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Indian firm wins first legal tussle in Nepal over power

Kathmandu, March 15: Indian construction and power project developer GMR Group has crossed its first legal hurdle in Nepal, with the apex court refusing to heed private petitioners who urged that the firm's newly signed hydropower pact be stopped.

The Hyderabad-based group became the first Indian company to break the jinx on Indian investment in Nepal's thorny hydropower sector by bagging a deal from Nepal's government to develop the 300 MW Upper Karnali hydropower project.

However, the group's move to float a joint venture company with the state-owned utility, Nepal Electricity Authority, to develop the project ran into public and legal opposition. Protesters accused Prime Minister Girija Prasad Koirala of selling out Nepal's natural resources under pressure from the Indian government.

Two individuals from the remote districts where the project is located filed a petition against the pact in Nepal's Supreme Court, saying the consent of two-third lawmakers was needed for such pacts.

Gorakh Bahadur BC from Kalikot district and Ram Singh Rawal from Surkhet challenged the MoU signed between GMR and Nepal's water resources ministry, asking for a stay order till the court gave a final decision.

However, the embattled Indian firm received a boost with Supreme Court this week declining to give a stay order.

Chief Justice Kedar Prasad Giri and judge Ram Kumar Prasad Shah heard the case and said the issue of whether the pact required parliamentary approval would be taken into consideration when the final verdict was delivered.

The government had sent its attorney general, Yagya Murti Banjade, to defend the pact.

The GMR case would be a test case watched by other potential investors.

After years of an impasse, GMR and another Indian company, Sutlej Jal Vidyut Nigam, were able to wrest two hydel projects in Nepal.

Sutlej, a public sector undertaking, has been given the right to develop the 402 Arun III project.

Over 10 more Indian companies are now bidding for a third project, the 600 MW Budi Gandaki.

Though the Maoists and nationalists are opposing the two deals, Koirala's Nepali Congress party said in its election manifesto this week that developing the hydropower projects under consideration would be given priority.

SC refuses relief to SEBI against analyst-cum-commentator

New Delhi, March 14: The Supreme Court on Friday refused to grant any immediate relief to market regulator SEBI which is seeking action against financial analyst Mathew Easow, who is also a commentator on a TV channel, for allegedly bungling in securities market.

SEBI counsel Pratap Venugopal has alleged that respondent (Easow), who regularly features on various electronic and print media, has recommended a very impressive price appreciation in certain scrips while he himself has sold those immediately, enabling himself to earn a huge profit at the cost of unsuspecting investors.

Barely a month ago, former SEBI chief M Damodaran in an interview to a TV channel had noted media's role in "talking up" and "talking down" stocks.

The Supreme Court bench headed by Justice B N Agarwal refused to grant any immediate relief saying that there was no urgency in the matter and it would be heard on March 31, the date scheduled for hearing.

SEBI has challenged the Securities Appellate Tribunal (SAT) judgment that set aside its order holding the Mathew Easow Research Securities chairman, an exclusive commentator for a TV channel guilty of violating regulation 4(2)(f) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations.

"SAT has failed to appreciate that the respondent, who regularly features on various electronic and print media vehicles, has recommended a very impressive price appreciation in certain scrips (between June-December 2005) within a short term, while he himself has sold those very shares on the same day, and on immediately succeeding days enabling himself to earn a huge profit at the cost of unsuspecting investors," counsel Pratap Venugopal said.

***** moves HQ from London to Geneva

London, March 15: Internet giant ***** has decided to move its headquarters from London to Geneva in what is seen as the first major fallout of Britain`s "uncompetitive" tax system affecting its attractiveness as a global financial hub.

***** says it is relocating to Switzerland to "increase its financial performance."

Tax consultants warn that tighter tax rules on foreigners bringing money into the UK could push private banks to move a third of their business offshore.

Chancellor Alistair Darling announced during his budget speech on Wednesday that people of Indian and other foreign origin who claim non-domicile tax status would need to pay 30,000 pounds after living seven years in the United Kingdom.

