june 25 (ie)

India, Pak exchange proposals on conventional, nuclear CBMs


India and Pakistan have exchanged several proposals on conventional and nuclear confidence- building measures like inclusion of cruise missile launches in the mechanism for advance notification of missile tests.
The proposal for including cruise missile tests in the existing bilateral agreement on Pre-Notification Of Flight Testing Of Ballistic Missiles, signed in October 2005, was mooted by the Indian side during yesterday's talks between the Foreign Secretaries on peace and security, sources familiar with the discussions said.
The Pakistani side gave a proposal for the two sides to "exchange experiences and expertise" in the field of nuclear technology, especially the operation of atomic power plants and their safety mechanisms, the sources said.
Making a reference to the recent nuclear accident at the Fukushima atomic plant in Japan after a devastating earthquake and tsunami, the Pakistani side proposed that the two sides could work together to address similar safety concerns, they added.
The proposals were discussed by the two sides but no firm commitment was made by either delegation, the sources said.
The discussions were only of a preliminary nature and both sides would explore the proposals in future talks, they added


Why should CBI be out of RTI, Madras HC asks Union govt


The Madras High Court today issued a notice to the Union government on a PIL seeking to declare a recent notification exempting Central Bureau of Investigation (CBI) from the purview of Right to Information Act as ultra vires or 'beyond the powers' of the Constitution.
A Bench comprising Chief Justice M Y Eqbal and Justice T S Sivagnanam directed Additional Solicitor General M Ravindran, who took the notice on behalf of the Union government, to get instructions from it within three weeks.
Petitioner S Vijayalakshmi, an RTI activist, challenged the June 9 notification issued by the Centre exempting the CBI from Central Act 22 of 2005 (Right To
Information Act).
However, the court declined to grant a stay on the notification as sought by the petitioner and posted the matter for further hearing after three weeks.
The petitioner alleged that since the expose of the Commonwealth Games, 2G spectrum allocation, other scams and the Lokpal movement, the Centre had become “jittery and rudderless” in the war against corruption.

The Centre had “maliciously” decided to conceal its “wrongdoings” by taking recourse to section 24 of the RTI Act and cloaked the CBI by granting it blanket exemption from the RTI, the petitioner charged.
Claiming that certain bureaucrats at a meeting of the Committee of Secretaries had disagreed with the decision to exempt CBI, the petitioner urged the court to issue a direction to the government to produce the related files.
Counsel for the petitioner Manikandan Vathan Chettiar contended the respondents have “willfully” overlooked the first proviso to section 24(1) of the RTI Act excluding information pertaining to allegations of corruption and human rights violations from being exempted under Section 24.
He further submitted that Section 24 exempts only intelligence and security agencies, whereas the CBI was a mere investigating agency.
New perspective required for close China-India-Pak ties: China
Seeking a “new perspective” for establishing close China-India-Pakistan ties, the official think tanks here today said recent efforts by Beijing to have strong relationships with its two neighbours should not be viewed with “suspicion”.
Outlining China's foreign policy perspectives in the next five years under the 12th five year plan, the Members of Foreign Policy Advisory Group (FPAG) said that China is seeking to have close relations with both India and Pakistan.
“Indeed we see improvement of relationship between India and Pakistan and we know you (India-Pakistan) are taking measures to solve differences,” Ma Zhengang, who headed the Ambassador's group in FPAG, told a media briefing at the Chinese Foreign Ministry here.
He along with Qu Xing, President of state-run China Institute of International Studies, addressed the media here to outline China's policy perspectives in the next five years.

China really hopes to see Indo-Pak relations improve and “we are making our own efforts to promote mutual understanding between your two countries. If the bilateral (ties) between India and Pakistan can make breakthroughs it is a great pleasure for Chinese people too,” Ma said answering a question on how China sees its role in South Asia, specially in the context of its close ties with Pakistan.
“So I think for all our three countries, China, India and Pakistan, we should have new perspective concerning international situation and we should shake our Cold War mentality,” he said.
“ ...In China's relations with India and China relations with Pakistan, we should avoid Cold War ideology," he said, adding that while Beijing enjoyed traditional friendship with Pakistan, the Sino-India ties also moved forward.
While pursuing further development of friendship with Pakistan, China is also working actively to promote friendship between China and India, Ma said. “So to be frank Chinese people do not wish to see suspicion from India or Pakistan concerning China's relationship with other country."
He was apparently referring to apprehensions in India about “all-weather” China-Pak friendship and similar anxieties in Pakistan over China's efforts to normalise ties with India.
Qu said China had close ties with both India and Pakistan until the 1962 Sino-India war that affected the relationship between Beijing and New Delhi.
“Back in 1950s, China indeed had struck a balance in its relations with India and Pakistan. The relationship with china and India was solidly based. But later the balance broke because of the border war and other reasons,” he said.
“Starting from that China developed a very solidly based relationship with Pakistan. Therefore, during that time China indeed had a closer cooperation with Pakistan than India," he said. “However, after the improvement in relationship between China and India, “we sincerely hope that we can move this bilateral relationship forward to have better relationship. The best solution is that we should try to have such cooperation equal to that of China and Pakistan,” Qu said.

“China sincerely hopes we can see friendship and cooperation between India and Pakistan because China does not wish to (see) tension to the west of our country. The country which will gain from tension from India and Pakistan is not China. So that I do hope that you can believe that China is not targeting India,” Qu said.
Both said suspicions about China's efforts to forge close ties with several of India's neighbours, including Bangladesh, Sri Lanka and Maldives, with huge aid and infrastructure projects were wrong as it was only making efforts to improve relations with them.
They also referred to various efforts by India and China to resolve the border dispute.
Stating the border issue is more an “emotional” matter than a technical one, they said good relations will improve public sentiments to resolve the problem with mutual concessions and adjustments.
“If we can win the general public support it may not be that tough (to resolve boundary dispute). So I do hope that friends from India can believe that China is not seeing India as rival,” Qu said.


Aus may lift ban on exporting uranium to India: report
In a bid to strengthen bilateral ties, Australian government could review and lift the long standing ban on uranium export to India later this year, a media report said.
“Later this year, the (Julia) Gillard Government is likely to take two very big decisions affecting relations with the US and India. It will provide much greater access for US military forces to northern Australia. This could ultimately lead to US ships being based in Australia.
“And it will likely lift the ban on selling Australian uranium to India. Both decisions should be seen against the backdrop of China,” The Australian said.
Expert on foreign affairs Greg Sheridan in the article said: “I now believe senior ministers within the Gillard government will make a serious attempt to change this policy at Labor Party's national conference in December.”
A resolution could take one of two forms -- it could simply allow an exception for India, with appropriate safeguards or allow federal cabinet the authority to make an exception where it wants to, provided various safeguards were met.

“Earlier this year, Indian foreign minister S M Krishna met the Australian authorities including Resources Minister Martin Ferguson where the uranium talks were raised.”
Australia had maintained its stand on not selling uranium to India as it has a policy of exporting the radioactive element only to the signatories of NPT.
The report cited that all big nuclear nations were now offering nuclear trade with India and the US had signed a civil nuclear cooperation agreement with India and secured support for this from Nuclear suppliers group.
“This is not an issue about the security of uranium supply for India. Rather, it is a determination to make the leap to real strategic partnership with India.”
“New Delhi is too proud to make a public fuss about Australia's uranium policy, and the hypocrisy of our selling uranium to China while we refuse to do so for India. But the Australian position is a huge road block to a real strategic partnership,” the report said.
The expert said that it was of first order importance or Canberra as commercially India was Australia's next China.
“Indian investment is already making a big difference in our resources sector,” the report out. It further commented that even more importantly the US-India-Indonesia-Australia relationship was essential to Canberra's ability to manage successfully the growing power of China.
“The only way we can become of genuine strategic consequence to India is through fulfilling a historic role of providing energy security, and in particular uranium. Such a policy reform would mean a big fight for the Gillard government with the Greens and with the far Left of its own party,” the report added.



'50% of India's workforce self-employed'
More than half of the India's overall workforce is self-employed, even as female employees receive less remuneration than their male counterparts for doing similar jobs, as per the data of a government survey released today (NSSO survey).
While 51 per cent of the India's total workforce are self-employed, only around 15.6 per cent are 'regular wage/salaried' employees and 33.5 per cent are casual labours, the key indicators from a survey the National Sample Survey Office (NSSO) revealed.
Among workers in rural areas, about 54.2 are self-employed, while only 41.4 per cent of the workforce in urban areas are self-employed.
While only 7.3 per cent of workers in rural areas are regular wage earners, 41.4 per cent of workers in cities are getting regular salaries.
The findings of the NSSO also reveal that women workers, both in rural and urban areas, continue to receive less remunerations than their male counterparts.
In urban areas, the average wage is Rs 365 per day and it is Rs 232 in rural areas.
NSSO survey found that the average earning per day received by male workers is Rs 249 but it is only Rs 156 in case of female workers, indicating the female-male wage ratio at 0.63.
Similarly, in urban areas males earn Rs 377 as against Rs 309 by woman, indicating a ratio of 0.82.
The indicators are based on a central sample of 1,00,957 households of which 59,129 were from the rural areas and 41,828 from urban areas.
This was the 66th round of the survey by NSSO.
The samples, collected between July 2009-June 2010, were drawn from 7,402 villages and 5,252 urban blocks across the country, a statement by the Ministry of Statistics and Programme Implementation said.
The survey found that the per day wage rates for a casual labourer in works other than public works in rural areas is Rs 93. In urban areas, the comparative rate is Rs 122.
In rural areas, male casual labourers engaged in such activities receive an average of Rs 102 per day. However, for a female labourer the rate is only Rs 69.
On the other hand, in urban areas the wage rates for casual labourers engaged in work other than public works is Rs 132 for males and Rs 77 for females.
The difference between the wages for males and females is visible even in projects under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
In rural areas, daily wage rates for casual labourers in MGNREG public works is Rs 91 for males and Rs 87 for females.
In public works other than MGNREG, the wages are Rs 98 for males and Rs 86 for females.
The NSS key indicators say that in rural areas nearly 63 per cent of the male workers are engaged in agriculture. The percentage engaged in secondary and tertiary sectors stood at 19 per cent and 18 per cent, respectively.
The agriculture sector is more dependent on female workers. Nearly 79 per cent of the female workforce is engaged in agriculture while secondary and tertiary sectors shared 13 per cent and 8 per cent of female workers, respectively.
The survey also found that the industry-wise distribution of workers in the urban areas was distinctly different from that of rural areas.
In urban areas the share of the tertiary sector is more, followed by that of secondary sector while agricultural sector engaged only a small proportion of total workers for both male and females.
In urban areas, nearly 59 per cent of male workers and 53 per cent of the female workers are engaged in the tertiary sector.
The secondary sector employs nearly 35 per cent of the male and 33 per cent of female workers, while the share of urban workforce in agriculture is nearly 6 per cent of male and 14 per cent for female workers.
The Ministry of Statistics and Programme Implementation said the key indicators have been released, before the full survey is made public, for use in planning, policy formulation, decision support and as input for further statistical exercises by the government and its agencies.
The NSSO 66th covered the whole country except interior villages in Nagaland situated beyond five kilometres of a bus route, villages in Andaman and Nicobar Islands which remain inaccessible throughout the year and the Leh, Kargil and Poonch districts of Jammu and Kashmir.



