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Tuesday, December 23, 2008

NEW DELHI: India has lifted a ban on cement exports, the trade ministry said, as price pressures eased and domestic demand is depressed due to a slowdown in construction activity.

The Director General of Foreign Trade under the Commerce Ministry said in a notification on the weekend it had allowed cement exports “with immediate effect”. The government had banned cement exports in May as part of efforts to increase local supplies and check rising prices.

In the past few months, construction activity has slowed down as high interest rates trimmed demand for new homes while companies deferred expansion plans due to a credit crunch. India’s cement output was 14.34 million tonnes in November, less than 14.76 million tonnes produced in October, according to the Cement Manufacturers Association.

Annual inflation slowed to 6.84 per cent in the first week of December from a high of 12.9 per cent in early August, reflecting a slump in oil and other commodity prices. The Indian economy expanded by 7.6 per cent in the September quarter, and analysts expect Asia’s third-largest economy to end the 2008/09 fiscal year with less than 7 per cent growth compared to 9 per cent of last year. In December, the authorities announced a slew of steps including interest rate cuts, a massive spending plan and duty cuts including that for cement, to arrest the slowdown.
 
Nelp-VIII likely to offer 100 blocks- Oil & Gas-Energy-News By Industry-News-The Economic Times

Nelp-VIII likely to offer 100 blocks
23 Dec 2008, 0120 hrs IST, ET Bureau

NEW DELHI: The petroleum ministry is planning to auction over 100 prospective areas for oil and gas exploration by March 2009 under the eighth round of New Exploration Licensing Policy (Nelp-VIII).

“It would be our endeavour to launch Nelp-VIII in first quarter of 2009,” petroleum minister Murli Deora said. He was speaking at the production sharing contract (PSC) signing ceremony for 44 oil and gas exploration blocks under the Nelp-VII.

Mr Deora said the government has started interaction with all stakeholders for bid evaluation criteria for the next auction round for both oil and gas exploration blocks and coal bed methane (CBM) assets.

“Efforts under Nelp have resulted in 68 discoveries of oil and gas in 19 blocks, establishing ‘in place reserves’ of 500 million tonnes of oil and oil equivalent of gas,” he said.

Discoveries have been made in Cambay onland, northern part of East Coast and Krishna-Godavari deepwater areas. Under Nelp, the committed investment on exploration is estimated at $8.3 billion, out of which about $4.5 billion has already been spent on exploration and about $1.5 billion on development of discoveries, he said.

The total committed investment for phase-I of exploration under Nelp-VII is about $1.5 billion. “Nelp-VII was our largest round so far with 150,000 sq km of area offered. Nelp-VIII would be even larger,” said director general of hydrocarbons (DGH) V K Sibal. He added 400,000 sq km of area roughly divided into more than 100 blocks would be offered in the next round.

The seventh round of auction that started in December last year attracted $1.5 billion in investment from oil companies. It offered 57 exploration blocks covering sedimentary basins in an area spread over 171,000 sq km. So far, 206 blocks have been awarded under seven rounds of Nelp bidding.

From these, 68 discoveries of oil and gas have been made in 19 blocks, establishing in-place reserves of 500 million tonnes of oil and oil equivalent gas.

Simultaneously, the fourth round of auction of coal bed methane (CBM) blocks would also be launched. In the previous three CBM rounds, 26 coal blocks have been awarded for exploiting gas lying below coal seams.
 
GSPC's find in KG basin certified at $ 6 billion-India Business-Business-The Times of India

GSPC's find in KG basin certified at $ 6 billion
25 Dec 2008, 0124 hrs IST, Nimish Shukla, TNN

AHMEDABAD: Ambitious plans to make Gujarat the 'Gas Capital' of the country have been fired up further. The Director General of Hydrocarbons (DGH) has commercially certified a gas discovery of 1.26 trillion cubic feet (TCF) by Gujarat State Petroleum Corporation (GSPC) in the Krishna-Godavari basin.

That would put a value of upwards of $ six billion (Rs 30,000 crores) to a cluster of three wells (KG-8, KG-15 and KG-28). This would end a debate over the credibility of the Gujarat government's first proclaimation about the "huge discovery" made in July 2005, a year after drilling operations began.

The news of DGH certification late on Tuesday has caused jubilation in the government, which expects the announcement to fuel its confident attempt to project a 'Vibrant Gujarat' shining through a depressed global environment.

The state's third investment summit, to be held on January 12-13, is focussing majorly on energy and infrastructure to act as magnets for more investments in the future. In July 2008, Gujarat chief minister Narendra Modi declared during a visit to KG-22 well that the entire Deen Dayal block of GSPC was worth $ 100 billion (Rs five lakh crores) at today's rates.

So far, the GSPC has drilled 12 wells and is going ahead with drilling four more in the Deen Dayal block, which is spread over 100 sq kms. Most of the action is happening on the south-west of the block in an area of 15 sq kms.

