Books on India
Irdian Rupee (INR)
Update No: 012 - (01/02/05)
The first phase of assembly elections are scheduled to be held in many parts
of India in early February. As part of this, the Congress party has stepped up
its campaign in states like Haryana. Congress President Sonia Gandhi launched
her election campaign in Haryana for polls scheduled for February 3. In a
statement to the people of Haryana, Gandhi urged the people to vote for the
Congress and outlined a program for better governance and welfare of all
sections of society. Gandhi also expressed concern for women's issues which
included the declining sex ratio and cases of female foeticide in Haryana. In
Jammu and Kashmir, the first phase of civic polls were held after a gap of 27
years. However, militant groups and the separatists called for the boycott of
polls. In the Baramulla constituency, two municipal corporations and six
municipal committees will go to polls. Elections will also be held in the
Kupwara and Handwara municipal committees. The main parties contesting the civic
polls in Jammu and Kashmir are the PDP, Congress and the National Conference.
Initial hopes of an improvement in India-Pakistan relations were dampened
after Pakistan accused India violating the ceasefire line across the Line of
Control (LOC). These allegations came after Pakistani troops resorted to firing
in the Poonch sector of Kashmir. India has dismissed the allegations as
baseless. Amidst a fresh round of allegations and counter allegations, Pakistani
and Indian troops fired on each others positions in the Mendhar sector. The
Indian army claims that "there were two instances of ceasefire violations
by the Pakistanis on January 18 and January 20, which the Indian side objected
to and asked for a flag meeting. This was held on January 23. There was no
ceasefire violation by India." However, the Pakistanis are arguing that
mortars were fired from within Indian territory. India's Defence Minister Pranab
Mukherjee in a recent statement is claimed to have said that the issue of fresh
shelling and firing across the Line of Control from Pakistan has been raised
with the Pakistanis. Mukherjee said that the Pakistani side has promised to look
into the issue. Mukherjee also added that both parties maintain that there
should not be escalation of tension along the border. The situation on the
ground, however, is very different.
Indian Army officials believe that since the infiltration across this border is
almost insignificant, it makes the situation tough for the other side. Firing is
usually resorted to as a measure to provide cover to militants crossing the Line
of Control. The firing seems to have also impeded the Indian Army's plan to
fence the Line of Control. Pakistan has always resisted the building of the
fence, which is now almost complete. Intelligence reports suggest that despite
the ceasefire, more than 2000 militants were ready in different training camps
in PoK in November. These militants are now stationed in the forests of Lassa
Danna and it is alleged will be pushed through forward posts in Kathua, Bagh,
Haji Peer and Kotli. The Indian army claims that this is a deliberate ploy to
provoke the Indian soldiers so that they violate the Line of Control, thereby
breaching the ceasefire agreement. These incidents of firing though appearing
trivial have the ability to push back the process of dialogue that was initiated
by leaders of the two countries. But if the provocation suggested were true, and
that 2000 plus militants are ready to move, it seems astonishing that Defence
Minister Mukerjee appears so sanguine about it.
India further expressed its concerns over the sale of US arms to Pakistan. India
views such American policies as being detrimental to the progress of bilateral
talks on cross border-terrorism. New Delhi fears that any such measure of
placating Pakistan can step up militancy in Kashmir and undermine peace talks
between India and Pakistan. The Indian government's fears may possibly be well
founded given past experience where the Pakistanis took advantage of US support
to ratchet up controversy over the Kashmir issue.
In a bid to reform the oil and gas sector, Finance Minister P Chidambaram is
planning to open these sectors to further competition. Towards this end, duties
will be restructured to make oil companies more efficient and bring down fuel
costs. The need to consolidate the oil sector arises from a gap in supply and
demand. Pointing out that taxes on the sector have to be fuel-neutral and
subsidies transparent, Chidambaram said that "Taxes and subsidies in the
sector are in conflict with each other," and that adding any departure from
fuel-neutral taxes and transparent subsidies should be avoided as far as
possible (Source: Press Trust of India Reports). The Finance Ministry is also
working on restructuring petroleum duties.
In other financial news, the IMF expressed concern over high levels of fiscal
deficit in India and urged the government to carry out far reaching fiscal
reforms to sustain high economic growth. International Monetary Fund's First
Deputy managing Director Anne O Krueger suggested that the Indian government
needs to improve the Tax-GDP ratio by pushing up revenues and phasing out tax
exemptions. Krueger said that "Fiscal deficit is an area of concern that
the government needs to give more attention to. In India, Tax-GDP ratio is very
low due to lot of exemptions in personal income tax. The tax base needs to be
broadened." In addition, measures need to be taken on both fronts; revenue
and expenditure. Also, interest rates should be managed effectively and
allocation of resources should be done in a better way for higher economic
The issues that were of critical importance and require to be discussed in the
upcoming budget are fiscal deficit management, expenditure control, public
sector resource management and rationalization of the tax structure.
