Current Economic Statistics and Review For the Week 
Ended September 01, 2007 (35^th Weekly Report of 2007)

Theme of the week:

Trends in Sugarcane Cultivation

Sugarcane has been a traditional and relatively more remunerative crop amongst all non-foodgrain and foodgrain crops cultivated in the country. Assured demand by sugar mills and provision of minimum returns to the growers in the form of fixed procurement price [statutory minimum price (SMP) by central government and state advisory price (SAP)] are the two basic factors that have lured farmers for cultivating this highly profitable commercial crop over the years.

Area covered under sugarcane in the country has increased from 1.71 million hectares in 1950-51 to 4.83 million hectares in 2006-07, registering an average compound annual growth rate (CAGR) of 1.41 per cent during the period of 56 years. The share of sugarcane in total cultivated area has gone up marginally to 2.5 per cent in 2006-07 from 2.3 in 2003-04.

While sugarcane production has risen from 57.1 million tonnes to 345.3 million tonnes marking an average CAGR of 2.97 per cent, the yield has improved at an average CAGR of 1.20 per cent to 66.8 tonnes per hectare from 33.4 tonnes per hectare in 1950-51. A glance at decadal CAGR (Table 1) reveals a cyclical pattern in terms of cultivation, production and productivity of sugarcane, growth in respect of which has been the highest during 1950-51 to 1959-60 partly due to base effect and has decelerated in the consequent decades. The CAGR in terms of area covered and production have been the lowest during 2000-2007 period. This can be attributed to factors like deficient rainfall experienced by major sugarcane growing states in 2002-03, mounting up of cane-price arrears resulting in lower returns to cane growers and lower cultivation of sugarcane, and spoiling of crop due to pest attack in 2003-04. However, favourable monsoon situation during kharif sowing season 2006 facilitated the highest ever coverage of 4.8 million hectares and has witnessed a record production of 345.3 million tonnes (4^th Advanced Estimate for 2006-07) in the sugar year 2006-07.

Sugarcane Production in India

The major states producing sugarcane in India can be classified under two broad agro-climatic regions, viz., tropical and sub-tropical. While tropical region includes western and southern states like Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka and Gujarat, northern states like Uttar Pradesh, Punjab, Haryana, Bihar and Uttarnchal form a part of sub-tropical region. Uttar Pradesh has always been the topmost sugarcane producer contributing around 40-50 per cent of the total production. In 2005-06, Uttar Pradesh has accounted for 45 per cent (125.5 million tonnes) of the total sugarcane production followed by Tamil Nadu and Maharashtra with their corresponding share standing at 13.6 per cent (38 million tonnes) and 13 per cent (36.2 million tonnes), respectively (Chart B). In terms of productivity, however, Tamil Nadu has recorded the highest yield (110.5 tonnes per hectare) during the same period. In fact, all the major sugarcane-producing states in the tropical region have registered better yields compared to those in the sub-tropical region (Table 2). Application of new varieties of sugarcane replacing the old ones seems to have improved productivity among the tropical states; on the other hand, vulnerability of crop to various crop diseases and pest attacks and a wide range of natural calamities like drought, salinity, water logging, and extreme temperatures appear to have deteriorated sugarcane yields in the sub-tropical region. At the international level, India ranks second in sugarcane production after Brazil and had a share of around 22.4 per cent of the world sugarcane production in 2003.

Sugarcane is the only source of sugar production in India unlike in western countries where sugar production is primarily sourced from sugar beet. The Indian sugar industry is the second largest agro-based industry after the cotton textile industry. Unlike the cotton industry, sugar industry is a rural industry and has been one of the largest employment-generators in the rural India .

The Sugar Economy

The sugar industry consists of two major segments, viz., registered sugar mills in the organised sector that produce centrifugal sugar (i.e. white refined sugar) and small-scale manufacturers of traditional sweeteners like gur and khandsari in the unorganised sector. Co-existence of these two segments affects availability of sugarcane to sugar mills, especially in periods of low output as manufacturers of gur and khandsari are free from controls and taxes that are applicable to the sugar sector and can pass on a part of cost to customers, whereas sugar mills have to follow certain cost-return margins fixed by the government. As per ICRA report (2006), about 68 per cent of the sugarcane produced in India is utilised for manufacturing centrifugal sugar, while the balance is used for producing gur and khandsari, as well as seeds and feeds.

The organised segment producing white refined sugar comprises three sub-segments, viz., private sector, public sector and cooperative sector. Cooperative sugar mills have traditionally dominated the Indian sugar market, contributing almost 70 per cent of the total sugar production in the late 1980s and nearly 60 per cent of the total sugar production in 1999-2000 (ICRA 2006). However, with the gradual deregulation of the domestic sugar market by the government, cooperatives’ share in total sugar production has diminished gradually. For instance, as per the ICRA report (2006), the share of cooperative mills in total sugar production has fallen from around 57 per cent in 2000 to 36.7 per cent in 2005, while that of private and public undertakings taken together has risen from 43 per cent to 63.3 per cent during the same period (Table 3).

Sugar production in the country has increased at a CAGR 5.2 per cent from 1.1 million tonnes in 1950-51 to 19.3 million tonnes in 2005-06. Sugar production remained below 5 million tonnes till 1980-81, except for the year 1977-78 when it had touched 6.5 million tonnes on account of an all time high level of sugarcane output (177 million tonnes) till that date. During the late 1990s, sugar production ranged between 6 to12 million tonnes and got accelerated during 1990-2000 remaining between 10-18 million tonnes. The pace of growth continued till the sugar year 2002-03 (October – September), when the country achieved an all time high-level production of 20.1 million tonnes. However, due to drought in major sugar-producing states like Maharashtra, Karnataka and Tamil Nadu and wooly aphids pest infestation, sugar production fell to around 14 million tonnes and 13 million tonnes in 2003-04 and 2004-05 sugar seasons, respectively. While sugar production recovered to stand at 19.3 million tonnes during the sugar season 2005-06, it has been estimated to record an upsurge of 17.5 per cent to touch 22.7 million tonnes in 2006-07. The increase in sugar production during the last and the current sugar seasons is mainly due to good monsoon and increases in sugarcane area under cultivation.

