Finance ministry wants FDI in airlines within SEBI framework

 

While approving the draft Cabinet note on FDI in airlines, the finance ministry has suggested the DIPP consult SEBI on the issue as several airlines, including Kingfisher and Jet Airways are listed companies

New Delhi: The finance ministry is understood to have given the green signal to the proposal to allow 26% foreign direct investment (FDI) by foreign airlines in the private carriers, many of them facing a cash crunch, with a rider that such investments should not violate Securities and Exchange Board of India’s (SEBI) takeover code, reports PTI.

The Department of Industrial Policy and Promotion (DIPP) had proposed 26% FDI by foreign airlines into the domestic industry in the backdrop of Kingfisher Airlines slipping into a severe debt crisis and several others facing resource crunch.

While approving the draft Cabinet note on FDI in airlines, the finance ministry has suggested the DIPP consult SEBI on the issue as several airlines, including Kingfisher and Jet Airways are listed companies, sources said.

“We have asked DIPP to consult SEBI so that their regulations do not come in conflict with the Takeover Code,” a senior finance ministry official told PTI.

Under the SEBI’s Takeover Code, an open offer is triggered once an investor acquires 26% stake in a listed company.

The size of the open offer required is 25%, which would mean that the investor will have to buy additional equity from the public.

Several ministries, including the home ministry and the Planning Commission have already backed the proposal.

However, the aviation ministry is for fixing a cap of 24% on the FDI.

At present foreign investment up to 49% is permitted in the domestic airlines, but the foreign carriers are disallowed to make such strategic investments.

 

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No plan to decontrol diesel pricing, says government

“There is no immediate plan to decontrol diesel or LPG as they have cascading effect (on general prices),” minister of state for petroleum and natural gas RPN Singh said

New Delhi: The government has no plans to decontrol diesel pricing but wants consumer to “get used” to changes in petrol rates being effected every fortnight, reports PTI.

“There is no immediate plan to decontrol diesel or LPG as they have cascading effect (on general prices),” minister of state for petroleum and natural gas RPN Singh told reporters here.

While the government had in June last year freed petrol pricing from its control, it continues to dictates retail rates of diesel, cooking gas (LPG) sold to households and kerosene sold through public distribution system (PDS).

State-owned oil firms are currently selling diesel at a record loss of Rs13.53 per litre, kerosene at Rs29.99 per litre and domestic LPG at Rs287 per 14.2-kg cylinder.

“There is no meeting scheduled (of the Empowered Group of Ministers) to decide on (raising) diesel or LPG prices,” Mr Singh said.

EGoM headed by finance minister Pranab Mukherjee is empowered to decide on rates of the three sensitive products.

Mr Singh said consumers should get used to changes in prices of petrol every fortnight—moving up if international rates rise or reducing if prices come down.

State oil firms had last month effected three price revisions in petrol—first hike rates by Rs1.80 per litre on 3rd November, then reducing it by Rs2.22 per litre on 15th November and a further cut of Rs0.78 a litre on 30th November.

On the three sensitive products, Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are projected to lose Rs1,37,605 crore in revenues this fiscal.

The three firms are losing Rs425 crore per day on sale of diesel, domestic LPG and kerosene at government controlled rates, which are way below cost.

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COMMENTS

Jaideep Sidhu

5 years ago

I have reading about the oil companies making huge losses each day due to selling these items at low prices.
How is it then that they still survive?
Does it mean that they haven't made a profit in ages?

There’s enough liquidity in system: RBI deputy governor

RBI deputy governor KC Chakrabarty on Monday said there is sufficient liquidity in the system, though banks have been borrowing nearly Rs1 trillion from the central bank’s short-term borrowing window everyday for quite some time now

Mumbai: Reserve Bank of India (RBI) deputy governor KC Chakrabarty on Monday said there is sufficient liquidity in the system, though banks have been borrowing nearly Rs1 trillion from the central bank’s short-term borrowing window everyday for quite some time now, reports PTI.

Answering a question whether there is a possibility of RBI cutting the cash reserve ratio (CRR) to ease liquidity crunch, he said, “I am also reading it in the press. The RBI can use any tool at any time.” 

To another question on whether a cut in the CRR which is the interest-free cash that banks park with the central bank as a measure of their solvency, will be an appropriate measure in the prevailing high inflationary environment, he said, “Appropriate steps will be taken to infuse liquidity at the appropriate time.”

The last time the RBI tweaked the CRR was in May 2010 and since then it has been pegged at 6%. Banks are mandated to park 6% of their assets as reserves with the central bank.

However, the policy rate or short-term borrowing rate, has been raised 11 times during the same period or 325 basis points (bps) with the last being in the October policy when the repo rate was upped by 25 bps to 8.50%.

The statement comes amidst a clamour for some urgent measures from RBI to ease liquidity pressure in the system as its tight monetary policy to fight a wayward inflation, which stood at 9.73% in October, has dried up private investment and brought growth to a two-year low.

The second quarter gross domestic product (GDP) came down to 6.9%, a two-year low against 7.7% in the first quarter.

Banks have been lapping up nearly Rs1 trillion every day from the liquidity adjustment facility (LAF), which is the short-term borrowing window of the RBI.

The massive fall of the rupee has only worsened the liquidity situation. Since August the rupee lost as much as 17% the greenback, making it the worst performer among its Asian peers, as there is a scramble for the safety of the US currency across the globe.

Also, liquidity tightness will only increase in the days to come as corporates will be making advance tax payments by 15th December.

Economists and analysts also say that given the sticky inflation, which has been sniffing at 10% for the past 13 months, it would be inappropriate for RBI to ease interest rates now, but a cut in CRR will send the right signal to the industry and markets.

A 25 basis points slash in the CRR can release about Rs15,000 crore into the system.

Analysts are seeing that pressure is mounting on the RBI to cut CRR by at least 0.25 percentage points to improve liquidity in the system.

Analysts believe the RBI intervention may come anytime during the week.

“We expect the Reserve Bank to continue to ease liquidity, first through open market operations, and then by cutting the reserve requirements of banks,” Goldman Sachs said in a report.

“Given this backdrop of growth slowing and inflation peaking off, we are relieved that RBI has finally begun OMOs to cut the money market liquidity deficit and reduce undue pressure on interest rates,” Bank of America-Merrill Lynch India economist Indranil Sen Gupta said in a report.

Since the last week of November, the RBI has bought back government bonds twice releasing nearly Rs16,000 crore into the system. On Monday it announced another Rs10,000 crore bond buyback on 8th December.

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