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The government on August 8 introduced the Electricity (Amendment) Bill, 2022 in the Lok Sabha amid protests by opposition parties.

Power minister RK Singh said the bill would be sent to a standing committee for detailed discussion. Moneycontrol has exclusively reported on August 5 that the government is likely to introduce the much-awaited Electricity (Amendment) Bill 2022, which aims to streamline the payment framework, empower regulators and encourage competition in the sector, this week.

The opposition parties protested against the Bill, citing that it will allow several power companies to distribute powers in any license area. They also said that it was against the interest of farmers.

Responding to the opposition, Minister Singh said that the bill will be discussed in detail in the standing committee. He also said that the bill makes no provision to stop electricity subsidies for farmers. 

The Bill proposes changes to allow operation of more than one power distributor in a supply area, which will give consumers the option to choose electricity suppliers and encourage competition. The minister said that this was first proposed in the 2003 bill.

The proposed amendments are to the Electricity Act, 2003 which was enacted to consolidate the laws relating to the generation, transmission, distribution, trading, and use of electricity and generally for taking measures conducive to the development of electricity.

“The amendments to the Act are also necessary in view of the importance of green energy for our environment in the context of global climate change concerns and our international commitments to increase the share of renewable energy. Further, it has become necessary to strengthen the regulatory mechanism, an adjudicatory mechanism in the Act and to bring administrative reforms through improved corporate governance of distribution licensees," the government said.

The Bill proposes that power distribution licensees will be allowed to use the networks of other licensees. This will boost competition as it will help new distributors to overcome infrastructure hurdles and also improve the efficiency of the power distribution network. 

The government also hopes to insert a new section that will enable the management of power purchase and cross-subsidy in case of multiple distribution licensees in the same area of supply.

The Bill also proposes to enable regulators to fix a minimum tariff ceiling to discourage unhealthy pricing wars among distributors and a maximum ceiling to ensure consumers are protected against price increase shock.

Among other amendments, the government is also making changes to strengthen the functioning of the National Load Despatch Centre for ensuring the safety and security of the grid and for the economic and efficient operation of the power system in the country.

Meanwhile, All  India Power Engineers Federation (AIPEF) said that lakhs of electricity employees and engineers from across the country have joined hands to observe a protest demonstration against the Electricity (Amendment) Bill 2022. The association is against the privatization of power distribution and believes that the bill will negatively impact the farmers and also lead to a rise in power bills for households. The association said in a statement that power sector employees and  engineers exercised their democratic right by boycotting their official duties and holding gate meetings in all the union territories and states like Jammu and Kashmir, Haryana, Uttar Pradesh, Maharashtra, Gujarat, Assam, Telangana, Tamil Nadu, Andhra Pradesh, Kerala, West Bengal, Karnataka, Chhattisgarh, Ladakh, among others. 

India’s plan to expand its corporate bond market faces an unexpected impediment because the regulator is considering tightening control of trading platforms that allow investments in company debt in just a few clicks.

While the proposed framework is designed to protect investors and is therefore being welcomed by some, a few of the proposals by the Securities and Exchange Board of India could actually prove counterproductive and hurt liquidity, according to experts who spoke to Bloomberg. That’s because the sale of unlisted debt would be banned, platforms would be forbidden to sell privately placed corporate notes on to non-institutional investors soon after acquiring them, and trades would need to be settled via routes that today are not commonly used.

Market participants have until Aug. 12. to give officials their input on the matter.

“The trade off is very often between creating depth in the market and ensuring investor protection,” said Shilpa Mankar Ahluwalia, a partner at law firm Shardul Amarchand Mangaldas & Co. “The regulator ideally needs to strike a fine balance between investor protection and innovation, also recognizing that online bond platforms have the potential to widen access and deepen the corporate bond market.”

Opening up India’s corporate bond market is an important part of Prime Minister Narendra Modi’s pledge to almost double the size of the economy to $5 trillion by 2025. As it stands, the local-currency bond market offers easier access only for the top-rated issuers, with big local banks and brokers doing deals based on long-standing relationships.

