a corpus of 100 crore rupees or more and attach assets in case of non-compliance. The ordinance was promulgated by the President following the powers granted to him by Clause 1 of Article 123 of Constitution. The Chairman of SEBI would have powers to authorize the carrying out of search and seizure operations, as part of its efforts to crack down on ponzi schemes. With President’s approval of the Ordinance, SEBI has received the power to seek information, such as telephone call data records, from any persons or entities in respect to any securities transaction being investigated by it. Establishment of Special Courts enabled by this Ordinance would fast-track the resolution of pending SEBI related cases.

Article 123 of Constitution of India: Power of President to promulgate Ordinances during recess of Parliament.-

(1) If at any time, except when both Houses of Parliament are in session, the President is satisfied that circumstances exist which render it necessary for him to take immediate action, he may promulgate such Ordinances as the circumstances appear to him to require.

(2) An Ordinance promulgated under this article shall have the same force and effect as an Act of Parliament, but every such Ordinance-

(a) shall be laid before both Houses of Parliament and shall cease to operate at the expiration of six weeks from the reassembly of Parliament, or, if before the expiration of that period resolutions disapproving it are passed by both Houses, upon the passing of the second of those resolutions; and

(b) may be withdrawn at any time by the President. Explanation.- Where the Houses of Parliament are summoned to reassemble on different dates, the period of six weeks shall be reckoned from the later of those dates for the purposes of this clause.

(3) If and so far as an Ordinance under this article makes any provision, which Parliament would not under this Constitution be competent to enact, it shall be void.

Production of Cotton to be Lower

Cotton Association of India (CAI) on 8 July 2013 released its June forecast on cotton production for the season ending September 2013. The released data estimated lower production at 355.25 lakh bales in the 2012-13, which would be lower than the 373.25 lakh bales, was produced in 2011-12. The estimated cotton supply during the season is estimated at 423.46 lakh bales that include opening stock balance of around 53 lakh bales. Following the details of the report released, domestic consumption is estimated at 283 lakh bales with exports at 95 lakh bales and it will leave the closing stock at 45.46 lakh bales.

Data of Cotton Produced in 2012-13 Crop Season

• Gujarat – 85.75 lakh bales (It was the largest producer of cotton)

• Andhra Pradesh – The state produced 75 lakh bales

• Maharashtra – 72 lakh bales

• Haryana – 24 lakh bales

• Punjab – 15.5 lakh bales

• Karnataka – 13 lakh bales

• Madhya Pradesh – 18 lakh bales

Government raised FDI in Telecom Sector

The Union Government of India on 16 July 2013 raised the FDI limit in Telecom Sector from 74 percent to 100 percent. Government also cleared that the FDI in the Insurance and Telecom sectors will be up to 49 per cent through automatic route. The Union Government also mentioned that FDI the single brand retail would be up to 49 percent through automatic route and remaining investments would be directed through Foreign Investment Promotion Board (FIPB) route. FDI in asset reconstruction companies will be up to 49 per cent through automatic route.

FDI in Credit Information Companies has been raised to 74 per cent from 49 per cent. The Government also confirmed that the FDI in Defence Production will continue to be 26 percent. However, it will be directed through FIPB route for state of art technologies, and investment beyond that will go to Cabinet Committee on Security. The decision was taken in a meet chaired by Prime Minister and attended by the Cabinet Ministers.

The decisions were made to boost the Foreign Direct Investment in the country.

India-Israel trade raised to 6 billion Dollars

As per the report from the Israeli Embassy in July 2013, the trade between India and Israel touched the 6-billion dollars mark during 2012-13. The trade between India and Israel went up from 5.15 billion in 2011-12. In a meeting of Andhra Pradesh Chambers of Commerce and Industry (Fapcci) and Indo-Israel Chambers of Commerce and Industry, the diplomat of Economic and Commercial Affairs to Embassy of Israel Jonathan Ben Zaken asserted the growth of trade volume from a modest 200 million dollars in 1992. The bilateral relations between India and Israel had strengthened significantly in recent years with both nations experiencing a convergence of interests in agriculture, farm research, science, public health, IT, telecommunications and cooperation in space. The Israeli agency is looking up for taking advantage of synergies with India in areas like water technologies, information technology and sectors that Israel is strong in. It is worth mentioning here that about 265 information technology companies are already doing significant business in Israel.

