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Centre gets active with new Centre gets active with new |
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Ground handling policy could be delayed
The Central government may delay making its new ‘ground handling policy’ applicable from 01 January 2008, by at least six months, as it faces opposition from airlines and airline employee unions. The policy was proposed to be implemented at Delhi, Mumbai, Chennai, Kolkata, Bangalore and Hyderabad airports. It included a prohibition for private domestic carriers to handle passengers, ramp and aircrafts, for which, three specialised agencies were assigned. Civil Aviation Ministry has already moved a Cabinet note seeking permission for extension and modifications in the ‘scope of work’ mentioned in the policy.
PM unveils Stimulus Package - I
The much awaited 'Stimulus Package' was announced on 07 December 2008, by Prime Minister of India, Manmohan Singh. The package is likely to help generate demand through lowering of prices for consumers and overseas markets, as there are many duty cuts and other sectoral incentives.
The following are some of the key highlights of the package:
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The Central bank has reduced the Repo Rate (rate at which it lends to banks) from 7.5 per cent to 6.5 per cent and the Reverse Repo Rate (rate at which banks lend to RBI) from 6.0 per cent to 5.0 per cent, effective 08 December 2008.
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To enhance credit delivery to the labourintensive micro and small enterprises sector, the RBI will provide refinance facility to the tune of Rs.7,000 crore to the Small Industries Development Bank of India, which is the prime financer to such enterprises.
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To bring some relief to the Real Estate and Housing Finance sector, the RBI has allowed loans granted by banks to housing finance companies (HFCs), towards houses costing less than Rs.20 lakh, to be classified under priority sector lending. However, the eligibility under this measure will be restricted to 5 per cent of the individual bank’s total advances. This dispensation will apply to loans granted by banks to HFCs up to March 2010. A refinance facility of Rs.4,000 crore is also being worked upon for the National Housing Bank (NHB), to lend directly to HFCs.
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To prevent banks from accumulating large real estate - linked NPAs, the RBI has extended an exceptional / concessional treatment to loans disbursed to the sector that are currently delinquent but can be restructured by June 2009
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An across-the-board 4 per cent cut in excise duties has been announced for all manufactured goods except petroleum and those where the current rate is less than 4 per cent. Import duty on naphtha for the Power sector has been reduced to zero from 5 per cent.
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For the Textile sector, the government has made an additional allocation of Rs.1,400 crore, to clear backlog in the technology upgradation fund scheme.
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Stimulus Package - II
The Union Government has released Stimulus Package - II on 02 January 2009. The highlights of the package are:
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Interest rate ceiling on external commercial borrowings (ECBs) scrapped under RBI approval route.
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Integrated townships permitted as an end-use of ECBs under RBI approval route.
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Non-banking finance companies (NBFCs) dealing exclusively with infrastructure financing permitted to access ECBs from financial institutions, under RBI approval route.
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Foreign institutional investor investment (FII) in rupee-denominated corporate bonds in India to be increased from $6 billion to $15 billion.
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SPV to be designated to provide about Rs.25,000 crore support against investmentgrade paper to NBFCs fulfilling certain conditions.
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Credit targets of government owned banks to be raised to reflect the needs of the economy.
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Government will monitor, sectoral credit by these banks every fortnight.
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Govt plans Rs.20,000 crore recapitalisation for banks over the next two years.
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States will be allowed to raise in the current financial year additional market borrowings of 0.5% of Gross State Domestic Product (GSDP), amounting to about Rs.30,000 crore, for capital expenditure .
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India Infrastructure Finance Company being enabled to access in tranches an additional Rs.30,000 crore through tax-free bonds to fund additional projects of about Rs.75,000 crore at competitive rates over the next 18 months.
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A committee chaired by finance secretary & including secretaries of the departments of revenue and commerce to examine and resolve procedural issues on "a fast-track basis".
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Measures taken by the RBI
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Cut repo rate - the rate at which banks borrow from the RBI - 100 basis points to 5.5%.
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Cut reverse repo rate - the rate at which banks lend to RBI - 100 basis points to 4%.
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Cut Cash Reserve Ratio (CRR) - the amount of cash banks must keep with the RBI - 50 basis points to 5%.
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Center mulls over relaxing rules for NTPC
The Union government is mulling over a proposal to eliminate the need for equipment suppliers to make a public disclosure of their bids. Equipment cost is a major determinant in finalising levelised tariff. The proposal when approved, will asusre NTPC that its bids would not be estimated by competitors in fray for power projects being bid on the proposed tariff.
The current Central Vigilance Commission guidelines state that PSUs must disclose quoted price of various equipment suppliers in presence of vendors’ representatives, while on the contrary, private sector companies are allowed to maintain commercial secrecy of their offers. With the proposal being approved, the offers will be opened in a transparent manner but not disclosing supplier quotes.
Centre to change to annuity model for NHDP
The Union government is likely to alter the development process of few non-lucrative stretches of the National Highways Development Programme (NHDP) under NHDP Phase-III and Phase-V, which have failed to attract bidders. The road stretches are mostly in Bihar, Orissa, Jharkhand, Chhattisgarh and Kerala. The Centre is considering switching over from the current BOT route to the annuity model, which will impact bidding for at least 20-30 projects with estimated investment of Rs.25,000 crore. The annuity model guarantees payment to developers from the government, while as per the BOT model, the operator owns the road stretch for the concession period and recovers its investment by collecting toll revenues. NHDP will make a decision after the government unveils its special package for Infrastructure sector, which will provide funds for road projects at concessional rates.
Cabinet approves Integrated Energy Policy
The Union Cabinet on 26 December 2008, approved an Integrated Energy Policy for the country.. A Monitoring Committee, to be chaired by the Cabinet Secretary, will be set up to review policy implementation. The policy deliverables are expected to: explore alternative technologies and possible synergies to increase energy system efficiency and meet requirement for energy services, allow for relative pricing of different fuels, considering their efficiency in-use and convenience and pollution generation (the Government is hopeful of the relative pricing to result in inter-fuel choices which are socially and economically desirable), bring in a level playing field for energy players of all capacities and location, a consistent tax structure for ‘relative prices’ with consistent excise and import duties for all fuels, tax structure on alternative fuels made attractive, ensure development of public infrastructure such as ports, rail and urban transport and support R&D in new technologies and new sources required by long gestation energy projects.
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