Jet Airways plans US$500m offering
Jet airways, the Indian carrier responsible for a revolution in the quality of
domestic air travel, has filed a draft prospectus for a n offering of new shares
that is expected to raise up to US$500m, the Financial Times reported on January
The sale of a stake of about a fifth of the carrier will reduce the personal
holding of Naresh Goyal, who launched and owns Jet through a company called Tail
Winds, to about 80 per cent following the initial public offering.
Bankers say the IPO, expected to be launched in February, will kick-start
another busy year on Indian capital markets. In 2004, Indian companies raised a
record Rs292bn (US$6.68bn), according to Prime Database, which tracks trends in
issuance. A record number of public and private-sector banks, telecoms and
software companies are hoping to raise capital via global depositary receipts,
sponsored secondary American deposit receipts and IPOs.
The fund-raisers include HDFC and ICIC, two leading banks, Infosys Technologuies
and Satyam Computer Services in the IT sector, and Hutchison, Idea and possibly
Reliance Infocomm in telecoms.
"The demand is deep and prospective issuers have been encouraged by the
strong response last year form foreign and Indian institutions and retail
investors," said Mr Ravi Kapoor, head of equity capital markets at DSP
Merrill Lynch in Mumbai.
Bankers say the strong returns from IPO stocks such as biotechnology company
Biocom (65 per cent), IT giant Tata Consultancy Services (32 per cent) and
broadcaster NDTV (47 per cent) and the continuing strength of the share market
that has pushed the benchmark index to record levels have been additional
factors favouring heavy issuance.
While these conditions will benefit Jet, the size of its IPO might prove to be
modest following recent policy changes by the government that allows Indian
carriers to fly on international routes.
Jet wants to launch services to the UK, US and south-west Asia, but the IPO
funds, which after partially paying off debt of about US$600m ad redeeming
preference stock, will not be enough to acquire wide-bodied aircraft for
Jet would have to raise extra funding but after the IPO, its leverage will be
enhanced, an executive close to the airline said. "The timing of the policy
changes, which were unexpected, and the implications are not reflected in the
IPO," he said.
Jet earned revenues of US$650m in 2003-2005 from a 43 per cent share of a rising
domestic market in terms of traffic.
India targets two big energy deals with Russia and Iran
India set in train two multibillion dollar energy deals with Iran and Russia
recently, underlining its rivalry with China in the race to secure oil and gas
supplies to fuel rapid economic growth, the Financial Times reported on January
In New Delhi, India and Iran signed a preliminary agreement - unofficially
estimated to be worth US$40bn - that committed India to importing liquefied
natural gas a nd developing two Iranian oilfields and a gas field.
Mani Shankar Aiyar, Indian oil minister, said: "Every last detail has been
settled, price too."
Separately, India's Oil and Natural Gas Corporation said it was in talks about
investing in part of Yukos, the Russian oil group broken up in a state-backed
auction last year.
Officials from New Delhi's petroleum ministry told India's Business Standard
newspaper that ONGC might soon place a US$2bn bid for a stake in Yuganskneftegas,
the main production unit of Yukos.
Subir Raha, ONGC's chairman and managing director, said the company was "in
touch with the concerned Russian entities about the Yukos assets and other
opportunities in Russia."
A spokesman for Mr Raha warned that the talks were in their early stages and the
company was discouraged by the liabilities of Yukos, which is being pursued by
the Russian authorities for billions of dollars in unpaid taxes.
Late last year Yuganskneftegas was bought by Rosneft, the Russian oil company
scheduled to merge with Gazprom later this year. Viktor Khristenko, Russia's
energy minister, said recently that Yuganskneftegas would be spun off into a
A bid by ONGC for a Yuganskneftegas stake could put it in competition with the
Chinese National Petroleum Corporation, which Russian officials had earlier
indicated was their preferred foreign partner for the assets.
Mr Raha, in a recent interview, said India and China were competing to secure
energy sources to cover the next 40 years.
According to the Iranian deal, India will import 7.5m tonnes of LNG starting in
2009 and lasting for 25 years. India's ONGC will also help develop the Iranian
oilfields in exchange for 90,000 barrels a day of crude oil.
