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Tuesday, January 18, 2011
Thursday, September 24, 2009
Is it a V or W
All is not right with the markets. If euphoria follows panic so quickly, its time to sit out than be caught in the middle. Last when I saw gold cross 1000, oil was over 140. This time around oil is at 70. And may be the gold price is still reflecting a flight to safety? When the Indian stock market was at 16000, the US$ was at 40 and people were talking of 30. Then the market went down to 8000 and the dollar to 50. The market is back but the dollar isn't. Not so long ago, the US financial system was said to have seized. Some said that the Anglo-Saxon capitalist system had collapsed. But I saw the US$ became stronger than ever before. People said flight to safety. I said never seen people swim into a sinking ship. Now the Media says business confidence is rising, but I only see unemployment in USA at 9.7%, highest since 1983. US banks say they are returning tarp funds and are reporting turnarounds. But the World Economic Forum says that they are 108th soundest in the world....... just behind Tanzania. May be its all in the accounting rules…..
Gentlemen, all is not right...... 12000 is not far away.
Tuesday, November 25, 2008
financial illetracy or enlightened confidence ?
New Delhi: According to a global survey on consumer confidence levels, spending and attitudes to recession, Indians have the second most optimistic attitude on the current world financial crisis after Norway.
Conducted by The Nielsen Company in 52 countries, the survey revealed that one in two Indians, 45 per cent of Vietnamese and approximately a third of Russians and Chinese expect the global recession to end within a year. The survey adds that in India, employment rates will rise in inverse proportion to the developed world, aided by the adoption of workforce optimisation.
The Nielsen Consumer Confidence Index ranked UAE fifth, and according to Piyush Mathur, regional managing director, West Asia, North Africa and Pakistan, The Nielsen Company, "Despite being affected by the current global conditions, consumers in the UAE and other developing markets are aware their medium-to-long-term prospects remain strong."
Many countries experienced double-digit declines in consumer confidence in the last year including the US, the UK, Hong Kong, Japan, Singapore and Malaysia.
Conducted by The Nielsen Company in 52 countries, the survey revealed that one in two Indians, 45 per cent of Vietnamese and approximately a third of Russians and Chinese expect the global recession to end within a year. The survey adds that in India, employment rates will rise in inverse proportion to the developed world, aided by the adoption of workforce optimisation.
The Nielsen Consumer Confidence Index ranked UAE fifth, and according to Piyush Mathur, regional managing director, West Asia, North Africa and Pakistan, The Nielsen Company, "Despite being affected by the current global conditions, consumers in the UAE and other developing markets are aware their medium-to-long-term prospects remain strong."
Many countries experienced double-digit declines in consumer confidence in the last year including the US, the UK, Hong Kong, Japan, Singapore and Malaysia.
Friday, October 03, 2008
Dow - Sprint on a heart and lung machine!
Will the US$ 700 bn bail out bring America on its feet? The Wall Street thinks so.... as of this moment it is 228 points up, when today's top news is... job losses at 159,000 in September 2008; straight nine months of losses !
Every analyst and trader understands that the malaise affecting our financial markets runs deep. Investment gurus are foretelling a situation worse than the depression of 1932. So what is this rally indicating? Pure punting, speculation, gambling..... We have allowed our markets to be hijacked by people who should be on a casino table in Sands rather than Wall street. Tragically, some small investors may be lured at this first sign of recovery, thinking the worst is over. My advice to you: Please stay away. This market is for people who run P and Ls on Bloomberg terminals and not you. This market is still headed down and you will see a decline, if not equally sharp, to new lows by the end of this month. My call: Dow Jones will breach 10,000 before October 31.
Monitoring.......
U.S. stocks plunged today after markets around the globe tumbled and financial fears intensified. At 1:25 p.m. ET, the Dow Jones Industrial Average was down 491 points to 9,833. The index had been down as much as 587 points at its session low.
quoted from msn money 6th Oct. 08
The Dow Jones Industrial Average dropped 508.39, or 5.1 percent, to 9,447.11, giving it a 29 percent retreat in 2008 that would also be the worst in 71 years. The Nasdaq Composite Index lost 5.8 percent to 1,754.88.
Quoted from Bloomberg / 7 Oct 08
Stocks have been battered over the last three days, even more than I ever expected. Obviously, redemption pressures & more of hedge funds working over time.... A bear covering is surely expected and some recovery is likely within this week. Since expectations, rumours and news drive the market, ultimately, I may not be able to stand with a prediction of 9800 or thereabouts by Oct 31st. A 9200 seems more than imminent, even if we see 9000 breaking in the interim.
Every analyst and trader understands that the malaise affecting our financial markets runs deep. Investment gurus are foretelling a situation worse than the depression of 1932. So what is this rally indicating? Pure punting, speculation, gambling..... We have allowed our markets to be hijacked by people who should be on a casino table in Sands rather than Wall street. Tragically, some small investors may be lured at this first sign of recovery, thinking the worst is over. My advice to you: Please stay away. This market is for people who run P and Ls on Bloomberg terminals and not you. This market is still headed down and you will see a decline, if not equally sharp, to new lows by the end of this month. My call: Dow Jones will breach 10,000 before October 31.
Monitoring.......
U.S. stocks plunged today after markets around the globe tumbled and financial fears intensified. At 1:25 p.m. ET, the Dow Jones Industrial Average was down 491 points to 9,833. The index had been down as much as 587 points at its session low.
quoted from msn money 6th Oct. 08
The Dow Jones Industrial Average dropped 508.39, or 5.1 percent, to 9,447.11, giving it a 29 percent retreat in 2008 that would also be the worst in 71 years. The Nasdaq Composite Index lost 5.8 percent to 1,754.88.
Quoted from Bloomberg / 7 Oct 08
Stocks have been battered over the last three days, even more than I ever expected. Obviously, redemption pressures & more of hedge funds working over time.... A bear covering is surely expected and some recovery is likely within this week. Since expectations, rumours and news drive the market, ultimately, I may not be able to stand with a prediction of 9800 or thereabouts by Oct 31st. A 9200 seems more than imminent, even if we see 9000 breaking in the interim.
