Current Economic Statistics and Review For the Week 
Ended June 23, 2007 (25^th Weekly Report of 2007)

Theme of the week:

Fiscal Scenario of Maharashtra*

Maharashtra, being one of the most advance states in the country and a leading industrial hub, stands at an imperative position amongst all states in India . As per the advance estimates for 2006-07 the real GSDP (gross state domestic product) of Maharashtra has been estimated to grow by 9.3 per cent – a shade higher than the 9.2 per cent of growth at all-India level. The gross domestic product of the state at current market prices is projected to grow by 13.7 per cent in the fiscal year 2007-08. Thus it is quite evident that the fiscal situation in the state with such a vibrant economy has a substantial impact on the economic condition of the entire country. In this note an attempt has been made to analyse the fiscal circumstances in Maharashtra during recent period with a major emphasis on budget 2007-08.

The government of Maharashtra has adopted a prudent fiscal policy pursuing a balanced tax structure with a reasonable tax rate and widening of the tax base. The measures like adoption of fiscal correction and fiscal consolidation in order to implement the FRBM (fiscal responsibility and budgetary management) act, introduction of VAT (value added tax) have put the state on the higher growth trajectory.

Trends in Deficit Indicators

The perseverance of the government to achieve the set FRBM targets backed by higher economic activity in the state has lead to improvements in all deficit indicators during the recent period. The fiscal deficit of the state as a percentage to GSDP has been estimated to decline at 2 per cent during the current fiscal year from 3.1 per cent of 2006-07 (Chart A). After reaching to 5.3 per cent of GSDP in 2003-04 it has seen a continuous fall for the subsequent years.

Projection of the surplus budget of Rs 511 crore for the year 2007-08 signifies the government’s efforts towards the elimination of the revenue deficit as per the FRBM target. Since 1995-96 Maharashtra has witnessed an increasing deficit on revenue account reflecting a deteriorating fiscal situation of the state. The year-on-year increase in revenue deficit had touched to 83.5 per cent during 2000-01. It saw a fall of 11.3 per cent during the fiscal year 2003-04 but again went up by 20.7 per cent in 2004-05. However, the implementation of FRBM act in 2005 improved the revenue deficit scenario; it has seen a fall of 61.7 per cent during 2005-06. For the year 2006-07, the government initially had estimated a revenue surplus of Rs 306 crore. However, due to the increased burden of power subsidy as well as widespread floods, the government is likely to incur a revenue deficit worth Rs 3,192 for the year 2006-07.

Primary deficit of the state has displayed an increasing trend from 2000-01 (1.5 per cent of GSDP) to 2003-04 (2.8 per cent of GSDP). However it has seen a steady decline after that it has stood at 1.9 per cent of the GSDP during 2005-06 and has been budgeted to decline further with the reduction in fiscal deficit (Annexure I).

Receipts of the government

 During 2005-06, the total receipts of the government have dropped sharply by 12.4 per cent over the year to Rs 66,873 crore. However, as per the revised estimates for 2006-07, they are expected to grow by 12.9 per cent over the year and they are budgeted to increase further by 9.8 per cent in 2007-08. The overall boom in the economy coupled with fiscal consolidation has resulted in the rise in receipts of the state.

The revenue receipts have been budgeted to grow by 13.3 per cent during the current fiscal year totalling to Rs 68,299 crore – 12.1 per cent to GSDP. The revenue receipts as a percentage of GSDP had stood at 11.8 per cent during 2000-01; after which  the ratio continued to decelerate till 2004-05 to reach 10.8 per cent. However, it has again seen an upward trend since 2005-06 when it had been 11.2 per cent of the GSDP. The increase in the revenue receipts of the government has mainly been attributed to the growth in the tax revenue of the state (Annexure I).

The State’s own tax revenue as per the revised estimates for 2006-07 has been estimated at Rs 40,323 crore - a growth of 25.9 per cent over 2005-06. It has been further estimated to rise by 14.4 per cent to Rs. 53002 crore during 2007-08. State’s own tax revenue as a percentage of GSDP has increased from 8.9 per cent in 2005-06 to 9.4 per cent in 2007-08 (Budget Estimates). The Introduction of VAT, balanced tax structure, restraining of tax evasion and wider tax base have been major factors contributing the substantial rise in tax revenue.

