The process of revival of the agrarian sector, which has witnessed stagnation in its growth due to a decline in productivity of land particularly during the post liberalization period, has been initiated with the recent appeal for ushering second green revolution in the country. Unlike the first green revolution, which helped country overcome the problem of food insecurity, the second green revolution aims at continuous growth in productivity from available land through the application of appropriate technologies and innovative methods facilitating multi-cropping and crop diversification in an environment friendly manner. Thus it entails qualitative changes in agricultural technology that might reverse the trend set by first green revolution – which was based on the abundant use of water, pesticides and fertilisers. This is where the role of biotechnology gains its importance in the intended second green revolution.

Most simply put, biotechnology is the application of scientific techniques in the field biology. Of many different definitions available, the one formulated by the UN convention on Biological Diversity is one of the broadest: ‘Biotechnology means any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use.’ Agricultural biotechnology covers broad areas of research and development leading to the improvement of micro-organisms, plants and animals. The application of modern techniques includes genotypic[1] manipulation either by using molecular aided selection or through genetic engineering. Genetic engineering is a novel technology for crop improvement both qualitatively and quantitatively, by adding desired traits to crop plants through genetic manipulation otherwise not possible through conventional breeding. Specific genes, containing desired traits such as, pest or disease resistance, drought or herbicide tolerance, etc, are introduced into seeds to develop new varieties with the desired qualities or characteristics One such example is Bt cotton. To provide resistance against bollworm, a specific gene from a soil bacterium (Bacillus thuringienesis) that produces a particular protein called Bt-toxin and is harmful for bollworm (lepidopteran insects) is inserted into the cotton variety. Any organism or plant whose genetic constitution has been altered by the introduction or elimination of a specific DNA sequence or genes through recombinant DNA technology is called a genetically engineered/modified organism/plant. Through genetic engineering, the aim of increasing productivity levels is achieved in an indirect way by technologically constructing plants to be resistant to the ravages of natural entities such as pests, diseases and herbicides. The widely popularised benefits from the use of genetically modified varieties include,

· Minimising of crop damage by use of disease and pest resistant varieties.

· Reduction in the use of chemicals and a resultant reduction in environmental pollution.

· Extension of the crop cultivation season and development of foods with different functional compositions as well as production of fruits and vegetables with better flavor and longer shelf life.

· Cost minimisation by bringing down the use of insecticide sprays in case of pest resistant GM varieties and by lowering manual labour wages in case of herbicide tolerant GM varieties as compared to traditional high yielding varieties.

The advent of genetic modification over the last two decades has enabled plant breeders to develop new varieties of crops at a faster rate than had ever been possible using traditional methods. Tobacco was the first plant to be genetically transformed in 1983 followed by cereals beginning in 1990 (Mashelkar, 2001). Since 1996, when the commercial cultivation of transgenic or GM crops took off, the global area covered under such crops has increased more than 50 folds, from 1.7 million hectares to 90 million hectares in 2005, with the USA alone accounting for around 55 per cent of the total cropped area in 2005. The number of countries growing biotech crops has tripled during the same period, rising from 6 in 1996 to 21 in 2005 with 8.5 million farmers around the world. While a substantial share (62 per cent) of the GM crops are grown in developed countries, the proportion of biotech crops cultivated in developing countries has increased consistently every year. Developing nations reporting continual strong growth have been China , India and Philippines in Asia as well as Argentina , Brazil and Mexico , plus Uruguay and Paraguay in Latin America and South Africa on the African continent. Arising out of a low base, the growth in these countries has picked up at a fast pace with growth in percentage terms being almost five times as high (23 per cent) in the developing countries as compared to that in industrial countries (5 per cent) (James, 2005). So far, genetically modified soyabean, maize, cotton and canola have been cultivated commercially all over the world; Bt soyabean (herbicide tolerant variety) taking the first position occupying around 60 per cent (54.4 million hectares) of the total cultivated area, followed by Bt maize (13 per cent), herbicide tolerant variety of Bt maize (7 per cent) and Bt cotton[2]. However, a large number of genetically modified varieties have been under field trials including potato, corn, tomato, tobacco, rice, melon, sunflower and peanut.

Bt in India : Slow Progress

According to reports by ISAAA (International Service for the Acquisition of Agri-biotech Applications), the total area under genetically modified crop varieties in the country has augmented to 5 lakh hectares in 2005, which had been below 1 lakh hectares in 2003 (James 2005). The progress in the application of biotechnology in India has been somewhat restricted to cotton cultivation with several controversies and debates involved in the process. Some interest sparked off in the cultivation of Bt mustard failed to take off and attempts in this direction were crushed. In recent times, a spur in activity for Bt brinjal has been high though there are several technological as well as social issues to be dabbled with in this case.

Bt Cotton

So far, Bt cotton has been the only GM crop cultivated commercially in the country and has registered a whopping 160 per cent growth over 2004 in its area under cultivation (James 2005). The field trials of Bt Cotton had begun in 1998 by Mahyco-Monsanto Biotech, a joint venture of multinational company Monsanto and Maharashtra Hybrid Seed Company. Several controversies and severe protests had surfaced from groups of farmers and environmentalists on account of the presumption that the terminator technology[3] had been used in developing the Bt cotton varieties on account of a complete lack of transparency regarding the process of conducting field trials[4] and regarding data/information generated from the field trials. Notwithstanding this, the government permitted commercial cultivation of Bt cotton from April 2002 in 6 states including Maharashtra, Andhra Pradesh, Gujarat , Karnataka, Tamil Nadu and Madhya Pradesh for the period of 3 years up to May 2005.