Bond platforms, either start-ups or businesses backed by banks or brokers, have boomed in India with more than a dozen financial technology platforms emerging in the last three years, competing for a share of the $1.9 trillion market for time deposits. They mainly target individual investors with a promise of much higher interest rates by putting money into company debt, and allow for minimum investments that can be as low as 10,000 rupees ($126).

Easy access through an interface similar to that of online shopping websites and the prospect of higher returns can be appealing to novices. The platforms, though tiny, have grown more than six times over two years with debt mainly sold to non-institutional investors, Sebi said in a consultation paper last month.

Six-Month Lock-in

• Sebi proposes to bar platforms from selling privately placed corporate bonds to non-institutional investors within six months of allotment
• The proposal comes after the regulator found that in some cases the entire privately placed issue was sold to more than 200 investors within 15 days of allotment, making it more akin to a public issue
• “The regulator is concerned about private placements becoming shadow public offerings via distribution on online platforms given that the rules, compliance and disclosure requirements for a public offering are much more stringent and detailed,” said Shardul Amarchand’s Ahluwalia
• But Ankit Gupta, who founded BondsIndia.com, said institutions would be required to maintain a huge balance sheet to buy and hold notes for six months
• Because of this, Gupta said there’s a risk of platforms’ ability to participate in primary issuance will be limited, thereby affecting liquidity. He will reach out to the regulator for more clarity.

Trade Settlement

• Sebi has proposed transactions on these platforms be settled either through the debt segments of exchanges or through request for quote platforms
• The regulator found that in some cases these platforms accepted funds directly from the client, bypassing procedural norms
• But market participants argue the two routes suggested by Sebi aren’t regularly used by bigger participants to settle over-the-counter trades
• “In cases where platforms are settling trades through clearing corporation, the party that buys bonds credits money in clearing corporation’s account directly and the seller supplies the debt securities,” said Aditi Mittal, co-founder at IndiaBonds.com and director at one of India’s leading broker A.K. Capital Services Ltd., adding only if the deal matches, respective accounts are debited and credited
• “This system is working beautifully as nothing is paid into the platforms’ account. Hence, the concern regarding tweaking the settlement structure needs to be discussed and deliberated,” she said.

India’s currency in circulation has increased by only around Rs 500 billion in the first four months of this financial year, which is nearly half the pace of the same period a year ago.

“Economic activity is completely back to pre-pandemic levels, and hence there is hardly any need for panic-driven cash withdrawals, which is leading to a drop in cash in circulation,” a trader with a state-run bank said.

The rise in the cash in circulation for April-July stood at Rs 508 billion ($6.38 billion), as compared to Rs 928 billion for the similar period last year and a mammoth Rs 2.25 trillion in 2020-21, the peak of lockdown, data from the Reserve Bank of India showed. The currency in circulation had jumped by over Rs 4 trillion in 2020-21, while the increase tapered to Rs 2.80 trillion in the last financial year, and market participants ex­pect another drop in the current year.

Meanwhile, India’s banking system liquidity surplus remains around Rs 2 trillion, and Kotak Mahindra Bank expects the surplus to ease to around Rs 1.50 trillion by the end of this week.

The Standing Deposit Facility (SDF) rate is now at 5.15 per cent, while the Marginal Standing Facility (MSF) Rate stands at 5.65 per cent. The SDF represents the lower band of the interest rate corridor and the MSF the higher.

A 'Business Standard' poll on Monday predicted a 35-50 basis-point increase in the repo rate at this week’s policy statement. The benchmark policy repo rate is now at the highest since August 2019.

As in its June policy statement, the MPC said this morning the rate-setting panel was focused on the withdrawal of accommodation. Given that the MPC is on a policy-tightening path, some economists had called for a shift in stance to neutral or calibrated tightening.

The latest rate action takes the total tally of rate hikes since May to 140 basis points. Accounting for the introduction of the SDF at a higher rate than the reverse repo rate in April, effective rate hikes stand at 180 bps so far in 2022.

