India’s infrastructure sector grew 5.1 per cent in September 2008, the fastest pace in the current financial year, helped by higher coal and cement production. Though lower than 5.8 per cent growth in September 2007, it is higher than last month’s 2.7 per cent.
The Bombay Stock Exchange bellwether Sensex gained 230 points in a choppy trade today, ending a two-day fall, after the government put out the numbers. (Rate cuts announced by European banks too improved market sentiment.)
This could have a positive impact on the overall industrial production index for the month, which had nosedived to 1.3 per cent in August. The six core industries have a 26.7 per cent weight in the Index of Industrial Production.
Data released by the commerce and industry ministry today showed that in the April to September period, the core sector (crude oil, petroleum refinery products, coal, electricity, cement and finished carbon steel) grew 3.9 per cent against 6.9 per cent in the same period last year
The expansion in the index during September was contributed by coal, as miners beefed up operations after the monsoon rains got over, and cement. “One could see a lower base in September last year contributing towards cement production growth in the month,” Axis Bank Vice-President Saugata Bhattacharya added.
On the other hand, growth in electricity generation remained flat in the month. Crude oil production growth dipped in September, as the output from existing oil fields fell. Petroleum product production growth too went down as refiners processed lesser crude.
Growth in finished carbon steel production in September was lower than the same month last year. Steel companies are cutting production because prices of the metal have crashed.
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Unlike the stock markets, industry representatives said this was another indication of industrial slowdown. “It is now imperative that boosting growth becomes the focus of all policy actions,” said Federation of Indian Chambers of Commerce and Industry Secretary General Amit Mitra.
West Asia’s Etilasat bought 45 per cent in Swan Telecom (which has a licence for 13 circles) for an enterprise value of Rs 9,400 crore.
In a hurriedly convened press conference Raja today said founding promoters had not sold their shares in either Unitech or Swan. Instead, the foreign investors had subscribed to the expanded capital in these companies.
“No windfall gain has been made by promoters in any of these deals. In Swan, the partner will bring in Rs 3,500 crore and in Unitech Rs 6,000 crore. This conforms to FDI policy.”
Raja added that the argument that the loss of revenue because the government did not auction spectrum but bundled it with a licence is “a myth” and threatened to resign if any violation was found.
| CORE HOPES Index of six core-infrastructure industries - September-2008 | |||||
| Sector | Weight (%) in IIP | Sept-07 % growth | Sept-08 % growth | Apr-Sept 07-08 % growth | Apr- Sept 08-09 % growth |
| Crude Petroleum | 4.17 | -0.7 | -0.4 | 0.7 | -0.8 |
| Refinery Products | 2.00 | 6.9 | 2.8 | 9.8 | 4.5 |
| Coal | 3.22 | 6.3 | 10.7 | 2.8 | 7.9 |
| Electricity | 10.17 | 4.3 | 4.4 | 7.6 | 2.6 |
| Cement | 1.99 | 5.4 | 7.9 | 8.7 | 6.0 |
| Finished Steel (carbon) | 5.13 | 9.5 | 5.8 | 7.7 | 5.3 |
| Overall | 26.7 | 5.8 | 5.1 | 6.9 | 3.9 |
| Source: Commerce and Industry Ministry | |||||
Experts endorse the view that changing licence conditions would violate the licensing agreement.
“This move is surely a violation and will be extremely difficult to implement,” said telecom analyst Mahesh Uppal.
“Instead of resorting to such measures, the government could have prevented this situation by pricing the spectrum in a correct manner,” he added.
“All serious companies need to have flexibility in their operations, having given away spectrum for such a low price, this can only be summed up as a post-hawk measure, where people cannot make a killing,” he added.
Incumbent mobile operators, however, support Raja’s move. “The valuation that the new players got has been blown out of proportion. After all, they are not taking away the money it is coming in the firm. Plus the money will come in tranches linked to roll-out obligations. I don’t think there is any case to go to court,” said a senior executive of a telecom company and member of Cellular Operators Association of India.