Numerous studies have been conducted to measure the economic and environmental benefits of growing Bt cotton, and have reported contradictory results. A field survey conducted at selected locations in Maharashtra and Andhra Pradesh by Gene campaign (Sahai 2003) has revealed poor performance of Bt cotton (Bt 162 and Bt 184 varieties) vis-à-vis the traditional varieties (Brahma and Banny) due to higher expenses on seed (cost of Bt seeds is four times higher compared to non-Bt varieties) along with moderate savings on cost of pesticides, inferior quality cotton, premature fall of cotton balls leading to a decline in cotton yield and consequently lower net returns to the growers. Further, the vulnerability of Bt cotton to pink bollworm requires more doses of pesticides and growing a refuge along with Bt cotton on 20 per cent of the total cultivated area is necessary for resistance management which has worsened the situation making the cultivation of Bt unviable for small and marginal farmers.

A scientific research carried out at the Central Institute for Cotton Research (CICR), Nagpur , on eight Bt cotton bollgard hybrids commercially grown in India , has proved the inappropriateness of Bt technologies. The study further indicates that the poor response of Bt cotton to bollworm in India has been because it is being grown by Indian farmers as ‘hybrids’, and not ‘true breeding varieties’ as has been the case in other parts of the world, including the US, China and Australia. A global analysis of the comparative performance of Bt cotton ‘varieties’ vis-à-vis ‘hybrids’ show that Bt cotton ‘varieties’ are much more effective in controlling cotton bollworm than Bt cotton ‘hybrids’.

In case of Maharashtra, while the report submitted by the Commissioner of Agriculture, government of Maharashtra has indicated that cultivation of Bt cotton varieties has improved the yield levels by 16-60 per cent in various districts, the reports from the farmers’ organisations such as Shetkari Sanghatana has pointed out the failure of Bt cotton and have seeked explanations from scientists (Thulasi. 2005).

During April-May 2005, the Genetic Engineering Approval Committee (GEAC) has granted fresh approvals for commercial cultivation of Bt cotton to the north Indian states of Punjab , Rajasthan and Haryana. The cultivation of 13 new varieties of Bt cotton hybrids in various parts of the country has also been sanctioned. And, with the completion of the three-year period for which commercial cultivation had been initially allowed in six Indian states, in March 2002, the approval has now been renewed for all 3 existing hybrids of Mahyco-Monsanto’s Bt cotton in Gujarat, Maharashtra and Madhya Pradesh. Only two existing hybrids have been granted renewal in the southern states of Tamil Nadu and Karnataka. The only exception has been Andhra Pradesh where none of the existing hybrids of Monsanto’s Bt cotton have been approved. Andhra Pradesh, considered as the seed capital of India, has banned Monsanto from marketing and selling its Bt cotton varieties in the state and also from conducting any trials on account of the failure by the company’s seeds in previous crops and its refusal to pay the compensation package of about Rs 4.5 crore to farmers in Warangal, Khammam, Guntur and Karimnagar districts.

Though it is too early to draw conclusions of the failure of Bt cotton, there is no clear and uncontroversial evidence so far on its performance and profitability on the fields. Even in cases where Bt cotton varieties have been reported to be successful, it has merely been partial with superiority in only one characteristic, that is, yield per hectare. Unsatisfactory yields, high prices of GM seeds and other costs of cultivation are grounds enough to assume that the promotion of Bt cotton could result in worsening of the economic conditions of hundreds of small and marginal farmers in India , rather than uplifting them, although, at the same time, it has proved successful in China , US and other countries.

Notwithstanding the poor performance of Bt cotton - the only genetically modified (GM) crop commercially grown in India at present - priority has been accorded in the draft biotech strategy to promoting GM cultivation of a wide range of crops, including food crops like rice, wheat, maize, sorghum, pigeon pea, chickpea, moong bean, groundnut, mustard, soybean, cotton, sugarcane, potato, tomato, cole crops, banana, papaya and citrus fruits (Thulasi 2005).

Bt Brinjal

Several public institutions and private companies in India have projects to develop improved varieties of the drought tolerant and important perennial eggplant, known locally as brinjal. This is the first time in the world that a vegetable crop to be directly consumed, with little or no processing by human beings and no experiments livestock with the Bt toxin incorporated into it, would be allowed such an advanced stage of release into the open environment in the name of trials and seed production. This vegetable has special socio-cultural significance in the country. It is even recognised for some of its medicinal properties and is used in Ayurveda for the preparation of some medicines.

If Bt brinjal is permitted, there are serious health hazards that could be faced, including allergies, antibiotic resistance, etc. Hence, a group of farmers from Haryana, Delhi-rural and western Uttar Pradesh led by the Bhartiya Kisan Union (BKU) in association with Shetkari Sanghatan from Maharashtra, Karnataka Rajya Raitha Samithi (KRRS) in Karnataka and the Tamil Nadu Farmers Association, have opposed the proposed introduction of Bt. brinjal for trials or seed production or commercial cultivation.

