Indian Economy - News & Discussion Oct 12 2013

[nawabs]

Finance Secy meets start-ups to discuss their problems

http://www.business-standard.com/articl ... 437_1.html

Union Finance Secretary and Secretary of Department of Economic Affairs Rajiv Mehrishi, along with a team of officials, has met several leading entrepreneurs here recently, to discuss regulatory issues and to enhance ease of doing business.Besides, taxation issues were also discussed.

The meeting, organised by software industry think-tank iSpirt, was also attended by Joint Secretary Manoj Joshi, National Institute of Public Finance and Policy Head Ajay Shah, Principal Economic Advisor Ila Patnaik and Capital Markets advisor CKG Nair.

While Mehrishi promised "deeper institutional reforms", representatives of iSpirt suggested to him a new programme, Jan Samridhi, for the government. "The programme builds on the open API work that iSpirt has already done and proposes-specific and inter-related policy and regulatory changes," Manju Nanjaiah, founder and CEO of Swarmverse BigData Solutions, who was present at the meeting, wrote in a blog.

The finance secretary also promised a quick resolution to taxation issues faced by new technology startups that arise mainly due to a poor definition of software products in government documentation.

According to the current tax laws, anything intangible can only be a service and can't be a product at all. However, a software can be a product as well as a service. Hence, taxing software products proves to be a cumbersome process.

"This was the first interaction with the government on those lines," said iSpirt Governing Council Member Sharad Sharma, who was part of the meeting, said, about the discussion on cashless India.

Centre secures approval to sell stake worth Rs 50k cr in 20 PSUs

http://www.business-standard.com/articl ... 058_1.html

[hanumadu]

Which among the below big firms in power, mining, metal & infra sectors would be attempting to strangle the country's economic output ?. Any ideas
- JINDAL (Power, Cement, Steel and etc) - A true blue congress politician run business organization.
- Reliance (woh bada bhai ka Oil refining & exploration business aur uski amreeki Shale oil fields investments)
- Reliance ADAG (woh chota bhai ka Power, Road Infra aur Cement business) ?
- Vedanta group (mining, zinc, oil exploration ) ?
- Essar (oil refining, steel & ports business) ?
- Aditya Birla group (cement & aluminium - but doesnt seem like a company that would play politics with central govt ) ?
- GMR / LANCO / GVK ( Andhra Pradesh origin promoters - all in power, airport, road infrastructure sectors and riding on large debts)
- HCC (Hindustan Construction Company of Lavasa fame ... but primarily a company similar to ECC type division of L&T)
- Punj Lloyd (This is an infra company that is just about crawling out of its bad days) ?
- DLF (just a reality company - right ?)
- Jaypee (Debt ridden with power, cements and road infra involvements)

I am personally unable to call companies belonging to Tata's, L&T, Adani Power and etc as those private sector corporates which might be trying to hit back at the NDA for their closing of avenues to bribe & collect favourable project conditions and sleep their way to profits.

My take - At least Jindal, Reliance (if it is into infrastructure at all), Reliance ADAG and Essar.

[arshyam]

Arun Jaitley's disinvestment act is looking better than Pranab's or Chidu's - R Jaggi, Firstpost
(Some excerpts, full article in the link above.)

The disinvestment department under Jaitley has now put in place an early-approvals process for year-round disinvestment, and, as things stand now, nearly 20 companies have been cleared for share sales of 5-15 percent each this year and the next.

This is needed because this year’s target is huge: Rs 69,500 crore from disinvestment and strategic sales (of which Rs 41,000 crore is from the former). It can’t be done by dusting up sales brochures plans in October.

Two reasons have held back finance ministers for milking the public sector cow for what it is worth in the past.

First, there was the need to maximise revenues – which meant waiting for market buoyancy before selling. This was the logic of waiting till September-October, which is the time when the markets normally start rebounding around Diwali, holding up till the budget in February.

Second, the fiscal process in the first six months tends to be slow, and revenue departments tend to start looking at trends in tax receipts and departmental expenditures only around the time when the process for the next budget starts kicking in.

The early moves on disinvestment, and the Modi government’s instructions to ministries to bring forward spending to the first half of the fiscal year will hopefully reverse this foolish approach to fiscal targeting.

