Worry not! RBI sees no big impact of weak monsoon on growth and farm output

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The impact of weak monsoon so far this year on India’s farm production and economy is likely to be limited, the central bank said today, as rainfall levels have improved considerably over the past one month.

In its annual report for 2013-14 released on Thursday, the RBI said even if the rainfall is normal in rest of the monsoon season (June to September), some deficiency will stay but it will not have a debilitating impact on the economy.

“The adverse impact of lower rainfalls on growth, inflation, fiscal and trade deficits is expected to be limited as on the current reckoning the deficiency in quantitative and qualitative terms is likely to be much less than that in 2009 (a drought year),” the RBI report said.

As of August 13, the all-India cumulative rainfall deficiency stood at 18 percent of the long period average (LPA) as against an excess of 12 percent in the same period last year.

There has been a marked improvement in the monsoon, which is crucial for agriculture – a source of livelihood for a majority in the country – since July 13 when the deficiency was a whopping 43 per cent.

The report said the area sown under kharif crops was 2.3 percent lower than the normal but 8.9 per cent higher than the 2009 drought year.

Moreover, the difference between kharif (summer) and rabi (winter) crops have evened out in the past few years, thus eliminating a massive impact on food production due to rainfall shortfall this season.

“On an average basis, for the last five years, rabi crops accounted for 50.7 percent of total foodgrains output,” RBI said, adding “based on the sowing data, it appears that the drop in output may now be restricted mainly to coarse cereals and pulses.”

As such, the odds are that agriculture and allied sector could make a positive contribution to overall growth as was the case even in 2009-10, the report said.

The RBI said current water levels in reservoirs are a source of comfort. As of August 13, 85 major reservoirs had 14 per cent higher water levels than the average over the last 10 years, though it was 12 per cent lower than last year’s level on the comparable date.

It said in case monsoon weakens again in the rest of the season, there was a risk of modest adverse impact on power production due to fall in water levels of reservoirs.

Mineral royalty rates go up

The government today gave its approval to raise the royalty rates on minerals, including iron ore and bauxite, a long awaited move that will boost the annual revenue of states.

However, the royalty rates for coal and lignite have not been raised, taking note of state electricity boards’ apprehensions that this could raise the cost of power generation. The royalty was raised on 23 of the 51 minerals whose rates can be decided by the central government.

The royalty rate for manganese ore was raised from 4.2 per cent to 5 per cent, while for iron ore and chromite it was raised from 10 per cent to 15 per cent. Bauxite rates were raised from 0.5 per cent to 0.6 per cent.

Odisha, Jharkhand, Chhattisgarh and Karnataka have been demanding a revision in the rates.

Under Indian law, royalty has to be paid by miners to state governments.

Officials said the states stood to gain Rs 4,000 crore from the hike, with total mineral royalty payout going up from approximately Rs 9,400 crore to Rs 13,400 crore.

Iron is mined by steel mills for captive use as well as by miners who sell to domestic mills and foreign markets, including to China, which is the largest consumer of iron ore exported out of India.

The increase in royalty rates will eat into the profits of steel makers such as SAIL, Tata Steel, Jindals and Essar as also mining companies such as Rungta Mines and Sesa Sterlite.

Odisha chief minister Naveen Patnaik had earlier asked the newly elected NDA government to raise mineral royalty from 10 per cent to 15 per cent and had also suggested a Mineral Resource Rent Tax (MRRT) on the sector.

Officials said MRRT, which was imposed in Australia two years back, is a tax on super profits generated from mining.

Other states had demanded that the increase be steeper at 20 per cent. However, the steel ministry and the Federation of Indian Mineral Industries had strongly objected to the hike.

The chief ministers of mineral-rich states — Chhattisgarh, Odisha, Jharkhand, Karnataka and Rajasthan — had last year sought a similar revision from the UPA government.

Royalty rates for minerals were increased in 2009 with ad-valorem taxes imposed on a host of minerals, including iron, coal, rock phosphate, bauxite and copper. However, fixed rates per tonne remain on other minerals such as asbestos and limestone. In 2012, royalty rates for coal and lignite were increased.

The Centre has been fighting against paying higher royalty rates for coal and iron as this would push up costs for user industries — power and steel plants.

Coal accounts for more than half of the cost of power generation and will be required for 85 per cent of the 76,000 megawatts additional capacity targeted in the next five years. Increase in coal prices because of higher royalty pay-outs will be reflected in costlier electricity.

Exporters of iron ore could face a Mineral Resource Rent Tax in case iron ore mining and exports are allowed again after a hiatus because of environmental and legal action that has seen leases being cancelled and mining stopped in many areas.

Onion price

The government today reduced the minimum export price (MEP) of onion to $350 per tonne following improvement in domestic supply situation and the softening of prices

Rs 1 lakh crore for Narendra Modi’s Digital India plan

The government on Wednesday approved an umbrella programme Digital India comprising various projects worth about Rs 1 lakh crore to transform the country into a digitally empowered knowledge economy.

The programme includes projects that aim to ensure that government services are available to citizens electronically and people get benefit of the latest information and communication technology.

