Even as domestic saving rate galloped, there has occurred a quantum leap in the country’s investment rate. For sometime in the initial period of the high saving phase (2001-02 to 2003-04) when rapid increases in foreign capital flows took place and domestic savings began to expand, the domestic investment rate could not catch up with the bulge in savings. As a result, there was the unhealthy spectacle of the country’s current account getting into a situation of surplus, that is, the counterpart of the negative capital inflow. As shown in Table 2, the three year period 2001-02 to 2003-04 experienced negative capital inflows ranging from (-) 0.7% to (-) 2.2% of GDP. That is, a saving-scarce economy like that of India experienced a situation of net capital outflow. The reasons were not far to seek. The root reason was the rapid bulge in capital inflows which contributed to the phenomenal increases in the country’s foreign exchange reserves (Table 3). The bulge began precisely in 2002-03 which is associated with a number of positive developments in the country’s macroeconomy thereafter including the vast increases in domestic saving and investment. The foreign exchange reserves, which had increased by $11.83 billion (Rs 66,831 crore) during 2001-02, expanded more rapidly thereafter by US $21.99 billion (Rs 97,432 crore) in 2002-03 and 36.86 billion (Rs 128,659 crore) in 2003-04. Such sudden increases in foreign reserves could not be absorbed by expanding investment in the economy contemporaneously and hence these were current account surpluses or negative net capital inflows for three years until 2003-04. But, by then, the country’s domestic investment rate had begun to improve rather rapidly, though not commensurate with the capital inflows or with the increases in the domestic saving rates. The gross capital formation (GCF) rate jumped from 22.8% of GDP in 2001-02 to 25.2% in 2002-03 and further to 27.6% in 2003-04. But, after 2003-04, the investment rates have overtaken the savings rates, thus absorbing the foreign capital inflow albeit partly to finance current account deficits and increased investment. Thus, the GFC rate has steadily risen to as high a figure as 39.1% in 2007-08.

Factors Influencing Jumps in Savings and Investments

As brought out above, the improvements in savings and investments after 2002-03 have been rapid and phenomenal; they have reached the levels attained in the south-east Asian economies including China, which have been high-growth epicentres in the world economy. These are a number of national and global developments since then which have contributed to the buoyant saving and investment scenario in the Indian economy.

Sizeable Capital inflows

First, as a result of the continuous high growth performance of the world economy, particularly in the USA and other developed economies, there arose huge capital surpluses seeking investment in the emerging markets, and as a result of the series of the reforms measures, the Indian economy became an attractive destination for foreign capital inflows. The bulk of these in the form of portfolio inflows, began to see quantum jumps in 2003-04 as shown in Table 4. Such inflows grew from US $10 billion in 2002-03 to US $ 11.38 billion in 2003-04 and remained high thereafter. This has been associated with the high tempo of capital market and financial market activities in the Indian economy since then.

As indicated earlier, in fact the foreign exchange reserves had begun to expand in 2002-0 as a result of sizeable improvements in the country’s services export receipts and also in private remittances.

All of the above factors contributing to the growth of foreign currency assets and consequently to the expansion of financial liquidity in the system, have helped to improve household financial saving shown in Table 5, gross financial savings of households as percentage of GDP have made a leap from 11.8% in 2000-01 to 13.0% in the next two years and reached the peak of 18.5% in 2006-07. Alongside, there have also been some improvements in the household physical assets formation.

The above explanation provided for the increases in household saving may be considered as static balance sheet explanation. In fact, there is the dynamic economic process found in the acceleration of the rates of economic growth – and growth in household incomes that should provide a more solid basis for the recent expansion in household savings (Table 6).

Increases in Savings of Public and Private Corporate Sectors

It must be admitted that in relative terms, the improvements in household saving is not as large as in the case of public sector and private corporate sector. However, the same virtual causation between growth and savings is also applicable to the savings of the public sector and the private corporate sector. As shown in Table 7, the increases in savings as indicated above in respect of the household sector, have been found to be more true in the cases of the above  two organised sectors. The public sector saving has improved from (-) 0.6. % of GDP in 2002-03 to .4.5.% in 2007-08 and the private corporate sector saving likewise has risen from .4.0% to .8.8.% during the same period.  The general buoyant economic environment has made it possible for these sectors to produce high levels of savings (and investment) in the recent period.