Non-tax revenue of the government consisting of interest payments, dividends and profits, central grants and fees, fines, penalties etc, has budgeted to rise by 9.9 per cent for 2007-08. The ratio of non-tax revenue to GSDP has been rising since 2004-05; it has projected to be 2.7 per cent for the current fiscal year. On the contrary, capital receipts of the state as a percentage of GSDP have seen a decline over the years. The ratio has stood at 10.6 per cent during 2003-04, which as per the budgeted estimates for 2007-08 would be at 2.6 per cent of GSDP. In absolute terms also, the capital receipts have descended since 2004-05, with the year 2005-06 recording a huge decline of 47.8 per cent to Rs 18, 435 crore over the previous year.

Plan and Non-plan Expenditure

The total expenditure of the government during 2007-08 has been budgeted to rise marginally by 2.2 per cent to Rs 17,849 crore. During the fiscal years 2000-01 and 2001-02 the share of plan expenditure in total expenditure has been reduced drastically to 8.6 per cent and 8.4 per cent, respectively. However from 2003-04 onwards it has increased substantially, that is, from to 10.8 per cent in 2003-04 to to 24.3 per cent for the year 2007-08 (Budget Estimates).

On the contrary, the share of non-plan expenditure in total expenditure has declined since 2003-04. It has stood at 89.2 per cent during the same year and has been budgeted to reduce to 75.7 per cent for the current fiscal year. Containment in non-plan expenditure has been achieved by keeping expenditure on establishment under control. The expenditure on salaries, pension and interest has reduced from 68.4 per cent in 2005-06 to 61.8 per cent in 2006-07 and is likely to diminish further to 59.8 per cent in the current year as per the budget estimates 2007-08.

Developmental and Non-Developmental expenditure

 Fiscal situation of the state has started deteriorating since mid 1990 reflecting an imbalance in budgetary structure due the higher expenditure on salaries and pensions on account of implementation of fifth pay commission and huge off-budget borrowings. For fiscal sustainability of state the medium term fiscal reform programme (MTFRP) has been implemented during 2002-03 with the aim minimising the expenditure by implementing the expenditure reforms.

Afterwards, the FRBM act 2005 has further accelerated the fiscal stabilisation of the state. The government has been making serious efforts to curb the non-developmental expenditure of the state. For the year 2007-08, the non-developmental expenditure of the state has been projected to rise by 13.9 per cent. The non-developmental expenditure on revenue account has budgeted to grow by 12.1 per cent during the year, while on capital account by 24.6 per cent.  The share of developmental revenue expenditure to the total revenue expenditure has stood at 46.3 per cent during 2001-02; it has declined to 41.5 per cent during the fiscal year 2005-06. The share of developmental expenditure on capital account in total capital expenditure has been declined to 28.6 per cent during 2005-06 from 81.9 per cent during 2001-02.

The developmental expenditure of the state has been budgeted to rise slightly by 0.8 per cent during the current fiscal year. The developmental expenditure on revenue account would grow by 3 per cent on the other hand that on the capital account would declined by 5.6 per cent on year-on-year basis.

The share of developmental expenditure in total expenditure of the state has seen a rising trend; it has stood at 42.9 per cent during 2000-01, which has gone up to 62.1 per cent in 2005-06. This rise in developmental expenditure has mainly been attributed to the growth in developmental expenditure on capital account. The share of it in the total developmental expenditure has also seen a sharp growth at 71.4 per cent during 2005-06 from a mere 18.1 per cent during 2000-01.

To Sum Up

 The progress on the fiscal front so far has been satisfactory. All the deficit indicators have seen improvement in the current budget. The non-development expenditure of the state has been reduced whereas the developmental expenditure has seen a reasonable growth. The FRBM targets set by the government also seem to be attainable. However, there are some critical issues like regional income disparities, which have not been covered by this note, need to be addressed immediately.

