NEW DELHI: The National Democratic Alliance government is planning to exempt public-private partnership (PPP) projects from the need to obtain consent of affected families and the mandatory social-impact assessment, through amendments to the land acquisition law.
In the Bill put up by the previous government and passed by Parliament, PPP projects need consent of 70 per cent of affected families and have to study the social implications in the neighbourhood.
Most states, irrespective of being ruled by the Congress or the Bharatiya Janata Party, sought scrapping of the social-impact study, claiming it would delay land acquisition by two years. The same reason was cited against the consent clause, too. An alternative formula was suggested, for reducing the consent requirement to 50 per cent of land owners. “The Act provides for obtaining consent from 70 per cent of affected families in the case of acquisition for PPP projects. This will be a big ask and identifying land owners in the initial stage will create problems. This will delay initial acquisition proceedings,” Kerala’s revenue minister had argued.
The exemption is one of the amendments that might be proposed by the department of land resources. The department of law and justice has endorsed the changes and has said the Centre has the powers to bring these in through an ordinance. A final decision is awaited.
The draft amendments in The Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation & Resettlement Act are expected to go to the Cabinet for clearance. The Act came into force on January 1, by repealing the Land Acquisition Act, 1894.
No dilution has been proposed in rehabilitation & resettlement practices. However, projects governed by 13 laws in the fourth schedule of the Act could be given a concession period of five years, to bring in rehabilitation & resettlement provisions on par with or greater than those provided in the law.
In the earlier law, the concession period was around one year. Some of the laws that provide for land acquisition include The Atomic Energy Act, 1962; The Metro Railways (Construction of Works) Act, 1978; The Land Acquisition (Mines) Act, 1885; The National Highways Act, 1956; and The Special Economic Zones Act, 2005.
Some state governments had represented to the Centre that projects needed by farmers, such as irrigation, canals and roads, were being delayed by lengthy procedures and contradictory sections in the new law. These will be streamlined.
The new land acquisition law was formulated by the previous government and passed by Parliament. Soon after the NDA government took over, there were consultations to bring in changes. Rural Development Minister Nitin Gadkari held discussions with all states in June. His ministry sent a list of proposed amendments to the Prime Minister’s Office after it received inputs from the states.
(Source: Business Standard, November 5, 2014)
JAITLEY EXPECTS RS 14,000-CRORE EXPENDITURE ON CSR IN CURRENT FISCAL
NEW DELHI: Indian companies will spend close to Rs 14,000 crore on corporate social responsibility activity (CSR) in FY 15 and the amount will increase in the years ahead, finance minister Arun Jaitley said on Tuesday. Under the new Companies Act, companies with a net worth of more than Rs 500 crore or revenue of over Rs 1,000 crore or a net profit of more than Rs 5 crore need to spend at least 2% of the average net profit of the preceding three years on CSR activities.
“… CSR alone in its very first year is going to contribute about Rs 14,000 crore into the (social) sector and that’s reasonably a large amount of money. This is going to increase year after year as corporate profits increase,” he said while speaking at a function organised jointly by the Jubilant Bhartia and Schwab foundations. Jaitley also holds the charge of corporate affairs ministry that is responsible for CSR law.
The UPA government had prescribed certain activities eligible for such spending. The new government has added contributions to Swachh Bharat Fund and Clean Ganga Fund as eligible spend under this law.
However, Jaitley said corporates have been a late entrant to the idea of charitable causes. “The best in the Indian society is yet to be realised…They (corporates) are essentially obsessed with their cause, they are convinced about their cause,” he added.
(Source: The Economic Times, November 5, 2014)
RBI MAY EASE DEBT RECAST RULES FOR LOSS-MAKING SHIPPING COMPANIES
NEW DELHI: Prime Minister Narendra Modi’s ‘Make in India’ initiative may come to the rescue of an industry that has its fate closely tied to economic cycles – shipbuilding. The shipping ministry has asked the central bank to relax rules allowing shipbuilding companies which are sitting on huge losses to go in for a second round of debt restructuring.
“We are not in favour of a bail-out package for the sector, but we want to address the systemic issues,” said a senior government official on the ministry’s proposal.
Banks have to write off part of their loans if the first round of debt recast fails. The shipping ministry wants the Reserve Bank of India to ease this rule for fund-starved shipbuilders so that they could undertake a fresh round of restructuring and raise finance as they try to revive business. An RBI approval for a plan that won’t increase their bad loans would likely encourage banks to extend more money. The RBI has given such leeway to certain sectors, including the solar industry, the official said, justifying the demand.
The shipbuilding industry in India is in a turmoil. Manufacturers had built up large capacities, often by taking on debt, when growing global trade had driven up demand for ships. But, over the past five years, as the global economy hit an uncertain patch, new orders dried up and existing orders were either postponed or cancelled. To add to the local industry’s woes, the government withdrew a programme that offered a 30% subsidy on the cost of building ships.
Lack of government support led overseas competitors to outbid Indian manufactures in a market where new contracts had become few and far between.
“Companies were hit from multiple angles as they had already borrowed loans and gone for capital expansion, buoyed by so many orders,” said Manish Sharma, executive director-infrastructure, at PricewaterhouseCoopers India.
The ‘Make in India’ campaign aims to boost manufacturing as a way to increase employment opportunities and speed up economic growth. Getting the shipbuilding industry, which has immense potential to generate jobs, back on track would provide a fillip to this initiative.