It is believed that India is the country of origin for brinjal and entry of Bt Brinjal would lead to contamination of the seed stock. This would have implications for development of newer varieties through agriculture research and could pose a serious danger for the crop itself. As far as GM labelling regulations are concerned, consumers would not be able to distinguish between Bt and non-Bt Brinjal and consumer choices would be seriously negated since labelling as a solution would have limited success for vegetable crops in the country. Most importantly, what is not apparent is the need for bringing in Bt brinjal into the country since there is no crisis in the production of brinjal and, in fact, farmers are often punished for producing adequate quantities due to a limited market for their product. Another question being asked is whether the government can assure guaranteed procurement at proper prices if production increases due to the cultivation of Bt brinjal since it is claimed that Bt Brinjal increases productivity by saving on pest losses.

Issues and Concerns

Indian agriculture, central not only to the growth of the country’s massive rural economy but also to overall growth, presents a high potential for the application of biotechnology in cultivation given low crop yields and large farming tracks. There seems to be little doubt that GM technology would play a distinctive role in achieving the goals of second green revolution. On the flip side, equally important issues like health hazards to consumers, effects on bio-diversity, social considerations like its effects on the farm community and unforeseen consequences, both in the initially modified organisms and their environments require serious consideration before further actions, that in this case would be irreversible and irreplaceable, are taken.

The suitability and adaptability of GM crops is dependent on various field and weather conditions and pest complex existing in the area under consideration; like Bt cotton is resistant to only lepidopteran pests that are more prominent in the US (bud worm, pink boll worm) but in India the pest complex of cotton includes some other important sucking insects like aphids, bugs etc., against which Bt cotton is not very effective. Additionally, given the small farm size and abundant availability of agricultural labour, the adoption of GM crop varieties with herbicide tolerant traits seems neither economical nor practical.

It has been argued that risk takers like farmers and consumers have unfortunately not benefited from the gains of biotechnology in agriculture in the Indian context; empirical evidences have revealed that it is the seed corporations that have benefited almost exclusively from the strains of herbicide resistant crops. Also, it is the future generations, who do not have voice, which are likely to face the greatest risk ( Denton , 2002). Environmentalists have expressed concerns that extensive cultivation of high yielding modern crop varieties has already resulted in considerable reduction of biodiversity and now the introduction of genetically engineered crops will aggravate the problem.

Given the country’s current self-sufficiency in food production, it would be appropriate to take a precautionary approach instead of hurrying to embrace a technology that is associated with potential risks. A very strong institutional and regulatory setup and increased accountability on the part of seed suppliers for the failure of their products would pave the way for a second green revolution, categorically, a gene revolution.

References

Das K. (2005), ‘Bt Cotton Cultivation: Fact and Fiction’, Info Change News & Features, September.
Denton P. (2002), ‘ Perspectives on Agricultural Biotechnology’, VIKALP Alternatives, Vol. X / No. 4
Iyengar S., Lalitha N. (2002), ‘Bt Cotton in India : Controversy Visited’, Indian Journal of Agricultural Economics, Vol. 57 / No. 3, July-September.
James C. (2005), ‘Global Status of Commercialized Biotech/GM Crops: 2005’, ISAAA Briefs No.34. ISAAA: Ithaca , NY .
Mashelkar R. (2001), ‘Towards Responsible Biotechnology’, Biotechnology Global Update Vol. 3 / Issue 3, July.
Sahai S., Rahman S. (2003), ‘Performance of Bt Cotton Data from First Commercial Crop’, EPW Commentary, Vol. XXXVIII / No.30, July
Thulsi L.(2005), ‘GM Crops To Go or Not To Go’ (Unpublished)
www.isaaa.org.
www.grain.org
Various Media Sources.

* This note is prepared by Pallavi Oak.