China preferred over India in M&A action
Global companies are more active in acquiring entities in China than in India, as the China focused Mergers and Acquisitions(M&A) activity this year so far amounted to a whopping USD 84.3 billion, while India-targeted M&A volume was just USD 24 billion.
According to global deal tracking firm Dealogic, India inbound M&A volume surged to USD 24 billion in 2011 so far, while China targeted M&A volume reached USD 84.3 billion in the same period.
"India and China have been the most targeted nations by acquirers outside the region posting volume gains of 191 per cent and 76 per cent respectively year-on-year," Dealogic said.
The United Kingdom dominated the acquisition scene this year with USD 19.2 billion announced deals so far, surpassing the US for the first time since 2007 (in the comparable period).
BP's USD 9 billion acquisition of Reliance Industries' oil & gas assets, was the deal that pushed the United Kingdom to this coveted position.
BP's USD 9 billion bid for 23 oil and gas blocks from Reliance Industries in February still stands as the largest inbound M&A in India so far this year and is also India's second biggest inbound cross-border deal on record.
The UK is the top acquirer into India with USD 15 billion much more than the value seen in the comparable period last year (USD 157 million) and accounts for 62.6 per cent of India inbound M&A volume in 2011 so far.
China targeted M&A volume, which stood at USD 84.3 billion in this year so far, witnessed 13 per cent surge from the USD 74.6 billion announced in the same period last year.
In terms of number of deals also there were 1,808 transactions this year so far, up 4 per cent from 1,733 deals announced in the same period last year.
Other leading acquirer nations into India this year so far were the United States (18 per cent), Germany (6 per cent), Japan (4 per cent), Denmark (3 per cent), the report said.
Though year-on-year there has been an increase in inbound M&A volume, on a quarter on quarter basis there has been a significant decline.
“India inflow M&A volume totalled to USD 3.9 billion in the second quarter of this year, down a whopping 81 per cent from the record quarterly volume of USD 20.1 billion achieved in the first quarter of 2011”, Dealogic said.

june 25 (aa)

SOUTH KOREA TO PERMIT FIRST STEM CELL DRUG
South Korea’s drug safety agency will likely approve a stem cell therapeutic drug in July in what could be the world’s first move to permit the sale of a stem cell medicine, officials said on Friday.
The Korea Food and Drug Administration is expected to finalise all procedures needed to permit the sale of “Hearticellgram-AMI,” a stem cell therapy for acute myocardial infarction, on July 1, according to the KFDA officials. The drug has passed all three procedures, including safety and validity tests, needed for its approval. The other remaining steps will likely be completed soon, the officials said.

GOOGLE MAYE FACE ANTI TRUST PROBE
As of Thursday afternoon, commission formalities remained before the investigation is officially started, but two people with knowledge of the matter said a final decision to issue the subpoenas was imminent in a matter of days For months, Federal Trade Commission lawyers gathered information about Google's search and advertising business
The Federal Trade Commission is preparing to issue subpoenas to Google as part of a wide-ranging civil antitrust investigation into practices in Google’s search engine business, according to two people with knowledge of the matter.
For several months, lawyers at the commission have gathered information about Google’s search and advertising business and whether the way it orders search results and related advertising constitutes illegal anticompetitive behaviour.
This month, commissioners privately debated whether to authorise its Bureau of Competition to issue subpoenas to Google and are close to moving forward. As of Thursday afternoon, commission formalities remained before the investigation is officially started, but two people with knowledge of the matter said a final decision to issue the subpoenas was imminent in a matter of days.
They agreed to speak only on the condition of anonymity because the action was not yet final and because it could be postponed if the commission required additional information. The commission’s action was first reported online by The Wall Street Journal on Thursday.
Spokesmen for Google and the Federal Trade Commission declined to comment.
Google has been the subject of repeated antitrust inquiries in recent years, most of them involving proposed acquisitions. In the United States, the Federal Trade Commission and the justice department have con
ducted reviews of Google's acquisitions of the Internet advertising companies DoubleClick and AdMob.
More recently, the justice department reviewed Google's purchase of ITA Software, a travel services company. In that case, the government cleared the merger only after Google agreed to conditions and continuing government monitoring. Just this month, the justice department began an investigation into Google's $400 million acquisition of Admeld, which provides advertising services to publishers.
In 2008, the justice department also blocked a proposed advertising pact between Google and Yahoo because of concerns about its effect on competition.
Last year, it also opposed a sweeping court settlement between Google and publishers and authors, in part because the agreement would have given Google too much power over the market for digital books.
But unlike those cases, which affected only small portions of Google's business, the current investigation focuses on Google's main business: Internet search and advertising. If it leads to charges against the company, its impact could be more far reaching, according to antitrust experts.
“This is the main act,“ said Ted Henneberry, a former trial lawyer at the Justice Department and partner at Orrick Herrington and Sutcliffe.
If Google is found to have abused its dominant position in Internet search and advertising, the FTC would not levy fines. But it has the authority to issue cease-anddesist orders for violations of the trade commission act, and it can also file a lawsuit seeking a preliminary injunction against certain behaviors.
The justice department and the FTC.
share jurisdiction over antitrust issues. But as a matter of practice they alternate as to which agency takes the lead in an investigation.
Critics of Google have been pushing for a broad antitrust investigation into the company’s search business, where it controls about two-thirds of the market in the United States. In the past, company executives have said that the increased scrutiny from regulators is a
normal byproduct of its success. Addressing its search results specifically, company officials say that its ranking decisions are made to benefit users and that, as with any ranking system, some parties will be unhappy with their placing.
The company's market share has remained steady in recent years. According to the research firm comScore, Google controlled 65.5 percent of the market in May; Yahoo had 16 per cent and Bing had 14 per cent.
Last year, the European Commission opened its own antitrust investigation into Google’s search business, after complaints from smaller companies, which claimed that Google downgraded their sites in its search results while giving favor to its own Web services. That investigation is pending.
By making a site more or less likely to rise to the top of its search results, Google theoretically could affect how much traffic a Web site got and therefore how much it could charge for advertising. If another company’s Web site for, say, a travel service, competes with an ancillary business of Google’s, manipulation of search results could be considered anticompetitive.
Google’s main searchadvertising business accounts for most of the
company's revenue, which totaled $29.3 billion last year. FairSearch.org, an organization that represents several of Google's critics including the Web sites Expedia, Travelocity, Kayak and Microsoft, said it was encouraged by reports of the FTC inquiry.
“Google engages in anticompetitive behavior across many vertical categories of search that harms consumers,“ the organisation said in a statement. “The result of Google's anticompetitive practices is to curb innovation and investment in new technologies by other companies.“
According to comScore, Google in May became the first company to have one billion unique visitors to its site in one month, a rate that was up 8 per cent over a year earlier. Google's share price is down 19 per cent since the beginning of the year.
By arrangement with the New York Times


MCX TO SEEK DAMAGES FROM NSE
A day after the competition watchdog held National Stock Exchange (NSE) guilty of abusing its dominant market position, MCX Stock Exchange said it would claim compensation for the losses and damages that it has incurred due to predatory pricing by the NSE.
The CCI on Friday pronounced NSE guilty of abusing its dominant market position and asked the bourse to pay a penalty of `55.5 crore within 30 days and also immediately stop subsidising its services.
This amount represents five per cent of the exchange's three-year average turnover. It said there was “a clear intention on the part of NSE to eliminate competitors in the relevant market.“
The order was passed on a complaint filed by NSE's younger bugbear and rival MCX-SX, which had accused NSE of abusing its dominant market position to corner business in CD segment.
NSE entered currency derivatives in August 2008, followed by MCX-SX in October 2008.
No immediate comments were available from NSE officials but they are expected to appeal against the order.
The CCI in its order also asked NSE to maintain separate accounts for each segment with effect from April 1, 2012, and modify its zero price policy in the CD market and levy appropriate transaction costs in 60 days.
Reacting to the CCI order, the MCX-SX managing director and CEO, Mr Joseph Massey, said, “It would safeguard new entrants and ensure innovators are not decimated by existing entities which have deep pockets and more powerful.“


SINGAPORE INDIA SIGN TAX PACT
India and Singapore on Friday amended their Double Taxation Avoidance Agreement (DTAA), a move that will help both the countries exchange banking and tax related information more effectively.
A Protocol amending the DTAA was singed here.
“This amended protocol will go a long way in strengthening relationship between India and Singapore and facilitate mutual co-operation by effective exchange of information in tax matters between two countries,” the Central Board of Direct Taxes (CBDT) said.
The two nations have adopted internationally agreed standard for exchange of information in tax matters.
This includes the principles incorporated in the OECD Model Article and requires exchange of information in all tax matters without regard to a domestic tax interest requirement or bank secrecy for tax purposes.


INDO PAK TRY TO FIX TRUST DEFICIT
THE TWO-DAY dialogue of the foreign secretaries of India and Pakistan, which ended in Islamabad on Friday, maintains the steady state which was sought to be brought into being by Prime Minister Manmohan Singh's Thimphu initiative about a year ago.
The specific mandate provided by the Prime Minister was to reduce and eliminate the “trust deficit“ that has marked relations between the two countries. This objective appears to have been amply met at the foreign secretaries' dialogue, given the tenor of the talks. India on this occasion agreed to a Kashmir-specific dialogue session, a development that would have pleased the Pakistan side enormously, and may be seen to be the principal reason that Pakistan has had no difficulty characterising the just-ended conversation as “cordial“, if “candid“. These expressions, agreed to by both sides to describe the engagement, suggest that both covered the thorny ground in detail at the official level but preferred not to let acrimony mar the occasion. Over the years India has never shied away from discussing the `K' word with Pakistan, but it has preferred to bring to the table the question of terrorism along with it as violent extremist actions have been at the centre of destroying peace in Kashmir and jolting India-Pakistan ties.
Abandoning this route did not throw up new ideas. The two senior officials indicated this when they told the media that the engagement on the Kashmir question was to continue. At this stage, it cannot be said that the Pervez Musharraf-era formula of finding a solution without disturbing the territorial status quo would remain on the table. Dr Singh had famously said then that the idea was to make borders “irrelevant“. However, the so-called Musharraf formula has not found favour with the present Pakistan government, and Pakistan Prime Minister Yousaf Raza Gilani has said so recently. Nevertheless, the two foreign secretaries agreed to step up the pace on cross-LoC confidence-building measures.
The working group designated for this will convene shortly, before the meeting of the two foreign ministers in New Delhi next month. For now this means a less tight visa regime, opening up more trade points and days of trade between Kashmiri traders on the two sides of the divide, and possibly looking at bank facilities to eliminate barter, which is currently the mode of trade across the two Kashmirs. These are undoubtedly a positive outcome of the talks and should help provide relief to the people of Kashmir who are, in effect, divided by a historically violent boundary (the Line of Control).
Besides giving Pakistan greater room on Kashmir through exclusive focus on it, the Indian side clearly did not seize upon the recent David Headley disclosures at the Tahawwur Rana trial in Chicago to make its case more acutely in the matter of the punishment of those guilty of the 26/11 Mumbai attacks. Of course, at the joint press conference of foreign secretary Nirupama Rao and her Pakistani counterpart Salman Bashir, the senior Indian official did not fail to point out that 26/11 was “of critical importance to us“. She noted that bringing the issue to a “satisfactory closure“ would help the process of “normalisation“ of relations, but gone was the earlier public insistence on trial and punishment of the guilty without delay. Mr Bashir, for his part, observed that while Pakistan noted India's concerns, it preferred to treat the issue in a more “generic“ sense -as an instance of terrorism which, of course, needed to be eliminated. Speaking at the joint press conference, he had little hesitation clubbing the Mumbai outrage with other high-profile incidents of terrorism. When the current IndiaPakistan “process“ moves to the level of foreign ministers in July, the spirit of the present is likely to be sustained.

SRINAGAR DAM QUESTIONS OVER EGOM CLEARANCE
In a scathing ndictment on the ministry of environment and forests (MoEF), historian Prof.
Nayanjot Lahiri questioned how the Srinagar Hydroelectric Project, that was cleared for generating 200 MW power in 1985, be granted environmental clearance for an enhanced 330 MW in September 27 1999.
The ministry had commit ed a grave irregularity, especially keeping in mind hat the Uttarakhand high court had stayed construc ion work beyond 200 MW.
In a dissenting report to EAC vice-chairman B.P.
Das and MoEF member secretary Sanchita Jindal, who visited the project site on June 6-7, 2011, Prof.
Lahiri insisted that this decision be reviewed and an opinion be sought from the ministry of law.
“Evidently, there is some hing errors since the min stry could not have transferred the environmental clearance for this project at 330 MW since the environmental clearance in 1985 was for a project of only 200 MW,“ she noted.
On the sensitive issue of the relocation of the Dhari Devi temple, she maintained that the local people and the temple samiti members were not opposed to the elevation of the temple above its present location but the existing plan prepared by TCE Consulting Engineers Ltd did not do justice either to the character of the shrine or to its location. “They were opposed to an elevation being done on a series of RCC columns,“ she said.
Prof. Lahiri, in turn, had proposed that a new plan should be prepared by a conservation architect in collaboration with the INTACH.
While IIT-Roorkee had prepared a detailed plan for muck disposal, Alaknanda Hydro-power Company Ltd (AHPCL) had not followed the procedures laid out by IIT-Roorkee. `The ministry could not have transferred environmental clearance for this project at 330 MW since the clearance in 1985 was for a project of only 200 MW'


INDIA US AIRCRAFT DEAL
India has finally June 15: India has finally inked the biggest-ever defence deal with the United States so far at $4.1 billion for acquisition of 10 Boeing C-17 Globemaster III advanced airlifter aircraft for the Indian Air Force, the MoD said on Wednesday. The deal was inked after it was approved earlier this month by the CCS.
Boeing stated that India will take delivery of its 10 C-17s in 2013 and 2014.
“The C-17 will elevate India’s leadership in the region. With its tactical and strategic capabilities, the C17 fulfils India’s needs for military and humanitarian airlift. The important transaction reaffirms our close relationship of several decades with India and also highlights our commitment to the strategic partnership between the two countries,” said Dinesh Keskar, president, Boeing India.