India achieved a Record Production of Pulses

India achieved a record production of 18.45 million tonnes of pulses in the 2012-13 crop year ended June 2013. This augurs well for the country which is dependent on imports to meet the shortfall of around 3 to 4 million tonnes. Higher support price prompted farmers to grow pulses. According to the 4th advance estimates released today, overall foodgrain production is projected at 255.36 million tonnes, which is lower than the record 259.29 million tonnes achieved in the previous crop year. In foodgrains category, rice production has been revised upward to 104.4 million tonnes from 104.22 million tonnes and coarse cereals to 40.06 million tonnes from 39.52 million tonnes in the third estimates. However, wheat output has been revised downward to 92.46 million tonnes from 93.62 million tonnes.

FIPB approved 7 Pharma FDI proposals

The Foreign Investment Promotion Board (FIPB) on 5 July 2013 approved seven Foreign Direct Investments (FDI) proposals for investment in Indian pharmaceutical companies. The approval has ended the policy of uncertainty over Investments in the sector. The board also has deferred three other Pharma proposals as there were ownership issues and it will be taken up after the Department of Industrial Policy and Promotion (DIPP) clarifies the policy. The Department of Industrial Policy and Promotion (DIPP), the nodal body for framing FDI policy, will review the policy to make certain there are enough safeguards to ensure domestic healthcare concerns. The proposals which were discussed in the meeting include that of Singapore’s GlaxoSmithKline Pte Ltd, US’ Mylan Inc, Mauritius-based Castleton Investment Ltd, Mumbai-based Ferring Therapeutics and Hyderabadbased Verdant Life Sciences. At present, 100% FDI in pharma sector is allowed through automatic approval route in the new projects but the foreign investment in the existing pharma companies requires FIPB approval.

What is Automatic Approval Route?

Most sectors are now open to 100% FDI, meaning thereby, that the foreign companies do not need a prior approval for investment either by the Government or the Reserve Bank of India. The investors are only required to intimate the Regional office concerned of the Reserve Bank within 30 days of receipt of inward remittance. The automatic route allows Indian companies engaged in various industries to issue shares to foreign investors up to 100% of their paid up capital in Indian companies. The investors are also required to file necessary documents within 30 days of issue of shares.

About Foreign Investment Promotion Board

The Foreign Investment Promotion Board (FIPB) is a government body that offers a single window clearance for proposals on Foreign Direct Investment (FDI) in India that is not allowed access through the automatic route. FIPB comprises of Secretaries drawn from different ministries with Secretary, Department of Economic Affairs, MoF in the chair. It is an inter-ministerial body which basically examines and discusses proposals for foreign investments in the country for sectors with caps, sources and instruments that require approval under the extant FDI Policy (prescribed vide Circular 1 of 2012) on a regular basis. The Minister of Finance, considers the recommendations of the FIPB on proposals for foreign investment up to 1200 crore. Proposals involving foreign investment of more than 1200 crore require the approval of the Cabinet Committee on Economic Affairs (CCEA).

RBI reduced Realisation Period for Exporters to Nine Months

The Reserve bank of India on 21 July 2013 brought down the period of realisation and repatriation for exporters of goods and software to nine months from earlier 12 months. The move to reduce the period of realization was directed towards increasing foreign exchange inflows. Earlier in November 2012 considering the global slowdown; RBI had increased the time limit so that they can bring in export earnings to 12 months, from six months at that time. But as per the industry experts, RBI brought down the realization period because of the deteriorating current account deficit of the country and the weakening of the rupee against the dollar. The Reduction of realisation period was taken after consulting with the Government of India to bring down the realisation period from 12 months to nine months from the date of export valid till 30 September 2013.India’s exports contracted by 4.6 per cent, for the second consecutive month, to 23.79 billion dollars in June 2013 compared to that in the year-ago period.

India signed agreement with ADB for loan for NKUSIP

The Government of Karnataka is dedicated to provide counterpart funds of 41.6 million dollars for a total project investment cost of 101.6 million dollars under this tranche. The Government of India signed an agreement with Asian Development Bank (ADB) on 19 July 2013 for a 60 million dollars loan as to improve urban services and to strengthen municipal and project management capacity in several towns in north Karnataka. Basically the agreement is for the third project under the overall facility of 270 million dollars for the North Karnataka Urban Sector Investment Program (NKUSIP).

Provisions under North Karnataka Urban Sector Investment Program (NKUSIP)

The third part of the loan under the North Karnataka Urban Sector Investment Program will develop sewerage networks in six towns, and help the rehabilitation and expansion of potable water systems in two more towns.

More than 100000 households will benefit from the improvements.