Annexure1: Overview of Bt Cotton around the World (Commercially cultivated, Field tested, Illegal Varieties)
Argentina	Monsanto’s Bt cotton approved in 2001, yet only planted on an estimated 5per cent of total cotton area in 2002/2003.
Australia	Bt cotton introduced in 1996. Reports are mixed. Initially pesticide use declines dramatically then increases year after year. Farmers do not see economic benefits. Still, by 2002/2003, 30per cent of total cotton crop is Bt cotton and this increases to 80per cent in 2004 with the release of Monsanto 's Bollgard II variety, which involves less stringent insect resistance management plans.
Brazil	In March 2005, following the adoption of a new biosafety law strengthening its powers, the pro-GM National Technical Biosafety Committee approves the commercial release of Monsanto’s Bt cotton. Monsanto claims that 5per cent of the 1.3 million tons of cotton produced in Brazil for teh 2005/2006 season are "black market" varieties of its Bt cotton and the company says that it is negotiating for a scheme to collect royalties on this production.
Burkina Faso	In 2003, Monsanto, Syngenta and Burkina Faso ’s Institut National de l'Environnement et la recherché Agronomique (INERA) begin field tests of two Bt cotton varieties without the involvement or consent of the national biosafety committee which is tasked with developing a national regulatory regime for GMOs.
China	Bt cotton released in 1997. Currently Bt cotton is planted on over half of the national cotton area. Bt cotton seed costs around 50-60per cent more than regular seed, but there is a high level of unauthorised use. While Bt cotton has reduced pesticide use, it still remains high and there are problems with secondary pests. In Shandong province, farmers spray 12.7 times per season on Bt cotton. It is also widely assumed that insect resistance will soon be a major problem.
Colombia	Monsanto imports Bt cotton in 2002, without an environmental clearance. Popular legal action results in the suspension of the authorisation.
Costa Rica	Monsanto began field trials without regulatory oversight in 1992. In 2004, 638 ha of Bt cotton were planted, mainly for the export of seeds.
Egypt	Monsanto and Egypt ’s Agriculture Genetic Engineering Research Institute currently collaborating in field trials of Bt cotton. They claim commercial introduction could take place as early as 2006.
Guatemala	Monsanto and Algodones Mayas S.A. have conducted a field trial of GM cotton tolerant to glufosinate (not a Bt cotton) and Monsanto is pursuing field trials of GM cotton with another local seed company, Semillas S.A.
India	In 1998 Monsanto's first field trials of Bt cotton disrupted by farmer protests. Commercial introduction of Bt cotton occurs in 2002. By 2004, Bt cotton accounts for 6per cent of total cotton area and is only permitted for cultivation in six states. Reports from Andhra Pradesh, one of the country 's major centres of cotton production, bring to light the failure of Bt cotton. In May 2005, the Genetic Engineering Approval Committee rejects Monsanto 's application to renew its temporary authorisation for the sale of its three Bt cotton varieties in Andhra Pradesh.
Indonesia	Monsanto’s Bt cotton commercialised in South Sulawesi province in 2001. However, two years later it is withdrawn after its failure to perform triggers farmer protests. Due to poor harvests, some 70per cent of the 4,438 farmers growing Bt cotton were unable to repay their credit after the first year of planting.
Kenya	Monsanto imports Bt cotton into Kenya in 2004 for field trials. The field trials begin in early 2006 at the Kenyan Agricultural Research Institute's research station in Mwea, Central Kenya .
Mexico	Bt cotton introduced in 1996. Government subsidises purchase of Bt cottonseeds. In 2002/3, 25per cent of the national cotton area planted to Bt cotton, slightly less than the percentage in 2000.
Pakistan	In May 2005, the Pakistan Atomic Energy Commission provides 40,000.00 Kg of Bt cotton seed (varieties IR-FH-901, IR-NIBGE-2, IR-CIM-448 and IR-CIM-443) to farmers in the Punjab to grow on over 8,000 acres of land during the 2005-06 season.
Paraguay	In July 2005, The Minister of Agriculture announces that it will approve Monsanto's GM cotton as part of a joint project with the company.
Philippines	In January 2005, the Cotton Development Authority signs a memorandum of agreement with the Philippine Rice Research Institute to begin field trials of Bt cotton.
Senegal	National cotton company (SODEFITEX) and Monsanto undertake field trials in the Senegal River Valley without notifying regulatory agencies or informing the local population. SODEFITEX backs away from project after early results show no reduction in pesticide use.
South Africa	Bt cotton approved for commercial planting in 1997. Adoption very rapid and by 2002/3, an estimated 75per cent of national cotton area planted to GM cotton.. In 2003/4 only 35,700ha of cotton was planted, an 80per cent reduction since 2000, ascribed to low world prices and droughts. In 2004/5 the area planted was 21,700 ha, an extraordinary 40per cent drop in area planted to cotton in one year. It is estimated that 60per cent of GM cotton is Bt cotton and 30per cent RR cotton. Small-scale farmers. 90per cent of whom adopted Bt cotton are in debt with the total debt amongst small-scale cotton farmers in Northern KwaZulu Natal estimated at over US$ 3 million in 2004.
Thailand	Monsanto imports Bt cotton seeds in 1995 and begins field-testing in 1997. In 1999, farmer's groups monitoring plantings of cotton find samples taken from locations outside Monsanto 's approved sites testing positive for the presence of the Bt gene. It is estimated that 8,000 hectares of Bt cotton are being grown illegally. An alliance of 35 farmer groups and NGOs threaten to stage a mass rally unless the government responds to their calls for a stop to the testing and commercial release of genetically engineered crops. The government reacts by setting up such a ban and terminating field trials of Monsanto’s Bt cotton.
USA	Around 40per cent of the cotton area in the US is Bt cotton. Studies show reduction in pesticide use since Bt cotton introduced in 1996, but now secondary pests are becoming an increasing problem.
Vietnam	Although IPM techniques have dramatically reduced the use of pesticides on cotton in Vietnam over the last two decades, Vietnam Cotton Company is pursuing Bt cotton in an effort to expand dry-season irrigated cotton production. Field trials of Bt cotton have taken place.
Zimbabwe	Monsanto planted a Bt cotton crop in 1998 without official permission. Crop was burnt before flowering when uncovered by authorities.
Source: GRAIN (http://grain.org/go/btcotton)

[1] Genotype: It is the specific genetic makeup of an individual or any living organism in a form of DNA (deoxyribonucleic acid).

[2] For the nature of applications of Bt Cotton worldwide see Annexure 1.

[3] There is a technology available suitably called the Terminator technology, which is designed to genetically switch off a plant's ability to germinate a second time.

[4] As the field trials were not conducted by a step-by-step procedure, two steps – lab experiments and trials in contained environment – were by passed and the direct open environmental field trials were conducted (Shiva et al, 1999).