Before the budget, Britain`s trade and industry organisations had demanded that Darling use the budget to simplify Britain`s corporate tax structure.

Reacting to *****`s decision, Richard Lambert, the leader of the confederation of British industry, said: "We are deeply concerned that the UK corporate tax system is becoming uncompetitive and, without knowing the detail, this sounds like another sign of that."

Richard Turnor, a partner at law firm Allen & Overy, said banks were already considering moving bankers overseas after the budget. The proposals involve taxing money brought onshore by non-domiciles to pay for investment banking and brokerage services in the UK.

Those considering investment into the UK or deals with UK brokers would also think twice because of the new tax regime. He told a newspaper: "this could lead to billions of pounds of business moving away from London."

Estate agents have also expressed concern that an exodus of high net worth non-domicile people could affect the housing market. Indians and Chinese are among the major investors in London`s booming housing market

Tata Motors to shift Ace, Magic prdn to Uttarakhand

New Delhi, March 15: Country`s largest automobile manufacturer Tata Motors will shift the entire production of its mini truck Ace and the passenger carrier variant of the vehicle, Magic, to Uttarakhand by next year.

"Currently, ace and magic are being produced from both Pune and Uttarakhand but the idea is to shift the total production to the latter unit," Tata Motors Vice-President Sales and Marketing (commercial vehicles) Ravi Pisharody told reporters here.

He said by the middle of next year, the shift would commence.

"We are expecting to utilise the full capacity of the Uttarakhand plant by the end of the next year," Pisharody added.

Tata Motors` Uttarakhand plant has a production capacity of 2.25 lakh units per annum and the company made an investment of Rs 1,000 crore in setting up the facility.

The company today launched its six-seater rural transportation vehicle `Magic`, priced at Rs 2.68 lakh (ex-showroom Delhi), and 9-13 seater maxicab `Winger` (Rs 4.67 lakh to Rs 6.67 lakh ex-showroom Delhi) in North India.

He said initially the company was targeting about 22-30 percent of the light commercial busses market, which presently has a volume of about 35,000 units per year, with Winger.

"Gradually, as we progress we are looking at about 15,000 units of Winger a year," he said declining to project any figures for Magic.

"This (Magic) is a new concept and we are evaluating how it is received by the target market," he said.

Pisharody said once the total production of ace and magic shifts to Uttarakhand, the Pune plant would fully focus on other light commercial vehicles.

RBI likely to widen repo, reverse repo margin
15 Mar, 2008, 2000 hrs IST.............

MUMBAI: The Reserve Bank of India (RBI) has hinted at measures to widen the spread between the rates at which it borrows from and lends to banks. This is aimed at giving the regulator more headroom to move either way, given the uncertainties in global markets.

Currently, RBI borrows from banks at 6% through the reverse repo auction and it lends to banks at the rate of 7.75%. The margin can be widened by either increasing the repo rate or reducing the reverse repo rate. Speaking to reporters on Friday, RBI governor YV Reddy pointed out, “By and large, uncertainties would continue. And as of now, it is not clear when things will get normal or a little less abnormal.

In situations where there are lesser uncertainties, it helps to have a smaller corridor between the repo and reverse repo rates and vice versa.” The governor was speaking on the sidelines of a function, where Bank of Mauritius governor Rundheersing Bheenick was delivering an address.

Reddy said that it’s sometimes difficult to guess the magnitude of the uncertainties arising out of the subprime crisis in the US. The central bank governor said that policy makers, across the globe, are cooperating to ensure that the uncertainties meet an early end, but the ultimate source of comfort can come only from the US.

Mr Reddy emphasised that monetary policy management becomes difficult in India, given the fiscal deficit and a large current account deficit. He reiterated that it has been stressed in the recent policy review that rising oil and food prices would exert pressure on price levels.

