CURRENT AFFAIRS LEARNING MATERIAL

8TH August’09 – 14th August’09

Decoding the new Direct Taxes Code

New Finance Minister Pranab Mukherjee, in his Budget speech last month, promised
that the much-awaited new Direct Taxes Code would be released within 45 days. And
the promise was duly met on Wednesday when the draft of the Code was released for
public comments. While the FM clearly delivered as far as the timeline is concerned,
let us now see certain reactions at first sight on the content of the Code.

The Code is proposed to come into effect from April 1, 2011. The Foreward to the
Code clarifies that the Code is to eliminate distortions in the tax structure,
introducing moderate levels of taxation, expanding the tax base and simplify the
language.

Some of the key changes bought about by the Code are as under: First and foremost,
the Code proposes that the tax rate for companies (both domestic and foreign) can be
substantially reduced to a uniform rate of 25 per cent. However, foreign companies
would be required to supplement their corporate tax liability by a branch profits tax
of 15 per cent on branch profits (that is, total income, as reduced by the corporate
tax).

Further, for the individual taxpayers, the taxation continues to be on slab basis.
However, the limits under the tax slab are proposed to be considerably increased as
under: Up to Rs 1.6 lakh: Nil; Rs 1.6 lakh to Rs 10 lakh: 10 per cent; Rs 10 lakh to Rs 25
lakh: per cent; above Rs 25 lakh: 30 per cent.

The Code now provides for the Minimum Alternate Tax calculated with reference to
the “value of the gross assets”. This is on the premise that the shift in the MAT base
from book profits to gross assets will encourage optimal utilisation of the assets and
thereby increase efficiency. The rate of MAT will be 0.25 per cent of the value of gross
assets in the case of banking companies and 2 per cent of the value of gross assets in
the case of all other companies.

The present distinction between shortterm investment asset and long-term investment
asset on the basis of the length of holding of the asset is proposed to be eliminated.
The Securities Transaction Tax, or STT, is proposed to be withdrawn.

One of the things on the simplification front is that the separate concepts of ‘previous
year’ and ‘assessment year’ will be replaced by a unified concept of ‘financial year’.

Consistent with the international trend, the Code contains a specific section on
general anti-avoidance rule saying that any ‘arrangement’ entered into by a person
may be declared as an impermissible avoidance arrangement. It may be noted that
such general anti-avoidance rule is non existent in the present statute.

Tax incentives for savings is proposed to be rationalised to an ‘Exempt-

ExemptTaxation’ method. Under this method, the contributions are exempt from tax,
the accumulation/accretions are also exempt, however all withdrawals at any time
are subject to tax at the applicable personal marginal rate of tax. It is proposed that
the withdrawal of any amount of accumulated balance as on the March 31, 2011 from
PPF and EPF will not be subject to tax. In other words, only new contributions after
the Code commences will be subject to EET method of taxation.

The Code also substitutes profit-linked incentives by a new scheme. Under the new
scheme, a person would be allowed to recover all capital and revenue expenditure
(except expenditure on land, goodwill and financial instrument) and he would be
liable to income-tax on profits made thereafter. The period consumed in recovering
capital and revenue expenditure will be the period of tax holiday. The new scheme
applies to developing, operating, maintaining of infrastructure facilities, power
generation and distribution, exploration and production of mineral oil or natural gas,
developing of SEZs, etc.

It will now take some time before the entire fine print is slowly decoded and then the
other side which is the tax experts, companies and associations take off with their
comments. These may be provided at direct taxes code-

2. Subir Gokarn tops list for RBI Deputy Governor’s

post
Subir Gokarn, Executive Director and Chief Economist at Standard & Poor’s Asia
Pacific, is heading the shortlist of candidates for the Reserve Bank of India (RBI)
Deputy Governor’s post. Gokarn is also a Business Standard columnist.

The selection committee, headed by RBI Governor D Subbarao, has forwarded the
shortlist to the Appointments Committee of the Cabinet, which will take a final
decision. Gokarn’s name topped the list for the fourth Deputy Governor, sources close
to the appointment process said. They added that a formal announcement was
expected over the next few days.

If selected, Gokarn will replace Rakesh Mohan who quit the central bank in June and
will be in charge of monetary policy matters, which are being looked after by the
Governor himself.

The others in the running included Arvind Virmani, the government’s chief economic
advisor, Ashoka Mody, assistant director at the International Monetary Fund’s
European department, and Jahangir Aziz, J P Morgan India’s Chief Economist.

3. Danone got Rs 380-cr capital gain in Britannia

divestment
Groupe Danone, the global dairy products major based in France, netted a capital gain
of Rs 380 crore (¤56 million) when it recently divested its indirect 25.5 per cent
holding in the Bangalore-based biscuit major Britannia Industries.

Danone and the Mumbaibased Wadia Group in April 2009 agreed to end their 13year-
old joint venture for running Britannia Industries for around Rs 900 crore. The
relationship had turned sour during the preceding 18 months owing to a range of issues
— intellectual property rights over Britannia’s ‘Tiger’ brand of biscuits, a minority
stake purchase by Danone in Bangalore-based nutraceuticals firm Avesthagen, to
Danone’s application to the Indian government to do business in India on its own.

Wadia Group and Danone owned 25.48 per cent each in Britannia through Associated
Biscuits International Holdings (ABIH), a London-based company. This company, in
turn, owned 50.96 per cent in Britannia. Leila Lands, a Mauritius-based investment
firm and wholly-owned subsidiary of Bombay Burmah Trading Corporation, a Wadia
Wadia Group company, bought out the Danone stake, giving the Wadias complete
control.

Group company, bought out the Danone stake, giving the Wadias complete control.

4. Mid-rung Bollywood houses enter regional movie

sector
With the release of its first Kannada movie, Houseful ,a comedy starring south Indian
actor Diganth, Maverick Productions ventured into regional cinema in July. The mid-
rung Bollywood firm is making three more regional movies, one each in Kannada,
Gujarati and Malayalam, slated to be released this year.

At least 10 other midrung production houses are following, mainly driven away by the
high production costs of Bollywood movies. Further reasons like entry of corporates
into production of Hindi films, a growing regional film sector and a rising number of
multiplexes across states are other reasons.

Ultra Distribution, Shri Ashtavinayak Cine Vision, Seven Star Creations, Down Town
Films and Spectra Multimedia, among others, which were into production of Hindi
films, have already lined 10-12 regional films this year.

“We ventured into production of regional movies as costs of producing Hindi movies
have escalated. Producing a Bollywood movie involves a high-degree of risk compared
with that of aregional film, which is still aniche market,” Ultra Distribution’s Chairman
and Managing Director Sushilkumar Agarwal told Business Standard.

The cost of an average Hindi movie is around Rs 3035 crore, more than 10 times that
of the average regional film. It would cost around Rs 1-3 crore for making a Gujarati or
Marathi film, while a Bhojpuri one would cost around Rs 50 lakh to 2 crore. So,
too,with Malayalam (Rs 80 lakh–Rs 3 crore), Kannada (Rs 1.5-3 crore) and Bangla (Rs 80
lakh- Rs 3 crore).

5. Bharti Airtel may sweeten MTN offer

Mobile phone giant Bharti Airtel may increase its offer for a stake in South African
peer MTN by between 5 and 10 per cent, a source familiar with the negotiations told
Reuters.

The two companies, which have been working on a complex $23-billion cash and share
swap for over two months, had said on Monday that exclusive talks will be extended
until late August and that the terms of the potential deal may be adjusted. .

The increase in price will likely be in the range of 8 to 9per cent, the source added,
and an agreement could be reached in a couple of weeks. But a second person close to
the proceedings cautioned that any improvement to the terms had yet to be agreed.

A sweetener below 5 per cent would not make a substantial difference to the current
proposal, while raising the offer price by more than 10 per cent would require major
changes to the deal structure, the second person added.

Bharti and MTN hope that the deal will lead to a full merger, creating the world’s
third biggest cell phone group, with more than 200 million customers and combined
revenues of $20 billion.

6. China to check stock gains without capping loans

Chinese officials said they will scrutinise gains in stock prices without capping new
lending after a record $1.1 trillion of loans in the first half added to credit risks and
threatened to cause asset bubbles.

The government wants stock-market stability and is studying share-price rises, Vice
Finance Minister Ding Xuedong said at a press briefing in Beijing today. The People’s
Bank of China has a range of tools to limit money supply, Su Ning, a deputy governor
of the central bank, told the briefing.

The Shanghai Composite Index has rallied 79 per cent in 2009 and real-estate prices
have rebounded, fueling concern that loans meant for infrastructure projects are
being used for speculation. The government wants to cool asset markets without
derailing the recovery of the world’s thirdbiggest economy, which grew 7.9 per cent in
the second quarter from a year earlier.

Ding and Su’s comments show the key factor in policy decisions is “economic
indicators, not asset markets,” said Gabriel Gondard, a portfolio manager at Fortune
SGAM Fund Management Co in Shanghai, which oversees about $7.2 billion. “Investors
could read that as meaning liquidity levels will remain high, at least for now.”
Shanghai’s benchmark stock index closed down 2.9 per cent, before the briefing
started, for the worst weekly loss since February. The measure fell by the most in
eight months on July 29 amid concern that the central bank would rein in liquidity.

The central bank won’t consider asset prices when adjusting policies, said Su, who
also elaborated on a reference in a quarterly monetary policy report to “fine-tuning”
policy, saying that this happened continuously.

The surge in loans in the first half was due to the rollout of the government’s stimulus
plan and lending won’t grow as quickly in the second half, Su said.

China Construction Bank Corp President Zhang Jianguo said yesterday that the nation’s
second-largest bank will cut new lending by about 70 per cent in the second half to
avert asurge in bad debt. Construction Bank plans to extend about 200 billion yuan
($29 billion) of loans, down from 708.5 billion yuan in the preceding six months. The
company’s new lending through June 30 was 42 per cent more than for all of 2008.

7. Hong Kong to hear billionaire Huang’s asset freeze

BLOOMBERG
Hong Kong’s High Court will hear on September 8 the application by the city’s
securities watchdog to prohibit the disposal of assets by billionaire Huang Guangyu,
China’s second richest man.

The court ordered the former chairman of Gome Electrical Appliances Holdings Ltd,
his wife Du Juan and the two companies through which he holds his stake in Gome not
to remove from the city assets worth as much as HK$1.66 billion ($214 million), legal
documents showed. The schedule of the hearing was posted on the Hong Kong
judiciary’s website.

Gome fell 7.8 per cent to close at HK$2.37 in Hong Kong trading, the most in almost
eight months. The stock resumed trading June 23 after a seven-month trading halt
following the detention of Huang, Gome’s largest shareholder, by Beijing police for
unspecified “economic crimes.” “The company was not approached by any regulators
or judicial authorities relating to such a court order,” Gome said in a statement to
Hong Kong’s stock exchange today.

8. Bollywood finds reason to smile

After a lull of three months, good times seem to have returned for Bollywood. Three
recent films — Love Aaj Kal, Kambakht Ishq and New York —have done well at the
boxoffice and have together collected over Rs 150 crore from ticket sales.

The success of the three films augurs well for the industry. Financiers had become
risk-averse, thanks to the liquidity crunch. Also, there was the suspicion that viewers,
especially in the urban markets, would cut down their entertainment expenses in the
economic slowdown. In addition, the multiplexes had gone on a long strike recently
after differences emerged with producers over revenue sharing.

The reversal in fortunes has brought relief to producers, especially because 40 big
budget movies are lined up for release in 2009-10. Eros International President (India)
Sunil Lulla said, The industry is equally upbeat about coming movies like Kaminey,
What’s your Rashee, Kites, Blue, London Dreams, Qurbaan, Sikander and 3Idiots.

Big Pictures has two films lined up for release: Sikander and Daddy Cool. Big Pictures
Chief Operating Officer Mahesh Ramanathan said, “We have come out very strongly
after the strike and it is important that films perform well to keep the momentum
strong. Our two movies are ready for release in August, in which we have invested
about Rs 20 crore.” According to a Mumbaibased media analyst, there is no more
looking back for Bollywood with three hits in a month and with aggressive line-up of
movies like Aladin, London Dreams, Kites and Yash Raj’s Dil Bole Hadappa.

What has also lifted the mood is the recent acquisition of the marketing and
distribution rights of Karan Johar’s My Name is Khan

Rs 106 crore. The turnover of the Indian film industry stood at Rs 10,700 crore in 2008,
up from Rs 9,600 crore in 2007. It is expected to grow 11.5 per cent over the next five
years to touch Rs 18,430 crore in 2013. The domestic box-office segment is expected
to grow at 10.2 per cent cumulatively over the next five years to reach Rs 13, 200
crore in 2013 from Rs 8,100 crore now, according to aPricewaterhouseCoopers study
on the Indian film industry.

9. Rio Tinto brings home the world’s costliest diamond

Rio Tinto, one of the world’s largest diamond mining companies, has launched the
pink diamond in India. Proposed to be sold through tender, the diamonds were opened
for public viewing today.

Pink diamonds cost at least 20 times more than processed white diamonds and only 40
to 60 pieces are available worldwide, with each stone weighing 40 to 60 carat.

They are mined at Rio Tinto’s Argyle mine in Africa and processed at its cutting and
polishing facility in Perth.

The Perth-based facility of the global mining major processes only around 50 such
diamonds every year, making them the world’s rarest gems, Bruce Cox, managing
director of Rio Tinto Diamonds, said here today.

Merck shareholders approve merger with Schering-

Plough
Merck & Co shareholders overwhelmingly approved the drug maker’s planned merger
with Schering-Plough Corp, and the deal remains on track to close in the fourth
quarter, Merck said on Friday.

Merck, which held a special shareholders’ meet on Friday to vote on the proposed
merger, said a preliminary tabulation indicates more than 99 per cent of votes cast
endorsed the deal.

The deal, whose value was pegged at $41 billion when it was announced in March, still
requires approval by US and European regulators.

The merger pact, which followed a long-standing joint venture between Merck and
Schering-Plough that sells the cholesterol fighters Vytorin and Zetia, was announced
only weeks after Pfizer Inc’s $68 billion planned purchase of Wyeth. That deal is also
slated to close this year.

11. IS INDEX-APING LUCRATIVE?

A lot has been written about index funds in the past two years, with most proponents
recommending it as a key component in a portfolio. The overall argument being that
most diversified equity funds are unable to beat the index, just as in the case of
Western markets. The other point was that index funds were a low-cost alternative to
exposure in the stock markets. On the other hand, most asset management companies
prided themselves on their active stock picking skills and hence made a lot of noise
with their performance statistics during bullish periods. Do index funds really do
better than actively managed funds in India? First, lets understand some basic
definitions.

Index Fund: An index fund is a mutual fund scheme that will mirror a stock market
index and invest in stocks that are part of that index in the same proportion. For e.g
Indias widely followed stock market indices are the BSE Sensex and NSEs Nifty 50. Most
of the 21 index funds in existence follow either of these two.

Tracking Error: It is a measure of how closely ascheme follows an index to which it is

benchmarked. Since an index fund is an imitation of the Sensex or Nifty, it is fair to
assume there will be no tracking error. However, the reality on the ground is
completely different and the tracking error varies between 0.3 to 2 per cent, plus or
minus.

Expense Ratio: This is the annual fund management charge by mutual funds. This is
charged on a daily or weekly basis and varies between 1.7 to 2.3 per cent p.a . Index
Funds have an expense ratio of 1-1.5 per cent.

