Telenor Threatens to Hang up on India Ops

Adding Insult to Injury After S&P's negative outlook, two big global businesses are now rethinking their India plans due to a difficult investment climate & slow policy-making 

Norway telco says it'll be impossible to carry on business if Trai proposals are accepted

    Norway's Telenor has warned it will exit India if the government accepts the telecom regulator's proposals to auction airwaves at 13 times the price used in 2008, highlighting the uncertainty shrouding a sector till recently seen as a poster child for liberalisation. 

The head of the company's Asia unit said it would be "impossible" to continue operations in the country of more than a billion people, in which it has invested over $3 billion since buying a majority stake in the telecom business of Unitech, a Delhi-based real estate company, in 2008. 

"If these recommendations become policy, we will be forced to exit India. It will be impossible for us to continue operations here," Telenor Executive Vice-President & Asia head Sigve Brekke said in an interview. "This is not a threat, it is a reality," he said. 

Brekke's comments come just a day before the Telecom Commission, the highest decision-making body in the sector, meets to decide on the recommendations put forward by the Telecom Regulatory Authority of India. But two analysts said quitting India would impact Telenor's growth potential as the Scandinavian telecom major has been depending on Asian and emerging markets for growth, with business in Europe, its main territory, declining. 

"The India exit will mark a monetary loss, but will also mean a threeyear setback to Telenor on growth in the next two years," said one. They asked not to be named. 

Telenor had forecast a breakeven for Uninor, its Indian unit, in 2013. Trai Proposals Not in Line with SC's Orders: Telenor's Brekke 

Telenor's India operations were among the worst affected by the Supreme Court's February 2 order quashing licences awarded in the controversial 2008 sale by former telecom minister A Raja. The court asked the government to issue new permits through an auction. 

Trai last week recommended that the government auction 5 MHz of airwaves in the 1800 MHz band in which Telenor operates, a quantum of airwaves sufficient for only one company to operate, though nine companies have lost licences after the court decision. 

The regulator also said mobile phone companies will have to pay a minimum . 3,622.18 crore for every unit of 2G spectrum, a 13-fold increase over what they paid in 2008 when Raja dished out pan-India permits that came bundled with 6.2 MHz of 2G spectrum for . 1,659 crore. Trai further said the first round of auctions would help establish the value of airwaves, which would be used as the base price for the next round to be held in 2013. 

Brekke, who is also the head of the Scandinavian company's India operations that offer mobile services under the Uninor brand, said Trai's recommendations were not in line with the Supreme Court's orders. 

"The Supreme Court said new licences should be given through auctions. But according to Trai's recommendations, only one licence, and not licences, can be issued. Even this is theoretical as incumbents can take away spectrum in the first round of auctions and companies like us are therefore finished," he said. 

"The main focus of the recommendations is refarming (redistribution) of airwaves in the 900 MHz band. To accommodate this, Trai has said only 5 MHz of airwaves in the 1800 MHz band can be auctioned. This is not what the court ordered. The SC simply said reaward the new licences through auction. The SC couldn't be any clearer," he reiterated. 

Trai has recommended that incumbent operators such as Bharti and Vodafone surrender a part of their airwaves in the 900 MHz band by 2014 and replace it with spectrum in the 1800 MHz band. As a result, it has not recommended the auction of airwaves freed up after the Supreme Court-ordered cancellations. Brekke said while issues like spectrum price are of concern, Telenor may not even wait for price discovery in the auction, given the nature of the recommendations. 

ROLLOUT OBLIGATIONS IMPOSSIBLE TO MEET 

The Uninor MD said the company's primary concern was the quantum of airwaves to be auctioned as well as requirements that the company establish its presence in a certain number of locations, known as rollout obligations. "With 5 MHz, the government would be setting a deliberate policy to reduce competition that has brought affordability. Auctioning 5 MHz when more than 20-30 MHz is available is nothing but creating an artificial scarcity to jack up prices. This will be the smallest spectrum auction in the world," he added. 

Brekke added that Telenor would not be able to continue operations if the government insisted on imposing Trai's rollout obligations. "It isn't logical to ask each operator to set up its own tower in every village when this is done smarter through collaboration and sharing between operators. Why use last decade's mindset to solve this decade's priorities?" 

Uninor would require an additional 120,000 towers to meet the rollout obligations, making its business here unviable, Brekke said. Brekke also slammed Trai for setting a steep price for airwaves. "We are being charged high spectrum prices and asked to recover them by using this spectrum for 3G and LTE (since this is liberalised spectrum) instead of using it for basic voice telephony that 90% of India uses. This is equivalent to taking from the masses and giving to the classes and goes against the political intention of the government," he added. 

The Trai recommendations enable telecom operators to use airwaves for all purposes, including data, to recover costs. However, for most operators, this implies massive replacement of infrastructure, which is unviable, Brekke explained. 

Some of the mobile phone companies plan to file a fresh petition in the SC, stating that Trai's recommendations are against the court's orders, according to people familiar with the plan. Brekke said he had 'heard of this plan' and added that 'Uninor had not yet decided to be party to this petition'. 

The Supreme Court last week ordered the government to conduct 2G spectrum auctions and grant licences by August 31, rejecting the Centre's plea that it required 400 days to complete the process, even as it allowed the nine mobile companies whose licences were cancelled earlier this year to continue operations till September 7, extending its earlier deadline of June 2. 

"The regulator seems determined to complicate this and bring in every telecom issue it possibly can. If this is what the SC wanted, then 400 days would have been allowed. But it wasn't," Brekke said. For now, the apex court seems to be done with its guidelines, and little more can be awaited on that front, he added.

ET reported last week that the DoT may first examine Trai's recommendations to auction 5 MHz of airwaves in the 1800 MHz band and later consider the other proposals submitted by the regulator. Some sections of the telecom department are of the view that setting aside most of Trai's proposals and focusing solely on auctioning 5 MHz of airwaves will enable the government meet the August 31 deadline set by the Supreme Court. But this will result in a limited auction, and not the re-auction of all the airwaves vacated due to the cancellation of licences by the apex court.