By keeping the disinvestment pipeline primed for year-round sales, revenues should start trickling in by the second quarter of the year, improving the ability of government to spend early and boost growth.

An interesting idea, what do gurus think of this:

However, Jaitley would do well to create a more permanent vehicle for all-year share sales, for this revenue opportunity is going to be crucial in the next two years to boost government spending for reviving growth.

He should create a special purpose vehicle (SPV) owned 100 percent by government (the LIC could also be roped in to provide some of the share capital). This SPV can then buy the shares to be offloaded for future sale to investors and institutions. If market conditions are bad, this SPV can raise debt funds from the markets and LIC and buy public sector shares to help reduce the fiscal deficit. These shares can then be sold later, when market prices are better, with the resultant profits being shared between the government and LIC (or any other entity) equitably. This way Jaitley will also avoid opposition political bullets – which will surely come – to the effect that crown jewels were sold for a song to brokers and private interests.

[RamaY]

^ That's what LIC is doing now, albeit without Mr Jaggie's approval.

LIC buys a good percent of divestment shares and plays the market as it sees fit. So far they are doing pretty good.

[gakakkad]

talking on disinvestment can , India replicate a temasek ? I mean a massive GOI owned venture fund?

[srin]

Major firms creating slowdown to hit back at PM: Ambit report - Business Standard

We need more medium-sized companies and less big ones. Two reasons - our equity markets don't have depth, and that big orgs tend to hold the economy by balls.

I offer two proposals to fix this:
a) Tax corporates like you tax individuals by slabs. Orgs with small revenue (or market cap) will have to pay less tax (10%), while orgs with more revenue (or market cap) pay more tax (30%).
b) Ensure that there is minimum public equity participation based on org revenue. So that a single rich person doesn't control everything.

[gakakkad]

w.r.t bizz standard report ,would any massive company wreck its own business on purpose to wreck the government?

[Hari Seldon]

w.r.t bizz standard report ,would any massive company wreck its own business on purpose to wreck the government?

Today's ET carries a report saying the bank NPAs are soaring. PSB recapitalization will take some $200 bn. Good luck with that.

Rajan's fears are coming true or something like that was the byline on the story.

[vina]

Frankly, I fear for the economy. I see disturbing signs that the Modi Govt is driving the economy into the Kakkoose with Jaitley being the wrecker in chief.

The govt seems to have fallen into the same suicidal mode that the UPA go into. The Modi govt seems to have decided that reforms means loss in elections, perceived or otherwise. They stalled the reforms after they govt elected in the 1st year because of MH and others, now stalling in the 2nd year because of Bihar, then comes UP and then TN after that. This election cycle driving economics and the preceived need for freebies/ doles for winning elections is what did the UPA in, and the Modi Sarkar seems to be playing the same dead end play book.

Suffice to say that investment is not picking up , the industry is very stressed, the bank NPAs are highly stressed and has probably not peaked yet. Just like Pranab Mukherjee as FM squandered the breathing space by the commodity collapse in 2008/2009 , Jaitley has done exactly same thing. There is no buffer for any external shock. All it is going to take is ONE event in the Middle East (say in Saudi) and the yellow matter will hit the fan.

Then the fights this sarkar is picking up with taxation and whatever is crazy. The MAT notices and penciling in 40,000 cr from that supposed receipt toward "expenses" is simply crazy. It just points to a runaway spending program out of control. The focus should have been to ruthlessly cut the UPA's hare brained spending in unproductive areas . But no, the continuing tax terrorism points to only one thing, an uncontrolled spending fetish (albeit in other pet programs) and the desperate attempt to somehow get in the cash to cover the hole.

The only sector which has seen a sharp turn around is coal india and the power sector. That is the easy part, clamping down on the corruption and mafia and applying the boot on the coal india babus and getting the bottlnecks cleared. Now the more difficult part is the SEB reforms which are untouched.

Suresh Prabhu needs time to turn around the railways which have been run into the ground by the Politicos from Eastern India (Lalu, Paswan, Nitish and Didi) and the final nail in the coffin driven by the last UPA minister. But he will turn it around, of that one can be sure.