Monday, April 07, 2008
where's dow headed?... an hour on the net
Here's what you get from an hour of surfing..........
"Early Thursday, stocks dipped after the Labor Department reported a spike in jobless claims to a level not seen since September 2005."
"The ISM said Thursday the services sector contracted in March 2008"
"......The median price of a new house is down 17% from its 2007 high --- and still falling".
".....facing a $14 billion deficit and even larger projected shortfalls, the Pension Benefit Guaranty Corp., or PBGC, decided not to save (by raising premiums) or to live within its means (by cutting benefits) but to gamble in the financial markets by taking on more risk. The premiums don't cover what the fund has to pay out in most years, and the odds are that the deficit will grow. The agency estimated that for fiscal 2006, the pension plans it covered were a total of $500 billion short. If any of these underfunded plans went bust, the assets that it turned over to the PBGC wouldn't cover the guaranteed payouts of retired workers, which would run the agency's deficit higher."
".......bad news from financial goliaths UBS AG (UBS, news, msgs), Deutsche Bank (DB, news, msgs) and Lehman Bros. (LEH, news, msgs) was treated as good news......"
"….leverage is far higher and more broadly used now, and losses are much deeper -- approaching $1 trillion by some accounts"
"The number of new people signing up for unemployment benefits last week shot up to the highest level in more than two years, fresh evidence of the damage to a national economy clobbered by housing, credit and financial crises. The Labor Department reported Thursday that new applications filed for unemployment insurance jumped by a seasonally adjusted 38,000 to 407,000 for the week ending March 29. The increase left claims at their highest point since Sept. 17, 2005, following the blows of the devastating Gulf Coast hurricanes. Meanwhile, the number of people continuing to collect unemployment benefits rose by a sharp 97,000 to 2.94 million for the week ending March 22, the most recent period for which that information is available. That was the highest since July 17, 2004. "
"For the first time, Federal Reserve Chairman Ben Bernanke acknowledged on Wednesday said the country could be heading toward a recession. Many other economists and the public believe it’s already there."
"More Americans have fallen behind on consumer loans than at any time in nearly 16 years, as credit problems once concentrated in mortgages spread into other forms of debt. In a quarterly study, the American Bankers Association said the percentage of loans at least 30 days past due rose to 2.65 percent in the fourth quarter from 2.44 percent in the third quarter, and from 2.23 percent a year earlier. The rate of delinquencies was the highest since a 2.75 percent rate in the first quarter of 1992. It provides a fresh sign the nation's economy is slowing, and may be in recession."
"Reports of suspected mortgage fraud rose 42 percent last year as banks became more leery of lies on loan applications. The Treasury Department's Financial Crimes Enforcement Network said Thursday that there were 52,868 reports for mortgage fraud in 2007, up from 37,313 a year earlier. Mortgage fraud reports were the third-most common type of suspicious activity. "
"The Institute for Supply Management said Thursday that the nation’s service sector — which includes retailers, the hotel business, insurance and various social services — contracted in March, but not as much as the month before. Still, worries deepened about soaring prices for raw materials. The institute, a trade group of purchasing executives, said its non-manufacturing index registered 49.6 last month, compared with 49.3 in February. A reading below 50 indicates contraction, while a reading above 50 indicates growth. It’s the third consecutive month of contraction, but the March reading was a bit stronger than the 49.0 expected by analysts surveyed by Thomson/IFR."
"Early Thursday, stocks dipped after the Labor Department reported a spike in jobless claims to a level not seen since September 2005."
"The ISM said Thursday the services sector contracted in March 2008"
"......The median price of a new house is down 17% from its 2007 high --- and still falling".
".....facing a $14 billion deficit and even larger projected shortfalls, the Pension Benefit Guaranty Corp., or PBGC, decided not to save (by raising premiums) or to live within its means (by cutting benefits) but to gamble in the financial markets by taking on more risk. The premiums don't cover what the fund has to pay out in most years, and the odds are that the deficit will grow. The agency estimated that for fiscal 2006, the pension plans it covered were a total of $500 billion short. If any of these underfunded plans went bust, the assets that it turned over to the PBGC wouldn't cover the guaranteed payouts of retired workers, which would run the agency's deficit higher."
".......bad news from financial goliaths UBS AG (UBS, news, msgs), Deutsche Bank (DB, news, msgs) and Lehman Bros. (LEH, news, msgs) was treated as good news......"
"….leverage is far higher and more broadly used now, and losses are much deeper -- approaching $1 trillion by some accounts"
"The number of new people signing up for unemployment benefits last week shot up to the highest level in more than two years, fresh evidence of the damage to a national economy clobbered by housing, credit and financial crises. The Labor Department reported Thursday that new applications filed for unemployment insurance jumped by a seasonally adjusted 38,000 to 407,000 for the week ending March 29. The increase left claims at their highest point since Sept. 17, 2005, following the blows of the devastating Gulf Coast hurricanes. Meanwhile, the number of people continuing to collect unemployment benefits rose by a sharp 97,000 to 2.94 million for the week ending March 22, the most recent period for which that information is available. That was the highest since July 17, 2004. "
"For the first time, Federal Reserve Chairman Ben Bernanke acknowledged on Wednesday said the country could be heading toward a recession. Many other economists and the public believe it’s already there."
"More Americans have fallen behind on consumer loans than at any time in nearly 16 years, as credit problems once concentrated in mortgages spread into other forms of debt. In a quarterly study, the American Bankers Association said the percentage of loans at least 30 days past due rose to 2.65 percent in the fourth quarter from 2.44 percent in the third quarter, and from 2.23 percent a year earlier. The rate of delinquencies was the highest since a 2.75 percent rate in the first quarter of 1992. It provides a fresh sign the nation's economy is slowing, and may be in recession."