BMC wants cluster-scheme bar raised for urban renewal

The BMC has sought an increase in the minimum area for cluster redevelopment from one acre to five acres. It also wants that old and dilapidated buildings should receive more incentive floor space index (FSI). These requests, to the urban development department, are part of municipal commissioner Subodh Kumar's wider plan for Mumbai's urban renewal, for which he has set up a committee. It will suggest ways of carrying out redevelopment with an eye to create facilities like wide roads, parking lots, open spaces and educational institutions. 

    The cluster redevelopment policy when launched in 2009 had mandated a minimum acreage of 10. But this was reduced to one under pressure from developers. Despite the concession, only five projects were approved, the largest being the 14-acre Bhendi Bazaar project that is being implemented by the Bohra Trust. 

    Kumar says cluster redevelopment should be big enough to enable road widening within the area and on the periphery, and to retain Development Plan reservations. As per the policy paper, "Since managing a (cluster redevelopment project) is more difficult and the implementation period is long, involving higher interest costs, incentive FSI shall be more liberal as compared to that (for the old and dilapidated building redevelopment scheme)." 

    Kumar has proposed that there is no need to give a uniform FSI of 4 to all cluster projects. "Since it (will be) an area development scheme on minimum five acres, it will be possible to utilize higher FSI in situ, without creating congestion." 

    Utsal Karani, secretary, Janhit Manch, said the proposal would enable the creation of better civic infrastructure. "It will bring in builders with better track records, who will ensure that they deliver on rehabilitation as well as civic infrastructure." 

    Kailash Agarwal, proprietor, Nish Developers, who has already undertaken a seven-acre cluster redevelopment project in Parel, said such projects were the only way to bring about urban renewal. "If the requirement is only one acre, it is difficult to put in place a sewage treatment plant and solar panels, and create open spaces. A larger area allows for such amenities to be set up. Also, with one-acre plots, the city will never get wide roads." 

    Agarwal said he had been urging government officials to study his project, understand the difficulties and tweak the policy so that implementation of future projects became easier. 

INCENTIVES FOR PROJECT 

New proposal by Mhada 

and BMC to boost cluster 

redevelopment Provide 10-20% additional rehabilitation area to tenants/occupants Increase ceiling of incentives offered to developers from a maximum of 70 sq metres to 100 sq metres Revise area-sharing ratio between developer and Mhada/BMC from 0.5:1 to 1:1 Create one-window system with Mhada as approving authority Remove FSI cap of 4 for cluster schemes Give developer incentive FSI of 80% against every 100 sq ft of rehab area, including accommodation reservation like housing for displaced, schools and hospitals Cluster Redevelopment Policy 

    The state has adopted a policy for private redevelopment of dense housing clusters spread over areas of one acre in the island city 

    The policy offers a floor space index (FSI) of 4 or that required for the rehabilitation of existing occupants, whichever is more, plus an incentive FSI to developers taking up reconstructing of pre-1960 buildings 

    Developers can commercially exploit an area that is 55-80% of the rehabilitation area Why is the scheme not taking off? 

    No dilution of reservation as sought by developers 

    Lack of clarity: BMC and deputy collector (encroachment) disclaim any responsibility for certifying legal slums and evicting illegal shanties 

    Mhada disclaims any responsibility for taking action against the balance 30% of tenants who refuse to give consent 

    Tenants revoke consent when a competitive builder offers additional benefits, despite a scheme getting high-power committee nod 

    Not all is well for tenants. Those owning two flats in a building refuse to give consent as under the policy they are entitled to only one 300-sqft rehab flat 

    Developers want additional FSI for developing amenities like schools and dispensaries 

    No mechanism exists to resolve dispute between multiple government agencies, developers and tenants

Sachin 1st Active Sportsperson Nominated To RS God has a new House

Rekha, Anu Aga Also Named To Parliament

New Delhi: A Bharat Ratna might still be a little distant, but cricket icon Sachin Tendulkar will soon be an MP. This will be the first time that an active cricketer, rather any sportsperson, has been nominated to the Rajya Sabha. On Thursday, the Manmohan Singh government nominated Sachin along with veteran actor Rekha and spunky business leader Anu Aga. 

    Sachin's nomination to the House of Elders took political circles by surprise, even though it was in the works for a while. Cricket lovers, too, were bemused with many wondering how an active cricketer who is on the road for around 250 days a year will be able to do justice to his parliamentary duties; and if he couldn't, would the Rajya Sabha entry really enhance his stature. 

    Senior government figures, including MoS for parliamentary affairs Rajiv Shukla, have been in touch with Sachin for a couple of weeks — obviously in the hope that his acceptance of a Rajya Sabha nomination would help burnish the UPA government's credentials. 'Sachin Tendulkar not planning to pack up kit' 

    The calculation appeared correct as no one, including the opposition, had anything but a welcome for the immensely popular cricket star. 

    Sachin, it is said, had sought time to think over the offer. A week ago, he conveyed his acceptance to Congress chief Sonia Gandhi. The news of his nomination, along with that of Rekha and Anu Aga, broke when Sachin with his wife Anjali came to meet Sonia Gandhi at 10 Janpath in the company of Shukla. 

    Tendulkar's nomination comes after he completed a historic 100 international centuries in March this year. It is also seen by some cricket buffs as indicating his retirement in the foreseeable future. 

    However, when asked if his acceptance of a Rajya Sabha nomination indicates a desire to hang up his boots, sources said, "No way. He is not retiring." 

    The home ministry sent the names of Sachin, Rekha and Aga to President Pratibha Patil after Prime Minister Manmohan Singh made the recommendations on Wednesday. Patil approved the recommendation on Thursday, leaving it for the Rajya Sabha secretariat to complete the formalities.

    The names have been cleared against five existing vacancies in the Upper House under the 'nominated members' category. At present, there are seven nominated MPs, including lyricist and script writer Javed Akhtar. 

