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<keyword id="46436" type="General" weightage="100" keywordseo="rec" source="Orion">REC</keyword> Ltd has been accorded the status of a 'Maharatna' central public sector enterprise (<keyword id="175867" type="General" weightage="50" keywordseo="cpse" source="Orion">CPSE</keyword>), thus giving it greater operational and financial autonomy. An order to this effect was issued by the Department of Public Enterprises, under the Ministry of Finance, on Wednesday. Incorporated in 1969, REC is a non-banking finance company (NBFC), focussing on power sector financing and development across <keyword id="3658" type="General" weightage="50" keywordseo="india" source="Orion">India</keyword>. It comes under the aegis of Power Ministry. The granting of 'Maharatna' status to REC will impart enhanced powers to the company's board while taking financial decisions, a company statement said. The board of a 'Maharatna' CPSE can make equity investments to undertake financial joint ventures and wholly-owned subsidiaries and undertake mergers and acquisitions in India and abroad, subject to a ceiling of 15 per cent of the net worth of the CPSE concerned, limited to Rs 5,000 crore in one project. The board can also structure and implement schemes relating to personnel and human resource management and training. With this, REC can also enter into technology joint ventures or other strategic alliances among others. Chairman and Managing Director of REC, <keyword id="765" type="General" weightage="50" keywordseo="vivek" source="Orion">Vivek</keyword> <keyword id="15053160" type="General" weightage="50" keywordseo="kumar-dewangan" source="Orion">Kumar Dewangan</keyword> said that REC achieved this feat owing to its adaptability, resilience and consistent performance even during the global Covid-19 pandemic. "In FY22, REC made its highest ever net profit of Rs 10,046 crore and reached a net worth of Rs 50,986 crore, owing to its cost-effective resource management and strong financial policies," he said. REC (earlier known as <keyword id="64468" type="General" weightage="50" keywordseo="rural-electrification-corporation" source="Orion">Rural Electrification Corporation</keyword>) has contributed towards achieving village and household electrification in the country. Some key Maharatna CPSEs in India are ONGC, NTPC, Indian Oil Corporation and BHEL, among others. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/rupee-slumps-51-paise-to-all-time-low-of-80-47-against-us-dollar/articleshow/94367387.cms">Rupee slumps 51 paise to all-time low of 80.47 against US dollar</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/dot-proposes-fee-penalty-waiver-under-new-telecom-rules/articleshow/94367368.cms">DoT proposes fee, penalty waiver under new telecom rules</a>

REC gets 'Maharatna' company status

In a bid to raise Rs 10,000 crore, the <keyword id="87432" type="ORGANIZATION" weightage="20" keywordseo="National-Highways-Authority-of-India">National Highways Authority of India</keyword> (NHAI) is starting sale of tax-free bonds, thereby giving retail investors an opportunity to ensure steady returns. 
 
Investors, who will get 7.39-7.60 per cent interest on paper with 10-15 year maturities, will be able to invest up to 40 per cent of the total issue size. 
 
"We expect the 10-year (benchmark) yield will move towards 7.64 per cent from 7.78 per cent now. The subscription will go through easily," Deepak Panjwani, head of debt markets at GEPL Capital, told ET. 
 
NHAI is not new as NTPC, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) have also come out with such bonds at Rs 750 crore each.

