- Consumption, export-led sectors made Nifty resilient: CrisilGold price surges most in 2 years, up Rs 1,310 as Indian rupee, stocks tumbleAs rupee, BSE Sensex, crashed around him, P. Chidambaram played soothsayerNo further capital control happening, efforts on to check Rs free fall: Finmin
Finance Minister P Chidambarams attempts to talk up the rupee today after it slid to a record low that forced the benchmark stock market indices down by about 4 per cent may not be enough to assuage investors fears.
For, their confidence has been undermined as much by the Reserve Bank of Indias panic late on Wednesday to clamp down on how much Indian nationals and domestic companies can invest abroad as by the long list of administrative clampdown and policy inaction across sectors in this government.
A recent Crisil Research report shows that in January 2008, investment-linked sectors such as materials, industrials, energy, utilities and telecom dominated the CNX Nifty with a weightage of 66 per cent. As these sectors wobbled, that cumulative weightage dipped to 31 per cent by July 2013.
Comparable to the impact of the RBI step is that of pooling of coal price. Instead of letting markets set prices of domestic and imported coal, the Ministry of Coal has tried to develop a pan-national price-pooling mechanism which has been panned by the markets.
Public sector Coal India, mandated to do the import and selling of coal to power plants, has lost a market cap of Rs 56,878 crore (since January 1, 2013) while the largest buyer, another public sector NTPC Ltd, too, has lost Rs 10,224 crore in the same period.
Thares a parallel to this in the power sector. The latest set of standard bidding documents for award of new generation power projects under the Case II route (where land and fuel source are prespecified) stipulates the appointment of an independent engineer by state electricity boards (or the utility buying power from the project).
This is tantamount to creating an independent authority not envisaged under the Electricity Act, 2003. Private project developers and lenders have termed the plan intrusive and unworkable. But the proposed norms, floated by the Power Ministry in consultation with the Planning Commission, have found their way into the final version of the bidding documents.
Result: the entire process of unbundling of state electricity boards initiated in the early part of the last decade is now coming unstuck.
Companies can still set up a power plant and run it but will have to hand it back to the distribution utility that had invited bids for the project after a period. So distribution companies will become power producers in another two decades a throwback to the power scenario of the eighties.
In the highways sector, too, it is back to the basics with the government signaling a shift from the build-operate-transfer model to the old engineering, procurement and construction (EPC) route since the beginning of this year.
The risk component of the projects is now entirely back with the government. Private companies will merely build a project and let the government run the maintenance. Similarly a bidder can sell his entire equity in the project at any stage if his finances become tight creating an incentive scenario for them to call in sick.
As a Crisil note points out, over the next 12-18 months, most road projects will be awarded through the EPC route boosting its share in total investments to about 40 per cent in the next five years from 28 per cent in the past five years.
In the fertiliser sector, the government had claimed that the adoption of nutrient-based subsidy regime from April 2010 for decontrolled fertiliser was one of the biggest reform measures as it did away with setting of prices for the sector. In June this year, however, the department of chemicals and fertilisers brought back price control quietly through an office memorandum.
No wonder, as many as 22 out of 27 companies in the investment-linked sectors (among 2008 Nifty constituents) have displayed negative returns in the same period.
The Civil Aviation ministry, too, is in the process of making operational an economic cell to monitor domestic airlines pricing mechanism. The cell, according to reports, would analyse data on tickets sold by airlines under different price buckets and would refer cases to the Competition Commission of India in case of any discrepancies.