The tea production across the world is likely to decline by 45 - 50 million kg in 2006, due to falling production in all major tea-growing countries, including India, on account of unfavourable climatic conditions in these countries. Tea production in the country during January - June 2006 has dropped by 10.3 million kg to 328.2 million kg as against 338.5 million kg in the corresponding period previous year. Production has registered fall of 8.7 million kg to 112.8 million kg from 121.5 million kg in the southern parts of the country while that of 1.6 million kg to 215.4 million kg from 217 million kg in the northern region.

As per the estimates of US Department of Agriculture, global wheat output for 2006-07 has been pegged at 598 million tonnes, 20 million tonnes lower than the previous year. While consumption has been pegged at 615.3 million tonnes, 9 million tonnes lower over the period of one year, ending stocks are also expected to be sharply down to 128.4 million tonnes. Hot and dry weather has reduced production for major exporters EU-25, Canada and Argentina , while favourable growing weather has raised production for Russia and Ukraine .

The import of edible oil from India has declined by about 10 per cent to 4,63,735 tonnes during July 2006 as compared to 5,14,559 tonnes during the corresponding period of the previous year. The decline in the import has been mainly due to rise in base import prices of edible oils during the same period. With the latest revision on August 14, 2006, base import prices have increased more than 10 per cent over the last month. During May-July 2006, the third quarter of the oil year (November-October), imports have seen a fall of 8 per cent. Imports for the first nine months of the oil year 2005-06has displayed a decline of 15 per cent to 3,052,605 tonnes from 3,576,978 tonnes last year. The government on August 14 raised the base import price for crude palm oil by $34 to $481 per tonne and crude soyoil by $2 to $572 per tonne. Besides, the base import price of crude palmolein has been raised to $509 from $481 per tonne and that of the RBD palmolein to $512 from $484 per tonne.

Industry

The Tamil Nadu government plans to set up a 250-acre industrial park for the pharmaceutical industry at the Nanguneri Hi-Tech Industrial Park in Tirunelveli district. The health minister, in response to the demand for grants to his department, has declared that the pharma park would have facilities for 50 large pharmaceutical units and 10 ancillaries, generating over 2,800 jobs directly and 2,800 indirectly and be capable of exporting drugs estimated at about Rs 500 crore a year.

The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, has announced that the government will soon set up a 'National Board for Micro, Small and Medium Enterprises' to examine the factors affecting their promotion and development and review the policies of the government in enhancing their competitiveness. The central government has recently passed a comprehensive legislation, which besides seeking to promote the growth of the small sector, would address credit facilities, preferences in procurement policies and delay in payments to these enterprises. SME presence is significant in sectors such as agricultural processing, engineering, ready-made garments, leather and leather products, ceramics and information technology.

The central government has agreed in principle to extend financial assistance to help implement a proposal for setting up a "footwear park and rural footwear service centre" in West Bengal . The proposed park is to have common infrastructure fitted with modern production facilities. Assistance to the tune of Rs 12.25 crore is expected to come for the proposed park and service centre out of the Rs 110-crore earmarked by the Planning Commission for proper infrastructure development for the country's leather sector during the Tenth Plan. The investment is to be made through the Leather Forum Calcutta for Research & Development, a promotional private body dedicated to create adequate infrastructure for footwear and leather goods manufacturers in West Bengal . The forum would monitor the infrastructure development project while a special purpose vehicle would be set up to implement the project.

The domestic newsprint manufacturers have been worried that they may find it difficult to survive only as producers of newsprint unless they acquire certain economies of scale to compete with imports. Although it will be tough for them to attain an international scale of operation on the basis of local forest raw material, the Indian Newsprint Manufacturers Association (INMA) has suggested to its member-units to examine the possibility of captive plantations abroad, preferably in countries such as Brazil , Chile and Indonesia . Most member-units of the INMA have decided to introduce swinging facilities in their existing manufacturing plants to enable them to produce writing and printing paper instead of newsprint at the time of uneconomic sales price of their products i.e. newsprint would be produced only when its manufacturing is profitable, thus ensuring viability. The strategy may strain domestic bulk consumers, particularly those who depend on domestic newsprint. The total domestic demand in the current fiscal (2006-07) would be about 19 lakh tonnes ( from 15 lakh tonnes in 2005-06) and is likely to grow by 10 per cent in the coming years. Also, the demand might be more than the projected volume since consumption has been increasing steadily from non-newspaper publishing applications. Currently, domestic production (about 8 lakh tonnes) takes care of only about 55 per cent of the total consumption leaving 45 per cent (7.5 lakh tonnes) to imports from a total of 54 countries including, Canada, Finland, Hungary, Korea, Philippines, Russia, Sweden and USA.