Among the top shipbuilding companies, Bharati Shipyard, ABG Shipyard, Hindustan Shipyard and Goa Shipyard are all in some sort of stress. Some public sector shipbuilding companies like Cochin Shipyard have managed to stay afloat because of orders from the navy and air force, where the profit margins are decided in advance.
Bharati Shipyards has been under the corporate debt restructuring (CDR) mechanism since 2012. It reported a Rs 843 crore loss on a turnover of Rs 203 crore in fiscal 2014, highlighting the lack of demand the company is facing and the high finance charge it pays on debt that totalled Rs 4,000 crore.
ABG Shipyard reported a net loss of Rs 56 crore on a turnover of Rs 266 crore in the March 2014 quarter, while state-run Hindustan Shipyard posted total income of Rs 562.50 crore and a loss of Rs 55 crore in fiscal 2013, the latest year for which numbers were available. Goa Shipyard, another government company, posted a net loss ofRs 61 crore on a turnover of Rs 553 crore in fiscal 2014.
Bharati Shipyard has a fairly large order book, but experts say it is not in a position to fulfill those commitments because of the restrictions of CDR. Lack of cash flow poses a challenge to the entire restructuring exercise.
While, ABG Shipyard has completed restructuring its Rs 10,000 crore debt, more than a dozen more lossmaking companies are likely to enter the CDR process in the near future.
“This (government’s) move will help us in giving a leeway. But the process would not be smooth, involving a lot of paperwork, meetings, etc.,” said Dhananjay Datar, chief financial officer of ABG Shipyard. The shipping ministry’s proposal to the RBI is a part of a Cabinet note for a comprehensive shipbuilding policy, as proposed in this year’s budget.
(Source: The Economic Times, November 5, 2014)
COAL BLOCK AUCTIONING TO START WITHOUT REGULATOR
NEW DELHI: As the government plans to expedite coal block reallocation to the private sector through auctioning, it appears in no hurry to set up a regulator for the sector. Not only does the Coal Mines (Special Provisions) Ordinance skip the issue, government officials say for 74 producing blocks that would be put up for e–auction by December, a regulator is not required.
“The coal blocks which would be put for e-auction are all for end-usage in power, cement and iron production. It is the commercial mining by private companies that needs to be put under vigilance and that would be done later, after the first batch of auction commences,” said a senior official.
Valuation of coal reserves and assets in these 74 blocks would be done by a committee under Pratyush Sinha, former chief vigilance commissioner .
The Supreme Court had cancelled 204 coal blocks saying their allocation was “illegal” and “unconstitutional”. The government has thereafter promulgated an ordinance for the reauction. The transparent process in December would start with a pool of 42 operational mines and 32 nearing production, for end-use in the power, cement and iron and steel sectors. Through the ordinance, the government has added enabling provisions in the Coal Mines (Nationalisation) (CMN) Act, 1973, and the Mines and Minerals (Development and Regulation) Act, 1957, for allowing commercial mining.
While the previous UPA government through a gazette notification in February 2014 did notify setting up of a coal regulator, no further follow up was done in the matter.
The role of the regulatory body under the Coal Regulatory Authority (CRA) Bill of 2013 was to look into pricing of coal on a cost—plus basis. Officials said it’s unlikely that the CRA Bill would be placed in the winter session of Parliament. “The priority is to make available coal to the sectors in want of fuel. Undoubtedly, once the sector opens up, a regulator would be needed,” said a government official.
The UPA government had through an executive order notified setting up of a coal regulator earlier this year but the new body remains un-operational with not even appointments to it being made.
(Source: Business Standard, November 5, 2014)
BANK NPAs MAY RISE BY RS 1 LAKH CRORE IN NEXT FIVE MONTHS
MUMBAI: Non-performing assets (NPAs) in the banking system are set to increase in the range of R60,000 crore to 1 lakh crore in the next five months, rating firm India Ratings and Research said on Tuesday.
With the Reserve Bank of India’s forbearance on classification of restructured asset to end after March 31, 2015, no fresh restructured accounts can be classified as standard after the deadline.
The agency, for this report, has analysed the credit metrics of the top 500 corporate borrowers, whose aggregate debt stood at R28.76 lakh crore in FY14, which was 73% of the total bank lending to industry, services and export sectors.
“Around 82 of these 500 largest borrowers have already been formally tagged as financially distressed (identified as NPA, CDR or restructured) and another 83 (17%) of these top 500 borrowers accounting for 9% of the overall debt of the group, have severely stretched credit metrics,” it said.
India Ratings said potentially one-third to half of these 83 accounts could be in the category of SMA 2 (special mention accounts) with delays in debt servicing ranging between 61 and 90 days. “If some of these corporates are unable to generate significant cash flow or infuse significant equity in the near term, they may be identified by their lenders for restructuring pursuant to the RBI guidelines,” the report added.
Gradual withdrawal of regulatory forbearance could persuade banks to take a decisive call on the weak corporates that need to be restructured with the timeline of March 2015 in mind.
“The RBI guidelines also incentivise banks that quick implementation of a restructuring package would enable them to benefit from the existing special asset classification of such restructured accounts.”
The report added that after 2013, the amount of corporate debt referred to restructuring has shot up, with the average ticket size of CDR packages approved creeping up after May 2013.
“While the coincidence of the spike in CDR amounts with respect to RBI announcement of withdrawal of regulatory forbearance is difficult to miss, it must be acknowledged that on-going poor economic conditions were definitely a significant reason behind this observation,” added India Ratings.
(Source: The Financial Express, November 5, 2014)