“Spillovers from geopolitical shocks are imparting considerable uncertainty to the inflation trajectory. More recently, food and metal prices have come off their peaks,” said the MPC’s statement.

“International crude oil prices have eased in recent weeks but remain elevated and volatile on supply concerns even as the global demand outlook is weakening. The appreciation of the US dollar can feed into imported inflation pressures.”

Consumer Price Index (CPI) inflation has remained above the upper band of the RBI’s mandated 2-6 per cent range for six straight months up to June 2022.

The June inflation print was at 7.01 per cent. The RBI’s medium-term target for CPI inflation is 4 per cent.

Upside risks to domestic inflation increased significantly after Russia’s invasion of Ukraine in late February led to a sharp rise in global commodity prices.

ALSO READ: Rate sensitive shares trade firm as RBI hikes repo rate by 50 bps to 5.4%

The RBI retained its CPI inflation forecast of 6.7 per cent for the current financial year, with risks evenly balanced. The CPI forecast assumes the average price of crude oil for the Indian basket at $105 per barrel.

CPI inflation is seen at 7.1 per cent in July-September, 6.4 per cent in October-December and 5.8 per cent in January-March. The price gauge is seen at 5 per cent in the first quarter of 2023-24.

The RBI’s forecast point to the likelihood of the MPC failing to meet the mandate of ensuring that average inflation does not sustain above the target band for more than three successive quarters. In the event of failure, the RBI must provide an explanation to the government.

The MPC on Friday retained the real GDP growth forecast of 7.2 per cent for the current financial year. GDP growth for the first quarter of the next financial year is seen at 6.7 per cent.

Bond prices fell sharply after the policy statement with the yield on the 10-year benchmark bond climbing 10 basis points to 7.26 per cent. The bond market had hoped for a rate hike of 35 bps along with signals that the RBI may temper future rate hikes.

The rupee appreciated sharply versus the US dollar and was last at 79.07 per dollar compared to 79.47 per dollar at the previous close on Thursday.

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Petrol and diesel prices held steady on August 5, the latest price notification issued by fuel retailers showed. Fuel prices have stayed unchanged for more than a month.

Petrol in Mumbai is being sold for Rs 106.31 per litre and diesel for Rs 94.27. Petrol in Delhi costs Rs 96.72 and diesel Rs 89.62 a litre. Petrol and diesel are priced at Rs 102.63 and Rs 94.24 in Chennai and at Rs 106.03 and Rs 92.76 in Kolkata respectively.

Oil marketing companies are reportedly incurring a loss of Rs 13.08 a litre on petrol and Rs 24.09 on diesel. India meets 80 percent of its fuel needs through imports.

Oil prices extend losses on demand worries

Oil prices extended losses on Friday, after hitting their lowest since before Russia's February invasion of Ukraine in the previous session, as the market fretted over the impact of inflation on global economic growth and demand.

Rs 94,800-cr gains from windfall tax an overestimation: Govt sources

The government would have earned less than Rs 48,000 crore in the nine months of the current fiscal year (2022-23, or FY23) if the windfall tax rates remained constant. It termed the figure of Rs 94,800 crore floating around as an ‘overestimation’, said two senior government officials.

Strong signal: India likely to be among top three global markets for 5G

Global telecom gear makers say that they expect India to account for about 15 per cent of the worldwide market for the 3.5 GHz-based 5G radio and network. The vendors are assuming that the telcos will be able to provide 5G coverage to over 50 per cent of the geographical area of the country in the next two years. Read more

Amended Energy Conservation Bill seeks to build carbon credit market

In line with the climate commitments made by India at the 26th session of the Conference of the Parties, commonly called COP26, the Centre has introduced amendments to its the Energy Conservation Act, 2001, to meet the targets embracing green fuels, industrial energy efficiency, and build the country’s own carbon credit market. Read more