(* This note has been prepared by Miss Snehal Nagori) 

References

• Government of Maharashtra , Budget documents of various years
• Economic survey of Maharashtra (various issues)

Highlights of  Current Economic Scene

AGRICULTURE  

The central government has approved the financing of an additional 30 lakh tonnes sugar buffer, over and above the 20 lakh tonnes created earlier in April 2007. This would funds worth Rs 570 crore, which would be used from the Sugar Development Fund (SDF). Besides, mills would be able to avail additional bank credit of about Rs 630 crore by getting their 15 per cent margin money released against the pledged buffer stock (assuming an average valuation of Rs 14,000 per tonne). The buffer would be created for a full year and the date from which it would be effective, would be announced in a short duration. To help sugar mills pay arrears to cane growers, the government has also decided to give more time to the sugar industry to repay bank loans.

The Indian sugar industry has been relieved slightly with the hope of increasing sugar exports as the European Union has offered to import additional 6,000 tonnes raw sugar against the preferential tariff. With this preferential access for 6,000 tonnes in place, the country can export 32,000 tonnes sugar, including 10,000 tonnes plantation white sugar.

The government agencies have decided to raise the minimum export price (MEP) of onion by US $ 80 (Rs 3,264) to US $ 305 (Rs 12,444) per tonne effective from June 20, 2007 following an increase in the domestic prices.  The price hike was necessary, as domestic rates have increased since the last revision took place in April 2007.

The State Trading Corporation (STC) has plans to import 25 thousand tonnes of pulses from Myanmar by August at a cost of Rs 70 crore per tonne to improve the supply situation in the country, which would in turn help in containing the prices.  STC would import 10,000 tonnes of urad (black mapte), 5,000 tonnes of green moong and 10,000 tonnes of lemon tur from Myanmar , which would be delivered at Kolkata, Visakahapatnam and Mumbai ports. The decision was taken. 

Punjab government has decided to replace 100 per cent wheat seed after every 3 years in order to end stagnation in production in the state agriculture sector. As per the agriculture minister Punjab , most of the available seed of wheat has lost its optimum potency. And hence there is an immediate need to make available the required fresh seed stock.

The central government has given in-principle approval to an action plan known as ‘Integrated Strategy for Promotion of Agri-business, Vision, Strategy and Action Plan for Food Processing Sector’ that aims to help the industry double its share in global food trade by 2015. The action plan includes establishment of mega food parks, modernisation of abattoirs, upgrading quality of street foods, detailed mapping of food clusters, and strengthening backward and forward linkages. The action plan also consists of adopting uniform and rationalised tax structure for the industry as well as strengthening and restructuring the ministry of food processing industries.

A mega poultry project worth Rs 5 crore is being undertaken in Jammu and Kashmir . The project, having the capacity to produce 10,000 chickens daily, would aim at fulfilling the rising chicken demand and subsequently create employment opportunities. The project is expected to be completed by next year.

In case of fertiliser requirement for the current kharif season 2007-08, the di-ammonium phosphate DAP requirement has been projected at 39.08 lakh tonnes. With domestic production estimated at 23.76 lakh tonnes, the balanced quantum worth 15.32 lakh tonnes need to met through imports. During 2006-07, the country had imported 28.75 lakh tonnes of DAP at an average price of $315 per tonne, cost & freight. The supply position of urea is somewhat better in relation to DAP. As against a total kharif consumption of 126.83 lakh tonnes projected for kharif 2007-08, domestic production is assessed at 98.59 lakh tonnes, with import requirement being 28.24 lakh tonnes.

The export of principal agricultural commodities, monitored by the Agricultural and Processed Food Products Export Development Authority (Apeda), has increased by about 9 per cent to Rs 16,459 crore, from Rs 15,084 crore during April-January 2006-07. The growth has come on the back of higher export volumes in non-Basmati rice, fresh vegetables and fruits, processed vegetables, groundnut and floriculture, despite a ban on the export of commodities like pulses and a fall in the export of wheat, dairy and poultry products. For the whole of 2005-06, total farm exports stood at Rs 17,918 crore.

The procurement of rice in the marketing season 2006-07 (October-September) is estimated to decline by 5.5 per cent as against 27.5 million tonnes recorded in 2005-06. The Food Corporation of India (FCI), as on June 11, 2007, had purchased 23.61 million tonnes of rice, registering a decline of about 6 per cent over 25.13 million tonnes purchased during the corresponding period of last year. However, the marginal drop in rice procurement is not a cause for concern as stock of rice at 25.1million tonnes, has been more than double the buffer requirement norm (of June 01) of 12.2 million tonnes.