Times View: Nominating Sachin Tendulkar to the Rajya Sabha may be a populist move, but it makes little sense. There is no doubt about Sachin's greatness as a cricketer. A nomination to Rajya Sabha, however, should not be treated as a means of honouring eminent people but as a way to enrich parliamentary debate by having people with expertise in different fields. Nominating an active sportsperson defeats that purpose. The Indian team spent 292 days on the road last season and Sachin himself was on the road for 216 days. His new role will force Sachin to choose between his duty to the team and his job as a parliamentarian. It's an unfair choice, one we should not compel him to make.

S R TONDULKAR BECOMES RS TENDULKAR

Sachin R Tendulkar (39), CRICKETER 

Highest rungetter 

in Tests and ODIs; also holds the record for most centuries in both formats of the game. Having achieved virtually every conceivable landmark in cricket, may now be preparing for a fresh innings in public life

Rekha (57), ACTRESS 

Has acted in over 180 films in a career spanning over 40 yrs. Filmfare best actress award for Khubsoorat (1980) and Khoon Bhari Maang (1988) and best supporting actress for Khiladiyon Ka Khiladi (1996). Won the National Award for best actress in 

1981 for Umrao Jaan

Anu Aga (69), BUSINESSWOMAN AND SOCIAL ACTIVIST 

Chairperson of energy major Thermax from 1996-2004. Got Padma Shri for social work in 2010. Now chairperson of Teach For India. Was one of the first business leaders to attack Narendra Modi for the Gujarat riots

TOI Interactive Should Sachin have accepted the RS nomination? Comment on toi.in/sachin 

India Inc’s funding costs to soar After Sovereign Rating Assessment, S&P Revises Outlook On 11 Indian Banks, 4 FIs, 3 IT Cos & 3 PSUs To Negative

Mumbai: Indian corporates could see their overseas borrowing costs shoot up should Standard & Poor's negative outlook result in an actual downgrade. A downgrade would hit overall funding and would inevitably end up being a self-fulfilling prophecy by hurting the economy rather than merely providing an opinion on its creditworthiness. 

    "A downgrade would have huge implications for the economy. India is at the lowest rung of the investment grade and a downgrade would result in the country falling to the junk category. This will result in certain allocation for India going away and a rise in the funding costs of corporates. This will also have implications for funding of the country's growing balance sheet/ funding requirements," said Ashish Vaidya, head fixed income currency and commodities at UBS India. 

    Besides revising its outlook on the sovereign, S&P has also put on its negative list three IT companies—Infosys, TCS and Wipro. Similarly three public sector entities NTPC, NHPC and Steel Authority of India have had their outlook revised to negative. Bankers say that international investors mandated to put their money in only investment grade paper will be wary of investing in bonds issued by PSUs because of the downgrade possibility. 

    For corporates a significant portion of funding comes from the external route. The global plans of Indian companies also depend on the availability of international finance. All the bigticket acquisitions by large business houses have been on the back of financing from multinational banks. "We expect spreads to be under pressure in the near term with an overhang of a potential downgrade should there be no improvement in the macroeconomic conditions or growth prospects, but issuances from strong Indian companies and institutions will continue to see investor interest," said Sunil Agarwal, head, institutional clients group, Deutsche Bank, India. 

    According to Gautam, Triveri, MD & head-equities, Religare Capital Markets, the outlook revision is incrementally negative for the rupee and capital flows (portfolio and direct). "We believe the rating remaining at investment grade contains the damage. Had a rating downgrade (to non-investment grade—Junk) happened, it would be far more negative, since it would escalate funding costs for Indian firms abroad, and preclude some FIIs to access local debt and equity markets." But several bankers see the downgrade as a clear and present danger. "I think that there are chances of a downgrade if there is no improvement in the current account or there is no reform and fiscal consolidation," said Vaidya. S&P has indicated that it will wait a few months to see if there is any improvement in the fiscal position or the direction of reforms. However, the rating agency has made it clear that it could take a downgrade decision at any time if there is deterioration in any of the macroeconomic parameters. 

    According to Deutsche Bank, a key risk to India's ratings outlook in the coming year or two is that the fiscal adjustment envisaged in the budget is not accomplished due to unfavorable macro developments like a further slowdown in growth and policy slippages such as a rise in subsidies. "More crucially, if the slippage also reflects no medium term movement toward expanding the tax base and expenditure restraint, the ratings outlook would invariably worsen," the bank said in a research report. 

    Corporates and banks will also find it tough to raise funds through international bond issues. A large number of funds that invest in these securities are mandated to put money only in investment grade paper while there are risk taking investors who buy "junk" bonds they demand a high rate of interest. 

    "The negative outlooks on the 11 financial institutions reflect the outlook on the sovereign credit rating on India. We could lower the ratings on these financial institutions if we lower the sovereign rating or the stand-alone credit profiles of these financial institutions deteriorate sharply or we believe that such deterioration is unlikely in most cases. We could revise the outlook to stable if we take a similar action on the sovereign rating," S&P said in a statement. 

DOWNGRADE FEARS 

• S&P has put Infosys, TCS and Wipro on its negative list 

• Outlook of three state-run entities, NTPC, NHPC and SAIL, has been also revised to negative 

• Fearing downgrades, international investors will be wary of investing in bonds issued by PSUs

S&P cuts India outlook to negative, sees no big reforms before ’14 poll Sensex, Re Slide; Borrowing Abroad May Get Costlier

New Delhi: Global ratings agency Standard & Poor's on Wednesday revised the outlook on India's long term sovereign rating to 'negative' from 'stable'—a thumbs down that could adversely affect the way foreign investors view India. 

    The S&P decision questions the India growth story by citing its sliding growth numbers. It also cites the high fiscal deficit, a growing debt burden and the government's inability to push through economic reforms. 

    The agency clarified that the action was not a downgrade but a revision in the outlook based on the current economic situation. It said India's rating of BBB (minus) is the lowest investment grade rating. 

    S&P's announcement immediately hurt sentiment in the financial markets and tripped shares, the rupee and bonds. Experts say the revision in the rating outlook will hit investor sentiment, increase overseas borrowing costs for Indian companies and add another element of risk for Asia's third largest economy. 

