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Economy Current Affairs August 2nd Week 2017
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Economy Current Affairs August 2nd Week 2017

1. Union Government launches Bharat 22 ETF to sell stakes in 22 firms.

 
The Union Finance Ministry has launched second exchange-traded fund (ETF), named Bharat 22. It will help to speed up Government’s disinvestment programme budgeted to raise a record Rs 72,500 crore in the FY 2018.  

Bharat 22 comprise of 22 stocks including those of central public sector enterprises (CPSEs), public sector banks (PSBs) and its holdings under the Specified Undertaking of Unit Trust of India (SUUTI).

Exchange-traded funds (ETFs).

Exchange-traded funds (ETFs) are essentially index funds that are listed and traded on exchanges like stocks. They are basically basket of stocks with assigned weights that reflects the composition of an index. They are similar to mutual funds in a certain manner but are more liquid as they can be sold quickly on stock exchanges like shares.The ETFs trading value is based on the net asset value of the underlying stocks that it represents.

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Bharat 22 is a well-diversified ETF spanning six sectors — basic materials, energy, finance, industrials, FMCG and utilities. The sector wise weightage in the Bharat 22 Index is basic materials (4.4%), energy (17.5%), finance (20.3%), FMCG (15.2%), industrials (22.6%), and utilities (20%).

The banking segment includes stocks from State Bank of India (SBI), Axis Bank, Bank of Baroda (BoB), Indian Bank, Rural Electrification Corporation and Power Finance Corporation. The energy segment includes Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), Bharat Petroleum (BP), and Coal India.

The first CPSE ETF was launched in March 2014. The first CPSE ETF consisted of stocks of 10 public sector entities. It is currently managed by Reliance Capital Ltd. Government was able to raise Rs. 8,500 crore by selling it in three tranches.
 
2. Indian Railways earned Rs.540 crore through flexi fare scheme.
Indian Railways earned Rs.540 crore through flexi fare scheme
The Railways has earned an additional revenue of Rs 540 crore in less than a year through the flexi fare scheme and there is no plan to discontinue it, a senior ministry official said.

The scheme, launched on September 9 last year, is applicable in Rajdhani, Shatabdi and Duronto trains, allowing 10% of the seats to be sold at normal fare and thereafter increasing it by 10% with every 10% of berths sold with a ceiling of 50% .

“We have earned money from flexi fare and there is no reason why we should discontinue it. In fact, we have gained 85,000 additional passengers in these trains since we launched the scheme, showing that even passengers are not averse to the scheme,” said a senior official of the ministry.

The official told PTI that from September 2016-June 30, 2017, the railways earned an additional revenue of Rs 540 crore.
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The scheme, which officials say will be continuously reviewed, saw a revision last December after the Railways took note of vacant seats in such trains.

The Railways made changes in the flexi fare structure to attract last minute travellers and introduced a range of discounts.

The 30% tatkal charges have been waived for these premium trains, a 10% rebate on basic fare has been offered on vacant berths after preparation of first chart in 

Rajdhani, Shatabdi and Duronto to lure last minute travellers, provision of tatkal quota has been reduced to 10% from 30% of the total berths available and there is also a provision for discounted fares for some trains.

“The scheme now comes with a lot of discounts for passengers and it is a success. However, there is always scope for more reviews,” the official added.

The numbers show a positive trend --- during September 2016-June 2017, Duronto trains earned Rs 140 crore more than the amount earned in the same period last year while Shatabdi trains earned Rs 120 crore more.

There are total 42 Rajdhani trains, 46 Shatabdi and 54 Duronto trains.

“Just to give an indication of how much the railways is expected to gain from the scheme - we have earned an additional revenue of Rs 240 crore from April-June this year, which is around Rs 80 crore additional revenue per month. This comes to around Rs 960 crore per annum. These are good signs,” the official said.
 
3. IDFC Bank partners with Zeta for digital payments solution.
 
 
Private sector lender IDFC Bank has partnered with digital payments company Zeta, to launch ‘IDFC Bank Benefits’ - a payment solution for corporates that digitises employee spends and claims, making the process simple, real-time and paperless. 

The end-to-end digital solution comprises an IDFC Bank Benefits Card and Zeta app which integrates the full suite of allowances and reimbursements offered by an employer into one preloaded card. Employees can also access the Benefits Card via  the Zeta app on mobile or web. This enables them to track spends, entitlement limits and submit claims, digitally, while on-the-move. 
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“The IDFC Bank Benefits solution developed jointly with Zeta allows for bank-like payment features outside the traditional banking relationship. It offers a strong value proposition to both employers as well as employees. The Benefits Card and Zeta app enhance user experience as it places convenience and flexibility in the hands of the employee, while enabling employers to digitally review and manage reimbursements,” said Avtar Monga executive director IDFC Bank. 

While the solution is being initially launched as an integrated Benefits Card for medical, meal, LTA and fuel reimbursements, it can be extended to other categories of allowances as well. Employees can avail the benefits of the IDFC Benefits card also via the Zeta app on the mobile or on the web and Zeta Super Tag (Zeta’s NFC payment solution). 

