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Bharatmala Pariyojana to get delayed by 4 years: ICRA

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The first phase of the ambitious Bharatmala Pariyojana (BMP) that was scheduled for completion in 2021-22 is now likely to get completed by 2025-26, rating agency ICRA said on Wednesday.

Till February 2020, a total of 246 road projects with an aggregate length of about 10,100 km were awarded under BMP Phase-I at a total cost of Rs 2.38 lakh crore.

"The Bharatmala Pariyojana (BMP) Phase–I is likely to be delayed by four years and get completed by FY2026 instead of earlier envisaged FY2022," ICRA said.

Saying that till February projects worth Rs 2.38 lakh crore were awarded under BMP Phase-I, ICRA said the average cost of award stood at Rs 23.80 crore per km, which is 54 percent higher than initial estimated cost of Rs 15.52 crore per km.

The land acquisition cost for NHAI, it said, increased at a CAGR of 27 percent from FY2007 to FY2019 from Rs 0.21 crore per hectare to around Rs 4 crore per hectare.

This along with prudent bidding by developers at a premium when compared to NHAI's base price has resulted in significantly higher awarded cost for BMP Phase-I when compared to initial estimates.

Further as per ICRA's estimates, the prevailing uncertainty due to COVID-19 and the consequent impact on valuations could delay asset monetisation plan of NHAI through toll-operate-transfer (TOT) auctions and launch of infrastructure investment trust (InvIT).

Depending on how quickly the normalcy is restored, these plans could take off by end of FY2021. Therefore, 2020 is likely to be another year of muted awards.

Shubham Jain, Senior Vice President, Corporate Ratings, ICRA said, "As on March 2020, 16,219 km of BMP (around 47 percent of BMP) was pending to be awarded. We expect the awards to remain in the range of 3,000-3,200 km in FY2021 and increase thereafter once NHAI completes its proposed fund raising through infrastructure investment trust.

"With pick up in awards starting FY2022, the Bharatmala awarding activity is expected to get completed by FY2023 only," he added.

The Cabinet Committee on Economic Affairs (CCEA) approved the BMP Phase-I along with other programmes on October 24, 2017.

A total of around 34,800 km roads are being considered in BMP Phase-I, which also includes 10,000 km of balance road works under NHDP.

Estimated outlay for BMP Phase-I was Rs 5.35 lakh crore spread over five years between 2017-2022, as per the initial plan.

As per the revised funding plan dated September 2019, the dependence on market borrowings for BMP increased substantially by 72 percent to Rs 3.59 lakh crore, while the budgetary allocations and contribution from central road and infrastructure fund were reduced by 46 percent to Rs 1.83 lakh crore.

Consequently, borrowings of NHAI are expected to increase significantly and peak by FY2023 or FY2024; at the same time, NHAI's asset monetisation also remains critical to meet the funding requirements of BMP Phase-I, ICRA said.

"About 21 percent of BMP execution is completed as on March 31, 2020. Given the limited labour availability and productivity loss due to COVID-19, ICRA expects the pace of execution for FY2021 to remain low at 3,104 km and thereafter witness an increase by 10-15 percent in FY2022 before peaking in FY2024. The pending works are expected to be completed by FY2026," Jain said.

Unlock 1.0 rules for Andhra Pradesh: What is allowed, what is not

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The Centre has extended Lockdown 5.0 till June 30 and stated that Unlock 1.0 will be undertaken in phases through the month to slowly revive economic activity after the prolonged shut down since March 25 due to coronavirus pandemic.