China's state-owned oil giant, GNOOC, is considering a bid of more than US$13bn
for Unocal of the US in what would be the largest overseas acquisition by a
India's rapidly growing economy is hungry for energy and demand for oil is set
to grow at an annual rate of at least 3.6 per cent during 2005-07. India imports
about 70 per cent of its crude oil.
India to open talks with Burma and Bangladesh on gas pipeline
India has opened high-level talks with both Burma and Bangladesh aimed at
approving a multi-billion-dollar gas pipeline to feed India's surging energy
demand, the Financial Times reported.
Agreeing to the talks amounts to a significant change of attitude by Bangladesh,
which has prevaricated for years over whether it would be prepared to link its
still untapped gas reserves to India by pipeline.
There has long been political resistance in Dhaka to exporting its most valuable
natural resource to its bigger neighbour.
But Mani Shankar aiyar, Inida's minister for petroleum, told the Financial Times
that the three countries had reached the stage where practical negotiations
could proceed. Indian officials say Bangladesh's new interest in the pipeline
has partly been stimulated by India's improving ties with Burma. If routed
through Bangladesh, the pipeline would earn transit fees for Dhaka, while also
offering it the option to sell its own gas to India sing the same
The Indian minister will hold talks with both countries in the Burmese capital,
then visit the country's offshore gas field, which was partly discovered by Gas
India Limited, India's state-owned gas company.
The proposed pipeline could either cross Bangladesh or bypass the country
altogether. India' whose demand for gas is projected to surge to 400m cubic
metres a day by 2025, is also evaluating a submarine pipeline across the Bay of
Bengal, in case Bangladesh does not agree to the project.
Another costlier option would be to route the pipeline from Burma's northern
border through India's north-eastern state of Mizoram.
A pipeline could go a long way towards meeting India's growing energy needs,
though it remains unclear how large Burma's gas reserves will prove to be.
Gas discoveries in the Shwe field in the Andaman Sea off Burma's coast last year
opened the possibility of exports to India.
But further drilling tests were needed in Burma's biggest offshore gas field to
assess its commercial potential, analysts said.
"More drilling will be done before any decision can be made on how the gas
can be transported to India," said Susan Mance, south-east Asia energy
analyst for Wood Mackenzie.
Analysts estimate gas reserves in the Shwe field of up to 14 trillion cubic
feet. Estimates for Bangladesh are also hazy, with net proven gas reserves of 15
trillion cu ft, but the US Geological Survey estimated that Bangladesh contains
32.1 trillion cu ft in additional "undiscovered reserves."
India is also keen on the pipeline project for diplomatic reasons.
"This gas pipeline would greatly strengthen relations with a much neglected
country to the east of India (Burma)," said Mr Aiyar. "We are
expanding our domestic supplies of gas and our overseas sources of gas - there
is more than enough demand in India for both to expand greatly."
India's increasingly close ties to Burma's military junta are widely seen as a
belated attempt to emulate China's influence in Rangoon, which is extensive and
includes a strong military element.
Although India and China enjoy more cordial relations than in the past, many
liken their competition for energy and influence in the region to the 19th
century "Great Game" between Britain and Russia.
However, India believes it can strengthen relations with Burma without
Mr Aiyar said: "I hope and believe India can have an economic presence in
Burma in hte hydrocarbon sector (without jeopardising relations with
India to boost trade with Kazakstan, Uzbekistan
The fifth Joint Commission Meeting (JCM) between India and Uzbekistan was
inaugurated by the Indian Minister of State for Commerce and Industry, Shri
Elangovan in Tashkent recently, Interfax News Agency reported.
The JCM was expected to give a boost to the trade and economic cooperation in
the areas of apparels, engineering goods, basic chemicals and pharmaceuticals, a
The Indian minister led a 73-member trade delegation to Uzbekistan and Kazakstan
as part of the Focus, Commonwealth of Independent States programme of the
ministry of commerce and industry to enhance the areas of economic cooperation
between India and the CIS countries. Twelve countries like Armenia, Azerbaijan,
Russia, Tajikistan, Kazakstan and Uzbekistan are members of the CIS group.
Under the CIS programme, the government gives assistance to exporter, export
promotion councils (EPCs), business chambers to visit these countries, organise
trade fairs and to undertake various market promotional activities.
Members from various export promotion councils like basic chemicals and
pharmaceuticals EPC, engineering EPC chemicals and allied products EPC were part
of the delegation. The thrust areas for cooperation are textiles, engineering
goods, chemicals and pharmaceuticals.