US HOUSE PANEL SETS LIMIT ON PAK AID
A key US Congressional committee has approved conditional aid of $1.1 billion to Pakistan, withholding 75 per cent of the fund till the Obama administration reports to Congress on how it would spend it
A key US Congressional committee has approved conditional aid of $1.1 billion to Pakistan, withholding 75 per cent of the fund till the Obama administration reports to Congress on how it would spend it.
The approval of the conditional aid to Pakistan for its counter-insurgency operations under the defence spending bill reflects the US Congress’ frustration with
Islamabad's efforts in the war against terror. This is the first major approval of Pakistan-related funding by the Congress after the killing of Osama Bin Laden. The move reflects the changing mood of US legislators towards Pakistan as an increasing number of influential Congressmen are questioning the decision of the Obama administration to give billions in aid to Pakistan as terrorists continue to operate in the country. The Defence Appropriations Bill passed by the House Appropriations Committee said that the Congress will withhold 75 per cent of Pakistan Counter-insurgency Capability Funds until the secretary of defence provides a report to Congress on a strategy and metrics for the use of these funds, said a statement issued by the House Appropriations Committee.


UK MPs WANT INDIA AID TO STOP AFTER 2015
Britain's department for international development, which has stopped aid to China and Russia, has decided to freeze the aid programme to India at £280 million per year till 2015
British MPs have recommended that the ToryLibDem government must fundamentally change aid relationship with India after 2015. The UK government is facing domestic pressure to slash foreign aid in view of spending cuts to stem budget deficit. Prime Minister David Cameron has promised to spend 0.7 per cent of the UK’s gross national income on foreign aid and India, increasingly considered an emerging economy, is the biggest single recipient of the aid.
Britain’s department for international development, which has stopped aid to China and Russia, has decided to freeze the aid programme to India at £280 million per year till 2015.
“Assuming the progress
we expect to see, DFID should continue to provide technical assistance where needed and requested, but the funding mechanism should change (post-2015),“ House of Commons select committee on international development said in its analysis of whether DFID should continue to provide aid to India.
In India, over 400 million people still live on less than 80 pence per day and the average per capita income is still only one-twentieth of that in the UK, the committee said. “Poverty levels remain high in some parts of India and these are states where UK funding is targeted,” committee chair Malcolm Bruce, a LibDem MP, said.
“DFID must now begin to consider how the post 2015 relationship will look and report on its plans in the next 12 months. We will continue to monitor progress in India and intend to ensure that any decisions are reviewed before the end of this Parliament,” the committee said.
“Our funding is small in relation to the Indian economy. DFID rightly focuses on demonstration projects which can be replicated and scaled up,” Mr Bruce said, adding the UK’s direct contribution is only 0.03 per cent of GDP.


INDIA AMONG TOP 5 NATIONS DANGEROUS FOR WOMEN

India has the dubi ous distinction of making it to the top five list of the world’s most dangerous countries for women. India has been cited for trafficking and sexual slavery.
Afghanistan is the world’s most dangerous country for women, followed by Congo
and Pakistan, India and Somalia are ranked third, fourth and fifth, respectively, in a global survey of gender experts by Thomson Reuters Foundation to mark the launch of its new TrustLaw Women section, a global hub of news and information on women's legal rights.
More than 200 gender experts from five continents ranked countries by overall perceptions of danger as well as by six risks -health threats, sexual violence, non-sexual violence, cultural or religious factors, lack of access to resources and trafficking. India ranked fourth on the list primarily due to female foeticide, infanticide and human trafficking, the survey revealed.
Of main concern was large-scale trafficking of women and girls. “The practice is common but lucrative so it goes untouched by the government and police,“ said Cristi Hegranes, founder of the Global Press institute, which trains women to be journalists.
The report quoted CBI's 2009 estimate that about 90 per cent of trafficking took place within India and that there were some three million prostitutes, of which about 40 per cent were children. In addition to sex slavery, other forms of trafficking include forced labour and forced marriage, the survey quoted US state department report on trafficking in 2010.

ECONOMY BUSINESS 13,30,16

Vital need for power capacity addition
The CEA has projected that the country will have an energy shortage of 10.3 % and a peak demand shortage of 12.9 %

CHRONIC SHORTAGE:Cooling towers of a super thermal power plant.
The saga of energy shortage will continue for one more year. This is the broad picture that the Central Electricity Authority (CEA)'s annual report on the country's power supply position gives.
In the financial year that just went by, all regions suffered shortage, both in terms of energy and peak demand. The western and northern regions were the worst hit, as they recorded energy shortages of 13.3 per cent and 8 per cent respectivelY.
For the current year, the CEA has projected that the country will have an energy shortage of 10.3 per cent and a peak demand shortage of 12.9 per cent. While the highest energy shortage of 11 per cent will be in the western region, the maximum peak demand deficit, 14.5 per cent, will be felt by the southern region.
According to the CEA, the hydel-rich States having run of river schemes on the Himalayan rivers — Himachal Pradesh, Jammu and Kashmir, and Uttarakhand — will be surplus in energy during south west monsoon (June-September) but they will face severe shortages during the winter low-inflow months when the generation from hydro schemes will dwindle to the minimum. Delhi, Dadra & Nagar Haveli and Sikkim would have both peaking and energy surplus on an annual basis. Though Himachal Pradesh will witness peak demand deficit from November 2011 to March 2012, the State's overall position in meeting the peak demand for the year is expected to be surplus with 7.1 per cent.
In the south, Karnataka and Puducherry will be energy surplus with 4.7 per cent and 4.8 per cent respectively. Other energy-surplus States will be Chhattisgarh, Mizoram and Tripura whereas Orissa will be in a comfortable position in peak demand.
All other States and Union Territories will have electricity shortages of varying degrees both in terms of energy and peak demand. Twenty-five of them will have energy deficit, of which four — Jammu and Kashmir, Uttar Pradesh, Uttarakhand and Daman and Diu — will fall under the category of energy deficit of over 20 per cent; nine under the category of 10-20 per cent and six each in the groups of 5-10 per cent and less than 5 per cent.


Deviations highlighted
One may ponder over the accuracy of the CEA's projections. To be fair to the Authority, the annual report clearly indicates the areas of deviation with regard to the projections for the previous year.
Although the Authority's forecast for the entire country saw only a minor deviation, its projections for some States, particularly those in the South, were well off the mark.
Compared to the anticipated figures, the actual energy availability and peak demand met in the South were higher by 8.9 per cent and 9.4 per cent respectively whereas the actual energy requirement and peak demand were lower by 1.3 per cent and 2.8 per cent. Similarly, the actual energy shortage in the region was 5.2 per cent against the forecast of 14.1 per cent.
The actual energy shortage in Andhra Pradesh was 3.2 per cent (anticipated shortage: 11.6 per cent); Karnataka 7.6 per cent (13.3 per cent); Kerala 1.4 per cent (10.1 per cent); Tamil Nadu 6.5 per cent (18.4 per cent) and Puducherry 4 per cent (5.7 per cent).
The actual peak demand and energy shortage was less than the anticipated due to higher load factor, demand-side management, lower requirement and higher availability of energy.
One more reason was that most of the southern States went on in an aggressive way to purchase power on a temporary and daily basis. As a result, what was sold at Rs. 8 or Rs. 9 per unit in the early part of 2010-11 got almost doubled in the later part of the year. At one stage, the Tamil Nadu Generation and Distribution Corporation bought power daily at an overall cost of Rs. 50 crore. Still, the authorities had resorted to load shedding of 1,500 MW daily.
What policy makers and administrators have to realise is that fundamental and chronic problems cannot be overcome through short-term measures. Additional capacity has to be created in a sustained and rapid manner. There is no short-cut to this option.
During 2010-11, about 12,161 MW only could be added against the target of around 21,440 MW. This year, it has been planned to add nearly 17,200 MW. It appears that the country will not even meet the revised target of about 62,300 MW. When the XII Plan ends, the achievement could be around 50,000 MW. All these only reinforce the need for focussed attention on capacity addition.
T. RAMAKRISHNAN



Close watch on RBI move over recent economic data
Markets are keenly watching how the Reserve Bank of India (RBI) will react to the key economic data that will be released during this week, when it will review the first mid-quarter of this financial year on June 16. The key data are: Wholesale Price Index (WPI) inflation for May to be released on Tuesday, advance tax numbers on Wednesday and monetary policy review meeting on Thursday.
The equity markets ended in the red for the third straight trading session on Friday last, with the NSE Nifty closing below the crucial 5500-mark. The Index of Industrial Production (IIP) growth for April was 6.3 per cent compared to 13.1 per cent in April 2010 as per the new series. Manufacturing growth (year-on-year) stood at 6.9 per cent (14.4 per cent) and mining growth at 2.2 per cent (9.2 per cent).
The base year of IIP has been revised from 1993-94 to 2004-05 by the Ministry of Statistics and Programme Implementation.
The two series have different item baskets and different weightages.
Inflation major concern
Inflation is the major concern for the RBI and in the recent policy announcement, the central bank made clear that even at the cost of a growth rate it had to control inflation and inflationary pressures.
The primary articles group in WPI witnessed a higher inflationary level at 11.52 per cent for the week ended May 28 against 10.87 per cent in the previous week.
Food articles rose to 9.01 per cent from 8.06 per cent.
Meanwhile, Finance Minister Pranab Mukherjee termed the industrial production figures as ‘disturbing', while adding that one should wait for longer term IIP growth to see the underlying trend.
The markets believe that a further interest rate hike (even by a 25 basis points) is imminent, which will have a negative impact on the market sentiment as they will consider the hike as a signal to slowdown in growth.
“The current macro condition of Indian economy is not the most desirable from a growth point of view. The growth is slowing down even as inflation remains well entrenched. This could lead to stagflation,” said Sanjeev Zarbade, Vice-President (Private Client Group Research), Kotak Securities.
Crude oil rose further last week, thus aiding inflationary pressures and at the same time squeezing government finances.
“We believe Indian equities would continue to remain range-bound and may even weaken further given the ongoing euro-debt crisis, fresh worries on U.S. economic growth and domestic economic risks,” he added.
Liquidity system
The liquidity system tightened over the week: average RBI infusion through the repo window was Rs.75,000 crore last week (June 6 to 10), higher than Rs.43,000 crore in the previous week (May 30 to June 3).
In the T-Bill auction held on June 8, the cut-off yield in the 91-day T-Bill auction was marginally higher (8.23 per cent) than the yield (8.19 per cent) in previous week auction (June 1). T
he cut-off yield in the 182-day T-Bill auction also was 8.23 per cent, marginally lower than 8.27 per cent in the auction held on May 25.
It is expected that the RBI will keep the rate hike cycle on and hike the repo rate (and consequently the reverse repo rate as well) by 25 basis points.
However, there is a view emerging in some quarters of the market that the RBI may pause this time, in view of some degree of softening in the global growth rate and the fact that the rate hike was 50 basis points (instead of 25 basis points) on May 3, according to BNP Paribas Wealth Management.
The mild softening in money market yields last week, in spite of tight banking system liquidity, is partially due to this view.
The softening of one-year overnight indexed swap (OIS) reflects the moderation in market expectation on rate hikes going forward.
Taking into account the limited progress on the policy front, Citi India Economist Rohini Malkani said the IIP numbers were likely to remain lacklustre till August.
“We maintain our view that 2011-12 will likely be a year of two halves: with first half GDP in the 7.57-8 per cent (year-on-year) range; and an up-tick in the second half GDP likely to be dependent on a recovery in investments which saw growth decelerating to 0.4 per cent in the fourth quarter of 2010-11.”
The soft fourth quarter GDP data for 2010-11 and other sectoral trends have once again brought debate on a possible pause by the RBI.
Probably, the central bank is in its last quartile of tightening and a further 50-75-basis point hike in policy rates is expected with a likely 25-basis point hike in its policy review meeting on June 16, according to Rohini Malkani.
Given the trend in the overall IIP growth numbers as per the new series and the prevailing inflationary pressures, “we expect the RBI to continue with its rate tightening regime, that is, increasing the repo rate by another 25 basis points in the upcoming monetary policy review,'' said Arun Singh, Senior Economist, D&B India.
Going forward, said Mr. Singh, this would lead to a subdued growth in the consumption and investment demand in the near-term. A slowdown in growth and a rise in food inflation will influence the RBI's plans for a rate hike.
Food inflation
Food inflation is showing signs of inching up adding to the core inflation pressures. Further, another hike in fuel prices is also imminent.
However, the silver lining is that the current expectation on monsoon is closer to 98 per cent normal.
Though the policy tightening since March 2010 would show its impact in the next few quarters, the RBI's focus will remain on controlling inflation while keeping a close watch on growth numbers.
OOMMEN A. NINAN