Negotiations among key World Trade Organisation (WTO) member countries, namely, the US , The EU, Brazil and India over a new trade agreement have got distorted with India and Brazil blaming the unwillingness of the US and the EU to cut their massive farm subsidies. The US and the EU, for their part, had demanded greater access for their farm and industrial products in developing country markets, which India and Brazil refused to accede to. Talks have failed as India refused to dilute its stand on agricultural market access. On the other hand, the US has refused to budge on removing its alleged ‘trade distorting’ subsidies from $22 billion to $13-14 billion, as demanded by developing countries like India .

INFLATION

Annual rate of inflation, based on WPI on point-to-point basis stood at 4.28 per cent for the week ended 9^th June 2007 as compared to 4.80 per cent last week or 5.29 per cent last year.

Over the week WPI declined by 0.1 per cent to 211.8 from 211.9 for the previous week. Primary articles prices fell marginally to 220.1 from 220.4 due to lower price in moong, gram,wheat and fruits and vegetables.However, prices of condiments and spices rose by 1 per cent. Marginal rise in the prices of Fuel, Power, Light and Lubricants witnessed during the week due to increase in prices of naptha and furnace oil. Manufactured products remained unchanged at 184.4.

WPI index for all commodities were revised upwards for the week ended 14-04-2007 to 211.4 from 210.9. Inflation rate correspondingly changed to 6.34 from 6.09 per cent. 

BANKING

For the first time since the housing boom, the country’s top three home loan providers, State Bank of India, ICICI Bank and HDFC, are approaching the Asset Reconstruction Company Ltd (ARCIL) to sell bad loans from their home loan portfolios. The move has been prompted by a sharp rise in defaults from retail customers, pinched by rising interest rates, in the last two quarters.

The RBI has asked 9 banks, including the State Bank of India and Punjab National Bank, to transfer their investments in non-SLR bonds issued by the development financial institution, IFCI, to available for sale (AFS) category from held to maturity (HTM) by the end of June 2007. The profits of these banks could be hit by around Rs 700 crore as they will now have to provide for depreciation in the value of these bonds. According to RBI guidelines, only SLR bonds can be held in HTM category.

FINANCIAL MARKETS

 Capital Markets

Primary Market

 ICICI Bank Limited has tapped the market between June 19 and 22 by issuing Equity Shares aggregating Rs.87, 500 million (Excluding Green Shoe Option of Rs.13, 125 million) with face value Rs.10 per share, in a price band of Rs 885-950.

Ankit Metal & Power Limited has tapped the market between June 18 and 22 by issuing 95,90,000 Equity Shares (Excluding promoters contribution 23,10,000 Equity Shares) with face value Rs.10 per share, in a price band of Rs 30-36.

Secondary Market

 Sensex garners 305 points

The market surged last week despite liquidity concerns arising from the mega follow-up public offer of ICICI Bank. The FPO was subscribed a good 11.38 times. The issue opened for subscription on Tuesday, 19 June 2007 and closed on Friday, 22 June 2007.

The BSE 30-shares Sensex rose 304.65 points or 2.15% to 14,467.36, while the S&P CNX Nifty gained 80.6 points or 1.93% to 4,252.05 in the week ended 22 June 2007.

Trading for the week started on a bearish note with the Sensex declining 82.57 points to 14,080.14, on Monday, 18 June 2007. The latest circular issued by the Central Board of Direct Taxes (CBDT) on Friday, 15 June 2007, failed to provide the much-needed clarity with regard to tax on profit/gain arising from sale of shares.

Sensex surged 215.36 point at 14,295.50, on Tuesday, 19 June 2007, boosted by short covering and buying in index pivotals. The sentiment was also boosted further by reports that advance tax paid by companies and individuals were up 28.6% for the April-June 2007 period, from a year earlier, which in turn raised hopes of robust corporate earnings in the period.