• The project will support the State in its endeavor to improve quality of life in towns (Bidar, Davanagere, Dharwad, Gadag-Betegeri, Gulbarga, Jamkhandi, Sindhanur and Yadgir) in North Karnataka and promote economic growth.

• The project will improve access to better urban services in the eight targeted urban local bodies, he added.

• The project is going to assist implementing the State’s reform agenda through the execution of property and utility mapping subprojects using geographic information systems and the establishment of the Heritage Planning Cell. He said that it will also provide assistance to enhance billing and collection efficiencies in program towns.

The loan taken from ADB’s Ordinary Capital Resources has a 25-year term including a grace period of five years, commitment charges of 0.15 percent and an interest rate to be determined in accordance with ADB’s LIBOR-based lending facility. The Government of Karnataka is dedicated to provide counterpart funds of 41.6 million dollars for a total project investment cost of 101.6 million dollars under this tranche.

Online Transfer Claim Form for EPFO Revised

The Union Government of India on 4 July 2013 at New Delhi released Revised Transfer Claim (RTC) form for EPFO beneficiaries. This is the first step towards the launch of the online Transfer Claim Facilities in New Delhi. The revised transfer claim was released by the Union Labour & Employment Minister, Sis Ram Ola.

Features of the Revised form:

• The form will be called Transfer Claim Form instead of Form 13 for easy comprehension by the beneficiaries.

• The form can be presented after verification, either through the present employer or previous employer. Earlier the form could be submitted after verification only through the present employer.

• This form can be submitted online as well as in physical form. The facility of online submission of this form will be given shortly after process of collecting the digital signature of the employer is completed.

• The facility to file physical form shall continue to cater to the needs of working class who do not have internet access.

• Employee will be allowed to submit their applications online, if their employer is having registered digital signature.

• Online submission of form will introduce paperless process for claim settlement.

• Every beneficiary will be informed through SMS and e-mail about the stage of process of the claim to make the entire process transparent and accountable.

• After introduction of online claim settlement, endeavour will be made to substantially reduce the assured time of settlement of transfer claim which presently is 30 days.

The plan is designed with an aim to develop a system of web based services to employers and employees for online submission of forms and settlement of claims.

1200 Crore as SCA to TSP in 2013-14

The Union Ministry of Tribal Affairs has allocated 1200 crore rupees as Special Central Assistance (SCA) to Tribal Sub Plan (TSP)for the year 2013-14 for being implemented in the states as the Special Area Programme– The amount allocated for the programme that is funded from the center has been increased by 11 percent as compared to 2012-13 allocation. The programme also have a provision of allocating 120 crore rupees more for the incentive projects, based upon the performance of the state in effective implementation of the Tribal Sub Plan. The fund would be segregated among 22 states and used for development of infrastructure and promotion of employment-cum income generation activities in tribal areas. If implemented successfully, the programme will help in raising the social and economic status of the tribals. The programme will give priority to development of key sectors like agriculture, horticulture, land reforms, animal husbandry, ecology & environment, watershed development, development of entrepreneurship in small scale industries and small scale trading as well as improving connectivity in tribal areas. The budget distribution of the allocated central fund would be done to the states based on the Yardstick Percentage of Tribal population in a state in the total tribal population of the Country.

Top three recipients states of the budget are

• Madhya Pradesh: 175.25 crore rupees

• Odisha: 133.21 crore rupees

• Jharkhand: 121.87 crore rupees

RBI imposed Restrictions on Imports of Gold

The Reserve Bank of India on 22 July 2013 imposed certain restrictions on the import of various forms of gold by nominated banks, agencies, premier or star trading houses, SEZ units, EoUs which have been permitted to import gold for use in the domestic sector. In order to narrow down the Current Account Deficit - CAD and to arrest the fall of rupee, the Reserve Bank decided to rationalise the import of gold including import of gold coins into the country. In the revised scheme for gold imports, RBI asked nominated banks and agencies to ensure that at least one fifth of every lot of gold imported - in any form or purity - is exclusively made available for the purpose of export. They have been asked to sell gold for domestic use only to entities engaged in jewellery business or bullion dealers supplying gold to jewelers. Further, these banks and agencies will be required to retain 20 per cent of the imported quantity of gold in the customs bonded warehouses. Fresh imports will only be permitted only after the export of atleast 75 percent of the retained quantity that lies in the customs bonded warehouse.

