What: The Mumbai Metro Rail project, which is expected to ease traffic flows in India's financial capital. It was inaugurated by Prime Minister Manmohan Singh on June 21. The first phase will start from Versova in west Mumbai and terminate at Ghatkopar in central Mumbai. The total distance: 11.7 km

When: Work on this will commence in October and be completed by 2009

How much will it cost: The first phase will entail an investment of Rs 2,356 crore

What next: There are three more phases with different timelines. The total cost of the project is Rs 19,525 crore; it will cover a total distance of 146.5 km and the entire project is expected to be completed in 2021

Who is in charge: Anil Ambani's Reliance Energy and MMRDA (Mumbai Metropolitan Region Development Authority) have bagged the contract for the first phase. Reliance Energy had to downscale the viability gap funding from Rs 1,251 crore to Rs 650 crore

-Krishna Gopalan

Methane Power

Fishing: For energy

What: A government-run programme has struck significant reserves of gas hydrates in the Krishna-Godavari Basin off the country's east coast

What are they: Gas hydrates, also called clathrate hydrates, are ice-like crystalline molecules containing gas, usually methane, and surrounded by a cage of water molecules

So what: Extraction of methane from this source can address some of India's energy concerns. Studies show that there could be big volumes of methane hydrates at depths of up to 2,000 metres below the Earth's surface

The catch: Methane is 10 times more powerful a greenhouse gas than carbon dioxide

How can it be exploited: The technology for exploiting methane hydrates on a commercial basis is still under development at the Oil and Natural Gas Corporation (ONGC) in India. Japan and the US are the other countries where such research is being carried out

-Kapil Bajaj

ECONOMY WATCH

MONSOON

Status: Delayed. After 12 dry days from June 9-22, the South-West monsoon has finally revived over the southern part of the country. It is expected to cover the entire country by July 15. The Indian Meteorological Department estimates that there's a 22 per cent probability of it being deficient by 10 per cent.

Impact: "The delayed monsoons, coupled with inequitable distribution of rain, may lead to 10-15 per cent lower foodgrain production this kharif season," says Tuhin Kumar Singh, Research Analyst, Agriwatch. However, he adds that if rainfall remains normal from now till September, the effect on foodgrain output might be minimal.

OIL PRICES

Status: Heading north

Impact: Will affect every sector of the economy and every section of society. Global crude prices are ruling at about $70 (Rs 3,220) per barrel. If prices rise further, and domestic prices rise in tandem, India's growth story will come under severe pressure. Besides, the government will have to fork out billions of dollars more for buying oil abroad.

-Compiled by Pallavi Srivastava and Anand Adhikari

P-WATCH
A bird's eye view of what's hot and what's not on the government's policy radar.

ELECTRONIC FILING OF DOCUMENTS MANDATORY AT ROCS

Come July 1, and companies will have to electronically file their annual statements with the Registrars of Companies (rocs). So far, companies had to physically file these annual statements relating to registration, compliance, etc., at any of rocs across the country. Individual rocs are converting existing documents into electronic form. The project is expected to help reduce red tape and bring greater transparency into the system. It will also reduce the incidence of corruption by precluding companies from filing false, misleading or incomplete documents. Registered users will also be able to track the status of their applications, online, thus, reducing harassment and delays. The public at large will also now be able to access corporate documents more easily on payment of a prescribed fee.

-Anand Adhikari

BANKS MAY FIND IT TOUGH TO MEET BASEL II DEADLINE

Some Indian banks may not adhere to the march 31, 2007 deadline for complying with Basel II norms. Several public sector banks have already informed the Reserve Bank of India about their inability to provide additional capital. They are, in fact, struggling to meet the RBI-mandated tougher provisioning norms on standard assets. In such a situation, they say, that it will be well nigh impossible for them to meet the additional cost of complying with Basel II norms. Under these norms, they will have to maintain a stringent capital adequacy ratio depending on the quality of assets they have on their books and the bank management's assessment of such risk. Data collection for such risk assessment has been a major issue with banks in India. Given government ownership, which must, out of political necessity, remain above 51 per cent, several smaller banks may find capital constraints just too much to handle. RBI will take a decision on the matter soon.

-Shalini S. Dagar

COAL TRADE MAY BE REVAMPED

The coal trade may soon take on a new look. For one, domestic prices may soon be linked to global prices. The Planning Commission has recommended that high quality coking and non-coking coal should be sold at a price that is equal to its import price at the nearest port minus 15 per cent. Steel plants are already paying for good quality coke using this formula. The commission also wants 20 per cent of the total coal production to be sold through e-auctions. The balance, it has recommended, should be sold through long-term fuel supply and transport agreements with users. The coal ministry will take a decision on the recommendations only after studying them in detail. No time frame has been set for the decision.