The man-made fibre industry wants the government to remove discrimination in fiscal dispensation between man-made fibres and cotton fibres so that India can achieve correction in its fibre mix to take advantage of the global opportunities in textile exports. They have strongly favoured lowering the excise duty for man-made fibre-based yarns/fabrics and garments at 4 per cent as is being given to cotton and the basic customs duty at 10 per cent. At present in India , cotton constitutes 80 per cent of total fibre usage leaving the man-made fibres to fill the rest whereas in global market the mix is 60 per cent man-made fibre and 40 per cent cotton. The continuing fiscal policy discrimination against the man-made fibre industry has resulted in decline in consumption leading to steady rise in import. The consumption of polyester staple fibre (PSF) and partially oriented yarn (POY) among the domestic textile manufacturing sector had remained stagnant at 2.1-2.2 million tonnes for the past few years as against the installed capacity of 3 mt in the country; the consumption of man-made fibres in 2005-06, in fact, has fallen marginally (0.43 per cent ) to 2.1 mt compared with a 22 per cent rise at 4.21 mt in 2004-05. The man-made fibre imports into the country during the same period have shown a staggering 28 per cent rise at $1,613 million. One of the strong reasons for this is the distorted exemption given for cotton textiles from the Cenvat duty. Stating that a fibre neutral fiscal policy should be given a push to correct the situation, the sources also said that such an approach would do good for the entire textile sector. This is because if India had to meet its target of achieving $40-billion exports by 2010, it had to raise the share of man-made fibres.

To provide necessary impetus to the textiles industry, the government may extend the Technology Upgradation Fund (TUF) scheme by another two years; the scheme is scheduled to expire in March 2007 and the textiles ministry is in consultations with the finance ministry to extend it for the benefit of the industry. Total projects amounting to Rs 42,583 crore have been sanctioned till June 2006 under TUF scheme that has been initiated during 1999-2000 while loans amounting to Rs 18,808 crore have been disbursed during the same period. During April-June 2006, project worth Rs 4,701 crore have been sanctioned and loan amount of Rs 1,723 crore have been disbursed for the industry.

Infrastructure

NTPC Ltd is in the process of sourcing gas in the spot market to increase generation at its gas-based stations. The company has tied-up supply of 5 million metric standard cubic metres per day (mmscmd) of LNG from Shell, GAIL India Ltd and Gujarat State Petronet Ltd (GSPL) through spot purchase, following a recent tie-up with Petronet LNG for 1 mmscmd of gas for a period of 70 days. The company is planning to stay active in the spot market to purchase gas since its ongoing gas-supply dispute with Reliance Industries Ltd does not seem to be reaching any conclusion. NTPC has been facing a critical situation due to low availability of natural gas for its gas-based plants and the demand-supply gap of natural gas for NTPC's gas-based power stations at Anta, Auraiya, Dadri, Faridabad , Kawas and Jhanor-Gandhar has been on the rise. As against NTPC's requirement of around 15.4 mmscmd at 90 per cent PLF (plant load factor), the supplies from all sources have been only around 10.91 mmscmd in 2005-06, reducing the PLF level to around 60 per cent. This lower PLF has been affecting the tariff competitiveness of NTPC's plants since under the current regulations the utility is required to demonstrate a minimum availability level of 80 per cent to achieve full fixed charges.

PowerGrid Corporation has firmed up an investment of Rs 40,000 crore in augmenting transmission network during the 11th Plan period. The corporation will also incur an expenditure of Rs 9,000 crore to lay 800 kV (plus, minus) high voltage direct current (HVDC) transmission line. This will help transmission of nearly 50,000 mw hydro power from north eastern region to other parts of the country. The corporation has commented that it would be able to install the national grid with carrying capacity of over 37,150 MW by 2012; it has so far completed national grid of 9,000 MW and will be able to increase the transmission capacity to 18,000 MW by March 2007. Additionally, the corporation has executed village electrification in 2,700 villages (25 per cent of the total target of 10,000 villages) in 2005-06 and during 2006-07 it proposes to execute electrification in 15,000 villages.

The civil aviation ministry, on one hand, is trying its best to lower the taxes on aviation turbine fuel (ATF), while, on the other hand, the petroleum and natural gas ministry is concerned that lowering taxes on ATF would result in higher taxes on other petroleum products. The civil aviation ministry has proposed to rationalise excise and import duties on jet fuel and simultaneously bring it under the “declared goods” category. But the petroleum ministry contends that the excise duty on ATF at 8 per cent is already half of the 16 per cent Cenvat rate. And as the revenue from petroleum products comprises a major part of government revenues (almost 40 per cent), the petroleum ministry is apprehensive that lowering excise on ATF might put more pressure on other petroleum products.

The Coal and Oil Company LLC, a Dubai-based integrated energy solutions company, is planning to supply 5 lakh tonnes (lt) of coal to various industrial units in Karnataka through the New Mangalore port during 2006-07. The company supplies coal to some of the major industrial units in cement and sugar sectors in Karnataka through the NMPT and has already supplied nearly 1.6 lt of coal in the last three shipments. The commencement of operations of the deep-draught multi-purpose berth at the NMPT and commissioning of Hassan-Mangalore railway line for freight traffic has helped the company expand its operations from the Mangalore port. The company, in association with Coastal Energy Pvt Ltd in Chennai and Mumbai, delivers 1.5 per cent of the global steam coal to the country and with the recent move it has become one of the largest suppliers of steam coal to India .