I am not so hopeful of the other key ministries. What about telecom. Is BSNL going to stop bleeding ? What about Air India. Stanching the bleeding in PSUs like those will bring in something like Rs 10K crore per annum easily. No one even hears anything about them. Same old same old there.

Agriculture seems to be a write off (who is the agriculture minister anyways?), monsoon will decide the trajectory of inflation, along with the events in Soddy Barbaria. The bleeding of the productive sectors of the indian economy to do mai baap and pouring money down a bottomless pit of unproductive consumption , instead of investing in real physical assets continue.

We then continue to gawk and marvel at China's infra and make speeches there and go to Korea and look at shipyards (that takes the cake. in 60s, India had far greater shipbuilding expertise than Korea, the govt nationalised the industry and killed it, and then 40 year later we go to Korea for "tech"!) and ask them to come in. How stupid do we think everyone is. What if someone asks what happened to that Posco steel plant, what happened to Mittal's ?

[gakakkad]

who says reforms are stalled? GST has been passed through ls and will go through rs in july...LAB see through the joint session in the monsoon session, which is a month from now...

w.r.t NPA , they must have been accumulated over several years...

[srin]

w.r.t bizz standard report ,would any massive company wreck its own business on purpose to wreck the government?

Yes - if the promoter (or one with controlling stake) believes it is better to take short-term losses in exchange for long term gain.

If you look many of the big businesses, you'll notice that they've thrived on Govt handouts and permits due to being close to the govt, and not because of any great talent or merit.

[vina]

And oh, dont even get me started on this govt's treatment of domestic capital vs foreign capital. They issue notices to the FPIs for MAT and then when those guys protest, they bend over backwards, grovel , cut down the supposed 40,000 cr to 40 lakhs or so and that too gets into litigation.

The insane discriminatory laws and tax treatment for domestic guys continues as before and not even a squeak from the govt on that. Sure, best thing to do is to be a foreign investor.No taxes (either cap gains or biz income) and then we wonder why we are exporting capital and then worrying about round tripping and then wringing our hands on how the entire capital markets are getting exported to Singapore and Dubai (SGX Nifty has close to 40% of onshore Nifty volumes from what I hear)

[panduranghari]

Today's ET carries a report saying the bank NPAs are soaring. PSB recapitalization will take some $200 bn. Good luck with that.

Rajan's fears are coming true or something like that was the byline on the story.

What was that Robert Frost poem in school....

...Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.

GOI has the option to recapitalise the banks by either diverting 'investment' funds there or take the losses on the chin thus avoiding the socialisation of losses. What does this mean? Which poison will the government choose?

1. the one where the urban yuppies (about 20% of population) {this includes the builders, the land mafia, the corrupt politicians, the corrupt civil servants} who have bought or invested or speculated on outrageously expensive properties on a high Loan-To-Value basis OR
2. the general populace which is debt laden anyway but are also in productive industries who depend of imports and exports thus the stability of the currency?

If the government lets the realty crash, much of the NPA's will reduce. I wont say the slate will be wiped clean, but the recapitalisation is manageable.

If the government sacrifices the productive engines of the economy by debasing the currency even further, then say good bye to resurgence of Made in India.

My hunch is - Modi will sacrifice 1. Jet li wont allow it so he will want to go for 2. Jet li is a snake, should be crushed. The angst that many have against him may not be misplaced.

Also the recapitalisation of PSB is ok. What to do about the private sector ones. The ICICI and HDFC are our Indian versions of Fannie Mae and Freddie Mac. Only that they are private sector. Here too I believe Jet Li will want to bail them out. I hope he does not.

As long as Rajan is there and is advising and Modi is acting on his advice, we will come through this.

..Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference

Take this for whatever you deem this is worth. But thats my 2 p opinion anyway.

[vina]

1. the one where the urban yuppies (about 20% of population) {this includes the builders, the land mafia, the corrupt politicians, the corrupt civil servants} who have bought or invested or speculated on outrageously expensive properties on a high Loan-To-Value basis OR
2. the general populace which is debt laden anyway but are also in productive industries who depend of imports and exports thus the stability of the currency?

If the government lets the realty crash, much of the NPA's will reduce. I wont say the slate will be wiped clean, but the recapitalisation is manageable.