Speaking on forex derivatives issues, Mr Reddy pointed out that the central bank had been flagging the risks involved in these products. He added that the regulator had been involved in an interactive supervisory role. However, the sensitivity towards these risks is growing more rapidly in recent times, he said.

Incidentally, Standard and Poor’s (S&P) on Friday, estimated that write-downs on account of the subprime crisis could reach $285 billion. According to S&P, the total market value of write-downs of subprime asset-backed securities (ABS) write-downs disclosed so far by financial institutions — banks, brokers, and insurers — well exceeds $150 billion, globally. S&P has estimated that the valuation write-downs of subprime affected ABS could reach $285 billion for the global financial sector.

The governor of Bank of Mauritius highlighted the challenges faced by Mauritius due to unprecedented foreign fund inflows. He pointed out that monetary authorities in Mauritius are currently revisiting their policy framework. Bank of Mauritius is considering the option of increasing the tenure of its special deposit facility and may increase the differential to 200 basis points (from 145 bps) below the key repo rate (9% currently).

Mr Bheenick said that the bank is in talks with other central banks to develop a liquid and deeper market for forex swaps. “We are encouraging investors to take away the focus from the local market and look for opportunities outside Mauritius to boost fund outflows. It is becoming increasingly difficult to distinguish hot money flows from those of a more permanent nature,” he said.

Bangladesh garment exports show strong recovery
15 Mar, 2008, 2044 hrs IST, PTI

DHAKA: Bangladesh's garment exports grew strongly on the back of hefty exports to major markets in Europe and the United States, signalling a recovery by the vital industry, officials said on Saturday.

Exports grew by 58 per cent in January to 957 million dollars from the same month a year earlier, latest available official figures showed.

"It's a huge comeback for our garments industry. After some bad times, we have now shown our capability and there are signs that growth will remain robust," the head of the government's export promotion bureau Shahab Ullah said.

Bangladesh's garment exports were in negative territory during the first five months of the fiscal year starting in July as a result of continued fallout from labour unrest and political turmoil.

But they began picking up in December. Labour unrest has begun to decline with promises by companies to improve working conditions and low wages and there has been relative political stability since the installation of a military-backed government in early 2007.

The garment trade is the backbone of Bangladesh's manufacturing industry, accounting for 80 percent of overall exports and 40 percent of the country's industrial jobs.

Exporters said the January growth showed that desperately poor Bangladesh can compete as a top garment exporting nation.

"We've shown we can beat China in prices and quality, and buyers from Europe and the US are now flocking in," Anwar ul Alam Chowdhury Parvez, president of Bangladesh Garment Manufacturers and Exporters Association, said.

Garment export sales fetched $9.3 billion out of a total $12.18 billion in export earnings in the last financial year to June 2007.

Parvez forecast this year garment exports would cross $ 11 billion.

PC's farm bonanza fails to save dying farmers
14 Mar, 2008, 1138 hrs ...............................

PIMPARKHUTI: Just before India's finance minister was announcing a massive farm bonanza last month, Narendra Totaram Chauhan quietly slipped into his cotton fields, opened a bottle of pesticide and drank it.

By the time the minister finished announcing a $15 billion loan waiver to give a new lease of life to millions of indebted farmers, the poison had snuffed the life out of Chauhan.

Over the next few days, while experts debated the efficacy of the staggering relief package, 60 farmers killed themselves, adding to a morbid official statistic: more than 150,000 Indian farmers committed suicide since 1997 unable to repay crop loans.

Though the crisis has been building for years, it presents a grave challenge for Prime Minister Manmohan Singh ahead of national polls next year.

Farm distress and soaring prices helped turf out the previous government in 2004 and put Singh in power. So, Singh's government came up with a plan in the 2008-09 budget: cancel debts of small farmers with loans overdue on December 31, 2007, and which remained unpaid up to February 29.

The write-off came with riders. Beneficiaries can own up to two hectares (five acres) and only bank loans will be cancelled. This has meant nearly a quarter of 40 million targeted farmers will not benefit because most borrowed from rapacious moneylenders or they own larger tracts of land.

