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[Economy] Current 2014 Feb Week 1: FDI, Regulatory Bodies,

Infrastructure (Part 2 of 3)
Posted BySupport StaffOn 10/02/2014 @ 6:24 pm In Z-Miscellaneous | Comments Disabled
1.

Prologue

2.

[Act III] FDI related current affairs [2014FebWeek1]

1.

[FDI] Multi brand Retail: Gaddari by Delhi & Rajasthan

2.

[FDI] Lobbying by Walmart and Amazon

3.

[FDI] Railways: FM, HM oppose Chinese FDI

4.

[FDI] Drugs Pharmaceuticals

5.

[FDI] Vodafone: fully foreign owned

6.

[FDI] Andhra favorite despite Telengana protests

7.

IFC Rupee bonds

8.

[FDI] Defense

9.

[FDI] Environment clearances

10.

[FDI] flows in last eight months (from highest to lowest)

3.

[Act IV] Regulatory bodies (Truckload of)

1.

#1: DGH: need statutory status

2.

#2: PNGRB- koi hum ko bhi puchho yaar

3.

#3: Civil Aviation Authority= no country for non-IAS

4.

#4: Rail fare regulator: Im Useless without statutory status

5.

#5: Desi Drug regulator: I want Firangi powers despite staff shortage

6.

#6: 14th Finance Commission: homework abhi baaki hai

7.

#7: 7th Central Pay commission

8.

#8: EPFO- I want to stay in news everyday

9.

#9: IRDA- I also want to stay in news every day

4.

[Act V] Infrastructure related

1.

#1: Monorail @Mumbai

2.

#2: Metro @Mumbai BOT Problem

3.

#3: North East: hydro, manpower potential

4.

#4: [Summit] 101st Indian Science Congress

5.

#5: Exhibition upgrades

6.

#6: Infrastructure Misc./chillar topics

Prologue
Overview of Economy related Affairs during 1-7 Feb 2014. Total three parts

1.

Part 1 of 3: fiscal and monetary policy

2.

(youre here) Part 2 of 3: FDI, regulatory bodies and infrastructure.

3.

Part 3 of 3: bilateral, poverty-hunger-HRD, Agriculture-food processing and

Persons in News (PIN).

[Act III] FDI related current

affairs [2014FebWeek1]
Important basics:

FDI matters are handled by Department of Industrial Policy and Promotion

(DIPP), under Commerce Ministry.

They release the FDI policy notification. (and not under Finance ministry or home
ministry or corporate affairs ministry or external affairs ministry)

There are two types of FDIs : automatic approval vs non-automatic (i.e. where
government permission necessary).

Where government permission is necessary, two things can happen:

Investment upto Rs.1200 crore

You need to get permission from FIPB
Foreign Investment Promotion Board.

Investment above Rs.1200 crore

Need permission from Cabinet
Committee on Economic Affairs
(CCEA).

FIPB headed by Secretary of Department of

CCEA is headed by Prime
Economic Affairs. (=IAS working in finance ministry=>
Minister. (although we all know who
meaning, the real Boss behind the curtains is Finance
is the real boss behind the curtains.)
minister.)
Other bodies related FDI

CCI
CCI
(infra)

PMG

Cabinet commission on Investment (Boss: PM)

Project worth Rs.1000 crore or more.
But cannot override decision of Environment ministry.
Cabinet Committee on infrastructure. No longer exists. It is merged with Cabinet
Committee on Economic Affairs (CCEA)
Project monitoring group. Attached with Cabinet Secretariat. (and not PMO)
For fast track clearance to the stalled investment projects.
Of 1000 crore or more.
Claimed to be Indias first completely file-less government office- works
entirly via web-platform.
In news because: Has cleared 70000 MW worth coal projects in last few
months.

[FDI] Multi brand Retail: Gaddari by Delhi &

Rajasthan

2012
2013
2013,
Dec
2014

Government permits 51% FDI in Multibrand retail.