GSPC had claimed a commercial potential of 5.6 TCF before the DGH, but the DGH has certified a minimum discovery of 1.26 TCF, which is subject to upward revision on a more detailed appraisal. If GSPC's claimed figure of 5.6 TCF is finally confirmed, KG-8, 15 and 28 together would be worth $ 28 billion (Rs 1.40 lakh crores).

In GSPC, which is still unlisted, the Gujarat government has a goldmine as its value is estimated many times more than all its other PSUs put together. So far, GSPC has invested $ 800 million (Rs 3,500 crores) in the KG basin. Now, GSPC plans to invest another $ 1.5 billion (Rs 7,500 crores) on bringing the gas to Gujarat, besides incurring further expenditure on exploration.

The GSPC will link up with the Reliance pipeline to bring it from Kankinada to Hazira, beyond which GSPC will use its own pipeline network which is already supplying gas worth Rs 15 crores a day in Gujarat. Plans are afoot that GSPC's gas from KG basin would land in Gujarat by Christmas of 2011 to meet the energy needs of a state.
 
bad news:

'IT sector in India may lose 50,000 jobs' - Express India

'IT sector in India may lose 50,000 jobs'

Bangalore Over 50,000 IT professionals in the country may lose their jobs over the next six months as the situation in the sector is expected to worsen due to the impact of global economic meltdown on the export-driven industry, a forecast by a union of IT Enabled Services warned.

"...there would be 50,000 job losses (IT and BPO put together) over the next six months," Karthik Shekhar, general secretary of UNITES India, a politically neutral union of ITES professionals said.

The job loss in the IT and BPO sector in the country topped 10,000 in the September-December period, Shekar said.

While employees of medium-sized companies bore the brunt of job losses in the September-December period, it's going to be their counterparts in the big and small firms who would increasingly face the axe in the coming six months, he said.

UNITES India, affiliated to the global union United Network International, suggested that the companies in trouble could resort to salary and incentive cuts without trying to "squeeze" the staff, rather than adopting the "layoff path".

Employees are willing to take such cuts for 12-16 months till the demand picks up again, when such benefits should be restored to them.

Shekhar said senior officials of the industry had concurred with the figure of 10,000 job loses in September-December, stating that it accounted for "bottom five per cent of the performers".

Consultations with the union's counterparts in the US and UK suggested that slowdown would continue to hit the offshore sourcing space, he said.

He said factors like continued slowdown, likely "tax application" to companies outsourcing jobs under the new US regime and tightening in regard to H1B visas were among the key reasons cited for the acceleration in issue of pink slips.
 
Reliance to set world's biggest refinery - Express India

Reliance to set world's biggest refinery

New Delhi Reliance Industries is set to double its capacity by starting up its new 580,000 barrels per day plant (bpd) this weekend, creating the world's biggest refinery just as global oil demand collapses.

The $6 billion project will make the oil complex in Jamnagar in Gujarat the world's single biggest supplier of fuels to the global market, pumping out 1.24 million bpd of ultra-clean fuels to Europe, Africa and the United States.

The project is a triumph for Chief Executive Mukesh Ambani, who helped break India's heavy reliance on imported fuel a decade ago with Reliance's first 660,000 bpd plant, a cash cow for the firm during a profit boom over the past four years.

Trade and industry sources said it appeared likely the company would announce the refinery's commissioning within the next week, just in time for its year-end target, although the announcement may be little more than a formality since it will take months to get the full plant running.

For tax reasons it is not expected to begin significant exports until April, when the new fiscal year begins in India.

"Pre-commissioning activities are almost over. We hope to announce start up of the refinery on Dec. 28," a company official said, declining to be identified because of company policy.

A company spokesman declined to comment on the issue on Wednesday.

This Sunday is also the birthday of the late Dhirubhai Hirachand Ambani, Ambani's father and founder of the Reliance group, who turned his textile firm into a petrochemical-to- telecom conglomerate and India's biggest private company.

While the new refinery's low cost, high sophistication and global reach mean it should turn a profit by crowding out less efficient export-oriented rivals in Europe or Asia, it enters a market utterly different than Ambani would have envisioned three and a half years ago when he unveiled the project.

Run by subsidiary Reliance Petroleum Ltd, in which Chevron Corp holds a 5 per cent stake, the refinery will at a stroke more than satisfy the world's additional oil product demand next year, if indeed the International Energy Agency's current forecast is not further cut by a deep global recession.

It is not a circumstance Ambani will relish, but it is also not one that will be unfamiliar.

"When in 1999 we started our first refinery at Jamnagar, we saw a recession globally and when we are about to start our second refinery, history is repeating itself," he said last month.

Reliance has already missed a series of ambitious internal targets to launch the new refinery as early as July, but seems to have accelerated efforts recently.