Lets take a look at some performance figures. This data is based on pure NAV and
excluding an entry load of 2.25 per cent.

If you look at the above data, it is very clear that some of the well-managed
diversified equity funds have clearly outperformed the index. The difference in
outperformance is not small, but as high as 5-18 per cent in a one-year time frame, 5-
9 per cent each year across a three-year time frame and 8-12 per cent ever year for a
five-year period. This is a huge gap and is one that typically happens in strong bull
markets. One will find similar outperformance during the bullish phase of 2003-2007,
where a lot of well managed diversified equity funds beat the benchmark index.

However, once the equity markets entered a downtrend or even a trading range, a lot
of funds were unable to beat the index and hence the entry costs mattered a lot. The
consistent ones, though, have done a fine job in bearish periods, too. Besides the huge
gap in returns, there is some tracking error of index funds that are visible, too.

Lets understand how a well-managed equity fund could beat the Sensex. The Sensex is
an index made up of 30 stocks which have an unequal weightage in the index . For
example, Reliance Industries accounts for a 13.65 per cent weightage in the Sensex.
Similarly, Infosys has 8.7 per cent and ICICI Bank has 7.41 per cent. These three stocks
put together comprise about 30 per cent of the index and the top 10 stocks have a
weightage of 67 per cent. The other 20 stocks, some of which are Tata Motors,
Jaiprakash Associates, Hero Honda, Reliance Infrastructure, Tata Steel, Maruti,
Hindalco, Wipro and so on, form a very small percentage of the index. Now if the top
10 index stocks do not perform well, but the balance 20 stocks do well, the impact on
the Sensex will not be huge. At the same time, if a diversified equity fund has a Tata
Motors weightage of 5 per cent in the portfolio (versus 0.92 per cent in the Sensex)
and Sterlite of 5 per cent (1.62 Sensex weightage) in the portfolio, an outperformance
versus the Sensex is quite likely, as formance has been negligible and this is the reason
why actively managed large-cap funds, which had ahigher proportion of these stocks
have done well.

With this data and those over the past several sharp bull markets, one can conclude
that during sharp rises and strong bull markets, a well managed, consistent and
diversified fund can beat index funds by a huge margin. The argument of low cost,
which until now was present because of the entry load in diversified funds, should be
history as even diversified funds will be no-load from here on. At the same time, the
expense ratio plus tracking error of index funds is equal to the expense ratio of
sizeable diversified equity funds.

12. A-I gets an extra month’s credit to pay ATF

dues...
Coming as a relief for cash-strapped Air India, the Union petroleum ministry has
approved athree-month credit period to oil marketing companies (OMCs) for payment
of its aviation turbine fuel (ATF) dues. Currently, OMCs provide A-I a two-month
credit.

“There was a request from the committee of secretaries (CoS) to extend the credit on
ATF to three months from the existing two months to help Air India. The ministry has
agreed to it,” said a senior petroleum ministry official. The assistance was sought by
Air India last month during a presentation to the CoS, which is headed by cabinet
secretary KM Chandrasekhar.

ATF prices had touched a peak of Rs 71,028 a kilolitre (in Delhi) in August last year.
Prices fell to Rs 27,106 a kl in March this year but have again moved up to Rs 36,922 in
line with crude prices. The Indian basket of crude has averaged $72.81 a barrel in the
month so far, up 12.3 per cent from the July average of $64.83. As of August 6, the
Indian basket stood at $73.70 a barrel.

As a result of rising losses, most airlines have not been able to make timely payments
to OMCs for ATF. However, of late, airlines have been rationalising capacity to
increase operational efficiency and contain mounting losses.

13. Turnaround at operating level for pharma sector

Pharmaceuticals companies struggled for volume growth during the quarter ended
June due to weak US markets, but still ended with profit before tax and extraordinary
income of Rs 2,502 crore compared to a net loss during the preceding two quarters.

An analysis of results from 83 small, medium and large companies indicate that the
domestic business is growing at a healthy pace, while export markets remain subdued.

The reported net profit of 83 firms rose by a healthy 29.4 per cent (adjusted net profit
up 5per cent), but largely due to gains on foreign exchange loans, gains on fair
valuation of derivatives and profits in FCCB buyback. Ranbaxy Laboratories, Aurobindo
Pharmaceuticals and Stride Arcolab are illustrations and have reported higher profits
on extraordinary gains. Wockhardt provided mark to market losses on derivatives,
while Glenmark Pharmaceuticals made aprovision for foreign currency exchange
losses, to report lower profits.

The profits of Sun Pharmaceuticals were hit by lower sales by its US-based subsidiary,
Caraco, while Divi’s Laboratories reported a decline in net profit due to tax provision
for earlier years. Dr Reddy’s Laboratories posted a healthy result on the back of a one-
time contribution of Rs 210 crore in sales and Rs 73.4 crore in net profit from Imitrex
AzG. Cipla reported strong numbers on healthy growth in export formulation sales and
lower provision for forex losses at Rs 27 crore against Rs 74.7 crore in the same
quarter last year.

Overall, the numbers for the first quarter ended June were notably higher than the
growth in previous quarters due to the improving business environment in semi-
regulated and advanced markets and the European Union, indicates the pharma
analyst at Sharekhan Research. The domestic formulation business continued to be the
main growth driver for most of these companies, while Piramal Pharma, Cadila
Healthcare and Lupin benefited from consolidation of their acquisitions.

The reported earnings were higher due to significant profitable adjustment and a
stronger rupee. The operating margins were lower by 132 basis points to 13.52 per
cent due to a poor show by Glenmark Pharmaceuticals, GlaxoSmithKline, Novartis,
Plethico Pharma, Ranbaxy Labs and Sun Pharmaceuticals. The results were extremely
well for Dr Reddy’s Laboratories, Cipla, Cadila Healthcare and Piramal Healthcare.

The analyst at Kotak Securities said the decline in sales of Sun Pharma was largely due
to fall in finished dosage sales at Rs 300 crore from an estimated Rs 400 crore. The US
generics’ sales were, at Rs 230 crore, lower than the estimate of Rs 380 crore due to
lower sales at Caraco. Margins were significantly lower due to inventory provision at
Caraco, forex losses and adverse product mix, with lower proportion of formulations’
sales.

Ranbaxy Laboratories reported a flat year-on-year consolidated revenues, but an

appreciable 15 per cent improvement over the March 2009 quarter. The sequential
growth in revenues came from the domestic formulation market.

According to the analyst at Reliance Money, European sales were key to revenue
growth, while US operations witnessed a hit from US FDA issues. The emerging markets
contributed about 57 per cent of Ranbaxy’s global sales. Latin America and the Middle
East faced lower demand due to the slowdown.

14. Indian hotel chains face double whammy

When Indian Hotels Chairman Ratan Tata told shareholders at the annual general
meeting earlier this week that the hotel chain, which operates the Taj group,
continues to be impacted by the slowdown, he was merely echoing what P R S Oberoi,
his counterpart at the East India Hotels (EIH), had said recently.

The performance of these two leading chains bear this out. In the first quarter of the
year, EIH saw a 22 per cent dip in its net profit. The impact was much more severe for
Indian Hotels, which posted a 73 per cent decline in net profit during the quarter,
while total income was down 24 per cent, partly on account of closure of 287 rooms in
the Taj Mahal Palace and Tower in Mumbai, target of a terrorist attack last year.

Room rates have also seen a sharp decline during the quarter, as the effort was on to
fill empty rooms.

The industry faces a double whammy — declining demand and increasing supply. This
year is particularly challenging, as a bunching of supply is projected. In the premium
5-star segment, for instance, rating agency Crisil had earlier estimated that about
3,000 rooms will be added in the current year in the 12 destinations it tracks,
compared with about 1,000 rooms last year.

While the dip in rates had been a muted 2 per cent in the past year (compared to the
year before), HVS expects a countrywide decline of 20 per cent in room rates this
year. Occupancy is likely to remain at around 60 per cent, the same as last year,
though sharply lower than the 69 per cent occupancy recorded in the year before
(2007-08).

According to Crisil data, average room rates have dropped 26 per cent in the first
quarter of the year. The overall drop this year was likely to be above 20 per cent,
though the final numbers were yet to be crunched, Crisil analyst Sudip Mukherjee said.

But, hotels are under pressure to increase rates, given the increasing costs of staff and
other inputs like energy.

In the first three months of 2009, tourist arrivals declined by 10-18 per cent,
compared with the same period last year, according to provisional data compiled by
the tourism ministry. Then, things improved; the decline in April and May came down
to single digits –3.5 per cent and 1.9 per cent –and in June, arrivals were up 0.3 per
cent.

Foreign tourist arrivals in June were at 341,000 against 340,000 last year So, the trend
is positive.

Data from Crisil (see chart) show some relief in room rates in the tourist destinations
of Goa and Jaipur. These are also the only two destinations showing an increase in
occupancy.

Occupancy in Goa went up to 61 per cent in June 2009, compared with 56 per cent in
the same month last year. In Jaipur, occupancy went up to 37 per cent against 35 per
cent in June last year.

The interesting point is, while occupancy rates across all leisure destinations rose,
business destinations, widely regarded as the cash cows for the industry, witnessed a
substantial decline. That’s giving sleepless nights to the leading lights of India’s
hospitality industry.

Duty exemption needs to be made more user-friendly

In the new Foreign Trade Policy, Commerce Minister Anand Sharma should try to
revamp the duty exemption scheme and make it more user-friendly. The advance
authorisation scheme, put in place about four decades ago, has stood the test of time
and become the basic scheme around which many alternative schemes (some of them
very poorly conceived) have been introduced from time to time and discarded. This
basic quantitybased duty exemption scheme deserves to be simplified further and
made more userfriendly.

The advance authorisation scheme allows the exporter to get duty-free imports for
export production. The Standard Input Output Norms (SION) specify how much
quantity of inputs can be imported against aunit of export product. The General Notes
to SION, however, require the exporter to declare the quality, grade and specification
of the inputs and export product. Sometimes this ‘nexus’ condition creates problems
for the importers in compliance as well as documentation. Considerable simplification
can result if the ‘nexus’ condition is restricted to only afew select ‘sensitive items’, as
in the case of Duty-Free Import Authorisation (DFIA) and Annual Advance Authorisation
(AAA) schemes.

Advance authorisation can be issued by simply stating the description of the inputs and
export product and the value, without stating the quantity to be imported against
each input. The exporter may be required to account for the inputs at the time of
redemption, the way it is being done under AAA and through Appendix23 consumption
statement. This will eliminate the need for AAA.

Similarly, the advance authorisation scheme can allow excise duty free procurement
from domestic sources under notification number 43/2001CE(NT) dated June 26, 2001,
the way it allows the facility under the DFIA scheme. Transferability may be allowed
upon condition of CVD (countervailing duty) payment. In that case, the DFIA scheme
can be given a quiet burial.

Quite a few redemptions are held up for want of proper documentation. The condition
of realisation of export proceeds and production of Bank Realisation Certificate must
be done away with. The redemption must be granted on the basis of the shipping Bill
transmitted electronically to the Regional (licensing) Authority by the Customs. The
requirement to submit hard copy of the shipping Bill must be done away with. Once
the Regional (licensing) Authority issues the export obligation discharge certificate,
the exporter should not be required to again submit all the documents to the Customs
get the bond/Bank Guarantee redeemed.

In cases where the Advance Authorisation is issued on ‘no norms’ basis, a ‘norms
committee’ should fix the InputOutput Norms within reasonable time. Although
categorical provisions exist to treat the norms applied as final after elapse of a certain
time, the regional (licensing) authorities are not allowed to redeem the authorisation,
unless norms are fixed. Specific provisions must be made to redeem the
authorisations, once the exporter is able to properly account for the inputs, whether
the Norms Committee has finalised the norms or not. The exporter should not be made
to suffer due to delay by the Norms Committee.

The scheme can be better administered through Customs (Import of Goods at

Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. That way,
a single monitoring authority, the excise, can issue the Procurement Certificate,
monitor proper end use and ensure fulfilment of export obligation and, thereby, plug
rampant misuse of the scheme.

NTPC likely to set up power plants in Nigeria, Sri Lanka

National Thermal Power Corporation Ltd (NTPC), country’s largest power utility, is
likely to set up power plants in Nigeria and Sri Lanka, a top NTPC official said.

It is also pursuing coal blocks amongst NTPC, RNRL, SAIL, NMDC and CIL for sourcing
coking coal and thermal coal from abroad for which International Coal Venture Pvt Ltd
was incorporated on May 20 this year.

The Joint Venture (JV) will explore various opportunities in Australia, Mozambique,
Indonesia and Canada etc, Sharma said.

Tata Power Trading approaches CERC against power

exchanges
Tata Power Trading Company Ltd, the power trading arm of India’s largest private
sector electricity generator, Tata Power, has approached the Central Electricity
Regulatory Commission (CERC) against the two power exchanges — Indian Energy
Exchange (IEX) and Power Exchange India Ltd (PXIL).

In a petition filed at the regulator last month, Tata Power Trading (TPT) has
questioned the functioning of some members of the exchanges. The company has
accused these members of operating as power traders but without any licence granted
by the commission.

“The exchanges have registered some people (as members) who are neither grid-
connected generators nor trading licensees. Our main objection is that while these
members are performing activities akin to a licensed power trader, they do not
possess trading licences,” said a senior official from TPT.

The CERC admitted TPT’s petition on July 30 and has directed the two exchanges to
file their reply by August 21.

Anybody who wishes to buy or sell power at the exchange is required to route the
transaction through a member. Entities such as power generators, distribution
companies, independent power producers (IPPs), captive power producers (CPPs),
merchant power plants and traders — with a minimum net worth of Rs 1.5 crore — are
eligible to become members of the Indian Energy Exchange.

18. Publicis to buy Razorfish ad agency from

Microsoft
Publicis struck a $530 million deal with Microsoft to buy the Razorfish ad agency and
boost its position in digital communications, the world’s third-largest communications
group said on Sunday.

Publicis will issue 6.5 million treasury shares to the software giant, worth ¤162 million
($232.6 million) at Friday’s closing price, and pay the rest in cash from its ample
liquidity position.

The two firms, which concluded a cooperation deal in June, also signed a strategic
alliance agreement to deepen their ties in digital advertising while Microsoft uses Bing
as its battleship in the search engine war with Google Inc.

Publicis is already the number one in digital advertising and Razorfish was number two
in the single advertising sector that still shows growth rates despite the economic
crisis.

The group, based in Paris, beat Britain’s WPP Plc and Japan’s Dentsu Inc in the final
bidding from an original field of some eight parties interested in the Microsoft unit.

The transaction means that Publicis will generate 25 per cent of its sales from the
digital sector, up from 21 per cent at the half-year stage, a figure Levy originally
targeted for end-2010.

Publicis is the world’s thirdlargest advertising group with ad agencies such as Leo
Burnett, Saatchi & Saatchi, media buyers Starcom MediaVest Group and
ZenithOptimedia while in digital advertising it owns Digitas.

Razorfish was founded in 1995 and became part of Microsoft in 2007 as part of the $6
billion aQuantive acquisition.

19. England pull out of badminton event after LeT

threat
Englandtoday pulled out of the World Badminton Championship, citing a “specific
Lashkar-e-Toiba threat” against the elite event, starting in Hyderabad tomorrow.