    Finance minister Pranab Mukherjee intervened to calm jittery markets, saying the government would overcome the difficult phase. "There is no need for panic. The situation may be difficult, but we will be surely able to overcome," the finance minister told reporters. 

    The revision also comes at a time when growth is slowing, business sentiment is down and the government is battling a string of issues from corruption, questionable laws like retrospective taxation to stinging criticism over stalled reforms. The Union Budget unveiled in March failed to boost sentiment and economists raised doubts about the government's ability to reduce subsidies and meet the Budget targets. 

FROM STANDARD TO POOR What Does It Mean? 

Business & investment sentiment may be hit; cost of borrowing for Indian companies may go up; foreign money into stock market may slow down; rupee & bonds may be hit; fear of India becoming noninvestment grade (junk grade) lurks 

Market Impact 

Sensex closes 56 pts down at 17,151, after plunging 190 pts 

Rupee falls 26 paisa before recovering to close at 52.50/$ How Can India Avoid A Downgrade? 

Basically, India has to reduce its fiscal deficit – that is, lower the gap between govt spending and its income 

Steps that might help prevent a downgrade are: 

Cut fuel, fertilizer subsidy Allow FDI in banking, insurance & retail Roll out GST quickly Tackle high inflation 

Countries With Same Rating As India Azerbaijan, Barbados, Colombia, Croatia, Iceland, Montserrat, Panama, Morocco and Tunisia Funding worry for corporates 

    Indian corporates could see their overseas borrowing costs shoot up should S&P's negative outlook result in an actual downgrade. Their global plans, hugely dependent on international finance, could also take a hit. The rating agency also put three IT companies (Infosys, TCS and Wipro) and three public sector entities (NTPC, NHPC & SAIL) on its negative list. Bankers say international investors will be wary of investing in bonds issued by PSUs because of the downgrade possibility. P 19 

No respite for UPA from allies, oppn 

    On a day S&P identified rising fuel subsidy as one of the reasons for its loss of confidence in India, UPA allies Trinamool and NCP said they would not allow decontrol of diesel prices, even as the government said it was committed to getting on with reforms. The S&P downgrade also gave the opposition a handle. "It is the policy paralysis of the last few years...that is responsible for this mess," BJP's Arun Jaitley said. P 19 Reforms have stopped, says Moody's Analytics 

    The outlook revision reflects our view of at least aone-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political setting," said S&P's credit analyst Takahira Ogawa. 

    Analysts say the announcement should serve as a wake-up call for the UPA gov. 

    The ratings agency said it expects only modest progress on fiscal and overall economic reforms before the 2014 general elections. 

    "High fiscal deficits and a heavy debt burden remain the most significant constraints on the sovereign ratings on India. We expect only modest progress in fiscal and public sector reforms, given the political cycle—with the next elections to be held by May 2014—and the current political gridlock," S&P's Ogawa said. Moody's Analytics, a division of Moody's Corporation, said India's economy is now growing below potential as a combination of bad luck and poor economic management weighs on sentiment. "The single biggest factor weighing on the outlook is the Indian government. In all economies it is impossible to separate the economic from the political outlook, and that is particularly the case in India...The wave of government reform and opening up through the 1990s lifted GDP growth above 8%. But these reforms have stopped," Glenn Levine, senior economist at Moody's Analytics, said in a statement.

1-in-3 likelihood of downgrade if external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow... 

Takahira Ogawa | S&P CREDIT ANALYST

No need for panic. The situation may be difficult, but we will be surely able to overcome 

Pranab Mukherjee | FM

India is likely to have normal monsoon in 2012

(Reuters) - India is likely to have normal monsoon in 2012 and the government will give a detailed region-wise forecast on Thursday, Farm Secretary P.K. Basu said on Monday.

The June-September monsoon, vital for agricultural output and economic growth, irrigates around 60 percent of farms in India, the world's second-biggest producer of rice, wheat, sugar and cotton. Agriculture accounts for about 15 percent of India's nearly $2 trillion economy, Asia's third biggest.

Last week a top weather official told Reuters that monsoon is likely to have average rainfall in 2012 despite fears the El Nino weather pattern may emerge in the second half of the season.

According to the state-run India Meteorological Department classification, rains between 96-104 percent of a 50-year average of 89 centimetres is considered normal.

RIL to Build Own Towers for 4G Blow for Reliance Infratel, other tower companies eyeing the business

Mukesh Ambani-owned Infotel Broadband Services plans to set up over 1,00,000 towers for its 4G operations in three years, moving away from its 'asset-light' model and possibly disappointing telecom tower companies, including Anil Ambani's Reliance Infratel, which were hoping the RIL group company would use their passive infrastructure for its services. Infotel Broadband had invited bids earlier this year from tower operators for leasing about 26,000 towers across India for the first phase of its wireless broadband foray. But those plans are on hold, and, according to three people familiar with the development, the company has sought quotes and samples from equipment vendors for carbon fibre telecom towers. The estimated outlay for the company's launch, expected later this year or early next year, has been nearly doubled to $8-9 billion, from the originally stated $4 billion in 2010, said one of the three persons. Overcapacity in Telecom Tower Market 

An RIL official, who asked not to be named, said the company may partly use its own towers while it may rent the rest from existing tower companies. But if Infotel Broadband does meet its target of building 1,00,000 towers, there might not be any need for it to rent further capacity. Indus Towers owns around 1,10,000 telecom towers. Infotel Broadband, 95%-owned by RIL, has all along been expected to lease towers from Reliance Infratel for its 4G rollout. The lease was to mark the first major collaboration between companies owned by the Ambani siblings after they carved out the Reliance empire between themselves in 2005. It was also supposed to boost the valuations of both Reliance Infratel and Reliance Communications, the company that owns a 95% stake in the tower unit. RCom has been looking for an equity partner for the tower arm for some years now. 

Emails sent to both RIL and Reliance Communications went unanswered. In May 2010, the Ambani brothers terminated a non-compete agreement that had been in place for five years, paving the way for RIL's re-entry into telecom. Subsequently, Reliance Industries bought 95% stake in Infotel Broadband for . 4,800 crore, in addition to paying . 12,848 crore for 20 MHz of spectrum in all 22 service areas in India — the only company to do so. 