The Jamnagar local government this month issued a "no-objection certificate" for Reliance to enable it get a licence from Commissioner of Explosives, which is required to start the new refinery, District Collector V. P. Patel said.

EXPORT ONLY, FOR NOW

Unlike a decade ago, when Reliance built its refinery to tap into India's growing demand for refined fuels, the new plant is geared entirely to the export market for now, avoiding the domestic market where the government still controls prices.

But the global refining industry has also changed dramatically as a surge in oil prices to nearly $150 a barrel and the worst financial crisis in nearly a century reverses steadily rising oil demand in the United States, Europe and even China.

Analysts at Credit Suisse warn that the refining sector is exiting its golden age and entering the Dark Ages, as China builds new plants quickly enough to meet its own demand while India and the Middle East vie for shrinking export markets.

But Reliance is better-placed than most to ride out the downturn, with a strategic position near Middle East crude supplies and an unrivalled capacity and complexity.

"It is basically a US Gulf Coast refinery that was built in India," says Al Troner, managing director of Asia Pacific Energy Consulting. "It is capable of producing large volumes of top quality product suitable for any market in the world."

It will play a swing supply role that will redraw traditional trade flows, and has already embarked on a robust marketing campaign in Europe, Mexico, East Africa and Asia, capitalising on delays and cost overruns faced by other big refinery projects.

Reliance has already leased clean oil products storage tanks in Singapore, the Mediterranean and Caribbean, industry sources have said, to boost its trading operations.
 
Stratfor warns on dangers of doing business in India

* US-based intelligence service says new threats from terrorists likely in case of Indo-Pak war

By Iftikhar Gilani

NEW DELHI: A US-based geopolitical security and intelligence service – which recently claimed that an Indian deadline for Pakistan to crack down on terrorists expires on Friday – on Thursday warned multinational corporations on the dangers of doing business in India.

“And if military confrontation between India and Pakistan erupts in the wake of the Mumbai attacks, multinational corporations quite possibly could face a number of new threats from terrorist groups, in addition to more traditional security problems,” according to the latest weekly report of Stratfor in the wake of the Mumbai terror attacks.

Highlighting that the exact nature and locations of ‘potential Indian military action against Pakistan’ were not known to pinpoint specific problems multinationals might face, the report warns about disruption of their operations – irrespective of coming in the line of fire or not.

In the event India chooses to carry out targeted airstrikes against Pakistan, the agency warns that all civilian aircraft could be grounded and Indian airspace frozen. In such a situation, executives and other travellers to India would be unable to leave the country until the ban is lifted.

“Pakistani retaliation to an Indian strike could take the form of traditional military action, but it also could well involve asymmetric warfare. In this scenario, Pakistan would act through its militant proxies – who could well target westerners associated with multinational corporations in a bid to damage the Indian economy,” said the agency.

Stratfor also points out that the Mumbai attacks have renewed fears that insiders could be used to carry out future attacks on multinational facilities. Highlighting its point, it claims the lone gunman arrested afater the Mumbai attacks has reportedly told police that at least five people in the Mumbai area aided them – providing information on various locations and police stations in the city, although they were not part of the actual attacks.

“While the investigation into how the attackers planned their mission is still ongoing, militants seeking to use the lessons from Mumbai might make renewed attempts to infiltrate multinational corporations to gain information that could be used to launch ... [further] attack,” the agency warned.

It says Indian military action against Pakistan could be the ‘trigger’ needed to incite widespread public protests against the Mumbai attacks, and multinationals should therefore also take into account “the possibility of Hindu-nationalist-led protests against the Mumbai attacks long after the attack itself, which could disrupt business operations”.

The agency says the Mumbai attacks showed that attacking locations where westerners are known to congregate – rather than attacks against marketplaces or cinemas that will primary kill Indian nationals – could well be a more efficient and effective way for terrorists to use their limited resources.

“And as hotels and other traditional soft targets harden their facilities and implement new security countermeasures to prevent further Mumbai-style attacks, terrorists will seek less-secure venues that will achieve the same result,” says the report.

It said such targets could include apartment complexes or neighbourhoods that primarily house Westerners, or other soft targets such as western-style marketplaces or restaurants.

“Though most multinational corporations operate in hardened facilities away from city centres, affording better access control and counter-surveillance, their employees cannot remain behind walls at all times. And even within multinational compounds, security cannot be fully guaranteed.”

“Given the high level of technical sophistication displayed in the way responsibility was claimed for the attack, and given that workers in the information technology industry were involved in previous attacks, the IT sector should be especially vigilant to the potential for terrorist attacks with inside assistance,” the report said.

In the long run, it says that corporate travellers in India (and elsewhere) would continue to face the threat of terrorist attacks.