"It's a lose-lose proposition. This will not relieve farmers' distress," said Kishor Tiwari, who leads a campaign against farmers' suicides across the arid plateaus of central India.

A map of the region, known as Vidarbha, hangs on Tiwari's office wall. It's most prominent markings are a profusion of black skulls, forming a grim diagram of death.

Here, across the black cotton-bearing soil of Vidarbha, far from the gleaming malls that symbolise India's economic boom, three million desperately poor farmers are fighting for survival.

More than 30,000 farmers have killed themselves in the region alone since 1997, making it the epicentre of India's grimmest agrarian crisis in recent memory.

But relief is still a distant dream for a majority of farmers here because their average holding is just above two hectares. Small and marginal farmers will not benefit because most of them borrowed from moneylenders and relatives.

It is the same story in the northern Punjab state, considered India's food bowl where rising cultivation costs are distressing farmers and leading many to commit suicide or to abandon farming.

As in Vidarbha, the southern states of Andhra Pradesh and Karnataka, which have reported thousands of farmers' suicides, have dry croplands where large holdings are unviable for a farmer with limited access to irrigation and loans.

The National Sample Survey Organisation says almost half of India's 100 million farming families are in debt.

India's stunning urban-centric economic growth has bypassed the farm sector where growth is estimated to have slowed to 2.6 per cent in the year ending March 2008, from 3.8 per cent the year before.

Even though farming supports 60 per cent of India's 1.1 billion people, it contributes only a fifth of gross domestic product and accounts for only around 15 per cent of bank credit.

Economic liberalisation since 1991 has not helped either, with duties being gradually phased out and farmers facing tough competition from heavily subsidised European or American growers.

In the past, farmers used to sell to the government at a price fixed in advance, but that safety net was removed for cotton growers in 2005, leaving them at the mercy of middlemen who often browbeat them into unprofitable sales.

Bad weather and falling prices only compound debts. Farmers are often underfinanced by banks, forcing them to turn to private lenders whose usurious interest rates bind them to a never-ending cycle of debt. Many also borrow unwisely to fund lavish spending or to pay for weddings.

Unable to get credit, Kisan Vithalrao Rahate used a plastic rope to hang himself from a tree at the threshold of his mud house in this Vidarbha village this month.

Rahate lost two batches of seed to a bad monsoon. Last year the crop was good, but still not good enough to pay off his debts and then subsist with his family of six until the next harvest.

"We fought over money but he never threatened to kill himself," Kunda Kisanrao, his widow, said, squatting on a mud courtyard fenced with twigs and thorny shrubs.

Rahate carried two debts at the time of his death: a $350 bank loan and $1,250 borrowed privately to buy expensive genetically modified seeds and fertilisers to stay competitive.

A 2006 study by the Mumbai-based Indira Gandhi Institute of Development Research, found that 86.5 per cent of farmers who took their own lives were indebted -- their average debt was about $835 -- and 40 per cent had suffered a crop failure.

But Prime Minister Singh is defending his scheme. "It will allow the fresh flow of institutional credit to farmers, it will clean up bankers' balance sheets, it will stimulate economic activity in rural areas, and I don't make any apologies on this," he told the Parliament this month.

The scheme will benefit farmers in the states of West Bengal in the east and Kerala in the south where sweeping land reforms left farmers with smaller holdings.

Agricultural scientists say state support for agriculture is imperative, calling for help with soil and water management, timely credit and subsidised seeds and fertilisers.

"In the name of liberalisation state support was withdrawn completely and the vacant space has been occupied by the private sector in an unregulated manner," said K Nagaraj of the Madras Institute of Development studies.

In Pimparkhuti village, Rahate's wife cares little for the hair-splitting debates. For her, it's a struggle to survive with her two daughters and a 2-year-old son. "My mind is blank, I don't know what to do," she said, staring at the tree her husband hanged himself from. "He escaped his misery. Now what do we do?"

