Ministry seeks Rs 10,830 cr for power reforms scheme in 12th Plan

The Power Ministry is seeking an extension of Restructured Accelerated Power Development and Reforms Programme for the 12th and 13th Five-Year Plan period to strengthen the distribution sector.

The Government launched this programme in the 11th Plan with an objective of reducing distribution losses.

If extended, the scheme would cost Rs 10,830 crore in the 12th Plan and Rs 11,897 crore in the 13th Plan. The Cabinet Committee on Economic Affairs is likely to discuss the issue on Friday, a Power Ministry official told Business Line.

In order to implement the programme, the Union Government would facilitate loans of Rs 50,000 crore to States. Of this, Rs 31,577 crore would be converted to grant.

During the 11th Plan, projects worth Rs 5,242.64 crore covering 1,401 villages in 29 States and Union Territories have been sanctioned.

The R-APDRP programme is divided into two parts. The first part includes projects for establishment of baseline data and implementing IT applications, billing and customer care services, among others.

The second part includes projects that strengthen the distribution network.

Sensex down 30 points on weak Asian cues

Indian markets opened the session on Friday marginally in the red on sustained selling by funds and retail investors in select stocks owing to weak Asian cues.

At 9.15 a.m., the 30-share BSE index Sensex was down 30.42 points (0.16 per cent) at 18,688.87 and the 50-share NSE index Nifty was down 23.4 points (0.41 per cent) at 5,632.50.

Asian stocks hit a fresh 9-1/2-month low, with the regional benchmark index heading for its biggest two-day decline since September 2011, amid concern that the Federal Reserve will reduce stimulus and China’s economic slowdown may deepen as a cash crunch worsens.

Japan’s Nikkei 225 was down 62.13 points or 0.48 per cent at 12,952.45 and Hong Kong’s Hang Seng plunged 309.45 points or 1.52 per cent to 20,073.42.

Fed Chairman Ben Bernanke had said on Wednesday that the central bank will stop its $85-billion monthly bond-buying programme later this year as the economy has improved. But he also said that Fed will withold from tapering if the economic conditions deteriorate.

Short-term joy for exporters, long-term pain for importers

The falling rupee is good news for exporters in the short run as they get more for every dollar earned despite some hedging by large businesses. However, the high volatility in the currency is affecting business decision making, say exporters. “The situation is so volatile that exporters have not been able to finalise their future orders,” says Ajay Sahai, Director-General of the Federation of Indian Export Organisations (FIEO).

Some exporters also complain about buyers asking for discounts every time the rupee falls. “Importers have been asking for discounts. Volatility coupled with speculation will impact business sentiment,” says Apparel Export Promotion Council Chairman A. Sakthivel.

Small exporters reap the maximum benefits when the rupee falls. However, they are the ones who are hit hardest when the currency rises.

Speaking to reporters earlier this week, Commerce Secretary S.R. Rao said: “Most contracts for exports and imports take place over a three-six month period. The fluctuating rupee is not good (for) business.”

Exporters agree but don’t seem to mind as long as the general direction of the rupee movement is southwards.

The rupee has made imports dearer and is adding to the strain in the current account.

Although the rise in prices of imported inputs is more than compensated by gains made in exporting the final product, the country’s trade account takes a hit every time the rupee depreciates as the rising cost of crude imports widens the deficit.

“Every Re 1 depreciation increases the crude cost by Rs 400 crore per month and by Rs 5,000 crore annually,” says P.K. Goyal, Director (Finance), Indian Oil.

How the rupee fared against world currencies

The rupee on Thursday plunged by a whopping 130 paise to hit life-time low of 60 against the US dollar in early trade on the Interbank Foreign Exchange on strong demand for the American currency from banks and importers.

Besides, dollar's strength against major currencies overseas on comments by Federal Reserve Chairman Ben Bernanke that the central bank may scale back its monetary stimulus programme later this year weighed on the domestic unit, dealers said.

RBI halts bond trading as prices crash

The sharp slide in the value of the rupee wrecked havoc in bond markets where gilt prices fell sharply anticipating a selloff by foreign institutional investors. Ironically, this happened on a day the Reserve Bank of India auctioned bond quotas to foreign institutional investors.

The fall in bond prices was so sharp that it triggered off circuit filters forcing a halt in trading. However, trading was restored after the Fixed Income and Money Market Dealers Association (Fimmda) sought RBI's permission to resume trade. The sharp fall in bond prices compelled NTPC to shelve its Rs 1,000 crore bond issue as yields rose much higher than anticipated.

The fall in bond prices would be a big negative for bank earnings. Banks which have been under pressure from non-performing assets and higher provisioning requirements had hoped to fall back on trading profits and write-back of excess depreciation provided on government bonds. However, the recent fall in prices has wiped out all gains, raising the prospect of making additional provisions for depreciation.