FHC model: safeguard against systemic failures
The RBI has sought to be the sole regulator of Financial Holding Company
The fall of unfathomable financial institution Lehman Brothers in August 2007 as a prelude to deep financial crisis that gripped the world in the last few years was a wake-up call for central banks. In August 2007, the Reserve Bank of India (RBI) came out with a discussion paper on holding companies in the banking group, where the central bank suggested to have financial holding company or a banking holding company to protect banks against possible adverse effects from the activities of their non-banking financial subsidiaries.
In the meantime, some enthusiastic banking groups, especially the private sector ones, had made their first moves to create ‘intermediate holding companies' by creating layers within their corporate structure, which would have made the central bank's job more difficult in monitoring them. While these discussions were almost concluded without making any headway, the RBI had set up another working group under the chairmanship of Deputy Governor Shyamala Gopinath in June 2010 to examine the feasibility of introducing a Financial Holding Company (FHC) structure.
The issue of the nature of corporate form adopted by financial groups for undertaking various financial activities has acquired relevance from two distinct perspectives — one, efficient corporate management within the groups addressing the growth and capital requirements of different entities, and two, the degree of regulatory comfort with different models, particularly in regard to the concerns relating to contagion risks.
Banks, at present, in India are organised under the Bank-Subsidiary Model (BSM) in which the bank is the parent of all the subsidiaries of the group. The working group was mandated to examine the need and feasibility of introducing a FHC model in the Indian context, including by drawing lessons from the global financial crisis.
The formation of FHCs should be seen in the background of the global financial crisis. The RBI says: “The recent global financial crisis can be said to be model agnostic as far as the form of conglomeration is concerned. ....... The post crisis reform proposals do not specify preference for any particular model. The focus, as far as structure is concerned, is on strengthening capital requirements at the consolidated level; reducing complexity of structures to enable efficient resolution of financial institutions; and separation of investment banking from commercial banking”.
From a regulatory perspective, one of the key risks posed by the BSM is that the parent bank is directly exposed to the functioning of various subsidiaries and any losses incurred by the subsidiaries inevitably impact the bank balance sheet. It therefore becomes imperative that the bank regulator has an interest in the health of all subsidiaries under the banks, even as each subsidiary is under the jurisdiction of the respective sectoral regulators.
The most obvious risk from affiliation of banks with non-banks is the risk of transference to non-bank affiliates of a subsidy implicit for banks in the safety net, deposit insurance, access to central bank liquidity and access to payment systems, with the attendant moral hazard. This subsidy is more readily transferred to a subsidiary of a bank and can, to a certain extent be reduced through the holding company structure. The other risk posed by this model is the difficulty in resolution if the bank, or any of its subsidiaries, is in trouble.
The working group felt that a holding company structure may enable a better supervision of financial groups from a systemic perspective. It would also be in consonance with the emerging post-crisis consensus of having an identified systemic regulator responsible inter alia for oversight of systemically important financial institutions (SIFIs). “A holding company model would provide the requisite differentiation in regulatory approach for the holding company vis-à-vis the individual entities.”
Suitable model?
On balance, a holding company model may be more suited in the Indian context. It, however, was conscious of the fact that regardless of the organisational forms, banks cannot be totally insulated from the risks of non-banking activities undertaken by their affiliates. It also recognised that there are divergent ownership and governance norms for various sectors and also entities within the sectors. The divergences primarily reflect regulatory and public policy objectives. There are also legacy issues concerning the existing conglomerates. “Any framework to harmonise them at the level of the FHC would be a challenge and therefore the FHC as a preferred model will need to be phased in gradually”.
While emphasising the view that the FHC model should be a preferred model for all financial groups, irrespective of whether they contain a bank or not, the working group said the ‘intermediate holding companies' within the FHC should not be permitted “due to their contribution to the opacity and complexity in the organisational structure”.
In the post-crisis analysis, the financial groups without banks could also be of systemic importance particularly if they are large and undertake maturity and liquidity transformation. This would be particularly relevant in the case of large conglomerates coming under the existing financial conglomerate supervision framework. So it was recommended that there can be Banking FHCs controlling a bank and Non-banking FHCs which do not contain a bank in the group.
Paving the way for a holding company structure for financial entities, the RBI has introduced two important caveats — the apex bank has sought to be the sole regulator of FHCs, irrespective of a bank's presence in the holding company or not and it has also sought a separate regulatory framework with a new Act.
The working group considered various possible options in this regard and concluded that a separate regulatory framework for FHCs, overarching the existing functional regulation for various segments, would be the most desirable alternative.
Firewall provisions
While firewall provisions can be important safeguards in preventing potential conflicts of interest and protecting insured deposits, in reality, the firewalls may not hold up, the working group felt.
Such a framework would also ensure that there is no ‘product arbitrage' across different functional regulatory regimes. However, the working group was very clear that the role of the financial holding company regulator would be supplementary to the role of existing functional regulators.
As regards the legal framework for separate regulation of FHCs, it has recommended that the enactment of a separate Act for regulation would be the most efficient alternative. It will avoid any legal uncertainties that could be there if FHCs were to be governed by amending the RBI Act or Banking Regulation Act. It will align the regulation of FHCs with the objectives of systemic oversight and it will enable design of a regulatory framework for FHCs different in scope and focus from entity regulation.
Further, the RBI has recommended that the amendments should also be simultaneously made to other statutes/Acts governing public sector banks, Companies Act and others, wherever necessary. Alternatively, in order to avoid separate legislation for amending all individual Acts, the provisions of the new Act for FHCs should have the effect of amending all the relevant provisions of individual Acts and have over-riding powers over other Acts in case of any conflict.
While strengthening the sense of responsibility in ownership, the RBI's efforts are in the right direction to avoid a systemic failure in the financial system in future, thus protecting the interest of all stakeholders.
OOMMEN A. NINAN

SAIL game plan to become a global player

SAIL Chairman Chandra Shekhar Verma (centre) viewing the modernisation plan model for the Durgapur Steel Plant.
Steel Authority of India Ltd. (SAIL) hopes to emerge as a global company in the next few years, Chairman Chandra Shekhar Verma said. Even as the company races to complete its Rs.72,000-crore modernisation plan, it has put in place a perspective plan to increase the capacity to 60 million tonnes by 2020 from the present 14 million tonnes. “Our target is to take the company from being a domestic player to a global brand,'' Mr. Verma told this correspondent.
Global ambitions
Mr. Verma said the stakeholders of the company would see the emergence of a global SAIL in the months to come. To realise this game plan, the company was working on multiple fronts at the international level by adopting the inorganic route and going in for strategic tie-ups aimed at backward, forward and lateral integration. The strategy hinged on ensuring domestic and overseas raw material security through the acquisition route while marking a footprint overseas through greenfield units in mineral-rich countries. On the scanner are countries like Mongolia and Indonesia for units and Australia for acquisition of properties. At least one deal for coking coal was likely within this fiscal, he said.
In times where securing raw material supplies are central to existence, tie-ups with rival domestic companies are no longer a taboo and Mr. Verma said discussions had been held with Tata Steel, JSW, JSPL, RINL and Bhushan Steel and others for the Hajigak mines in Afghanistan where SAIL had already bid.
SAIL secures iron ore from its captive sources and the recent environmental clearance given by the government for mining in the Chiria mines in Jharkhand had also strengthened its position, Mr. Verma said. In Chiria, SAIL had sought forestry clearance for about 25 per cent (595 hectares) of the total leasehold area to start mining operations, for which stage-I forestry clearance had been provided. Environment clearance for Budhaburu, the biggest lease of Chiria (824 hectares), had also been granted.
Development activities for setting up a 14 million tonnes per annum (run-of mine) mechanised mine were under progress at Rowghat to meet the Bhilai Steel Plant's long-term iron ore requirement. Only 30 per cent of the coking coal requirement was met from indigenous sources he said. To reduce dependence on increasingly costlier imported coal, SAIL had laid a thrust on developing the coal-blocks allocated to it by the government besides expanding production from captive collieries.
The ongoing phase of modernisation to increase the capacity from 13.82 million tonnes to 23.50 million tonnes with an investment of about Rs. 72,000-crore, including modernisation and expansion of iron ore mining capacity, would be completed by 2012-13. A milestone-based monitoring system was being put into place, Mr. Verma said. Referring to the 2020 plan, Mr. Verma said that dovetailing with the government's plans to increase the domestic steel production capacity to 180 million tonnes by 2020, SAIL too was putting a perspective plan in place to raise the production capacity to 60 million tonnes by 2020.
“Our target is to take the company from being a domestic player to a global brand. SAIL also plans to increase its share in the domestic market from the present 19-20 per cent to one-third of the market for steel.''
On SAIL's strategy for staying ahead at a time when its competitors too are racing ahead with their expansion plans, Mr. Verma said the company's people-focus had led to highest-ever labour productivity of 241 tonnes a man. SAIL also planned to increase the share of value-added products in its product basket, from the present 38 per cent to around 50 per cent.
Mr. Verma said SAIL had tied up with top steelmakers such as Nippon Steel, POSCO and Kobe Steel for joint ventures. SAIL was working with Kobe Steel of Japan to install a 1.5 million tonnes steel plant based on gas-based DRI technology and using electric arc furnace for steel-making with value-added products at Jagdishpur in Uttar Pradesh. The feasibility of setting up a 1,000-MW gas-based power plant was also being examined.
“SAIL is in talks with different governments like Mongolia and Indonesia for setting up steel projects. We are aggressively pursuing equity participation with existing leading coal mining companies. Due diligence of some coal assets is in progress and we hope to finalise these shortly. At present, I would not like to comment on any proposed tie-up with Arcelor.''
INDRANI DUTTA