They were the only team to do so, and their action could leave a bad taste in India’s
mouth for its demonstration of low confidence in New Delhi’s ability to provide
security.

Home Minister P Chidambaram had said: “I am satisfied that the World Badminton
Championship will take place in complete security. No one need to have any
apprehensions on this score.The alert in Hyderabad was based on information shared
with the state police in a routine manner. There is no specific information that points
to any imminent threat to the championship.” Badminton England said in a statement
that the decision followed “concerns about the English team potentially being a target
of attack in the event of a terrorist act”.

Badminton England Chief Executive Adrian Christy said the decision was taken after
seeking advice from the British Foreign Office and High Commission in India.

20. Now, fund-raising for charity goes mobile

Realising that raising money for charity will only get tougher in the present economic
environment, the International Society for Krishna Consciousness (Iskcon) has decided
to harness the ever-increasing mobile users in India. For Iskcon, this will help them
sustain the inflow of donations for its mid-day meals programme.

Iskcon along with Atom Technologies has introduced a mobile interactive voice
response system (IVRS) module that will enable individual donors to zip cash donations
over the mobile phone, using their credit cards.

Technology will make fund-raising easier, asserts Shri Radha Krishna Das, MD, Iskcon
Food Relief Foundation, who is keen to roll out the IVRS mode of payment to all 16
Iskcon centres across India. At present, the IVRS mode has been launched for Iskcon’s
Mumbai centre.

Through the IVRS mode, Iskcon is targeting the Gen Y (a term applied to those born
between 1981 and 1995), who are comfortable paying for downloads, movies and
music electronically and most of whom have mobile phones.

Neralla asserts, “India’s mobile population is a huge universe for charities, especially
for the smaller players who struggle for donations.” He reckons that mobile donors
may contribute smaller sums, averaging between Rs 100 and Rs 200, but the volumes
are bound to be much larger than any other form of donations. While nonprofits relied
on a smaller number of donors making large gifts in the past, the new paradigm is
appealing to a vast number of smaller donors.

Atom Technologies has also joined hands with two other NGOs — GiveIndia & CPAA.
GiveIndia will be adopting atom’s IVR-based payment option, whereas CPAA will be
going in for a mobile-based payment solution where donors can donate via text
messages. Nonprofits could also send targeted messages to their donor base to update
them on the progress made with fund-raising or on cause objectives.

21. Sony plans $199 e-reader in Amazon challenge

Sony Corp will begin selling this month the cheapest digital book reader for the United
States, heating up the competition with Amazon.com Inc in the small but fast-growing
market for electronic readers.

Sony plans to start selling its 5-inch-screen Reader Pocket Edition at $199 — which it
called a breakthrough price — and a larger touchscreen reader for $299, through
nationwide retail outlets such as WalMart and Best Buy.

To drive demand, the company plans to reduce the price it now charges for downloads
of best-sellers and new releases to $9.99 from $11.99, bringing prices largely in line
with Amazon’s.

22. Idea walks the talk

‘Walk, When you Talk’ has prompted many viewers to approach the Indian Customer
Complaints Forum on the ground that walking while talking can lead to accidents, but
Idea Cellular isn’t complaining. The country’s fifth largest telecom services operator is
busy enjoying all the attention the campaign has drawn.

The latest campaign, which is the fifth in the ‘What an Idea, Sirjee!’ series, was
launched last month and its success has led Idea to conduct ‘walkathons’ all over the
country, introduce theme ring tones and launch awebsite , which suggests that if
‘Talktime’ equals ‘Walktime’ for mobile users, fitness scores can go up.

Lowe Lintas India Chairman and Creative head R Balakrishnan (popularly known as
Balki), who has conceptualised the ‘What an Idea…’ series, says he sees little point in
the protests. “These campaigns are based on fun themes. I don’t expect the whole
world to follow it, even though I expect everyone to appreciate it,” Balki says.

The ‘Walk, When you Talk’ campaign is about a universal insight that as people spend
almost 1.5 hours on an average on the phone every day, walking while talking might
be a solution to solve the fitness problem.

23. DTH operators may have to offer inter-operable

boxes
Direct to Home (DTH) operators could be asked to provide inter-operable set-top
boxes to their customers with the Competition Commission of India (CCI) seeing prima
facie merit in a complaint filed by a consumer organisation that it is in violation of
competition laws.
The CCI is already one month into its investigation that began on the basis of
information filed by Consumer Online Foundation that says DTH service providers are
limiting competition among themselves by not providing consumers inter-operable set-
top boxes that will allow them to switch operators without paying for a new box.

There are over 15 million DTH subscribers currently among five private DTH operators
— Dish TV, Tata Sky, Reliance Big TV, Sun Direct and Airtel Digital TV.

Current DTH licensing norms only specify inter-operability between DTH operators
offering services using MPEG-2 technology like Dish TV and Tata Sky (which are in
compliance). However, the Bureau of Indian Standards (BIS) is yet to set out norms for
MPEG-4 technology (used by Sun Direct, Big TV and Digital TV), so the boxes of Dish TV
or Tata Sky are not portable with the services of the MPEG-4 DTH operators.

Gautam Shahi, advocate with APJ-SLG Law Offices, who is handling the case for
Consumer Online Foundation, said operator-set-top box link is a direct violation of
licensing conditions. "There is a prima facie tie-in of DTH services with settop boxes
that violates Section 3of the Competition Act, 2002," he said.

24. JLR ties up three-year financing for inventory

Tata Motors-owned Jaguar Land Rover (JLR) said yesterday it had successfully secured
a financing facility of up to £75 million (Rs 600 crore) with Burdale Financial Ltd, a
member of the Bank of Ireland Group.

The package consists of a three-year committed facility to finance Land Rover’s parts
and accessories’ inventories and receivables in the UK and the US. It does not form
part of JLR’s applications to the UK government’s Automotive Assistance Programme,
about which discussions continue, the company said in a media statement.

Said Ken Gregor, CFO: “Jaguar Land Rover is pleased to have concluded this facility,
which is an important element of our working capital financing arrangements.” This is
an important element of JLR’s working capital financing to cover the key Land Rover
parts and accessories’ inventories and receivables part of our business, which has a
high cash requirement, to function properly.

25. Channel V gambles again on new format

Channel V faces a tough task. While its revamp — a new look with focus on reality
shows —is slated for August 22, market analysts are of the view that it’s almost a do-
or-die situation for the TV channel.
Languishing at the bottom of the pile (among the top five players), with a market
share that has risen marginally from 6to 8 per cent in the past six months, the channel
needs to do something new to garner eyeballs.

The new mix — 60 per cent music and 40 per cent reality show — is targeted towards
achieving just that. The bouquet of reality shows would include, Exhausted and Kidnap
(both game shows), Dare to Date (based on the blind date concept), Lola Sunday and
School Of Cool (a show for college students).

But will it able to turn on the magic? Says Prem Kamath, General Manager: “In the
first quarter itself, we have launched five new shows. This revamp would help us
differentiate far more significantly.” According to him, besides changing the content
matrix from 90 per cent music and 10 per cent shows to 60 per cent music and 40 per
cent shows, they have also hired an external production house, Endemol, for the first
time. Endemol will produce their lead show, Exhausted —a show based on an
international format that will have contestants performing tasks for 48 hours without
sleep. Kamath hopes this show will help turn around the channel’s fortunes.

Market leader MTV India is following a wait-and-watch policy. Said its General Manager
and Senior Vice President (Creative and Content) Ashish Patil, “It should be interesting
to see how audiences react towards these new shows. Anyway, they have revamped
five times in the last few years, but the content mix has not worked still. I hope they
get it right this time.” The issue, Patil felt, was faulty execution. MTV is launching a
new show called Striped this Friday. While admitting that MTV’s shows, like Roadies
,have worked better, Kamath said they have had a line-up of shows like Get Gorgeous
and Launch Pad .“Our market share among all the channels has risen from 0.18 per
cent to 0.4 per cent, whereas MTV’s is at 0.6 per cent.” Media analysts said it is
imperative for Channel V to get the programming mix right this time. “It has not been
able to garner market shares despite the various revamps. It is important for them to
click this time,” said one.

26. IOC-Adani win CNG rights

The Indian Oil Corporation (IOC) and Adani Energy combine has bagged rights to retail
CNG to automobiles and piped gas to industries in Chandigarh and Allahabad by
quoting zero pipeline tariff.

The Petroleum and Natural Gas Regulatory Board (PNGRB) had asked the companies to
quote only the tariff that they will charge for transporting gas within the perimeters
of a city and left the final selling price of the fuel for the companies to decide.

Industry sources said PNGRB today opened price bids for two cities to discover that
IOC-Adani combine had quoted zero pipeline tariff for 25 years in Chandigarh and the
same for 7 years in Allahabad. On top of this, the PNGRB has also allowed a 5-year
marketing exclusivity to the winning company.

Even after 5 years, the operator like IOC-Adani will have system (that is pipeline)
exclusivity for 25 years, meaning no other company can lay a pipeline network and
would have to necessarily request them to use their network if they want to retail
CNG to automobiles and piped gas. But the regulations do not specify the extra
capacity the operators would have to create in the system for usage by others and so
third parties can be turned down on pretext of no capacity, they added.

The other bidding criteria was the length of pipeline a company proposes to lay in the
city and the number of consumers they propose to sell the gas to. In some cases,
companies have indicated enrolling consumers even more than the population in that
area, again making a mockery of PNGRB’s regulations, they added.

27. Emerging Media’s Badale to buy 50% in

Rajasthan Royals

MANOJ Badale, co-founder and managing partner of the UK-based venture capital
group Blenheim Chalcot, is acquiring a 50.3% stake in Rajasthan Royals, the team that
won the first edition of the Indian Premier League (IPL) in 2008.
Jaipur IPL Cricket, the company which has the franchise for the Rajasthan Royals
team, is wholly-owned by Mauritius-based EM Sporting Holdings (ESH). Nigeria-based
NRI family Chellarams holds 44.1% in this company and is the single largest
shareholder.
Emerging Media (IPL), promoted by Mr Badale, owns 32.4% in this holding company
while the rest 23.5% is equally split between Blue Water Estate, representing Lachlan
Murdoch and Kuki Investments, which is promoted by UK-based Kundra family and is
also believed to represent investments of Bollywood actress Shilpa Shetty.
Post this transaction, Emerging Media (IPL) will own 50.3% direct stake in the
cricket team besides an indirect stake of around 16% through the Mauritius joint
venture.
The fresh issue of shares is being made against the initial investment made by the
venture. As per the deal, the Rajasthan Royals franchise owners had to pay BCCI $67
million in ten equal installments of $6.7 million.
Emerging Media (IPL) had paid $5.05 million as earnest money for the bid to get the
team franchise. This earnest money was to be adjusted with the first installment of
$6.7 million to be paid to BCCI. The remaining $1.65 million was paid by the Mauritius
joint venture, partly through a wholly-owned unit.
 28. DoT to refund Rs 86-cr fee paid by ByCell
THE Department of Telecommunications (DoT) will refund the entry fee and the
performance guarantee of Rs 86 crore paid by little-known Swiss firm ByCell to start
operations in India.
DoT has prepared a draft note revoking the letters of intent (LoIs) issued to ByCell,
paving the way for refunding the entry fee of Rs 23 crore, and two performance bank
guarantees of Rs 18 crore and Rs 45 crore, said a government official, who asked not
to be named.
ByCell, which was given approval to begin operations in 13 circles, including Assam,
Bihar, north-eastern states, Orissa and West Bengal, has received LoIs for five of
these circles. But DoT had withheld its licence because of security concerns raised by
the ministry of home affairs (MHA) and the revenue department. In 2006, it had
received FIPB approval to invest Rs 500 crore.
ByCell, founded by a group of Russian businessmen, was to hold 74% in the Indian
telecom company with Hyderabad-based Jayalakshmi Group that has interests in tea,
tobacco, cotton yarn and power owning the rest. Both companies had announced this
joint venture in 2006.
In fact, FIPB had given ByCell approval twice to invest in India, but DoT refused to
give it licence on grounds of security.
In 2008, the company moved court to obtain licence to operate in the country as it
had paid the licence fees and other charges to the government. On the court’s
direction, it received a licence from DoT to start its services in India. Meanwhile, it
also received clearances from the home ministry. On the basis of this, the company
decided to invest $500 million.
Earlier in May this year, MHA and the revenue department had sought that FIPB
review the clearance it had given to ByCell to launch telecom operations in India.
The revenue department had expressed concerns to FIPB about ByCell’s shareholding
structure, its source of funding and the lack of clarity about the company. It had said
the company be allowed to launch operations only after it offers clarity on these
issues.

29. India emerges as the new IT front office of the world

GLOBAL markets may be the breadwinners for Indian technology majors, but the
domestic market is fast becoming the next hot destination for global firms,
particularly smaller, niche market players. While the western economies are still
waiting for ‘green shoots’ of recovery, a slew of niche technology vendors, who were
focusing on the US and Europe for so long, are finding greener pastures in emerging
markets such as India.

Some of the companies that have set up shops in India in the past six quarters
include business intelligence provider MicroStrategy, anti-virus vendor AVG
Technologies, investment analytics provider MSCI Barra, document manager ReadSoft,
insurance software company IDIT Technologies, banking solutions firm Trasset and
financial technology outfit SmartStream.
While the downturn in western markets triggered this trend, these firms were lured
by India’s resilience to the global crisis, its strong local industrial base and the
government’s big-ticket spends on technology infrastructure. “Corporate India
consists of 5,000 large enterprises, 27,000 small and medium outfits (SMEs) and more
than seven lakh home-office set-ups. This sums up into a huge opportunity for tech
providers,” says Mohammad Saif, global consulting firm Frost & Sullivan deputy
director of ICT practices for South Asia and the Middle-East.
Most new entrants into India are niche technology players, points out Milan Sheth,
business advisory services partner of professional advisory firm Ernst & Young. “These
companies are targeting two major areas, including government and public sector
segment and specialised analytics and modelling,” he adds.
Some of the new entrants that ET spoke to cited maturity in domestic IT market as
an important reason to target India. “Since Indian companies are increasingly
competing in the world market, they find a need to adhere to global best practices in
their respective fields. Hence, we feel that the time is right for us to bring our global
customer insights to the Indian market,” says Shankar Ganapathy, world-wide V-P of
MicroStrategy, a $360-million US provider of business intelligence solutions that
announced the launch of its India operations a few weeks ago.
Also, according to SunGard managing director Atul Sareen, various regulatory
changes in India are creating new opportunities for technology providers to bring in
bestin-industry solutions. For instance, the Reserve Bank of India’s decision to allow
retail investors to invest in global markets requires technologies to connect broker
terminals to international exchanges and also necessitates use of advanced risk-
mitigating solutions, says Mr Sareen, who looks after sales of financial solutions for
SunGard, a $5.6-billion US vendor of software solutions.
SunGard, which has been operating off-shore development centres in India since
1993, recently set up sales office in India to cater to local customers. The company
will initially target financial solutions for segments including banking, insurance, front
and back-office trading, and energy trading. At the end of 2008, the company had
2,000 employees in India or 10% of its global headcount of 20,000. It expects a 50%
rise in its Indian headcount by the end of 2009.
AVG Technologies, which has 80 million users of its anti-virus solutions across the
world, launched direct channel presence in India two months ago. “So far, our India
presence was through Internet downloads of our free software. However, looking at
fastgrowing Internet connectivity in India, we have established channel sales in the
country,” said Peter Baxter, vice-president, business development.
Foreign firms that set up shops in India early have already started reaping the
benefits. Buongiorno, the world’s largest listed mobile value-added services (MVAS)
provider that launched its India operations three years ago, is expecting a three-fold
growth this year. The company, which earns close to 10% of its global revenue from
India, has been providing VAS services to top domestic telecom operators, including
Bharti Airtel.
According to Nasscom estimates, the domestic IT services market has grown two
folds to $8.3 billion in the three years ended March 2009. Over half of this revenue
 came from IT spends by small- and medium-sized companies.