Well, the two areas where NPAs are LEAST are home loans and consumer finance (basically 2 wheeler and 4 wheeler loans). Dont beleive me ? Llook up the NPAs of HDFC Bank, which a fully retail focused bank and it's Home Loan parent, HDFC. Look up the NPAs of the other private banks, which are largely retail focused.

After that,look up the NPAs of the PSU banks and see where their bad loan pain is coming from (read up the commentary of BoB, PNB, IOB, etc .etc , and look up the bad loan portfolio of PSU banks like SBI). Look up creative accounting of how Air India's loans are classified.

Look up the personal indebtedness of the average indian (dont divide the govt's debt by no of Indians).

After you have looked up both, wake up, smell the coffee and welcome to the real world and not your make believe world.

[hanumadu]

Today's ET carries a report saying the bank NPAs are soaring. PSB recapitalization will take some $200 bn. Good luck with that.

Rajan's fears are coming true or something like that was the byline on the story.

NPAs of Indian banks to touch ₹4-lakh crore in FY16: Crisil

4 lakh crores would be less than 70 billion dollars.

http://seekingalpha.com/article/3156556 ... -woods-yet

Data released by Reserve Bank of India shows that non-performing assets (NPA) as % of total loans increased to 4.45% by the end of March 2015, in the Indian banking system. Though this is lower than 4.78% recorded in December 2014, it reinforces the fact that the Indian banking system is yet to be out of troubled times. Further, adding restructured assets to the NPA numbers, stressed assets ratio (Gross NPA+ Restructured Advances as % of Gross Advances) for the system as a whole stood at 10.9% as of the end of March 2015.

Even if we assume all restructured loans will turn out to be NPAs, its still 10.9% of all loans which would be around 150 billion dollars. 200 billion $ seem to be a bit alarmist. 3% NPAs for banks is normal it seems.

If we keep recapitalizing banks, when will they learn to be responsible, both lenders and borrowers? Let them feel the pain except in the case of PSU banks its no body's skin off the nose. Of the private banks, ICICI bank has 6% NPA while HDFC has the least at 1% NPAs. PSU banks are totally screwed up.

[Theo_Fidel]

The Indian population as a whole is one of the most careful in paying their bills and servicing their debts in the world. Debt is very low, in fact IIRC about 80% of the population carries no debt at all and defaults are very low. If anything we should be encouraging them to borrow and invest in the future.

Housing needs to become more affordable. The modest apartments I see out there are not worth Rs 1 crore+ and at India's income level these prices are financially ruinous.

The worst group of wastrels are no doubt the loss making PSU's. Air India, BSNL, MTNL between them lost Rs 20,000 crore last year alone! I bet you this is more than the NPA losses of the entire Indian consumer class, literally a Billion folks. But apparently these dinosaurs have friends in high places and nothing will be done as usual....

[vina]

Let them feel the pain except in the case of PSU banks its no body's skin off the nose. Of the private banks, ICICI bank has 6% NPA while HDFC has the least at 1% NPAs. PSU banks are totally screwed up.

The problem IS the PSU banks. The private banks are fine! And you can do diddly squat about it because much of the PSU lending is politically directed and the wilful defaulters have political cover.

[panduranghari]

After you have looked up both, wake up, smell the coffee and welcome to the real world and not your make believe world.

How many debts are off book? Like those taken by politicians who are also board members? How many are given by the board under favourable terms to various businesses who happened to be controlled by politicians? These things are not on the balance sheet and are clearly stated so. They tend to be the ones which are hidden under fine print. How do I know this? I know a guy who is a board member of Thane Janata Sahakari Bank. Its a scheduled bank but still they have done things under duress for chota motha politicians. Think about the national scale politicians and the things they have done with these 'nationalised' banks.

Snide remarks aside, I will NEVER respond to your posts. You are like congress, once out of power cant think what to do except pass snide comments. Your knowledge of economy has been debunked about 5 times at least by myself. I think Suraj saar has already eaten you for lunch.

[Yagnasri]

w.r.t bizz standard report ,would any massive company wreck its own business on purpose to wreck the government?