Carbon fibre towers are 25-40% more expensive than traditional steel ones but are ecologically friendly as well as easier to camouflage and relocate. They are also believed to have lower maintenance and base equipment requirements. Tenancy levels in existing towers are low and with Uninor, Loop, S-Tel and others shutting operations because of the SC order, the current overcapacity in the tower market will get further exacerbated. While this has led some to question the wisdom of creating more capacity, a telecom analyst said there could be some justification for RIL's strategy. "This strategy could make sense if the towers were set up in semi-urban or rural areas for faster rollout in remote areas. If there is little overlap with existing tower companies, this would make sense," said an analyst. Fourth-generation, or 4G, networks will offer Internet and data services at much faster speeds as compared to existing 3G services. Their initial demand will be more in metros and big cities, which are adequately covered by existing tower companies. At the time of Infotel's acquisition, RIL Chairman Mukesh Ambani had said the company would follow an 'asset-light' telecom deployment strategy, meaning it would not set up its own towers or rollout optic fibre cables to carry calls. But the thinking has changed a little along the way, said a source.

SOLO ACT: Mukesh Ambani

MUMBAI:New app helps users find commuters who carpool

Mumbai: A new app will help commuters reduce their carbon footprint and make the daily commute easier. The app, Smart Mumbaikar, that was launched on Friday lets users find travellers who carpool. 

    "It's a simple Facebook app that lets you identify who among your friends shares the same route you take to office, school or college," said entrepreneur Raxit Sheth, developer of the app. 

    When users set up the app, they are asked for details about their daily commute. Users can use a drop-down menu of city landmarks to select the origin and destination of their journey. It also prompts users to select their mode of transport and timing. 

    "We have compiled a list of about 5,000 popular landmarks across Mumbai. These include locations in the western suburbs, Navi Mumbai and the central surburbs," added Sheth. Software professional Parth Lalcheta has helped Sheth develop the app. 

    According to the developers, women travellers can select if they want to travel with at least one female companion or an all-women group. 

    "During research, we realized that security was a key concern, especially for women," said the software developer who is also the creator of MumbaiAuto (an app that calculates autorickshaw and taxi fare once commuters feed the meter reading) and Mobile4Mumbai (an app that allows users to search BEST bus routes). "We know that a large number of people are underutilizing rickshaws, cars and taxis during rush hour. Autos and cabs with single passengers simply add to the city's traffic woes." 

Aid to Easy Commute 

• When users set up the app, they are asked for details about their daily commute 

• Users can use a drop-down menu of city landmarks to select the origin and destination of their journey 

• Women travellers can select if they want to travel with at least one female companion or an all-women group 

• Log on to smartmumbaikar.com

Home loans to get cheaper as RBI cuts key rate after 3 years

GIVING A SHOT IN THE ARM

Slashes Repo Rate By 50bps To Fuel Growth No Penalty For Pre-Payment Zero-Balance Savings A/C

Mumbai: Home and auto loans are expected to become cheaper with the Reserve Bank of India cutting interest rates on Tuesday for the first time in three years by a more-than-expected half a percentage point. The move is aimed at boosting the sagging economy. 

    RBI in its annual policy reduced by 50 bps its repo rate-—the rate at which it lends overnight funds to banks and also announced a slew of consumer-friendly measures such as zero balance savings accounts for all and abolition of pre-payment charges for home loans. The availability of cheaper funds is expected to spur individuals to spend more and business to increase investment. It was expectedly cheered by bankers and industrialists across the board. 

Will curb govt expense: Pranab 

    Finance minister Pranab Mukherjee said the monetary policy announcement should help revive investment and strengthen business sentiment and promised that additional steps would be taken to reinforce the focus on growth. Though RBI flagged some concerns that could hurt growth and fiscal deficit, Mukherjee vowed there would be no slippage on fiscal deficit. "I will do my best to restrict the government expenditure to the budgeted figures," he said. P 21 

MAJOR POLICY MEASURES 

    50 basis points cut in repo rate signals shift of RBI's focus to growth 

    Liquidity support by allowing banks to borrow more from RBI 

    Economy expected to grow 7.3%, inflation 6.5%, deposits 16% and loans by 17% in 2012-13 THE BAD NEWS 

RBI wants govt to hike fuel prices 

Warns that future rate cuts not guaranteed 

Deposit rates could come down 

Inflationary pressures to continue 

THE GOOD NEWS 

Loans to individuals and businesses to become cheaper 

No foreclosure or prepayment charges on home loans 

Zero-balance savings accounts with minimum facilities to all bank customers 

Unique customer ID may pave way for savings a/c portability 

Banks not to provide undue returns for bulk depositors 

Fixed rate bank home loans may become a reality BOOSTER SHOT Is RBI rate cut a one-off affair? 

Mumbai: Giving the RBI's monetary policy a thumbs up, the BSE sensex closed 206 points higher at 17,357 points. It was buoyed largely by the magnitude of the cuts since it was only expecting a 25 bps reduction. Bonds rallied, with the yield on 10-year benchmark bonds falling to 8.34% from 8.44% on Monday. In the forex market the rupee rallied against the dollar to 51.49, up from Monday's close of 51.68. 

    While banks are unequivocal about lending rates falling, all of them may not pull down their rates immediately. "With the reduction in interest rates, EMIs will definitely fall. That is the good news. But how fast the transmission takes place…we will have to watch depending on our cost of funds. But clearly, the trend is downward," said Chanda Kochhar, MD & CEO of ICICI Bank, the country's largest private bank. The country's largest bank SBI is meanwhile looking at a 'comprehensive' reduction in lending rates. "On car loans and all other loans wherever the spreads over the base rate (benchmark rate for loans) are high, we will look at bringing down rates. I am not sure about the base rate but it is our asset liability committee that will take a call" said Pratip Chaudhuri, chairman, SBI. 