30. Coca-Cola arm buys back Kinley bottling rights from

franchisees
HINDUSTAN Coca-Cola Beverages, the bottling subsidiary of Coca-Cola India, has
acquired the bottling and distribution rights for its Kinley packaged water brand from
franchisee bottlers in three states, ending a long-drawn dispute.
The compensation the world’s largest beverages maker paid to individual
franchise bottlers could not be confirmed.
With this acquisition, which is for both retail and bulk water, Coca-Cola can have a
direct and centralised distribution system for Kinley, which tops the retail packaged
water market with a 10.3% share, and align its bottling operations more efficiently.
The mass-distributed Kinley leads the Rs 2,200-crore retail packaged water market
with a 10.3% share, according to market research firm AC Nielsen. The market is
growing at a rate of about 17% per year.
The integration of bottling operations also means that there is no overlapping
between Hindustan Coca-Cola Beverages and Coke’s franchise bottlers in these
markets.
The Coca-Cola spokesperson said the integration has been done over the last 24
months.
Several leading franchise bottlers of Coca-Cola had signed an agreement called the
Coca-Cola International Bottlers Agreement (CIBA) to get the franchise r i g h t s for
Kinley.
Under the agreement, bottlers had to set up manufacturing capacities and take care
of infrastructure development of coolers and signages. Coca-Cola did only advertising.
The contracts, ranging between five and eight years, had been renewed from time to
time.
Packaged water is highly fragmented and categorised by low margins estimated to be
a third of carbonated drinks.

31. Three top Hollywood studios bring films to web

IT IS a dash of Hulu and a sprinkle of YouTube, features a crystal clear picture, can
rewind or fastforward at lightning speed, and doesn’t require a download of any
special software.
But epixHD.com, the soon-to-launch video website, will have its success dictated
more by the movies, concerts and original programmes it offers than the technology
behind it, said the executive charged with creating and running the site.
But they added a twist. In addition to the premium movie channel and a video-on-
demand component, the venture is building epixHD.com a website where the studios’
vast collections of full-length movies and new original programming can be streamed
by any subscriber.
 Rensing, a former executive with Time Warner’s AOL, was hired to run the site. His
aim, he said in an interview, was to make it “all about being easy to use” yet not a
“dumb player” that simply acts as a projection screen for video.
So epixHD.com comes with an array of features. When watching Paramount’s “Iron
Man”, for instance, a person will have access to the trailer, lists of facts about the
superhero film, a plot synopsis, and cast list.
Because of its relationship with the studios, Rensing said epixHD.com could
eventually offer more unique features.
EpixHD.com is due to launch before the cable channel does in October, and will
build its library of films from its parent studios in the months that follow. At the
moment, it is still being tested in front of a small audience.
As for its appearance, the site features as wall of movies from which a viewer with
a click of the mouse. The movie then pops up, set against a traditional red movie
theatre curtain. Another mouse click plays the movie.
Rensing noted one feature he particularly liked: a sharing function. Under the
current distribution agreement with Verizon Communications, Epix subscribers can
invite up to four friends to watch a movie online — from their own computers. Those
friends can also swap message about the movie through a chat function in the player.
And so long as they are invited by an Epix subscriber, the friends watch for free.
“Hey, when you come to my house and we’re going to sit down and watch the
‘Sopranos’ and you don’t have HBO, do I charge you a dollar and stick it in my cable
bill?” — Reuters

32. Govt to pocket Rs 10k-cr special dividend

THE government will mop up around Rs 10,000 crore by way of special dividends from
some cashrich companies run by it, ahead of planned public issues aimed at enhancing
public ownership. It plans to tap the unlisted Bharat Sanchar Nigam (BSNL) and Coal
India as well as listed companies such as NMDC and MMTC, said an official, requesting
anonymity. The intent is not to strip these companies of their assets, he said, adding,
“Large amounts of cash in banks reduce overall rate of return on capital.” The move
will not affect the valuation of the companies, he said.
The government had raised its target for dividend income by Rs 10,000 crore to Rs
49,750 crore in the Union Budget 2009-10, against the revised estimates of Rs 39,736
crore for the previous year, clearly indicating the intent to claim special dividends.
Though the proposal is still at the discussion stage, officials with the government
and companies involved in the deliberations said they were already planning for
special dividends. “The government may ask for a special dividend,” said a BSNL
official.
A leading banker, involved in disinvestments process in some of these companies,
also confirmed the development. “Going by the economic indicators and performance
of the companies, chances are that the actual dividend income for 2009-10 would be
lower than the previous year’s figure, unless the companies declare special
dividends,” he said, requesting anonymity.
 In 2008-09, the government earned Rs 39,736 crore in dividend and profit, Rs 3,468
less than the target of Rs 43,204 crore. “Since the year 2008-09 was a bad one for
many public sector oil companies, it was expected that the actual dividend would be
lower,” said another government official.
Some of the companies such as BSNL and Coal India have cash to the tune of Rs
35,000 crore and Rs 25,000 crore, respectively, on a consolidated basis. Though these
companies need some cash to meet their capital expenditure, the current level of
cash was far beyond their requirement in short to medium term, he said, requesting
anonymity.
Total amount of cash with all public sector firms is estimated to be over Rs 75,000
crore. While NMDC has Rs 7,200 crore in cash, MMTC and Neyveli Lignite have Rs 5,950
crore and Rs 4,750 crore cash reserves, respectively.

33. Reliance General fined for tweaking ‘approved’ plan

INSURANCE Regulatory and Development Authority (IRDA) has imposed a Rs 20-lakh
fine on Reliance General Insurance for violating ‘file-and-use’ guidelines, which apply
to the approval of new products. Reliance General Insurance has been penalised for
making changes to its health insurance plan after it was approved by the regulator.
Just as the market regulator Sebi requires a company to file a draft red herring
prospectus a few weeks before its listing on the stock exchange, IRDA mandates that
insurance companies seek its approval before launching new products. If the regulator
has no queries or objections, insurers can start selling products after a fortnight. The
norms relating to the process of lodging details of a new insurance plan with the
regulator before starting to sell are termed as file-and-use guidelines. Once a new
scheme is approved by the regulator, the insurance company cannot make changes
without the former’s clearance.
When contacted, Reliance General Insurance said, “We had filed and received
approval from IRDA for our retail health product by the name of Reliance HealthCare,
while we introduced the same as Reliance HealthWise. In 2007, we had reviewed the
pricing based on our claim experience after two years of the product approval and the
same was introduced after filing with IRDA as per ‘file-and-use guidelines’. This
confusion/lapse had occurred on account of oversight as the new file-anduse
guidelines were introduced around the same time which required prior approval for
any revision even in existing products which was not the case in the earlier file-and-
use guidelines.” The statement added that the company has confirmed strict
compliance to the file-&-use guidelines as advised by IRDA and that there would be no
impact on policyholders.
In 2007-08, the insurance regulator collected Rs 25 lakh by way of fines imposed on
insurance companies. Earlier, the regulator had imposed fines on private and state-
owned insurance companies for not meeting priority sector targets, selling policies
below prescribed rates, opening branches without permission and for delay in filing
returns.
Section 102A of the Insurance Act, 1938, allows IRDA to impose a penalty on insurers
of Rs 5 lakh for each violation. The violations include failure to furnish any document,
failure to comply with directions, failure to maintain solvency margins and failure to
 comply with the direction in insurance treaties. Despite the limit, IRDA can charge
higher penalties by compounding the violations.

34. Is India ready for debt management office?

DEBT MANAGEMENT HAS OVER THE YEARS become a specialist job and
administrations the world over have resorted to branching this activity under a
separate authority. In the US, debt management falls within the Treasury’s domain,
while the Federal Reserve, the US government’s central bank, deals with monetary
policy. Most of the jurisdictions worldwide, like UK, Sweden, Brazil, have a separate
entity managing debt and in-charge of raising and managing debt for the respective
administrations.
Presently, the Reserve Bank of India carries out both the debt management and the
monetary policy implementation functions, for the central government. Therefore, a
case for a separate DMO is being made out mainly on the ground that the central bank
is conflicted when it acts both as the government’s banker trying to borrow as cheap
as possible, and also as the prime authority responsible to enforce the monetary
policy with the prevalent interest rates.
Contrary to popular belief, a separate DMO is unlikely to increase in forced mopping
of government securities (G-Secs) by public sector banks anymore than already be.
With ever-decreasing global interest rates, higher yield of Indian public debt anyways
remains very alluring.
Importantly, the development of the G-Secs market is essential for any economy to
come of age. It requires dedicated professional management and carving out a
separate DMO may be the correct approach. Another factor to consider is India’s debt
rating that is just about investment grade or thereabouts. A dedicated approach
towards debt management will help in improving the disappointing debt rating.
With the Indian government taking on its biggest public debt raising exercise till
date of approximately close to $ 90 billion or Rs 4.5 lakh crore, the presence of a
vibrant and dynamic debt and G-Secs market involving participation from all class of
investors (and not only from a few institutional players, as is the case now) has
become paramount.
Due to the severe global credit crisis, the Indian government, like most other
governments the world over, was pushed to walk the path of an expansionary fiscal
policy. The Fiscal Responsibility and Budget Management Act, 2003, which lay policy
targets for both the fiscal deficit and the revenue deficit up to 2008 and aimed at
institutionalising fiscal management to bring about greater fiscal discipline, had to be
consequently put in suspension. Taxes were lowered and expenditure increased to
stimulate (a) the sagging economic sentiment; and (b) increase the money flow to
thwart the adverse effects of credit crunch which has resulted in India’s present fiscal
deficit reaching alarming levels.
Therefore, the need for a sound public debt management strategy has become even
more pressing. It is the need of the time to lower the cost of public borrowing, while
balancing it with extant monetary policy initiatives and refinancing risks inherent in
any government borrowing plan.
 Is there a downside? Absolutely, every change has the potential to be catastrophic.
It is contended that there exist three pre-conditions to separation of debt
management, namely, (a) reasonable control over fiscal deficit; (b) development of
financial market; and (c) legislative changes.
The first two pre-conditions are moot as they pose the chicken and egg problem.
The third one is entirely achievable.
There are some issues that must necessarily be addressed during the process of
setting-up the DMO.

• The seamless integration for efficient debt management and coordination of the
DMO with the other limbs of the Indian government is the pivotal concern.

• Sustainability analysis for public debt should incorporate appropriate mechanism for
reporting from onground debt managers, thereby drawing upon their market
intelligence and understanding.

• The ongoing credit crisis has proven that the once infallible are also fallible.
Countries can little afford defaulting on their sovereign debt obligations as there is
unquantifiable reputational risk associated with it. Legal enforceability of debt
obligations in both, domestic and international markets, and understanding the legal
implications of various complex structured transactions becomes essential. Adequate
measures are necessary in this regard.

• Creation of DMO has to adhere to a proper constitutional procedure that empowers

the DMO to bind and be bound on behalf of the Indian government. Clarity in
delegation of this power and function is indispensable.

• It is rather impossible to foresee all future situations for such a wide function. Thus,
the regulations must not be too detailed. They should clearly state the main activity
of DMO, provide operational guidelines and establish a seamless coordination
mechanism.
Indian regulators, RBI and SEBI, have been casted away for towing a conservative
approach over the years, but the same dogged approach tempered with sensible pro-
action, like in the Satyam fiasco, has largely served in shielding India from the Asian
financial crisis and the present global credit crisis.
Nevertheless, the creation of DMO will not be frivolous, as it shall result in removing
the conflict with monetary policy management and provide the much needed stimulus
to debt markets. In any case, divestment of the debt management function from RBI
to a separate authority is likely to involve multiple phases, with adequate check-posts
at each phase. If worked out with adequate precaution, the DMO can serve as a
change agent for the development of the Indian debt markets.

35. Maruti stays ahead of the pack

 THE lower base effect of July 2008 translated into healthy sales growth in July this
year, as carmakers posted increase in sales of 31% to 1.15 lakh cars last month in the
domestic market over the same month last year, when sales dipped 1.7% to 87,724
cars.
As per the Society of Indian Automobile Manufacturers (Siam), the domestic auto
industry is likely to perform well for the next few months, with strong demand
expected during the upcoming festive season. Car sales were primarily led by Maruti
Suzuki India, whose sales jumped 31% to 60,012 cars and the No. 2 carmaker Hyundai
recorded a 54% increase in sales to 23,193 cars. Mahindra & Mahindra sales jumped
74% to 11,660 units last month.
“The domestic market will continue to post impressive sales growth till the festive
season and after that, there could be some correction in the sales numbers. The
market is growing as the fundamentals of the economy are strong, but the ongoing
drought could play spoilsport in demand after the festive season,” said Mahantesh
Sabarad, an auto analyst with Centrum Broking.
Tata Motors sales rose 21% to 14,537 units in July, while Honda Siel Cars dispatches
rose 20% to 4,827 units last month compared with 4,006 units sold in the same month
last year. General Motors India, the Indian subsidiary of troubled American carmaker
General Motors, saw sales drop 16% to 3,729 .
The sales growth story was the same for commercial vehicle (CV) makers, which
after a gap of 11 months, posted an increase of 10% to 37,624 vehicles in July against
34,325 vehicles in the yearago period. The growth came largely from light commercial
vehicles, which grew 28% to 21,486 units in July, while medium and heavy truck sales
fell 8% to 16,138 vehicles in July over last year. The CV segment posted a small 1.93%
growth in July 2008 and had started declining from August last year.
The two-wheeler segment also posted growth as market leader Hero Honda’s
motorcycle sales surged 31% to 3.42 lakh units though rival Bajaj Auto’s sales dipped
4% to 1.09 lakh units. Honda Motorcycle’s bike sales rose 53% to 38,758 units while
TVS Motors posted a decline of 19% to 31,916 bikes.
Export of passenger vehicles grew 21% to 33,789 in July. Exports led by huge
demand from Europe helped carmakers generate impressive growth, and this was
largely driven by Maruti Suzuki India, whose overseas sales grew 88% to 10,432 units
last month.

36. It’s a big day for Nokia chief

NOKIA folklore has it that in the early 1990s, when the Finnish mobile phone giant’s
board was deliberating whether to set up operations in India or China, the then CFO
Olli-Pekka Kallasvuo insisted that it was not an either-or decision—Nokia needed both
markets. So the company set up operations in India in 1995. And the rest, as they say,
is history. Today, Nokia boasts of a Rs 24,200-crore business in India with 70%-plus
marketshare in mobile handsets. On August 20, the 56-year-old Finn will have to take
similar decisive calls. As the chairman of the jury for the ET Awards for Corporate
Excellence, he will head an eight-member grand jury that will change the lives of a
 chosen few in India Inc—doing no less than inducting them into India Inc’s Hall of
Fame. Mr Kallasvuo, now president and CEO of the euro 51.05-billion Nokia is looking
forward to the challenge. “It’s an honour. It’s also a great opportunity to meet some
of the architects of the new Indian business powerhouses,” he says. “It’s a big event
for me personally. India is not an emerging economy now, but it’s in full bloom—
taking into account the significance, the size, the importance of the nation.”
In his 28 years with Nokia, Mr Kallasvuo has seen a small company from Finland
transform into a truly global handset giant. Naturally then, the category that excites
the chairman of the jury is Emerging Company of the Year. “That category holds huge
promise as these companies identify new business opportunities and think of new
marketing techniques that enable a successful outreach. I have looked at some of the
nominations, they are quite interesting,” he says.
Over the years, the jury has been chaired by a range of diverse personalities—from
Infosys’ NR Narayana Murthy, to HDFC’s Deepak Parekh, to Pepsico’s Indra Nooyi and
ArcelorMittal’s LN Mittal.