Daily Times - Leading News Resource of Pakistan
 
Business Today - Beta - India's leading business magazine

An inflexion point
December 11, 2008

September 2008 is likely to be remembered as the month that saw the collapse of the financial world, as we knew it. Icons of Wall Street went belly-up, lost their identity by converting themselves into commercial banks, sliced themselves up into pieces or were forced by regulators to merge with other banks. A large number of marquee names are now owned by governments. Wall Street will never look the same again.

Amongst all this global turmoil, there is a positive outlook for India. As we analysed the audited results (2007-’08) of banks in India for the Best Banks Survey, we could not but compare the strength of the Indian banking system to the over-leveraged banks in the US and Europe.

In the previous year’s assessment (Business Today, February 24, 2008) we had decided to add more weight to the strength parameters vis-a-vis the growth and size parameters. Time has proven us right.

The world order changeth?

China and India have suffered— what can only be called—collateral damage. China, due to its direct linkage to diminishing demand in the West for its massive exports, and India, due to the consequential damage resulting from the significant pullout of investments by global investors from its capital markets. However, given the massive war-chest of China, the macroeconomic structure of India and the relatively insular nature of their large banks, the two seem to be relatively less damaged.

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Yet, cracks are starting to appear in Indian banking, too. While Indian banks have limited or no exposure to the subprime crisis, they seem to be struggling to cope with the liquidity crisis. Tight liquidity has resulted in increased interest rates across the board, and a cutback on lending by the banks to the real estate sector. The Indian manufacturing sector and the economy as a whole are feeling the impact.

Additionally, the flight of foreign capital from the stock market has dramatically reduced the collateral value of promoter shares, further aggravating the problem of accessing capital. The RBI has acted swiftly to contain the damage by reducing the CRR, SLR and repo rates. It has also provided lines of credit (Liquidity Adjustment Facility) to provide liquidity to the tune of Rs 2.5 lakh crore.

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However, the systemic damage is starting to tell. While most analysts have focussed on the shortterm impact of the financial crisis, a longer term view starts presenting some very interesting questions and possibilities. At a banking and financial services industry level: with the large global banks impaired for the foreseeable future, can consolidated banks from India and China take on a more global role? Could draconian risk assessment norms imposed by the G20 result in a tectonic shift in risklinked asset pricing and result in certain types of leveraged models completely disappearing? Given all these changes, will certain banking models and the very existence of some banks be questioned; with universal banking no longer fashionable— given that off-balance sheet transactions are likely to be brought into the ambit of regulatory supervision and investment norms tightened—the current models of investment banking and fund management are expected to undergo a fundamental structural change.Indian banks’ finest hour?

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The KPMG Annual Best Banks Survey is a check-point on the performance of the banking system in India. The past five years have seen the Indian banking industry gain significant strength. This strength is reflected in the high growth in credit and size of the balance sheets; well diversified portfolios across corporate, retail and SME; improved margins and spreads; healthy asset quality; reduction in non-performing assets with improving asset coverage ratio; and improvement in the implementation of the SARFAESI Act through effective use of debt recovery tribunals.

Not surprisingly, PSU banks, with low-risk appetites and being conservative followers of regulatory guidelines, have significantly improved their position. Driven by better technology and risk principles, they have seen considerable improvements in their asset quality, operational efficiency, spreads and margins.

However, crucial challenges lie ahead in the immediate future. Key amongst these is the need for managing capital for addressing the needs of a credit-hungry India, in the face of stricter adequacy norms under BASEL II guidelines and substitution of foreign currency borrowings.

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For PSU banks, where government ownership has been reduced to just above 50 per cent, this poses a major structural and ownership challenge.

Consolidation ahoy!
Capital requirements and management is one of the most critical challenges Indian Banks are likely to face over the next few years. Most banks are adequately capitalised— the median capital adequacy ratio for large banks in 2007-08 was 12.34 per cent as against 12.02 per cent a year ago. The RBI estimates an additional requirement of Rs 10,000 crore over the next five years to support continued credit growth at 12 per cent capital adequacy.

This additional requirement for capital is arising due to three key factors: Incremental credit required for sustaining the current levels of economic growth; servicing of over $220 billion (Rs 11 lakh crore) of external debt over the next few years, constituted largely by external commercial borrowings (ECB). A large part of this borrowing is likely to be re-financed through domestic borrowing given the credit tightness in the international markets and higher credit spreads for emerging markets like India; and, third, higher capital requirement on account of implementation of the BASEL II norms and the anticipated impact from slippages in asset quality due to the ongoing credit crisis.

Given the state of the capital markets, the likelihood of Indian banks being able to raise such a staggering amount is remote. The implications for the Indian banking system are immense: banks with strong balance sheets and a focus on stakeholder rewards might still be able to access the capital markets, although at significantly depressed premiums. Banks also need to improve their efforts to efficiently collect low-cost deposits through their more modernised and extensive branch network.