NHAI rolls out attractive tax-free bonds
with 15-year maturities

<ul><li>With economic actvities resuming gradually across the country, the power consumption data may come as a breather for stocks in the power sector. </li><li>The power consumption in July 2020 was just 2.6% short of the demand exactly a year earlier.</li><li>Check out the latest news and updates on <a href="https://www.businessinsider.in/" data-type="tilCustomLink" target="_blank">Business Insider</a>.</li></ul>The slump in power consumption has narrowed to just 2.64% in July at 113.48 billion units (BU) indicating spurt in economic activity and raised hopes that it would touch normal level this month. Power consumption in July last year was at 116.48 BU, as per power ministry data. The latest data of the power ministry shows that power consumption has improved after government started giving relaxations for economic activities and onset of summer. "The slump in power consumption has narrowed down considerably to 2.6 per cent. It is expected to be at normal level (what it was last year in same month) during August. There could be growth in power demand in coming days with expansion in economic activities," an industry expert told PTI. This data may come as a breather for stocks in the power sector that have been reeling under the pessimism about their prospects in the near term. <table style="width: 226pt;"> </colgroup> <tbody><tr> <td class="xl63" style="height:15.0pt;width:141pt">Stock</td> <td class="xl63" style="border-left-width: initial; border-left-style: none; width: 85pt;">Last one month</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">NTPC</td> <td class="xl64" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-9.19%</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">Reliance Power</td> <td class="xl64" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-22.53%</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">Adani Power</td> <td class="xl64" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-1.67%</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">Tata Power</td> <td class="xl64" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">8.58%</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">JSW Energy </td> <td class="xl64" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-2.65%</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">CESC</td> <td class="xl64" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-11.65%</td> </tr> <tr> <td class="xl63" style="height: 15pt; border-top-width: initial; border-top-style: none;">Torrent Power </td> <td class="xl64" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">2.10%</td> </tr></tbody></table> The months of April, May and June this year witnessed low power consumption on account of lower commercial and industrial activities due to COVID-19-related restrictions. However, as the economy slowly reopened, peak power demand met, the highest energy supply during the day across the country, was at 170.54 GW in July, down 2.61% compared to a year ago. <table style="width: 247pt;"> </colgroup> <tbody><tr> <td class="xl65" style="height:15.0pt;width:48pt">Month</td> <td class="xl65" style="border-left-width: initial; border-left-style: none; width: 128pt;">Peak power demand met</td> <td class="xl65" style="border-left-width: initial; border-left-style: none; width: 71pt;">Growth (YoY)</td> </tr> <tr> <td class="xl65" style="height: 15pt; border-top-width: initial; border-top-style: none;">April</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">132.77 GW</td> <td class="xl68" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-25%</td> </tr> <tr> <td class="xl65" style="height: 15pt; border-top-width: initial; border-top-style: none;">May </td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">166.42 GW</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-8.82%</td> </tr> <tr> <td class="xl65" style="height: 15pt; border-top-width: initial; border-top-style: none;">June </td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">164.94 GW</td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-9.50%</td> </tr> <tr> <td class="xl65" style="height: 15pt; border-top-width: initial; border-top-style: none;">July</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">170.54 GW </td> <td class="xl66" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-2.61%</td> </tr></tbody></table> The return of industrial demand will bode well for power distribution companies like Tata Power, Adani Power and Reliance Power, as well as the ones owned by state governments, because they make wider margin on supply to industries than to households. This will ease the stress on the financials and the need for additional loans from companies like Power Finance Corporation and Rural Electrification Corporation of India. <table style="width: 226pt;"> </colgroup> <tbody><tr> <td class="xl65" style="height:15.0pt;width:141pt">Stock</td> <td class="xl65" style="border-left-width: initial; border-left-style: none; width: 85pt;">Last one month</td> </tr> <tr> <td class="xl66" style="height: 15pt; border-top-width: initial; border-top-style: none;">Power Finance Corp</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-3.75%</td> </tr> <tr> <td class="xl66" style="height: 15pt; border-top-width: initial; border-top-style: none;">Rural Electrification Corp</td> <td class="xl67" style="border-top-width: initial; border-top-style: none; border-left-width: initial; border-left-style: none;">-7.35%</td> </tr></tbody></table> An earlier estimate by ratings agency <a href="https://www.livemint.com/news/india/power-demand-to-shrink-3-4-this-fiscal-as-states-return-to-lockdown-icra-11595261269964.html" data-type="tilCustomLink" target="_blank">ICRA had projected a 5% to 6% decline</a> in nationwide demand for power for the full year ending March 2021. With inputs from PTI SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/policy/economy/news/e-invoice-under-gst-these-businesses-need-not-prepare-electronic-invoices-up-to-a-revenue-of-500-crore-any-more/articleshow/77299435.cms">E-invoice under GST: These businesses need not prepare electronic invoices up to a revenue of ₹500 crore any more</a><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/policy/economy/news/e-invoice-under-gst-these-businesses-need-not-prepare-electronic-invoices-up-to-a-revenue-of-500-crore-any-more/articleshow/77299435.cms"></a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/auto/news/marutis-july-sales-data-sparks-hope-for-other-carmakers/articleshow/77298443.cms">Maruti's July sales data sparks hope for other carmakers</a><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/auto/news/marutis-july-sales-data-sparks-hope-for-other-carmakers/articleshow/77298443.cms"></a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/here-are-all-the-startups-that-raised-funding-in-july/articleshow/77297781.cms">Here are all the startups that raised funding in July</a>