Occasional sparks rekindle hopes of Indian steel firms
The steel industry, which suffered a blow during market meltdown is recovering steadily with occasional sparks rekindling the hope of steel-makers.
Steel production and consumption are one of the major indices of economic growth and development but production and consumption depends on the extent to which market supports such drive. Before meltdown, the steel market was upbeat for long during 2003-08, a good luck period for a steel-maker. The period was marked by a quantum jump in output of crude steel across the world from 970 million tonnes in 2003 to 1,329 million tonnes in 2008 accounting for 37 per cent increase.
Global steel market
Taking advantage of the feel-good factor in the steel sector, many new companies mushroomed with steel making facilities in greenfield as well as brownfield expansion. It suffered a jolt due to the turmoil in the global economy and since then the steel market is witnessing a sluggish growth. Worldwide steel production and consumption started the upward swing from 2009.
During 2010, global steel market remained sluggish due to higher growth of around 15 per cent in production of crude steel, de-stocking and buyers adopting ‘wait and watch' approach. In the current year, crude steel production is likely to grow by 5 per cent as against 15 per cent in the previous year.
This rate may also get affected due to slackening of appetite for growth in China and Japanese mills suffering on account of tsunami and its after-effect.
In the international steel market, it will not be a question of excess availability of finished steel, as in last year rather it will be an issue of consumption.
Given the forecast of rate of consumption being around 5 per cent, international market, except for seasonal drop, will look up during this year. On the world market, Chairman-cum-Managing Director of Rashtriya Ispat Nigam Limited (RINL) P. K. Bishnoi, when contacted said: “China, India, Brazil and South Korea will continue to drive global growth in steel. With Western countries registering positive consumption and growth, the steel market is bound to come out of sluggishness”.
Good sign
The good sign is that the domestic market during 2010-11 was quite subdued but the domestic prices of steel have been ruling more than the international prices.
During the last fiscal, steel market in India started moving up only from December 2010.
An interesting feature from the behaviour of steel market was the response to international scrap price instead of coking coal. Coking coal price on an average rose by $89 a tonne in 2010-11. There was no upward movement in the market but when scrap prices in December 2010 rose by $50 from $425 to $475 a tonne, steel prices started moving up and it stopped rising once scrap prices dropped to $427 a tonne in mid-February 2011.
T. K. Chand, Director (Commercial), RINL, points out that 74 per cent of production in long products remained with thousands of secondary producers. He also said that yearly steel cycle generally started moving up from the middle of third quarter of the year. However, in 2010-11, it started moving up only from December 2010, mainly due to sluggishness in the international steel market.
On the prospects of domestic steel market this year, he predicted that it is bound to look-up given the gross domestic product (GDP) growth projection of 9-9.5 per cent and industry, infrastructure, housing, construction, power and automobile sectors registering reasonable growth rates. However, he said that the margins of steel producers might be greatly eroded due to steep increase in the prices of key raw materials such as coking coal by around $105 a tonne and iron ore by around $30-40 a tonne, which might affect the growth of the steel sector, unless suppliers take a reasonable approach.
In this see-saw game of steel market, it is quite rewarding to review the growth of RINL, one of the main producers located in Visakhapatnam, Andhra Pradesh, which was once upon a time reported to the Board for Industrial and Financial Reconstruction (BIFR), but bounced back to become first a miniratna and now a navratna company. It is also encouraging to note that the company has no key captive raw materials like iron ore and coking coal, yet the company is progressing by its sheer efficiency in value addition.
In the last fiscal, the company has recorded a higher sales turnover of Rs.11,517 crore, a jump of more than Rs.1,000 crore over that of the previous year. Again in 2011-12, RINL is faced with a gigantic task of achieving a target of over Rs.13,600 crore of sales turnover.
Director (Projects) A. P. Choudhary is quite optimistic about completing the expansion scheme in time.
Mr. Choudhary also indicated that secondary refining facilities in steel-making like ladle furnace, electro-magnetic stirrer and RH de-gasser are being set up, which facilitate production of cleaner steel of high-end value addition, suitable for applications such as axles, seamless tubes and automobile components.
On strategies to meet the market challenge, the RINL CMD said that RINL was focussing now on a dynamic market mix with more emphasis on customisation of products and services. He points to the recently concluded ‘Partners' Summit-2011” in taking the customer on-board.
SANTOSH PATNAIK


Wake-up call to the Centre from RBI
Time-bound action needed and not mere promises and studies

The latest review of interest rates of banks announced by the Reserve Bank of India on May 3 included an increase in short-term lending rate by 50 basis points to 7.5 per cent and short-term borrowing rate by 50 basis points to 6.25 per cent. The RBI Governor, D. Subbarao, has justified this as necessary to moderate inflation even if it means a slowing down of growth in the short run. The gross domestic product (GDP) expectation for 2011-12 has been lowered to 8 per cent. The RBI Governor has warned that high and persistent inflation undermines growth by creating uncertainty for investors and driving up inflation expectations. He has called for an increase in prices of petrol and diesel.
Main trigger
It seems the initial reaction was to treat inflation as a supply bottleneck problem. Later, spurt in demand was considered as the main trigger. Over the last 12 months, the RBI has increased bank rates eight times but the latest one is the steepest. The perception is that these are too late and too little. It is, however, necessary to understand the predicament of the RBI. Monetary policy and tools are not the sole devices to promote economic growth. Fiscal policy is a vital ingredient. These should work in tandem. Any disconnect will lead to unacceptable economic slowdown. The persistent fiscal deficits in government budgets lead to government borrowings which increase the money supply and liquidity in the economy. This is what has been happening in India. The increasing fiscal deficits of the Central and State governments over the last few years have placed the RBI in a difficult position to control liquidity and moderate inflation.
The fiscal problems and issues to be tackled by the government go beyond budgetary deficits. How the revenues are raised and how the public money is spent raise the important role of good governance especially in implementation. Investor confidence in the future is not a quantifiable concept but will be encouraged only by visible proof of good governance. For an immediate and ready example corruption is a virus which is eating into the vitals of the economic system. It pervades the whole gamut of raising and spending public money.
The proposal to set up an apex body to deal with this canker has been in limbo for the last so many years and has been revived only now with the Lok Pal bill and that too by public outcry and protest: the bill is only in the drafting stage and the start has been mired by unnecessary controversy. Black money is a huge drain on the country's wealth and revenues. The action taken so far has not made any dent. The Supreme Court has expressed its displeasure with the non-action in tracking black money. The only response it has got from the government is the proposal to set up a committee to study the problem revealed by the Finance Minister when he presented the central budget in February this year.
The control of fiscal deficit also presents a poor track record. The Fiscal Responsibility and Budget Management (FRBM) Act 2003 has not helped in tackling the root of the problem. There has been obsession with showing compliance with quantitative deficit targets .This has been based on revenue buoyancy and one-time receipts like spectrum auctions. The resulting complacency has sidetracked major fiscal issues and problems. The so called medium-term road map for achieving fiscal consolidation is not based on any time-bound action to identify and reform these problems. The list is substantial covering revenue and expenditure.
These have been covered in detail in these columns in the past. Broadly the problems are fundamental review of government functions, activities and schemes, addressing the policy and implementation issues to reduce subsidies, prioritisation of expenditure, dependency of public sector enterprises on government budget, sick and loss making enterprises due for closure, transparency in budget and accounts, accountability, use of output and outcome budget as a management tool and critical examination of tax revenue forgone which was nearly Rs.5-lakh crore in 2009-10.
Even the computation of fiscal deficit ignores quasi fiscal deficits like those of Central Public Sector Enterprises and Special Purpose Vehicles (SPV). These are relevant in addressing the overall liquidity position which the RBI has to tackle through monetary measures.
Another crucial point in deficit control is the State government deficits and the borrowings which again affect the liquidity in the economy. The Central Government can make the States follow the fiscal path through leveraging funds transferred to them annually as central assistance. But they can do this only if they set their house in order and adopt a reform-based medium-term road map.
Supply-side problem
The current inflation in food prices deserves a special mention. This seems to be a supply-side problem. The aspects needing consideration and action are modern methods in farming, supply of improved seeds, useful extension service, proper storage for grains, rural loans and improved irrigation and water supply to reduce dependence on rain fed crops. Output and outcome budgeting can be useful in ensuring proper use of irrigation dams and reservoirs to improve efficiency in water use and evolving suitable crop pattern. As a medium-term agenda the Central Government can take action to amend the constitution to make agriculture, water and irrigation a concurrent subject instead of a purely state subject. Interlinking of rivers and canals can also be a long-term project.
In conclusion, what is needed is urgent and time-bound action plan to reform all these issues and not mere promises and studies. For better coordination of fiscal and monetary policies a parliamentary committee can call the Finance Secretary and the Governor of RBI for a joint hearing.
A. RANGACHARI


Big push to deregulation of savings rate
In most countries, interest rates on savings bank accounts are set by commercial banks based on market conditions

A HAPPY LOT: Bank customers have something to rejoice as the Reserve Bank of India raised the savings bank account interest rate by 50 basis points to 4 per cent in its annual policy for 2011-12. The picture shows a busy day at a nationalised bank branch in Chennai.
Freeing savings bank rate is a complex issue in India. The Reserve Bank of India (RBI) recently launched a debate on this issue by presenting a discussion paper prior to its Annual Monetary Policy for 2011-12.
While announcing the policy, the RBI has also raised the savings bank rate from 3.5 per cent fixed in 2003 to 4 per cent. The spread between savings deposit and term deposit rates has widened significantly in recent times. This was why the RBI raised the savings bank rate, while a decision on freeing these rates was pending before the central bank for a final decision.
“We want to be sure that it contributes to financial inclusion. So that it does not militate against financial inclusion,” said the RBI Governor, D. Subbarao, in his post-policy press conference, referring to the deregulation of savings bank rate.
On raising the savings rate his deputy Subir Gokarn said that this rate had been at 3.5 per cent since 2003 all other rates have been deregulated, rates have moved up and down in the last eight years but this one had not and so as part of the overall adjustment, deregulation was still a debated proposition whether “we should let it go or not”. But given the differential that had emerged between this rate and all the other rates, particularly in this upward cycle, the RBI thought that an adjustment was necessary.
With regard to all other interest rates, Dr. Subbarao has pointed out that “We moved away from regulation”. Almost all interest rates, except the one on savings bank and NRI deposits which are administered as of now, are deregulated. So, “we believe that that is the way to move forward but again I want to say that we are open-minded and we would certainly respect and are being open to all the feedback that we get”.
Now banks have complete freedom in fixing their domestic deposit rates, except interest rate on savings deposits, which continues to be regulated. In pursuance of the announcement made in the Annual Policy Statement for 2009-10, the Reserve Bank advised scheduled commercial banks to pay interest on savings bank accounts on a daily product basis with effect from April 1, 2010.
Prior to the introduction of a daily product method, interest on savings deposit account was calculated based on the minimum balance maintained in the account between the 10th day and the last day of each calendar month and credited to the depositor's account only when the interest due was at least Re.1 or more. After this change, the effective interest rate on savings bank deposits increased, benefiting the depositors.
Savings accounts are maintained for both transaction and savings purposes mostly by individuals and households. A savings account, being a hybrid product, provides the convenience of easy withdrawals, writing/collection of cheques and other payment facilities as well as an avenue for parking short-term funds which earn interest. The maintenance of savings bank deposit accounts, however, entails transaction costs. In fact, a term deposit doesn't involve transaction cost for banks.
Savings deposits are an important component of bank deposits. The average annual growth of savings deposits, which decelerated in the 1990s compared with that of the 1980s, accelerated sharply in the decade of the 2000s. In this decade, the average growth rate of savings deposits exceeded that of demand and term deposits, notwithstanding the growth in term deposits outpacing that of savings deposits during 2005-10. The RBI had raised several questions on this issue. Should savings deposit interest rate be deregulated at this point of time? Should savings deposit interest rate be deregulated completely or in a phased manner, subject to a minimum floor for some time? How can the concerns with regard to savers (senior citizens, pensioners, small savers, particularly in rural and semi-urban areas) be addressed in case savings deposit interest rate is deregulated? How serious are concerns relating to a possible intense competition among banks and asset-liability mismatches if savings deposit interest rate is deregulated? Should higher interest rate be paid on savings deposits without a cheque book facility?
Global experience
In sum, deregulation of savings deposit interest rates has both pros and cons. The RBI's view, as reflected in the discussion paper, was that savings deposit interest rate could not be regulated for all times to come when all other interest rates have already been deregulated as it created distortions in the system. International experience suggests, according to the RBI, that in most countries, interest rates on savings bank accounts are set by the commercial banks based on market interest rates.
Most countries in Asia experimented with interest rate deregulation to support overall development and growth policies. These resulted in positive real interest rates, which in turn contributed to an increase in financial savings.
Further the RBI argues that deregulation of savings bank deposit interest rate also led to product innovations.
The flowery points of the RBI are likely to give a push for a de-regulation. However, unlike many other countries in Asia as well as other parts of the world, the Indian situation is different. A large number of people in India are from the rural background with less saving.
The urban poor, migrated from the remote rural areas of the country too are having small savings.
The urban labourers send their weekly earnings through public sector banks (PSBs) to their dependants living in villages.
Further, with larger presence in rural and semi-urban areas, the PSBs would be having maximum number of small savings bank account holders. Generally, the PSBs were attracting small customers along with other high value depositors, who trust PSBs compared to other private sector banks.
Maintaining an account with huge balance in savings bank would be cheaper for banks than maintaining an account with small balances as transaction cost of banks would be higher in the case of small account holders. In the case of salaried employees, their salaries would be credited to a particular bank. As the regulator frees the savings bank rate, the private sector and foreign banks will offer boutique products and fascinating interest rates to attract these huge accounts from corporates as well as government organisations.
Deregulation of savings bank rate would work against financial inclusion as public sector banks saddle with all un-remunerative accounts and all high value accounts would migrate to the new generation private sector banks and the foreign banks. Always the small customer is at the receiving end.
OOMMEN A. NINAN


How the process started
The process of deregulation of interest rates was resumed in April 1992 when the existing maturity-wise prescriptions were replaced by a single ceiling rate of 13 per cent for all deposits above 46 days.
The ceiling rate was brought down to 10 per cent in November 1994, but was raised to 12 per cent in April 1995. Banks were allowed to fix the interest rates on deposits with maturity of over two years in October 1995, which was further relaxed to maturity of over one year in July 1996.
The ceiling rate for deposits of 30 days and up to one year was linked to the Bank Rate less 200 basis points in April 1997.
In October 1997, deposit rates were fully deregulated by removing the linkage to the Bank Rate. Consequently, the Reserve Bank gave the freedom to commercial banks to fix their own interest rates on domestic term deposits of various maturities with the prior approval of their respective board of directors/asset liability management committee (ALCO).
Banks were permitted to determine their own penal interest rates for premature withdrawal of domestic term deposits and the restriction on banks that they must offer the same rate on deposits of the same maturity irrespective of the size of deposits was removed in respect of deposits of Rs.15 lakh and above in April 1998.