Total 12 states/UT permit FDI in Multibrand retail.
Including Rajasthan and Delhi (Congi government in both states)
Congi lost Rajasthan to BJP and Delhi to AAP
UK company TESCO becomes the first MNC to give 51% FDI in multi-brand
retail. They tie up with TATA to open malls in India.
New state governments of Delhi and Rajasthan, write letter to DIPP saying we want to
cancel the permission given to FDI-multibrand, by the previous Congi governments.

Union government is upset because

Delhi Rajasthans move will create negative impression among foreign investorsIndia has an unpredictable policy environment.

So far 12 state/UT has permitted. MINUS Delhi, Rajasthan = only 10 state/UT

left where MNC can open multibrand shopping malls. = Market not Big enough to
attract investors.

Therefore, Union asks Attorney-General can state governments revoke such

permission after change in political regime?

Experts say yes. Besides even if Union gets some relief from Supreme court,
still AAP/BJP state governments could refuse to give building permission etc. to those
MNC to open shopping malls.

[FDI] Lobbying by Walmart and Amazon

Lobbying= when private companies try to influence the politicians, to make

favourable policy/act for them.

American companies spend truckload of cash on lobbying- both within US and

outside. But as per American laws, theyve to submit report of their expenditure on
lobbying (even if done in foreign countries.)

So, from such disclosure reports, it was found that

2012 Walmart spent crores to lobby for FDI-multibrand retail in India

Government (Corporate affairs ministry) forms a commission to look into this allegation.
2013
(only one man army: retired Justice Mukul Mudgal)
Amazon spent crores to lobby for FDI in E-commerce in India. (and simultenously
2013 government releases a Whitepaper on FDI in E-commerce. If you join the dots, then its
obvious government is influence by Amazon lobbying.
2014 Justice Mukul Mudgal gives his report to Government (Corporate affairs ministry.)
Limitations:

Mukul Mudgal panel was not formed under commission of Inquiry act => he
did not have the power to summon documents/witnesses.

Walmart executives did not cooperate with him, refused to give detailed breakup
of account/expenses in India.

Walmart maintains that company did not spend money to lobby in India. Only
some individual executives of walmart spend money from their own salary. So we as a
Company have not broken any Indian law.

[FDI] Railways: FM, HM oppose Chinese FDI

DIPP: Department of Industrial Policy & Promotion wants to liberalizing FDI in Railways.
here is their recommendation:

permit FDI in
high-speed tracks

Dont permit FDI in

existing passenger rail

network
Existing freight network
operations

Railway freight lines connecting ports, mines and

power installations
Railway corridors in sub-urban areas.

DIPP gave this note to Cabinet for consideration. But Home Minister and finance
minister say Chinese FDI shouldnt be allowed in railway sector because:

China is Indias main rival on the economic and military fronts,

We have unresolved border disputes with China.

Recently Chinese company Huawei was accused of hacking into BSNL network.

Therefore, Chinese investment in core sectors such as Railways= Dangerous

from National security POV. (Point of view).

Even if Non-Chinese players are allowed thru FDI window, all issues related to
security, safety and quality control should vest with the Indian Railways.

[FDI] Drugs Pharmaceuticals

Present status
FDI in New projects= 100% automatic route (dont
need permission from Government/FIPB/CCI)
FDI in existing pharma companies =100% but ned
permission from FIPB (Foreign Investment Promotion
Board) approval.

What DIPP wants

This system is right.
Not good. FDI in existing Indian
companies should be reduced to 49%
(from 100%)**

**why? Why does DIPP want to reduce FDI in existing desi-pharma companies?

Because if desi pharma cos are 100% owned by Foreign MNC giants, itll impact
the availability of affordable/cheap drugs in India.

And in the worst case scenario: Pfizer /Novartis may simply buy out desi
companies and make them produce only the patented expensive drugs only (and not
the cheap generic drugs.)
Latest clearance: US company Mylan to acquire desi drug company Agila.

[FDI] Vodafone: fully foreign owned

Vodafone Indias parent company is located in Mauritius, owns >60% shares in

Vodafone India.

The parent firm wanted to buy all shares from Indian shareholders, to have
100% ownership of shares.