37. Nokia boss believes in consensus

THEY brought their individual styles to the collective decisionmaking process: some
were consensus-builders, some wanted time-bound quick decisions, some allowed long
debates and even agreed to disagree with the members. Mr Kallasvuo sees himself as
a consensus-builder. “Nokia’s culture is very collaborative and equitable. But I guess,
it’s also about finding the right balance,” he says. But after looking at the list of
nominees, Mr Kallasvuo has no doubt that arriving at decisions is going to be a tough
ask; he finds the shortlisted companies truly world-class.
Unsurprisingly, he remains bullish on the India story. “India has come a long way
from the agrarian economy it was to being one of the most favoured investment
destinations,” he says. “The liberalisation charter and reforms process initiated
by the government 18 years ago were the first steps toward global optimism for India.
The telecom industry has immensely benefited from the steps that were taken in the
early years.”
Mr Kallasvuo believes the rise of the Indian MNC has been an important step in the
movement of India Inc to the global centrestage. “It indicates India’s growing role in
global business. Today, Indian businesses are competing at the global level—making
global acquisitions to expand their reach and grow their capabilities. Tatas’ Corus
acquisition, HCL’s Axon buy, the acquisition of Jaguar-Land Rover, all of these reflect
India’s growing role in the comity of nations,” he expands.
The winners of The Economic Times Awards, like Infosys, Tata Steel, Bharti, HDFC
Bank, Ranbaxy Laboratories and TCS, have helped the India story go further and also
done their bit in nation-building. Mr Kallasvuo’s jury will take it a step further.
The ET Awards are presented by Raymond in association with Trident, Nariman
Point, Mumbai, and the television partners are ET NOW and Times NOW.

38. Bharti to offer $500-m cable network outsourcing deal

 INDIA’S largest telco Bharti Airtel will outsource the management and maintenance
of its 80,000 km-plus inter-city optic fibre cable network in a deal that is estimated to
worth about $500 million over a five-year period, two executives familiar with the
development said.
Bharti has made outsourcing the cornerstone of its business strategy, and has
signed multi-billion dollar contracts with network vendors such as Ericsson, Nokia and
Siemens, which build, operate and manage its mobile network. It pioneered the
network outsourcing model in 2004 by awarding contracts to Ericsson and Siemens —
which later merged with Nokia Networks — and this business model has now been
replicated by over 100 operators globally.
Bharti was also the first to outsource its IT requirements when it awarded a 10-year
$750 million contract to IBM, which is now worth $2.5 billion. Vodafone, too, has
outsourced its IT systems to IBM. Another billion-dollar pact exists with six BPOs,
which collectively handle Bharti’s customer services for a 10-year period.
The Alcatel-Lucent-Bharti JV is the front runner to manage and maintain the telco’s
inter-city networks, said another industry executive aware of the development. In
April 2009, Bharti Airtel entered a joint venture with Franco-American telecom gear
maker Alcatel-Lucent to manage its landline and broadband business, expanding its
tested strategy of outsourcing technology functions to focus more on marketing and
sales.

39. Lehman verdict will decide future of securitisation

AUS court verdict of a case shortly, which may largely determine the future of
securitisation globally, will be closely watched by markets worldwide, including in
India.
The case is a claim by the bankrupt Lehman that disputes the concept of
‘bankruptcy remoteness’ for special purpose vehicles (SPVs), considered the basis of
securitisation. An SPV is bankruptcy remote, if it enjoys the legal protection against
claims from the bankruptcy of the originator, limiting the credit risk of investors to
the assets of the SPV.
This case refers to the synthetic Dante Multi-Issuer Secured Obligation Programme,
where a few Irish SPVs — held by Lehman — issued notes to investors to raise money,
which was then used by the SPVs to buy collateral, such as government and other
secured bonds. Simultaneously, the SPVs entered into a default swap with Lehman
Special Financing (swap counterparty), where Lehman bought protection from the
SPVs, agreeing to make payment of regular swap premium to the SPVs. Collateral is
usually held by SPVs to ensure that the swap is backed by real assets and gives
investors the confidence to put money into an SPV.
With Lehman’s bankruptcy in September resulting in default of swap payments, the
investors’ trustees filed a claim for the collateral, as the agreement stated that
investors would have a priority over the collateral, in case the swap counterparty
 defaulted.
Contesting the claim, Lehman’s lawyers, in the UK Chancery Court, argued that the
clause providing for subordination of Lehman’s interest in the collateral, was void,
under UK Law, based on a some earlier rulings. A UK court, in an earlier case, had
ruled: “There cannot be a valid contract that a man’s property shall remain his until
bankruptcy, and on the happening of that event go over to someone else, and be
taken from his creditors.”
Lehman’s lawyers also contended that the proceedings should be held in US courts,
as the bank is American, even though the documentation is done in the UK.
The Chancery Court, however, quashed Lehman’s arguments on grounds that
Lehman cannot continue to enjoy the collateral even after defaulting the swap
payments. The case was adjourned, to comply with UNCITRAL’s model law on cross-
border insolvency, as Lehman’s bankruptcy proceedings are already going on in the
US.
Analysts said a court ruling in favour of Lehman will be hugely negative for the
global credit markets, as investors would fear that their money would no longer be
safe in bad times.
The head of global markets with a foreign bank said, “The implications of a court
order against the investors go beyond securitisation into any trade where the concept
of credit risk mitigant becomes important. In the absence of such a vehicle, a
significant part of investors would be precluded from taking active interest in the
programme.”
According to Vinod Kothari, a Kolkata-based credit derivatives analyst, “We have
always contended that the concept of bankruptcy remoteness is a product of good
times, and has not been tested in bad times such as these.”
Kothari said the issue is relevant to India, as some domestic banks have exposure to
synthetic credit products. “Also, the litigation on principles of bankruptcy laws is
equally relevant to India, as we have adopted bankruptcy principles from the UK,” he
added.

40. Nokia goes the Apple way to prop up sales

HANDSET giant Nokia may well bite into Apple’s market share in India. The Finnish
mobile maker will launch its Music Store later this month, allowing Nokia users online
access to a huge catalogue of music — films, devotional and international among
others. The move is expected to boost device sales for Nokia, which already has over
70% share of the Indian market.
The Music Store may give enough reasons for Apple, which started off as a computer
maker and is now best known for iPhone, to speed up the launch of its web-based
music download service iTunes in India. Pending that launch, music lovers may opt for
Nokia devices over Apple’s iPhone and iPod. Apple’s iPhone has not taken off here
due to a price tag of over Rs 30,000.
Nokia will not charge users for downloads during the first year, whereas iTunes is a
 paid service. Currently, Indian users cannot download music from iTunes. Nokia’s
focus on music is part of the handset giant’s strategy to turn into a services provider
from a pure products company. “We want to generate revenues through services and
music is one of them. We will soon launch our online digital stores,” Nokia marketing
director Vineet Taneja told ET.
The first of the Nokia Music Stores went live in the UK in November 2007, and is now
available in 15 markets. The service will be available as an application on handsets
and on the web.
To promote its music initiatives, Nokia has also partnered with Hong Kong-based
Music Matters to start India’s first music forum, Music Connects. The forum, which
will meet on August 26 in Mumbai, will discuss issues being faced by the Indian music
industry. “The aim is to bring together all stakeholders. I think music will be one of
the biggest services for Nokia while most revenues will still
come from handset business,” Mr Taneja said.
“By offering unlimited free music, Nokia stands to wean off market share from all
its nearest competitors in the low-end smart phone category and will also take a stab
at the higher priced iPhone as well as iPod, Apple’s music playing device,” said
Ascentius Consulting principal analyst Alok Shende.
The smartphone market in India, including iPhone, is estimated to be 6 million
phones in 2009, with estimated revenues of Rs 7,800 crore. According to a Soundbuzz-
PricewaterhouseCoopers report, the mobile music industry in India will be at Rs 3,600
crore by 2009-10. Nokia is eyeing a share of this pie.
Anubhuti Belgaonkar, telecom market analyst at technology research firm Ovum,
said Nokia will be able to influence user consumption habits through its free download
offer. “People will use it even when it becomes a paid service, proving a good
revenue opportunity for Nokia, especially in a market where low-cost handsets are
hitting Nokia’s margins,” she said.

41. China Mobile to open online app store soon –source

China Mobile (0941.HK), China's leading mobile telecoms provider, will launch an
online mobile phone applications store soon to tap into the segment's rapid growth,
a company source said on Wednesday.

The company's Mobile Market store, www.mmarket.com, will be open to developers

to create games and other mobile phone applications and will only be available for
download by existing China Mobile subscribers, the source said.

China Mobile, the world's largest mobile carrier by number of users, dominates
China's cellular market with a two-thirds share. The firm will charge developers a
small listing fee.
 China Mobile has said it was actively preparing a site to sell mobile phone
applications but declined to give further details.

China Mobile competes with China Unicom (0762.HK) and China Telecom (0728.HK)
in an increasingly saturated and competitive market. (Reporting by Melanie Lee;
Editing by Edmund Klamann)

42. Microsoft plans Office tie-up with Nokia

SEATTLE (Reuters) - Microsoft Corp said it will announce an alliance with Nokia on
Wednesday, likely unveiling plans to make the software company's Office suite of
applications available on devices made by the world's top cellphone manufacturer.
Microsoft, the world's largest software firm, is set to bring out the latest version of
its Office product next year, including an online version that will allow users to
access the popular Word, Excel and PowerPoint programs over the Internet.
The move counters the recent entrance of Google Inc into the software market,
offering free versions of word processing, calendar and e-mail applications online.

43. Britain's Royal Opera wants you to make tweet music

LONDON (Reuters) - Britain's Royal Opera House (ROH) wants Twitter users to help
create the "world's first online opera." The Covent Garden institution, which stages
performances of ballet, opera and other classical music productions wants Internet-
savvy tweeters to write the words to an opera using 140 characters or less at a
time. Duthie told Reuters on Tuesday that the most dramatic moments of the opera
will be performed as part of the Deloitte Ignite festival in September and said the
experiment aimed to debunk notions of opera as stuffy and traditional.
Twitter, the online micro-blogging site used by celebrities and less well-known
people to broadcast their thoughts to followers over the Internet in bursts of text
140 characters or less has become a sensation on the web. Anyone interested in
contributing to the Royal Opera piece can sign up and start writing at
www.twitter.com/youropera. So far only Act One, Scene One has been completed
with the character William languishing in a tower, having been kidnapped by a
group of birds bent on revenge after he has killed one of their number, according to
a link on the Twitter site: royaoperahouse.wordpress.com/.

44. Facebook to face off with new Web rivals

SAN FRANCISCO (Reuters) - Facebook's vision of becoming a "utility" that offers
activities to keep people online for hours could set it on a collision course with the
Web's giants.

In recent days, the No.1 social networking company revamped its search engine and
bought a start-up that some call a rival to hot micro-blogging service Twitter. It is
 also testing a stripped-down version of its service to boost growth overseas and is
developing an electronic payments system.

These moves mark a new phase in Facebook's evolution as the five-year-old company
meshes the viral power of social networks and its huge member base to barge into
new markets.

The site, co-founded by 25-year-old Mark Zuckerberg in a Harvard University dorm

room, could challenge Web portals like Yahoo Inc and Google in content and
communications, Brigantine Advisors analyst Colin Gillis said.

With more than 250 million members, Facebook was the world's fourth most visited
website in June, according to comScore. It is on track to bring in more than $500
million in revenue this year, most of it from advertising sales.

The new initiatives represent the natural evolution of the service, said Facebook Vice
President of Product Christopher Cox. He downplayed the increasing overlap between
Facebook's new search engine and Twitter's search engine, or Google's dominant Web
search engine.

45. Hollywood sees win in China WTO case as first step

LOS ANGELES (Reuters) - Hollywood scored a win with the World Trade Organization
as it seeks inroads into China, but rampant piracy in the market means the WTO ruling
is just a first step in a long slog for the U.S. entertainment industry.

The WTO said China broke international trade rules by restricting the imports of
movies, music and books and other audiovisual content. The current system hinders
studios, filmmakers, musicians, videogame makers and authors from marketing works
at competitive prices, it said.

China has said it will evaluate the decision and had not ruled out an appeal.

Hollywood has sought for years to crack the world's third-largest economy, but has
failed due to restrictions on getting films into theaters and a torrent of pirated media
content, with DVDs going for $1 on most street corners.

The ruling was a landmark decision 10 years in the making, said Greg Frazier,
executive vice president of the Motion Picture Association of America, representing
the world's largest studios like Walt Disney Co and Time Warner Inc's Warner Bros.

Michael Pachter, analyst with Wedbush Morgan, said while the business atmosphere
may improve, the studios may still face challenges in appealing to consumers, used to
cheap DVDs.
46. Jumpstarting U.S. Biodiesel Industry for Less than 3
Cents Per Gallon
B5 blend would add up to $6 billion to GDP, $1.3 billion in tax revenue, prevent
export of more than $2.5 billion dollars, reduce imports by 60 million barrels - all
for less than 3 cents per gallon cost increase
SEATTLE--(Business Wire)-- Imperium Renewables today applauded U.S. Senators
Maria Cantwell (D-WA) and Patty Murray (D-WA) for their continued support of the
U.S. biodiesel industry.
The senators co-signed a letter from U.S. Senators Kent Conrad (D-ND) and
Charles Grassley (R-IA) which asked President Obama to enforce the consumption of
1.15 billion gallons of biodiesel, as mandated by the Renewable Fuels Standard (RFS)
and Congress in early 2007. Those goals could be met by replacing 5 percent of each
gallon of petro diesel with biodiesel at a cost of less than 3 cents per gallon. This
would revitalize the U.S. biodiesel industry, creating tens of thousands of jobs,
contributing $6 billion to the nation`s Gross Domestic Product and reducing CO2
emissions by 30 million tons.

The RFS mandates the consumption of 1.15 billion gallons of biodiesel at retail pumps
in 2009 and 2010. Meeting those mandates by replacing 5 percent of each gallon of
diesel with biodiesel (a level that is approved by nearly all engine manufacturers),
would result in significant benefits, including:

* Reduction of imports of 27 million barrels of foreign oil over two years

* Retention of more than $2 billion dollars that would otherwise go to foreign
governments and unstable regimes
* Creation/Retention/Re-hiring of more than 20,000 family wage jobs
* Contribution of more than $2 billion to nation`s GDP
* More than $550 million in local, state and federal tax revenue
* Reduction of greenhouse gas emission by nearly 13 million tons
* Over $50 million in tax and other revenues to Washington State

At current prices, the additional cost to using a 5 percent blend of biodieselis less
than 3 cents per gallon.