State-Wise Picture

A glance at state-wise sugar production reveals that Uttar Pradesh has emerged as the top- most sugar-producing state in sugar year 2005-06, with its share touching around 30 per cent (5.8 million tonnes) of total production, followed by Maharashtra contributing almost 27 per cent (5.2 million tonnes), though the situation was just the opposite almost a decade ago with Maharashtra holding the top position (a share of 33 per cent) and Uttar Pradesh ranking second (27 per cent) (Table 5). However, it can be observed that production by the states in the tropical region has been higher compared to those in the sub-tropical region in spite of the states from sub-tropical region having higher cane output. It is the higher sugarcane yields among the tropical states that have led to better recovery rates, and in turn it has resulted in higher sugar output among those sates. For instance, recovery rate in Maharashtra and Gujarat have ranged between 10.5-11.5 per cent, that in Karnataka within 9.5-10.5 per cent during 1994-95 to 2005-06. On the contrary, recovery rates have remained lower than 10 per cent among the major sugar-producing states in sub-tropical region, except for Haryana (Table 5).

In Relation to the Global Picture-and Export – Import Trade

At the global level, India ranks second in the sugar production after Brazil . As per ICRA (2006) report, India is estimated to have contributed around 15 per cent (22.3 million tonnes) to the world sugar production in 2006-07. However, lower recovery rates in India have been affecting its competitiveness in the world market.

In spite of being the second largest producer, India is not a major sugar exporter. This is partly because yield rates are low and partly because of sizeable domestic consumption by the large population. Sugar exports from India used to be routed through notified export agencies, viz., Indian Sugar & General Industry Export Import Corporation Ltd. (ISGIEIC) and State Trading Corporation of India Ltd. (STC) till January 15, 1997 after which exports have been decanalised and carried out through the Agricultural and Processed Food Products Export Development Authority (APEDA) under the Ministry of Commerce. However, the central government has removed the quantitative ceiling on sugar exports since April 2001, allowing various sugar mills/exporters to carry out export operations and hence sugar exports have picked up pace since the financial year 2000-01 onwards; these continued till 2002-03 but once again declined due to fall in sugar production in the country from 2003-04 onwards (Table 6).

Sugar imports, on the other hand, remained sluggish during financial years 2000-01 to 2002-03 on account of rise in the domestic availability and increase in custom duty (the custom duty was raised to 60 per cent in February 2000 from 40 per cent in December 1999 apart from levying countervailing duty of Rs 850 per tonne). Sugar imports, however, rose in the subsequent years in order to meet the rising demand in the domestic market in the backdrop of fall in domestic production (Table 6).

Continuous increase in sugar demand started putting upward pressure on domestic sugar prices and to curb this rise in sugar prices, the government banned export of sugar with effect from June 22, 2006, excluding exports permitted through ISEC subject to the quantitative ceiling notified by the Directorate General of Foreign Trade (DGFT) from time to time and export of sugar against irrevocable letters of credit (LC) opened before June 22, 2006 and export of sugar that has left the factory premises before June 22, 2006 and in port premises or in transit after verification of certain documents. The government also permitted sugar imports at zero duty for the period June 23 to September 30, 2006 and banned sugar exports effective July 21, 2006.

However, in view of the estimated bumper production of sugar in sugar season (October-September) 2006-07 following the weakening of domestic prices, the government lifted the ban on exports on January 23, 2007 allowed exports against advance licenses. The government further relaxed the ban and has allowed export of sugar under open general license (OGL) vide Notification dated January 23, 2007. The export ban was lifted on January 23, 2007 following the weakening of domestic prices in the wake of a bumper sugar production this marketing year.

However, lifting of the ban has failed to benefit the exporters because the decision was delayed, and by that time the Indian rupee has started appreciating against the U.S. dollar even as the international sugar prices have been falling.

Bumper Crop – and Policy Responses

Record output of sugarcane has become a major cause of concern for sugar industry in the domestic market as it has resulted in excess supply of sugar in the domestic market, lowering prices and swelling up of stocks, thus eroding the profitability of sugar mills. Mills are under immense pressure from farmers to crush additional cane despite adverse economics. Consequently, the sugar industry is facing a severe financial crisis resulting in delays in payments to the farmers. Sugar mills in Uttar Pradesh and Maharashtra , the country’s two largest sugarcane-producing states, are forced to shut down operations ahead of schedule to protect losses to some extent.

To rescue the sugar industry, the central government has already taken various steps, which are as follows:

§         Build up of buffer stocks of two million tonnes of sugar and providing an export incentive of Rs. 1,350 ($32) to Rs. 1,450 ($34) per tonne of sugar to mills, both to be paid out of the government’s Sugarcane Development Fund (SDF). The buffer stock would be allocated to individual mills that will have the responsibility of maintaining them. The mills will use the warehouse receipt for the allocated buffer stock to secure loans from banks to make timely payments to farmers for the purchased cane. The government will reimburse mill owners’ interest costs, storage, and insurance, associated with the buffer stock maintenance.

§         Approving the financing of an additional 3 million tonnes of sugar buffer, over and above the 2 million tonnes created earlier, which would require the provision of funds worth Rs 570 crore, which would be used from the Sugar Development Fund (SDF).

§         Extending the time limit given to the sugar industry for repaying bank loans

§         Provision of additional bank credit of about Rs 630 crore by getting their 15 per cent margin money released against the pledged buffer stock (assuming an average valuation of Rs 14,000 per tonne). Following this, the Reserve Bank of India has already authorised banks to create a fund of Rs 798 crore for the sugar industry, which would have to be used exclusively for payment of cane arrears to farmers. Under this arrangement, the central government would release a subsidy of Rs 378 crore out of the Sugar Development Fund for crediting to the account of individual sugar mills and banks have been asked to waive margin requirement on the buffer stock inventory, which translates into additional credit entitlement for the sugar industry assessed at Rs 420 crore.

§         Announcement of relief package that would increase the moratorium period till March 2010 and provide financial assistance to sugar units that missed the current crushing season.

§         The export subsidy on sugar announced by the central government in March 2007 would not apply to mills exporting sugar under the advance licence ( AL ) scheme. Further, the subsidy for exports under the open general licence (OGL) would apply only to exports done on or after April 19, 2007, and up to April 18, 2008.

The central government has also announced some non-cash incentives to encourage exports. According to this, the mills exporting sugar would be exempted from supplying the same amount to government at a highly subsidised rate for distribution to the poor under the public distribution system (PDS). These incentives are, however, not applicable to exports under preferential quota allotted by importing countries. These incentives were to be given only on export of sugar made during the period January 3, 2007 to July 2, 2007 under Advance Authorisation Scheme and for exports under the Open General Licence Scheme for the period January 23, 2007 to July 22, 2007. The government has decided to extend the period of these incentives by six months. Accordingly, the period of incentive stands extended from July 3, 2007 to January 2, 2008 for exports under Advance Authorisation Scheme and from July 23, 2007 to January 22, 2008 for exports under Open General License Scheme or till further orders whichever is earlier.