Dec 2013
Feb 2014

FIPB approves
Cabinet also approves

Thus, Vodafone India=First telecom company in India that is 100% fully owned by
Foreigners.

[FDI] Andhra favorite despite Telengana

protests

Andhra CM says that despite the political turmoil (about Telengana), Andra
pradesh is still favorite destination for foreign investors. MNCs like Johnson and
Johnson, Proctor and Gamble are setting up plants worth crores of rupees.
Why?

John D Rockefeller (American oil tycoon)- he was richer than Bill Gates, Steve
Job and Mark Zuckerburg.

His business mantra: The way to make money is to buy when blood is running
in the streets. He used to buy firms, factories, land, shares and bonds during
riot/war/famine/depression like situation because at that time businessmen in
distress would sell their assets at throwaway prices.

Perhaps same is happening behind the curtains in Andhra. Thats why favorite
destination for MNCs.

IFC Rupee bonds

IFC= International finance corporation, its a member of the World Bank Group.

Theyve released IFC Rupee bonds.

Foreign investors buy such bond (by paying dollars to IFC). Who are these
clients? Asset companies, Private banks, insurance cos, even central banks of Asia,
Europe and US.

IFC convert these dollars into rupees and invests in India- particularly in the
areas of low-growth states.

They earn money (in Rupees), covert it into dollars.

Then principle/interest paid to you in (dollars), and IFC keeps some part as
commission.

IFC also doing same with Brazilian real, Chinese renminbi, the Nigeria naira,
Russia ruble etc. They convert dollars into local currency and invest.
So, is this FDI or FII? If we go by the Chindu definition (less than 10% investment in a
company=FII and >10%=FDI, then rupee bonds is mostly FII).

[FDI] Defense
Needs a separate article. Just a few point here:

2014 Held in Noida (UP);

by Defense ministry
Biennial event. (Every second year)

DefExpo

At present FDI limit in Defense= 29%. Latest clearance.

Joint venture
Thales (UK firm)
BEL (Desi)
Product

ownership
26%
74%
Main focus= Radar production in India.

Defense procurement procedure 2013

Wants to boost Indian defense industry (Both public + private sector)

In Defense purchases, it gives preferences to Buy (Indian), Buy and Make

(Indian) category of products.

India wants to procure 70% of its defense requirement from domestic players
(both public + private) but difficult given the low limit in FDI.
Some tie-ups between Foreign and Desi brands:

Sensor

MicroObserver Unattended Ground Sensor (UGS) for securities agencies.

By Bharat electronics + an American company

UAV

SQ-4 Recon= new brand of Unmanned Aerial Vehicle (UAV).

India based OIS-AeroSpace + a UK company.

Vehicle

Light armoured high mobility vehicle (LAMV)

By TATA and a UK company.

Related topic
Rafael jets=purchase delayed (kyoki apni hesiyat nahi)

2012

We decide to buy 126 Rafael fighter jets from a French company Dassault.
Cost: ~60k crore rupees.
Theyre MMRCA= medium multi-role combat aircraft
Negotiations start.

Defense Minister says we dont have enough ca$H at the moment for FY13 (ends
@31st March 2014).
2014
If we borrow money to buy these planes then fiscal deficit target will not be
achieved (4.8% of GDP)
So, we Will have to postpone this purchase- perhaps to FY15.

[FDI] Environment clearances

Old story, Needs a separate elaborate article. Just an overview.

December 2013: Moily becomes Environment minister. But he simultaneously

holding charge a petroleum minister.= one is pollution controlling ministry, one is
pollution creating ministry. = incompatible jobs. Should be done by two separate
ministers.

Moily giving fast clearances = to attract investors, improve IIP and show that he
is also pro-business like Modi.

POSCO

cleared

Vedanta

S.Korean company. Steel plant. $12bn USD. Odisha.

bauxite mining project in in the Niyamgiri hills of Odisha
Moily Says local gram sabhas are opposed to it, so I cant approve.