The Zeta app offers employees a real time view of spends, reimbursement limits and claims. It also allows for selecting the dependents for whom the purchase is being made and tagging it to the corresponding expense; and finally, submitting the claim for review without any paperwork. Integrated in-app shops allow for easy online purchases. The Zeta Super Tag can be attached to any device to turn it into a payment device. 
 
4. SEBI allows MCX to launch Gold Options.
SEBI allows MCX to launch Gold Options 
Capital and commodity market regulator SEBI has allowed MCX, the country’s largest commodity exchange, to launch options trading in gold.

It will allow investors and hedgers to minimise their price risk at a fraction of cost compared to currently available futures trading.

Murgank Paranjape, Managing Director of MCX, confirmed the approval and told BusinessLine that the exchange is yet to decide on a firm date (on the launch of gold options) as the mock trading is still going on.
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“We would like to conduct few more awareness events since it is a new instrument for commodity investors. We will fix a date for the launch only after we are fully satisfied that members and bullion traders are ready,” he said.

MCX has been conducting mock trading since the last week of June.

Market sources said the exchange is also upgrading its technology to handle increased participation one year after options launch and would be ready to launch gold options by October.

With participation of 60-70 per cent of the members, mock trading in options has been smooth sailing so far but the exchange will take a call only after 95 per cent of the members test the system, said sources.

Commodity futures
Options trading will deepen the market by attracting new set of investors and encourage corporate participation. SEBI recently allowed Category III Alternate Investment Funds to invest in the commodity futures market.

It allowed and issued norms for the launch of commodity options in June. The regulator has allowed only one commodity option per exchange on a pilot basis.
 
5. IIP output contracts 0.1% in June 2017.
IIP output contracts 0.1% in June 2017
 
India’s factory output, measured by the Index of Industrial Production (IIP) has registered negative 0.1% growth in June 2017. It was mainly due to a fall in output of the manufacturing and capital goods sectors.

According to data released by the Central Statistics Office (CSO) it is the first negative fall since June 2013. In June 2016, it had grown 8%.

Highlights :
  • Manufacturing sector: It contracted by 0.4% in June 2017. 

  • Mining output: It rose by 0.4%. 

  • Electricity generation: It increased by 2.1%. 

  • Capital goods output: is a barometer of investment. It shrank by 6.8% in June 2017. 

  • Consumer durables output: It contracted by 2.1%. 

  • Consumer non-durables production: It rose by 4.9%.

About Index of Industrial Production (IIP)

The IIP is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to chosen base period. It is compiled and published monthly by the Central Statistical Organization (CSO), Ministry of Statistics and Programme Implementation.
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Base year: The CSO had revised the base year of the IIP from 2004-05 to 2011-12 in May 2017 to capture structural changes in the economy and improves the quality and representativeness of the indices. The revised IIP (2011-12) reflects the changes in the industrial sector and also aligns it with the base year of other macroeconomic indicators like the Wholesale Price Index (WPI) and Gross Domestic Product (GDP).

Sector wise items and weightages: It covers 407 item groups. Sector wise, the items included falls into 3 categories viz. Manufacturing (405 items), Mining (1 items) & Electricity (1 item). The weights of the three sectors are 77.63%, 14.37%, 7.9% respectively. The revised eight core Industries have a combined weightage of 40.27% in the IIP. Decreasing order of weightage of core industries is Electricity> Steel> Refinery Products> Crude> Coal> Coal> Cement> Natural Gas> Fertilizers.

 6. Economic Survey 2016-17 Volume 2: Agriculture and Food management Reforms Measures.

Economic Survey 2016-17 Volume 2: Agriculture and Food management Reforms Measures
The Economic Survey 2016-17 Volume II released recently has taken into consideration various challenges faced by the Agriculture sector in India. It has suggested multi-dimensional Agricultural and Food Management Reforms Measures.

Small Operational Land Holdings: The average farm size in India is small and declining since 1970-71. It is a major limitation to reap the benefits of economies of scale in agriculture operations.

Credit: The predominance of informal sources of credit for farmers is a concern. Moreover, there is regional disparity in the distribution of agricultural credit. 
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Post- harvest losses: The horticulture sector in India faces problems like post-harvest losses, availability of quality planting material and lack of market access for horticultural produce of small farmers.

Reforms suggested
Price risks in agriculture and allied sectors: Strengthening and building marketing infrastructure along the entire value chain.

Production risks: The share of irrigated area should be expanded by increasing the coverage of water saving irrigation systems like micro irrigation systems. 

Increase productivity of crops: Standards should be set and enforced for better quality, pest and disease resistant seeds.

Trade and domestic policy changes: It should be announced well before sowing and should stay till arrivals and procurement is over.

Enhance women’s involvement in the dairy projects: Funds should be earmarked through appropriate mechanisms.