However, there are also some components of public policies which have created a conducive environment for the public sector and the private corporate sector to generate higher levels of savings.

Fiscal Discipline and Reductions in Revenue Deficits of the Government Sector

The public sector savings comprise retained earnings of departmental and non-departmental enterprises as well as saving of the general government administration. As in the case of the private corporate sector, the commercial enterprises of the government - departmental and non-departmental –have derived the benefits of higher activities and larger savings. Within the public sector, the segment that has achieved substantial improvement in savings relates to the savings of the public administration. This is almost entirely due to the implementation of the Fiscal Responsibility and Budget Management (FRBM) Act and the rules framed there under. The results of this fiscal discipline, germane to the estimation of savings, are reflected in rapid decline in the combined revenue deficit of the central and state governments. As shown in Table 9, there has occurred a sharp decline in the combined revenue deficit from 6.9% in 2001-02 to just 0.9% in 2007-08.

Higher Profits Lower Taxes and Reduced Interest Burden of the Corporate Sector

The private corporate sector has derived allround benefits of economic, fiscal and monetary reforms. As shown in the results of the RBI studies on company finances (Table 9), gross profits to sales ratio of the sample public limited companies has shown a steady improvement since 2001-02; from about 10%, it has touched 14.2% in 2006-07. But that is not all; the corporate sector has derived historically the highest level of benefits from two key sources: reduced interest burden; and lower incidence of corporate taxation. These crucial public policies, put in place for encouraging increased investment and expansion of productive capacity, are reflected in-huge benefit derived the corporate sector at first remove in the form of significant declines in (i) the ratio of tax provisions to profits before tax; and (ii) the proportion of interest paid to gross profit. The former ratio has come down from about 37% in 2001-02 to 24% in 2006-07 and the latter has dropped from 58% to 16% during the same period. Obviously, the benefits of these liberal public policies for the corporate sector have indeed been very large and they would have directly contributed to the increases in corporate sector savings.

The central government would be allowing private traders to exports 2 million metric tonnes of wheat from May 15 2009. Private companies are requested to purchase wheat from the market for overseas sales, as the government has decided that it won’t be using its reserves for exports. Apart from wheat, exports of wheat products like sooji, maida and atta would also be allowed to be exported.

Wheat procurement by the central government, so far, has increased by nearly 20% in the 2009-10 (April-March) marketing season at 212.54 lakh tonnes as against 177.52 lakh tonnes during the same period last year. The government has targeted to procure 244 lakh tonnes of wheat in the current season. To achieve the target it started purchasing the grain in Madhya Pradesh, Rajasthan and Gujarat on 18 March, while in remaining states it started on 01 April. Of the 212.54 lakh tonnes of wheat, FCI purchased 38.81 lakh tonnes, while co-operatives procured 57.66 lakh tonnes. Procurement in Punjab stood at 104.21 lakh tonnes as on 08 May, compared to 93.34 lakh tonnes in the same period last year. While procurement in Haryana was reported to be at 36,493 tonnes, in Uttar Pradesh it was 1.59 lakh tonnes and Madhya Pradesh 57,258 tonnes, respectively.

The Centre had procured over three lakh tonnes of bajra from Haryana at a rate of Rs 812 per quintal lower than the minimum support price (MSP) of which it would be disposing 11,000 tonnes. It has also procured about 7,000 tonnes of bajra from Madhya Pradesh, Karnataka and Maharashtra in 2008 kharif season, as market prices were lower than its MSP at that time. Currently, bajra prices at the regulated market yard (mandi) are hovering in the range of Rs 600-1,190 per quintal depending on the quality and variety.

Coverage under gaur in Rajasthan is likely to fall by 9.74% in 2009-10 crop year at 2.5 million hectares from 2.77 million hectares of last year. Most of the farmers cultivating gaur are expected to opt for cotton and cereals, as they are likely to fetch better prices. Gaur acreage in the state increased in 2007-08, as price of the commodity showed a drastic rise. Rajasthan, which accounts for about 70% of the country's guar output, covered an average area of 2 million hectares under this crop during 2002-03 to 2006-07.