Some state governments have also announced relief measures (tax relief and subsidies) to mills to enable them to make timely payments to cane farmers. Several states have announced tax reliefs for late season crushing.

For instance, the government of Maharashtra has announced a waiver of sugarcane purchase tax for October-September 2006-07 for sugar industry in the state. At present, sugar mills are required to pay 3 per cent of sugarcane prices as purchase tax. The waiver of purchase tax is expected to result in substantial savings for the sugar industry, compensating for some the losses faced by it this season. The sugar factories that have already paid the purchase tax for this period would be compensated next year. The government has also announced a hike of Rs 20 lakh in the legislators' development fund, which would amount to Rs 1 crore compared to the earlier Rs 80 lakh.

It has approved a special package for the sugar industry. The government is expected to bear an additional burden of over Rs 200 crore on account of the package, which comprises an export subsidy of Rs 1,000 per tonne of sugar for 2007-08, a transport subsidy of Rs 2 per km per tonne and a subsidy for sugar recovery loss (on an average Rs 130 for 1 per cent reduction in the sugar recovery). Provision of this package has been in addition to the government’s decision to exempt sugarcane from the purchase tax. In addition to this, with effect from April 25, 2007 sugar mills in Maharashtra would no longer offer sugar to exporters at the last-declared floor of Rs 1,190 per quintal f.o.r (free-on-rail). The government of Maharashtra has dispensed with the system of fixing export floor prices on a weekly basis. Factories can now fix their own rates, so long as they are broadly compatible with prevailing London white sugar rates.

A KPMG report, ‘The Indian Sugar Industry Sector Roadmap 2017’ has suggested creating a ‘strategic stock’ for sugar by disposing of the existing monthly release mechanism that governs sugar sales to maintain prices in a sustainable band. According to the report, commissioned by the Indian Sugar Exim Corporation (ISEC), the strategic stock would involve the government or an independent body intervening as a market participant in order to maintain sugar prices within a defined band. The strategic stock intervention would get initiated through sugar purchases when the sugar price falls below the band, thus increasing the prices and vice-a-versa. The strategic stock could be funded through a special purpose vehicle, with the sustainable price band being defined by the government and the day-to-day operations of procurement and release of stocks being vested with an independent agency.

(*This note has been prepared by Miss Pallavi Oak)

References

§         Indian Institute of Sugarcane Research , www.iisr.nic.in

§         ICRA Sector Analysis, ‘The Indian Sugar Industry’ (2006), July

§         Ministry of Agriculture, ‘Agricultural Statistics At a Glance 2005 and 2006’

§         Ministry of Agriculture (2007), ‘Reports of the Commission for Agricultural costs and Prices for the crops sown during 2006-07 season’

§         Ministry of Consumer Affairs, Food and Public Distribution, ‘Annual Report 2006-07’

§         Various Media Sources

Highlights of  Current Economic Scene

AGRICULTURE  

Kharif sowings in the current season has been completed by about 95 per cent and has revealed that sowing pattern has drastically changed because most of the farmers have responded to the prices of the crops rather than the rainfall. Rice acreage have declined marginally by 319.04 lakh hectares as compared to 322.76 lakh hectares from the corresponding period of last year, with states like Tamil Nadu, Punjab and Andhra Pradesh facing decline in the cultivation of about 17 per cent, 2 per cent and 6 per cent, respectively. On the other hand, the area under coarse cereals, especially maize and bajra, prices of which have gone up by 6 per cent due to demand from poultry and other industries. The total coverage of kharif oilseeds has also improved nearly by 8 per cent this year, i.e., about 167.93 lakh hectares as against that of 155.41 lakh hectares a year ago, with groundnut gaining 13 per cent and soybean 9 per cent in cropped area. Even crops such as niger and castor have been planted on about 24 per cent and 17 per cent more area, respectively. While, kharif pulses acreage is reckoned to have increased with their coverage increasing by about 7 per cent, i.e., 112.85 lakh hectares as compared to 105.05 lakh hectares as per the estimation. Area under moong has gone up by 13 per cent from last year and 35 per cent from long period average. Urad has gained about 12 per cent in acreage and arhar by about 9 per cent. Cotton has been sown on about 87.7 lakh hectares, which is 6.7 per cent more than last year’s 82.21 lakh hectares. Whereas among other commercial crops, the area under jute and mesta has fallen down marginally by about 3.5 per cent, while sown acreages under sugarcane have risen by 6 per cent to 52 lakh hectares despite the glut in the sugar market.

The central government has expressed its concern over the rising prices of onion, which have influenced the prices of other vegetables like tomato. Onion prices have started rising by the second week of August. For instance, onion prices at Lasalgaon in Maharashtra have risen in the range of Rs 1,000 to Rs 1,716 per quintal, while at Pimpalgaon Baswant, onions have been auctioned at prices ranging between Rs 1,255 to Rs 1,751 per quintal. These situations seem to have occurred not because of shortage of the product but due to disruption in the transportation. Subsequently, late arrivals of the product have affected the market directly causing the wholesale price inflation rate of commodities to increase to 4.10 per cent on August 11 from 4.05 per cent as per previous week However, due to fresh arrivals of onions in different parts of the country, their prices have started declining gradually in the following weeks of August 2007.

Wheat prices, which are quoting around Rs 1,050 per quintal, are set to go up by at least 10 to 15 per cent by Diwali, as stocks with flour mills would get exhausted and fresh demand would crop up by that time. Meanwhile, wheat prices would rise much more than expected as international prices are moving up at a faster rate, (quoted around US $325 per tonne) and have touched their peaks in recent times. Prices are rising because Canada , Europe and Australia have cut their crop estimates due to bad weather and global wheat inventories are also at their lowest since 1979.

According to, Solvent Extractor’s Association of India , the country would import 5-6 lakh tonnes of various vegetable oils during the period August-October 2007. While, the import ratio has tilted in favour of palm oil products, whose share would increase to 68 per cent in 2006-07, from 58 per cent in 2005-06 and the rest are soft oils, mainly consisting of soyabean oil. It has been projected that total oil import in oil year November-October 2006-07 is likely to be 4.8 million tonnes, as compared to 4.4 million tonnes of last year. During the period November - July 2006-07, India imported 3.30 million tonnes (mt) of edible oils consisting of 2.23 mt of palm products and 1.07 mt of soft oils, reporting an increase of 8 per cent from the same period a year ago.

