Companies & Sectors
Mazgaon Docks to set up JVs with L&T, Papavav Defence

The agreements came nearly a year after such an agreement was first signed between MDL and Pipavav, only to be put on hold in the wake of opposition from some companies


Mumbai: State-run warship building yard Mazgaon Docks Ltd (MDL) has entered into separate joint ventures with Larsen & Toubro (L&T) and Pipavav Defence and Offshore Engineering for constructing submarines and warships, respectively, reports PTI.
 
The agreements, part of a government policy on formation of JVs to produce Naval assets within set timelines and avoiding cost overruns, come nearly a year after such an agreement was first signed between MDL and Pipavav, only to be put on hold in the wake of opposition from some companies.
 
Interestingly, L&T was reportedly first among those who had opposed the deal.
 
Following objections from bidders who lost out, the defence ministry had put on hold the award to Pipavav on 3 September 2011.
 
MDL, which is sitting on an order book of over Rs1 lakh crore which includes submarines, destroyers and frigates, said it will also "explore the feasibility of diversifying its product profile by entering into partnerships with other eligible leading shipbuilders as well." 
 
"The JVs (with L&T and Pipava) will leverage the strengths of the respective JV partners in the public and private sectors to work out a collaborative strategy for taking the nation towards self-sufficiency in warship construction," it said.

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Scope for interest rate cut low, says BNP Paribas

Market expectations on rate cuts, as reflected by the overnight indexed swap (OIS) level, shows lower expectation of rate cuts over the next one year


The market players are veering towards the view that the RBI (Reserve Bank of India) is likely to maintain status quo in the policy review meeting on 31 July 2012, says BNP Paribas. While the WPI (wholesale price index) data gave rise to some expectations of rate cuts, comments from RBI governor D Subbarao were interpreted by the market as indication of status quo on 31 July 2012. CPI (Consumer Price Index), even after marginal deceleration, remains over the double digit threshold. All in all, the policy space for the RBI to cut rates in the near term remains cramped, says a BNP Paribas.
 
Market expectations on rate cuts going forward, as reflected by the overnight indexed swap (OIS) level, shows a similar trend. One-year OIS came down to 7.52% on Monday 16 July 2012, representing expectation of around 50 basis points (bps) rate cut over the next one year. This has moved up to 7.67% now, showing a lower expectation of rate cuts over the next one year.
 
At this juncture, monetary policy makers are in a dilemma. While broadly it is a soft/easing rate regime, inflation and inflationary expectations (below par monsoon, etc) are posing hurdles. Add to that, we are yet to see concrete steps towards fiscal consolidation by the government, apart from one step on the petrol price hike.
 
BNP Paribas backs up its argument with inflation figures and macro-economic data. Headline WPI inflation eased to 7.25% y-o-y in June from May’s 7.55% y-o-y rate. Non-food primary articles and energy prices, especially diesel, led the pull-back. Core inflation measures held broadly steady. April WPI was revised upwards to 7.50% y-o-y from provisional 7.23% y-o-y announced earlier. The All-India combined CPI eased to 10.02% y-o-y in June versus 10.36% y-o-y in May. Food inflation ticked up to 10.9% y-o-y against 10.6% in May. ‘Core’, ex-food and energy inflation eased to 9.1% y-o-y compared to 10.0% y-o-y in May. A sharp pull back in housing inflation accounted for most of the improvement.
 
G-Sec (government securities) yield levels eased on Monday 16 July 2012 following lower than expected wholesale inflation data and the possibility of a rate cut. The CPI data released on Wednesday 18th July had a mild positive impact on the market, though it was still in double digits, as there was a small deceleration.  In the T-Bill auction on 18th July, the cut-off yield in the 91-day T-Bill was 8.19%, marginally lower than 8.23% previous week (11 July 2012). In the 182-day T-Bill, the cut-off was 8.12%, lower than 8.27% on 4 July 2012. Reduced system liquidity tightness contributed to lower yields.
 
According to BNP Paribas, there are a number of reasons for the current low yields. One of them is the search for safe havens. The current economic and financial environment favours bids for safety—and the safest areas are the short maturities and the best credit-quality countries. 
 
The ECB’s (European Central Bank) decision to lower the rate on the deposit facility has strengthened the case for negative policy rates in the coming months. In Europe, negative rates would also have important repercussions for money market funds (MMFs), which may be driven out of business, as investors with excess liquidity shift to alternative, more profitable market segments. But MMF activity is already expected to decline very sharply in the coming months, as the deposit rate is already at zero. 

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FDI in retail: Government to face stiff opposition in Parliament

JD-U President Sharad Yadav said that there will be unanimity within the NDA on the issue and his party will also reach out to other parties including UPA allies to put up united fight against this 'biggest assault' on Indian economy


New Delhi: The Union government is likely to face stiff opposition on foreign direct investment (FDI) in retail in the Monsoon session of Parliament beginning on 8th August, reports PTI.
 
An indication to this effect was given by JD-U President Sharad Yadav, who said that there will be unanimity within the National Democratic Alliance (NDA) on the issue and that his party will also reach out to other parties including United Progressive Alliance (UPA) allies to put up united fight against this "biggest assault" on Indian economy.
 
Yadav, whose party has given a notice to Lok Sabha Speaker Meira Kumar seeking permission to raise the issue in House during the upcoming session, thanked Trinamool Congress chief Mamata Banerjee for halting the move on FDI earlier.
 
Raising the banner of opposition, Samajwadi Party yesterday joined hands with Left parties and JD(S) asking the government not to go ahead with the controversial decision without wide-ranging consensus.
 
SP chief Mulayam Singh Yadav, CPI(M) General Secretary Prakash Karat, CPI General Secretary S Sudhakar Reddy, Forward Bloc's Debabrata Biswas, JD-S' Danish Ali and RSP's Abani Roy wrote a joint letter to Prime Minister Manmohan Singh, saying parties across the spectrum are opposed to this move.
 
The JD-U chief said he thanked SP, CPI-M, JDS and RSP for opposing FDI in retail, saying "they have rightly done so. This move will be the biggest assault on Indian economy." 
 
"We appeal to all parties including the UPA allies to oppose this anti-people measure. A population of 22 crore Indians are employed in retail who will be affected by this attempt of the government, in a similar manner like the entry of East India company had destroyed India's trade," Yadav said.
 
Congratulating Banerjee for opposition to FDI in past, he said, "Mamata Banerjee was the only ally in UPA who opposed it and ensured that there was no move forward on it." 
 
Yadav urged Agriculture Minister Sharad Pawar, the chief of another UPA ally NCP, to also "realise his responsibility" at a time when droughts are being reported from various states and oppose the FDI in retail saying it would exacerbate the problem by causing huge unemployment.
 
He said taking care of one's political future is right, but the NCP leader should also realise his responsibility.
 
The JD-U chief said that all political parties in the country should be united in opposing the move. "We will raise it in Parliament. A notice has been sent by us for taking up the issue in the coming session," he added.
 
Noting that the East India Company had come to the country in past looking for a market, Yadav said, "the search still continues for the Western world and it gets reflected every now and then -- be it through the statement by US President Barack Obama, the report of international credit agency Standard and Poor, the article in Time magazine or this attempt for FDI in retail," Yadav said.

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