The BSE index gained 116.45 points to 14,411.95, on Wednesday 20 June 2007, with shares from auto, banking, cement and metal leading the rally

The upmove continued for the third straight day, as the Sensex rose 87.29 points to 14,499.24, on 21 June 2007. Shares from the capital goods sector were in demand.

The three day rally fizzled out on 22 June 2007, with the Sensex slipping 31.88 points at 14,467.36, in highly volatile trade.

Derivatives                                   

The Nifty June 2007 futures settled at 4239.50, a discount of 12.55 point discount to spot closing of 4252.05

Government Securities Market

Primary Market

RBI conducted the auction of State Development Loans (SDLs), 2017 for nine

states for an aggregate amount of Rs.3565.59 crores. The cut-off yield was 8.45% for the states of Andhra Pradesh and Kerala, 8.46%for Rajasthan, 8.48% for Arunachal Pradesh, Meghalaya and West Bengal, 8.49% for Madhya Pradesh, 8.52% for Assam and 8.57% for Jammu & Kashmir.

RBI has announced the additional auction of 91-day Treasury Bills for Rs.5000 crore on June 25, 2007.

Secondary Market

During the week, the weighted average call rates during the period ranged between 0.28 per cent and 2.97 per cent, while weighted average repo rates ranged between 0.10 per cent and 0.72 per cent and the weighted average CBLO rates ranged between 0.02 per cent and 0.16 per cent. The average volumes of Call, Repo, and CBLO segments were Rs.7593 crores, Rs.133,64 crores and Rs.206,87 crores respectively. The daily average outstanding amount in the LAF (reverse repo) operation conducted during the period was Rs. 29,99 crore. The 1-10 year YTM spreads increased by 33 bps to 64 bps.

Bond Market

 Karnataka Bank has tapped the market to mobilise Rs 150 (75 Greene shoe option) crore by issuing bonds by offering 10.50 per cent for 10 years.

Kotak Mahindra Bank has tapped the market to mobilise Rs 45 (25 Greene shoe option) crore by issuing bonds by offering 10.50 per cent for 10 years.

Foreign Exchange Market

The rupee closed at Rs.40.71/USD on June 22, 2007 as compared with Rs. 40.97/USD as on June 15,2007. The Rupee moved between Rs. 40.70 and Rs.40.82, with a standard deviation of 5 paise during the week. Similarly during the fortnight (June 11, 2007 - June 22, 2007), the Rupee moved between Rs.40.70 and Rs.40.97, with a standard deviation of 10 paise. The Rupee moved between Rs.40.45 and Rs.40.98 during the last 1 month (May 28, 2007 -June 22, 2007), with a standard deviation of 16 paise.

The six-month forward premia closed at 2.67% (annualized) on June 22, 2007 vis-à-vis 3.14% on June 15, 2007.

Commodities Futures derivatives

 The world’s largest producers of black and white pepper - Indonesia , Vietnam and Brazil - have joined hands to form a consortium to control the global pepper market as high volatility in Indian futures over the last three-four months has upset the market. These nations together control 65-70 per cent of the world’s global pepper production. Representatives of Indonesian Pepper Association, Brazilian Pepper Exporters Association and Vietnam Pepper Association will meet in Indonesia between June 25 and 28 to discuss “joint marketing strategies and plantation surveys”. This consortium has been active for a couple of months, as India had been slashing price of the ASTA grade pepper considerably. Currently, India has the lowest price tag across the globe and it reportedly has been affecting exports from these countries, especially Vietnam . In the last fortnight alone, India has sold 1000 tonnes of pepper to Europe, USA and Canada in the range of $3650-3725 a tonne. Vietnam , almost on a steady note, has been quoting $3850, while Indonesia quotes $3900 and Brazil ’s indication prices are $3700 for B1 and $3800-3850 for BASTA. Malaysia quotes the highest tag of $4200 in the current international market. According to the experts, Vietnam is still quoting higher tags because of the drop in global and domestic production of pepper. Compared with 2006, production would drop 25-30 per cent resulting in various countries quoting much higher tags than that of 2006.The world requires 20,000-25,000 tonnes of pepper on a monthly average.