Watch out for stocks like Adani Power, Tata Power, PFC and REC as electricity consumption nears pre-COVID levels

(Image source- Reuters) <ul><li>The Indian Cabinet has approved the sale of a 52.63% stake in infrastructure financier <keyword id="112060" type="CITY" weightage="20" keywordseo="Rural-Electrification-Corp">Rural Electrification Corp</keyword> (REC) to another state-run power lender, <keyword id="77463" type="COMPANY" weightage="20" keywordseo="Power-Finance-Corporation">Power Finance Corporation</keyword> (PFC). </li><li>The deal will also see the transfer of management control to PFC, which is India’s largest lender to the power sector, and create a power financing behemoth. </li><li>The major impetus behind the deal is to help the Indian government meet its <keyword id="44532" type="PERSON" weightage="20" keywordseo="Disinvestment">disinvestment</keyword> target of ₹800 billion for the year and the <keyword id="6365485" type="DEFINITION" weightage="20" keywordseo="Fiscal-Deficit">fiscal deficit</keyword> target of 3.3% of GDP. It is expected to raise around ₹140 billion from the sale.</li></ul> In a bid to meet its disinvestment targets for the year, the Cabinet of the <keyword id="6354642" type="PERSON" weightage="20" keywordseo="Modi">Modi</keyword> government has <a href="http://www.pib.nic.in/PressReleseDetail.aspx?PRID=1554933">approved</a> the sale of a 52.63% stake in infrastructure financier Rural Electrification Corp (REC) to another state-run power lender, Power Finance Corporation (PFC). Once the transaction is completed, the government will retain a 6% stake in REC. The deal will also see the transfer of management control to PFC, which is India’s largest lender to the power sector, creating a power financing behemoth. Under the proposed terms of the deal, REC will become a subsidiary of PFC and retain its separate identity. The two government-owned financiers operate in the same space at the moment, which is why the idea of a <keyword id="42411" type="PERSON" weightage="20" keywordseo="Merger">merger</keyword> came about. REC largely focuses on providing financial support to companies engaged with power generation and transmission while PFC is primarily a non-banking financial company in the power infrastructure sector. The decision marks a reversal from an earlier proposal for REC to buy out PFC. That proposal was struck down because it was determined that it would be easier for PFC to raise the funds to finance the deal since it was larger. While the supposed objective of the sale is to help REC and PFC capitalise on synergies, raise funds with greater ease and provide cheaper financing to the sector, the main aim of the Indian government is to meet its disinvestment target of ₹800 billion for the year and fiscal deficit target of 3.3% of GDP. To date, it’s only raised <a href="https://www.livemint.com/Politics/sgsUZRUC78eXn6dVXYzk8M/Cabinet-approves-sale-of-govts-stake-in-REC-to-PFC.html?utm_source=scroll&amp;utm_medium=referral&amp;utm_campaign=scroll">₹327 billion</a> following the botched <keyword id="2573" type="COMPANY" weightage="20" keywordseo="Air-India">Air India</keyword> sale. The government is expected to raise as much as ₹140 billion from the sale of the majority stake in REC, which will be a much-needed boost to its coffers. However, the deal may come at a greater cost than intended. Power is one of the problem sectors of the Indian economy, as financiers to the sector are weighed down with over <a href="https://www.bloombergquint.com/business/india-banks-said-to-plan-resolving-19-billion-power-sector-debt#gs.9uL3Okw">₹1 trillion </a>in bad loans. Both REC and PFC suffer from shaky balance sheets, so their intended merger could exacerbate the financial strain at the latter. At the end of <a href="https://www.bloombergquint.com/business/cabinet-approves-sale-of-governments-stake-in-rec-to-pfc#gs.ZHw3cuc">September 2018,</a> PFC was saddled with ₹283 billion worth of gross non-performing loans while REC had around ₹204 billion of gross bad loans on its books, according to BloombergQuint. The deal could see PFC’s credit profile deteriorate further as it will have to raise a lot of debt capital to fund the purchase. To prevent this, it will probably have to liquidate some asset holdings. SEE ALSO: <a href="https://www.businessinsider.in/the-indian-government-is-trying-to-make-its-struggling-national-carrier-an-attractive-acquisition-target-by-selling-off-a-profitable-subsidiary/articleshow/66841033.cms">The Indian government is trying to make its struggling national carrier an attractive acquisition target by selling off a profitable subsidiary</a> <a href="https://www.businessinsider.in/indias-government-is-selling-a-minority-stake-in-the-nations-largest-coal-producer-as-it-tries-to-meet-its-disinvestment-targets-for-the-year/articleshow/66444890.cms">India’s government is selling a minority stake in the nation’s largest coal producer as it tries to meet its disinvestment targets for the year</a>

