Sector & Commodity Update - November 17, 2012 - Eastern Financiers

- Oil marketing companies have announced a cut in petrol prices by Rs 0.95 per litre with effect from midnight to pass on the impact of softening global rates. The fuel will cost Rs 67.24 in Delhi against the current price of Rs 68.19. The new price in Mumbai, Chennai and Kolkata will be Rs 73.53 (-Rs 1.20), Rs 70.57 (-Rs 1.20) and Rs 74.55 (-Rs 1.19), respectively. The drop is lower in the other three metros due to a higher VAT component. Petrol prices were last revised on October 27 when they were raised by 29 paise following an increase in the commission paid to petrol pump dealers.

- Industry body ASSOCHAM has suggested the government that the domestic infrastructure companies should be allowed to list in overseas capital markets through direct equity shares in a bid to access low-cost funds in order to spur growth. Also, the transfer of holding to such an overseas entity from an Indian entity should be permitted at erstwhile book value, prevalent till March 31, 2010, as infrastructure projects are long-term and require high gestation, it said. Advocating the need for long-term bank finance availability for the sector, the industry body has suggested for mandatorily increasing the bank lending by way of incentives. It further suggested that banks may be permitted to issue long-term, tax free bonds for the purpose of lending to infrastructure sector at a lower rate of interest. Provisions may also be made by the Reserve Bank of India (RBI) to provide interest subsidies to the banks for their exposure in this sector. Incentives doled out to the infrastructure entrepreneurs earlier, should be restored and current regulations be amended, it added.

- Electronic transactions in the country in first nine months were reported at Rs 14,88,353 crore rising 53% over similar period last year. Electronic transactions include electronic clearing services (ECS), national electronic funds transfer (NEFT) and card payments (credit and debit). NEFT had the largest chunk in electronic payments at Rs 12,54,210 crore. ECS transactions were worth Rs 1,43,286 crore followed by credit and debit cards.

- Low proceeds of just Rs 9,400 crore from 2G Spectrum has dealt another blow to the beleaguered government exchequer. Besides, even this Rs 9,400 crore would be a staggered payment as telecom operators need to shell out only Rs 2,820 crore this financial year. Even this amount may not go to the Centre's kitty as the government under the auction terms had agreed to adjust the 2G license fee with operators whose licenses have been cancelled due to the Supreme Court order.

- Bank credit grew by 16.21% year-on-year to Rs 48.59 lakh crore while deposit growth remaining sluggish to 13.74% to Rs 64.35 lakh crore for the fortnight ended November 2. The incremental credit grew by Rs 43,813 crore while deposits grew by Rs 47,211 crore during the fortnight. However, on a Year To Date (YTD) basis, the loan growth was 5.38% compared with 6.13% similar period last year while deposit growth was 9% compared 8.63% on YTD basis. The first half of the current fiscal has been sluggish in terms of credit growth. But bankers expect the second half to be better. In the second-quarter monetary policy review held last month the RBI had revised the Credit Growth projection downwards to 16% from 17% projected in April and July. However, deposit growth projection was kept unchanged at 15%.

- A panel of ministers, headed by Agriculture Minister Sharad Pawar, is expected to meet next week to fine tune the drug pricing policy after the Cabinet deferred taking a decision on it following objections from the Finance Ministry. The policy that aims to bring 348 essential drugs under price control of the government was earlier approved by the GoM on September 27 and was subsequently sent to the Cabinet but was deferred last week. At present, the government through the National Pharmaceutical Pricing Authority (NPPA), controls prices of 74 bulk drugs and their formulations. The draft policy aims at fixing prices based on weighted average of prices of all brands, which have more than 1 per cent market share. Last month, the Supreme Court had, however, asked the government not to alter the existing mechanism of cost-based drug pricing.

- Till October 2012, the Union shipping ministry awarded 9 projects, of which four were PPP projects. Last year it could only award three projects. However, one of these was the ambitious Rs 8,000 crore fourth container terminal at the Jawaharlal Nehru port which will soon be up for re-bid. The project alone made up for more than half of last year's achievements. Cabinet Committee on Infrastructure, in late September 2012 approved the proposal of delegation of enhanced financial powers to the ministry of shipping for awarding port projects of less than Rs 500 crore in cost. Earlier for instance, all projects up to Rs 250 crore had to be approved at three stages; first by the standing finance committee, second by the committee of economic affairs and shipping secretary and then by the shipping minister and the finance minister. For projects above Rs 300 crore, a cabinet note had to be prepared. For all projects that fell in between a PPP appraisal committee had to look into the project.

Source : Equity Bulls

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