As per government sources, state-run trading firms have contracted to import an additional 30,400 tonnes of white sugar from Brazil and Thailand, taking purchases to 50,400 tonnes this year. State Trading Corporation of India Ltd. has ordered 25,000 tonnes from Thailand, MMTC Ltd. has contracted 5,400 tonnes from Brazil, while PEC had earlier decided to import 15,000 tonnes of white sugar from Thailand and 5,000 tonnes from Brazil. Sugar mills have requested the importing agencies to buy white sugar on their behalf.

According to the Textiles Ministry, exporters, so far, have shipped 1.2 million bales after the government made registration of export contracts mandatory to curb domestic prices in the month of July 2008. Domestic cotton suppliers sought permission from the central government to export 2.4 million bales in the nine month period that ended in the month of April. Cotton output may drop by 8% to 29 million bales during the year ending 30 September 2009 as against the previous year and shipments this year would drop to 5 million bales from 8.5 million bales of the last year. Traders have also registered to export 67,950 bales of cotton waste between August and April. In total 40,427 bales have so far been shipped from the country. Cotton Corporation of India (CCI) has reiterated that market arrivals would drop to 27 million bales as of 02 May 2009 down from 29.7 million bales a year ago.

According to latest data compiled by the Solvent Extractors' Association (SEA), oilmeal exports dropped sharply by 64% during April 2009 to 2.32 lakh tonnes as compared to 6.47 lakh tonnes in April 2008, mainly on reduced demand for compound feeds globally. Meat production declined in Europe, the US and the other countries. Poultry production has slowed down notably in Brazil and marginally in India. Several Asian countries suffered from a crisis in the livestock industry, which contributed to lower consumption of soyameal and other oilmeals reflected in lower exports.

Exports of castor oil has registered a significant growth of 74% to 3.08 lakh tonnes during the fiscal year 2008-09 from 1.76 lakh tonnes during the same period a year ago. This resulted due to good purchase of the product by China. The country has so far exported about 75,000 tonnes of castor oil till April during the current calendar year, as fresh arrivals of new crop has started to enter into the market since January. It is predicted that daily arrivals in the market has reached to one-lakh bags (each of 75 kgs).

As per the report by US Department of Agriculture (USDA), coffee exports from India are expected to jump by 21% to around 230,000 tonnes in the financial year 2010 season starting from October due to expected increase in production. However, during October-April 2009, coffee exports are expected to decline to around 1, 90, 000 tonnes because of reduced exportable surplus and high domestic prices vis-à-vis lower global prices. Exports would be lagging behind by 25,000 tonnes as compared to the corresponding period of the previous year.

According to the government's trade promotion body ‘Agricultural and Processed Food Products Exports Development Authority’ (APEDA), mango exports to the US have stood at 31.7 tonnes in April this year, compared to around 20 tonnes in the corresponding period last year. During 2008 mango season starting from April, exports from the country stood at 143 tonnes of mangoes to the US valued at around Rs 2 crore. According to trade estimates, the output is expected to decline by 30% to 8 million tonnes in 2009 season, compared with 11.9 million tonnes in a year-ago period.

Industry

Infrastructure

Inflation

Capital Markets

Primary Market

Primary market remaining dull during the week as there was no issues entering the Capital market to mobilize funds.

Secondary Market

Most of the sectoral indices of BSE recorded positive returns over the week except Consumer Durable, Realty and FMCG index. Among the gainers IT recorded 9.9% growth followed by Bankex, TECk and Auto with 7.8%, 6.4% and 6.3%, respectively. Better than expected numbers from Teck firms and a weak rupee pushed up the IT indices. TECk index rose due to good results from Bharti. The Bankex rose on hopes that lower rates would boost asset growth.

Foreign institutional investors (FIIs) made heavy purchases. FII inflow in April 2009 totaled Rs 7,039.90 crore, and the inflow in calendar year 2009 totaled Rs 368.10 crore (till 28 April 2009). Mutual funds sold stocks worth Rs 396 crore during the week.

The Securities and Exchange Board of India (SEBI) is in talks with the Reserve Bank of India (RBI) to introduce foreign currency options on the exchanges. As per media sources a seven-member standing committee, with representatives from both SEBI and RBI, is working on the modalities to bring in foreign currency options by October 2009. The move assumes a huge significance in view of the heavy losses that companies had incurred in overseas cross-currency options deals last year.