A departure from conventional approach
The objective of the Reserve Bank of India will be to condition an environment to bring inflation down to 4-4.5 per cent

CALIBRATED MOVE:RBI Governor D. Subbarao (second from right) with Deputy Governors before announcing the monetary policy in Mumbai recently.
The Annual Policy 2011-12 was substantially different from all other recent monetary policies announced by the Reserve Bank of India (RBI). While it stressed more on the current as well as future inflationary pressures and the ways and means to mitigate its horrors, the RBI decided to sacrifice the prevailing growth rate and cut that to 8 per cent for 2011-12 from the last year's 8.6 per cent.
A subdued RBI Governor D. Subbarao was at pains to explain how inflation would affect growth. He has also admitted that RBI failed to judge or foresee the inflationary pressures early, which even affected the credibility of the RBI.
Even though the trend of moderating inflation and consolidating growth in the second and third quarters of 2010-11 justified the calibrated policy approach of the central bank, the resurgence of inflation in the last quarter of 2010-11 was a matter of concern.
Economic stability
By dropping its earlier calibrated approaches, the RBI has entered a mission in this financial year to focus on economic stability by anchoring inflation expectation instead of sustaining growth momentum. It hiked the repo rate by 50 basis points from 6.75 per cent to 7.25 per cent, tightened some provisioning norms and there is also a 50 basis point increase in the interest rate on savings deposits from 3.5 per cent to 4 per cent.
While the RBI expects inflation to be close to 9 per cent in the first-half of the current fiscal that began in April, it has projected the headline number to moderate to 6 per cent by end-March 2012.
At present, inflation is hovering between 8 per cent and 9 per cent or close to 9 per cent, a high level as compared to RBI's target levels. The objective or the endeavour of RBI will be to condition an environment to bring inflation down to 4-4.5 per cent and to bring an environment in the medium term of 3 per cent inflation consistent with the global inflation scenario. Meanwhile, Chief Economic Advisor Kaushik Basu is hopeful that April headline inflation is expected to ease to 8.3 per cent. The number rose to 8.98 per cent in March from 8.31 per cent in the previous month.
RBI fixes grace period
Now the RBI has fixed a grace period for the rising prices to take a reverse trend, by “the first-half of the current year”. However the situation is very bearish and negative as global commodity prices are moving up and demand also is rising. Complexity in economic situation would reach its nadir once inflation remains near 9 per cent or above 8 per cent and growth momentum falls below 8 per cent as at end September 2011. The central bank's expectation of a growth momentum was based on the assumptions of a normal monsoon and global crude oil price of $110 a barrel. Once the present socio-political scenario in the Middle East and North African nations worsens, commodity prices would escalate further.
This annual policy has also surprised the markets. When the RBI signalled the market by raising the repo rate — the rate at which banks borrow funds from the central bank — by 50 basis points — the equity market dipped by 463.33 points or 2.44 per cent to 18534.69 with banking, real estate and automobile counters leading the decline on May 3. For the week ended May 6, it closed at 18518.81 compared to the previous week's close of 19135.96, a loss of 617.15 points. The market was expecting a rise of 25 basis points. However, the markets belatedly accepted the fact that the RBI's move clearly reflected its concern about rising prices. Hereafter RBI will have only one single policy rate, the repo rate, to indicate the rate changes in the banking system.
The significant changes announced by the RBI in its operating procedure of monetary policy are expected to bring in more clarity in the policy rates. Further, this would enhance the transmission of monetary policy and reduce volatility in overnight call money rates. The reverse repo rate (the rate at which banks park their funds with the central bank) will continue to be operative, but it will be pegged at a fixed 100 basis points below the repo rate. Hence, the reverse repo rate will no longer be an independent variable.
Further, the RBI has instituted a new Marginal Standing Facility (MSF). Banks can borrow overnight from the MSF up to one per cent of their respective net demand and time liabilities or NDTL. The rate of interest on amounts accessed from this facility will be 100 basis points above the repo rate. As per the newly introduced scheme, the revised corridor will have a fixed width of 200 basis points. The repo rate will be in the middle. The reverse repo rate will be 100 basis points below it and the MSF rate 100 basis points above it.
The RBI has demonstrated, as an aggressive central bank, with nine rate rises since March 2010, post-global financial crisis. But gradual policy tightening (a “baby step” of 25 basis points each) failed to quench the fuelling price rise.
With the “long step” of a rise by 50 basis points, tough conditions would prevail in the economy. Rising commodity prices, increased fuel subsidy, subsequent risk of overshoot in government borrowing and pressure on trade gap are factors which would make the central bank's task more difficult.
Three factors that shaped the monetary policy
Three factors have shaped the outlook and monetary policy for 2011-12. First, global commodity prices, which have surged in recent months are, at best, likely to remain firm and may well increase further over the course of the year. This suggests that higher inflation will persist and may indeed get worse.
Second, headline and core inflation have significantly overshot even the most pessimistic projections over the past few months. This raises concerns about inflation expectations becoming unhinged.
The third factor, one countering the above forces, is the likely moderation in demand, which should help reduce pricing power and the extent of pass-through of commodity prices. This contra trend cannot be ignored in the policy calculation. However, a significant factor influencing aggregate demand during the year will be the “fiscal situation”.
The budget estimates offered reassurance of a fiscal rollback. However, the critical assumption that petroleum and fertilizer subsidies would be capped, is bound to be seriously tested at prevailing crude oil prices. Even though an adjustment of domestic retail prices may add to the inflation rate in the short run, the Reserve Bank believes that this needs to be done “as soon as possible”. Otherwise, the fiscal deficit will widen and will counter the moderating trend in aggregate demand.
The latter portion of the third factor is the operative and crucial part which shapes the monetary policy outlook for the current fiscal. The RBI is in a hurry to pass-through the high oil prices to consumers. Otherwise, navigating inflation to a soft landing of 6 per cent at end March 2012 would end up as an unfinished agenda for the central bank.
The monetary policy trajectory that is being initiated in this annual statement is based on the basic premise that over the long run, high inflation is inimical to sustained growth as it harms investment by creating uncertainty. Current elevated rates of inflation pose significant risks to future growth. Bringing them down, therefore, even at the cost of some growth in the short-run, “should take precedence”.
OOMMEN A. NINAN


Regressive impact of world inflation
The situation in India is comparatively less uncomfortable than in other countries


The calibrated monetary policy aimed at taming inflation and at the same time sustaining the growth process has been given up. The Reserve Bank of India Governor D. Subbarao is anxious that persisting high inflationary levels should be effectively tackled, even with the growth process getting slowed down, for avoiding the emergence of new pressures.
Towards this end, the repo and reverse repo rates have been raised by 50 basis points for the first time in recent months. Different procedures are, of course, being adopted for reckoning variations in key interest rates though the actual cost of credit will be one percentage point higher than the repo rate.
Though it is generally agreed that the monetary authorities have adopted a conservative approach and inflationary pressures have to be effectively checked even if the earlier calculations about the pronounced growth in gross domestic product GDP will get reduced to 8 per cent, many questions remain unanswered.
In some quarters it is felt that food inflationary pressures are getting under control and new difficulties have risen only on account of imported inflation.
Having regard to the assertion of inflationary pressures, the world over it can be safely claimed that the situation in India is comparatively less uncomfortable than the conditions in other countries.
Foreign trade
The trends in foreign trade in 2010-11 clearly indicate that agro as well as manufactured products are competitive in the traditional markets in the West as well as new areas in Latin America and elsewhere.
This will be borne out by the fact that the uptrend in exports in the past year has been sustained and shipments of textiles, leather, gems and jewellery, engineering goods and other items have fetched handsome foreign exchange earnings.
Also, there is no suggestion that the demand for various goods and services will be less keen. Indeed, having regard to the development in world markets, the uptrend in exports will be sustained and the plans for achieving growth in exports in excess of 25 per cent will be easily feasible. It will not then be difficult to secure forex earnings of $500 billion yearly in three years.
The favourable developments in 2010-11 facilitated a growth in export earnings of 67.12 billion while imports have risen by $62.32 billion despite an increase in the oil import bill.
The trade deficit could, therefore, be contracted by $4.80 billion to $ 104.83 billion. The favourable trends in exports and a pick-up in net invisible receipts, the current account deficit for October-December could be reduced to $9.7 billion ($12.2 billion). There will, of course, be an increase in this deficit for the whole year because of the unfavourable experience in April-September on account of a slow down in net invisible receipts.
The balance of payment position has remained comfortable as the bigger current account deficit could be easily absorbed as the net foreign exchange assets have increased to $273.70 billion (at the end of March 2011) from $252.76 billion (at the end of March 2010).
Agro sector
Another favourable factor for the economy as well as consumers is the extremely commendable performance of the agricultural sector in the 2010-11 agricultural season ending in June.
The latest estimates indicate that an all-time record has been established with the output of foodgrains rising to $235.88 million tonnes from the earlier peak of 234.47 million tonnes (2008-09). Even with a lower yield of rice, procurement purchases have been encouraging in the current marketing season so far. Also, it is hoped that wheat procurement will surpass the 25 million tonne mark (April-March). Taking into account the estimated current account deficit of $46 billion for the whole of 2010-11 and the outflows for investment purposes, the gross addition to forex assets were $68 billion.
As the meteorological experts expect that the monsoon will behave satisfactorily in the forthcoming kharif season, the Ministry of Agriculture has estimated that the output of food crops may be even 250 million tonnes. If these expectations materialise, it will be well nigh impossible to store bulging food stocks in good condition.
If exports have to be effected in limited quantities even after meeting the requirements of those below the poverty line on the stipulated basis, higher export prices for fine cereals may push up prices for both these cereals in the domestic market which will get reflected in a higher food inflation index. Fears in this regard have perhaps been responsible for continuing the ban on exports. Even otherwise the food index has been fluctuating irregularly around 8.5 per cent and if there has been no noticeable drop from this index in this level it is due to higher prices of other products which are not available in the desired volume or which are becoming costlier due to adjustments in procurement prices.
In fact, in respect of wheat the minimum support price (MSP) for the current season has been raised and some State governments also have agreed to raise the procurement price by Rs.100 a quintal.
A further drop in food index depends on the developments in the coming months with supply constraints in some directions getting moderated and availability from indigenous sources turns out comfortable.
Against this background, it is imperative that there should not be any disincentive for creating additional capacity wherever necessary and maximising production with the existing facilities. In fact, the earlier calculations regarding a pronounced growth in GDP by 9 per cent were based on the scope for raising the yield of food and cash crops to new high levels and a satisfactory growth in industrial output.
Though the trends in industrial production in 2010-11 have given rise to misgivings about sustained increase in industrial output, there is reason to believe that the details relating to variations in industrial output have not taken into account adequately the commendable performance of the textile, leather, consumer durables, gems and jewellery, engineering goods and other segments of the industrial sector.
If industrial growth slackens on account of paucity of resources for implementing on-going and new schemes, there will be a distorting effect.
The fears of the monetary authorities in regard to rise in inflation rate in the coming months on account of upward adjustments in prices of petro-products and the impact of external factors there will surely be a heightening of inflationary pressures in the short-term as visualised by the monetary authorities. (Luckily, there has been a short break in crude prices by more than $10 a barrel due to favourable developments in the Middle East and on the terror front.)
If world crude oil prices get stabilised at lower levels and the turmoil in the Middle East and West Asia is out of the way in a short period, the happenings in the latter half of 2011-12 should not be embarrassing.
Even if, according to the RBI, it is desirable to have slower growth with a view to tackling long term inflationary pressures, there should not be any disinclination to review the monetary policy after October especially, as the calculations of the Union Finance Ministry relating to the collection of indirect taxes should not be adversely affected. Also, reduced availability for domestic consumers and continuing brisk exports should not be inhibited due to slower industrial growth.
Tax collections
Any heavy shortfall in tax revenues over the budget estimate will get reflected in a higher fiscal deficit if it also becomes difficult to realise the anticipated proceeds of Rs.40,000 crore under the disinvestment programme. It will not be possible to ensure success of offers of sale by public sector units if the bourses continue to remain depressed and fresh forex inflows are not at the desired rate.
The decisions of the RBI and other developments brought about a steep drop of over 1,400 points in the Bombay Stock Exchange Sensitive index.
P. A. SESHAN