Their business model is based on GOI giving them money, contracts and soaps etc and bankers giving useless loans for GOK reasons. So there are not really doing much negative by stop working now. If any honest person sits in the helm of the affairs these companies will not survive. Take Essar Steel which is now reported as N.P.A. There are many reasons for that including your humbly also.

Most the corporate have huge debts running into 10s K of cr. Many servicing on fresh borrowings. Another one is Bhushan Steel - 3rd biggest steel maker in India. N.P.A. is a serious problem for which difficulties in recovery is also one of the main reasons. Your humbly is suffering in the hands of people like Vijay Malya almost every day. Lot of BP and heart problem etc. My one munna (Team Leader) is also now diagnosed with High tension and BP problem.

Gurus, you people do not know the NPA and other dramas from first hand. Please do not go by useless paid media reports. Situation is very very bad. We can give solutions, but who will listen? All great people like RRs AJs will not listen to us.

[Supratik]

One of the checks and balances of a market economy is that you let inefficient, corrupt corporates to fail. It is no water on anyone's back. It remains to be seen how Modi brings in efficiency and accountability to PSU banks.

[nawabs]

Yagnasri ji, please enunciate your views on the issue and counter-measures if possible.

[hanumadu]

Why Ambit Capital has got it wrong

Nice article with a lot of numbers, especially sector wise debt and leverage.

The above-mentioned averages, however, hide the extent of financial pain in capital hungry sectors such as infrastructure, power and metals where Ambit allegedly found evidence of an engineered slowdown.

Take construction and infrastructure sector, for example. It was the fastest growing industry under the two terms of the United Progressive Alliance (UPA) government. In the past five years ending March 2014, infrastructure companies grew their capex at a CAGR of 32%, double the pace of growth in the entire sample (16.8%). Nearly fourth-fifth (81.6%) of the incremental capex was, however, financed through borrowings. As a result industry’s leverage ratio swelled to 3x at the end of FY14 from 1.5x at the end of FY09.

Their revenues and operating profit during the period grew slower at CAGR of 16.7% and 20.3% respectively. Most of the incremental growth in gross earnings was, however, soaked up by interest expenses and depreciation allowances resulting in a flat growth in net profits. Given this infra companies are hardly in a situation to grow capex unless these companies take more debt.

It's similar in power sector. Industry’s capex (gross block) jumped 2.7 times in the last five years growing at CAGR 22% between FY09 and FY14 largely funded through debt. Incremental borrowings accounted for 77.2% of the industry’s incremental investment during the period as power companies bet on mega projects such as 4,000 MW Ultra-mega power projects. At the end of FY14, power companies in our sample had a debt-to-equity ratio of 1.9 up from 0.88 at the end of FY08.

Metals and mining companies on the other hand, were let down by a global meltdown in demand and metal prices post-2008 financial crisis.

[hanumadu]

There is 20 GW of capacity lying idle because of lack of gas. At 5000 crores per GW, thats 100000 crores of investment and at debt to equity ratio of 1, that is 50000 crores of bad loans for the banks right there. F(ck gas based power plants until we discover 100 tcf of reserves.

[gakakkad]

>>Gurus, you people do not know the NPA and other dramas from first hand. Please do not go by useless paid media reports. Situation is very very bad. We can give solutions, but who will listen? All great people like RRs AJs will not listen to us.

solutions ?

[Theo_Fidel]

Which brings us around to the fact that the Oil PSU dinosaurs are sitting on approx. 95% of the productive gas acreage off Andhra in the KG basin. The only one producing gas is Reliance on their tiny slice of area. In a normal economy the PSU’s would have been stripped off their acreage and forced to hand it over to the productive company that has shown the ability to invest and actually make some money by pumping gas. Instead in India we have the exact opposite with the greedy PSU’s trying to strip reliance of its acreage and attack its ability to produce gas or even explore/acquire acreage. And then we treat the symptom by strangling the setting up of power companies....

[vina]

One of the checks and balances of a market economy is that you let inefficient, corrupt corporates to fail. It is no water on anyone's back. It remains to be seen how Modi brings in efficiency and accountability to PSU bank

But India is NOT a market economy in terms of exits. Bankruptcy laws dont exist (that is one of the reason why we came in at 180 odd in the ease of business survey in the IFC report).