As per Solvent Extractors’ Association of India (SEA), the demand for edible oils in the country is expected to increase by 6 per cent per annum, from the current 12 million tonnes to15.6 million tonnes by 2010 and further to 21.3 million tonnes by 2015, assuming per capita consumption increases by 4 per cent and population growth by 1.8 per cent. This would take place because domestic vegetable oil production, which is around 7 to 8 million tonnes, is not sufficient to meet domestic demand. Oilseeds production for the current oil year (COY) ending on October 2007 is estimated to 23.2 million tonnes which is down by 4.7 million tonnes from the previous year, equivalent to 7.7 million tonnes of vegetable oils. Total availability of vegetable oils from domestic production and import is estimated to 13.50 million tonnes during 2006-07. The overall imports of vegetable oils, edible oils, vanaspati and non-edible oils during the current year are projected to be around 5.8 million tonnes compared to 5.4 million tonnes a year ago. The share of palm oil is expected to increase to 4.15 million tonnes whereas that of soft oil such as soy oil is likely to decrease to 1.65 million tonnes. The total imports would be 4.7 - 4.8 million tonnes for the entire year as compared to 4.4 million tonnes in 2005-06. India has imported 3.30 million tonnes of edible oils consisting of 2.23 million tonnes of palm products and 1.07 million tonnes of soft oils during November-July 2006-07, registering a rise of 8 per cent over the previous year.

As per India Trading Company, Indian sugar exports have crossed 2 million tonnes in the crop year of 2006-07 and is expected to reach 5 million tonnes in 2007-08 if weakness in the rupee sustains for the longer period and international sugar prices continue falling further. Notwithstanding this, the central government is expecting sugar exports much less than 5 million tonnes, i.e., around 3 million tonnes in 2007-08.

Jaggery producers from all over the country have demanded production subsidy from the central government, in line with the sugar sector. Industrial bodies, including Muzaffarnagar-based Federation of Gur Traders, are in the process of finalising the proposal, which would be submitted to the government for recommendation. As Jaggery sector has been under tremendous price pressure nation-wide since when Centre allowed leftover standing sugarcane crop to be converted into jaggery. In Maharashtra state alone, prices have declined by Rs 50 per tonne over the last fortnight as quoted in the range of Rs 1100-2700 per tonne depending upon its quality, quantity of purchase and payment terms. Even though, the state government has compensated 52,400 hectares of the standing crop at Rs 25,000 per hectare, accumulating Rs 131 crore, then too the disposal of the crop have turn into big worry for farmers and the government. Where as in Uttar Pradesh, however, the benchmark Chaku variety sweetener, which did not attract any demand, is quoted in the range of Rs 460-520 per 40 kg. Although a marginal demand has been seen in low quality jaggery that is priced between Rs 465 and Rs 470 per 40 kg, demand has dried out for good quality. While, Sugarcane is sold at Rs 50 per tonnes in the South to clear the standing crop, which is mopped up by the jaggery producers from western UP reducing the overall production cost.

As per Associated Chambers of Commerce & Industry (Assocham), Tobacco exports would increase to Rs 1605 crore towards the end of current fiscal from about Rs 1506 crore of last year. Tobacco growers are in position to export more than 60 per cent of their produce in view of rising demand in countries like Russia , Vietnam , the UK , Germany and Belgium .

As per the notification given by Director General of Foreign Trade (DGFT) on August 29 2007, Mangalore Port would be the only port that would proclaim to import the Arecanut commodity and it would fix floor price for the same. So that the prices in the domestic market would remain stable and the threat of large-scale import from other nations would be curbed.

As per the Marine Products Exports Development Authority (MPEDA), marine exports from the country have crossed Rs 8,000 crore mark for the first time, it have touched to $1.85 billion during 2006-07, an increase of 12.69 per cent over the previous year. In terms of quantity, seafood exports increased by 19.62 per cent to 6.12 lakh tonnes from 5.12 lakh tonnes a year ago and value realisation in terms of rupees has also increased by 15.43 per cent to Rs 8,363 crore. Meanwhile, China is emerging as strong buyer of Indian seafood exports, at present it is the top importer of Indian seafood in terms of volume and its share in value-terms has gone up by13.83 per cent. Frozen shrimps have constituted the biggest contributor in terms of value in the total exports and have accounted for 53.88 per cent of the total value of exports. At the international level, Europe has continued to be the largest exporter, accounting for 33 per cent of the total value of exports, at $611 million and is followed by Japan with 16.15 per cent at $299 million and the US with 16.03 per cent at $297 million.

Council for Leather Exports (CLE), the leading national body of the Indian leather industry, has signed a memorandum of understanding (MoU) with the British Footwear Association (BFA), UK for further the technical and sector-wise cooperation between the two business communities. The agreement would lead to build up capacity in critical areas of production, management. Important issues like implementation of dispute settlement mechanism through mutual consultations, exchange of information on rules of origin in free trade areas, development of standards, conformity assessments and mutual recognition arrangements would also get proper attention.  

Central Silk Board (CSB) has set a target to increase bivoltine silk production to 5,000 tonnes per annum at the end of 11^th plan period from the current level of 1,095 tonnes. It has been projected to achieve 90 per cent of its target from the southern states like Tamil Nadu, Andhra Pradesh and Karnataka. Andhra Pradesh government has set a higher target to increase its bivoltine raw silk production by 2,000 tonnes per annum during the 11^th plan period from 193 tonnes produced in the financial year 2006-07. To achieve this target, the state has decided to increase its cocoon production to 12,000 tonnes per annum from 3,150 tonnes as per the current fiscal year. The state government of Karnataka has fixed the target to push up bivoltine raw silk production to 1,500 tonne per annum during the 11^th plan period from 358 tonnes in 2006-07 by creating new sericulture clusters in non-traditional parts of the state. The state is likely to increase the area under sericulture to 1.30 lakh hectares during 11^th plan period from the current 97,647 hectares. Tamil Nadu government has planned to promote bivoltine sericulture by following ‘cluster approach’ to expand its mulberry areas, for which it has identified 43 clusters and is expected to increase its production by more than 1,500 tonnes per annum during 11^th plan period from 296 tonnes in 2006-07.

Industry

Pharmaceuticals

India ’s second largest pharmaceuticals company, Dr Reddy’s Laboratories is planning to develop new biological entities (NBEs) or new drug molecules from living organisms. NBE discovery and development will be costlier and riskier vis-à-vis new chemical entities (NCEs) or small molecules developed by pharma companies through chemical processes.