"Reports of suspected mortgage fraud rose 42 percent last year as banks became more leery of lies on loan applications. The Treasury Department's Financial Crimes Enforcement Network said Thursday that there were 52,868 reports for mortgage fraud in 2007, up from 37,313 a year earlier. Mortgage fraud reports were the third-most common type of suspicious activity. "
"The Institute for Supply Management said Thursday that the nation’s service sector — which includes retailers, the hotel business, insurance and various social services — contracted in March, but not as much as the month before. Still, worries deepened about soaring prices for raw materials. The institute, a trade group of purchasing executives, said its non-manufacturing index registered 49.6 last month, compared with 49.3 in February. A reading below 50 indicates contraction, while a reading above 50 indicates growth. It’s the third consecutive month of contraction, but the March reading was a bit stronger than the 49.0 expected by analysts surveyed by Thomson/IFR."
Friday, March 14, 2008
Funding crises in the power sector
The following piece appeared in livemint.com on 14th March 2008:
India’s renewed attempt to revive power sector reforms, promoted by the Planning Commission, will not fly as state governments are rejecting the proposal that requires them to provide sovereign guarantee to the Rs1 trillion loans that state electricity utilities, in both transmission and distribution, will have to raise from financial institutions to move the needle.
Power shortages due to limited capacity and growing electricity theft have been identified as one of the key infrastructure bottlenecks threatening India’s ability to sustain the 9% per annum growth rate recorded in the last two years.
About 40% of power generated in India continues to be lost due to theft and pilferage. Earlier, the Planning Commission had rejected a model, proposed by the Union power ministry, under which the Centre would provide Rs51,000 crore in loans directly to state electricity utilities to finance investments badly needed for the sector’s reforms. If the utilities do adhere to the specified benchmarks, the loans owed to the Centre will be converted into grants for the respective state governments. Taken together, the divisions in government have put the brakes on India’s power sector reforms, even as 40% of every 10 units of power generated in India continues to be lost due to theft and pilferage. The country has an installed capacity of 141,000MW at present.
As a result, the ruling United Progressive Alliance has not been able to come up with a fresh programme ever since the accelerated power development reforms programme, or APDRP, lapsed a year ago. “We are not in favour of the loans given under APDRP as gross budgetary support from the government, as argued by the power ministry. We want the state utilities to raise finances on their own from financial institutions such as Rural Electrification Corp. Ltd and Power Finance Corp. Ltd, for which the state government’s should give sovereign guarantees,” said a Planning Commission official, who didn’t want to be identified.
APDRP was created for upgrading the distribution system, minimizing transmission and distribution losses, improving metering, and assigning responsibility for realization of user charges. However, it has grossly underperformed as it has not been able to bring down the losses to 15% by the end of 2007 as originally targeted in 2000-01, when the programme commenced. Power sector officials of Tamil Nadu, Andhra Pradesh, Bihar and Karnataka, who didn’t want to be identified, say that since states have other work commitments for which resources have to be raised, giving sovereign guarantees is not the way forward.
“The Planning Commission is absolutely right. APDRP is a questionable investment today even though it is the flagship programme of the government. The ways that the funds have been utilized need to be revisited. Providing grant funds is a counter measure as the power sector is an economic sector rather than a social sector. Grant funding is fine for rural electrification, but not for this,” said Shubhranshu Patnaik, an executive director at audit and consulting firm PricewaterhouseCoopers
Indian bureaucracy has two serious problems. Excessively complicated mind set AND complete lack of coordination. The Planning Commission, the Power Ministry and the Finance Ministry all are & will have their say on the financing issue but no one is going to call in the RBI or consult the private sector. After all the future of the power sector is most critical for industry and ordinary citizens, alike. Should not there be more discussions in the public domain ? Decisions on such issues should be taken transparently and understood by us. I am sure there are enough International Banks, even in this choppy market, who would be happy lend to established power players in India. (Lets not forget that our interest rates are so very attractive). But please recall we have squeezed the foreign debt maket dead. RBI in its guidelines issued in August 2008, when everything every where was booming, virtually strangulated the debt market by restricting raising of funds to a maximum of USD 20 million through the automatic route and mandating RBI permission for any larger debts. It is widely held that no approvals have been granted ever since by the RBI for any borrowings by the private sector.
So that is how we create a problem and go on complicating it.
Hey ..someone is listening!
Economic Times / 21st April 2008
New Delhi: External commercial borrowing (ECB) norms may be relaxed for infrastructure companies. The finance ministry, which is in favour of creating a special window for such companies, is expected to push for a review of the norms with the RBI.
While the overall cap of $22 billion may remain, an additional limit may be set for these companies. The total amount raised through ECBs in April-February 2007-08 was over $26 billion, much more than the overall limit.
The finance ministry has been pushing for some relaxation in ECB norms for core companies ever since the curbs were introduced, especially on the end-use. A comprehensive review of the policy is expected next month, with senior officials of the finance ministry and RBI sitting together to discuss strategy.
The review of the norms comes at a time when domestic companies are facing higher interest rates at home and there is a growing demand for access to cheaper overseas funds. RBI continues to toe a hard line on excess liquidity with inflation ruling at a much higher level of over 7% as against its comfort level of 5%. A final decision on relaxing the norms would be taken by a high-level committee.
Infrastructure firms have been impacted by the restrictions placed on rupee spending of dollars borrowed overseas, since a large part of the expenditure is local in nature. A company cannot raise more than $20 million for permissible end-use. Under the current norms, all firms registered under the Companies Act can tap overseas markets for funds up to $500 million under the automatic route, subject to restrictions based on end use.
Realty firms setting up integrated townships have been barred from raising ECBs. The ceiling on interest to be paid on such borrowings was also lowered, making it difficult for small and medium sized companies to borrow abroad. It is unlikely that any relaxation will be made for this sector.
1st Aug 2008 / LiveMint.com
New Delhi: Anxious that sharply rising interest rates could force companies to postpone much-needed investments, India’s finance ministry is trying to help by working towards loosening rules involving companies’ ability to raise overseas debt through external commercial borrowings, or ECBs.