S& T 16,2

Signature of radiation induced thyroid cancer
It is now possible to discriminate between cancers caused by intake of a radioactive material and those that arise spontaneously

Ready evidence: The study was successful because the researchers had carefully collected, documented and stored samples of thyroid cancer tissues from the Chernobyl region in the Chernobyl tissue bank.
Recently, scientists from the Helmholtz Zentrum Munchen have identified a genetic change in thyroid cancer as a signature or fingerprint that points to a previous exposure of the thyroid to ionizing radiation. They discovered the gene marker in papillary thyroid cancer cases from the victims of Chernobyl; this marker was absent in the thyroid cancers in patients with no history of radiation exposure.
This breakthrough has profound biological significance. Now, for the first time, scientists have been able to discriminate between the cancers caused by the intake of a radioactive material and those that arise spontaneously.
Cancer occurence
Most cancers occur spontaneously or when cells get exposed to certain viruses or chemicals or a physical agent such as ionizing radiation. So far, there was no way to identify uniquely a radiation cancer from a naturally occurring cancer.
The researchers led by Prof Horast Zitzelsberger and Dr Kristian Unger from the Radiation Genetics Unit of the Helmholtz Zentrums Munchen in collaboration with Prof. Geraldine Thomas, Imperial College London, examined the thyroid cancers from children exposed to the radioiodine fallout from the accident at the Chernobyl nuclear power station.
After decay
For comparison, they looked for the same genetic change in thyroid cancers of children born more than one year after the explosion, after all radioiodine decayed away. Iodine-131 has a half life of 8 days.
Scientists found that the number of copies of a small fragment of chromosome 7 was increased only in the cancers from the irradiated children.
Writing in the May 23, 2011 issue of the Proceedings of the National Academy of Sciences (PNAS), the researchers noted that this is one of the first genetic markers that indicate a radiation aetiology of cancer.
Normally, humans have 46 chromosomes. Two copies of chromosome 7, one inherited from each parent are present in every cell. Forty one disorders are associated with genes on chromosome 7. Changes in the number or structure of chromosome 7 occur frequently in human cancers. According to National Institutes of Health (NIH), some genes in chromosome 7 may play critical roles in controlling the growth and division of cells.
“Without these genes, cells could grow and divide too quickly or in an uncontrolled way resulting in a cancerous tumour”, NIH clarified in Genetic Home Reference.
According to Professor Zitzelsberger, the availability of the genetic marker will improve both the clinical diagnosis of thyroid cancer and our understanding of how radioiodine causes the disease to develop (B ioscience Technology, May 24, 2011).
Researchers will extend the study to determine if the genetic fingerprint is able to indicate the dose required to cause cancer.
The study was successful because the researchers had carefully collected, documented and stored samples of thyroid cancer tissues from the Chernobyl region in the Chernobyl tissue bank, a unique venture to establish a collection of biological samples from tumours and normal tissues from patients for whom the cause of their disease is known as exposure to radioiodine in childhood.
The unique collection of materials made it possible for the team to compare for the first time tumours from children of the same age and regional background ( insciences.org, May 24, 2011)
The accident at the Chernobyl nuclear power station led to contamination of milk with iodine-131, a radioactive isotope of iodine. If authorities administered stable iodine promptly during the early phase, radiation dose to the thyroid would have been negligible. Stable iodine saturates the thyroid so that the gland will not receive radioactive iodine when it arrives.
Not implemented
Unfortunately, this measure was not implemented at Chernobyl. The exposed population received large doses to their thyroid; this led to a significant fraction of the more than 6,000 thyroid cancers observed to date among people who were children or adolescents at the time of the accident. By 2005, 15 of these patients died.
Thyroid cancers will not occur in Fukushima because as per emergency plan the management at Fukushima promptly evacuated the population from the affected regions and supplied stable iodine to the evacuees.
K.S. PARTHASARATHY


Wise investment in hydrographic services capacity building needed
World Hydrographic Day (WHD) is celebrated on the 21 {+s} {+t} June each year to commemorate the establishment of the International Hydrographic Organisation (IHO) at Monaco in 1921 by Prince Albert, an ardent Oceanographer. IHO is an inter governmental consultative and technical organization and recognized as a competent international authority on hydrography and nautical charting services.
Every activity at sea
These are executed through more than 25 strict IHO Standards by the 80 member states, which has ensured uniformity in the sea sapping and related subjects.
Hydrography impinges on every activity at the sea, the most important being provision of nautical charts and publications for worldwide navigational safety with 24 X 7 updating service under the IMO /IHO/UN Conventions. Major impact of hydrography is on navigational safety, offshore maritime development (Oil/Gas/Energy/Fisheries/Minerals/Tourism/Environment) and coastal zone management, to name a few. IHO has estimated that the cost benefit ratio for investment in hydrography as a national service is 1:10.
Hydrography is the branch of applied sciences which deals with the measurement and description of the physical features of oceans, seas, coastal areas, lakes and rivers. It also seeks to provide prediction of their change over time, for the primary purpose of safety of navigation and in support of all other marine activities.
These include economic development, security and defence, scientific research, and environmental protection.
Hydrographic surveying is a top notch profession for development of any maritime nation. This along with the “National Spatial Data Infrastucture” organization has provided “mountains to deep seas” seamless data base. Now, there is an imperative need to dovetail the established hydrographic training facilities at the National Institute of Hydrography at Goa. Also this need is felt in the private sector to cover offshore human resources needs of the hydrographic industry as well and evolve credible dissemination methodology to the end users.
Vast improvements
It is significant that the hydrographic technology is seeing vast improvements, both in hardware and software terms, especially in the management of voluminous 3D digital data. Keeping hydrographic experts current in their profession is a necessity to meet many user needs.
Marine Cartography to international Standards will enable the Nation to translate the voluminous processed 3D field survey data into many user-friendly nautical products and services.
The modern equipment fit in the new catamaran design six survey vessels, coupled with well trained manpower, will enable the Indian National Hydrographic Office (INHO), to achieve 100 per cent insonification with 3D surveys within the Indian Exclusive Economic Zone. This is possible even if requested for foreign waters, with products and services to meet end users' needs with better revenue earnings.
INHO has a great responsibility on their shoulders and duty to perform on hydrography and related fields, on which some key resources shall come from the Indian juridical waters, since “the 21 {+s} {+t} century will be the Century of the Seas”.
Wise investment on hydrographic capacity building (assets and human resources ) by the Indian Government is needed.
Autonomous status
This should be coupled with a restructured autonomous status for the INHO for more effective functioning in predominantly civil applications oriented domain. These measures shall facilitate higher professionalism and profound strategic and economic returns in the years to come.
K.R. SRINIVASAN



While other migratory birds take advantage of many possible stopovers en route to rest and feed, great snipes fly the distance almost nonstop, Klaasen said.

Technology to utilise automobile exhaust

New technology is being developed to capture and use the low-to-medium grade waste heat that is going out the exhaust pipe of automobiles, diesel generators, factories and electrical utilities.


Tapping into plants to combat climate change
The photosynthetic antenna of plants absorbs the sunlight used in photosynthesis. It is an incredibly efficient mechanism, which if harnessed, can lead to more efficient solar energy, and fight against climate change.

Species expansion, exit must both be studied
As species disappear or are made extinct, many species expand their range as a result of human introduction and because certain species benefit from climate change. The two phenomena must be studied at the same time.

Volcano spews ash, gas in a plume 10 km high

A huge plume of sulphur dioxide spewed from Chile's Puyehue-Cordón Caulle Volcanic Complex, which lies in the Andes. On 4 June, a fissure opened, sending a towering plume of volcanic ash and gas over 10 km high.


new way called flash processing that makes steel 7 per cent stronger than any steel on record in less than 10 seconds has been found. The new steel is stronger and more shock-absorbing than the most common titanium alloys


GAGAN – making GPS more accurate
N. GOPAL RAJ
Use of GPS in civil aviation demands higher accuracy and reliability in determining position than a mobile phone user would need

Space sojourn: India's GSAT-8 satellite being checked prior to launch from the European spaceport at French Guiana in South America.-PHOTO: ARIANESPACE
These days, anyone who wants to find out exactly where they are can turn to their mobile phones. Phones that pick up signals from orbiting U.S. Global Positioning System (GPS) satellites are now commonplace. The phone uses that information to work out the location and display it on a map.
In a similar fashion, the GPS signals can be used to assist aircraft during take off and land as well as in flying shorter routes to their destination.
But, as there can be hundreds of passengers in a single aircraft, the use of GPS for such purposes in civil aviation demands higher accuracy in determining position than a mobile phone user would need as well as greater reliability in doing so.
One important way to meet the demands of civil aviation has been through what is known as a Satellite-Based Augmentation System (SBAS). Satellites in geostationary orbit, where they match the earth's rotation and therefore remain over the same place on the globe, are used to supplement the GPS signals.
The first such SBAS was the U.S. Wide Area Augmentation System (WAAS) that became operational in 2003. The European Geostationary Navigation Overlay Service (EGNOS) began working in October 2009 but was officially declared available for aviation use only in March this year. The Japanese have a system known by the acronym MSAS.
India is establishing its own system, the 'GPS Aided Geo Augmented Navigation' (GAGAN), a joint effort by the Indian Space Research Organisation and the Airports Authority of India.
The ground segment for GAGAN, which has been put up by the U.S. company Raytheon, has 15 reference stations scattered across the country. Two mission control centres, along with associated uplink stations, have been set up at Kundalahalli in Bangalore. One more control centre and uplink station are to come up at Delhi.
The space component for it will become available after the GAGAN payload on the GSAT-8 communication satellite, which was launched recently, is switched on. This payload was also on the GSAT-4 satellite that was lost when the Geosynchronous Satellite Launch Vehicle (GSLV) failed during launch in April 2010. Two more satellites carrying the same payload are to be launched in the coming years.
The reference stations pick up signals from the orbiting GPS satellites. These measurements are immediately passed on to the mission control centres that then work out the necessary corrections that must be made. Messages carrying those corrections are sent via the uplink stations to the satellites in geostationary orbit that have the GAGAN payload. Those satellites then broadcast the messages. SBAS receivers are able to use those messages and apply the requisite corrections to the GPS signals that they receive, thereby establishing their position with considerable accuracy.
But as with any SBAS, GAGAN needs to do more than simply provide the corrections. Not less important is ensuring the system's integrity. “Integrity is a measure of trust that can be placed in the correctness of the information supplied by the total system,” observed S.V. Kibe, who was at the ISRO Headquarters till his retirement.
It included the ability to provide timely and valid warnings to the users when the navigation system was not performing as required, he noted in article on the GAGAN system published in a recent issue of the specialist magazine Coordinates.
Currently, aircraft from must fly from one place to another along predefined air routes marked with ground-based navigation aids. Planes with SBAS receivers will, on the other hand, be able to take shorter routes, saving both time and fuel.
To help pilots land their aircraft in bad weather and poor visibility, several airports in the country are equipped with ground-based Instrument Landing Systems (ILS). Such ILS equipment is expensive. Consequently, even in airports that have it, only one runway and that too one end of a runway may have the ILS capability.
An SBAS, on the other hand, can provide guidance on both ends of all runways that fall within its coverage area. The U.S. Federal Aviation Administration (FAA) has, for instance, published the approach procedures that aircraft equipped to receive the WAAS signals can use to access 2,300 runways in over 1,200 airports in poor weather conditions.
“WAAS will provide an equivalent level of precision approach service to that of the Category 1 ILS when fully deployed,” according to the FAA. (There are three ILS categories, with those in Category 3 being able to help aircraft land in conditions with the worst visibility.)
When GAGAN becomes operational, it would provide close to Category 1 services across much of India, observed one official associated with the project. In due course, the Indian system would be upgraded and improved to meet Category 1 requirements.
During the technology demonstration phase when GAGAN was tested in 2007 with just eight reference stations and a leased transponder on the Inmarsat 4F1 satellite, the position given by a stationary SBAS receiver during a 24-hour period varied by only two metres to three metres. An ordinary GPS receiver, on the other hand, varied by as much as eight metres to 20 metres during the same period. Moreover, when aircraft fitted with SBAS receivers were flown, the GAGAN was found to provide very good position accuracies.
Once the GSAT-8's GAGAN payload becomes available for use, the full system can be thoroughly tested. However, certification of the system for safety-critical use in aviation will be taken up only only after the second GAGAN-equipped spacecraft becomes operational. The certification will be carried out by the Directorate General of Civil Aviation.
Since all augmentation systems follow common standards laid down by the International Civil Aviation Organisation, aircraft with SBAS receivers can use any of those systems.
India's GAGAN has a reach well beyond the country, from Africa and Middle East on one side to the Bay of Bengal and South-East Asia on the other other. It will therefore fill a gap between Europe's EGNOS and Japan's MSAS systems.
Moreover, as has already happened with GPS receivers, the uses for GAGAN will no doubt go well beyond aviation. Those involved in surveying and map-making will obviously benefit from the better accuracy it provides, as can the transportation sector and marine operations, not to mention recreational applications.


