22.03.2007

• ADC – Access Deficit Charge slashed!
• We covered about ADC on a couple of occasions earlier. TRAI has now reduced ADC by about 37%.
• The new ADC regime will be:
• No levy on all outgoing ISD calls; as against the earlier Rs. 0.80 per minute.
• For incoming ISD calls, it will be Re. 1 per minute instead of the earlier Rs. 1.60 per minute.
• For STD calls, the telecom companies would have to pay 0.75% of their adjusted gross revenue towards ADC as against the earlier 1.5%.
• TRAI Chairman: Nripendra Mishra.
• Yet another authority to vet SEZ land needs
• The government finally seems to be getting extra cautious with its SEZ plans.
• The rural development ministry has proposed that there should be an authority to scrutinize the claims of land sought by the promoters of SEZs before forwarding their case for further approvals.
• Is it not a case of too many bureaucratic hurdles? I feel the very powerful eGoM (empowered group of ministers) that is already looking into it should be able to look into all these aspects.
• Power shortages
• The country is currently facing peaking shortages of about 12%.
• During the 10^th Plan the country has been able to meet just about 50% of the planned generation capacity addition.
• Indian iron ore
• India reportedly has the best quality iron ore deposits – about 23.5 bn tonnes of proven reserves – and ranks among the top five in the world.
• A Rs. 100 cr revolving fund to finance PPP projects
• In a bid to address the constraints faced by the state governments in promoting projects taken on PPP (public private partnership) basis, the government is coming out with a Rs. 100 crore fund.
• The major constraints faced by such PPP projects are:
• Policy gap
• Resource gap
• Lack of capacity in public institutions to conceptualize and implement projects
• Lack of a shelf of bankable projects
• A revolving fund is money that is renewed as it is used, either by additional appropriations or by income from the programs it finances. This ensures that a balance is retained in the fund at all times. In this case, the government the revolving nature of the fund arises out of the income it receives from the programs it is funding.
• How is Minimum Support Price (MSP) fixed for agricultural commodities?
• The CACP (Commission on Agricultural Costs and Prices) is the body that recommends the ultimate quantum of the MSP. In recommending the MSP, it takes into account a number of factors. They include:
• Cost of production of the crops
• Trend and spread of input use
• Production, productivity of the crop concerned
• Market prices (domestic and global)
• Inter-crop price parity
• Emerging supply-demand situation
• Procurement and distribution
• Terms of trade between agricultural and non-agricultural sectors
• For quite some time we did not note much from his writings. I am talking of IIMA Prof. TT Ram Mohan. Today he wrote about why the banking story (in India) is intact. Take a look at the article here. The one thing that impressed me in today’s article is his forecast at a macro level. Look at this:
• The prospects thus are of a small deceleration in retail loan growth accompanied by an acceleration in corporate loan growth.
• He sure reminds me of Alan Greenspan, the predecessor of Ben Bernanke, the US Federal Reserver Chairman.
• I have a nagging feeling that in the near term (next three to six months time), the subprime US mortgage market and the unwiding yen carry trade, coupled with a US economic slow down will very badly affect our economy. I am no economist, though. Let’s hope I am wrong. If I am proved right, the banking story that is seen by our Professor as intact will, I fear, fall apart.
• Somebody was asking me more detail about subprime US mortgage market. Here is notes from what appeared in today’s ET. Hope this will bring a little more clarity.
• During the housing boom of the last five years, people with bad credit histories, many of who lied about their income and nature of employment, got mortgage loans they weren’t qualified for to buy homes they couldn’t afford. The problem can be gauged from the fact that a woman who was living on social security benefit of $1800 per month was given a loan of $9 million!!
• The home prices have now stopped rising. So the house can’t be refinanced or sold at a profit. As long as the home prices rose, there is no problem in repayment. Rents rule usually high or you can always resell or transfer the burden of mortgage payments to an interested buyer. At least it helped in postponing a problem, than offering any fundamental strength to the mortgage transaction.
• This leads to repayment default. With this, the US mortgage market will take a severe hit. This will in turn affect a lot many other segments of the US economy and it will have devastating effects on the overall US economy. A deeply hurt US economy will have spin off effects on other economies of the world.
• Do you see the connect?