The SEBI is in talks with the RBI to consider a proposal to permit dollar settlements for FIIs in India. The move would mean a tectonic shift in the way FIIs invest in Indian markets. Dollar settlements would not only mitigate risks of currency fluctuations for FIIs, but also help in improving the volume and liquidity of the derivatives market. At present, settlements in India are done in rupee denominations. As a result, a number of FIIs, who intend to trade in Nifty futures, take the Singapore route where CNX Nifty index futures are traded on SGX. If dollar settlement is allowed in India, many participants, who want to take exposure to Indian markets through index buying, will be able to participate freely. This, in turn, will give stability to Indian markets as there will be buying of underlying stocks by the sellers of these contracts to FIIs. Sources close to the development said that it was a consultative process between RBI and Sebi and that it was difficult to fix a time frame as to when guidelines on this would be issued. RBI has formed a committee to discuss the issue.

Derivatives

Primary Market

RBI auctioned 91-day TBs and 364-day TBs on 6 May 2009 for the notified amount of Rs 8,000 crore and Rs 1,000 crore, respectively. The cut-off yield for the 91-day TBs and 364-day TBs were set at 3.15% and 3.50%, respectively.

The State Government of West Bengal auctioned 10-year paper maturing in 2019 for the notified amounts of Rs 2,500.00 crore on 6 May 2009.

Secondary Market

Inter-bank call rates moved in the range of 3.23-3.27% during the week. Bonds remained steady as traders booked profits though financial markets continued to be dogged by the liquidity overhang. At the weekend liquidity adjustment facility auctions the recourse to the reverse repo window amounted to Rs 89,350 crore.

Bond Market

During the week under review, 1 FIs/banks, 1 NBFC, 1 corporate and 1 central undertaking tapped the bond market to mobilize an amount of Rs 1,275 crore, respectively.

On 28 April, Anil Ambani group firm Reliance Communications said that it has bought back 247 zero coupon foreign currency convertible bonds (FCCBs) worth Rs 125 crore (USD 24.7 million) from the international markets. In a filing to the BSE, the company declared that the repurchased FCCB's are expected to be extinguished shortly. Last year, the RBI had allowed the corporate houses to buy back FCCBs from the foreign markets if they are trading at a discount of 25% from their book value.

Indian companies are borrowing money overseas to buy back the FCCBs that were issued by them and are now selling at a steep discount. Details on foreign loans, termed external commercial borrowings (ECBs) by the regulator, reveal that the major borrowers in March 2009 were telecom company Aircel, which received permission to raise half a billion dollars, and flag carrier National Aviation Company, which got a clearance for $136 million to fund their expansion plans. The data also shows that six corporates were given the nod to raise funds abroad to repurchase FCCBs. Following buybacks, the prices of Indian FCCBs have improved in the secondary market. Last week, the RBI further liberalised the norms for repurchase of FCCBs by allowing corporates to buy back FCCBs worth $100 million. The central bank has also extended the relaxed guidelines for international borrowing up to December 2009. The numbers show that despite a relaxation in overseas borrowing norms, the trend of lower borrowing continued till the end of the fiscal. In March, the central bank had approved borrowings worth only $1.1 billion; this is around a fourth of the $4.4 billion raised in March 2008. In FY08, the funds raised through ECBs amounted to 20.5 billion. The total ECB sanctioned for the year, including FCCB, was $19 billion, compared to $22.6 billion sanctioned for the previous year. In the second half of FY09, the RBI had substantially liberalised the overseas borrowing norms. 

The rupee fell by around 25 paise against the dollar on May 11, 2009, after losing most of the intra-day gains. The rupee opened with a positive gap at 49.10 and strengthened to touch an intra-day high of 49.05. It weakened to close at 49.52, against the previous close of 49.28. The higher opening was on account of euro’s rally against the greenback in the previous trading session and the positive global equity markets, said a dealer with a private bank.  However, it lost most of the gains tracking the negative domestic equity indices, added the dealer. In the overseas markets, the dollar gained a bit against the euro and the pound but was flat against the yen. In the forward premia market, the six-month premium closed at 2.75 per cent and the one-year closed at 2.26 per cent.

Commodity market regulator Forward Markets Commission (FMC) has directed exchanges to relook at the spot-futures disconnect in potato as the data supplied by Multi Commodity Exchange of India (MCX) and National Commodity & Derivatives Exchange (NCDEX) on the commodity’s high futures prices have failed to satisfy the regulator on the market dichotomy. The exchanges are likely to revert to FMC by the weekend. A few weeks ago, the regulator asked multi commodity exchanges - NCDEX, MCX and Ahmedabad-based NMCE - to justify runaway prices in sugar, rubber, turmeric and potato futures.