However, the RFS target of 1.15 billion gallons is still only a small percentage of the
overall 60 billion gallons of annual diesel consumption in the U.S., and significantly
lower than the U.S. industry`s current capacity of 2.6 billion gallons. By producing at
full capacity the impact would be even greater:

* Reduction of imports of 60 million barrels of foreign oil over two years

* Retention of more than $5 billion that would otherwise go to foreign
governments and unstable regimes
* Creation/Retention/Re-hiring of more than 50,000 family wage jobs
* Contribution of $6 billion to nation`s GDP
 * More than $1.3 billion in tax revenue
* Reduction of greenhouse gas emissions by 30 million tons

Biodiesel is an environmentally friendly alternative to petroleum diesel fuel

made from oils derived from crops, plants and waste products, which can be used in
any conventional diesel engine. It can be used in pure form (100 percent biodiesel) or
in a "blended" form, in which it replaces a percentage of petroleum diesel. A National
Renewable Energy Lab study shows biodiesel emits about 78 percent less carbon
dioxide than petroleum diesel. Imperium`s high quality fuel meets or exceeds ASTM
D-6751 specifications.

47. Plutocracy: A New Fashion World Order

NEW YORK, Aug. 14 /PRNewswire/ -- New York-based designer Anitra Michelle
announced today that her highly anticipated collection Plutocracy
(www.beplutocracy.com) will debut during New York's Mercedes Benz Fashion Week.
She will host a two-day presentation at the Bryant Park Hotel, located just steps away
from the semiannual fashion mecca in the heart of midtown Manhattan, beginning on
September 15.

The fusion of American design sensibilities and the daring of African exploration,
Plutocracy exudes the designer's mantra of Individuality, Innovation and Iconography.
Anitra Michelle's goal is to reach out to different types of women based on the idea of
showcasing the future, while
exploring the past through cultural sensitivity and ancestral roots. To encourage their
style discovery and fashion experimentation, Plutocracy offers sexy, flattering
silhouettes catering to various shapes and sizes and are complementary in varied
settings and platforms. The premier collection is called "Classic Funk."

The motivation behind Plutocracy's designs encompass the woman on the move: one
who is young and professional, and needs effortless style. According to Anitra, her
inspiration is an up and coming professional who is attempting to create her image,
while building her rolodex and client base--a vision that is not limited to any
particular ethnic or cultural demographic but is expanded upon by the woman, who is
dynamic, yet has the desire to maintain a certain mystique. "She engages in
networking and business opportunities in versatile environments, while showcasing
her individuality," the designer says.

ABOUT ANITRA MICHELLE

For Anitra Michelle, who hails from Michigan to Maryland, the path to designing has
been one of growth and internal exploration. From a very young age, she has
embraced all things eclectic and diverse. She earned a dual Bachelors Degree from
Howard University with an internship with the Patternmaking Department at Vera
Wang, as well as coveted internships in the
 showrooms of Karl Lagerfeld and Lanvin, while a fashion student at New York's
Fashion Institute of Technology. With the anticipated debut of her first collection,
Plutocracy, in September 2009, Anitra is awaiting the opportunity to free women and
offer something that is not only fresh, but reflects individuality. For more about
Plutocracy, visit www.beplutocracy.com.

48. Da Vinci's lion prowls again after 500 years

AMBOISE, France (Reuters) - A mechanical lion invented by Leonardo da Vinci to
entertain the King of France has sprung back to life in the Renaissance genius's last
home.

Da Vinci's original automaton is lost, but the animal has been recreated at the
Chateau du Clos Luce, in the Loire Valley town of Amboise in France, where the
master lived for the last three years of his life and where he died in 1519.

Known around the world for the Mona Lisa and Last Supper paintings, Leonardo was
also a prolific inventor who envisioned flying machines including a forerunner of the
helicopter.

Eye witnesses from Da Vinci's time said a mechanical lion that could walk was
presented to King Francois I by the Florentine community in the French city of Lyon in
1515, to celebrate a new alliance between Florence and France.

The symbol of Florence was a lion, and when the king lashed the mechanical beast
three times with a small whip, its breast opened to reveal a fleur de lys, emblem of
the French monarchy.

A similar lion -- it is not known whether it was the same one or a newer version --
made another appearance at a lavish party organized in honor of the king in 1517.

Da Vinci left no plans or sketches of the lion, although he did leave detailed drawings
of mechanisms that give insight into how he may have made it work.

49. Glaxo starts testing flu pandemic vaccine

LONDON (Reuters) - GlaxoSmithKline has started testing its pandemic H1N1 swine
flu vaccine in humans, and expects to start giving the results to government agencies
next month, the drugmaker said on Friday.

Britain's Chief Medical Officer Liam Donaldson said on Thursday that vaccination
would start for at-risk people in October, and Glaxo is expected to be the country's
main supplier.
 The company said that the first tests were being done on 128 healthy adults at a site
in Germany, and in the next few weeks it would also start testing children and elderly
people.

It plans to conduct 16 different trials of the vaccine and to test 9,000 people in total
across Europe, Canada and the United States.

50. German, Greek commandos thwart pirate attack

BERLIN, Aug 14 (Reuters) - A German Navy helicopter thwarted a suspected pirate
attack on a Turkish ship in the Gulf of Aden on Friday by firing warning shots at a
speed boat as it approached the MS Elgiznur Cebi, the German armed forces said.

Responding to a call for help from the Turkish vessel, the German helicopter from the
warship Bremen, part of a European Union mission to combat piracy, spotted a speed
boat with six people and ladders in it.

It fired warning shots and the speed boat stopped. A Greek naval vessel, the HS
Narvarinon, also responded to the call for help then boarded the speedboat and
discovered weapons on board.

Piracy has surged off the Somali coast in recent years where sea gangs continue to
defy foreign navies patrolling the vast shipping lanes linking Asia and Europe.
Germany has two warships patrolling in the region.

Piracy attacks around the world more than doubled to 240 from 114 during the first
six months of the year, according to the ICC International Maritime Bureau's Piracy
Reporting Centre.

51. Volkswagen threat "tantamount to blackmail": Opel

union leader
FRANKFURT (Reuters) - Opel labor leader Klaus Franz branded Volkswagen's renewed
threat to pull business from Canadian auto parts supplier Magna if it acquires VW's
closest German rival as "tantamount to blackmail."

Magna is in a close race with Belgian finance group RHJ to gain majority control of the
German carmaker and has had to play catch-up recently as management at former
Opel parent General Motors had already agreed with RHJ in principle over the sale of
a 50.1 percent stake.

With the board of GM set to make a decision as early as next week over the two bids
that could finally end months of uncertainty over Opel's fate, European rival
 Volkswagen renewed on Friday its criticism of a Magna deal that is backed heavily by
the German government.

Late on Friday, Opel's senior labor leader Klaus Franz fired back at VW Chief
Executive Martin Winterkorn, hoping to quash a harmful debate in its infancy
regarding whether a supplier like Magna should compete directly with its customers
by acquiring a carmaker.

The VW CEO told reporters earlier that day that his company viewed the deal with
suspicion, and would reconsider doing business when it came to complex components
were it to pose a disadvantage, despite Magna's repeated assurances to cleanly
separate its supplier operations with any automotive operations.

The Opel labor leader added that Volkswagen has enjoyed state support since decades
thanks to Lower Saxony controlling 20 percent.

52. Swedish consortium eyes Volvo cars bid: report

STOCKHOLM (Reuters) - A consortium dominated by Swedish owners plans to bid for
Ford Motor Co's Volvo car unit, a Swedish business daily reported on Saturday without
disclosing its sources.

Dagens Industri said the group, Konsortium Jakob AB, had intensified efforts recently
to raise enough capital to make an offer in light of reports Ford was getting ready to
intensify talks with China's Geely (0175.HK), which according to sources is among the
suitors for the Ford unit up for sale.

The U.S. carmaker put money-losing Volvo cars up for sale in December last year as it
looked to cut costs and raise cash amid industry wide record-low vehicle sales. The
firm said in July it was in discussions with a number of parties on the car maker.

The engineers' trade union at Volvo cars had taken the initiative to the consortium,
which would aim at listing the car maker, Dagens Industri said.

53. U Car Share Launches - the Alternative to Car

Ownership
SALT LAKE CITY, Aug. 13 /PRNewswire-FirstCall/ -- U Car Share is expanding its
growth as it partners with the Utah Transit Authority, the City of Salt Lake and the
University of Utah by launching the alternative to vehicle ownership in Salt Lake City.
U Car Share allows members access to cars 24/7, thus eliminating the need to own a
car or bring one to campus during the school year. Members pay only for what they
use, in one low hourly rate starting at $4.95 per hour (plus $0.59 per mile). U Car
Share takes care of fuel, insurance and maintenance costs. Hourly rates that include
 180 miles free per reservation range from $8.00-$12.00 per hour, depending on the
vehicle.

Anyone 18 years or older with at least two years of driving experience may qualify to
become a member. U Car Share encourages students at local universities and colleges
to consider using car sharing instead of bringing a car to campus. With many locations
around town, U Car Share is a convenient alternative that can save thousands of
dollars vs. owning a car and having to
deal with parking, insurance, fuel and maintenance.

Car sharing meets the needs of any individual who needs a car occasionally, while
being sensitive to the surrounding community and environment. Car sharing reduces
the demand for parking and results in greater sustainability while enabling individuals
to retain their mobility.

U Car Share vehicles have been positioned for easy access to the local community,
and will be available at Ogden Transit Center, Lake Central Station, Ballpark,
Millcreek, Meadowbrook, Murray Central and Sandy Civic Center, beginning August 18,
2009. U Car Share will be providing 12 EPA SmartWay certified vehicles: one Ford F-
150s, one Ford Escape Hybrid, four
Ford Focuses, four Toyota Yarises and two Toyota Priuses. The vehicles will be
parked conveniently at each rail location. Sixteen additional vehicles will be arriving
and soon will be placed throughout Salt Lake City and the University of Utah.
Members will be able to access the vehicle with a U Car Share membership card.
They will be able to log on to ucarshare.com at any time and reserve any vehicle of
their choice on the U Car Share network. Members can reserve cars for as little as an
hour at any time of day. Gas and insurance are all included in one low hourly rate
starting at $4.95 per hour ($0.59 per mile). Daily and hourly rates with included miles
are available, as well.

54. Lula says Brazil's economy turning the corner

BRASILIA, Aug 12 (Reuters) - Brazil's economy is showing signs of recovering in the
second semester, President Luiz Inacio Lula da Silva said on Wednesday.

Interest rates are at historic lows but it is "desirable and possible" for them to be cut
further, he said. The central bank has slashed borrowing costs by 500 basis points
since the beginning of the year to 8.75 percent.

"The employment and industrial activity curves signal a return to growth in the second
semester, confirmed by greater confidence by the industry and the foreign investor,"
Lula said at an event in Brasilia.

Brazil's Bovespa stock index .BVSP is up more than 50 percent this year and its real
currency BRBY has gained about 27 percent this year.
 The strength of the economy is what continues to attract foreign capital to Brazil's
financial markets, Lula said.

55. Print Your Own Life Magazine: Getty/Time Partner

With HP
Ever wanted to run your own iconic photo-journalism magazine? Soon, web users will
get to print their own, personalized edition of Life, as Getty Images (NYSE: GYI) and
Time Inc. continue trying to monetize the mag they revived as Life.com in March.

This Q4 or next Q1, Getty VP and Life.com CFO Catherine Gluckstein tells
paidContent.org, Life.com will partner with HP’s MagCloud to offer users a
personalised “timeline”. They will get to print their own edition of Life magazine
comprising a selection of catalogue images from any given date, as well as their own
uploads.” It’s a play for the gift market, where newspaper publishers already offer
historical editions for readers’ birthdays, and may come in time for Christmas.

As the re-awakened debate over pay-for-content rumbles on, Gluckstein says Life.com
tried it with a set of pictures showing Angelina Jolie and Brad Pitt, but it didn’t work
out so well. Whilst Life.com carries some ads, it’s more about e-commerce. Visitors
can already order Life photos on mugs, mousemats, t-shirts and in frames.

Gluckstein says the site, a JV between Getty and Time Inc, clocked 10 million page
views a day after launch and is now at 100 million a month, plus nearly 700,000
Twitter followers. “Social media is a massive traffic driver. Celebrity news is the most
popular channel on the site.” But, while this new-look Life.com has affiliate
relationships with stablemates Time.com and CNN.com, there are still no third-party
deals.

56. Bangladesh to get $19 million for reforestation project

DHAKA (Reuters) - The United States and Germany have agreed to donate $19 million
for the reforestation of a Bangladesh wildlife sanctuary under a global climate change
mitigation project, the U.S. embassy said on Wednesday.

Low-lying Bangladesh, a country of some 150 million people, is at risk from rising
world sea levels caused by climate change, with experts warning of millions of people
being forced out of from their homes and encroaching into forests.

The funds will be used for the reforestation of Chunati Wildlife Sanctuary, a major
corridor for the movement of Asian elephants between Myanmar and Bangladesh and
home to an important timber species under threat.

The sanctuary lies about 350 km (219 miles) southeast of Dhaka.

 Under the project, to be implemented over the next four years, trees will be planted
to help restore 2,000 hectares of forest land and to decrease carbon emissions in the
region.

The project will help restore the severely degraded sanctuary, raise awareness
through public education, and create alternative income opportunities for over
125,000 people who live in communities in and around Chunati, a U.S. embassy
statement said.

Sea levels rose 17 cm (6 inches) in the 20th century and the U.N. Climate Panel
estimated in 2007 they could rise by another 18-59 cm by 2100, and perhaps even
more if a thaw of Greenland or Antarctica accelerates.

Bangladesh is considered among the most vulnerable countries to climate change with
millions living less than a meter above sea level.

57. Facebook sacking highlights hidden dangers

The perils of mixing business and pleasure on social networking sites was highlighted
again this week after a woman was apparently sacked because of comments she made
about her job on Facebook.

Details of the work-related rant from an office worker known as Lindsay flew around
the internet this week, and were even posted on social bookmarking site Digg,
although it remains to be seen if the post is genuine or a hoax.

In a status update, Lindsay wrote: "OMG I HATE MY JOB. My boss is a total pervy
wanker always making me do shit stuff just to piss me off!!"

However, the woman crucially forgot that she had added her boss as a friend on the
site, and when he logged on and saw the four letter tirade, he took decisive action.

"Hi Lindsay, I guess you forgot about adding me on here?" he commented on her
profile page. "You also seem to have forgotten that you have 2 weeks left on your 6
month trial period. Don't bother coming in tomorrow. I'll pop your P45 in the post, and
you can come in whenever you like to pick up any stuff you've left here."

The incident is one of a growing number of examples of staff failing to understand the
potential dangers of social networking sites. In an almost identical incident in
February, a 16 year old office worker was sacked after her boss spotted comments
she'd made on Facebook criticising her job.
58. India Launches Bhuvan to challenge Google Earth

Indian Space Research Organization (ISRO) recently unveiled "Bhuvan" which is set to
challenge Google Earth.

Bhuvan, which means 'earth' in Sanskrit, will allow users to navigate and zoom into
any part of the world and discover virtual earth in 3D space, with restrictions and
exceptions to sensitive and important places.

Bhuvan uses images taken by ISRO's remote sensing satellites building a 3 Dimensional
map of the world, which can be used freely on the Internet.