    The policy, designed to give growth a much needed push, predicted that the economy would grow at 7.3% even as it continued to remain concerned about inflation saying it would remain high at 6.5% in 2012-13. RBI governor D Subbarao denied that the government had any influence on the move. However, he said that the government needs to do its bit to 

spur growth. "Monetary easing is necessary but not sufficient condition for growth. The government should adjust oil and other subsidies and address supply side constraints," Subbarao said. 

    Besides addressing rates and setting forecasts for 2012-13, the policy also includes a number of announcements aimed at giving bank customers a better deal. New regulatory initiatives include specialized training to bankers to help them detect fake notes.

Time to Increase Exposure to Interest-sensitive Stocks Prashant Mahesh analyses how companies in the infra, banking and auto sectors are going to benefit in the event of a rate cut by the RBI on Tuesday

Stock market pundits are betting on a repo rate cut of 0.25-0.50% on April 17, when the Reserve Bank of India reviews its monetary policy. Repo rate is the rate at which the Reserve Bank of India lends money to banks. Naturally, all eyes are on the stocks in the interest rate sensitive sectors such as infrastructure, banking, housing finance and automobiles, which have been beaten badly on the bourses for sometime now. For example, in the last one year the Bankex and CNX Infrastructure indices are down by 12.73% and 22.29%, respectively, compared with the Nifty which is down only 9.66%. Arguably, a change in the interest rate scenario could definitely alter the fortunes of these sectors. "Investors should increase their allocation to the interest rate sensitive sectors gradually. These sectors could constitute about 30% of your overall portfolio," says Madhumita Ghosh, senior VP (research), Unicon Financial Intermediaries. 

That may sound a great strategy. Many traders have already taken bets on some stocks in these sectors expecting a rate cut, as the central bank has already cut CRR by 1.25% since January this year. Several stocks in the infrastructure and banking space have moved upwards during the past three months. For example, State Bank of India (SBI) has moved up from . 1,630 in January to . 2,210, a run-up of 39%. Similarly, IRB Infra has moved up from . 126.40 to . 187 a gain of 53% during the same period. But the question is whether a minor reduction in the policy rate will have a lasting impact on them, forcing investors to have a serious look at these sectors and weak stocks in their universe? The question is even more pertinent because many banking experts believe that it will be a while before the central bank may actually unwind its tight policy regime. "At the moment, we expect only a 25-50 basis points cut, after which the central bank will pause. It will then take a look at inflation, economic growth rate, crude oil prices before deciding its next course of action," says Dipen Shah, head of fundamental research at Kotak Securities. 

DON'T EXPECT MIRACLES 

"A small drop of 25 basis points alone may not be enough to make these sectors a great pick. One has to be sure that we are in a falling interest rate environment, and more cuts are likely in the near future to make these sectors attractive," says Abhishek Jain, head of research at JHP Securities. That sums the key to investing in sectors expecting a policy change. While experts may have varying views — which is always the case when it comes to taking such calls — you need to make a decision after taking into account your investment horizon and goals. For instance, if you are an investor with an investment horizon of two to three years, the long-term outlook for these sectors is bright. "With the economy expected to grow by 7-8%, one needs good infrastructure in the form of roads, power, ports, etc to support this growth, thereby pointing to a bright future for the infra sector. Similarly, high economic growth will present multiple opportunities for banks to grow in both corporate as well as retail spaces," says Sadanand Shetty, vice president and senior fund manager, Taurus Mutual Fund. 

INFRASTRUCTURE STOCKS WILL 

BENEFIT THE MOST 

One of the major reasons for poor performance from the infrastructure segment over the last couple of years has been the continuous rise in interest rates. Since infrastructure companies have a high debt component on their balance sheets, high interest rates reduced returns from such projects and even made many of them unviable. "Most infrastructure companies are highly leveraged. On an average, if a project costs . 100, . 75 is funded through debt and the balance . 25 comes in through equity. If interest rates fall by 1%, it could bring down the interest cost of infrastructure companies by 8-9%," says Gaurang Vasani, executive director, Strategic Growth Advisors. 

TWIN BENEFITS FOR BANKING 

Besides the overall increase in economic activity on account of lower interest rates, which will benefit the banks, there are a couple of other reasons why they will benefit more. "Bond portfolio of a bank benefits in a falling interest rate scenario," says Dipen Shah. When interest rates fall, bond prices rise, which in turn could give banks a capital appreciation on their bond portfolios, thereby increasing their treasury income. So, if the interest rate drops by 50 basis points, a 5-year bond could see a capital gain of approximately 2-3%. 

Public sector banks will benefit on another front, where the percentage of restructured assets as a percentage of total advances is high. Take the case of the Punjab National Bank. Restructured loans as a percentage of advances are as high as 6.4%. For the Central Bank of India, it is even higher at 7.4%. "Once the interest rate cycle reverses, restructuring of loans will go down, thereby improving profitability of banks. Thus restructured assets of banks will peak out faster," says Kartik Mehta, AVP (research), Sushil Finance. 

Housing finance and automobile companies, like LIC Housing Finance and Maruti, could also be beneficiaries of a rate cut, as it could lead to higher consumer demand. Similarly, automobile companies could gain due to higher demand for passenger vehicles. "A decrease in interest rates could lead to increase in demand for home and auto loans," says Vijay Kedia, managing director, Kedia Securities. 

prashant.mahesh@timesgroup.com 

India could Lose World Bank Soft Loans Middle-income tag to make it ineligible for IDA funding

World Bank has informally told India that its rapidly-growing economy may soon make it ineligible for soft loans, prompting the government to lobby for concessional lending for a few more years. 

India stands to lose over $2 billion in lowinterest funds for many of its welfare schemes, besides missing out on social initiatives spearheaded by the Washingtonbased lender over the previous decade. 

"We expect India to move into the middleincome category of countries in the next two years. This will mean that the IDA ( International Development Association) funding India got last year was the last cycle of such funding for the country," said a senior World Bank official. 