Radiation dose limit for eye lens slashed
The lens of the eye is one of the most radiation sensitive tissues in the body. If the eye lens which is normally crystal clear receives a high enough radiation dose it may become partly cloudy or totally opaque depending on the dose. Radiation protection agencies have prescribed dose limits to the lens to prevent induction of lens opacity or cataract.
On April 21, this year, the International Commission on Radiological Protection (ICRP) which issues recommendations on radiation protection, slashed the dose limit for the lens of the eye to 20mSv in a year, averaged over defined period of five years, with no single year exceeding 50 mSv.
Earlier dose limit
The earlier dose limit was 150mSv in a year. (Sv is a unit of biologically effective dose. The radiation energy absorbed in a sievert (Sv) is one Joule per kilogramme of material; since the unit is large, a sub-multiple such as one thousandth of a Sv or milliSv —mSv — is normally used).
Several studies over the past few years led the Commission to reduce the dose limit steeply.
There are three main forms of cataract depending on its anatomic location in the eye lens: nuclear, cortical and posterior sub capsular (PSC). Among these, PSC is the least common and is commonly associated with exposure to ionizing radiation. Radiation Effects Research foundation (RERF) describes the formation of radiation cataract thus: “There is a transparent layer of cells covering the interior frontal side of the capsule that covers the eye lens.
This layer maintains the function of the lens by slowly growing toward the centre, achieved through cell division at the periphery. Because irradiation is especially harmful to dividing cells, exposed cells at the equator are most prone to damage.
Unknown reasons
For unknown reasons, damaged cells move toward the rear of the lens before converging on the centre. Such cells prevent light from travelling straight forward resulting in opacity.”
So far, scientists believed that cataract will be formed only after the lens receives a typical radiation dose called the threshold. ICRP assumed that threshold was 2Gy for a single dose and 5 Gy when the exposure occurs in a protracted way.
Not any more. Recent studies appear to show the formation of radiation induced cataracts at much lower doses than the current standards. (Gy is the unit of absorbed dose; the dose is said to be one gray — Gy — when the ionizing radiation energy absorbed per kilogramme of material is one joule).
ICRP now considers that the threshold dose for cataract is 0.5Gy. ICRP also stated that although uncertainty remains, medical practitioners must be made aware that the absorbed dose threshold for circulatory disease may be as low as 0.5Gy to the heart or brain.
“Doses to patients of this magnitude could be reached during some complex interventional procedures, and therefore particular emphasis should be placed on optimization in these circumstances,” ICRP cautioned the specialists. The procedures include angioplasty.
The June 2010 on-line version of Catheterization and Cardiovascular Interventions and October 210 issue of Radiation Research have published studies on increased risk of cataracts among interventional cardiology professionals. Though the numbers of professionals monitored in the studies was limited, the results demand urgent action.
Chernobyl effect
Cataract analysis of 8607 Chernobyl clean up workers,12 and 14 years after exposure, indicated that posterior sub-capsular or cortical cataracts appeared in 25 per cent of the participants (Radiation Research, February 2007). Researchers found evidence of a dose threshold of less than 0.7Gy.
The researchers noted that the workloads tend to increase in catheterization suites. This, together with lack of training in radiation protection and unavailability or non-use of radiation protection accessories may result in doses to the eyes of cardiology professionals sufficient to cause cataracts.
Studies show that leaded glass alone reduced the dose to the lens by 5 to 10 times; scatter-shielding drapes alone reduced the dose rate by 5 to 25 times; using both reduced the dose rate by 25 times or more
In BioMed Central Public Health (2010), Dr Sophie Jacob from the French Institute of Radiological Protection and Nuclear Safety (IRSN) and other specialists listed 14 peer reviewed studies showing evidence for low dose radiation-induced cataracts.
The results of their study on occupational cataracts and lens opacities in interventional cardiology involving 1700 interventional cardiologists in France is expected to be available this year.
The jury is no more out on radiation induction of cataract. The present ICRP recommendations must serve as a wake up call for interventional cardiology and radiology professionals.
Raja Ramanna Fellow, Department of Atomic Energy


Wheat grown on soil with fly ash is safe
Belying apprehensions that wheat and other crops grown on fly ash mixed soil may not be safe for human consumption, research has proved that on the contrary, it has beneficial effects.
Research conducted by Hyderabad-based National Institute of Nutrition (NIN) recently cleared the concerns that fly ash disposal could contaminate soil and crops grown over it.
“Results have indicated that there is no difference between wheat samples grown in soils with fly ash and without fly ash,” Bhaskaracharya Kandlakunta, a senior scientist at NIN associated with the experiment, told PTI.
The purpose of the NIN study was to evaluate nutritional and toxicological aspects of wheat grown on soils treated with fly ash.
The results of the study were published in the Journal of Science Food and Agriculture.
Scientists carried out evaluation on rats fed with wheat grown in fly ash-applied soils.
Results showed that the moisture, protein and ash content of wheat samples showed no difference between fly ash treated and control samples, the scientist said.
The study clearly demonstrated that the shoot and root growth and yield of test crops at different locations after fly ash incorporation resulted in beneficial effects of fly ash addition in most cases. Fly ash disposal is a big environmental problem. — PTI


A new analytical method improves detection of dimethyl fumarate (DMFu) in leather and footwear. The substance causes allergic contact dermatitis. It has been detected in leather products made in Asia.


Ocean acidification will hit coral reef diversity
A new study concludes that ocean acidification, along with increased ocean temperatures, will likely severely reduce the diversity and resilience of coral reef ecosystems within this century


A widely publicized study concluded that a bacterial bloom consumed the methane discharged from the Deepwater Horizon well. Now, a recent study has shown low measured rates of methane consumption by bacteria.

New research shows that the Antarctic Circumpolar Current (ACC) played a key role in the shift in the global climate that began about 38 million years ago. Early ACC was vital to the formation of modern ocean structure.


Moving the heaven to get some rare earth

Exploration: The plan is to send rovers to the moon to look for minerals and ores which contain rare earth elements.
About a month ago came an intriguing piece of news. One Mr. Naveen Jain, who has started a company called Moon Express Inc. in California, has plans of sending robotic rovers to the moon.
These rovers will look for minerals and ores which contain rare earth elements such as Yttrium, Dysprosium, Nyobium and others, and upon finding, will send back images to the control station on earth. The team will then plan on sending space crafts to go and retrieve the rare earth minerals from the moon and bring them here.
An out-of-the-box (more an out-of-the-earth) idea! After all, recall that the moon was once part of the earth and was ejected from us (either by simple break-off from where the Pacific Ocean now is or due to collision by an external body) in the early history of the solar system. Thus, it is not unlikely that some of the ores and minerals we have here are also present on the moon; since the technology is available, why not explore there?
Why this focus on the rare earths? What are they? As many students of chemistry know, this is a group of 17 elements of the Periodic Table, specifically the fifteen of the “Lanthanide group” plus Scandium and Yttrium. Indeed, as they were discovered, they posed an embarrassment to the orderliness of the Periodic Table, much as the inert gases (also called rare gases) did. But the latter could simply be added on as an extra column (the zero group) where they fitted decorously.
But the lanthanides had to be grouped into one position with an asterisk and footnote. All the 15 elements from Lanthanum (atomic number 57) to Lutetium (atomic number 71) are placed in one spot on the table, between Barium (56) and Hafnium (72).
And they all occur together. In a given ore, for example Ytterbite which takes as name from the Swedish village Ytterby, the oxides of Yttrium and Cerium were first discovered. Further analysis revealed two more oxides, those of Lanthanum and Didymium (which itself is a twin mixture of Praseodymium and Neodymium). These Swedish ores yielded element after element, much like the Russian Matryoshka doll contains doll within a doll within a doll. The village Ytterby became famous since as many as seven elements (Yb, Er, Tb, Y, Pr and Nd) are named after it. What use are they? Because of their remarkable electronic structures, these elements and their compounds are useful in making specialty glasses, battery electrodes, superconducting materials, electromagnets, microwave resonators, and of course laser sources.
One of the most common lasers used in YAG (yttrium-aluminium-garnet), and its cousin is Nd-YAG which contains the element Neodymium also.
Other lanthanides are used in magnets, steel, MRI contrast agents and phosphors. They are ubiquitous in today's gadgets: disc-drives, miniature chargeable batteries, display, TV monitors, rangefinders, night vision goggles, and so on.
Soon it became clear that these elements and oxides are not as rare as was thought. In fact they occur just as abundantly as copper, and mostly in Brazil, China, South Africa, Malaysia US and of course India. We have rare earth ores found in Kerala and the Department of Atomic Energy has a company called Indian Rare Earths.
It is estimated that the world uses as much as 134,000 tons of rare earth metals a year, but mining only 124,000. Given this gargantuan appetite, those countries with supply are in a winning position, making rare earth stocks the new oil. And China, which holds 37 per cent of the world's supply, has decided to decrease its exports and regulate its mining efforts as well. Foreseeing the looming situation, a note has been circulated to the US policymakers by the Congressional Research Service highlighting the effect this would have on national security. Rare earth metals are used in missile guidance systems, jet fighter engines, underwater mine detectors and so forth.
Aware of the importance, India too appears to have geared up its policy. A new national multi-pronged strategy has been suggested, not only to ramp up domestic production, but also to enter into joint ventures with international players. Granted that we only offer 2% today of the world's needs, business opportunity on one hand and national needs on the other, demand such a move.
No wonder then that Naveen Jain is thinking of going to the moon. Now, if he can do it, should we not too? Moon is just as free and uninhabited as the Antarctic (just a bit farther away), and several countries have pitched their tents and hurled their flags in the latter.
And it is not the same as the colonization of The Gold Coast (Ghana) by the Portuguese and British, subjugating the native residents, or of D R Congo by the Belgians for diamond. So, are there rules for such exploitation and owning virgin territories, or is it free for all – first come first own? Are there any international laws or accepted practices? I wonder.
D. BALASUBRAMANIAN