India is not the first country to challenge Google. In 2005, a Frenchman planned to
develop a search engine with Europe as its center, to challenge "Internet control by
Britain and U.S.", but it eventually failed.

In 2006, France unveiled "Geoportail", satellite mapping service tool, to challenge

Google Earth, but it could not attract much attention.

59. Nandita Das appointed head of CFSI

National award-winning actress and independent filmmaker Nandita Das,

who has acted in several films in English, Hindi, Oriya, Urdu, Bengali,
Malayalam, Tamil, Telugu and Kannada, has been appointed the new
chairperson of the Children's Films Society of India (CFSI). The tenure of her
appointment, subject to the provisions of Rule 18 of the aforesaid Rules,
shall be for a period of three years.

CFSI is a nodal Government of India organization dedicated to providing wholesome

entertainment for children through film and television, with the objective of
broadening their horizon and justifying the role of film and television. Earlier, the
post was held by actress-social activist Nafisa Ali. It fell vacant when she resigned to
contest the Lok Sabha election from Lucknow on the Samajwadi Party ticket this year.

Nandita, widely acknowledged for her stupendous performances

in Fire (1996), Earth (1998),Bawandar (2000) and Aamaar Bhuvan (2002), is the
daughter of celebrated Indian painter Jatin Das. The 39-year-old recently donned the
director’s hat for Firaaq (2008), which has won a number of national and international
awards. She is a B.A. (Hons) in Geography and M.A. (Social Work) from Delhi
University.

Wipro close to Rs 1,500-crore IT deal with Etisalat

Etisalat DB Telecom India, in which the UAE-based Etisalat holds a 45 per cent stake,
is close to signing a Rs 1,500 crore outsourcing deal with IT major Wipro Technologies.

If the deal goes through, this would be the second largest deal for Wipro in the
telecom space. Earlier in April, the IT major bagged a Rs 2,500-crore contract from
another new operator, Unitech Wireless.

Importantly, Wipro will be pipping seven other IT vendors, including IBM and Tech
Mahindra, who were also in discussions with Etisalat, according to sources.

Under the agreement, Wipro will manage the IT infrastructure and services for
Etisalat, including setting up of servers, enterprise resource planning (ERP) suites and
technology, computers and other software required for billing and customer care,
among other things.

While a Wipro spokesperson declined to comment, an Etisalat spokesperson stated

that the company does not comment on speculation.

Etisalat DB Telecom India, a joint venture between Etisalat and Mumbai-based

Dynamix Balwas Group, has licence to provide services across 15 circles. The company
had received spectrum to start services across 13 circles in the country and was
gearing up for the services.

The telecom companies were increasingly outsourcing their IT infrastructure, as it

would enable them to be asset light and concentrate on their core competencies.

In January 2008, Aircel Cellular had awarded a $600-million deal to Wipro, while
Aditya Birla group company Idea Cellular had signed a 10-year IT outsourcing deal with
IBM. Idea Cellular’s deal was estimated to be around $600-800 million.

IF THE DEAL GOES THROUGH

It would be the second largest deal for Wipro in the telecom space

It will be pipping seven other IT vendors, who were also in discussion

Wipro will manage the IT infrastructure and services for Etisalat

India to rope in China for climate change initiative
While it fights the pressure of the Western countries over the issue of climate change,
India now wants to rope in China in its efforts. Minister of State (independent charge)
for Environment and Forests Jairam Ramesh today said the two countries would set up
a joint mechanism to study the Himalayan glaciers.

Ramesh is set to visit China towards the end of this month to finalise this mechanism,
along with related bilateral issues on environment protection.

The minister also made it clear that the joint mechanism would not be made only to
produce “bundles of research papers” but also to take concrete action plans. “There is
no Indian research so far to decisively conclude that the Himalayan glaciers are
melting because of the global warming. While the bulk of glaciers are receding, there
are also some glaciers that are expanding. We need to study this matter,” the minister
said.

While the Indian scientists will study the glaciers on the Indian part of the Himalayas,
their Chinese counterparts will undertake a similar exercise. Following this, both sides
will exchange their findings and try to chalk out a comprehensive solution.

Ramesh also said some findings suggested that the Gangotri glacier’s rate of melting
has slowed in comparison to what it was during the 1960s and the ’70s. “On Monday, I
saw a report saying the Siachen glacier is actually expanding. So, we need a
comprehensive study about the impact of global warming,” Ramesh said.

India and global finance: What next?

The global financial system is evolving. What does it mean for India, asks SUMAN BERY
Almost six months after their last get-together in London in early April, the heads of
government of the G-20 countries will meet again in Pittsburgh in the United States in
late September. They will presumably return to the quartet of issues that has
progressively engaged them since they first met as a group in Washington in November
2008. These issues are: macroeconomic coordination, global imbalances and
resumption of global growth; global financial reform (including reform of the IMF and
the multilateral development banks); strengthening the global trading system and
avoiding protection; and burden-sharing in fighting global warming, primarily by
capping the growth in the stock of green-house gases in the atmosphere.

Looking at the agenda as a whole, one would have to conclude that progress since
April has been somewhat underwhelming, largely because of political constraints in
the advanced countries. Profound differences of views persist between the major
blocs on the appropriate fiscal/monetary mix, reflecting different traditions and
capacities. In the absence of such co-ordination, exchange rates are likely to take on
the main burden of adjustment, raising risks of protection, primarily directed at the
emerging markets.

Banking systems in both Europe and the United States, while now better capitalised,
remain dependent on exceptional liquidity support, even as the cleansing of toxic
assets from their balance sheets remains unresolved, inhibiting the flow of credit. The
US administration shows little or no appetite for deep engagement in multilateral
trade negotiations, although the political window for action in the US, India and Brazil
is hauntingly narrow. On preparation for the Copenhagen meeting in December, the
less said the better.

But my main theme this month is the second topic listed above, the evolution of the
global financial order. India has dual, linked interests in this topic. On the one hand, it
has the opportunity, if it wishes to exercise it, to be an active player in G-20 debates
on this issue (as was done, for example, by Rakesh Mohan as Deputy Governor earlier
this year). The second challenge is to equip the domestic financial system to deal with
the next phase in global finance, whatever that may turn out to be.

The four issues he chooses to address are the role of global imbalances; coordination
of fiscal and monetary policies; inflation targeting; and the relationship between the
financial sector, the real economy and growth. Given his courteous and civil
personality, the broad conclusions Dr Subbarao draws are moderate and sensible. As
with all central bank heads, however, the interest is in the nuance, so it is worth
examining his views in some detail.

Dr Subbarao draws similarly cautious conclusions on the prospects for prompt fiscal
adjustment in the advanced countries, with the implication, as he puts it, that
“monetary policy will have to be conducted in a regime of large and continuing
structural deficits” for some time to come in the advanced countries. In the language
of economists, “fiscal dominance” and public debt management are likely to drive
monetary policy much more in the future than in the past.

So far, then, so good. But what conclusions should one draw on how Dr Subbarao might
steer the RBI in preparing for India’s future engagement with global finance? Dr
Subbarao is silent on the future evolution of the global exchange rate system, and
what that implies for India. The combination of slow growth, global imbalances and
structural fiscal deficits in the advanced countries is quite likely to lead to
fundamental shifts in real exchange rates between emerging markets and rich
countries. Greater flexibility in nominal rates would facilitate such adjustment.
Second, there is bound to be the relocation of major financial institutions to Asia
where the world’s growth and savings will be centred. Does India want to opt out of
this wave? Or will we encourage our financial institutions to go abroad as we have our
corporations? Finally, while we remain concerned by asset bubbles, I understand that
the Chinese are drawing the opposite conclusion, namely that inflation alone should
be the preoccupation of monetary policy. Dr Subbarao is in for interesting times. We
need to wish him luck.

MphasiS to buy AIG’s Indian IT arm

IT and BPO services company MphasiS today said it will acquire AIG Systems Solutions
(AIGSS), the IT arm of the US based insurance giant AIG (American International
Group), for an undisclosed sum.

The acquisition, which comes with guaranteed business from AIG, is expected to
strengthen MphasiS’ domain-based solutions in its key banking, financial services and
insurance (BFSI) industry vertical, MphasiS CEO Ganesh Ayyar said. The BFSI segment
brings in 40 per cent of the company’s revenues.

MphasiS, a majority of which is owned by Hewlett-Packard subsidiary EDS, did not

disclose the financial details of the deal. With cash and bank balances of $74 million in
its second quarter ended April 30 this year, the company is likely to fund the
acquisition through internal accruals, according to analysts.

The MphasiS buy of AIGSS signals renewed activity in the tech merger and acquisitions
space, which has been sluggish since January this year. TCS had bought the back-office
unit of Citigroup Inc for $505 million in October last year, while Wipro acquired in
December another captive unit of Citigroup for $127 million.

AIG, once the world’s largest insurance company, was part of an $800-billion fiscal
stimulus package from the US government and has been looking at hiving off assets
which fall outside its core insurance business.

Jaypee Group, L&T ink Rs 4,000-crore deal

Jaiprakash Power Ventures Ltd (JPVL), promoted by the $7-billion Jaypee group, has
signed a Rs 4,000-crore agreement with Larsen & Toubro Ltd, the engineering and
construction major, for supply of equipment for its Nigrie Super Thermal Power
Project in Madhya Pradesh.

Under the agreement, L&T will supply two units of 660 Mw each for the power plant.

Coal for the plant will be sourced from two captive coal blocks – Amelia (North) and
Dongri Tal II – owned by a joint venture of Jaypee Group with the Madhya Pradesh
State Mining Corporation Ltd (MPSMCL). The first 660 Mw unit of the power project is
expected to be commissioned in April 2013 and the other unit would be commissioned
in September same year. The power plant, when operational, will generate over 10
billion units of power annually.

The Jaypee Group has a current operational power generation capacity of over 900 Mw
and plans to add another 2,000 Mw capacity by the end of the current Plan period
ended March 2012.

This is the second order bagged by L&T in the supercritical segment in India after it
won the order for supplying a 1,600 Mw turbine generator from the Andhra Pradesh
Power Development Corporation earlier.

The company plans to set up around 4,000 Mw of domestic power equipment

manufacturing capacity by 2010.

Samsung launches HD video recording cellphone in

India
Samsung Electronics today launched OMNIAHD in India — world’s first full-touch
handset featuring 720P HD video recording, with the largest 9.4 cm AMOLED screen on
mobile. The Active Matrix Organic Light Emitting Diode or AMOLED touch screen offers
sharpness of tone, vivid colours, greater clarity in direct sunlight and consumes less
power.

With its 1 Ghz Processor, Samsung OMNIAHD is a high performance full-touch screen
phone that incorporates the latest multimedia features and speedy data
communication. The phone has a16:9 screen with 16M colours and a dual stereo
speaker. It helps users capture photographs with a 8MP (megapixel) camera. Users can
enjoy and share these images and videos through highspeed internet access (HSUPA
5.76Mbps and HSDPA 7.2Mbps).

Global positioning system (GPS) with an integrated compass makes OMNIAHD suitable
for both pedestrians and drivers, and the navigation touch control and voice guidance
via dual stereo speaker provide drivers with easy ternal memory — expandable to
another 32GB — allows users to store up to 48GB of data.

IBM wants to make our planet ‘smarter’

Malta — a group of islands in the Mediterranean sea —is known for its dry sunny
weather, knights and architectural history. More importantly, however, this
Mediterranean archipelago is about to become the world’s first ‘smart grid’ country.
Malta’s electricity and water systems are intertwined. It depends entirely on foreign
fuel oil for the production of all of its electricity and for more than half of its water
supply, which filters through an energy-intensive desalination process.

The new smart grid, integrating both water and power systems, will be able to identify
water leaks and electricity losses in the grid, allowing the utilities to more
intelligently plan their investments in the network and reduce inefficiency. Around
250,000 interactive meters will monitor electricity usage in real time, set variable
rates, and reward customers who consume less energy and water. And by addressing
the issues of water and power as asystem, the Maltese government can provide
citizens with better information to make smarter decisions about how and when they
use power. It can also help the country to begin the task of replacing carbon-intensive
fuel oil with renewable energy for the future.

Malta has contracted global IT giant IBM to install this £70 million (around Rs 560
crore) smart utility grid and replace the 250,000 analogue electricity and water
meters with smart meters by 2012.

IBM is intent on using information technology to create many such ‘smart grids’ all
over the world —including India — in a bid to create a ‘smarter planet’.

Indeed! The concept is hotting up. Billions of dollars are expected to start pouring into
Smart Grid development from big companies like Cisco, IBM, Intel, Oracle and Google,
as well as from governments which are expected to spend billions of dollars for the
Smart Grid. IBM, however, insists that its proposition is unique and more broad-based.

Third, all of those instrumentStockholm, for instance, has With innovative digital
techply. Investigators in the United States were baffled by a mysterious salmonella
outbreak that infected more than 1,300 people and cost tomato growers more than
$100 million. These events illustrate the vulnerability of the food supply chain as well
as the fragility of food supplies in general.

The IT giant is also focusing on creating smarter infrastructure. As populations grow at

a fast clip, they are placing greater demands on city infrastructures that deliver vital
services such as transportation, healthcare, education and public safety. “However,
with recent advances in technology, we can infuse our existing infrastructure with new
intelligence,” says Rhoda.

IBM is also working to build smarter railways in some of the most complex transit
systems in the world, partnering with Netherlands Railways, the Taiwan High Speed
Rail Corporation and Guangzhou Metro in China to improve the commute of millions of
travellers every day. Mobile condition-based monitoring systems, the company argues,
will provide railroads with more intelligence through continuous real-time capture and
analysis of critical data, such as the health of rolling stock as well as operational data.
Sensors on cars will trigger messages based on decision modeling and analytics.
Autonomic routines will then distribute the information appropriately, dispatching
service, ordering parts, scheduling maintenance and performing remote diagnostics.
Eventually, such mobile technologies could reduce the need for fixed infrastructure
along the wayside and give railroads the flexibility and responsiveness they need to
make decisions to optimise crew schedules, add or remove cars, and integrate
passenger and freight transport more seamlessly, with far fewer delays, notes Rhoda.

Smarter railroads can create competitive advantages in the ecosystem of

transportation infrastructure for rail companies besides reducing the costs of adding
new lines and rolling stock even as they increase customer service in acapacity
constrained environment. And by taking on more freight and passenger traffic, smarter
railroads can reduce congestion and improve safety on highways which will also reduce
carbon emissions.

US wins WTO case against China

China today suffered another defeat at the World Trade Organization when a dispute
settlement panel ruled in favour of the US by pronouncing that Beijing violated core
global trade rules, including the obligations it undertook to join the global trade body,
in restricting foreign books, publications and audiovisual home entertainment
products.

In a 469-page final ruling, a three-member WTO panel said several Chinese measures
to restrict the flow of imported books, newspapers, periodicals, electronic
publications, audio-visual home entertainment (AHVE) products and films for
theatrical purposes violated China’s commitments under its Accession Protocol (AP).

The AP set out all the obligations and commitments that China had to implement after
joining the WTO in 2001.

It also indicated the timeframe for implementation of each commitment as well as the
liberal treatment that it would have to grant “trading rights”.

However, key industrialised countries led by the United States, the European Union
and Canada among others raised several trade disputes alleging that China created
numerous hurdles to deny them access to the Chinese market.

From auto parts to audiovisual films, the industrialised countries took China to task at
the WTO for its alleged violation of global trading rules.