What we have is a mai-baap system. All promoters are politically connected and game the system because the banks are owned by the govt. That is what RR said in early on when this govt came to power that bad managements who scam banks, and bankrupt their companies while stripping cash out should not be allowed to continue (privatise profits and socliase losses) and immediately the lemmings started baying for his ouster (including here in BRF) because that hits at the vested interests immediately.

The ARC business in India is a joke. The ARCs are not the traditional distressed debt investors like elsewhere, but again a mai baap joke, where the banks sell their bad loans to the ARC and it goes into limbo. The SAREFESI act is a half assed joke. When ICICI Bank used it to move against a defaulter, it got stuck in the courts and it is still stuck there I think.

The first thing to do is to allow a proper bankruptcy and takeover code. Do that and there will be turnaroudn funds operating, distressed debt will will get bought at cents to the dollar, incumbent managements thrown out, liabilities shed in bankruptcy court, balance sheets cleaned out and a proper chance of a turnaround happening.

So, WHERE is the bankruptcy law. That would have gone through the legislative process without much trouble, if you really pushed it as a measure against vested interests and cronyism.

[vina]

And then we treat the symptom by strangling the setting up of power companies....

I was speaking with the CFO of one such power company. He has close to 1500MW of stranded gas based power sitting idle for the past few years. Imagine the liabilities building up on that.

The lack of a bankruptcy law is a serious serious impediment in restructuring those kinds of things. He cannot tear up the PPA with the SEB and the loan terms with the banks and liquidate his assets , cut his losses and walk away.

[RamaY]

And then we treat the symptom by strangling the setting up of power companies....

I was speaking with the CFO of one such power company. He has close to 1500MW of stranded gas based power sitting idle for the past few years. Imagine the liabilities building up on that.

The lack of a bankruptcy law is a serious serious impediment in restructuring those kinds of things. He cannot tear up the PPA with the SEB and the loan terms with the banks and liquidate his assets , cut his losses and walk away.

If he is CFO, on what basis they built the capacity? From where and at what price they expected to get the gas for their power plant? What penalty clauses they built into their negotiations? Why is it Govt problem when the CFO couldnt do a proper financial viability study of the project?

[vina]

rom where and at what price they expected to get the gas for their power plant?

From Reliance KG D6 basin gas, on the govt regulated price based on which the PPA was signed. After the plant is up, if you get NO gas, then you have to invoke force majure and exit like in other paces. If he cannot exit, then it is a system problem. No one is idiotic enough to set up or even lend to a project once you discover there is no gas available!

Ok, even if he used imported gas to produce, the PPAs dont allow full pass thru of fuel costs and even if they did,it is a political decision. So you get shafted anyways.

Same thing happened with Tata Power and Adani Power projects in Mundra which are based on imported (Indonesian coal). The Indonesians raised the taxes on their coal exports AFTER the plants were set up when they had you by the gonads. Now what do you do ? You cannot pass through the higher input cost to the customer and you are immediately unviable.

[Theo_Fidel]

I don’t disagree that a bankruptcy law is useful but without bankrupting the PSU’s it is toothless and useless. For decades a few of us have been saying that the #1 item ailing the economy is the lumbering PSU’s that are strangling the ability of the economy to get a move on. I can’t pretend that the private sector are any angels but at least they are purely in the business of making money. AFAIK the PSU’s are in the business of playing politics, cushy jobs for family members, creating monopolies and stripping the productive economy of its hard earned cash. Boo to that and wait for the day that ‘haar haar PSU’ becomes a slogan….

[Supratik]

@Vina

India is moving towards market economy after socialism failed but it is still not there yet. A long journey awaits.


What all these datas and debates say is that a lot needs to be done. It needs a long term perspective. There are no short-cuts. However, what needs to be noted is that with all these problems the economy is the fastest growing in the world. If most of these things are fixed one can imagine the effect. But it will require continuity - i.e. multiple terms. I am not pessimistic yet.

[RamaY]

India is moving towards market economy after socialism failed but it is still not there yet. A long journey awaits.