The Indian government is selling a majority stake in Rural Electrification Corp in a deal that will create a power financing giant

<keyword id="105181" type="COMPANY" weightage="80" keywordseo="Power-Grid-Corporation">Power Grid Corporation</keyword> (PGC) of India is back in the bond market as the state-owned electric utilities company has raised about Rs 3,000 crore by selling bonds for the first time in the fiscal year 2015-16 with banks interested in buying those bonds. 
 The triple-A rated company decided to raise funds following softening of the benchmark rate with banks jumping to buy bonds. India's largest lender <keyword id="6354731" type="CITY" weightage="80" keywordseo="State-Bank-Of-India">State Bank of India</keyword> (SBI) was quick to bet big on the blue-chip securities with four 15-year strip maturities, while the country's third largest private sector lender <keyword id="6355975" type="CITY" weightage="80" keywordseo="Axis-Bank">Axis Bank</keyword> also bought bonds worth as much as Rs 500 crore. 
	 

	SBI is said to have bought Rs 564 crore through its arm SBI Capital Markets, three people familiar with the matter told the Economic Times. 

	Bonds offered 8.40%, which was about 55 basis points higher than the sovereign benchmark security. 
	 

	A basis point is one hundredth of a percentage point. Strip bonds are those where investors are supposed to buy all securities with maturities up to 15 years at a uniform rate. Ahead of the Reserve <keyword id="6355303" type="CITY" weightage="80" keywordseo="Bank-of-India">Bank of India</keyword>'s June bi-monthly credit policy, markets are mostly expecting a 25-50 bps rate cut, which means bond yields would fall further pushing up prices. 
	 

	Banks can then sell their holdings in the secondary market for a profit, said one of the persons cited above. 
	 

	There were about 18 arrangers for the PGC issue. During mid-May, the 10-year benchmark bond yields rose to a high of 7.96% as prices fell. Accordingly, bond sellers shied away from the market as investors demanded higher rates after the yield spiked from 7.68% earlier in March. The benchmark yield is now hovering at its past level. PGC had last issued long-term bonds three months ago raising Rs 435 crore at an yield of 8.30%. Some frequent issuers include Exim Bank, Power Finance Corporation and <keyword id="64468" type="CITY" weightage="60" keywordseo="Rural-Electrification-Corporation">Rural Electrification Corporation</keyword>. They normally raise funds with ticket size as low as Rs 150 crore or as high as Rs 2,500 crore. All these government-owned companies are triple-A rated entities. <keyword id="109319" type="ORGANIZATION" weightage="80" keywordseo="Steel-Authority-of-India">Steel Authority of India</keyword> ( SAIL) and GIC <keyword id="100080" type="ORGANIZATION" weightage="80" keywordseo="housing-finance">Housing Finance</keyword> had deferred their bond offerings as investors demanded at least 25-30 basis points higher rates with five-year maturities. 
	 
	(Image: Indiatimes)

Power Grid raises Rs 3,000 crore by selling bonds

Ahead of Union <keyword id="2783177" type="UNKNOWN" weightage="100" keywordseo="Budget-2016">Budget 2016</keyword>, Finance Minister <keyword id="42575" type="PERSON" weightage="100" keywordseo="Arun-Jaitley">Arun Jaitley</keyword> hinted at major <keyword id="6612393" type="UNKNOWN" weightage="100" keywordseo="Banking-reforms">banking reforms</keyword> in the forthcoming Budget and assured foreign investors that retrospective <keyword id="6383566" type="PERSON" weightage="100" keywordseo="Taxation">taxation</keyword> will be a thing of the past. 