The US, for example, challenged the Chinese measures on a range of products that fall
under the so-called cultural goods, like books, recorded audio tapes and films, saying
Beijing also chose to treat domestic entities more favorably than foreign companies to
provide these products.

China claimed that it had the right to regulate the flow of these cultural goods under
what are called Article XX exceptions.

Beijing argued that it was well within its rights to adopt measures relating to foreign
reading materials, sound recordings and audio-visual home entertainment products to
protect public morals given their adverse impact on societal and individual morals.

The panel disagreed with the Chinese claim saying that Beijing’s justification under
Article XX exceptions was not “necessary”, ruling that the Chinese measures were
inconsistent with its WTO obligations Since many of these items fell under both goods
and services, the panel’s ruling has important implications, analysts said, suggesting
that Beijing lost the dispute on various important grounds such as market access and
national treatment principle.

Film business may lose Rs 25 crore

With the Maharashtra government ordering closure of all multiplexes and theatres in
Mumbai till August 16 due to fast spreading swine flu, the film exhibition business may
incur an overall financial loss of at least Rs 25 crore from the upcoming long weekend
holiday on account of Janmashtami and Independence Day.

This is because the film exhibitors are expecting a lower occupancy rates in the
multiplexes in all major centers as a direct fall out of swine-flue spreading at a fast
pace. However, the much awaited Bollywood film, Kaminey,

(starring Shahid Kapoor and Priyanka Chopra) remains on-schedule for an all-India
release on August 14 along with another new film, Life Partner,

also releasing on August 14. The Saif Ali Khan-Deepika Padukone starrer, Love Aaj Kal,
has already done brisk business in the past week, may suffer from lower theatre
occupancy the coming weekend, say film trade analysts.

UTV, the producers of, Kaminey,

have clarified that it is going ahead with the release despite the closure of theatres in
Mumbai region. The Maharashtra government has already ordered the closure of
around 10 multiplexes in Pune.

With the 30-odd multiplexes in Mumbai region, that contribute around 25 per cent of
the overall weekly box office collections in the country remaining closed during the
weekend, trade analyst are fearing the worst for the overall financial health of the
Bollywood business that is already coping with the adverse impact of the two-month
strike during April and May when no new films were release in the theatres.

According to bookmyshow.com, an online movie booking website, swine flu and the
“verified by visa” directive from the Reserve Bank of India on all online credit card
transactions together have contributed to at least 5-10 per cent reduction in the
online bookings.

Industry sources say, around 10,000 tickets have already been booked for August 13 to
August 16. “ We will make full refund for all tickets booked for multiplexes in
Mumbai,” says Roopesh Shah, head of marketing at Bookmyshow.com.

Aditya Birla Nuvo in talks with global PE investors

Aditya Birla Nuvo is in talks with global private equity players Blackstone, Carlyle and
KKR to sell shareholding in its proposed holding firm for its financial services business.
The financial services holding company will house its asset management, insurance,
stock broking, wealth management and private equity businesses.

Nuvo, in a joint venture with Canadas Sun Life, holds 74 per cent in its life insurance
and 50 per cent in its asset management company under Birla Sun Life. It recently
acquired Apollo Sindhoori from the Chennai-based Reddy family to scale up its
stockbroking business. It also increased its stake in the distribution and wealth
management company Birla Sun Life Distribution by buying Sun Life’s 50 per cent
stake.

An A V Birla spokesperson said, “We do not comment on market speculation.” The life
insurance venture — Birla Sun Life —saw operating losses rise 57 per cent to Rs 686.56
crore during the year-ended March 2009, against Rs 437.60 crore in 2007-08. The
market share of the fifth largest private life insurer went up to 10.4 per cent in the
last financial year from 7.8 per cent in the previous year. The company is focusing on
the life insurance business as it expects over half the revenue to come from this sector
by the end of 2010-11, the year when Birla Sun Life Insurance is expected to break
even.

The company had earlier said that the group had lined up capital expenditure of
around Rs 1,000 crore during the current financial year for the business, while another
Rs 800 crore will be required in 2010-11.

The company requires equity to expand because its debt is already high. At the end of
the last financial year, it had Rs 4,300 crore of debt against a net worth was Rs 3,744
core. The company also had a treasury surplus of Rs 800 crore, which gives it a net
gearing of 0.93. This gives Aditya Birla Nuvo little room to raise fresh debt.

FTA inked, $50-bn trade by ’10

The signing of the Free Trade Agreement (FTA) with the Association of South-East
Asian Nations, or Asean, would increase the overall trade turnover between India and
the 10-country block by over a fourth to as much as $50 billion.

Under the pact, which forms apart of the Comprehensive Economic Cooperation
Agreement, tariffs on most of the trade between India and Asean will be cancelled by
2016, while duties on 489 “very sensitive” products will be retained. The agreement
would come into force from January 2010.

Trade between India and Asean has grown at a compounded annual growth rate of 27
per cent since 2000. The pact will give a further impetus to the bilateral trade and
investment linkages, the government said.

The agreement, which was inked after six years of negotiations, calls for gradual
elimination of duties on items which account for 75 per cent of the trade between
India and Asean. These include electronics, textile, machine and chemical goods.

The agreement would provide additional market access to exporters, fuelling the
growth in bilateral trade and investment. Indian exporters which stand to benefit from
the pact include those dealing in machinery, steel, agriculture products, auto
components, chemicals and synthetic textiles.

In addition, Indian manufacturers now would also be able to source products from
overseas at competitive prices from the Asean members.

The pact also provides for safeguard mechanisms to protect bilateral trade in case of
asudden surge in imports after the treaty. “In such an eventuality, if it hurts a
domestic industry, measures like imposition of safeguard duties may be put in place
for up to 4 years,” the statement mentioned.

Commerce Minister Anand said that India’s trade with Thailand alone — one of the
Asean members and ranking fourth in Indian imports — may jump to around $10 billion
by the end of 2010 from $6 billion currently.

The overall trade turnover between India and Asean was over $40 billion in 2007-08,
making the bloc the fourth-largest trading partner for the country.

The domestic industry bodies have expressed hope that the pact would open up
market for the exporters. India-Asean trade was around $40 billion during 2007-08,
making Asean the fourth-largest trading partner of India

Indias total trade in services was $137.50 billion in 2006. The corresponding figure for
Asean was $280.90 billion

India and Asean have set an ambitious target of achieving bilateral trade of $50 billion
by 2010

India has excluded 489 items from the list of tariff concessions and 590 items from the
list of tariff elimination

The Trade in Goods agreement is targeted to eliminate tariffs on 80% of the tariff lines
accounting for 75% of the trade in a gradual manner starting January 1, 2010

Thaicom to launch IPSTAR service in India

Thailand’s leading satellite operator, Thaicom PCL, said on Thursday it expected to
launch a high-speed internet service in India via its broadband satellite IPSTAR in the
second half of this year.

The company should start booking revenue from the Indian market in the fourth
quarter, and an IPSTAR service in China should be relaunched soon, Chief Financial
Officer Tanadit Charoenchan told reporters.

The Indian market, accounting for about 17 per cent of IPSTAR’s capacity, is the
second largest after China, where operations have stalled.

Thaicom has already made an agreement with new partner China Telecom, which
should help stimulate revenue growth in the second half of 2009, Tanadit said.

ICICI Pru ranked first for managing EPFO funds

ICICI Prudential AMC has emerged as the top earner by providing a return of 8.73 per
cent on the EPFO funds, invested by the private fund house during the nine months
period ended June 30.

The State Bank of India was relegated to the second spot by providing 8.70 per cent
returns to the Employees’ Provident Fund Organisation (EPFO) during the period,
according to the Crisil analysis.

The other two fund managers HSBC AMC and Reliance AMC were ranked third and
 fourth having recorded investment yields of 8.67 and 8.52 per cent, respectively.

The EPFO had appointed the four fund managers in July last year to manage its funds
with an idea of improving returns on its funds. A major chunk of its funds are invested
in government schemes and securities having yields of less than 8 per cent.

EPFO manages PF deposits of about 45 million subscribers with a corpus of around Rs

2.57 lakh crore. Its incremental deposits every year is close to Rs 25,000 crore. It had
also appointed Crisil for evaluating the performance of fund managers.

ICICI Pru AMC, HSBC AMC and Reliance AMC were ranked second, third and fourth with
returns of 8.84, 8.72 and 8.68 per cent, respectively, for those six months.

73. RIL exits ONGC team for Venezuela oil bid

RELIANCE Industries (RIL) has pulled out of an ONGC-led consortium which was formed
to bid for a 40% stake in an oil field in Venezuela, leaving the staterun company to
find another partner to bid for the foreign oil block.
ONGC chairman RS Sharma confirmed the development to ET, but declined to
elucidate. Mr Sharma said he was talking to other global
energy firms to jointly bid for the Venezuela oil block which is estimated to hold up to
40-50 billion barrels of proven oil reserves.
The ONGC chief, who spoke to us on Monday, declined to name these potential
partners. The winning bidder may be required to invest $16-18 billion for
development of the block over a 15-year period, the estimated life of the field,
according to earlier media reports. An analyst with an international research firm said
RIL might bid on its own for the large oil field in the vast Orinoco oil belt of
Venezuela. An e- mail sent to RIL remained unanswered.
Although RIL and ONGC, along with BG, operates the Panna Mukta and Tapti (PMT)
oil and gas fields of India’s west coast, they have never jointly bid for any foreign
assets. So, they took the market by surprise when they announced a combined bid for
the Venezuela asset in April.
Venezuela’s national oil firm Petroleos de Venezuela SA (PDVSA) has invited bids for
three oil blocks in the Orinoco Belt. Under the bid proposals, PDVSA will offer a 40%
stake to winning bidders, keeping the remaining 60% with itself. PDVSA is yet to notify
the last date for the bidding.
However, the interested parties might include global energy majors like Chevron,
Gazprom, Shell and Total. Mr Sharma said ONGC Videsh, the overseas investment arm
of ONGC, has been looking for assets across the globe. “We are evaluating various
options. However, I can’t comment on any specific transaction,” he said.
This deal, if it goes through, will help ONGC increase its oil production as the
company is spending billion of dollars to maintain its ageing fields in India. The
 Organisation of Petroleum Exporting Countries (OPEC) expects that India and China
will drive future global oil output. The ONGC stock lost 1.82% to close at Rs 1,130.55
on the BSE on Wednesday. The RIL stock also marginally declined to close at Rs
1,991.75.

74. Microsoft can’t sell Word version in US

A US federal court has ordered Microsoft to stop selling some versions of its widely
used Word software in the United States in two months, ruling in favour of a small
Canadian firm that accused the software giant of violating its patents. A US district
court in Texas ruled in favour of i4i in its long-running patent dispute against
Microsoft, slapping more than $290 million in damages on Microsoft and issuing an
injunction preventing the world’s top software company from selling versions of Word
that contain the disputed patent technology.
The patent in question relates to the use of XML, or extensible markup language, in
the 2003 and 2007 versions of Word. Toronto-based i4i had claimed in a 2007 suit that
Microsoft knowingly infringed one of its patents in its Word application and its Vista
operating system.
The injunction, set to take effect in 60 days, is not expected to hurt Microsoft. It
could easily adjust its programmes to comply with the court’s ruling, according to
industry experts, or settle with i4i. And a new version of Word — which does not
include the disputed patent technology — goes on sale next year with the release of
Office 2010, potentially side-stepping the issue.
Microsoft, which is involved in a number of legal battles over patents, said it plans
to appeal the verdict. “We believe the evidence clearly demonstrated that we do not
infringe,” Microsoft spokesman Kevin Kutz said. — Reuters

75. Godrej eyes Sara Lee’s foreign biz

GODREJ Consumer Products, India’s second-biggest soap maker, may acquire some of
Sara Lee Corp’s international businesses, including the US company’s stake in its
Indian joint venture.
Godrej Consumer may acquire Sara Lee’s stake in the companies’ venture as well as
“bits and pieces” of the Downers Grove, Illinois-based company’s global assets,
Hoshedar Press, vicechairman of the Indian company, said in an interview. “If Sara
Lee manages to find a buyer globally, we will certainly want to buy out their local
business,” he said.
Sara Lee, which owns 51% in the venture with Godrej Consumer, may sell its
Utrecht, Netherlands-based international household and body-care unit that sells
items such as Ambi Pur air-fresheners and Brylcreem hair products. The Indian
household goods maker has told Sara Lee that it will exercise its right to buy out its
partner’s stake in the local venture, should the maker of frozen cakes sell its global
businesses, Press said.
 Godrej Consumer, based in Mumbai, is also looking to purchase other companies
valued at as much as Rs 1,000 crore ($208 million), Press said from Mumbai by phone
on August 11. “We have some dedicated resources in the Godrej Group that are
looking for acquisitions,” he said. Good Knight mosquito repellent and other
household insecticide products account for the bulk of the revenue of Godrej Sara
Lee. The venture also sells Ambi Pur, Kiwi shoe polish and Brylcreem in India. Godrej
Sara Lee’s household insecticide products account for about a third of the Indian
market, according to the company. — Bloomberg

76. VW seals Porsche deal for € 3.3 b

VOLKSWAGEN, Europe’s largest carmaker, will pay about € 3.3 billion ($4.7 billion)
for a 42% stake in Porsche’s automotive unit as it executes a gradual merger of the
two manufacturers. Volkswagen will fully integrate the maker of the 911 sports car in
2011 as long as all merger requirements are met, the companies said on Thursday in
separate statements. Volkswagen plans to issue new preferred shares in the first half
of next year to help pay for the purchase, which values Stuttgart, Germany-based
Porsche’s car division at € 12.4 billion.
Volkswagen CEO Martin Winterkorn said the merged carmaker’s operating profit will
increase by € 700 million annually. Winterkorn will be CEO of the Porsche holding
company as of September 15 and VW’s CFO , Hans Dieter Poetsch, will take the same
role at the company.
“The merger seems kind of odd because the companies work together anyway, so
they clearly don’t need to own one another to work together,” said Stephanie Brinley,
an analyst at AutoPacific in Troy.
“The story reads like a personal war instead of a strategic purchase, but that doesn’t
mean VW can’t make it work.”
The manufacturers announced plans in July for a transaction that would include a
stateowned Qatari investment fund buying 17% of Wolfsburg, Germany-based
Volkswagen and a possible holding in Porsche. Winterkorn said Qatar will be a “strong
partner” for VW.
Executives have said the combined company will eventually overtake Toyota Motor,
the world’s biggest automaker, in sales and profitability. Winterkorn set a target in
early 2008 of beating Toyota in sales and profit margins as the Japan-based
competitor was poised to overtake General Motors as the industry’s largest carmaker
by deliveries. Winterkorn said the combined carmaker will have sales of 6.4 million
vehicles and more than 400,000 employees. Porsche will become the 10th brand in
the Volkswagen stable and will continue to have all of its production sites.
Volkswagen brands include the Audi luxury division and the cheaper Seat and Skoda
marques. — Bloomberg

‘Opel deal not imminent’

FRANKFURT/BERLIN: General Motors and the German government on Friday played
down hopes of an imminent decision over the sale of the carmaker’s European unit,
Opel. GM’s top negotiator for the sale, John Smith, said the company still needed to
compare the latest offer it got from Magna with the “attractive proposal” it received
from Belgium-based financial investor RHJ on July 20. GM was also awaiting input
about what state aid it could expect from European countries that host Opel plants —
AP