The country’s top two commodity exchanges, MCX and NCDEX, have imposed special margin on sugar futures in an attempt to curb volatility in prices of the sweetener at the futures market. The measure has been taken on the direction of the commodity market regulator FMC. The FMC was recently asked by the committee of secretaries (COS) to watch the movement in sugar prices in the futures market and take necessary steps to curb excessive speculation. According to an NCDEX circular, the exchange has imposed 5% special margin on long positions of all running contracts of sugar except for contract expiring in August 2009. After the imposition the total special margin levied on sugar will be 10% on the long side on all contracts except for August, which will remain at 15%. Similarly the MCX has fixed 10% special margin on both M and S grade of sugar traded on the exchange, the MCX circular said. Special margin is effective on both the exchanges from 4 May 2009.

Ahmedabad-based agri commodity bourse National Multi Commodity Exchange (NMCE) has seen a sudden spurt in average daily turnover (ADT) over the past two months. From Rs 220 crore in January, ADT shot up to Rs 839 crore in March’09 before moderating to Rs 542 crore in April. For an exchange that has seen ADT range between Rs 275 crore and Rs 400 crore in previous fiscals, this rise is stupendous. ADT for rival bourse NCDEX stood at around Rs 1,500 crore in March, according to an exchange official. While the rise may be attributed in part to reactivation of contracts such as sacking bags, coffee and kapas by NMCE in FY09 and to the launch of the evening session since September 2008, which resulted in increased participation in bullion and metals, traders relate it mainly to increased speculative activity in the final months of the fiscal. . The rise in speculative activity on NMCE can be determined by the high volume to open interest (OI) ratio. OI indicates rising market participation. A very high multiple (volume/OI) indicates a high level of speculative activity, or day trades.

After lying dormant for quite some time, futures trading in agri commodities at 22 commodity exchanges showed a sign of pick-up and the turnover of farm items shot up by 18.40% to Rs 36,400 crore in the first fortnight of the current fiscal, FMC has said. The exchanges had generated a business of Rs 30,744 crore in agricultural futures in the corresponding period last year, the commodity market regulator Forward Markets Commission (FMC) said in a release. Trade volume and investors' participation in the futures trading in farm commodities had witnessed a setback due to a ban on potato, chana, rubber and soya oil in 2008, which was lifted after six months. Agri futures, however, has shown improvement in the first fortnight of 2009-10 fiscal.

On 29 April Jeera futures on the NCDEX hit 2% upper circuit mainly on reports of lower supplies, uncertainty over crops in Syria and Turkey supported by reduced inflows in Unjha centre. NCDEX jeera May contracts were traded higher at Rs 12,165 on Wednesday over the previous day’s close of Rs 11,914 per quintal, up by 2.10% on reports of bad weather in the major producing regions. Report on the production front from Turkey, Syria and Iran is likely to have a short term impact on the prices.

Notwithstanding slowdown in gold sales even during the auspicious occasion of Akshaya Tritiya, small investors have been increasingly shifting their focus towards gold as an investment option during the last one year. The MCX which launched its first ever gold guinea futures contract a year back has already sold 44,125 guineas (8 gram each). More than 352 kg of gold has been purchase by small investors through buying of these guineas. Small retail investors have been specially showing interest in the product because of 'physical delivery' and quality certification from London Bullion Market," Ashok Mittal, vice-president, Karvy Comtrade, told FE. Investors have taken delivery of 715 gold guineas from Karvy during the April 2009. Another factors going in favour of gold guinea is that eight gram gold guinea are not only being physically delivered at home but also sold at around 15% less than the market price of gold coin sold by financial institutions and banks. The guinea prices have moved from Rs 9,661 per 8 gram on 8  May 2008 to Rs 11,370 for the April 2009 contract, a rise of more than 15%.