	With the Budget is scheduled for February 29, he did not elaborate on what the shape of the <keyword id="6354778" type="ORGANIZATION" weightage="100" keywordseo="Banking">banking</keyword> reforms will be.<o:p></o:p>

	“We have two tax disputes with large corporates. This we are working to settle amicably,” he said while speaking at the Asia Business Forum 2016 as part of ‘Make in India’ week in Mumbai on Sunday.<o:p></o:p>

	He guaranteed that legacy issues in the tax system will be sorted out.<o:p></o:p>

	The government, according to Jaitley, would maintain an arm’s length in the functioning of banks but will not divest completely from public sector banks.<o:p></o:p>

	“The country has not reached a stage where the government can completely exit its holding in the 27 public sector banks,” he said. <o:p></o:p>

	To professionalise the operations of state-run banks, which control over 70 per cent of the industry, he said that the government has already committed to bringing down its holding up to 51 per cent, he said.<o:p></o:p>

	While talking about the passage of the Goods and <keyword id="645517" type="COMPANY" weightage="100" keywordseo="services-tax">Services Tax</keyword> in the Rajya Sabha, Jaitley said he hopes to “negotiate through” in the coming days. 
	 
	On divestment, the Finance Minister blamed the choppy market for not being able to meet the target.<o:p></o:p>

	The windfall gains from declining oil prices have been used to create infrastructure, he said. However, there is a need to focus on investing in rural roads, electrification and irrigation to push up rural demand, which has been hit by two successive droughts, he added.<o:p></o:p>

	Advising States to reconsider the issue of higher taxes in the tourism sector, Jaitley said the Centre has offered visa-on-arrival facility to 125 countries and this has already resulted in a quantum jump of foreign visitors. 
	 
	Image credit: Indiatimes<o:p></o:p>

Budget 2016: Arun Jaitley hints at big banking reforms, but no full divestment from PSBs

The immediate priority of finance minister of India is to improve GDP growth and employment rates while keeping the targets of fiscal consolidation (3.5% of GDP in 2016-17) under control. Based on past few quarters’ results of corporate sector, we see demand hasn’t yet picked up. One of the main reasons is lack of rural demand, low rise in urban consumption and high food inflation. Based on this we think our finance minister should focus on sectors which could have a large scale impact to revive the <keyword id="34412" type="ORGANIZATION" weightage="20" keywordseo="economy">economy</keyword> while providing enough employment to receive the benefits of India’s demographic dividend. These sectors include Agriculture, Infrastructure and Healthcare sector. 
 
1. Agriculture &amp; Rural economy 
Indian Agriculture sectors contributes around 17% to overall GDP, however, 49% of India's workforce is dependent on it. Overall GDP growth rate is round 7.5% while Agri-growth stutters around 1.7% (Down from 4% AGR in 11th Plan). Drought in last two years has made the situation worse by pushing marginalised farmers and agricultural labourers to the brink, leading to massive agrarian distress. 
 · The <keyword id="6355532" type="PERSON" weightage="20" keywordseo="Mahatma-Gandhi">Mahatma Gandhi</keyword> National Rural Employment Guarantee Scheme (MGNREGS) has been successful in providing employment to India’s rural poor and improve their livelihoods. A study NCAER found that the MGNREGS “has reduced poverty overall by up to 32% and has prevented 14 million people from falling into poverty.” Budget allocated should be increased to Rs. 40,000 cr from current allocation of Rs.34, 699 cr as the current allocation is not sufficient to cover the increased demand. Govt. needs to make it demand-driven programme i.e. allocating resources to states and districts based on poverty level &amp; exposure to drought. Making state &amp; local bodies accountable by monitoring KPIs (Employment level, Assets etc). 
 
· Reliable, faster and effective rural electrification by investing &amp; promoting renewable energy sources (bio-gas, solar, wind etc.) under an integrated rural electrification framework. 
 · Crop insurance schemes in India covers merely 23% of farmers. Pradhan Mantri Fasal Beema Yojna (PMFBY) needs to employ technology and innovation in crop insurance by assessing farm-level damage through satellites &amp; drones, linking farmer’s farm to Aadhar number and transferring the amount directly to account. Out of total sown area of 141 million hectare only 45% (65 million hectare) is covered under irrigation. Pradhan Mantri Krishi Sinchai Yojana (PMKSY), launched in 2015, needs to achieve convergence of <keyword id="6362476" type="ORGANIZATION" weightage="20" keywordseo="investments">investments</keyword> by Integration of water source, distribution and farm level applications. Using MSP as insurance mechanism rather than structural tool. 
 