According to an Assocham study, higher power cost, centre and state levies coupled with lack of quality coal will lead to contraction of growth of cement industry in 2006-07. Moreover, cement remains the highest taxed essential infrastructure input in India with levies and taxes accounting for 80 per cent of the ex-factory price; the excise duty alone works out to over 35 per cent on ex-factory cost, whereas the duty levied on luxury goods is only 24 per cent, the study points out. There is also a lot of concern in the industry regarding the pace at which infrastructure projects are materialising; the National Highway Authority of India had terminated eight contracts. The study suggests that the Government continue to treat cement as a core sector, for only then can it prioritise the sector for coal blocks allocation. Moreover, the study adds, in the case of allocation of a coalfield, the government should ensure that all the necessary formalities, including environmental clearance have been done so that the cement firms do not face any hurdles in their operations.

Public Finance

The revenue departments has estimated that the maximum tax base for the fiscal year 2006-07, would not be more than 5 crore (5 per cent of the population of India). At present, there are 3 crore taxpayers in the country. Finance ministry, in the statement on the status of the implementation of report of the standing committee on finance, relating to the revenue department, said that the average size of the households is about 5 people and in most, not more than one person may be the earning member. In addition, various exemptions and deductions are allowed to different categories of taxpayers, which also reduce the tax base. Taking into account the above facts, it was felt that the maximum tax base would not be more than 5 per cent of the population.

The tax-GDP ratio of the centre has been projected to reach 11.2 per cent in the fiscal year 2006-07 on account of the rationalisation and removal of tax exemptions and concessions laid down in the Income Tax Act.

The finance ministry has refused States' request for 50 per cent devolution of service tax collections as part of the compensation package for proposed Central sales tax (CST) phase-out. The States currently get 30.5 per cent of all Central tax collections, including service tax. However, the Ministry has, in principle, agreed to allow the States to collect and retain 100 per cent of collections on 77 services of intra-State nature as part of the package. States have been asked to consider increasing the VAT rate of four per cent to five per cent and then six per cent over the next two years.

Punjab National Bank has posted a 2.6 rise in its net profit at Rs 368 crore for the quarter ended June 30, 2006 as compared to Rs 358 crore for the same quarter in 2005-06.

The National Bank for Agriculture and Rural Development (NABARD) and National Dairy Development (NDB) have joined hands to set up a Rs 2,000 crore comprehensive animal husbandry project in the country. The project would envisage a ten-year milk plan, which would be almost similar to operation flood.

Financial Markets

Voltamp Transformers Ltd has fixed a price band of Rs 295 to Rs 345 for its IPO 48.8 lakh equity shares, which is to remain open for subscription between August 24 and August 29; post issue, the promoters stake will come down to 51.73 per cent. The company, which manufactures transformers, is planning to enter the export market, as it sees significant growth prospects for dry type transformer in the West Asia, Africa and South-East Asia . It is also planning to expand its dry type transformer market base, apart from exploring new business sectors.

During the week, the stock markets remained buoyant due to firm Asian markets and due to a fall in crude oil prices, which triggered an upswing in the market. The market recorded the fourth straight week of gains as several positive news came in during the past few weeks. The major news that provided relief to the markets was the US Federal Reserve’s decision to hold interest rates steady at 5.25 per cent.

On Monday, the BSE Sensex rose by 120 points, taking cue from firm Asian and European markets and receding global crude oil price, which was followed by a holiday on account of Independence Day. The Sensex advanced 135.32 points on Wednesday, on trigger from a rally in Asian markets due to easing concerns of inflation in the US , and a further fall in global crude oil price. On Thursday, the BSE Sensex added 29.17 points on the back of sustained buying in blue chips. The benchmark index finished lower on the last day of the week as profit-booking activity increased pushing the index lower by 12 points. Crude oil price declined sharply by about $ 4 a barrel during the week following a truce in the Middle East that came into force from Monday.

Among the sectoral indices of BSE, except metal all indices registered a positive gains with the highest gains recorded by health care induced by the reports that the government has agreed to a 10-year exemption from price control for any new drug molecule emerging out of indigenous research and development, followed by oil and gas which surged given the fall in crude oil prices, and by auto. While BSE sensex recorded gains of 2.4 per cent and BSE mid and small cap registered 3.3 per cent and 3.0 per cent, respectively.

Between August 1and 18, FIIs were net sellers to the extent of Rs 3,559 crore with purchases of Rs 16,794 crore and sales of Rs 13,536 crore. During the same period, mutual funds were net buyers to the extent of Rs 251 crore with purchases of Rs 4,823 crore and sales of Rs 4,572 crore. However, during the week under review, FIIs were net buyers of Rs 1,835 crore while mutual funds were net sellers of Rs 21 crore.

The Reserve Bank of India, imposed monetary penalty of Rs.5 lakh on IDBI Ltd. for violation of the RBI guidelines on opening of accounts, including joint accounts, know your customer (KYC) norms and also for violation of extant guidelines of the Reserve Bank relating to IPO financing.

In case of Capital Protection Oriented Scheme, Sebi has said that the mutual funds should disclose in their offer documents, key information memorandum (KIM) as well as in the advertisements that the scheme offered is “oriented towards protection of capital” and “not with guaranteed returns”. It should also be indicated that the orientation towards protection of the capital originates from the portfolio structure of the scheme and not from any bank guarantee, insurance cover etc.

Derivatives

During the week under review, the total F&O turnover increased from Rs 96,122 crore to Rs 174,268 crore, an increase of almost 80 per cent with the turnover in stock options almost doubling from Rs 2,544 crore to Rs 5,340 crore.