Fed Expected to Cut Interest Rates Tuesday, but by How Much?
WASHINGTON (AP) -- Desperate to aid an economy in crisis, the Federal Reserve is ready to deliver yet another big interest rate cut.
How big? One-half of a percentage point, some economists say. Investors and others hope for even more, a three-quarters cut or perhaps a full point, given the turmoil on Wall Street. It will be a close call, Fed watchers say.

The speculation ends Tuesday afternoon after Fed Chairman Ben Bernanke and central bank policymakers have met.

Whatever the decision, for a growing number of analysts, one more rate reduction will not be the lifeline that pulls the country back from the brink of the first recession since 2001.

Experts in this camp believe the economy is shrinking now because of the fallout from the housing and credit debacles. Businesses are shedding jobs, Wall Street is convulsing, energy prices are skyrocketing and people are reluctant to spend. Yet these economists say lower interest rates should help cushion the blows of a recession.

"Many consumers, businesses and investors are simply running scared right now," economic consultant Carl Tannenbaum said.

The rate-cutting began in September with the goal of shoring up the economy and reviving spending. The Fed's key rate has fallen from 5.25 percent to 3 percent. The pace picked up measurably in January when, during an eight-day period, the Fed slashed the rate by 1.25 percentage points. It was the biggest one-month reduction in a quarter-century.

In response, commercial banks have lowered prime lending rates by corresponding amounts. The prime rate, now at a nearly three-year low of 6 percent, applies to certain credit cards, home equity lines of credit and other loans. A cut ordered by the Fed on Tuesday would further drop the prime rate.

Even with the Fed's aggressive moves, economic and financial conditions keep deteriorating.

The Fed in recent days has taken extraordinary steps to help banks and Wall Street investment firms survive the stresses of the credit crisis. Financial institutions have racked up multibillion-dollar losses when mortgage-backed investments soured with the collapse of the housing market.

On Friday, the Fed used a Depression-era procedure to aid troubled Bear Stearns Cos. The investment bank, which faced a possible collapse, received a rescue package from the Fed and JPMorgan Chase & Co. Bear Stearns, which had made a fortune in mortgage-backed securities, has taken $2.75 billion in write-downs since last year.

Consultations about the situation continued through the weekend among representatives from the Fed, Treasury Department, financial institutions and others. President Bush planned to meet on Monday with his advisory panel on financial markets, whose members include Bernanke and Treasury Secretary Henry Paulson. The panel on Thursday recommended stricter regulation of mortgage lenders as part of a broad effort to prevent a repeat of a credit crisis threatening to drive the country into recession.

The Fed this past week also said it would pour as much as $200 billion into big Wall Street banks and investment houses and allow them to put up risky home-loan packages as collateral. This maneuver was intended to bring sorely needed relief in the market for mortgage securities. The Fed also has offered as much as $200 billion in short-term loans to banks and large financial institutions.

Some economists believe these actions minimize the need for an interest rate cut of 0.75 percent, or more, on Tuesday.

"I saw it as a bit of a substitute for the super-sized rate cut that the financial markets are expecting," said Stuart Hoffman, chief economist at PNC Financial Services Group. Hoffman is predicting a half-point cut.

Battling an ailing economy is the Fed's No. 1 focus now. Yet galloping prices for oil and gasoline can complicate the job.

High energy prices are a double-edged sword. They threaten to restrain economic growth because people have less money to spend elsewhere and they can aggravate inflation by forcing companies to boost prices.

Crude oil prices top $110 a barrel. Gasoline surged to a record national average of $3.28 a gallon. At a few stations in California and Hawaii, the pump price has hit $4 a gallon.

At a congressional appearance in late February, Bernanke was asked how the economy's woes stack up against what the country faced in 2001. "I think there are some similarities," he said. "But, I guess as a Russian novelist once said, unhappy families are all unhappy in their own way, and every period of financial and economic stress has unique characteristics."