The government will now try to persuade the central bank, the Reserve Bank of India, or RBI, to agree to loosening ECB rules, primarily for maturity periods of five years and above, a senior finance ministry official told Mint. This will be done when RBI and finance ministry officials meet to discuss capital market issues shortly, he added, asking not to be named.
India’s current domestic interest rate level, coupled with a relatively immature bond market, could short-circuit investment plans of companies, the official added, explaining the finance ministry’s reasons to want to push RBI to agree to ease restrictions.
RBI officials couldn’t be reached for comment.
On 29 July, RBI, as part of its monetary policy review, hiked the cash reserve ratio, or CRR, by 25 basis points (bps) to 9%. The so-called repo rate was also revised upward by 50 bps to 9%. CRR defines the balance commercial banks need to keep with RBI. The repo rate is simply the rate at which it lends money to banks, thus infusing liquidity in the system. One basis point is one-hundredth of a percentage point.
The last time the Indian government loosened some ECB rules to help infrastructure borrowers was on 29 May.
Investment demand has been the most significant driver of India’s recent economic growth, according to the government’s Economic Survey of 2007-08. The annual economic growth in the past three consecutive years has been at least 9% or more.
In 2007, the finance ministry significantly tightened ECB rules twice—in May and August—as large foreign capital inflows made it difficult for RBI to use monetary tools at its disposal to balance the needs of exchange rate management, inflation control and economic growth.
In 2007-08, foreign portfolio investment and ECBs were the largest sources of inflows into India, amounting to $29.26 billion and $22.16 billion, respectively. Consequently, the Indian rupee appreciated relatively quickly against the dollar and money supply increased beyond the RBI’s targets, which added momentum to inflation.
However, the situation has changed since last August, the same finance ministry official pointed out. According to RBI data, foreign portfolio investors have turned net sellers, and the rupee depreciated 6.3% against the dollar since March-end to trade at Rs42.51 in late afternoon deals on Thursday.
“Some opening up (of capital inflows) would help, (and) I don’t think it will pressurize inflation up. One can afford to ease ECB norms a bit,” said D.K. Joshi, principal economist and director at the credit rating agency, Crisil Ltd.
One of the tightening measures announced by the finance ministry last year was a reduction in the spread between the London Interbank Offered Rate, or Libor, and the interest rate on ECBs, which served to squeeze some companies out of the ECB market.
Another measure announced last year was to ask companies to park money outside India and use it to buy machinery for use at home, which slowed an increase in domestic money supply.
According to a senior banker, who didn’t want be identified as he is not authorized to talk to the media, a simple way to increase access to ECBs is to widen the spread over Libor even if the money can’t be brought in. This measure would open the door to a larger number of companies, the banker said. The current spread over Libor for ECBs with a maturity period of more than five years is capped at 3.5%.
In the wake of the subprime crisis in developed countries’ financial markets, the risk attached to debt issued by companies from emerging economies such as India increased, making ECBs more expensive. However, simultaneously the six-month Libor, which is the benchmark for interest rate on ECBs, softened on account of monetary policy measures in the US.
According to Anil Ladha, head of capital markets at ICICI Securities Ltd, a top-notch Indian company, typically one with the highest domestic credit rating, could pay 1.5-2 percentage points lower on ECBs (including hedging cost) as compared with domestic debt of the same duration. The same Indian company could raise money through ECBs for a five-year period at a total cost of about 9%, Ladha said. The cost saving on an ECB for Indian companies at a slight lower level could be more than 2 percentage points compared with domestic borrowing for the same period, he added.
22nd September 2008 / Bloomberg
India Eases Loan Rules for Infrastructure Companies (Update1)
By Kartik Goyal
Sept. 22 (Bloomberg) -- India today eased borrowing rules allowing companies building roads, ports, utilities and other infrastructure projects to borrow more from overseas, a finance ministry release said. Infrastructure companies can borrow as much as $500 million for rupee expenditure, compared with the maximum of $100 million currently. The new rules will come into force when the Reserve Bank of India notifies them, the finance ministry said. The move will help companies including Larsen & Toubro Ltd. and GVK Power and Infrastructure Ltd. access less expensive funds from overseas after the central bank in July raised the benchmark interest rate to a seven-year high to fight the fastest inflation since 1992. Higher inflows may also help stem a decline in the currency, the third-worst performer in Asia this year. ``The government doesn't want infrastructure funding to get hurt as it's critical to the economic growth,'' said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor's. ``It will help companies access funds at cheaper costs.'' The cap on borrowing costs for overseas loans maturity in more than seven years was raised 100 basis points to 450 basis points plus six-month Libor, or London interbank offer rate. A basis point is 0.01 percentage point. ``In view of the widening credit spreads in the international financial markets, it has been decided to modify the all-in-cost ceilings in respect of'' external commercial borrowings with a minimum average maturity of more than seven years, the finance ministry said. The government estimates that Asia' third-biggest economy needs to invest $500 billion in the five years to build roads, ports and power stations if it has to sustain 9 percent average annual economic growth. Yet, companies are facing difficulties in accessing funds domestically after the central bank raised the benchmark rate thrice since June to seven-year high of 9 percent. The rupee fell almost 2 percent on Sept. 16 as the credit- market turmoil in the U.S. prompted overseas funds to pull out money from Indian stocks. The rupee gained today after the U.S. government proposed buying as much as $700 billion in financial assets to clean up banks' balance sheets. Easing rules on overseas borrowings ``may help shore inflows in to the country and strengthen the rupee,'' Crisil's Joshi said. Foreign investors, who bought a record $17 billion of Indian stocks in 2007, have withdrawn $8.7 billion this year, fueling a 31 percent decline in the benchmark stock index. All other aspects of the policy on external commercial borrowings remain unchanged, the finance ministry said.
Companies engaged in mining, exploration and refining activities can now borrow up to $500 million a year from abroad for spending in India, 10 times more than the $50 million allowed till now. The finance ministry on Tuesday relaxed the external commercial borrowing policy to allow entities in these sectors to borrow more from abroad by defining them as infrastructure companies.
