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Discoms: Cutting the losses

78%

What is it? The percentage stake the government has in Coal India.

Why is it important? The government is reportedly considering offloading a stake in world’s single-largest producer of coal, after its plans to sell Air India did not attract any prospective buyers. Failure of Air India disinvestment could impact Rs80,000 crore target set for disinvestment in 2018-19. The government recently rejected Niti Aayog’s proposal to reduce the former’s stake in non-strategic public sector units even as it is reportedly confident of breaching its disinvestment target this fiscal.

Tell me more: The government, which was said to be considering the option of listing Air India, has suffered a setback after the markets regulator denied the national carrier exemption from a rule that mandates that the firm reports net profit for the last three years.

Rs 3-4 lakh crore

What is it? The amount in credit that may face refinancing risks if the current challenges in the financing environment remain, according to a report by India Ratings and Research.

Why is it important? The borrowers that have lower ratings may find it difficult to refinance outstanding loans unless liquidity is at least partially improved in financing channels. The sectors that face increased refinancing risks include power, telecom, infrastructure, and metals and mining and are skewed towards smaller businesses that do not have the capacity to withstand such pressures.

Tell me more: The reasons for these risks include the poor health of public sector banks that may lend to better-rated corporates, leaving little for the weaker ones, and the heavy reliance of non-bank financial companies on banks for credit.

5

What is it? The number of years for which Sandeep Bakhshi (the head of ICICI’s life insurance unit) has been appointed as the chief operating officer and whole-time director on ICICI Bank’s board, beginning June 19, subject to regulatory approvals.

Why is it important? The bank said on Monday that its managing director and chief executive officer Chanda Kochhar will go on leave until an independent probe into alleged conflict of interest and charges of impropriety is completed against her. Bakhshi will report to Kochhar and during her absence, to the board.

Tell me more: Former Supreme Court judge BN Srikrishna will conduct an investigation into the loans granted by ICICI Bank to Videocon Group, whose chairman Venugopal Dhoot had business links with Kochhar’s husband, Deepak Kochhar.

Rs17,350 crore 

What is it? The annual losses incurred by power distribution companies in India, according to a report by Deutsche Bank Market Research.

Why is it important? This is 70% reduction in losses in two years’, says the report. Power distribution companies, mostly state-run, incurred loss of Rs70,000 crore per year before the UDAY scheme was introduced. The losses narrowed as the power utilities closed the gap between cost of supply of power and tariff rate to Rs0.24 per kWh, a reduction of 57%.

Tell me more: Under the UDAY scheme – where debt of power utilities was converted as sovereign debt – the transmission and distribution losses has to be capped at 15% by January 2019. There is wide variation among states, with 16 states reporting losses increasing by 20% to 56%.

50% 

What is it? The percentage of audits done by KPMG on firms listed in FTSE 350 that did not meet the auditing standards set by Financial Reporting Council (FRC), United Kingdom.

Why is it important? FRC has mandated that all at least 90% of all audits done by the ‘Big four’ audit firms should meet the watchdog’s standard by 2018-19. PwC scored the highest with 84% of audits meeting the standard. EY and Deloitte scored 82% and 79%. FRC blamed senior management, ‘extent of challenge of management and exercise of professional scepticism’ as reasons for poor audit standards by KPMG.

Tell me more: In India, auditors have resigned from 30 companies in calendar 2018, as compared to seven resignations in 2017, according to data compiled by Prime Database.

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6.4%

What is it? Percentage by which Index of Industrial Production (IIP), which measures activities in mining, electricity and manufacturing, grew in August.

Why is it important? The growth is the highest in nearly three years and much higher than the 4.8% expected by analysts polled by Reuters.

Tell me more: The growth was led by a pickup in mining and electricity, rise in production of durable goods and double digit production in capital goods. Of the 22 industry groups in the manufacturing sector, 15 expanded  in August 2015 year-on-year.

 

7.7%

What is it? India’s share in number of new cancer patients in the world. In other words, every 13th new cancer patient is from India.

Why is it important? Cancer is already either the biggest or the second biggest killer in the country.

Tell me more: Nearly 5 lakh cancer deaths were reported in 2014 and the estimated cancer incidence was 11.2 lakh. India is planning to set up a national cancer institute to be modelled after the US National Cancer Institute, which would promote and conduct research to better understand and diagnose cancer.

 

75%

What is it? Percentage of banks’ outstanding loans to power distribution companies (discoms) likely to be converted to government bonds at a coupon rate of 8% and reducing the lending rate on the rest, according to a proposal discussed by the power ministry and bankers.

Why is it important? State electricity boards, which control the discoms, owe nearly Rs 4 lakh crore to banks. And, banks have a high exposure to the power generation companies and to infrastructure as a whole and their rising bad loans as a result is a huge concern. Solving this issue is a must if the Indian government hopes to fulfill its commitment of 24*7 electricity for all by 2022 and improve infrastructure in general, which is essential for economic revival and growth.