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The weaker and smaller banks may not have either of these options and may, therefore, need to either merge with larger and stronger banks, or seek infusion of capital from the government.

Low-cost borrowings are back
The collapse of global investment banks has an important lesson for financial markets. Investment banks based their “funding strategy” on high-cost bulk deposits for growing their balance sheets. The first consequence of the credit crunch was the flight of bulk deposits to perceived safer investment options, leading to a rapid erosion of the funding base. This has put the spotlight back on growth through the humble “low-cost deposit” as the more stable banking model.

Most Indian banks have established a strong franchise to raise low-cost deposits. The ability to grow that base is critical to their effective management of the balance sheet for maintaining adequate liquidity, lower their cost of borrowing and subsequently higher net interest margins and finally for establishing a diversified risk-based asset product portfolio.

Private and public sector banks in India have increasingly focussed on the growth of their low-cost deposit base. By leveraging technology, branding and through advertising and large branch networks, these banks have built impressive deposit-conducive franchises.

In the next few years, they may have to consider the value and productivity in their customer facing processes as their franchise size grows. Effective channel management, offering value-added services to attract customers, and brand recall and recognition are likely to be key imperatives to support the growth of low-cost deposits.

The weaker and smaller banks are likely to face significant challenges in attracting low-cost deposits in a tight liquidity scenario, impacting their ability to grow, as will banks that have a significant proportion of their funding through bulk deposits.

Operating costs
Here’s another positive view of the Indian banking system. Most banks have shown good growth while keeping their operating costs under control. The cost-to-income ratio, which reflects control over operating costs, has shown an improving trend and this is especially true of the large banks. The improved use of core technology, better operating controls, cost reductions due to optimised central processing models have resulted in improved returns to stakeholders.

However, most banks are also guilty of silo-based cost increases during the credit expansion phase in the last five years. While they have created valuable distribution franchise models to distribute capital market products and increase share of low-cost deposits, cost inefficiencies were generally hidden in the high-growth numbers. If, as predicted, the Indian economy does slow down for the next few years and retail credit off-take reduces significantly due to high interest rates, these inefficiencies could start showing up prominently.

Private and foreign banks have already started rationalising their business structures and may most likely shrink their fixed costs as a response to the slowdown. PSU banks, without as much flexibility to lower their fixed costs, may, therefore, need to improve their incomes through efficiency and productivity measures for controlling their cost-to-income ratios.

Indian banks need to respond rapidly to the market slowdown by lowering operating costs in response to potentially lower incomes. Banks that can continue to increase their market share, at either the same or lower costs, are the ones likely to emerge winners.

Wither asset quality?
The global crisis and the resultant slowdown in the Indian economy is a real test for Indian banks in terms of the asset quality of their existing portfolios and for any new business that they are willing to undertake. The asset quality of Indian banks has shown substantial improvement in recent years—median Net NPA improved 0.73 per cent as against 0.83 per cent in ’07. However, 2008-09 has the potential to reverse this trend.

The rapidly changing business and economic scenario is likely to present significant challenges for the banking system, which could potentially see an escalation in their NPAs. The challenges include: rapid shrinkage in corporate balance sheets, specifically those exposed to commodities and metals; funding of expansion and acquisition plans by highly-leveraged corporates; export-oriented firms facing a slowdown in business due to weak global demand; and volatile currency movements impacting corporate cash flows.

The worst-case scenario for India, which assumes GDP growth will reduce to 6 per cent over the next few years, is likely to create a major challenge for Indian banks. Should they be focussing on growth or should they focus on keeping NPAs under control? Banks may then have to extensively rely on refurbished and dynamic credit scoring models, de-centralised decisionmaking based on ground level relationship assessment and increasing use of tracking MIS to control their portfolio in these uncertain times.

Indian banks, in contrast to their global peers, appear “strong” from an asset quality, diversified risk portfolio and “low-cost” deposit base perspective. This is partly due to their effective management of the business and partly due to the conservative nature of our bankers and the regulator. The key question now facing the industry is: can the Indian banking system maintain its position in a sustainable manner, even as dark clouds gather?
 
India may miss $200 bn export target


India may miss $200 bn export target
Press Trust of India
Friday, December 26, 2008 (New Delhi)


India is likely to miss the export target of $200-billion by 5-10 per cent this fiscal as exporters face payment defaults, price cut and order cancellations with deepening of global financial crisis.

"Feedback from the apex chambers of commerce and different export promotion councils (EPCs) suggests that the target for the current year is unlikely to be achieved," a top official said.

He said with the worsening situation in the global markets, the number of exporters not realising the dues from buyers in the US and Europe would "increase substantially".

Several EPCs have informed the Commerce Ministry about the "noticeable decline" in export orders, cancellation of pro-forma invoices, re-negotiation of orders and prices by buyers and slowdown in export realisation.

The recession in the key markets, is likely to result in cash flow difficulties for exporters, delay in execution of orders in hand and high cost of insurance cover.