Economic Times / 8 Oct. 08
India’s renewed attempt to revive power sector reforms, promoted by the Planning Commission, will not fly as state governments are rejecting the proposal that requires them to provide sovereign guarantee to the Rs1 trillion loans that state electricity utilities, in both transmission and distribution, will have to raise from financial institutions to move the needle.
Power shortages due to limited capacity and growing electricity theft have been identified as one of the key infrastructure bottlenecks threatening India’s ability to sustain the 9% per annum growth rate recorded in the last two years.
About 40% of power generated in India continues to be lost due to theft and pilferage. Earlier, the Planning Commission had rejected a model, proposed by the Union power ministry, under which the Centre would provide Rs51,000 crore in loans directly to state electricity utilities to finance investments badly needed for the sector’s reforms. If the utilities do adhere to the specified benchmarks, the loans owed to the Centre will be converted into grants for the respective state governments. Taken together, the divisions in government have put the brakes on India’s power sector reforms, even as 40% of every 10 units of power generated in India continues to be lost due to theft and pilferage. The country has an installed capacity of 141,000MW at present.
As a result, the ruling United Progressive Alliance has not been able to come up with a fresh programme ever since the accelerated power development reforms programme, or APDRP, lapsed a year ago. “We are not in favour of the loans given under APDRP as gross budgetary support from the government, as argued by the power ministry. We want the state utilities to raise finances on their own from financial institutions such as Rural Electrification Corp. Ltd and Power Finance Corp. Ltd, for which the state government’s should give sovereign guarantees,” said a Planning Commission official, who didn’t want to be identified.
APDRP was created for upgrading the distribution system, minimizing transmission and distribution losses, improving metering, and assigning responsibility for realization of user charges. However, it has grossly underperformed as it has not been able to bring down the losses to 15% by the end of 2007 as originally targeted in 2000-01, when the programme commenced. Power sector officials of Tamil Nadu, Andhra Pradesh, Bihar and Karnataka, who didn’t want to be identified, say that since states have other work commitments for which resources have to be raised, giving sovereign guarantees is not the way forward.
“The Planning Commission is absolutely right. APDRP is a questionable investment today even though it is the flagship programme of the government. The ways that the funds have been utilized need to be revisited. Providing grant funds is a counter measure as the power sector is an economic sector rather than a social sector. Grant funding is fine for rural electrification, but not for this,” said Shubhranshu Patnaik, an executive director at audit and consulting firm PricewaterhouseCoopers
Indian bureaucracy has two serious problems. Excessively complicated mind set AND complete lack of coordination. The Planning Commission, the Power Ministry and the Finance Ministry all are & will have their say on the financing issue but no one is going to call in the RBI or consult the private sector. After all the future of the power sector is most critical for industry and ordinary citizens, alike. Should not there be more discussions in the public domain ? Decisions on such issues should be taken transparently and understood by us. I am sure there are enough International Banks, even in this choppy market, who would be happy lend to established power players in India. (Lets not forget that our interest rates are so very attractive). But please recall we have squeezed the foreign debt maket dead. RBI in its guidelines issued in August 2008, when everything every where was booming, virtually strangulated the debt market by restricting raising of funds to a maximum of USD 20 million through the automatic route and mandating RBI permission for any larger debts. It is widely held that no approvals have been granted ever since by the RBI for any borrowings by the private sector.
So that is how we create a problem and go on complicating it.
Hey ..someone is listening!
Economic Times / 21st April 2008
New Delhi: External commercial borrowing (ECB) norms may be relaxed for infrastructure companies. The finance ministry, which is in favour of creating a special window for such companies, is expected to push for a review of the norms with the RBI.
While the overall cap of $22 billion may remain, an additional limit may be set for these companies. The total amount raised through ECBs in April-February 2007-08 was over $26 billion, much more than the overall limit.
The finance ministry has been pushing for some relaxation in ECB norms for core companies ever since the curbs were introduced, especially on the end-use. A comprehensive review of the policy is expected next month, with senior officials of the finance ministry and RBI sitting together to discuss strategy.
The review of the norms comes at a time when domestic companies are facing higher interest rates at home and there is a growing demand for access to cheaper overseas funds. RBI continues to toe a hard line on excess liquidity with inflation ruling at a much higher level of over 7% as against its comfort level of 5%. A final decision on relaxing the norms would be taken by a high-level committee.
Infrastructure firms have been impacted by the restrictions placed on rupee spending of dollars borrowed overseas, since a large part of the expenditure is local in nature. A company cannot raise more than $20 million for permissible end-use. Under the current norms, all firms registered under the Companies Act can tap overseas markets for funds up to $500 million under the automatic route, subject to restrictions based on end use.
Realty firms setting up integrated townships have been barred from raising ECBs. The ceiling on interest to be paid on such borrowings was also lowered, making it difficult for small and medium sized companies to borrow abroad. It is unlikely that any relaxation will be made for this sector.
1st Aug 2008 / LiveMint.com
New Delhi: Anxious that sharply rising interest rates could force companies to postpone much-needed investments, India’s finance ministry is trying to help by working towards loosening rules involving companies’ ability to raise overseas debt through external commercial borrowings, or ECBs.
The government will now try to persuade the central bank, the Reserve Bank of India, or RBI, to agree to loosening ECB rules, primarily for maturity periods of five years and above, a senior finance ministry official told Mint. This will be done when RBI and finance ministry officials meet to discuss capital market issues shortly, he added, asking not to be named.
India’s current domestic interest rate level, coupled with a relatively immature bond market, could short-circuit investment plans of companies, the official added, explaining the finance ministry’s reasons to want to push RBI to agree to ease restrictions.
RBI officials couldn’t be reached for comment.
On 29 July, RBI, as part of its monetary policy review, hiked the cash reserve ratio, or CRR, by 25 basis points (bps) to 9%. The so-called repo rate was also revised upward by 50 bps to 9%. CRR defines the balance commercial banks need to keep with RBI. The repo rate is simply the rate at which it lends money to banks, thus infusing liquidity in the system. One basis point is one-hundredth of a percentage point.