The Reserve Bank of India has brought down the period of realisation and repatriation for exporters of goods and software to nine months from earlier 12 months. This move could shore up foreign exchange inflows. Last November, RBI had increased the time limit to bring in export earnings to 12 months, from six months at that time, in view of global slowdown. Industry experts said this step has been taken by the Apex bank as the country is facing a worsening Current Account Deficit and the weakening of the rupee against the US dollar. The rupee has depreciated by over 12 per cent against the dollar since the beginning of this fiscal. The Reserve Bank of India has started scrutiny of nearly 3 thousand companies which could be carrying out non-banking finance operations without requisite registration. The step has been initiated by the Apex Bank in the wake of concerns about their actual business activities. The Reserve bank’s move comes against the backdrop of the government efforts to crackdown on entities that are illegally raising large amounts of money from the public. The Reserve bank has sought details from the companies about their financials, including balance sheets, for the last three years, among others.

Special Liquidity Window for Mutual Funds opened

The Reserve Bank of India (RBI) on 17 July 2013 opened a special liquidity window for commercial banks to meet the cash requirements of mutual funds (MFs). The special liquidity window was opened taken into concern the Mutual Funds which faced heavy redemption pressure in debt-oriented MF schemes following a series of steps taken by the RBI to shore up the faltering currency. Keeping all this into consideration the RBI opened a special three-day repo window that will allow banks to borrow a total of 25000 crore Rupees at a rate of 10.25%. Banks can borrow this money to lend onwards to MFs. RBI will conduct the first repo auction under the special facility on 19 July 2013.The second auction is scheduled for 23 July 2013 and the subsequent operations at an interval of three days. Individual banks will be allocated funds in proportion to their bids, subject to the overall ceiling of 25000 crore, Rupees. In addition, banks availing of the additional liquidity support can seek a waiver of penal interest for any shortfall in maintenance of the statutory liquidity ratio (SLR) up to 0.5% of their deposits, in addition to the 2% waiver allowed under the marginal standing facility (MSF). SLR refers to the proportion of deposits that have to be invested in government securities.
On 15 July 2013, RBI sought to curb liquidity in the debt markets by making it more expensive to borrow money in a bid to prevent speculation in the currency market. The rupee, which fell to a lifetime low of 61.21 against the dollar on 8 July, has recouped some losses following measures by RBI and the Securities and Exchange Board of India. After having lost as much as 7% since the beginning of the year, the rupee has recovered by about 3% against the dollar.

RBI fixed the borrowing limit for banks at 1% of the system’s net demand and time liabilities, or banks’ total deposit base. Effective 17 June 2013, the overnight borrowing limit was set at 75000 crore Rupees for the entire banking system. There was no limit earlier. Besides the borrowing limit, RBI also raised the interest rate on money that banks borrow from MSF to tide over liquidity shortages—by two percentage points to 10.25%. The RBI is also planning to sell bonds worth 12000 crore Rupees in the secondary market on 18 July 2013 for another liquidity draining measure.

Modified Industrial Infrastructure Upgradation Scheme approved

The government on 12 July 2013 approved the Modified Industrial Infrastructure Upgradation Scheme (MIIUS) with an outlay of 1030 crore Rupees during the 12th Five Year Plan period ending March 2017. As per the Information and broadcasting Ministry, Out of the total outlay, a sum of 450 crore rupees will be utililized on committed liability and the remainder for taking up 14 to 16 new infrastructure upgradation projects in existing or Greenfield industrial clusters. The decision will help to develop better common infrastructure and common facilities, including skill development centres, at the selected industrial clusters. It will also certainly impact better employment generation in the selected clusters.

Some Important facts related to the Industrial Infrastructure Upgradation Scheme

• All states are covered under the scheme. However, projects are likely to be undertaken in only 14 to 16 states/districts due to limitation of outlay.

• At least 10 per cent of the outlay will be set aside for a minimum of two projects in the North East.

• Project proposals would be scrutinised with the help of the PMA and they would be placed before an apex committee for in-principle approval.

• The projects will be monitored after in-principle approval is given so that these achieve stipulated milestones to qualify for final approval.

Earlier In 2003, an Industrial Infrastructure Upgradation Scheme (IIUS) was launched to improve the industry’s competitiveness by providing infrastructure through the public-private partnership model in selected functional clusters. Under the scheme, central assistance would be provided for as much as 75 per cent of the project cost, subject to a ceiling of 5 crore Rupees. In February 2009, the plan was remodeled based on the suggestion of an independent evaluation.

The continuation of National Mission on Food Processing approved

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.