· National Agriculture Market instead of current Mandi system, which suffers from cartelization of intermediaries’ problem, to enable farmers to discover the true price of their product. 
 
2. Infrastructure Sector Investment in infrastructure must give a boost to rail, road, irrigation and ports. Infrastructure has a high multiplier effect and goes a long way in creating sustainable GDP growth. Ports will help boost up trade and rail &amp;road will push activity within the country. Sufficient funds to be allocation to meet NHAI target of 30km/day. <keyword id="547488" type="UNKNOWN" weightage="20" keywordseo="tax-incentives">Tax incentives</keyword> for multi cargo ports with handling capacity of more than 100 MTPA will boost India’s exports. Withdrawal of minimum alternate tax in a calibrated manner must be done. Government should privatize managing of smaller airports and modernization of atleast 400 railway stations should be done in next year. Further atleast 30GW of renewable energy capacity can be established majorly through wind and solar. Accelerated depreciation benefit should be extended to wind sector apart from solar. 
 
3. Healthcare Sector 
In healthcare government should increase allocation to public healthcare by increasing it to 2% of GDP from current 1%. There must be tax holidays given to the pharma sector and the sunset clause on weighted deductions must be extended as India has the potential to become pharmacy of the world. These deductions on R&amp;D will go a long way on propelling innovation in pharma. Universal health insurance should be carried out through Jan Dhan-Aadhar-Mobile which will benefit patients and increase access thus helps us materialize our demographic dividend. 
 
 The article has been written by Devendra Meel and Sahil Makkar. 
 
(Devendra is a first year PGP student at IIM Bangalore. He has served on the program management &amp; strategy team of RIL's 4G venture. He holds a degree in electronics &amp; communication engineering, and takes strong interest in economics, governance &amp; political issues, reading and cricket) 
 
(Sahil is a first year PGP student from IIM Bangalore. Prior to this he has worked two years in R&amp;D division of Samsung. He is a graduate in Electrical engineering from IIT Bhubaneswar. He is an avid follower of cricket and has interest in economics and finance)

Budget 2016: It's time to create a long lasting impact

(Image source- Reuters) <ul><li>The board of the state-owned <keyword id="6356834" type="COMPANY" weightage="20" keywordseo="indian-oil-corporation">Indian Oil Corporation</keyword> (IOC) has approved a plan to buy back a little over 3% of its total equity shares. </li><li>The fuel retailer will spend around ₹44.4 billion on the buyback plan, culminating in its largest buyback in 17 years. </li><li>The move also includes a dividend payout of ₹6,75 per share, resulting in a total payout of ₹65.6 billion. </li><li>This will result in a huge cash infusion for IOC’s shareholders, especially the central <keyword id="26362" type="ORGANIZATION" weightage="20" keywordseo="Government">government</keyword>, which holds a 54% stake in the oil firm. </li></ul>On 13 December, the state-owned Indian Oil Corporation (IOC) <a href="https://www.bseindia.com/xml-data/corpfiling/AttachLive/22e1d47f-e2d1-4ec5-b78c-f27d5217edb5.pdf">announced</a> in a stock exchange filing that its board had approved a plan to buy back a little over 3% of its total equity shares. India’s largest fuel retailer will spend around ₹44.4 billion on the buyback plan, culminating in its biggest buyback in 17 years. The move also includes a dividend payout of ₹6,75 per share, resulting in a total payout of ₹65.6 billion. It will result in a huge cash infusion for IOC’s shareholders, especially the central government, which holds a 54% stake in the oil firm. However, it could add unnecessary strain to IOC’s finances. At the end of September 2018, it had total debts of <a href="https://iocl.com/download/Q2Results18-19.pdf">around ₹600 billion</a>, compared with a paltry cash balance. It remains to be seen how exactly it will fund the transaction, but it will likely incur a lot more <keyword id="44647" type="ORGANIZATION" weightage="20" keywordseo="debt">debt</keyword>. This, coupled with its <a href="https://www.firstpost.com/business/indian-oil-corps-net-debt-levels-to-rise-due-to-large-capital-expenditure-and-investment-plans-in-medium-term-fitch-4752471.html">high capital expenditure plans</a> in the medium term, could leave it a rather unviable position. The impetus behind the transaction is to help the government, acting through the the Department of Investment and Public Asset Management (DIPAM), meet its <keyword id="44532" type="PERSON" weightage="20" keywordseo="Disinvestment">disinvestment</keyword> target of ₹800 billion for fiscal 2019. It has reportedly collected 68% of that amount so far this year. The DIPAM is reportedly planning to earn as much as ₹50 billion from share buyback programmes of large state-owned enterprises energy firms like Coal India and Bharat Heavy Electricals, according to the Press Trust of India. As per a government order, all public sector enterprises with a cash balance of over ₹10 billion have to undertake share buybacks. Last week, the government also decided to sell a 52.63% stake in infrastructure financier Rural Electrification Corp (REC) to another state-run power lender, Power Finance Corporation (PFC). However, just like IOC, the issue of debt could be a problem here. PFC will have to raise a significant amount of debt to finance the purchase, a tough ask for a firm weighted down by ₹283 billion worth of gross non-performing loans. SEE ALSO: <a href="https://www.businessinsider.in/heres-why-the-indian-governments-intervention-to-stop-rising-fuel-prices-may-only-be-a-temporary-relief/articleshow/66082071.cms">Here’s why the Indian government’s intervention to stop rising fuel prices may only be a temporary relief</a> <a href="https://www.businessinsider.in/indias-reliance-is-teaming-up-with-bp-in-a-move-that-could-send-the-countrys-state-owned-fuel-giants-into-a-tailspin/articleshow/66331991.cms">India's Reliance is teaming up with BP in a move that could send the country's state-owned fuel giants into a tailspin</a> <a href="https://www.businessinsider.in/indias-government-is-asking-its-largest-oil-company-to-sell-fuel-below-global-prices/articleshow/64300993.cms">India’s government is asking its largest oil company to sell fuel below global prices</a>

