What is 3G? 3G or third-generation mobile networks will
allow mobile service providers to provide high bandwidth data
applications and allow for better utilisation of the frequency
spectrum.
What is the noise all about? Certain people in the government
(including in the Finance Ministry) believe that a lot of money
can be made by auctioning 3G spectrum as was done in countries
like the UK and Germany. Ratan Tata also subscribes to this view.
What is the problem? Other operators, such as Airtel,
India's largest mobile network, feel that 3G auctions will result
in massive auction fees and lead to unviable service offering
(as Western European operators are discovering). They feel spectrum
should be allotted on the basis of existing subscriber base (which
benefits Airtel, BSNL and Reliance Communications but not Tata
Teleservices) for which the government should charge a licence
fee. This, they claim, will lead to lower tariffs and allow India
to leap ahead in 3G usage.
The Decision? Spectrum master Dayanidhi Maran has indicated
that DoT will take a final decision and send it for Cabinet approval
by February.
-Kushan Mitra
The Maharaja Dons New Colours
What is it? After three decades (and one failed attempt
in the early 90s) Air-India is getting a livery update. Purists,
who feel the airline has one of the world's classic airline colour
schemes, needn't be aghast since it is a minor upgrade (less red,
more white and individual windows continue to have the "palace"
motif), but it brings Air-India's Centaur back on to the plane
and introduces a dash of gold!
Who did it? Netherland-based design house Lila Design.
When do we see it? The first of Air-India's new 777-200LRs
(VT-ALA) scheduled for delivery in mid-February is sitting with
the new colours at Boeing's factory near Seattle while its new
interiors (including an audio-video on demand system) get fitted
out!
-Kushan Mitra
ECONOMY WATCH
IMPORTS
Status: Rs 5,17,500 crore between April and October 2006-07.
Impact: Rising imports signal increased economic and
industrial activity and is the norm at times when the economy
is in expansion mode. However, it eats up precious foreign exchange
and affects the country's trade balance by widening the trade
deficit.
BOND YIELDS
Status: 7.83 per cent as on January 19, 2007.
Impact: The rise in the 10-year bond is a clear indication
of hardening interest rates in the short run. There is a strong
possibility that surplus liquidity in the system, as a result
of a reduction in the SLR, may fuel inflationary pressure in the
economy.
-Compiled by Anand Adhikari
P-WATCH
A bird's eye view of what's hot and what's
not on the government's policy radar.
SEZ POLICY UNDER REVIEW
| Moderation, at Last! |
| »
Sectoral cap on SEZs: IT and pharma corporates
will have to jostle for SEZ space
» Land
use norms: only vacant and contiguous rural land (read:
wasteland) to be used for SEZs
|
Mass protests crank the government policy machinery like nothing
else. The protests in Nandigram and elsewhere in the country over
the SEZ policy have moved the government to make it more amenable
and acceptable. For one, sector-wise caps on SEZs may be in place
soon, a move that is aimed primarily at limiting the number of
it and pharma sector SEZs. Also, sector-specific SEZs may be allowed
to come up only on contiguous vacant (and not built up) land.
In addition to this, existing ports may not be allowed to be converted
into SEZs. This will force corporates to set up their own port
facilities. The ostensible intention: enhance the port infrastructure
in the country. Clearly, investment opportunities are aplenty.
-Aman Malik
POWER PSU COMPANIES TO HIT THE MARKET
The government is mulling a proposal to divest up to 5 per cent
of its stake in three public sector power companies, namely, Power
Grid Corporation (PGCIL), Rural Electrification Corporation (REC)
and the National Hydroelectric Power Corporation (NHPC). The IPO
for PGCIL and REC was approved by the Cabinet in November last
year, while that for NHPC was approved in December. What makes
the process smoother is that the Law Ministry is of the view that
no Parliamentary approval is required. The pace of public offerings
in the power sector is as tardy as sector reform itself-in November
last year, government had turned down a proposal to divest 5 per
cent in Power Finance Corporation following opposition from the
Left parties. Later though, PFC was given the go ahead. Hopefully,
the government will blink this time around.
-Aman Malik
FUNDING FOR OVERSEAS M&A SET TO EASE
While India Inc.'s appetite for foreign acquisitions has vaulted
in the recent past, funding norms have not kept up with the times.
As a result, Indian companies are forced to borrow heavily from
the international markets, relying less on their parent companies
that can leverage the domestic markets and deliver cheaper funds.
The Reserve Bank of India is now planning to relax the prevailing
lending norms to ease this situation. RBI plans to allow corporates
to lend 200 per cent of their net worth to overseas step-down
subsidiaries, ventures promoted by the holding company of the
Indian subsidiary. At present, Indian firms can lend only to direct
subsidiaries for M&A activity. RBI's move will enable the step-down
subsidiary to not only leverage the balance sheet of the holding
company but also the Indian corporate. What it also means is that
the Indian banking sector can look forward to more business. Who
says the colour of money does not matter?
-Balaji Chandramouli
INFLATION FEARS
With inflation recording a two-year high of 6 per cent early
this month, the political class could not be more worried-price
of mass consumption products like basic food articles have risen.
While Finance Minister P. Chidambaram's plea to the market to
desist from raising prices will carry weight, a possible increase
in interest rates by the RBI is not ruled out. On the policy front,
reduction in duties is also a possibility. Or, a mix of all three
options!
-Balaji Chandramouli
 |
| Lifting: Infrastructure
efforts |
LONG-TERM MONEY
With the government ushering in policy moves for greater private
sector participation in infrastructure, the need for long-term
funds could not get more critical. The Finance Ministry is planning
to dip into the foreign exchange reserves and float a $10 billion
(Rs 45,000 crore) special purpose vehicle for this purpose. The
lure of easy funding surely helps.
-Balaji Chandramouli
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