Tawang
Ennore
Chennai
Teesta
Coal
Mines
Hinduja

Arunanchal Pradesh
Coal based powerplant, TN
Petroleum pipeline
Sikkim hydroelectricity project. (NHPC)
Allowed some of them to increase output without requiring new
permissions.
Coal power station @Vishakhapatnam, Andhra

Cleared
cleared
cleared
cleared

Not
cleared

Cleared.
Cleared

[FDI] flows in last eight months (from

highest to lowest)
sector
Service sector
Automobile
Construction
Chemical

From country
Mauritius**
Singapore
UK
Netherlands

** it doesnt mean Mauritian people are very rich. These investors are mostly
American/European tycoons who setup post-office companies in Mauritius to get tax
benefits. [Recall Vodafone/Hutch controversy.]

[FDI] declined in India: says UNCTAD

UN Conference on Trade and Development (UNCTAD) report.
FDI destinations:

Year
2012
2013

Indias position
15
16 (meaning incoming FDI has declined.)

[Act IV] Regulatory bodies

(Truckload of)
#1: DGH: need statutory status
Directorate General of Hydrocarbons (DGH).

Present status
DGH falls under Oil
Ministry.
funded by the Oil
Industry Development
Board (OIDB)
Top officer from ONGC
and Oil India, get posted
here.
Not under direct CAG
audit.

What Finance ministry wants

Should be given Statutory status. Because DGH implements New
Exploraton Licensing Policy (NELP), matters related to Production
Sharing Contracts for oil exploration fields etc. = it must have
autonomous status.
Should get ca$h from consolidated fund of India (from Budget).

No, should have independent staff.

No. Once DGH starts getting funds from budget, then CAG will audit
it.

By the way, whats the situation in other bodies? Where do they arrange cash?

SEBI,
IRDA,
FMC
TRAI

RBI

Charge fees on the licensees.

Gets funding from government.
TRAI wants commission from the spectrum licensing, but government doesnt agree
to share the maal.
Its the central bank. Central Banks earn money from seigniorage. We learned
about it in Nachiket Committee article. Click me+ income through OMO, repo,
MSF, license fees.

#2: PNGRB- koi hum ko bhi puchho yaar

It is a statutory body setup under Petroleum and Natural Gas Regulatory Board
(PNGRB) Act 2006.
You need to get its permission before setting up city gas distribution network (cooking
gas lines, CNG station).

GAIL wants to setup its own CNG gas stations

2013
Oil Ministry says, ok go ahead, you dont need permission from PNGRB to setup
CNG stations in cities.
2014 Oil Ministry makes a U-turn. Tells GAIL to get permission from PNGRB.

#3: Civil Aviation Authority= no country for

non-IAS

Statutory body.

Problem: this boss (DG) is mostly a serving/retired IAS => CAA has become an
inefficient bureaucratic organization. = lazy approach => USA downgraded Indias
aviation safety rating.

Now Ministry of Civil aviation proposing a bill, to ensure only professional person
is appointed as DG. (and not some serving/retired IAS). And he must be given security
of 3 years tenure.

Problem: cabinet not clearing this bill.

#4: Rail fare regulator: Im Useless without

statutory status

Cross subsidization = railway sells passenger tickets cheap (=~25k crore loss
per year), but recovers that loss by keeping freight charges high. (=ticket prices for
transporting non-human things cements,coal etc.)

Result= not making optimum profits. Bogus food, bogus toilets, bogus security.

Government finally notified to setup a new Rail Tarrif authority. (Feb 2014)

Itll suggest pricing in such way that railway generates healthy profit.

Problem=Executive body. Recommendations not binding to rail ministry.

If you want to make it statutory body, then need to amend Railway act 89 =
but thats unlikely in the current budget session.

#5: Desi Drug regulator: I

want Firangi powers despite staff shortage

USA has FDA (Food and drug administration)

Similarly India has CDSCO- Central Drugs Standard Control Organization

CDSCOs boss is called Drugs Controller General of India. (DGCI)

CDSCO Falls under Ministry of Health (mind it: Drugs/Pharmaceutical falls under
Chemical ministry)
Anyways, why in News?