-Amit Mukherjee

POs: Now pay your service tax

SERVICE TAX AT POST OFFICES

Service taxpayers in Delhi will be able to file their returns at select post offices. A pilot project will kick off in the Capital in July in about 20 post offices. "The idea is to make it convenient for assessees to file their tax returns and register themselves without any hassles," says Gautam Bhattacharya, Commissioner, Service Tax, Central Board of Excise and Customs. It will be rolled out nationally after the results of the pilot project are assessed.

-Kapil Bajaj

PADDY SUPPORT PRICE LIKELY TO RISE

The government is likely to increase the paddy procurement price soon. The idea is to avoid a repeat of the wheat procurement fiasco-the government was unable to procure adequate quantities to replenish its buffer stocks due to high prices. "A Cabinet decision needs to be taken. Apart from the possibility of an increase in paddy procurement price, coarse grains are also likely to be procured to cope with the shortage in supplies," an agriculture ministry official says.

-Shalini S. Dagar

Unsound Advice
Junk fiscal prudence, government told.

Beg or borrow, but spend more. This, in a sense, appears to be the Planning Commission's advice to the government to ensure an 8.5 per cent growth rate in gross domestic product (GDP) during the 11th Plan period (2007-12). In a recent draft approach paper, the Commission has argued for relaxation of the fiscal discipline regime that the government undertook to implement two years ago. The fact that discipline doesn't come easy has already been demonstrated; the Fiscal Responsibility and Budget Management (FRBM) Act was put on pause mode last year. While the FRBM Act aims to eliminate the revenue deficit by 2008, the Commission wants to defer this deadline.

The planning body of the government, which has lost its relevance in almost all sectors apart from infrastructure, has argued on the basis of preliminary estimates that the allocation of funds for development projects for states as well as the Centre be increased from 7.15 per cent of GDP, during the 10th Plan period (2001-06) to around 9.5 per cent in the next five years.

Although the Planning Commission's role in framing government policies has taken a back seat in recent times, the government is unlikely to dismiss its advice on reviewing the FRBM Act, as it offers scope to indulge in more populism. Moreover, the plan body has pegged its argument on the practice adopted globally, where fiscal responsibility legislation does not take into account revenue deficit management. "It is not a good idea to tinker with the FRBM Act. Although there is nothing sacrosact about the Act, nevertheless, stability and continuity in government demands that it sticks to the rules," says Kavita Rao, Senior Fellow, National Institute of Public Finance and Policy (NIPFP).

Sure, global practices ought to be adopted, but not on a selective basis.

-Balaji Chandramouli

IT's Time For SMEs
IT giants eye huge business opportunity.

Historically, the IT intensity at small and medium enterprises (SMEs) has been very low, but as they grow, they will need it solutions to de-bottleneck internal constraints," says Alok Shende, Director (it Practice), Frost & Sullivan. He estimates that SMEs across the country spent around $9 billion (Rs 40,500 crore) on it in 2005; and that this number is galloping along at 27 per cent year-on-year.

"The SME market is no longer a side show for us," says Subhodeep Bhattacharya, National Manager, Marketing, Hewlett-Packard India, adding that small business owners don't have homogenous technology requirements. "Small companies are all aggressively investing in it today. Though they can't afford a full-fledged ERP or CRM package, they don't often need many of the bells and whistles that large corporations do, so we build customised solutions for them," he explains. IT companies now offer integrated solutions for their SME clients. ICICI Bank, hp and Intel have recently tied up to address the problem of finance by providing credit ranging from Rs 1 lakh to Rs 50 lakh to small enterprises. IBM has created facilities where smaller software vendors can port their applications on to IBM platforms and customise them for small businesses. "Several companies have used our centres in Delhi and Bangalore for providing such technology solutions," says Ganesh Margabandhu, Director, Global Mid-market Business (South Asia), IBM. "The real growth in SME business will happen now," he says.

-Rahul Sachitanand

'Tis The Season To Fly
Airlines are offering special fares and incentives to woo flyers this monsoon season.

The ads talk of Re 1, Rs 99 and Rs 500 air fares. But why the sudden rush of rock bottom fares even from carriers that historically offer low fares? The answer: to shore up the abysmal passenger load factor (PLF) encountered by the airlines during the monsoons.

A SpiceJet spokesperson says the low-cost airline has seen load factors of 92 per cent in May, but admits the number is expected to decline 7-8 per cent in June. "The cost of flying a plane from Point A to Point B is more or less constant. And seats are perishable goods. That means empty seats mean losses for airlines. So, it makes sense for them to sell seats at a steep discount; it is better than making no money at all," explains Deep Kalra, CEO, MakeMyTrip.com, an online travel portal.