Exactly. We are happy voting for socialist congress govts for 67yrs and we want Modi govt to absorb all 67yrs of NPAs in one year. This doesnt make any economic sense.

Vinaji... so the business model is
> Businessman X wants to setup a power plant. Does a business plan.
> Gets ??% loans from national banks
> Gets into a fuel agreement at certain prices (or open prices)? What happened to hedging strategies?
> When the input costs increase, want to pass all those costs to output.
> When the (semi-open) market doesnt accept that price increase thats market's fault. Here we are assuming that (a) the market doesn't go for low-price power wherever/whenever it exists (b) market shouldnt have an option NOT TO buy expensive power (like some state govts prefer power-outages to expensive power)
> And in all this the promoters take no "personal" responsibility and want bankruptcy laws that suits their interests.


Interestingly "I/RamaY" cant get a loan from a bank that is 2x of my net-worth if I use this same business model, but somehow all these capitalists can get nnX of their net-worth as loans.

Why should we allow a $23B networth Ambani to file for bankruptcy on a $1B project? This is the Crony Capitalism RR was questioning earlier.

I don’t disagree that a bankruptcy law is useful but without bankrupting the PSU’s it is toothless and useless. For decades a few of us have been saying that the #1 item ailing the economy is the lumbering PSU’s that are strangling the ability of the economy to get a move on. I can’t pretend that the private sector are any angels but at least they are purely in the business of making money. AFAIK the PSU’s are in the business of playing politics, cushy jobs for family members, creating monopolies and stripping the productive economy of its hard earned cash. Boo to that and wait for the day that ‘haar haar PSU’ becomes a slogan….

Theoji,

Majority of the NPAs are the "Private Sector" loans that were in the business of making money. Do you see the logical fallacy?

[RoyG]

I don’t disagree that a bankruptcy law is useful but without bankrupting the PSU’s it is toothless and useless. For decades a few of us have been saying that the #1 item ailing the economy is the lumbering PSU’s that are strangling the ability of the economy to get a move on. I can’t pretend that the private sector are any angels but at least they are purely in the business of making money. AFAIK the PSU’s are in the business of playing politics, cushy jobs for family members, creating monopolies and stripping the productive economy of its hard earned cash. Boo to that and wait for the day that ‘haar haar PSU’ becomes a slogan….

PSUs are on their way out. In another 20 years, most PSU's will be finished. Right now its a fine balance between winning elections, special interest, and divestment. I think the PMO has the right formula for this term. In the next term things should speed up.

[Theo_Fidel]

Since we are back on the topic of gas, can someone please revise the stupid gas pricing formula we have in India. He maybe a smart man elsewhere but C Ranga was not well informed when it comes to gas and set up a pricing system that is unworkable and opaque to the Nth degree. This is what happens when bureaucrats get involved in market decisions. And it has strangled the ability of Reliance to invest and produce more gas.

Even the gas pipeline from Iran is impossible to work out because of the overly complex pricing formula. BTW said pipeline should be under construction right now, it is $5 Billion project, less than we spend on shampoo...
-----------------------
Suprantik,

That is incorrect, what India had was market socialism driven by bureaucrats. To be perfectly honest this is the exact same system Japan/SoKo has had during their rapid growth phases. This is no excuse for the poor decision making.

What exactly prevents the port-maduravoyil project from being executed. IMHO a 1% GDP boost overnight. It’s not socialism.

[Supratik]

Where did you see the market pre-1991? You think maruti 800 was market? What we currently have can be called a compromise between market economics and socialism? What we will eventually have is market economy with some socialist intervention (the degree will depend on which model we adopt) as in advanced economies.

[Theo_Fidel]

I don’t understand the comment. What does Maruti have to do with not executing a project here in 2015. Even prior to 1991 the majority of the Indian economy particularly consumer was private sector. Think houses, construction, clothes, food(though distorted), restaurants, publishing, transportation, cement, fertilizer, even banking. If I were to venture a guess I would say 90% of Indian economy even prior to 1991 was private. Even excluding agriculture which was 50% +- of economy back then.

[Suraj]

A lot of topics discussed lately.