The bank lends to developing countries under two arms — IDA and International Bank of Reconstruction and Development (IBRD). IDA funds are highly concessional or interest-free loans and grants aimed at improving living conditions of the poorest. India is Currently a Blend Country 

IBRD funds infrastructure projects in middle-income and creditworthy lowincome countries at interest rates higher than those provided by IDA but lower than those offered by other commercial lending agencies. 

India is currently classified as a "blend" country — defined as one in transition from lower middle-income to middle-income — and is creditworthy for lending from both IDA and IBRD. In 2010, India's per capita national income stood at $1,330, which is higher than the operational eligibility cut-off of $1,175 per capita income. 

The finance ministry, which is lobbying with the bank, has argued that though per capita income has risen, India has the highest number of poor and should, therefore, continue to get IDA support, an official said. According to official estimates, India has more than 350 million people below the poverty line. Last July, the World Bank board approved $1 billion for the National Rural Livelihood Mission (NRLM) — an ambitious livelihood guarantee scheme launched in 2011 under the rural development ministry. The bank is helping 13 poorest Indian states in building institutional systems before the scheme is scaled up at a national level in the next three-five years. "We tried hard to get the funding for NRLM as we knew that getting IDA funding will not be possible after this. There is a huge demand for concessional lending from poorer countries, particularly in Africa," the official said.

NO ’91 CRISIS Rising fiscal deficit disturbing: Subbarao

New Delhi: Reserve Bank of India (RBI) governor D Subbarao has said that rising fiscal deficit and short-term debt levels are "quite disturbing", but the nation is not facing a repeat of the 1991 balance of payment crisis. 

    While the 1991 crisis was triggered by high oil prices almost drying foreign reserves and currency crash, large fiscal deficit and current account deficit are lead indicators of stress building up in the system again, he said at a panel 

discussion on India's economic reforms and development. 

    With Prime Minister Manmohan Singh listening, Subbarao said fiscal deficit in 1991 was 7% and it is ruling at 5.9% in 2012. The current account deficit at 3.6% is higher than 1991 figure and short-term debt at 23.3% of GDP in 2012 is much more than 10.2% in 1991. 

    "That is quite a disturbing picture. Nevertheless, I would still argue that in 1991, an implosion was imminent. In 2012, an implosion is not imminent," he said. AGENCIES

Govt may tweak rules for Mhada colony redevelopment

Mumbai: In a move that may impact redevelopment of many housing societies in the city, minister of state and housing Sachin Ahir said on Wednesday that the state was planning to introduce new guidelines for redevelopment of Mhada colonies 

    Ahir was replying to a discussion in the legislative council. The government permits a floor space index (FSI) of 2.5 for redevelopment of Mhada colonies. The state housing department had imposed a condition that developers either share a portion of the surplus FSI or hand over a share of the built-up tenements to Mhada. While the conditions were imposed to overcome the shortage of house, Ahir admitted that the response to it had not been satisfactory, with only seven developers/societies coming forward. 

    Opposition leader Vinod Tawde demanded a rethink of the conditions. Ahir said that a common ground, which was acceptable to both developers and Mhada, would be attempted, and a decision would be taken within one month.

State orders probe into Ambani home extension

Mumbai: The Maharashtra government on Tuesday ordered a probe by an officer of the rank of secretary into an alleged unauthorized construction carried out on a footpath as part of the extension of Mukesh Ambani's 27-storey home, Antilia. 

    The probe will also look into allegations of 'generosity' shown by the civic body while legalizing work adjoining the billion-dollar structure ''at the cost of public convenience''. But senior civic officials said the controversy was being blown out of proportion and was, in fact, resolved at a meeting between BMC commissioner Subodh Kumar and Ambani late last year. 

    The probe was ordered by state urban development minister Bhaskar Jadhav after allegations in the legislative assembly that the state government was trying to shield Ambani and shrugging off its responsibility. Without committing on a time-frame, Jadhav said: "If investigations prove that illegal work did take place on the setback plot, we will take action and remove the contentious portions." 

HC: No double allotment of flats T he Bombay high court on Tuesday said no one should be allotted more than one flat, while directing the state government to produce a list of cases of double allotment of flats under the chief minister's discretionary quota. P 7 BMC officials had raised doubts over setback land 

Mumbai: Mukesh Ambani's residence Antilia is in the news again, this time over an allegedly illegal extension on an adjoining footpath. 

    The Ambani group had in May 2010 handed over 309.31 sq m of 'road setback' to the corporation in lieu of additional floor space index (FSI), which it consumed in due course. The setback was sought to widen the 18.30mwide Altamount Road. But in the absence of a setback at an adjoining Bank of India building and the presence of large trees on the land, the corporation did not proceed with the widening. 

    Setback land is claimed for public development from the owner of private land in lieu of transfer of development rights (TDR) or FSI. 

    In the meantime, Antilia carried out 'illegal' beautification on the setback, including laying out a lawn, constructing a bund wall, a staircase and a security cabin. On receiving a complaint, the civic body served a notice under section 314 of the BMC Act on December 14, 2010. 

    At a meeting between Ambani and civic chief Subodh Kumar, it was decided that since the BMC could not put the area to good use, it be handed over to Antilia Commercial Pvt Ltd for beautification on the condition that the civic body could cancel the allotment ''on its discretion''. Doubts were raised at civiv meetings over the allotment, made despite there being no policy to hand over setback land back to the owner. 

    "Doubts were raised even by senior civic officials. The government must clarify how the setback was allotted and unauthorized work legalized conveniently," said Eknath Khadse, leader of the opposition in the assembly. 

    The Antilia management said it had constructed a security wall to prevent public car parking in front of two gates of the building, and the grass was planted as a minor beautification measure. 

    The Ambani-Kumar meeting decided the civic body would levy Rs 2.82 lakh as 'pay and park charges' and 1.7 lakh as rent every year. "What is the harm if we get Rs 5 lakh every year for land which is of no use to us in the near future? Once we get the remaining setback, the land will be taken back and put to use," said a senior civic official. 

    The Ambani residence was earlier in the news over charges that it was constructed on Waqf board land reserved for the poor.