 Automobiles

Swedish car major Volvo Car Corporation (VCC) is planning to launch its two-flagship products S80 sedan and sports utility vehicle XC90 SUV, in India starting at Rs 38 lakh and 45 lakh, respectively.

Steel

Steel prices are expected to rise in September 2007 by $15-20 a tonne, following a steady rise in global steel prices resulting from the increase in the price of the scrap and iron ore.

Infrastructure

The government has roped in CRISIL Infrastructure advisory, Deloitte Touche Tohmatsu India , Ernst and Young pvt ltd, RITES and IDFC as transaction advisers for infrastructure projects routed through the public private partnership (PPP) mode. They are a part of 12-member advisory panel, which has been set up by the finance ministry to facilitate private funds in such projects. The services of these consultants would be available to the centre and states, municipal authorities and other agencies that are undertaking PPP transactions.

Natural Gas

GAIL ( India ) has sought review of price of natural gas produced by the consortium of Reliance Industries, BG Group of UK and Natural Gas Corp from Panna-Mukta and Tapi fields, off the Mumbai coast. In March 2005, petroleum ministry allowed PMT Joint venture (JV) to supply only 6 million standard cubic meters per day of gas to GAIL for one year at $3.86 per mBTU. A year later it allowed PMT JV to supply gas in excess of 4.8 mmscmd out of the total available gas at the rate of $ 4.75 per mBtu for two years ending March 31,2008. In its letter to the petroleum ministry GAIL has stated that when the of gas from KG basin is being looked into by the government, in case of GAIL, there is enough scope for review of price paid to PMT JV at the rate of $4.75 per million British thermal unit and also for supplying the entire volume of gas produced from PMT fields to GAIL.

Oil and Natural Gas Corporation has entered into a memorandum of understanding with global oil major British Petroleum for collaboration in exploration and production (E&P) business in India and abroad.

Aviation

 The National Aviation Company of India (NACIL), which is formed after the merger of Air India (AI) and Indian Airlines (IA) has decided to make New India Assurance and ICICI Lombard the co-insurer. The total exposure value of the deal will be $ 5-6 billion for 2007-08.New India Assurance has formed a consortium with other state run non-life insurance companies comprising Oriental General Insurance, National General Insurance and United India General Insurance. These four together would share 80 per cent of the total risk while the rest 20 per cent by ICICI Lombard-led consortium comprising Bajaj Allianz, IFFCO-Tokyo and Reliance General Insurance Company.

Coal

Oil India has decided to set up a $2.5 billion coal liquefaction project in the north-eastern region, in collaboration with Headwaters CTL (HCTL) of USA . Total requirement of coal for this project has been pegged at 120mt over the project life of 30 years.

Power

Bharat Heavy Electricals (BHEL) has bagged a contract for a 500 MW nuclear power plant at Kalpakkam in Tamilnadu being set up by Bhartiya Nabhikiya Vidyut Nigam. Under international competitive bidding BHEL has won a contract for the turbine generator and secondary side equipment for the first Prototype Fast Breeder Reactor of 500MW rating. The unit is scheduled for commissioning during the 11 th five-year plan. Of the 17 nuclear power generating units operating at six locations in the country BHEL contributes 3,280 MW, which is 80 per cent of India ’s Installed nuclear capacity of 4,120 MW. 

State-run Power Grid Corporation of India wishes to raise maximum Rs 2,984 crore with an initial public offer of 5.7 crore shares. The offer will be priced in a band of Rs 44-Rs 52 a share. After the proposed issue government’s holding in the firm will fall to 86.36 per cent from 100 per cent. The money to be raised would be used to fund 15 transmission projects worth Rs 12,700 crore. The company will also focus on diversified businesses including telecom.

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) declined by 3.94 percent for the week ended August 11,2007. During the comparable week of the earlier year, it was 5.12 per cent.

During the week under review, the WPI rose to 213.6 from 213.4 in the previous weeks’ level (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), rose by 0.5 percent to 224.7 from its previous week’s level of 223.5, mainly due to higher prices fruits and vegetables, bajra, masur,and gram.

The price index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) registered remained unchanged at the last weeks level.

The index of ‘manufactured products’ group declined by 0.1 per cent to 185.6 from 185.7 during the week under review. The lower prices of  edible oils, khandasari etccontributed for the down trend in the prices of manufactured products.

The latest final index of WPI for the week ended June 23, 2007 has undergone upward  revision; as a result both, the absolute index and the implied inflation rate stood at 212.4 and 4.32 per cent as against the provisional data of 212.0 and 4.13 per cent.

Banking

The RBI has allowed urban co-operative banks to shift their branches from one city to another within the area of operation.

Under the powers conferred by section 45-1A (6) of the Reserve Bank of India Act, 1934, the RBI has cancelled the certificate of registration of Financial Eyes (India) Ltd for having carried out business of a non-banking financial institution.

The RBI has cancelled the certificate of registration granted to the New Delhi-based Bhasin Credit Aid Ltd. The company will not be able to transact any business of a non-banking financial institution.

The RBI has sanctioned the scheme of amalgamation of Lord Krishna Bank with Centurion Bank of Punjab Ltd. The scheme will come into force with effect from August 29, 2007.

Financial Markets

Capital Markets

Primary Market

Banglore-based Purvankara Projects, which was listed on the stock exchange at a 22.50 per cent discount on August 30, was the second real estate IPO to be listed at a discount to its issue price during this calendar year, reflecting growing investor fatigue to real estate IPOs. It debuted on the NSE at a discount of 22.5 per cent at Rs 310, against the offer price of Rs 400 and closed at Rs 362.30. Traded quantity on the NSE and the BSE was 1.08 crore shares and 71.23 lakh shares, respectively.

Kaveri Seed Company Ltd, an agri-input company, proposes to tap the markets with an initial public offering of 40 lakh equity shares of face value Rs 10 each. The issue is to be made through a 100 per cent book building process, opens on September 6 and closes on September 11. The price band has been fixed at Rs 150-170. Of the total issue, 2 lakh shares have been reserved for eligible employees. Therefore, the net issue to the public is 38 lakh equity shares. The total issue will constitute 29.20 per cent and the net issue will constitute 27.74 per cent of the fully diluted post issue paid-up capital of the company. The equity shares are proposed to be listed on the BSE and the NSE.The company plans to raise between Rs 60 and Rs 68 crore.

The volatility in the stock market appears to have hit public issue mop-ups in August. Indian companies mobilised only about Rs 665 crore from IPOs and follow-on public offerings (FPOs) during August, a drop of almost 82 per cent from the July level, but above the year’s low seen in May.