Ideally, cash market follows the derivatives market, but recently, it seems that derivatives markets have been trailing the cash market. As reflected by the nifty futures have been trading at discount to spot for quiet some time. This backwardation has been attributed to a variety of reasons such as investors holding short position in index futures to hedge against the volatile markets and overvaluation of the stocks has been the another reason. One of the important reasons has been is that the futures market has been incorporating dividend impact, which is not visible in cash market.

The RBI re-issued 8.07 per cent 2017 and 8.33 per cent 2036 for notified amounts of Rs 5,000 crore and Rs 3,000 crore, at a cut-off yield of 8.12 per cent and 8.73 per cent, respectively.

The cut-off yield on 91-day TB rose to 6.40 per cent from 6.36 per cent in the previous week.

During the week under review, the yields declined across the maturity despite the increase in inflation rate with the sharpest decline in the 5-year maturity and the weighted average YTM on 10-year benchmark security 7.59 per cent 2016 was 8.04 per cent as against 8.11 per cent in the previous week.

Among the three money market segments, the call rates declined during the week while the repo and the CBLO rates increased.

Bond Market

Global Trade Finance Ltd tapped the market to mobilise Rs 20 crore through the issue 9.50 per cent maturing in 6 years.

IDFC mobilised Rs 250 crore by offering 8.15 per cent for 2 years and United Bank of India raised Rs 150 crore plus Rs 50 crore by offering 9.25 per cent for a tenure of 10 years.

Foreign Exchange Market

During the week, the rupee dollar exchange rate appreciated from Rs 46.52 on August 11 to Rs 46.48 on August 18. The six-month forward premia rose from 1.2 per cent on August 11 to 1.43 per cent on August 18.

Commodities Futures derivatives

On NCDEX, the August contracts saw record deliveries to open interest ratio. Out of the 22 commodities delivered on the exchange, 20 commodities saw deliveries to open ratio of above 80 per cent and deliveries in Potato (10 million tons), Chana (7760 million tons) and Medium Staple Cotton (420,750 kilo grams) and Gold (420 kilo grams) broke previous records.

Corporate Sector

Birla Cellulose, the fibre division of the Aditya Birla group and the only producer of cellulose fibres in the country, is investing Rs 350 crore for expanding its Kharach plant capacity situated near Surat by about 18 per cent to 3,14,000 tonne of fibre a year.

Mahindra & Mahindra (M&M) has signed a Memorandum of Understanding with Maharashtra government t set up a manufacturing facility at Nashik. M&M will invest Rs 550 crore in the project for its new multipurpose vehicle unit, Ingenio. The plant will have a capacity of producing 1.5 lakh vehicles per annum and it is expected to commence production by 2008.

Pharma company Strides Arcolab Limited has signed an agreement with US based bio-pharmaceutical company, Gilead Sciences, for manufacturing and distributing generic versions of anti-HIV drugs Truvada and Viread. It will enable Strides to manufacturer and distribute generic versions of Truvada and Viread in over ninety (90) countries.

Chennai based Areva T&D has secured Rs 25 crore contract to build the national load dispatch centre (NLDC) by the Power Grid Corporation of India and is expected to be completed by 2008.

Bharti Shipyard has secured Rs 120 crore contract from Reliance Industries Limited (RIL) for construction of six vessels. These vessels will be used by RIL for its offshore terminal at Jamnagar .

Simplex Infrastructures Limited has secured various orders worth Rs 577 crore. It includes construction of elevated expressway corridor in Hyderabad on engineering, procurement and construction basis worth Rs 439 crore. The orders also consist of undertaking Tsunami reconstruction project in Andaman and Nicobar island for construction of 1050 units of permanent shelters worth Rs 83.41 crore.

India

’s fifth largest software company HCL Technologies has registered a 31 per cent rise in sales revenues for the year ended June 2005-06. The company has reported a substantial 93 per cent growth in net profit at Rs 638 crore. For the quarter ended June 2006, HCL has posted a net profit of Rs 233 crore an increase of 44 per cent over the same period a year ago. The company has added 2,678 employees in April-June 2006 boosting its staff to 32,626 persons.

Telecom

The number of telegrams booked during 2004-05 stood at 151 lakh, which has declined by 28 per cent against the previous fiscal. The declining trend started since 1991-92, when the numbers of telegrams booked were 651 lakh. Since then, the number has fallen every subsequent year. The telegram services are provided by BSNL. The usage of telegram service has been affected due to the rapid growth of mobile phones, e-mails and SMS.

In a setback to basic telephone services provider Bharti Telenet, telecom tribunal TDSAT has rejected its petition and directed that long distance (STD) call traffic of Bharti would be carried by state-run BSNL from the point of origin. Bharti had contended that it was entitled to carry long distance call traffic on its own up to the point where its network was available – a move which would have resulted in huge savings to the company on payment of interconnection charges to BSNL.

Information Technology

A software engineer based in Lucknow has duped at least 20 customers transacting on the world’s largest online marketplace ebay.com. Though the amount involved was only Rs 14 lakh, the engineer succeeded in breaking the security checkpoints and duping several banks. ebay is the world’s largest online marketplace. About 12,793 Indians use ebay as their primary or secondary source of income. ebay claims to have registered about 1.3 million sellers and 203 million potential buyers worldwide on its site.

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.