Majority wins battle for hsg soc’s redevpt Decision Taken By General Body Final: HC

Mumbai: The Bombay high court has set it in concrete: a decision for redevelopment taken by a housing society's general body will prevail. 

    Brushing aside the objections raised by three members of Jaydeep Apartments Cooperative Housing Society in Borivli (W), Justice S J Vazifdar paved the way for the 27-year-old building's redevelopment and ordered the dissenting three to vacate their flats by April 30, 2012. 
    The three had not attended the society's general body meeting in which the redevelopment decision was taken. 
    "The question of balance of convenience is obviously in favour of the (builder), the society and the 51 members who are waiting for their new flats," said the judge. "If the reliefs sought are not granted, they would, for reasons too obvious to enumerate, suffer grave and irreparable harm and injury." 
    The court was hearing a petition filed by Vaz Infrastructure Ltd seeking eviction of the three flat owners as they had refused to vacate the premises. While ordering the three to vacate their flats, the court said they "would not suffer much harm". "Their interests are safeguarded in every possible manner, especially by their being put in possession of flats which are of greater value than their own flats," said the judge. 
    The court referred to earlier judgments in such cases and held a builder could approach the court seeking implementation of a deal struck between the developer and a housing society when the project fails to take off for various reasons, including opposition from a minority group of flat owners. 
    "The judgments hold that the developer, in such circumstances, can maintain an action for obtaining possession of the property from the society; that in such an 
action, reliefs, including interim, can be granted requiring the dissenting members to hand over possession of their flats to the developer through the society and that the minuscule dissenting minority is bound to comply with the resolutions duly passed by the society for the redevelopment," said the judge. The court said developers were at liberty to launch legal proceedings to claim damages from members who fail to vacate. The judge clarified he was not concerned with the issue as no such application was before the court. 
Jaydeep housing society comprises two wings with an extension and has 54 members. In 2010, following a general body meeting, the society decided to go in for redevelopment and appointed Vaz as the builder. As per the agreement between Vaz and the society, all flat owners were to vacate the premises by July 2011. In court, the three members doubted Vaz's capability to carry out the work. But the court said that 51 members had taken a decision and the three had not challenged the redevelopment proposal itself. 
LEAVING NO ROOM FOR DISPUTE 
Jaydeep Cooperative Housing Society in Borivli enters into a redevelopment agreement with Vaz Infrastructure Ltd following a general body meeting 
Three of the 54 society members object to the choice of builder and refuse to vacate their flats 
Vaz moves court seeking eviction of the three flat owners 
The Bombay high court rules that the redevelopment decision taken by the housing society's general body will prevail and orders the three to vacate their flats

Court rejects trust’s decision not to let ‘non-Marathi’ redevelop SoBo property

Mumbai: Non-Maharashtrian builders may cheat: This was the reason that a trust in the city cited for not calling public bids to redevelop its sprawling property in Girgaum. Last week, the Bombay high court refused to accept the Late Rao Bahadur Anant Shivaji Desai Topiwala Charity's excuse and also set aside the charity commissioner's order approving the trust's decision to appoint a builder chosen by it, essentially a Maharashtrian firm, to redevelop the prime property, Kudaldeshkar Brahmin Niwas. 

    "It is clear that the trustees dealt with it like it was their private property and did not follow any transparent procedure," said Justice G S Godbole, even as he ruled that the reason given by the trustees for not issuing a public ad was not "genuine". 

    The court has ordered the charity commissioner to ask the trust to call for bids by placing advertisements in newspapers. It also set the minimum reserve price for the plot at Rs 6 crore, besides other basic requirements, but none of the conditions included the criteria that the developer should be a Maharashtrian. 

    The Kudaldeshkar Brahmin Niwas, comprising four buildings constructed before 1925, houses around 122 tenants. Most tenants belong to the Kudaldeshkar Adya Gaud Brahmin community. In May 2011, the trust approached four builders and finally signed a deal to sell the plot to Raunak Constructions for Rs 6 crore. The developer was also supposed to give 4,000 sq-ft area to the trust and a 460 sq-ft flat to each tenant. 

    Feeling apprehensive that non-Maharashtrian developers might cheat them, the tenants had requested the trust to sell the land to a Maharashtrian construction firm, a trustee said. The charity commissioner in, September 2011, accepted the reasoning and approved the sale. But challenging the sale, another group of tenants, along with a builder, Siddhivinayak Developers, moved the high court, saying according to the ready reckoner rates, the property was worth over Rs 12 crore, an amount much higher than Rs 6 crore, which was offered by Raunak Constructions. 

    Senior advocate V A Thorat, counsel for Siddhivinayak Developers, claimed that the concept of having only a Maharashtrian builder was not only vague but also obnoxious, as every person staying in Maharashtra was a Maharashtrian. He called the reason for not calling for public bids "an eyewash". Agreeing, the court said, "No material was placed on record before the charity commissioner to prove the basis of the contention that the tenants wanted only a Marathi developer." The judge added Mumbai had many reputed developers of Maharashtrian origin at the helm and the trust had not explained the reason for approaching only four chosen developers. 

    "The entire process has been completed in a hush-hush manner behind closed curtains," said the judge while rapping the charity commissioner for not being vigilant. The court has ordered that bids be called and set some minimum criteria for the tenders. The conditions must include that the reserve price be fixed at Rs 6 crore, the developer will have to hand over a 4,000 sq-ft area to the trust free of cost, tenants would be rehabilitated in 460 sq-ft flats, the builder will set up a corpus fund for the tenant society, and an additional Rs 1 crore should be paid to the trust if extra FSI is approved. 

    THE COMMUNITY 

    Kudaldeshkar Aadya Gaud Brahman community hails from Konkan, Goa and some parts of coastal and central Karnataka. Kudaldeshkar Brahmins follow Shankaracharya's Advait school of philosophy and have their own threecentury-old shrine in Dabholi.

The ready reckoner rate of Kudaldeshkar Brahmin Niwas in Girgaum is over Rs 12 crore, but the trust chose a Maharashtrian developer who offered only Rs 6 crore