After showing a handsome growth of 30.9 per cent for the first half of the current fiscal, exports slipped into negative territory. Exports decelerated by over 12 per cent in October.

The government had set the $200-billion target after the exports grew by over 23 per cent to $162 billion in 2007-08.

So far, over 7,00,000 workers have been laid off in the textile industry, while 1,00,000 people have lost jobs in the gems and jewellery sector.

The second stimulus package under consideration of Prime Minister Manmohan Singh is likely to provide further relief to the exporting sector. The first package had extended the concessional loan from 90 days to 180 days.
 
Forex reserves up $3.6 bn at $254.05 bn

Forex reserves up $3.6 bn at $254.05 bn

India's foreign exchange reserves swelled to $254.052 billion for the week ended December 19, up by $3.599 billion over the previous week.

Foreign exchange reserves stood at $250.453 billion in the previous week.

The foreign currency assets (FCA), during the week, went up to $245.308 billion, up $3.583 billion, from $241.725 billion in the week-ago period, the Reserve Bank of India's (RBI) weekly data showed here.

According to the RBI data, the country's gold reserves and Special Drawing Rights (SDR), during the week, stood unchanged at $7.861 billion and $3 million, respectively.

FCAs expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies such as euro, sterling and yen, the apex bank said.

India's reserve position in the international monetary fund further swelled by $16 million to $880 billion during the week from $864 million in the previous week, the RBI said.
 
India Today - India's most widely read magazine.

Interest rates on loans finally start floating down
Malini Bhupta
Mumbai, December 31, 2008

Interest rates are finally beginning to float downwards. India’s largest private sector bank, ICICI Bank, on Wednesday, reduced the rates by 0.50 per cent in its floating reference rate for loans, with effect from 31 December, 2008. The revised rate will be 13.75 p.a. per cent against 14.25 per cent p.a. at present. The beneficiaries of this will be auto and home loan borrowers who are on a floating loan rate.

The bank has also announced a cut of 0.50 per cent in its benchmark Advance Rate from the present 17.25 per cent p.a. to 16.75 per cent p.a. With loans getting cheaper, the interest rate on deposits, which had gone up sharply over the last one year will also start coming down as ICICI Bank has announced a cut in its deposit rates between 0.50 per cent to 0.75 per cent.

As the year comes to a close, banks are playing Santa Claus with their consumers and reducing benchmark lending rates to spur growth. Punjab National Bank earlier this week reduced its prime lending rate (PLR) by 50 basis points to 12 per cent which is the lowest in the industry. Evidently the lending rates are now aggressively being cut in the hope that it will revive domestic demand, but with salary cuts and pink slips doing the rounds, there isn’t enough money in the hands of consumers to splurge.

The bank has also cut deposit rates across all maturities. Now, the highest rate that the bank offers is 8.5 per cent for a period between one to three years compared to the 9.5 per cent the bank was offering a few months ago. The new lending and deposit rates will come into effect from tomorrow. In this game of cutting rates, the lead has been taken by the public sector banks. Dena Bank too recently cut its PLR from 13.5 per cent to 12.75 per cent.

With RBI cutting key rates, banks are taking a cue and cutting rates across the board in a hope that it will spur demand. But with pink slips and salary cuts building a pall of gloom the government will have to do more than cut rates to spur demand.
 
DNA - Money - Reliance set to knock out Asia-West fuel arbitrage

The days may be numbered for Asian refiners and oil traders who have long profited from intermittent arbitrage for selling surplus regional motor fuel cargoes into Western markets — Reliance Petroleum has arrived.

India’s biggest private company formally commissioned its new 5,80,000 barrels per day (bpd) Jamnagar refinery last week, nearly doubling the company’s capacity and creating the world’s single-largest refining complex at 1.24 million bpd.

Once it hits full stride by the second quarter, when it is expected to begin exporting fuel to capitalise on an Indian fiscal-year tax break, it will add an enormous 8 million tonnes of gasoline and 12 million tonnes of diesel to the market every year, upsetting current supply flows, traders say.

Because of its location on India’s west coast, it’s in prime position to meet any unsatisfied demand that emerges from the mainstay European market or even the Middle East and Africa, where demand could continue to expand.

“When both its refineries are running... it looks likely that Reliance will offset or replace North Asian diesel barrels going West,” said a Singapore-based trader.

Already besieged by a demand slump on fears of a deep recession, that lost market has forced refiners such as top exporters Formosa Petrochemical Corp in Taiwan and SK Energy, South Korea’s biggest refiner, to sell at more competitive prices or even to cut runs in future.

And trading firms such as Vitol or Trafigura, which make much of their living on arbitrage, would need to overhaul their trading strategies to fit in Reliance’’s additional supplies through term contracts, for example.