The Fed's rate cuts have added to the downward pressure on the value of the dollar, which recently plunged to a record low against the euro and has fallen sharply against the Japanese yen. The drooping dollar is stoking fears that inflation might take off. The weaker dollar could raise the cost of imported goods entering the U.S. and lead American companies to raise prices as foreign-made products become more expensive.

To Hoffman, that is a case for going with the half-point rate reduction. Other analysts believe the situation is so dire that the Fed must cut deeper.

Brian Bethune and Nigel Gault, economists at Global Insight, are among those predicting a three-quarter point reduction. Given the turmoil on Wall Street, there even is a chance of a 1 percentage point cut, they said.

Dangerous cracks, meanwhile, are deepening in the job market.

Employers did away with 63,000 jobs in February, the most in five years. It was the second month in a row in which nervous employers got rid of jobs. With the economy faltering, economists predicted the unemployment rate -- now at 4.8 percent -- would climb to 5.5 percent by year's end.

Even after Tuesday's expected rate cut, economists predict the Fed's key rate will head even lower, probably to 2 percent or even lower by the spring or early summer.

The rate reductions and the government's economic aid plan of tax rebates and breaks should help economic growth in the second half of this year, analysts said.

"It we can make it through the first part of this year and then recover, that would be a remarkable achievement," Tannenbaum said.

Inflation changes Chidambaram`s tone on rate cuts

New Delhi, March 15: With inflation again creeping up to worrisome levels, Finance Minister P Chidambaram Saturday virtually ruled out any government intervention to ease interest rates.

Chidambaram, who hoped for cheaper credit at least on housing one week ago, changed his tone Saturday saying the Reserve Bank of India (RBI) would determine rate policies.

Speaking at the India Today Conclave, the minister said: 'We are not insulated from international commodity or crude prices.

'Interest rate policies are determined by the RBI. The main purpose of interest rates is to contain inflation. Please remember India is not entirely insulated from rising commodity prices.'

He said crude oil prices were USD 37 a barrel in 2004 and moved up to USD 67 in April 2007, USD 93 this February and now to USD 110. Similarly, he added, palm oil moved up from USD 471 a tonne to USD 710, USD 1,777 and USD 2,270 during the period.

'So long as there is a threat of inflation, we have to trust the RBI to use interest rates in order to contain inflation and to dampen inflationary expectations,' Chidambaram said.

His comment came in the backdrop of India's wholesale price index-based inflation rate rising to a nine-month high of 5.11 percent for the week ended March 1, above the central bank's 5 percent threshold.

Speaking in Lok Sabha Friday, Chidambaram said: 'Inflation is on the rise. It is a matter that causes worry to any government.'

He admitted that there was a slowdown in the Indian economy, but added that he was optimistic of gross domestic product (GDP) growth reaching 8.8 percent during the current fiscal.

'The idea is to maintain the same batting average. Adam Gilchrist is here,' Chidambaram said, referring to the presence of the former Australian cricketer in the audience. 'The question is how to make it happen.'

'Industry will continue to grow at a clipping pace,' the Finance Minister said.

SBI loses Rs 1 cr only in overseas credit derivatives

Chandigarh, March 15: The government on Saturday said public sector State Bank Of India has suffered a loss of Rs 1 crore only in the overseas credit derivatives market even as private lender ICICI bank has reported a loss of over Rs 1,000 crore.

"SBI has also suffered a mark-to-market loss of Rs 1 crore because of exposure to overseas credit derivatives and investments," Minister of State for Finance Pawan bansal told reporters here.

Bansal claimed that the bank did not suffer any actual loss. "It is just a notional loss which arose after the exposure to overseas credit derivatives," he said.

Earlier this month, Bansal in a written reply to a question in Rajya Sabha had said that ICICI bank had put the mark-to-market loss at Rs 1,056 crore as on January 31, 2008.

Other Indian banks who have reported losses due to exposure to overseas credit derivatives include Bank of India and Bank of Baroda.