Groundnut oil prices hit an all-time high at Rs 700 per 10 kg on Tuesday in Mumbai as unaffordable global prices, low availability for crushers have pushed the prices up. The price has jumped over 8 per cent in the last one month. According to government estimates, total crop was reported at 49.83 lakh tonnes in 2006-07 against 79.93 lakh tonnes a year ago.Trade estimates, too, project the total production lower at 53.5 lakh tonnes in 2006-07 compared with 62.5 lakh tonnes last year.

Indian crude oil importers are in a fix for two reasons. Global prices are ruling higher at an unaffordable $1300 a tonne. In Malaysia , groundnut crude oil prices are quoted at 2440 ringgit, which is way above the affordable level of 2300 ringgit. Availability of groundnut for crushers have gone down in the domestic market due to a spurt in direct consumption and exports.

The Jeera Product Committee (JPC) of NCDEX has urged the exchange to reduce margin requirements and increase open interest position to encourage participation of wholesalers and small traders. NCDEX officials, who met the JPC, warehouse service-providers and assayers after the recent controversy over jeera delivery in Unjha, Gujarat , assured it that they would take necessary action after getting the approval of the Forward Markets Commission.

Speaking at the CII Mutual Fund Summit 2007 on Wednesday, Mr P.H. Ravikumar, Managing Director of NCDEX urged the SEBI to allow mutual funds investment in commodity trading. Participation of banks, mutual funds and financial institutions will help bring down volatility in the commodity futures trading, according to him.Over two years ago, an Association of Mutual Funds in India committee had submitted its report to the SEBI on allowing mutual funds in commodities. He further said that often, retail investors take positions without having prior knowledge in commodity trading. Mutual funds can provide the tool for retail investment in commodities. The volatility in the commodity market would come down substantially if the investor base widens

The National Commodities and Derivatives Exchange (NCDEX) is spearheading several projects to encourage farmers to use the exchange platform to participate in futures trading in commodities and hedging their price risks. Farmers would be in a position to choose their cropping pattern based on the future prices disseminated by the exchange rather than the practice of sowing a particular crop based on current prices. Mr Ravikumar said several projects were being initiated in Gujarat , Andhra Pradesh and Madhya Pradesh to encourage farmers participate in the exchange.

The National Commodity and Derivatives Exchange Ltd (NCDEX) is shifting its focus from agricultural commodities to bullion, metals and energy products.Now about 80% of the volume of daily turnover on NCDEX comes from agricultural commodities. Frequent changes in margins, ban on trading in some commodities, stock limit by state governments, delay in permitting options trade in commodities and many other regulations are making on-line trading in agricultural commodities difficult. Ravikumar said that the recent increase in prices of essential commodities was not due to exchanges but because of fall in production and increase in demand The Abhijit Sen Committee is to submit its report on possible linkage between inflation and commodity exchanges next month. If the findings of the report went against the commodity exchanges, the shift in focus of the exchange would be accelerated, he said

The May turnover of National Commodity & Derivative Exchange Ltd (NCDEX) has come down to Rs 75,662.11 crore as compared to the April turnover of Rs 93,361.42 crore, a decline of 18.95%.The main factor bringing down the turnover was that majority of the agri-commodities traded lower in volumes during May as compared to the month before that. Volumes of all major agri-commodities, such as chana, guar, mentha, potato, turmeric, castor seed, chilli, jeera, maize, mustard seed and pepper, traded much lower in May than in April. Even the number of traded contracts was much less in May, falling by as much as 53% in the case of chilli. However, gold and silver on the exchange traded much higher volumes in May than in April, contributing partly to NCDEX salvaging its bottom line for the month.Multi Commodity Exchange (MCX), registered an increase in the May turnover, as compared to April but the trade of agri-commodities on the bourse showed a decrease of over 15%, to Rs 7156.04 crore in May from Rs 8541.85 crore in April.However, gold and silver on the exchange traded much higher volumes in May than in April, contributing partly to NCDEX salvaging its bottom line for the month.