USFDA even monitors the desi-plants of desi pharma companies (e.g they
banned Ranbaxys Toansa (Punjab) plant from manufacturing medical products for the
US market.

So CDSCO feeling envy, we also want similar powers to inspect the foreign
plants of foreign companies- who supply drugs to India.

Problem: CDSCO doesnt even have enough staff to supervise desi drug
companies. They asked Union government to increase budget so we can hire 5000
more people. But no positive response. After all funding to drug supervision =not as
important as MNREGA.

#6: 14th Finance Commission: homework

abhi baaki hai

Constitutional body, setup in Jan 2013.

Boss = Ex RBI governor Governor YV Reddy

His recommendations will be effective from 1/5/2015, for a period of five years

Apart from the usual terms of reference, 14th FC also has to make
recommendations about:

1.

Pricing of public utilities such as electricity and water in an independent manner

2.

issues like disinvestment, GST and subsidies.

Why in News

It was to submit report by 31/10/2014.

But things are moving slow, Finance commission will take long time to meet all
state government and process the data and demands. + issue related to compensation
to Seemandhra from mega Polavaram project from Telangana and so on.

Finance commission is seeking an extension of 3 months (i..e up to Jan 2015)

This is not the first time in history though. 13th FC (under Kelkar) they also
submitted their report in December 2009 (instead of original deadline in Oct 2009)

#7: 7th Central Pay commission

Chief= Justice Ashok Kumar Mathur

Member= Vivek Rae full time (IAS) + Rathin Roy part time (economist) + Meena
Agarwal (Secretary, IRAS)

Target audience= 50 lakh Central government employees, including the Railways

and Defense. +30 lakh pensioners.

Deadline= submit report in two years.

Implemented from January 1, 2016. [6th PCs recommendations from January 1,

2006.]

Criticism:
6th PC cost us more than 20k crore rupees= fiscal deficit + and blamed to
be one of the factors for inflation (Because money increased in babu-logs hands
without subsequent increase in their productivity.)

Timing before the general election.

#8: EPFO- I want to stay in news everyday

From aspirants point of view, EPFO= most bogus of all public entities. Because
they create new current affairs on almost daily basis or just keep coming in news for
no reason.

Anyways what did they do in Feb. 2014, first week?

For anyone earning upto Rs.15000 = EPF contribution is must. = this will enroll
50 lakh more employees in the EPFO game.

Minimum Rs.1000 pension to retired people.

(did not implement) minimum age to get pension: raise from 58 to 60 years.

#9: IRDA- I also want to stay in news every

day

Just like EPFO, ye IRDA walla also keep doing something new every day to stay
in the news. Anyways why in news?

1.

Broker model for Bancassurance (already covered in past article. click me)

2.

Allowed common service centres (CSCs) to sell life insurance products. CSC are
setup under National e-governance plan.

3.

Norms/guidelines for Micro-insurance products (for rural/poor people). Allowed

RRB, Coop. Banks, SHG, Banking BCA etc to sell such micro-insurance products.

4.

Asked companies to general insurance companies should increase their focus on

agricultural insurance, disaster Management products.

[Act V] Infrastructure related

Important fact: that the 12th plan envisages $1 trillion for infra development
GS3 (Mains): Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
Lets check

communication
Energy
airport
Railways

spectrum auction
NELP, LPG, Electricity = given in part1
aviation safety sucks =given in part 3
FDI given above, Monorail given below

#1: Monorail @Mumbai

Monorail runs on a single rail. This rail may be located either above or beneath the
railway cars. Observe the photo

Mumbai Monorail was setup by Mumbai Metropolitan Region Development

Authority (MMRDA) + L&T Engineering.

None of our neighboring countries have Monorail (except China).

First phase: ~9km from shootout @Wadala to Chembur.

Minimum fare: Rs.5

When entire project is completed:

itll have ~19km length.