India’s largest fuel retailer is undertaking its biggest share buyback since 2001 in order to help the central government meet its disinvestment target

New Delhi, Jan 31 () A cut in personal income tax, sops for rural and agriculture sectors as well as an aggressive push on infrastructure spending are likely to be part of Finance Minister Nirmala Sitharaman's "feel-good" second Budget.
 Facing the worst economic slowdown in more than a decade, Sitharaman is expected to pull out all stops to spur consumer demand and investment, government sources and economists said.
 Sitharaman's second Budget, to be presented on February 1, is expected to announce measures to restore economic growth and to set out a clear road map for achieving the ambitious target of USD 5 trillion economy by 2025.
 Investments have failed to pick up despite corporate tax cuts and other stimulus measures, higher FDI inflows, plans to consolidate state-owned banks and monetary easing.
 After corporate tax cuts in September last year, speculation is rife about possible reduction in personal income taxes. A combination of an increase in the basic exemption limit and/or the introduction of a differentiated tax rate structure for higher incomes may be on the cards.
 To cushion the impact on collections, these tweaks might be accompanied by rationalisation in tax rebates.
 "The government announced a slew of stimulus measures in the last four months but consumer confidence is missing. Not many are eager to take loans to buy homes or cars fearing the worst. The feel good factor in the economy is missing," a senior government source said.
 "I think the Budget will be a feel-good Budget that will try to restore faith in the economy and spur spending and investments," the source said.
 With disbursements under the PM-Kisan scheme to farmers being less than the budgeted amount, the Budget may also see measures to get states to onboard more eligible farmers under the scheme.
 Also, there would be announcements for sectors such as renewable energy, e-vehicle, power, affordable housing, real estate, and exports, they said.
 Financial markets are expecting relief on Securities Transaction Tax (STT), Long Term Capital Gains Tax (LTCG) and removal of dividend tax.
 Capital infusion in public sector banks and liquidity measures for Non-Banking Finance Companies (NBFC) may also be on the horizon.
 Both the government sources and the economists felt the Budget would reaffirm the focus on infrastructure spending after the rollout of an ambitious National Infra Pipeline (NIP) in December.
 Social sector schemes such as rural electrification, MGNREGA, healthcare, education and skill training may also find mention in the Budget.
 However, all such measures would come at the cost of fiscal slippage.
 The Economic Survey for 2019-20, released on Friday, has already laid the ground by suggesting to the government to keep the focus on reviving growth and letting go of fiscal discipline a bit.
 The RBI, armed with a favourable inflation backdrop, defended slowdown risks last year with 110 basis points cut in interest rates. As it puts a brake on the easing cycle, due to an unseasonal spurt in food prices leading to above-target inflation, the ball is in the government's court to revive growth.
 Sitharaman would have to do a balancing between efforts to boost growth and the need for fiscal restraint. Economists expect a slight policy tilt towards prioritising growth.
 Real GDP growth is estimated to fall to an 11-year low of 5 per cent in FY20 from 6.1 per cent in FY19. Estimated nominal growth at 7.5 per cent in FY20 is the lowest since 1975-76 (FY76) as per the FY12-based GDP series.
 IIP growth turned positive but remained low at 1.8 per cent in November 2019 after contracting by (-) 4 per cent in October 2019.
 CPI inflation increased to a 65-month high of 7.4 per cent in December 2019, its fifth sequential rise, mainly due to persistently rising vegetable prices.
 Also, growth in bank credit fell to a 25-month low of 8 per cent in November 2019. ANZ RAM
RAM