Formal and institutional credit: It should be provided in timely and affordable manner to the small and marginal farmers is the key to inclusive growth. Regime based on timely interventions needs to be adopted.
 
7. Ecomomic Survey proposes Transparency of Rules Act.
Ecomomic Survey proposes Transparency of Rules Act 
The Second volume of Economic Survey 2016-17 has proposed Transparency of Rules Act (TORA), a progressive legislation to end any asymmetry of information regarding rules and regulations faced by an average citizen.

The objective of TORA is to help citizens overcome an opaque mesh of complicated rules that often leads to corruption and endless litigation.

At present due to opaque mesh of regulations prevalent in India make life of ordinary citizens (as well as businesses) difficult as it is not easy for ordinary citizens for them to navigate the multitude of rules, regulations, forms, taxes and procedures imposed by various tiers of government. Moreover, these rules frequently change and sometimes contradict each other. Even government officials struggle to keep up with ‘the latest version’ of complicated rules. They also act as a magnet for corruption and endless litigation.

Key Features of TORA
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TORA will require all government departments to mandatorily place all citizen-friendly rules on their website. Government Officials will not be able to impose any rule not mentioned beforehand. It will make mandatory for updating all existing laws by the department.

Government websites will also have to notify the date and time of each change made. TORA will normally be applicable after a specified time after the rule has been posted. “TORA compliant” departments will ensure that citizens get authentic and updated information.

Way Forward 

India will benefit enormously if the average citizen could easily access the latest rules and regulations in a comprehensible format. Transparency of Rules Act (TORA) will be a possible solution for this.
 
8. Indian Oil Buys First Shale Oil from United States.
 
Indian Oil Buys First Shale Oil from United States
 
State-owned Indian Oil Corp (IOC) has bought the countrys first shale oil from the US and is looking to step up imports from America as part of its crude diversification strategy.

IOC bought 1.9 million barrels of US crude in its second import tender seeking oil from the Americas, company Director (Finance) A K Sharma told PTI here.

India, the worlds third-largest oil importer, joins Asian countries like South Korea, Japan and China to buy US crude after production cuts by OPEC drove up prices of Middle East heavy-sour crude, or grades with a high sulphur content.

IOC had last month sealed a deal to import 1.6 million barrels of Mars crude from the US and 400,000 barrels of Western Canadian Select oil for delivery at its Paradip refinery in Odisha -- the first ever such purchase of US crude by an Indian state-run refiner.

"In the second tender, we have bought 950,000 barrels of light sweet Eagle Ford shale oil and 950,000 barrels of heavy sour Mars crude. This is for delivery in end-October," he said adding the oil was bought from trading firm Trafigura.

The first cargo was loaded on ships on August 7 and would after a 40-day journey reach Paradip sometime around September 20, he said. Sharma said IOC has received government nod for buying one cargo (or shipload) of US oil every month till March 2018.

India allows import of crude oil only on Indian carriers but US oil can be imported only on foreign vessels. So a special permission is needed for using foreign-flagged ships for ferrying the oil.
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"Shipping Ministry has given as permission to import one cargo from US on DES (Delivered Ex Ship) basis," he said.

DES means the seller makes arrangement to deliver the goods to the buyer at the named port of destination. The seller has to bear all costs and risks involved in bringing the goods to the named port of destination.

As per present policy, when a domestic refiner tenders to buy a crude from foreign nation, Indian shipping lines get the first right of refusal by virtue of they being allowed to match any lowest bidder for transportation of crude oil. Only when they waive their right can the oil firms use a foreign line.

Transporting US crude needs very large crude carriers (VLCCs) and can be done only by foreign shipping lines. And to do that, oil companies have to obtain permission of the shipping ministry.

Bharat Petroleum Corp Ltd (BPCL) has bought two of the US cargoes. A few days ago it bought 1 million barrels of US WTI Midland sweet crude for delivery in October - its first purchase of the sweet variety from the US.

In July, it bought 500,000 barrels each of Mars and Poseidon varieties of medium-to-high-sulphur crude for delivery to its Kochi refinery between September 26 and October 15.

Hindustan Petroleum Corp Ltd (HPCL) is also looking at buying US crude oil.
Sharma said buying US crude has become attractive for Indian refiners after the differential between Brent (the benchmark crude or marker crude that serves as a reference price for buyers in western world) and Dubai (which serves as a benchmark for countries in the east) has narrowed.

Even after including the shipping cost, buying US crude is cost competitive to Indian refiners, he said.

"We are not looking at any term (or fixed quantity) deal from US as of now. We will tender to buy crude and if the US crude is competitive as compared to others, we will buy it," he said.

The deals by IOC and BPCL came within weeks of Prime Minister Narendra Modis visit to the US when President Donald Trump talked of his country looking to export more energy products to India.

An oil ministry official had last week stated that Indian shipping lines do not have vessels to match the demand. They account for only 22 per cent of the total oil transportation and bulk of this is coastal shipping. PTI ANZ MKJ SRK.

 

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