Arbitrage under threat
The private Indian refiner, which commissioned the $6 billion plant last Thursday, may start large-scale exports only from April.

Having established a global trading network from Singapore to London to Houston, Reliance will be able to quickly reach the most profitable market for its ultra high-quality fuels, but distance and marketing networks will also be important.

Oil traders expect Reliance to export its gasoline mainly to Africa and the fast-growing Middle East — because of freight rate advantages — as opposed to United States, while low-sulphur diesel will be shipped mainly to Europe and the Mediterranean, where diesel is the preferred motor fuel.

Iran needs at least 4,50,000 tonnes of gasoline a month, while Singapore had moved about 45,000 tonnes of the auto fuel to the United Arab Emirates earlier this month, a timely relief for sellers which faced a tightly shut Asia-US arbitrage window.

“The new refinery will make it tough for sellers. Reliance will have to export one medium-range gasoline cargo a day when it’s at 100% capacity,” said a Northeast Asian trader. It can ship out daily an MR cargo of diesel from the new plant, equivalent to 30,000 tonnes in volume, traders said.

Reliance has already sold up to seven cargoes of 0.005% sulphur diesel to trader Vitol, and secured term deals to supply up to a total of 26 cargoes of 0.05% sulphur diesel to Trafigura, Kuwait’s International Petroleum Group and Dubai-based trader Galana.

The supplies are a mix of 40,000-tonne, 60,000-tonne and 80,000-tonne shipments.
Formosa and SK Energy together export around 300,000 tonnes of gasoline and some 700,000 tonnes of diesel a month in spot and term deals, some shipments of which are usually bound for markets that will now be targeted by Reliance.

The East-West gas oil arbitrage window last swung open in late-November, with at least 300,000 tonnes of diesel seen moving from Asia to Europe, traders said.

Back then, the EastWest spread — a measure of arbitrage economics with a wider spread indicating higher profitability — was at discounts of up to $40 a tonne for the front month.

At discounts narrower than $10 a tonne now, the arbitrage window is firmly shut, traders said.

Other exporting plants include the large facilities in Japan and those in Singapore run by ExxonMobil and Royal Dutch Shell, although the two retain an advantage serving the Australian market.

Tough at home
Given its targeted markets on gasoline, some traders are hoping Reliance will not try to sell directly into the US West Coast, leaving traders to handle the Asia-US arbitrage.But with global oil demand contracting this year for the first time in a quarter century, Reliance may find itself competing on Asian refiners’ home turf in the one region that economists are counting on to maintain some growth.

“If the regions (that Reliance is eyeing) fail to absorb the products, then you will see them coming to the East,” said another trader.

Yet, the Asian spot market may not be welcoming. Economic slowdown has hit demand in the region’s top motor fuel importers Indonesia and Vietnam, the latter of which will fire up its first oil refinery come February, relieving the country of 30% of its domestic needs.

China, the world’s number two oil consumer, saw oil demand retreat for the first time in three years in November and has more or less halted any motor fuel imports after a surge in pre-Olympic demand in the first half of the year.
 
OVL to takeover Imperial as shareholders accept open offer- Oil & Gas-Energy-News By Industry-News-The Economic Times

OVL to takeover Imperial as shareholders accept open offer
31 Dec 2008, 1235 hrs IST, Rajeev Jayaswal, ET Bureau

NEW DELHI: ONGC Videsh (OVL), the overseas investment arm of India's largest oil exploration company Oil & Natural Gas Corp (ONGC), will formally takeover Imperial Energy soon as over 96.82% sharesholders of the UK-based company has accepted its open offer, a source based in London told ET.

When contacted, a senior official in the government said: "The deal is through, but I' m not in a position to give any details." He didn't specify the timeline for the ownership transfer. "It is being worked out," he said, requesting anonymity.

ONGC chairman RS Sharma said that the company will soon issue a press statement. "You wait till a statement is issued later in the day," he told ET.

OVL's 1,250 pence per share offer values the entire deal at around £1.4 billion or approximately $2.1 billion at the prevailing exchange rates.

OVL had firm offers for only 15.6% share capital of Imperial Energy. The directors of Imperial have already accepted OVL's offer with regard to their entire holdings, representing approximately 6.4% of the existing issued ordinary share capital including 6.1% share of Mr Peter Levine, Chairman Imperial Energy. Another shareholder, Baillie Gifford & Co, has also accepted the share offer for its 9.2% holding.

State-owned OVL had made an open offer to the shareholders of Imperial on December 9 after the 'Hearings Committee' of the takeover in the London Stock Exchange (LSE) panel rejected its request to extend the deadline.

OVL had to take a fresh Cabinet approval for the acquisition in light of the fall in crude oil prices that have changed the economics of the deal. Crude oil prices have fallen below $50 now from a peak of $147 in July when OVL made the offer to acquire Imperial Energy, which has hydrocarbon assets in Russia.