There were five IPOs during the month— Take Solutions, KPR Mill, Motilal Oswal Financial Services, Indowind Energy and Magnum Ventures were issued through book building process — while the month’s sole FPO by Dagger Forst Tools raised Rs 16.23 crore from the market.

On August 31, lack of interest from retail investors had forced IT People ( India ), a provider of manpower to IT and BPO industry, to withdraw its ongoing FPO, resulted in its stocks plunging by 9.88 per cent to Rs 31 on the BSE. The company said that while the FPO had received favourable response from Qualified Institutional Buyers (QIBs) and High Networth Individuals (HNIs), the absence of adequate interest from retail investors (in spite of the issue being completely underwritten by the Book Running Lead Managers) led the company to withdraw its issue.

Secondary Market

After a tumultuous month’s trading in August - the benchmark BSE sensex swung back from a low of 13,779.88 (August 17) to a high of 15,318.60 Friday, 31 August.  The S&P CNX Nifty was up 169.4 points to 4,464 in the week.

Private equity player Baer Capital Partners plans to launch $ 250 million India-dedicated hedge fund by the year-end. Baer Capital is the first hedge fund to announce its India plans, after the recent proposal by the Securities and Exchange Board of India allowing direct entry of hedge funds.  The fund is likely to be called Beacon India Growth Fund. 

New share listings in August have borne the brunt of the market turmoil with five of the 14 companies debuting at a discount to the issue price.  Market watchers say that perception about the pricing and the subscription garnered are two important factors that influence the performance of an issue on listing day and subsequently. Most issues including IVR Prime Urban, Alpa Laboratories, KPR Mills and Puravankara Projects that listed at a discount are trading in red territory. Only SEL Manufacturing Company has managed to lift itself up after a weak opening.

The UB Group has got regulatory approval from the Securities & Exchange Board of India (Sebi) for its open offer of additional shares of Deccan Aviation Ltd. SEBI had sought financial details on the UB Group would fund the open offer and these details had been submitted, following which Sebi gave its approval, Dr Vijay Mallya, Chairman of the UB Group, told mediapersons at the launch of NDTV's lifestyle channel. The alcoholic beverage major is the promoter of Kingfisher Airlines. UB Group had in July postponed an offer to increase stake in Deccan Aviation, because of a delay in getting approval from Sebi.

Trading at Hyderabad Stock Exchange (HSE) came to a halt for the second consecutive day on August 30 as it is now de-recognised as per the Securities Contracts Regulations 2006 notified by Sebi. The 64-year-old HSE was required to complete the demutualisation scheme on or before August 28 and it failed to do so because of lack of response from investors to its offloading of 51 per cent of outstanding capital. According to HSE officials the exchange had not received any formal communication from Sebi on its status. But as per the Act, HSE was automatically deregistered from August 29. Sebi is not required to communicate the same immediately.

The Sebi on Tuesday approved the open offer of Vedanta Resources for Sesa Goa. The open offer is being made by Vedanta Resources, a diversified industrial group with interests in metals and mining, to shareholders of Sesa Goa, after it bought 51 per cent stake held by Japan’s Mitsui & Co in the Indian company for Rs 4,086 crore in April this year.  The price of the open offer is Rs 2,036 a share, the same price Vedanta paid to Mitsui for the acquisition of the majority stake.

In its Annual Report, the RBI said that further deterioration in sub-prime delinquencies could lead to reassessment of risk by investors across products and markets and retrenchment of capital from the emerging market economies (EMEs), given the contagion and herd mentality. As a growing number of hedge funds invest in the country, the capital inflow can be volatile, given the nature of the funds, said the RBI. Private equity funds, another major source of capital for EMEs, are sensitive to interest changes. Therefore, any monetary tightening in the major economies could lead to a slowdown of investment from private equity funds, the RBI pointed out. The RBI said while its monetary policy stance would continue to be that of maintaining price stability and anchoring inflation expectations, in this context, financial stability would assume greater importance in the months to come.

Derivatives

The spot Nifty closed at 4464 on Friday with the September series settled at 4429 while the October series was settled at 4410 and November at 4397. Open interest in the November series has already hit 41,000-plus, which is quite impressive.  Among the other indices, the September Junior was settled at 8620 with the spot Junior held at 8633. The September Bank Nifty was settled at 6682 with the spot at 6676. The CNX IT was settled at 4792 with the spot closing at 4813. Apart from the Nifty, none of the other indices have any liquidity outside of the near-term contract. 

The Nifty September-October differential is a little larger than one would expect and this is a short settlement. So arbitraging with a calendar bear spread is possible . However, one would prefer to wait a week or so before taking a short September-long October.The differential is unlikely to disappear. The CNX IT contract normally trades at premium to the spot so, a long position here is reasonable. The market rebounded strongly through settlement week as short-covering triggered a technical recovery.  The Nifty closed at 4464 points for a rise of 6.54 per cent while the Sensex closed at 15318.6 points for a rise of 6.19 per cent. The Defty was up 6.93 per cent as the rupee also strengthened. The Nifty Junior jumped an incredible 8.14 per cent. 

The recovery was across the board with the BSE 500 rising 6.64 per cent and a positive advance-decline ratio. This was despite FIIs being net sellers until the end of the settlement on Thursday.  Domestic mutual funds were net buyers and so were operators and retail traders. The Bank Nifty also jumped 8.08 per cent despite bearish pronouncements from the RBI. The CNX IT rose 5.09 per cent despite the adverse rupee situation. Volumes were average for a settlement week. 

Government Securities Market

Primary Market

The government of India has announced the sale (re-issue) of 8.33 per cent 2036 and 8.20 per cent 2022 for Rs. 3,000 crore and Rs.4,000 crore on September 7, 2007.

The primary market for short-term papers such as certificates of deposit (CDs) and commercial papers will remain abuzz with issues primarily from banks and corporates. Banks are rushing to raise deposits before interest rates harden. 

In fact, at the weekly 91-day T-Bill auctions, the bids amounted to Rs 7,552 crore, though only Rs 3,500 crore was accepted. But the cut-off yields firmed to 7.10 per cent, well over the previous week’s yield of 6.73 per cent.

Secondary Market

Trading interest in the market will emerge from banks, which have cornered the gilts portfolio at lower prices. These banks will engage in trade at least before the second quarter ends to avoid a further upward movement of yields. A negative trigger for the market has been the robust growth figure of 9.3 per cent. Banks feel that higher growth is likely to fuel inflation, which, in turn, may lead to monetary-tightening measures by the RBI. 