There are some other reasons for the PLF decline during the monsoons. This period is considered inauspicious in the southern states (which see the biggest drop in passenger numbers); also, this is the traditional holiday season, so business travel (which still accounts for the majority of travellers) drops.

"If you want to plan your travel in advance, now is a great time to do it," says G.R. Gopinath, CEO, Air Deccan. But he warns that despite Air Deccan, SpiceJet, GoAir and others offering bargain basement fares, not all passengers will be lucky. "Every airline has complex yield management systems, which raise fares on days a lot of travellers are flying. When we say we have 10,000 Re 1 or Rs 500 tickets, it does not mean that they are equitably distributed through the system."

SpiceJet has a similar policy. "We have 23,000 Rs 99, Rs 299 and Rs 499 tickets, but these are almost always on routes that need to be promoted-like Delhi-Chennai or Delhi-Kolkata. You are unlikely to find these fares on the Delhi-Mumbai or Pune-Bangalore or Mumbai-Hyderabad sectors where demand is very high," says a company spokesperson. Similarly, since Goa sees a downturn in traffic during the monsoons, discounted fares to Goa are available even on full-service carriers such as India, Jet Airways and Kingfisher, which tend to package their deals in conjunction with large hotel chains. A three day-two night package at a five star resort in Goa, including airfare, is available for about Rs 10,000 ex-Mumbai.

And though these fares will be harder to come by once business travel perks up again in end-July, MakeMyTrip.com's Kalra feels that passengers might still get a good deal. "With carriers like IndiGo and Jagson starting up and GoAir becoming more aggressive and expanding in a big way, I don't think that you will see fares increasing significantly on routes that have major competition, even during the peak October-March period. There has never been a better time to be an air-passenger."

-Kushan Mitra

Opportunity Lost
The Pension Bill imbroglio has cost crores.

Losing out: Finally, its pensioners who pay

As the left parties continue to act as peeved partners of the UPA government, one of its antics is hurting its own constituency. As the Pension Fund Regulatory and Development Authority Bill hangs fire due to opposition from the Left, the employees who joined the New Pension Scheme (NPS) from January 1, 2004, onwards are losing out as their pension contributions are sitting idle or earning extremely low returns-typically 5-8 per cent. The equity market, during this period, has doubled, dipped and risen again.

Under NPS, employees joining the central or state governments or autonomous bodies moved to the defined contribution pension regime, in contrast to the earlier defined benefit scheme. The new system was to work as follows: pension contributions from individuals would flow to a Central Recordkeeping Agency, which would allocate these to pension fund managers (PFMs) on the basis of individual risk preferences. The PFMs would then invest the amount accordingly.

In the absence of parliamentary approval for the pension Bill, there is no clarity about how the pension contributions are being invested. The central government has assured its own employees 8 per cent interest on the pension corpus, but it is not clear if this covers the contributions of employees of various autonomous bodies.

Compounding the confusion is the fact that nobody seems to know the total number of autonomous organisations under the NPS or the total number of employees involved. The Finance Ministry has just started compiling such a list. Guesstimates put the total number of central and state NPS members at between 100,000 and 600,000. "These people have lost out on two years of compounding of returns for no fault of theirs," says a pension analyst. And the Left continues to drag its feet on pension reforms.

-Shalini S. Dagar

Taming The Lions
This was India's best year at Cannes.

The Cannes Lions International Advertising Festival took up the mindspace of every ad professional worth his salt last week. The festival, in its 53rd year, is said to have received an unprecedented 24,862 entries from 81 countries this year. The total number of categories: nine-film, press, outdoor, direct, media, cyber, radio, promo and titanium; plus the young creative.

For India, this has been one of the best years-both in terms of entries and awards won. India sent 738 entries-including 244 in the Press, 275 in the Outdoor, five in Radio, 16 in Promo, 66 in the Film categories and one for the Titanium Lion. Of these, only 59 made it to the finals. Indian participants made a contribution of £239,568 (around Rs 2 crore) to the coffers of the organisers. The entry fee-it varies from $130-1,615 (Rs 5,980-74,290) depending on the category-at the upper end is a big constraint for the smaller agencies, which complain that the awards are more about affordability than creativity.

For the record, India won 12 Lions this year, its best ever showing at the festival. Of these, four were gold, three silver and five bronze. JWT India's Slim Jeans campaign for Levi's won many accolades, and a Gold Lion under a sub-category in the Press segment; it was also the second runner up in the Grand Prix in Press. Others who won gold include O&M in the Outdoor category for Discovery Channel, Rediffusion for Midland Bookshop and JWT, again, for its Kurkure promo. Other winners include Leo Burnett, Everest and Madison Communications.

-Archna Shukla