MCX received a major blow after the Central Electricity Regulatory Commission (CERC) ruled that it has jurisdiction to regulate the forward contracts in electricity. However, till its regulations and guidelines for electricity forward contracts come into effect MCX transactions in forward contracts in electricity will be governed by CERC’s existing orders. CERC issued order on a petition filed by NSE promoted Power Exchange India (PXI) with an appeal to restrain MCS and Indian Energy Exchange (IEX) from introducing, selling, marketing or otherwise dealing in any manner with electricity forward contracts. MCX had submitted that by virtue of the notification issued by the Centre only FMC had the jurisdiction to regulate the forward contracts in electricity through an association recognised under section 6 of the 1952 Act.

Buyers from the spot exchange, however, will have to pay Rs 200 for every turnover of Rs 1 lakh. NSEL, which was launched in October last, is awaiting licence from Tamil Nadu to commence spot trading in various agricultural products. It expects the licence in a month’s time after which different contracts will be offered in different places such as Salem, Madurai and Coimbatore.

Banking

ACC cement’s production in the month of April 2009 increased to 1.84 million metric tonne against 1.80 million metric tonne during the same month last year, recording a growth of 2.2%.

L&T has entered in to a pact with Europe’s EADS (Defence & Security) for the development and manufacturing of high-end defence electronics products, mobile systems and solutions for both India and international market. The company will spend Rs 2000 crore in the defence related business over the next 3-5 years.  L&T is looking forward to set up three separate companies to look after defence, aerospace, and nuclear power by 2012-13.

Bharati Shipyard Ltd (BSL) has acquired almost 15% stake of Great Offshore for Rs 174 crore.  BSL has bought 55,33,786 equity shares of the Great Offshore at Rs 315 per share.

India’s largest power generator, NTPC to fund its ongoing capacity addition of 22,4300 Mw is raising capital in the domestic market. The company is planning to raise Rs 11,330 crore in 2009-10 of which NTPC will be borrowing Rs 8,500 crore loan from SBI at a floating rate of interest during 2009-10. The loan will be disbursed in tranches and will be utilised in 3-7 years and will be made available in tranches.

Tata Motors has garnered nearly Rs 2,500 crore from 2.03 lakh fully-paid orders for the Tata Nano, a week after the booking process for the car came to a close. As much as 70% of the 2.03 lakh bookings received were financed, while the remaining 30% of the applications booked in cash by paying virtually the full cost of the vehicle upfront. Around 4,000 cash bookings were made online. Tata Motors announced that the first 1- lakh allottees from among the applicants would be chosen through a computerised randon selection procedure, and allotment will made within 60 days of booking closure. The maximum numbers of bookings were received for the top-end model, accounting for half the overall applications. The Nano car is scheduled to hit the roads in July. However, the number of fully-paid bookings is far lower than the number of booking forms sold at various centres. Around 6.10 lakh forms were purchased from these bookings centres. The amount mobilized through Nana booking comes as a relief to the company, which posted a loss of Rs 263 crore in Q3 2008-09 as against a profit of Rs 499 crore a year earlier.

The country’s largest real estate firm, DLF may have to pay Rs 400 crore in additional tax following a special audit of its books for the assessment year 2005-06 by the income tax department.

Recently Religare Venture Capital Limited, a wholly owned subsidiary of  Religare Enterprises, and private equity player Milestone Capital formed a 50:50 joint venture (JV). The newly formed JV is making its investment within a month by acquiring a majority stake in a mid-sized (150-bed) hospital in the country by investing Rs 50 crore. 

External Sector

Information Technology

Adlabs Films, Reliance group company has announced its launch of a BPO business for the media domain. Spread over 90,000 sq ft, the BPO which has 300 employees is planning to increase its headcount to 1200 employees within a year and will comply with Motion Pictures Association of America (MPAA) standards. The BPO will be providing a comprehensive one-point solution for the transition from analog to digital and from physical media to digital data. It will be one of the world’s largest comprehensive digital restoration and content processing services facilities.

Tata Ltd, one of the promoter companies of TCS, has sold its entire stake of 1.05% (1.03 crore shares) of TCS at Rs 615.04 per share in the open market. This sale of the stake will garner nearly Rs 650 crore. With this deal, Tata Group’s total shareholding in TCS had reduced to 75.16% from its earlier stake of 76.21% . 

Telecom 

The government has issued a service tax notice to Vodafone Essar Ltd. on account of evading service tax of Rs 3.67 crore. The company is liable to pay service tax for receiving services from foreign service providers as well as its distribution of the prepaid vouchers to its retailers and distributors in lieu of commissions for services rendered by them to the company.