Particulars of the easing have been left up to the states, especially in containment zones. Here are the details for Andhra Pradesh:

> Lockdown in containment zones extended till June 30

> Phased re-opening or Unlock 1 in non-containment zones to be done as per MHA guidelines

> Fines to be imposed for spitting in public spaces

> Wearing of mask and social distancing made mandatory in public spaces

> Unlock 1: Places of worship, hotels and restaurants re-opened from June 8

> Unlock 1: Hospitality services and shopping malls also re-opened from June 8

> Plans for Phase II: Decision on re-opening educational institutes to be taken in July

> Plans for Phase II: Secondary School Certification (SSC) exams or 10th board exams to be held from July 10

> Plan for Phase III: International air travel, theatres, gymnasiums, swimming pools, entertainment parks, bars, auditoriums, assembly halls, and social, political, sports, entertainment, academic, cultural and religious functions may be allowed after assessment

> Trains, flights and bus services resume – all passengers to be screened, must enrol to Spandana portal, exemptions in case of death of relative, for medical professionals and other officials

> Restrictions on inter-state transport to continue, symptomatic travellers from Delhi, Madhya Pradesh, Rajasthan, Gujarat, Maharashtra and Chennai to be quarantined for seven days and tested again; asymptomatic travellers to be quarantined in native districts and tested after seven days. Those testing positive to be moved to COVID-19 hospitals

> Those above 60 years and below 10 years of age, pregnant, lactating and terminally ill to be home quarantined. Daily visits by ASHA workers.

National Pension System: Here are seven reasons why this savings instrument stands out

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The National Pension System (NPS) is a voluntary-defined contribution pension system in India. NPS like PPF and EPF, is an EEE (Exempt-Exempt-Exempt) instrument in India.

It is administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

Here are the 7 benefits of National Pension System (NPS)

Flexibility: Subscribers has control over the choice of asset class (Active or Auto choice) and the Pension Fund Managers (PFMs) or Pension Funds who manages the investments. Subscribers can switch the Pension Fund once in year and the investment option or asset class twice in a year.

Dual benefit of Low Cost and Power of compounding: NPS carries the benefit of being the lowest cost pension product in the world. The overall costs in NPS are the lowest due to economies of scale in operations of the system architecture.

Also, accumulation of the retirement corpus over a period of time gets accelerated on account of the compounding effect and nominal charges borne by the subscriber.

Tax benefits:

(a) On subscriber’s contribution: Own contributions are eligible for tax deduction u/s 80 CCD (1) upto 10% of basic + DA or up to 20% of Gross Income for self-employed within the overall ceiling of Rs. 1.50 Lacs u/s 80 CCE

(b) On employer’s contribution: Contributions made by employer are allowed as deduction u/s 80CCD(2) while computing total income of the employee. However, the amount of deduction is restricted to 14% of salary in case of Central Govt. employees and 10% in any other employees (otherwise 20% of gross total income).

NPS provides additional tax benefit u/s 80CCD 1(B) on contribution in NPS account subject to a maximum investment of Rs 50,000. Thus, investing in NPS, a subscriber can get a tax benefit of Rs 2 lakh (1,50,000+50,000).

Safety (Regulated & Monitored): NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), which is established through a statute. PFRDA prescribes the investment norms and monitors the performance of the entire system.

Simple and transparent: NPS is simple to open and operate. A subscriber can open an account with any one of the Point of Presence or through eNPS and get a Permanent Retirement Account Number (PRAN).

 Portable: The NPS account (PRAN) is unique and the subscriber can transfer the pension account across employment and locations while changing his/her employer or on relocation.

Online Access: Subscriber can access and operate the pension account online through web based interface or through the mobile application.

Why RBI policy is now a non-event for the common man

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A closer look at the minutes of the monetary policy committee (MPC) released on Friday shows deepening worries among the members about the lack of monetary policy transmission in the banking system, which makes the monetary policy ineffective.

“For monetary policy actions to transmit fully to the credit market, it is important that banks remain well capitalised. Only banks with strong balance sheets could be expected to support lending activity as and when credit demand picks up,” said Janak Raj, one of the MPC panel members.

India’s banking system is dominated by state-run banks which control 60 percent of the assets. Government, the majority stakeholder in these banks, has not allocated any capital this fiscal year for these banks. Banks require capital mainly for two reasons.

To set aside money against risky loans (provisions) and to lend afresh. Chetan Ghate, another MPC member, too has clearly said that rate cuts do not work unless banks restart lending.