MAT/taxation issues: Rs.40,000 cr in *aggregate* claims is chickenfeed. Does anyone know how much the aggregate turnover is on a daily, weekly or monthly basis ? Well, here it is. The daily turnover just from FPIs is around Rs.15K crore. Monthly turnover is around Rs.300,000 cr, or $50 billion. The annual turnover just by FIIs is ~$600 billion. The total MAT claim is 1% of that.

The 'FIIs ran away when MAT was applied' is a joke. There's too much money in the market for them to do anything of the sort. They'd put in even more, especially into debt instruments, if the $30 billion limit on FPI holding of Indian debt, were not close to being reached. We're in a falling rate regime, and any bond manager with any sense would buy, and buy now, if he could. The problem is one of policy and legal clarity. They very much should apply the tax, but they shouldn't have let litigation get in the way like it did, by planning better.

Bankruptcy laws: Despite all the moaning about lack of one, there's no mention of the fact that one was announced in the Union Budget in Feb 2015. What's more, a detailed report of the Bankruptcy Law Reform Committee of Fin Min is already out since February too. Why is this a problem ? In this case, GoI is avoiding the mistake of MAT - not getting the groundwork set up properly. In the near future, there'll be a bill out, and being a money bill, it will pass without an issue.

I also checked prsindia.org . There's not a single bankrupcy law bill previously circulated in the last 10 years. If someone can provide data otherwise, they're welcome to, but I could find nothing. Why do posters moan about the lack of a bankruptcy code today, when data clearly points to one being put together by this administration, after a decade of the prior one - as far as I can tell - not doing a thing about it ?

Bank NPA data: Is available from RBI data. Private sector banks are not 'fine'. They're in variously deep holes themselves. It would help the purpose of this thread if posters keep their politics to the politics thread and discuss data driven matters with pretty easily accessible data like this.

Electricity output: There are various factors affecting idle power generation, including the fact that we have functionally excess capacity today, because while we've addressed the question of generation to a great extent, the T&D companies are still insolvent, and cannot buy the electricity. Penniless power sector yet to act on govt initiatives

[hanumadu]

> And in all this the promoters take no "personal" responsibility and want bankruptcy laws that suits their interests.

The promoters are losing money too. In most of the cases, no body comes out better off in a bankruptcy deal. Its the same in the power plants case too. Not only are they losing investment, but potential profits and capacity to expand.

Why should we allow a $23B networth Ambani to file for bankruptcy on a $1B project? This is the Crony Capitalism RR was questioning earlier.

Because when the started the business, he did not put his 23 billion $ as collateral. He put his share of the investment and may be some collateral, could be the company itself. Banks lend him the money in the expectation of making a profit. The banks can't have the cake and eat it too - get interest on the loan with out any risk of losing the principle. If you go after individual's wealth then people will be risk averse and business averse. And banks will not have any body to lend the money. They will be out of business too and there will be no need for the banks. Common you are an MBA. How would you finance a business?

Majority of the NPAs are the "Private Sector" loans that were in the business of making money. Do you see the logical fallacy?

Most of the NPAs are private because they are more in number than there are PSUs and they do not operate in a monopoly like PSUs did all these years and still do in many cases. And where PSUs do not have a monopoly their performance is pathetic. If we take the accumulated losses of PSUs like Air India, BSNL and others, they would perhaps total more than the bank NPAs. I don't see what you are trying to prove here by saying PSUs are better than private sector companies. Modi or no Modi, PSUs will never be more efficient than private sector. And imagine, when we have a less capable leader or UPA3 comes to power.

[Supratik]

I don’t understand the comment. What does Maruti have to do with not executing a project here in 2015. Even prior to 1991 the majority of the Indian economy particularly consumer was private sector. Think houses, construction, clothes, food(though distorted), restaurants, publishing, transportation, cement, fertilizer, even banking. If I were to venture a guess I would say 90% of Indian economy even prior to 1991 was private. Even excluding agriculture which was 50% +- of economy back then.

Per my understanding a market economy is where production and services are determined by the market and not the govt. The govt generously decided that Indians can now buy maruti but only maruti 800. That is not a market economy. You can at best say there was restricted private sector activity. Market socialism is what they say China is today which IMO is an oxymoron. China has a hotch-potch but it is working for them.

[member_29058]

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