Bond yields remained steady during the week as traders looked for cues from the Reserve Bank of India ’s reactions to the uncertain conditions in the global financial markets. But traders said that the renewed flows from foreign institutional funds provided some comfort. FIIs were largely drawing support from the liquidity extended by the Federal Reserve Board to those troubled by the sub-prime meltdown. The inflows were evident from the week-end liquidity adjustment facility auctions. At the LAF auctions, there were 18 banks that took recourse to the reverse repurchase window for Rs 16,855 crore.

Traders said that the sharp increase in yields was largely on account of the fact that most deposits were coming in the high rate band, mostly between one and two-year band, that offered rates anywhere between 9 and 10 per cent. Besides, some of the banks were also loading the cost of maintaining 7 per cent cash reserve ratio to T-Bill pricing. CRR currently does not earn any interest. The weighted average yield for the 91- day auctions firmed to 7.02 per cent, up 25 basis points over the previous week.

The government bond market could get a booster dose this year with the Reserve Bank of India (RBI) planning to reintroduce floating and inflation-linked bonds. The government had earlier issued FRBs as well as inflation indexed bonds (also termed as capital index bonds). FRBs in 2001 (8-year paper for Rs 3,000 crore) and 2003 (11-year bonds for Rs 5,000 crore).  RBI may issue floating rate & inflation-indexed bonds.     

Gilt yields witnessed marginal improvement after easing in the previous week. In the absence of any fresh triggers, the gilt market registered range-bound trades and thin volumes for most part of the week, except for some buying interest towards the weekend. 7.49 per cent 2017 benchmark paper yield ended steady at 7.93 per cent after it registered an intra-week movement of 7.92-7.98 per cent. The firm short-term yields, notwithstanding, the ten-year YTM remained steady at 7.94 per cent on a weighted average basis last week, as against 7.93 per cent the previous week. But the undertone was weak. This was evident from the drop in daily trade volumes to just about Rs 4,100 crore.

Bond Market

The long-term bond issuers are waiting for cues from the monetary policy meeting of the US Federal Reserve on September 16 and will assess the liquidity situation around September 15 after advance tax payments. Therefore, most of the issuers Rural Electrification Corporation, Indian Railway Finance Corporation and Power Finance Corporation are likely to wait. However, the primary market for short-term papers such as certificates of deposit (CDs) and commercial papers will remain abuzz with issues primarily from banks and corporate. Banks are rushing to raise deposits before interest rates harden, says a banker. 

 Foreign Exchange Market

 The market reaction is mixed on the movement of the spot rupee. The rupee appreciated marginally against the dollar to 0.21 paise from 24 August to 31 August. A section of the market is of the view that there has been no fresh fallout of the subprime crisis on the global markets. This is expected to rule out the fears of risk aversion towards emerging markets gradually. The rupee movement was choppy throughout the week. A consistent recovery of stocks and other global factors allowed the unit to recover sharply in the later half. The rupee rose to Rs 40.88 per dollar late in the week, up from week’s low of Rs 41.37 per dollar. Earlier, the rupee attempted but failed to derive and sustain strength out of the stock market rallies. Month-end demand and a general chaotic condition of the financial markets as a whole stopped the rupee at Rs 41 per dollar.

The Reserve Bank of India made net market purchases of $26.8 billion from the foreign exchange market in 2006-07, significantly higher than $8.1 billion in the previous year. The central bank’s intervention in February 2007 alone touched $11.9 billion. The rupee appreciated by 2.3 per cent in 2006-07 and ended the year at 43.60 against the dollar. The RBI’s annual report for 2006-07 said that the interventions in the foreign exchange market in India have been “by and large successful” in reducing volatility in the foreign exchange market.

Commodities Futures derivatives

 According to Kotak Commodity Services Ltd, demand in the physical markets is seen to be very weak. Despite the upcoming festive season, poor offtake from the millers is weighing heavily on the markets. Stocks in NCDEX warehouses have been witnessing a declining trend for past 10 days and this may be another factor to add bearish sentiment into the markets, it said.

According to Angel Commodities, huge arrivals of moong in Rajasthan have pressured farmers to liquidate their chana stocks, leading to increased availability. Also, global chickpea production is projected to be higher at 2.16 lakh tonnes against 1.63 lakh tonnes last year. Besides, the crop in Tanzania and Australia is reportedly good. As India depends on these countries for its imports, chana prices are expected to be under pressure.

Refined soyabean oil prices are expected to recover this week on festival demand and better trend in overseas market. In the global market, soya oil prices are ruling firm on Chicago Board of Trade owing to dry and hot weather in the US , which is not favourable for soyabean crop. Soyabean yield is expected to fall slightly in the US due to hot and dry weather, according to Angel Broking. Kotak said the medium term outlook was bearish in view of the bumper oilseed production hopes. It also saw gains for investors who go short with a target of Rs 472.

Last week, NCDEX September refined soya oil futures declined by 1.35 per cent mainly on hopes of a better domestic oilseed production. On Saturday, refined soya oil for September delivery ended at Rs 480 for 10 kg and for October at Rs 479. Persistent overseas demand is likely to a positive factor for mentha oil in the medium term, while in the short term prices would be driven by the quantity of arrivals, Angel Broking said. Arrivals in Uttar Pradesh were around 700 drums a day. Last week, there was lack of demand from exporters and local manufacturers, as they held ample stocks and awaited further fall in prices. As a result, the sentiments in domestic and futures markets were mixed. On Saturday, Mentha oil September contracts closed at Rs 519 a kg, October ended at Rs 530.

Public Finances

As per the official figures released by Controller General of Accounts, the revenue deficit of the central government has stood at Rs 82,400 crore during the first four months of 2007-08, exceeding the projection for the entire fiscal by 15.28 per cent. This implies that the government's expenditure on revenue account, which includes interest payments, is growing at a much faster rate than its revenue receipts, including taxes. The higher expenditure is partly due to the huge tax refunds made in this fiscal year. The fiscal deficit during the period has stood at Rs 1,29,408 crore comprising 85.7 per cent of the budget estimates for 2007-08. The acquisition of the Reserve Bank of India ’s 59.73 per cent stake in the State Bank of India (SBI) by the Centre has led to a 49.8 per cent jump in its fiscal deficit during the first four months of the current fiscal year. Net tax revenues for April-July 2007, have seen an increase of 25.6 per cent amounting to Rs 79,911 crore, while non-tax revenues have risen by 12.3 per cent to Rs 15,380 crore. On the other hand, total revenue expenditure during April-July 2007, at Rs 177,691 crore, has stood 14.2 per cent higher than the Rs 155,546 crore for April-July 2006.