“This is a follow up to the key decisions taken on the design of the programme during the meeting of the Prime Minister on Digital India Programme on August 7, 2014, and to sensitise all ministries to this vast programme touching every corner of the government,” Telecom minister Ravi Shankar Prasad said after a Cabinet meeting.

The programme will be implemented in phases from the current year till 2018. The government also gave nod to increasing royalty rates on minerals including iron ore and bauxite, a long-awaited move that will significantly swell the annual revenue of states.

“Cabinet in-principle approved revision of mineral royalty. There are 55 such items but this excludes coal, lignite and sand for stowing,” communications and IT minister Ravi Shankar Prasad said after the Cabinet meeting.

“We are satisfied that revision has been done. It has not been revised for a long time,” he said, without disclosing the impact of the move in financial terms. As per some estimates, annual revenue collection of mineral-bearing states could swell over 40 per cent to around Rs 15,000 crore.

Disclose company board decisions within 15 minutes: Sebi

Market regulator Sebi has proposed that all listed companies should intimate within 15 minutes of closure of the board meetings about decisions on dividends, bonus, fund-raising and buyback, among others.

The move is part of Sebi’s effort to ensure ‘timely and adequate’ disclosures by listed companies.

In the discussion paper, the Securities and Exchange Board of India (Sebi) has suggested that all listed firms would have to intimate to the exchanges within 15 minutes of the closure of board of directors meeting about decisions on fund-raising proposal, dividends, cash bonuses, buyback of securities.

Among others, listed entities also need to inform about decision on financial results, voluntary delisting, increase in capital by issue of bonus shares through capitalisation, including the date on which such shares would be credited, and re-issue of forfeited securities.

According to the 26-page discussion paper, these proposals have been prepared after reviewing practices in some of the international jurisdictions and after having discussions with various market participants, including bourses and industry representative.

The discussion paper is open for public comments till September 12.

“The quality of disclosures that are currently being made by the listed entities under the existing provisions, also points to the need for detailed rules governing continuous disclosures.

“Continuous, adequate, accurate and timely disclosure of information on an ongoing basis would achieve parity while enabling investors to make informed investment decisions,” the discussion paper said.

P-Notes investment drops to USD 34 billion in July

Investments into Indian shares through participatory notes (P-Notes) in July dropped to Rs 2.08 lakh crore (about USD 34 billion) after hitting over six-year high in the preceding month. 

This also marks the first decline since April. 

According to the data released by the Securities and Exchange Board of (Sebi), the total value of P-Note investments in Indian markets (equity, debt and derivatives) declined to Rs 2,08,284 crore at the end of July from Rs 2,24,248 crore in June, the highest level in more than six years. 

The June figure marked the highest investments into Indian shares through P-Notes since May 2008, when the cumulative value of such investments stood at Rs 2,34,933 crore. 

P-Notes are mostly used by overseas HNIs (High Networth Individuals), hedge funds and other foreign institutions, allow them to invest in Indian markets through registered Foreign Institutional Investors (FIIs), while saving on time and costs associated with direct registration. 

However, investment into the equity market via P-Notes had been rising in the past few months and analyst attributed the surge to hopes of investors from a stable government. 

It shot up in May post general election results, primarily on the new government’s promise to revive economic growth and the momentum continued in June. However, it slipped in July. 

Besides, the value of P-Notes issued with derivatives as underlying stood at Rs 1.6 lakh crore as on June 30, 2014. 

The quantum of FII investments through P-Notes grew to 12 per cent in June from 11.7 per cent in the previous month. 

Till a few years ago, P-Notes used to account for more than 50 per cent of the total FII investments, but their share has fallen after tightened the disclosure norms and other regulations for such investments. 

P-Notes have been accounting for mostly 15-20 per cent of total FII holdings in India since 2009, while it used to be much higher – in the range of 25-40 per cent – in 2008. It was as high as over 50 per cent at the peak of Indian stock marketbull run during a few months in 2007. 

FIIs, the key drivers of Indian markets, pumped in a net amount of over Rs 13,000 crore (USD 2.2 billion) in the domestic equity market last month, while they poured in a net Rs 23,000 crore (USD 3.8 billion) in the in July.

Gold futures fall on weak global cues

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Gold prices fell 0.82% to Rs 28,420 per 10 grams in futures trade today amid a weak trend overseas and profit-booking by speculators.

Crude palm oil falls by 0.6% on global cues

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Crude palm oil futures traded lower by 0.60 per cent to Rs 476.50 per 10 kg today as speculators trimmed positions, tracking a weak global trend.
At the Multi Commodity Exchange, crude palm oil for delivery in September fell by Rs 2.90, or 0.60 per …

Mentha oil gains by 1.5% on spot demand

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Mentha oil futures rose 1.49% to Rs 720 per kg in futures trade today as speculators created fresh positions amid pick-up in domestic and export demand.

Cardamom climbs by 2.3% on rising demand

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Cardamom prices surged 2.35% to Rs 945.20 per kg in futures trade today as speculators created positions amid strong demand in the spot markets supported by festive season.

Lead strengthens on global cues

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Lead futures rose 0.34% to Rs 134.20 per kg as participants enlarged positions on rising spot demand at domestic markets amid a firming trend overseas.