Washington: The 2008 global financial crisis had little impact on funds flow to south Asia's power sector and had only marginal adverse impact on India's power sector, reports PTI quoting a new report.
In India, the impact of the global financial crisis on its power sector was marginally adverse in the short term, said the report "The Impact of the Global Financial Crisis on Investments in the Electric Power Sector: the Experience of India, Pakistan, and Bangladesh", released by the World Bank's Energy Sector Management Assistance Program (ESMAP).
"India's relatively strong economic fundamentals provided room for cushioning the impact of the crisis through fiscal stimulus packages in December 2008 and January 2009," it said.
The report said India's monetary policy was also eased and interest rates were sharply lowered during the crisis.
However, it added, the negative impact of the global financial crisis was felt on private sector investments, but it lasted only for a few months in the latter part of 2008.
Similarly, investments in renewable energy projects became relatively unattractive due to perceptions of technology risk on top of the usual commercial and financial risks, the report co-edited by Mohua Mukherjee and Kumar V Pratap said.
It attributed India's power sector resilience in the face of the global financial crisis to strong domestic demand fundamentals, conducive business environment since the enactment of the Electricity Act (2003), broadening of domestic private power developer base, dependence on domestic sources of debt funding and existence of strong sector-focused financing entities.
Timely intervention by the government in the form of fiscal stimulus packages to revive demand, appropriate monetary policy measures by the central bank to address liquidity problems and existence of government-owned central sector entities with strong balance sheets and robust cash flows also helped withstand the crisis better.
However, the crisis had a beneficial effect on India's power sector as it helped weed out speculative developers who had a relatively short-term outlook on the sector.
Besides, it underscored the importance of power companies with strong balance sheets and discouraged speculative behaviour in competitive bidding for power projects and brought tariffs to realistic levels.
A letter of objection to senior-most executives in the finance ministry and the apex bank, documenting alleged performance failures and ignoring of governmental appointment norms, may queer the pitch for the selection of the central bank’s new DG
While RBI (Reserve Bank of India) Deputy Governor, Usha Thorat, has stepped down on Tuesday, 9th November, the appointment of Mr Anand Sinha as the new Deputy Governor has run into rough weather. We learn that the appointment has not been announced following a letter from Mr Deepak Mehra, who claims to be from the Forum for Financial Fairness in Mumbai. Writing to the Finance Minister, Mr Mehra has made some serious charges against Mr Sinha, which are confirmed by our sources in the RBI. However, the RBI has not responded to our query for its comments.
Mr Mehra alleges that Mr Sinha spent his entire career of three-and-a-half decades at Mumbai, barring short stints at Bhubaneshwar and Guwahati which were controversial.
Specifically, he says, that Mr Sinha was charge-sheeted for certain performance failures during his Guwahati stint, leading to a department inquiry and punishment in the form of reversal of two increments. This is considered a serious punishment at the RBI. Our sources say that the punishment was later reduced to the reversal of just one increment, but that he was indeed found guilty of dereliction at least, in his stint in the estates department. As officer in charge at Bhubaneshwar, he was issued a "letter of displeasure" and shunted out halfway during his tenure. Mr Mehra alleges that this was due to "incompetence and failure to rise to the occasion".
According to Mr Mehra, Mr Sinha was then sidelined by shunting him to the Deposit Insurance and Credit Guarantee Corporation (DICGC), where his tenure was again lacklustre. However, a more serious charge is that in selecting Mr Sinha, the RBI ignored "the government's own well-laid criteria of minimum residual service of one year." Mr Sinha apparently retires in February.
Given the fact that Mr Mehra's letter has been sent to the Finance Minister, Finance Secretary, RBI Governor, Cabinet Secretary and Ms Omita Paul, Advisor to the FM, it is clear that an inquiry is on, since Mr Sinha's appointment has not been announced by the government. With a tenure of only until February, it seems certain that RBI may have to hunt for a new Deputy Governor, since the government is unlikely to court yet another controversy at a time when it has just been forced to sack Maharashtra Chief Minister Ashok Chavan and Mr Suresh Kalmadi, a key figure behind the loot of funds at the Commonwealth Games.
Meanwhile, Deputy Governor KC Chakrabarty remains in the doghouse, because all of Ms Thorat's portfolios have been 'temporarily' handed over to Deputy Governor Ms Shyamala Gopinath.
Indian sugar exports are expected to be the only saviours in easing overheated global prices due to shortage predictions. The future of sugar stocks depends on when the govt allows exports and how much
Just about everything seems to be going right for sugar prices. In New York, raw sugar prices reached a 29-year high. Australia has said that it could produce its smallest sugar crop in 20 years because of heavy rains. Brazil, a key sugar producer, is facing a dry spell in key parts coupled with loading problems in its ports. India on the other hand is going to produce a lot more than it initially expected and is in a position to export some of its surplus.
India is at the centre of it all for some time now. In February, when it was feared that sugar production in India would be a dismal 15 million tonnes (MT), sugar prices the world over soared. Then came the news that it was not going to be so bad (about 19MT) and sugar prices fell drastically. But not for too long. Once again sugar prices are soaring on speculation that there will be a deficit in global sugar supplies against the predictions of a 2.5MT surplus earlier.
India is in a position of power with a good monsoon under its belt. With cane production expected to be around 350MT, experts believe that India can easily produce about 25MT of sugar now. This, coupled with leftover stock from last year will make our end-of-the-year sugar position at around 32MT. Not surprisingly, sugar producers are pushing for opening up exports in a big way. In FY08 (a good production year) India exported around 5MT of sugar.
The speculation is that the Indian government will soon free up sugar exports and permit 2MT under the Open General Licence. Millers believe India will export at least 3MT this year.However, things are not that simple. India is facing a delayed crushing season this year as there is no accord between cane producers and millers over cane prices (although this is not unusual). Crushing is expected to begin in another 10 days if all goes well. In UP, a key sugarcane-producing state, the government has fixed the minimum price of cane at Rs210 per quintal. In general, what the millers pay to cane-growers is above this price anyway.
But this time the growers seem to be demanding Rs280 per quintal, a price which sugar millers claim is not viable. Last year, due to a shortfall, mills did pay these kinds of prices to producers.So far, retail sugar prices (which had touched Rs50 per kilogram this year) have remained at low levels of Rs30. With food inflation just starting to cool down in India, there is a worry that the government may take a call about not permitting too much export to maintain prices. However, so far, the market opinion is that agriculture minister Sharad Pawar will push for aggressive exports.
Meanwhile, it looks like sugar stocks will continue to surge. Shree Renuka is trading at Rs107 levels, still some way off from its year high of Rs124 in January. EID Parry has already touched a new high of Rs567 yesterday. Triveni is at Rs129, still below its high of Rs144 in March. Both Bajaj Hindusthan and Balrampur Chini are way below their highs of Rs243 in January and Rs150 in November 2009.
(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).