“For rate cuts to work, banks have to lend. Despite the large number of steps taken to improve the liquidity and functioning of credit markets, as of April 24 (the most recent data available), non-food credit growth on a y-o-y basis was at 6.5 percent on May 8, 2020, lower than 7.2 per cent on April 10, 2020,” Ghate said.

In effect, the MPC members have sent a clear signal to the government on the recapitalisation issue of PSBs.

Capital is not the only worry. Lack of demand on the ground is a bigger problem. Companies do not have the confidence to borrow more in a scenario where consumer demand is low.

The recent RBI consumer surveys point to a sharp fall in consumer sentiments. How can the demand situation improve? Monetary policy has only limited tools available to address the demand problem. Economists, for long, have pointed out that fiscal measures should be aimed at demand creation on the ground. This is absent so far.

Warning on growth situation

Lack of monetary transmission is a bigger worry in the context of sharp slowdown in economic growth. The RBI top brass has used strong words to describe the growth situation. For instance, governor Shaktikanta Das said the growth outlook has deteriorated sharply.

“Economic activity, however, is expected to contract in the first half of the year before recovering gradually in the second half of 2020-21 on the back of various fiscal, monetary and liquidity measures undertaken in the recent period,” said Das.

“Overall, the GDP growth in 2020-21 is estimated to remain in negative territory. The pace of recovery will be contingent upon the containment of the pandemic and how quickly social distancing/lockdown measures are phased out,” Das said.

Overall, this is the second statement from the governor on likely contraction in the economic growth due to Covid-19. In his last monetary policy statement Das first suggested that growth is likely to remain negative this year. “Given all these uncertainties, GDP growth in 2020-21 is estimated to remain in negative territory, with some pick-up in growth impulses from H2: 2020-21 onwards,” Das said.

Das committed an accommodative policy going ahead. “I also vote for persevering with the accommodative stance of monetary policy,” the governor said. Not just Das, his deputy Michael Patra too have flagged major threats to growth on account of pandemic.

Patra, who is in charge of monetary policy at the central bank, said: “My view is that the damage is so deep and extensive that India’s potential output has been pushed down, and it will take years to repair,” Patra said.

“The MPC has decided to remain accommodative as long as it is necessary to revive growth and mitigate the fallout of COVID-19.,” Patra said.

The MPC has reassured the government that it is willing to cut rates further if the situation warrants. But for these rate cuts to reflect on the ground, government needs to make sure banks are well capitalised. According to a BofA Securities report, Government-owned banks’ non-performing assets (NPA) could go up by 2-4 percent of the credit in the present economic environment. This, BofA says, will result in a recapitalisation requirement of $7-15 billion (Rs 1.14 lakh crore at the upper end).

How can a cash-starved government fund these banks? With revenues falling short of expectations and disinvestment not happening, the government is already walking a tight rope on fiscal discipline (expected around 5.5 percent this year).

The decision to borrow Rs 4.2 lakh crore additional itself was part of an emergency measure to cover the likely revenue losses. But PSB’s capital requirement cannot be ignored whether it happens through recap bonds or, as BofA suggests, by tapping RBI’s revaluation reserves.

If banks are reluctant to pass on the rate cuts to the end borrower, monetary policy actions, no matter how big is the quantum of the rate cut, do not have much impact. Till banks start lending,  RBI policy is a non-event for common man.

GST Council to meet on June 12

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The GST Council is scheduled to meet on June 12 and likely to discuss the impact of the COVID-19 pandemic on tax revenues, sources said. The 40th meeting of the GST Council, headed by Finance Minister Nirmala Sitharaman and comprising state counterparts, will be held via video conferencing.

The meeting would discuss the impact of the pandemic on revenues of the Centre and states and ways to bridge the revenue gap, sources said.

Faced with dismal collection and extended deadline for filing returns, the government has refrained from releasing the monthly GST revenue collection figures for the months of April and May.

The Council will also discuss ways to garner funds to compensate states for the revenue loss due to Goods and Services Tax (GST) implementation.

In the previous council meeting on March 14, 2020, Sitharaman had said that the Centre will look into the legality of GST Council borrowing from market to meet the compensation requirements.