The last time the Indian government loosened some ECB rules to help infrastructure borrowers was on 29 May.
Investment demand has been the most significant driver of India’s recent economic growth, according to the government’s Economic Survey of 2007-08. The annual economic growth in the past three consecutive years has been at least 9% or more.
In 2007, the finance ministry significantly tightened ECB rules twice—in May and August—as large foreign capital inflows made it difficult for RBI to use monetary tools at its disposal to balance the needs of exchange rate management, inflation control and economic growth.
In 2007-08, foreign portfolio investment and ECBs were the largest sources of inflows into India, amounting to $29.26 billion and $22.16 billion, respectively. Consequently, the Indian rupee appreciated relatively quickly against the dollar and money supply increased beyond the RBI’s targets, which added momentum to inflation.
However, the situation has changed since last August, the same finance ministry official pointed out. According to RBI data, foreign portfolio investors have turned net sellers, and the rupee depreciated 6.3% against the dollar since March-end to trade at Rs42.51 in late afternoon deals on Thursday.
“Some opening up (of capital inflows) would help, (and) I don’t think it will pressurize inflation up. One can afford to ease ECB norms a bit,” said D.K. Joshi, principal economist and director at the credit rating agency, Crisil Ltd.
One of the tightening measures announced by the finance ministry last year was a reduction in the spread between the London Interbank Offered Rate, or Libor, and the interest rate on ECBs, which served to squeeze some companies out of the ECB market.
Another measure announced last year was to ask companies to park money outside India and use it to buy machinery for use at home, which slowed an increase in domestic money supply.
According to a senior banker, who didn’t want be identified as he is not authorized to talk to the media, a simple way to increase access to ECBs is to widen the spread over Libor even if the money can’t be brought in. This measure would open the door to a larger number of companies, the banker said. The current spread over Libor for ECBs with a maturity period of more than five years is capped at 3.5%.
In the wake of the subprime crisis in developed countries’ financial markets, the risk attached to debt issued by companies from emerging economies such as India increased, making ECBs more expensive. However, simultaneously the six-month Libor, which is the benchmark for interest rate on ECBs, softened on account of monetary policy measures in the US.
According to Anil Ladha, head of capital markets at ICICI Securities Ltd, a top-notch Indian company, typically one with the highest domestic credit rating, could pay 1.5-2 percentage points lower on ECBs (including hedging cost) as compared with domestic debt of the same duration. The same Indian company could raise money through ECBs for a five-year period at a total cost of about 9%, Ladha said. The cost saving on an ECB for Indian companies at a slight lower level could be more than 2 percentage points compared with domestic borrowing for the same period, he added.
22nd September 2008 / Bloomberg
India Eases Loan Rules for Infrastructure Companies (Update1)
By Kartik Goyal
Sept. 22 (Bloomberg) -- India today eased borrowing rules allowing companies building roads, ports, utilities and other infrastructure projects to borrow more from overseas, a finance ministry release said. Infrastructure companies can borrow as much as $500 million for rupee expenditure, compared with the maximum of $100 million currently. The new rules will come into force when the Reserve Bank of India notifies them, the finance ministry said. The move will help companies including Larsen & Toubro Ltd. and GVK Power and Infrastructure Ltd. access less expensive funds from overseas after the central bank in July raised the benchmark interest rate to a seven-year high to fight the fastest inflation since 1992. Higher inflows may also help stem a decline in the currency, the third-worst performer in Asia this year. ``The government doesn't want infrastructure funding to get hurt as it's critical to the economic growth,'' said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor's. ``It will help companies access funds at cheaper costs.'' The cap on borrowing costs for overseas loans maturity in more than seven years was raised 100 basis points to 450 basis points plus six-month Libor, or London interbank offer rate. A basis point is 0.01 percentage point. ``In view of the widening credit spreads in the international financial markets, it has been decided to modify the all-in-cost ceilings in respect of'' external commercial borrowings with a minimum average maturity of more than seven years, the finance ministry said. The government estimates that Asia' third-biggest economy needs to invest $500 billion in the five years to build roads, ports and power stations if it has to sustain 9 percent average annual economic growth. Yet, companies are facing difficulties in accessing funds domestically after the central bank raised the benchmark rate thrice since June to seven-year high of 9 percent. The rupee fell almost 2 percent on Sept. 16 as the credit- market turmoil in the U.S. prompted overseas funds to pull out money from Indian stocks. The rupee gained today after the U.S. government proposed buying as much as $700 billion in financial assets to clean up banks' balance sheets. Easing rules on overseas borrowings ``may help shore inflows in to the country and strengthen the rupee,'' Crisil's Joshi said. Foreign investors, who bought a record $17 billion of Indian stocks in 2007, have withdrawn $8.7 billion this year, fueling a 31 percent decline in the benchmark stock index. All other aspects of the policy on external commercial borrowings remain unchanged, the finance ministry said.
Companies engaged in mining, exploration and refining activities can now borrow up to $500 million a year from abroad for spending in India, 10 times more than the $50 million allowed till now. The finance ministry on Tuesday relaxed the external commercial borrowing policy to allow entities in these sectors to borrow more from abroad by defining them as infrastructure companies.
Economic Times / 8 Oct. 08
Tuesday, March 11, 2008
Africa - China: A strategic partnership
The African continent is of strategic importance in the energy & resources security policy of the developed and emerging economies. China has been forging deep relationships with impoverished countries of the continent in a bid to secure resources. Oil has been one of the most important targets for China. Today 33% of China's oil imports are derived from Africa, with Angola being the single most important source. (17% of oil imports of China are sourced to Angola in 2006). Other important sources of oil for China within Africa are Congo, Guinea & Libya. At the same time, African countries are increasingly sourcing imports from China and 20% of the imports into Africa are sourced to China. China's exports to African countries have grown 10 times in 10 years. The strategic approach of China (as always) has increased the economic interdependance between the China & some African countries concommitantly leading to important politcal moves for cementing the relationships.