CORPORATE SECTOR

 Tata Sons has created a wholly owned subsidiary company, Tata Capital Ltd. This newly formed company is planning to enter the area of capital market services, merchant banking, housing finance, private equity investments assets and vehicle financing, retail finance and other related areas.  However, Tata’s existing financial services like Tata AIG insurance, Tata Asset Management and Tata Investment Corporation in which Tata Sons has a substantial direct holding will continue to remain separate entities and function as at present. Tata Son’s venture into these new initiatives will help them to grow their existing business.

In order to grow globally and enhance overseas revenues significantly Bharat Earth Movers Ltd (BEML), the market leader in earth moving and excavating machinery in India has signed a memorandum of understanding for establishing a joint venture company with Companhia Comercio E Construcoes (CCC) of Brazil to manufacture and supply rail wagons, bogies, mining equipment and spare parts. BEML will be holding 60 percent stake in the new venture. In addition, BEML is also planning to acquire an assembly plant in Victoria , Australia . The company is planning to invest around Rs 900 crore on expansions and diversifications.

Tata Motors are launching two passenger vehicles Magic and Winger. Both these vehicles will be available in Maharashtra and Gujarat and then rolled out nationally in six months. The company has invested Rs 350-400 crore to develop these vehicles.

In the states of Kerala, West Bengal and Jharkhand Reliance Fresh is facing strong opposition from local vegetable vendors and middlemen, as a result Mukesh Ambani’s Reliance Retail has reworked its strategy and now it is introducing Reliance Super stores with an area of 4,000-10,000 sq ft, which will stock grocery, stationary, pharmaceutical products and apparel.

PSL Ltd, a major pipe manufacturer in India has bagged a contract amounting to $45 million from Petronas Malaysia , the world’s major oil and gas company. PSL will be manufacturing pipes to carry gas over a distance of about 78 km for the Sabah Sarawak gas pipeline project in Malaysia . Also, PSL is expecting two orders of similar nature from Petronas.

PSL is setting up a new pipe manufacturing service in the Hamriyah (UAE) Free Trade Zone (FTZ)’ over a total land area of 18 acre. The stand-alone overseas venture will supply to the markets in Saudi Arabia , Oman , Qatar and Kuwait , among other countries in the region.

The Board of Approval (BoA) for SEZ has accepted the Mukesh Ambani-promoted Navi Mumbai SEZs proposals for projects related to biotechnology (64 hectare), light engineering (179 hectare) and pharmaceuticals (103 hectare) in Maharashtra . RIL initially planned a single SEZ in Navi Mumbai but later it decided to split the zone into four projects in order to bypass the contiguity issue and avoid procedural roadblocks. As well, Anil Ambani’s 18 hectare IT/ITeS SEZ in Maharashtra has also been approved.

Reliance Industries (RIL) is facing a fair degree of technical risk in executing its exploration & production (E&P) projects in the Krishna Godavari (KG) Basin, which can cause further delay in hydrocarbon production. Exploration in RIL's KG basin field is in greater water depths, and therefore, assumed to have a higher risk profile. Also, technologically complex infrastructure is required to develop the field and export the hydrocarbons. RIL is expected to produce gas from the KG Basin by July 2008.

Bombay Dyeing, through a stand-alone entity, is venturing into the development of eight to ten luxury malls in metros, apart from several mid-sized malls and shopping centres. The luxury malls will operate on a lease model. The company is entering into a joint venture with Simon Inc, an American real estate company, to facilitate infrastructure, mall management, and designing of mid-sized malls with an area of 50,000 sq ft in Bangalore , Hyderabad , Delhi and Kolkata.  

TELECOM

The rising mobile subscriber base with monthly additions of 5-6 million users causes high level of congestion at the time of interconnection (POI) between mobile operators resulting in poor quality of service. TRAI reported that PoI congestion during January-March period has increased than what it was during December 2006. TRAI had issued show cause notices to leading telecom operators like Bharti Airtel and Reliance Communications for high congestion at PoIs.  

INFORMATION TECHNOLOGY

 HDFC and Barclays Bank have agreed to sell their entire shareholding in Intelnet Global Services to SKR BPO Services. While there is no confirmation on the deal amount, it is pegged around $200 million (Rs 820 crore), which will make it the largest BPO deal in the country. SKR BPO services are jointly owned by the management of Intelnet and Blackstone GVP Capital. 

*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.

LIST OF WEEKLY THEMES

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