With states raising the issue of shortfall in compensation kitty, there were discussions on resorting to market borrowing to meet the revenue guarantee to states.

Under GST law, states were guaranteed to be paid for any loss of revenue in the first five years of the GST implementation from July 1, 2017. The shortfall is calculated assuming a 14 per cent annual growth in GST collections by states over the base year of 2015-16.

Under the GST structure, taxes are levied under 5, 12, 18 and 28 per cent slabs. On top of the highest tax slab, a cess is levied on luxury, sin and demerit goods and the proceeds from the same are used to compensate states for any revenue loss.

The Council would also discuss waiver of late fees for non-filing of GST returns for the period August 2017 to January 2020.

Forex - Dollar Gains on China Tensions; Euro Awaits ECB

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The dollar has gained some buyers in early European trade Thursday, as tensions between China and the U.S. flared up again overnight, but gains against the euro have been limited ahead of the European Central Bank meeting.

At 3:10 AM ET (0710 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 97.502, up 0.3%. However, the index is still down about 5% from its March peak, when the coronavirus pandemic had caused a sprint to this safe haven.

Elsewhere, USD/JPY rose 0.1% to 109.03, GBP/USD fell 0.3% to 1.2533 and EUR/USD dropped 0.2% to 1.1210.

Overnight, the U.S. administration suspended flights into its country by Chinese airlines effective from June 16, reciprocating after China had barred American carriers from entering its airspace.

Relations between the two countries soured after China’s approval of the enactment of national security laws in Hong Kong and Macau last month.

Still, EUR/USD remains above the 1.12 level that it broke through on Wednesday for the first time since mid-March. 

The currency has been bolstered by hopes for European Union-wide fiscal support measures after Germany last month threw its weight behind the idea of a European Union recovery fund, breaking away from its long-held tradition to resist moves towards fiscal integration in the currency bloc.

This prompted the European Commission to propose a 750 billion euro recovery fund, with the money divided into 500 billion euros given to EU countries as grants and the remaining 250 billion euros would be available as loans. 

The European Central Bank had been undertaking a lot of the heavy lifting needed to support the region’s weakest economies prior to this, and is still expected to offer up more largesse later Thursday.

"I suspect the market has already priced in an increase of about 500 billion in the PEPP and in the near-term, there is risk of a correction," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

"The market could react positively if the ECB expands the target of its bond purchase or scrap its limit on each country. But in terms of the total size, it is hard to expect a positive surprise now," he said.

The ECB delivers its policy decision at 1145 GMT and ECB President Christine Lagarde holds a news conference at 1230 GMT.

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Dollar Up as U.S.-China Tensions Escalate

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The dollar was up on Thursday morning, with investors turning to the safe-haven asset as U.S.-China tensions flared up overnight.

In its latest move, the U.S. suspended flights into the U.S. by Chinese airlines effective from June 16 after China barred American carriers from re-entering China.

Relations between the two countries soured after China approved the enactment of national security laws in Hong Kong and Macau last month.

Hong Kong’s Legislative Council has started voting on national anthem bill, a precursor to the national security laws.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies gained 0.21% to 97.465 by 12:12 AM ET (5:12 AM GMT).

The USD/JPY pair was up 0.11% to 109 and the USD/CNY pair was up 0.20% to 7.1260.

The AUD/USD pair lost 0.33% to 0.6896. Australia’s Bureau of Statistics said earlier in the day that retail sales for April fell by a seasonally adjusted 17.7% in April.

The bureau also said that GDP fell 0.3% during the first quarter of 2020 on Wednesday.

The NZD/USD pair slid 0.09% to 0.6413 and the GBP/USD pair lost 0.28% to 1.2536.

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Only 5% Asia Pacific infra firms highly exposed to COVID-19 disruptions: Moody's

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Barely 5 percent of the rated project and infrastructure companies in Asia Pacific have high exposure to coronavirus disruptions, Moody's Investor Service said on Wednesday. Pressure has eased for Chinese toll roads, while a small number of utilities face moderate exposure, it said.