The African continent is also a rich source for other critical minerals for China's industry. The continent accounts for 51% of global cobalt production, 47% of chromite, 31% of Managanese, 20% of Titanium, 11% of Bauxite.....
Despite India's much closer ties with Africa and presence of a large Indian diaspora through several generations, we have not been able to capitalize upon relationships to this extent. The India-Africa engagement in the hydrocarbon sector was first witnesses in Nov. 2007 via an energy conference organised by FICCI. Only a quarter of India’s crude oil imports are currently being sourced from Africa and given that the continent is expected to contribute approximately 25% of the growth in the world’s petroleum and LNG supplies over the next three years, there is enormous potential for India to increase its volumes of crude oil imports from African countries in the future. Not only that, Indian drilling industry can also take the lead in exploration in the African continent, an initiative, which is lagging severely due to the inward looking approach of Indian business. With 10% of the world’s total oil and gas reserves, Africa’s hydrocarbon exploration potential remains relatively untapped. There are significant opportunities for Indian companies to increase their exploration efforts in the continent and provide better equity to impoverished African countries.
******************
April 22 (Bloomberg) -- Angola was the top supplier of crude oil to China in the first quarter, ahead of Saudi Arabia, Iran, Oman and Russia as the world's second-biggest energy user boosted purchases to ease a domestic shortage. Angola exported 8.48 million metric tons of crude to China in the three months ended March 31, about 688,000 barrels a day and 55 percent more than a year earlier, the Beijing-based Customs General Administration said today. Saudi Arabia shipped 8.18 million tons, a 38 percent increase. China's oil imports surged 25 percent to a record 17.3 million tons in March as refineries expanded processing to ease a gasoline and diesel shortage that deepened as farmers started planting their crops. African grades, such as those supplied by Angola, are favored for their relatively low sulfur content and high yields of auto fuels.
******************
Hey, someone is listening....
India, Asia’s third largest consumer of oil, will focus on obtaining energy assets in Angola after failing to secure supplies closer to home.
“Angola is the next country where we are going to concentrate,” petroleum minister Murli Deora said. “We lost because our bid wasn’t good enough” in previous auctions, he said. “We have learnt from this.”
State-run explorers from India and China have submitted bids for oil blocks in Angola as the world’s two most populous nations need imports to sustain economic growth.
India’s oil shortage has spurred Deora to turn to Angola, the fastest growing member of the Organization of Petroleum Exporting Countries (Opec) with reserves equivalent to 11 years of India’s imports, after losing out to China in $10 billion (Rs400 billion) of auctions.
India’s energy independence has been threatened because it hasn’t been able to increase production at home, where output from three-decade-old fields is declining. India will also compete for oil in Nigeria, Africa’s biggest producer, and Sudan.
“India has to acquire assets overseas. There is no other way,” said Prashant Periwal, an analyst at stock broking and equities research firm Batlivala and Karani Securities in London. “China has slowly and steadily spread across most of Africa and is sitting on huge resources. For fuel security, you have to take control of supplies.”
India has been beaten by China to auctions for energy assets in Kazakhstan and Myanmar in the past three years. India has offered to build ports and railways in Nigeria and Sudan, copying tactics used by China.
The South Asian nation hosted a two-day India-Africa conference in November to discuss oil cooperation, where Deora offered to build refineries and pipelines.
India sought stakes of as much as 32% in two fields in Sudan, R.S. Butola, managing director of ONGC Videsh Ltd (OVL), the overseas exploration unit of India’s largest producer Oil and Natural Gas Corp., said during the November conference in New Delhi. Petroliam Nasional Bhd., Malaysia’s state oil company, and Total SA, Europe’s third largest oil company, control the areas, he said.
India, the fastest growing economy after China, estimates demand for oil will rise 62% over the next five years to 241 million tonnes a year, or 4.8 million barrels a day.
Deora will travel to Venezuela next month to complete an agreement to acquire a stake in fields in the biggest crude-exporting nation in the Americas.
OVL will invest up to $356 million (Rs1,424 crore) in a venture with state-owned Petroleos de Venezuela SA to operate the San Cristobal area.
OVL and China Petroleum and Chemical Corp., Asia’s largest refiner, are among 43 companies that will bid to explore for oil in Angola, according to state-run Sonangol SA. The African nation is offering 11 licences for fields with a potential of 9.6 billion barrels of oil reserves, Sonangol said on its website.
The bidding has been delayed after Angola extended the deadline indefinitely. The offers originally had to be submitted by 13 March, according to Sonangol.
The auction will take place after elections in September, Diario Economico reported on 19 March, without saying where it got the information.
Angola, which became a member of OPEC last year, was set a daily production target of 1.9 million barrels at the group’s meeting in Abu Dhabi on 5 December. Angolan output increased 18% last year to 1.61 million barrels a day, according to the International Energy Agency.
Crude oil futures have risen 59% from a year ago on concern of supply disruptions from major producers, including Nigeria and Iraq. Crude oil for May delivery fell as much as $1.28, or 1.2%, to $104.34 a barrel on the New York Mercantile Exchange.
The South Asian nation expects a decision from Russian authorities on another stake in an exploration area in Sakhalin Island “soon,” Deora said. OVL is keen on acquiring a stake in the Sakhalin-3 area, R.S. Sharma, chairman of the parent company, had said on 12 October.
India plans to resume talks with Pakistan over a $7.4 billion pipeline to transport natural gas from Iran after more than a decade of delays, Deora said.
Quoted from:
India to focus on Angola after losing out in energy auctions
Livemint.com
1st April 2008
Originally published by Bloomberg
ONGC-Mittal Energy (OMEL) — a joint venture between oil major ONGC and L N Mittal group — is planning to set up its first refinery in Nigeria with an investment of around $4 billion. The company has appointed UK-based consultant Nexant to undertake a feasibility study for the proposed 9-million-tonne refinery.