Airtel gears up for 5G roll-out this month; partners with Ericsson, Nokia

Bharti Airtel on Wednesday signed agreements with global telecom equipment majors Ericsson, Nokia, and Samsung to commence the deployment of 5G services across the country this month. The company is likely to start with Delhi, Hyderabad, Bengaluru, and Pune. The launch could coincide with the Independence Day, sources indicated. Read more

US Fed shrinking balance sheet at a much slower pace than planned earlier

The stock market's worst fears of a "too" hawkish monetary stance by the US Federal Reserve has turned out to be unfounded. The American central bank is shrinking its balance sheet at a much slower pace than planned earlier which has kept the liquidity conditions in the market much more benign.

After two consecutive years of fiscal stress, states have again resumed following the path of fiscal consolidation by augmenting revenue mobilization and containing expenditures,” Sacchidananda Mukherjee, Associate Professor at the New Delhi-based institute, said.

Given the growth prospects of gross state domestic product in the current financial year, overall revenue side of state budgets seems realistic as they have set cautious targets in revenue mobilization, he added.

States’ finances had come under significant stress over the last few years as the pandemic stalled economic activities, hurting revenue collections. The consolidated fiscal deficit of 18 major states rose to 3.89 percent of aggregate GSDP in 2020-21 from 2.56 percent in 2019-20 but the deficit is expected to fall to 3.29 percent this financial year after slipping to 3.39 percent last fiscal.

Meanwhile, consolidated public debt of these states is pegged to rise to 23.93 percent this fiscal from 23.66 percent last year, 20.53 percent in 2019-20 and 19.66 percent in 2018-19.

With rising economic growth, revenue mobilization has improved, helping states boost spending in the last financial year.

States budgets were also cushioned over the last two fiscals they continued to receive GST compensation which helped them contain fiscal deficits. States also received back-to-back loans in lieu of shortfall in GST compensation fund from the Centre during 2020-21 and 2021-22 which helped them to contain public debt.

A dozen states have sought an extension of GST compensation beyond the deadline of June 30 this year as they stare at a potential shortfall in revenues. The Centre has acknowledged their suggestion but has not been in favour of such a dispensation. The GST compensation cess has been extended to March 2026 to repay the special borrowings over the last two fiscal years that were used to plug the shortfall in the GST cess collections.

Interestingly, states have taken into account fiscal implications of the end of GST compensation regime in the budget estimates of the current financial year, according to the NIPFP paper.

“The impact of end of GST compensation regime on state finances will vary across states and it will be depending on state-specific dependence on GST compensation to finance budgeted expenditures,” it added.

Home buyers should move forward to purchase a property only if they are absolutely sure that it is free from legal or financial trouble. But how do we know if there are any claims or charges against the property? An Encumbrance Certificate will certainly help in this regard.

What is an encumbrance certificate?

An Encumbrance Certificate tells the buyer if the property is clear of charges. These charges could be a mortgage loan, liens, a third party sale or multiple transactions on the same property. After knowing the encumbrance history of the property, the buyer can safely proceed with the transaction.

Why do we need an encumbrance certificate?

An encumbrance certificate will caution the buyer beforehand about the property. For instance, the buyer might not be sure about the third party rights on the property or has doubts about the seller. He or she can then get an encumbrance certificate to verify if the property is free of litigation.

Is it mandatory to get an encumbrance certificate?

No, it is not mandatory to get an encumbrance certificate. However, if the buyer wants to apply for a home loan or if he or she would like to use the property as collateral to get a loan, the lender might ask for an Encumbrance Certificate.

How and where can we get it?

The encumbrance certificate is issued by the Registrar of Assurances or the Sub-Registrar's office where the property has been registered. One needs to submit an application for an encumbrance certificate by paying a nominal fee. The applicant may also specify a certain time period for which he needs the certificate. It is issued usually within 15-30 days.

If the property has any financial or legal claims against it, the encumbrance certificate will reveal it. However, if the property is free of encumbrances, a nil encumbrance certificate is issued.