"The Cabinet considered both pros and cons of the deal and then decided in its favour," a source present in the meeting said on condition of anonymity. Experts involved in the deal told the government that the acquisition would be profitable due to future prospects of its assets.

"In future, the recoverable reserves of its assets may go up by 20-25% more that the declared reserves of the oil assets held by Imperial at 900 million barrels. It is an excellent opportunity for the country which imports about 75% of crude oil requirements," he said.
 
The Pioneer > Online Edition : >> Indian economy Winner in global turmoil of 2008

Indian economy: Winner in global turmoil of 2008

PTI | New Delhi

Described as the elephant that didn't know its strength, India stood tall in 2008 as the global community battled this century's worst economic crisis, while easing prices and dissipation of energy turbulence offered the hope it would outperform the rest in the new year.

Arguably the most eventful year ahead of Lok Sabha polls, the high of the initial months gave in to despair by the middle, but the end appeared to be working in favour of the consumer with inflation halving from the year's high of close to 13 per cent.

The academic theories and manifestation of the Finance Ministry for strict fiscal discipline were, for once, given a backseat as the government worked to push agriculture by waiving farm loans, industry through a stimulus package and consumer by paving the way for low interest regime.

The best part of the economy was its resilience, of course with a little help in the form of fiscal actions from the government to reverse the slow down, at a time when Finance Minister P Chidambaram was asked to take charge of the law and order machinery as Home Minister in the face of Mumbai terror attacks.

Prime Minister Manmohan Singh took the finance portfolio under his fold.

It is the collectivism of RBI and the Government that possibly helped the government avert the blues of the global financial crisis on the domestic economy at a time when the world economies are falling prey to recession one by one.

However, India is expected to grow between six-seven per cent at the pessimistic and optimistic level for the current financial year, while it would be a tad lower - five-six per cent - in the next financial year.
 
Job slump? Companies to hire 2,50,000 in next few months- Jobs-News By Industry-News-The Economic Times

Job slump? Companies to hire 2,50,000 in next few months
1 Jan 2009, 1650 hrs IST, PTI

NEW DELHI: There is a good news for job seekers, with the companies planning to hire more than 2,50,000 new employees over the next months -- making the new year a welcome change from the gloom of 2008 in the job market.

While the proposed over 2.5 lakh hiring is mostly for the financial services industry, the industry experts believe that the overall job market scenario is also set for a recovery in the second half of the year.

Topping the list of the companies planning to hire big include public sector banking
giants like State Bank of India and Punjab National Bank as well as insurance firms such as Anil Ambani group's Reliance Life, SBI Life, Metlife, Max New York Life.


Even some BPOs and healthcare firms like ACS and Accentia are planning to hire thousands of people in the coming days.

The proposed hirings include more than one lakh of full- time employees and about 1.5 lakh in the part-time positions with the insurance companies.

Among other sectors, manufacturing and export-oriented businesses are, however, likely to continue to witness some pressure in the next few months, after huge job losses seen during 2008.

HR consultancy major Hewitt Associates believes that sectors like insurance, telecom (where new licensees are entering), infrastructure and Special Economic Zones may look for fresh hirings in 2009, being the major beneficiaries of the government's stimulus plans.

However, the hiring outlook remains uncertain for sectors like real estate, textile and retail sectors, it believes.

Another global HR consultancy Mercer believes that hiring plans by the companies would depend on their business prospects in the coming year.

Among the major companies planning to hire big time, SBI is planning to recruit 25,000 employees by March. Besides, its life insurance venture, SBI Life, is looking to hire 13,000 agents and 200 sales managers.

Besides, the country's second largest public sector lender PNB and Union Bank are also hiring 5,000 people each, while Indian Overseas Bank, South Indian Bank and IDBI Bank are bringing on board 1,000, 12,000 and 650 employees, respectively.

Among life insurance firms, Reliance Life is hiring 90,000 agents and 2,500 managers, Metlife has announced plans to hire 30,000 agents and 2,000 managers and Max New York Life is recruiting 30,000 agents and 14,000 managers.

Among other sectors, BPO major ACS is hiring 1,000 employees, while health care solutions provider Accentia plans to add 5,000 staff to its payrolls.

" Exponential growth had resulted in a culture where mediocrity flourished. 2009 is an opportunity for companies to bring the performance orientation back into how they manage their human capital," Mercer India Information Product Solution business leader Gangapriya Chakraverti said.

Global HR consultancy major Manpower believes that hiring outlook for the first quarter of 2009 was the weakest since 2005.

Expressing similar views, leading job portal Naukri.com's owner InfoEdge India CFO Ambarish Raghuvanshi told PTI that hiring was going to be slow in the first quarter of 2009 as recruitment trends are impacted by the slowdown in economic growth and decline in business confidence in the country.

He, however, added that some improvement was likely in the second half of calendar year 2009.
 
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