Economic Times / 8th Oct 08
The African continent is also a rich source for other critical minerals for China's industry. The continent accounts for 51% of global cobalt production, 47% of chromite, 31% of Managanese, 20% of Titanium, 11% of Bauxite.....
Despite India's much closer ties with Africa and presence of a large Indian diaspora through several generations, we have not been able to capitalize upon relationships to this extent. The India-Africa engagement in the hydrocarbon sector was first witnesses in Nov. 2007 via an energy conference organised by FICCI. Only a quarter of India’s crude oil imports are currently being sourced from Africa and given that the continent is expected to contribute approximately 25% of the growth in the world’s petroleum and LNG supplies over the next three years, there is enormous potential for India to increase its volumes of crude oil imports from African countries in the future. Not only that, Indian drilling industry can also take the lead in exploration in the African continent, an initiative, which is lagging severely due to the inward looking approach of Indian business. With 10% of the world’s total oil and gas reserves, Africa’s hydrocarbon exploration potential remains relatively untapped. There are significant opportunities for Indian companies to increase their exploration efforts in the continent and provide better equity to impoverished African countries.
******************
April 22 (Bloomberg) -- Angola was the top supplier of crude oil to China in the first quarter, ahead of Saudi Arabia, Iran, Oman and Russia as the world's second-biggest energy user boosted purchases to ease a domestic shortage. Angola exported 8.48 million metric tons of crude to China in the three months ended March 31, about 688,000 barrels a day and 55 percent more than a year earlier, the Beijing-based Customs General Administration said today. Saudi Arabia shipped 8.18 million tons, a 38 percent increase. China's oil imports surged 25 percent to a record 17.3 million tons in March as refineries expanded processing to ease a gasoline and diesel shortage that deepened as farmers started planting their crops. African grades, such as those supplied by Angola, are favored for their relatively low sulfur content and high yields of auto fuels.
******************
Hey, someone is listening....
India, Asia’s third largest consumer of oil, will focus on obtaining energy assets in Angola after failing to secure supplies closer to home.
“Angola is the next country where we are going to concentrate,” petroleum minister Murli Deora said. “We lost because our bid wasn’t good enough” in previous auctions, he said. “We have learnt from this.”
State-run explorers from India and China have submitted bids for oil blocks in Angola as the world’s two most populous nations need imports to sustain economic growth.
India’s oil shortage has spurred Deora to turn to Angola, the fastest growing member of the Organization of Petroleum Exporting Countries (Opec) with reserves equivalent to 11 years of India’s imports, after losing out to China in $10 billion (Rs400 billion) of auctions.
India’s energy independence has been threatened because it hasn’t been able to increase production at home, where output from three-decade-old fields is declining. India will also compete for oil in Nigeria, Africa’s biggest producer, and Sudan.
“India has to acquire assets overseas. There is no other way,” said Prashant Periwal, an analyst at stock broking and equities research firm Batlivala and Karani Securities in London. “China has slowly and steadily spread across most of Africa and is sitting on huge resources. For fuel security, you have to take control of supplies.”
India has been beaten by China to auctions for energy assets in Kazakhstan and Myanmar in the past three years. India has offered to build ports and railways in Nigeria and Sudan, copying tactics used by China.
The South Asian nation hosted a two-day India-Africa conference in November to discuss oil cooperation, where Deora offered to build refineries and pipelines.
India sought stakes of as much as 32% in two fields in Sudan, R.S. Butola, managing director of ONGC Videsh Ltd (OVL), the overseas exploration unit of India’s largest producer Oil and Natural Gas Corp., said during the November conference in New Delhi. Petroliam Nasional Bhd., Malaysia’s state oil company, and Total SA, Europe’s third largest oil company, control the areas, he said.
India, the fastest growing economy after China, estimates demand for oil will rise 62% over the next five years to 241 million tonnes a year, or 4.8 million barrels a day.
Deora will travel to Venezuela next month to complete an agreement to acquire a stake in fields in the biggest crude-exporting nation in the Americas.
OVL will invest up to $356 million (Rs1,424 crore) in a venture with state-owned Petroleos de Venezuela SA to operate the San Cristobal area.
OVL and China Petroleum and Chemical Corp., Asia’s largest refiner, are among 43 companies that will bid to explore for oil in Angola, according to state-run Sonangol SA. The African nation is offering 11 licences for fields with a potential of 9.6 billion barrels of oil reserves, Sonangol said on its website.
The bidding has been delayed after Angola extended the deadline indefinitely. The offers originally had to be submitted by 13 March, according to Sonangol.
The auction will take place after elections in September, Diario Economico reported on 19 March, without saying where it got the information.
Angola, which became a member of OPEC last year, was set a daily production target of 1.9 million barrels at the group’s meeting in Abu Dhabi on 5 December. Angolan output increased 18% last year to 1.61 million barrels a day, according to the International Energy Agency.
Crude oil futures have risen 59% from a year ago on concern of supply disruptions from major producers, including Nigeria and Iraq. Crude oil for May delivery fell as much as $1.28, or 1.2%, to $104.34 a barrel on the New York Mercantile Exchange.
The South Asian nation expects a decision from Russian authorities on another stake in an exploration area in Sakhalin Island “soon,” Deora said. OVL is keen on acquiring a stake in the Sakhalin-3 area, R.S. Sharma, chairman of the parent company, had said on 12 October.
India plans to resume talks with Pakistan over a $7.4 billion pipeline to transport natural gas from Iran after more than a decade of delays, Deora said.
Quoted from:
India to focus on Angola after losing out in energy auctions
Livemint.com
1st April 2008
Originally published by Bloomberg
ONGC-Mittal Energy (OMEL) — a joint venture between oil major ONGC and L N Mittal group — is planning to set up its first refinery in Nigeria with an investment of around $4 billion. The company has appointed UK-based consultant Nexant to undertake a feasibility study for the proposed 9-million-tonne refinery.
Economic Times / 8th Oct 08
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