7000 passengers per hour

Cost: Rs. 3000 crores

Ranking
1
2
3
4

Monorail in
Osaka, Japan
Mumbai, India (when entire project completed)
Tama, (Tokyo), Japan
Kuala Lumpur

#2: Metro @Mumbai BOT Problem

Being developed by Anil Ambanis Reliance infra

PPP Project under BOT model (buildoperatetransfer).

But dispute with Maharashtra government about pricing of metro rail tickets.

CM asks union government to setup a dispute redressal mechanism at the

national level to resolve disputes in such BOT projects.

Railway Misc.
Kolar

New rail coach factory here. (will build passenger coaches)

Rail minister + Karnataka State government will share cost.

Delhi-Amritsar Bullet train

Chennai Metro

Bids invited
Under testing. manufactured in Brazil.

#3: North East: hydro, manpower potential

Truckload of schemes and issues, only listing new points happened in Feb2014 week#1,
related to economy:
Planning commission says

North Eastern states can earn ~650 crores per year by hydroelectricity.

12th FYP wants to add 88000 MW electricity generation. And out of them North
East can generate ~3000MW

5000 crore spent on developing airports @North East. Asks state governments to
hasten the land acquisition
Modi says:

1.

Youngsters in the North Eastern states are generally tech-savvy with good
command over English

2.

= Suitable for digital outsourcing/IT jobs. But at present theyve to migrate to

Bangalore and Hyderabad.

3.

Government should create such job opportunities within their own villages in
North Eastern States.
Related issue: Arunanchal boy Nido Taniam murdered in Delhi in a racial hate-crime.

#4: [Summit] 101st Indian Science Congress

\Not an economy topic as such but Mohan said we must spend atleast 2% GDP on
science tech, hence making a passing reference here (else separate discussion in S&T
compilation later on)

Where? Jammu

Theme? Innovations in Science and Technology for Inclusive Development.

Major Points/Achievements listed by Mohan

Neutrino-based Observatory @TN

India joins CERN as associate member

ISROs missions to Mars and moon

Can issue Tsunami alert within 13 minutes

Setup new dept for Health Education and Research

A Rota Virus vaccine, a new drug for malaria, CSIR discovering new drug for TB

We should not succumb to unscientific prejudices against genetically modified

(GM) crops.

#5: Exhibition upgrades

India Trade Promotion Organisation (ITPO)- government owned company. It has

planned to spend crores of rupees to upgrade following venues

1.

Pragati Maidan, New Delhi.

2.

Vigyan Bhavan

3.

Kochi (for coffee, tea, spcies exhibition).

4.

Karnataka: wan to setup a venue for IT-related fares and exibitions.

Some notable expos in 2014:

Expo-2014
Auto
Defense
Petro-Tech

Venue
Pragati Maidan, New Delhi
Noida (UP); organized by Defense ministry.
Noida (UP)

#6: Infrastructure Misc./chillar topics

Pharma

Youre aware of the mega food parks click me. In mega food parks, the
companies have common facilities for packaging, weighing etc. = operation cost
reduced.

Chemical ministry launching similar scheme for Pharma companies.

In SEZ/industrial locations, Government will give them financial assistance to

setup common infrastructure for setting up effluent plants, R&D labs, training centers
etc.
Toll Tax

Fall under State list (entry 59)

As per National Highway Authority of India (NHAI) minimum distance between

toll booths should be 80 km.

But in Maharashtra toll booths are setup even at distance of every 20-30 kms

The toll collection money is supposed to be used for road-repair, but its not
done.

Traders allege bribery and irregularity by toll booth operators. Road contractors
have recovered their original investment, yet toll tax still collected.

Shiv Sena and MNS have ordered their troops to attack and vandalize tollbooths.
Steel industry: we ar unhappy

Goa used to be Indias top Iron-Ore exporter. But declined after SC ban on illegal
mining. = less supply= input cost increased.

government imposed a 5% tax on the export of iron ore pellets

Jindal Steel says Karnataka-walla miners have formed a cartel = steel industries
suffer.

Inflation = automobile sales declined, therefore demand of steel decline.

click me For the next part 3 of 3.

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