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Black clouds over coal

Coal India as a monopoly, has grown far too big to handle its operations. Perhaps, the time has come for Coal India to be split

 
Black clouds are gathering over the anticipated heavy storm conditions in the capital this week, as opposition parties, spearheaded by the BJP, chant the ouster mantra for prime minister Dr Manmohan Singh to take the rap and resign on the coal block allocation issue. They demand that he takes the moral responsibility for this great lapse.
 
The only peace pipe offering seems to be the urgent and immediate need to cancel all the coal licenses issued, some 142 of them, and then arrange for a thorough investigation; only then, they will let the Parliament function and that too after ensuring a detailed and perhaps a volatile debate on the issue.
 
Unfortunately for the government, as details surface, there are lapses and errors of judgement.  The most prominent case, unearthed by Times of India (Times Now?) refers to tourism minister Subodh Kant Sahay’s admission that the allocation sought for his brother of two coal blocks, where he is an ‘honourable’ executive director does hold any water.  
 
It is presumed that assistance sought from the Prime Minister's Office (PMO), would in all probability get a stereotyped letter, recommending to the concerned department/ministry to take ‘appropriate’ action. No more, no less. The PMO probably releases several such letters in a day!
 
Though coal minister Sriprakash Jaiswal has initially stated that no licenses will be cancelled; later, he stated that the allottees have been asked to explain why they have not made any progress in the blocks allocated to them. Chances are, at least some of them will come up with lame but plausible excuses of being unable to make any progress due to their inability to get the required clearances. Eventually, some licenses will have to be cancelled, without question.
 
However, if the licensees had any sense of responsibility and seriousness to work on the blocks, why did they not raise the issues in public? Why were they squatting on the allotted work without practically doing even the basic spade work?
 
Let those allottees of these blocks who have made some progress come out to the media and detail the areas where they are stuck and also say whether the work is held up at the state or MOEF (ministry of environment and forests) level. Simply passing the buck to lack of clearances will no longer be palatable.
 
Coal India (CIL) itself is in a mess with so many pending applications and the fact remains that as a monopoly, it has grown far too big to handle its operations in India itself, forgetting, for the time being, its keen interest to branch into foreign territory.
 
There have been reports in the media that perhaps, the time has come for Coal India itself to be split into various units covering different aspects of its operations of its business, so that this sort of balkanization help to improve the overall performance of the coal industry.  We must remember that CIL has a vital role to play in ensuring fuel supply to meet the growing demand of the power industry.
 
In fact, the UPA government must now set a time-frame of say three months to complete its investigations and new system to be in place latest by the 1 January 2013 for effective functioning.
 
No more excuses; no more marathon meetings on FSAs and the government must direct the state, MOEF and Coal India to sit across the table and sort out their problems in a marathon session. It should not even leave the meetings until the agreement is reached and time frame set for execution.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)
 

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Bad loan risk looms large over Chinese banking sector

According to market analysts, the might worsen as local governments have attempted to unleash a new round of stimulus packages amid the current economic downturn

Beijing: China's state-run banks are facing increased bad loans partly due to a lending spree to support massive economic stimulus three years ago, the official media said, highlighting for the first time concerns about economic slowdown following a fall in exports, reports PTI.

 

That risk might worsen as local governments have attempted to unleash a new round of stimulus packages amid the current economic downturn, market analysts have said.

 

The concerns rose as seven out of the 16 Chinese listed banks reported a rise in their non-performing loan (NPL) ratios in the first half of 2012, according to their interim reports.

 

Though many managed to keep the ratio below 1%, bad loans in some particular sectors and regions were more significant.

 

According to the interim reports, Shanghai Pudong Development Bank, Minsheng Bank, and China Everbright Bank saw overdue loans grew by 81.6%, 63.2%, and 62% in the first half, respectively.

 

Some analysts believe that the sluggish economy will erode the huge profits made by China's banks, once called the most lucrative sector in the world. The 16 listed banks still earned a profit of 545 billion yuan ($86 billion) in the first half, nearly half of the net profits made by China's listed companies combined, the reports show.

 

Loans extended to businesses in Wenzhou, a city in east China known for its entrepreneurship, went bad most notably for Ping An Bank and Bank of Communications, the Xinhua report said.

 

Qian Wenhui, vice president of Bank of Communications, said 90% of the bank's 887 million yuan ($140 million) new default loans in the first half of this year were from Wenzhou.

 

Since late last year, Wenzhou had been embroiled in a debt crisis caused by unregulated private lending that boomed with stimulus following the 2008-2009 global financial crisis.

 

As weakened overseas demand continued to dampen demand for exports, many of Wenzhou's small and medium-sized businesses went bust, their loans to banks or private creditors invalidated.

 

"Past experience has taught us that a bad loan crisis usually came three years after a period of abnormal credit surge," Wei Guoxiong, chief risk management official with the Industrial and Commercial Bank of China said, adding that "there will be a notable rise in bad loans in banking sector this year".

 

China's external debt this year crossed $751 billion, the highest since it embarked on economic reforms in 1985.

 

Analysts say banks should learn from the experience that loans to solar panel manufacturing, ship-building and steel, which later suffered from over-capacity, notably went bad three years ago.

 

"The banking sector is extremely sensitive. We can't overlook the risks even though the overall NPL ratio remains low," said Zeng Gang, a researcher with the Chinese Academy of Social Sciences.

 

He said banks should ramp up measures -- including by slashing dividend payments -- to be better prepared for bad loan risks.

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Indian Bank revises FCNR deposit interest rates

For FCNR (B) Deposits, in USD, Indian Bank fixed its interest rate at 3.03% for deposits of one year and above but less than two years as against 3.05%

 
Chennai: Public sector lender Indian Bank has revised its interest rates on foreign currency non-resident (banking) term deposits across different maturities with immediate effect, reports PTI.
 
For FCNR(B) Deposits, in USD, the interest rate has been fixed at 3.03% for deposits of one year and above but less than two years as against 3.05%, the Chennai-based bank said in a statement.
 
For deposits of two years and above but less than three years, the interest rate remained unchanged at 2.42%.
 
The interest rates have been revised to 3.5% from 3.48%, for deposits of three years and above but less than four years.
 
For deposits of four years and above but less than five years, the rate has been increased to 3.66% from 3.63%, it said.
 
For deposits of five years, it has been hiked to 3.87% as against the existing 3.79%, the statement added.
 

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