Insurance

ICICI Lombard Insurance has bagged Indian Oil’s (a Fortune 500 company) insurance account for 2007-08. In a tough battle among the general insurance companies including the four general insurers, ICICI Lombard General Insurance was selected for its lowest-premium offer. The company has managed to get the prized deal at around Rs 50 crore. New India Assurance, which had insured the deal in 2006-07, lost the account as it had bid higher.

Corporate Sector

Bajaj Auto had decided to shut down its Pune plant from September 1, 2007. The company said that workmen have been asked to stay at home and will receive five-and-half days’ wages per week for doing absolutely no work. The company has refused to entertain suggestions of another round of VRS scheme for these employees. The Pune plant currently has 2,730 workers. 

Hotels major EIH, part of the Oberai Group is planning to expand capacity by 66 per cent by building 2,700 rooms in new properties over the next five years in India and abroad. The group is also planning to set up flight kitchens in Kolkata and Mauritius .

Punjab Chemicals and Crop Protection has acquired Dutch company Pegevo Beheer BV for Rs 225 crore. The acquisition of Pegevo, also known as AgriChem, will help Punjab Chemicals to gain access to the European markets.

Fashion apparel retailing major Globus Stores is planning to increase its presence from 19-152 locations spread across 70 cities by 2012 on a lease model. The company has decided to invest Rs 800 crore for this expansion program, which will be sourced from debt, equity and internal accruals. It is also planning to foray into retailing of new product categories such as footwear and sunglasses, which will be retailed under ‘Globus’ private label brand through the stores.

Fortis healthcare is investing Rs 800 crore to set up a 950-bed multi super specialty hospital in Gurgaon. The seven star hospital, Fortis International Institute of Medical sciences, will be spread over 10.7 acres of land and is expected to be completed in the next two to three years.

Essar Power, Gujarat Limited (EPGL), a subsidiary of Essar Power Holdings is planning to invest Rs 4,800 crore to set up a 1,200-mw power plant in Jamnagar , Gujarat . According to Essar sources, EPHL has chalked out plans to increase its overall generation capacity to 6,500 mw from the current 1,200 mw by 2012, which will entail an investment of Rs 20,000 crore. The company has identified around 700 acres of land near Khambalia in Jamnagar district for executing the project and expects the financing of the project to be in the debt/equity ratio of 3:1.The company is in discussions with major Chinese companies like Sanghai Electric and others for equipment supply.

Ashok Leyland (AL) has entered into an agreement with Japanese auto major Nissan Motor Company to develop, manufacture and distribute light commercial vehicles (LCVs). The move will help AL to fill the major gap in its product portfolio and expand into the fast growing LCV segment in India . Under the pact, three joint ventures will be formed: for vehicle production, power–train manufacture and technology development. An exclusive LCV manufacturing plant will be set up in India for both partners. AL will hold a majority stake in the company, which is expected to produce 1-lakh units annually in the medium term.

The first quarter results of 2007-08 have shown that the Corus acquisition of Tata Steel has helped the company to grow five times in size by turnover and six times by net profit. Tata Steels consolidated net profit stood at Rs 6,388 crore against Rs 1,014 crore in the first quarter of 2006.Turnover jumped to Rs 31,155 crore during the period against Rs 5,748 crore in the previous year.

Tata Sons is joining Nagarjuna Group’s Rs 4,700 crore oil refinery project in Cudalore in Tamil Nadu. Both the companies have signed an investor agreement recently according to which Tata’s will take 26 per cent stake in Nagarjuna Oil Corporation with the total investment of Rs 350 crore while Nagarjuna Fertilizers and Chemicals will retain its 51 per cent share .The other partners in the project includes Sunterra with 10 per cent and remaining 13 per cent is shared between TIDCO, EXIM and Udhe, GmbH of Germany.

Apollo Health Street (AHS), a group company of Apollo Hospitals, has brought out Atlanta- based Zavata Inc, a leading BPO and enterprise support solutions company, for around $170 million making AHS the largest healthcare outsourcing solutions provider in India .

Essar Oil has decided to raise Rs 3,000 crore from abroad to fund the expansion of its Vadinar refinery in Gujarat . It would raise the money through issue of foreign currency convertible bonds (FCCBs), Global or American Depository Receipts or other instruments overseas. The company is planning to raise the funds mainly for expanding Vadinar Rrefinery’s capacity to 16 million tonne.

External Sector

The Central government is confident of meeting the US $ 160 billion export target set for the fiscal provided the rupee continues at “present levels” against the dollar. The Commerce Department is holding a series of meetings with various export promotion councils to work out ways to enhance exports. During July 2007, exports have grown by almost 16 per cent in dollar terms over the corresponding period of the previous year, while in rupee terms the growth has been about 6 per cent. The Commerce Ministry has set up a target of exports worth US $ 300 billion by 2012-13 and imports of US $ 400 billion on the back of increased emphasis on manufacturing.

Information Technology

Mumbai-based BPO Firstsource Solutions Ltd had acquired MedAssist Holding Inc of the US for $330 million. The acquisition is the largest in the BPO space so far. MedAssist provides revenue-cycle management to the US healthcare industry. The company’s revenues for the year ended December 31, 2006 were $99 million. It employs about 1,400 people in the US .

TCS has won a deal worth Rs 574 crore spread across a period of 9 years from telecom operator BSNL. The multi-year engagement involves setting up of complex data networks across the vast BSNL footprint in north and west of India and includes deployment of operational support system ( OSS ) and business support systems (BSS) components such as customer relationship management, billing, mediation and directory enquiry, among others.

Telecom

Subscriber base of CDMA based technology in the country has surpassed 50 million fixed and mobile device users only after four years the technology was introduced here, the CDMA development group. It took more than ten years for GSM to reach the same number.

Private telecom majors Reliance Communications and Tata Teleservices have been found making false claims and drawing excess subsidy from the Universal Service Obligation Fund for providing services in rural areas. Inspections in various circles have revealed that their claims included urban lines, known as Direct Exchange Lines (DELs), which fall within municipal limits as rural lines. These were not eligible for subsidy.

Delhi based Parsvnath Developers is planning to foray into telecom sector. The company has applied to the department of telecommunications (DoT) for a unified access service licence (UASL) for 22 telecom circles across the country. The company plans to offer GSM and other services at a cost of Rs 6000 crore.

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.

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