A high proportion (67 percent) of rated project and infrastructure companies in Asia Pacific continue to have low exposure to the coronavirus-related disruptions, supported by their essential nature and predictable cashflows, Moody's Investors Service said in a statement.

“The number of companies with high exposure has reduced in recent months, particulary the Chinese toll road sector following the end of the toll-free period and with recovering traffic volumes,” said Arnon Musiker, senior vice president and manager at Moody's.

Airports now make up most of the high exposure category, he said.

Whereas Moody's in April estimated 9 percent of project and infrastructure companies had high exposure to coronavirus disruptions, this number has now declined to 5 percent.

"On the other hand, a small number of power utilities now have moderate exposure to coronavirus disruption, given rising pressure from falling power prices and lower demand, which is only partly offset by lower fuel costs," the statement said.

Following the reclassification of these toll roads and utilities, the number of companies with moderate exposure has increased to 28 percent from 23 percent in April.

“Moreover, a limited number of projects with exposure to commodity risk – particularly energy-related – also face rising challenges following the recent material fall in oil, gas and coal prices,” Musiker said.

Still, the majority – 67 percent – of companies face low exposure, and include regulated utilities, projects and public-private partnerships, the statement said adding, this risk exposure for regulated networks remains low notwithstanding temporary tariff relief measures instituted by certain companies, given their temporary nature and immaterial effect on metrics.

Indian Stock Market - Art of Stock Investing

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Manikandan Ramalingam

Its a book that will break the common mis-conception, that Stock Investing is gambling.

I love investing in companies. I started investing way back in 2004, just like everyone else with Zero knowledge. It took me nearly 7 years to learn all critical basics, that is needed to succeed with investing on my own. In this book, you would learn those critical basics in less than a day.

If you think you know everything about stock markets & still making losses, you definitely need to read this book. Its a book, for beginners, amateurs & expert investors. I guarantee you one thing. Your perspective towards Stock Investing will change radically.

Main Topics Discussed in the Book

  • Introduction
  • Why & How Stock Markets Came Into Existence?
  • How & Why Does A Share Price, Rise & Fall?
  • Some Basic Terms of Stock Markets
  • Market Capitalization
  • Earnings Per Share (EPS) & (P/E)
  • Where Can I Check All These For A Company?
  • Art Of Picking Worthy Stocks
  • Power Of Compounding
  • 10 Stock Recommendations - Evergreen Stocks with detailed reports
  • Common Mistakes To Stay Away From
  • Better Times To Buy & Best Times To Sell
  • Gold ETF's
  • Some Personal Advice
  • What About Mutual Funds?
  • Summary or Re-cap of the Book
  • Your Feedback
  • Disclaimer

Dollar Retreats Over Increased Hopes of Global Economic Recovery

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The U.S. dollar was down on Wednesday morning in Asia after increasing optimism over a global economic recovery from COVID-19 increased investor risk appetite.

Investors focused on countries continuing to loosen lockdown measures and restarting their economies, despite the ever-growing number of COVID-19 cases and no cure.

There are almost 6.4 million global cases of the virus as of June 3, according to Johns Hopkins University.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies fell 0.24% to 97.427 by 11:49 PM ET (4:49 AM GMT) as investors retreated from the safe-haven asset.

“The U.S. dollar is generally weak... The economy recovery story is the main factor.

The USD/JPY pair was down 0.05% to 108.61. The yen is also considered a safe-haven asset.

The USD/CNY pair rose 0.16% to 7.1107. China’s Caixin/Markit services Purchasing Managers’ Index (PMI) reading for May was 55, indicating a return to growth for the country’s services sector for the first time since January.

The AUD/USD pair gained 0.66% to 0.6939 even after the Bureau of Statistics said that Australia’s GDP fell 0.3% during the first quarter of 2020.

Daiwa Securities’ Ishizuki remained optimistic about the AUD, saying that “The Australian dollar has a lot of room to run because there are still a lot of shorts that need to be covered.”

The NZD/USD pair rose 0.71% to 0.6413 and the GBP/USD pair gained 0.31% to 1.2588.

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