'Feel good' Budget may see cut in tax rate, sops for social sectors

New Delhi, May 19 () Moody's Investors Service on Tuesday said the measures announced by the government for financial institutions as part of Rs 20 lakh crore-economic package will help ease their asset risk, but will not fully offset the negative impact from the COVID-19 outbreak. The government last week announced a support package of Rs 3.70 lakh crore for micro, small and medium enterprises (MSME) sector, Rs 75,000 crore for non-banking financial companies (NBFCs) and Rs 90,000 crore for power distribution companies. This is part of the overall economic package announced by the government over last week to mitigate the economic impact of coronavirus crisis. "While these measures will help ease asset risks for the financial sector, they will not fully offset the negative impact from the coronavirus outbreak," Moody's said in a commentary titled 'Financial Institutions - India: Support measures to provide relief to the financial system, but will not solve all issues'. On MSME package, the rating agency said the sector was already under stress before coronavirus outbreak and further slowdown in economic growth will lead to more liquidity woes. With regard to measures for NBFCs, it said the support is "far lower than the immediate liquidity requirements of those companies" and the sector will continue to pose risks to the banks. Amongst the measures, the most significant is the government guaranteed, automatic and uncollateralised loans to MSMEs. Such loans will help improve MSMEs' near-term liquidity and ease asset risks for the banks and NBFCs who are the key lenders to the sector, it said. However, the MSME sector was already under financial strain before the outbreak of the coronavirus because of the gradual slowdown in India's economic growth over the past 18 months. As a consequence, it has limited capacity to weather another economic shock, Moody's said. "The deeper and broader economic slowdown in India's growth, the more the MSMEs will face liquidity stress, leading to asset-quality problems for the financial system," it added. Moody's said the relief measures for the NBFC sector will fall short of solving the liquidity needs of the sector. The government will set up a special purpose vehicle that will subscribe to new and existing bonds issued by NBFCs up to a maximum of Rs 30,000 crore. "This is the first instance of direct support to the NBFC sector from the government, but the size of support is far lower than the immediate liquidity requirements of those companies. "The planned debt purchase represents about 2 per cent of the total outstanding debt of the top 20 NBFCs that represent close to 75 per cent of the assets of the NBFC sector," it added. Also, the Reserve Bank of India's (RBI) liquidity measures have so far benefited the larger and better-rated NBFCs, while the credit flow to smaller NBFCs has been less effective. "We do not expect these new measures to significantly help the smaller NBFCs and their funding conditions are likely to remain difficult. We expect that NBFCs will continue to pose risks to the banking sector as banks are a large lender to the sector," it added. Liquidity support to power distribution companies (discoms) will improve near-term cash flows of power generating companies. According to the agency, loans from the Power Finance Corporation Ltd and Rural Electrification Corporation Ltd to discoms will allow them to repay amounts owed to power generating companies and help their cash flow, easing asset risks for the lenders to the sector. "Nevertheless, the sharp slowdown in India's economic growth and the continued low capacity utilisation in the power sector will exacerbate the already stressed conditions of power generation companies. "For PFC and REC, although the loans carry low risk because of state government guarantees, the new loans will increase leverage unless the two companies raise new equity capital. Leverage is measured as total assets/shareholders' equity," Moody's added. JD ANSANS

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