Tell me more: The government has also proposed to count discom losses as a part of a state’s fiscal deficit. This is intended to force state governments to take steps to decrease power losses and increase tariffs to cover costs, a measure most have been hesitant to do so.

 

90%

What is it? Percentage of funds involved in the alleged Rs 6,100 crore black money remittance case routed through proper banking channels from 30 banks, according to Bank of Baroda executive director, B B Joshi.

Why is it important? This relates to a case being investigated by the Central Bureau of Investigation (CBI) and the Enforcement Directorate where it is alleged that Rs 6,172 crore was remitted from Bank of Baroda to Hong Kong as payments of non-existent goods such as cashews, pulses and rice. Despite strict rules and laws such as Know Your Customer (KYC) norms and Prevention of Money Laundering Act, 2002 and frequent reporting to the Reserve Bank of India, the enormity of the scam points to serious lapses in the banking system. This scam could damage the bank’s reputation.

Tell me more: It is also alleged that cash was deposited as advance for import in 59 accounts, which was then transferred to some companies in Hong Kong. Bank of Baroda has suspended two employees so far.

 

0.097%

What is it? Percentage of cases taken up by anti-corruption bureau (ACB) from  the 7,232 complaints filed with the agency in Mumbai between January 1, 2012 and September 23, 2015.

Why is it important? Shows one or a combination of the following: corruption levels are low in Mumbai, number of false cases are high, witnesses turn hostile, different methods used by officers to give and take bribes so as to not get caught and inefficiency on the part of ACB and the government.

Tell me more: Of the total cases filed, the state government has ordered inquiries in only 671 cases. These have come to light in response to a public interest litigation filed by Jeetendra Ghadge, a Mumbai-based activist. Interestingly, according to a list of seven cities released by the ACB last year, Mumbai was the least corrupt city (90 people were arrested last year) with Pune (216 arrested) topping the list.

 

 

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News In Numbers – August 18

News In Numbers: August 18

 

211 vs 175

India’s largest airlines by market share, IndiGo, has placed an order to purchase 250 Airbus A320neo aircraft, in a deal worth $26.55 billion at list prices. This is the largest-ever order for Airbus in terms of number of planes. The IndiGo order will help Airbus open its lead over rival Boeing in the Indian market. Data from the aviation regulator shows Airbus had 211 aircraft in operation in India, against Boeing’s 175. Globally, though, with revenues of $233 billion in 2014, Boeing was bigger in size than Airbus ($175 billion), primarily because the former’s sales include bigger and more expensive airplanes.

 

Rs 7,957 crore

The extent to which power distribution companies in Delhi reportedly overstated accumulated losses over the years. The estimate has been arrived at by the auditor to the government in a forthcoming report. If true, the report is a major boost to the Aam Aadmi Party government in Delhi, which made high power charges in the national capital one of the main points in its electoral campaign. The report gives room to the AAP government to press for a reduction in power rates. According to the report, the three discoms, two from the Anil Ambani Group and one from the Tata Group, bought costly power, ‘suppressed’ revenue and gave undue favours to group firms.

 

$75 billion

The amount the United Arab Emirates (UAE) has committed to invest in India as part of an infrastructure fund created by the two countries. This fund seeks to invest and expand India’s network of railways, ports, roads, airports and industrial corridors. The two countries also plan to increase their trade by 60% in the next five years. India received $239 million as foreign direct investment (FDI) from the UAE in 2013-14, and $1.31 billion between 2009-10 and 2013-14. India received $34 billion as FDI in 2014.

 

2

The number of verticals that are reportedly being created by the Central Board of Excise and Customs (CBEC) to implement the proposed Goods and Services (GST) Bill. Besides these two verticals (one for performance management and the other for taxpayer services), there are various sub-groups working under the CBEC, and state officials are working on the law and procedures. The GST Bill, which is supposed to merge all central and state taxes into a single tax rate, was passed by the Lok Sabha but not by the Rajya Sabha, where the NDA is in a minority. A few media reports, quoting anonymous sources, say the government is considering a special session of Parliament in September to pass the GST Bill.

 

Rs 143 crore

The Supreme Court has asked the Central government to update it about the three-member committee it had asked to constitute to ensure the implementation of its order on government advertisements. This May, the court laid down certain guidelines for government advertisements to avoid misuse of public funds for glorifying the ruling party, and had suggested only the photographs of the President, Prime Minister and Chief Justice of India be used in government advertisements. An NGO had filed petitions in the Supreme Court in July to initiate contempt of court proceedings against the Delhi government (alleging it had earmarked Rs 526 crore for government ads in 2015-16) and the Tamil Nadu government for putting out ads that glorified their respective leaders. Previously, the Congress-led UPA government spent Rs 143 crore to place 84,733 advertisements in print publications between 2008-09 and 2012-13 related to the birth and death anniversaries of 15 leaders.

 

 

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