RBI Permits Banks to Use Brickwork Ratings for Loans Up to Rs 250 Crore

New Delhi: The Reserve Bank of India (RBI) on Wednesday permitted banks to use ratings by Brickwork Ratings India Private Limited for loans of up to Rs 250 crore. This marks a significant development for the credit rating agency, which had faced regulatory challenges in the past.

In October 2022, the RBI instructed banks and other regulated entities not to obtain any fresh ratings from Brickwork Ratings India after the market regulator, Securities and Exchange Board of India (Sebi), cancelled Brickwork Ratings India's Certificate of Registration as a Credit Rating Agency (CRA).

However, after a thorough review of the October 2022 circular, the RBI has now allowed banks to use the ratings provided by Brickwork Ratings for risk-weighting their claims for capital adequacy purposes, albeit with certain conditions.

"In respect of fresh rating mandates, the rating may be obtained from the CRA for bank loans not exceeding Rs 250 crore. In respect of existing ratings, the CRA may undertake rating surveillance irrespective of the rated amount till the residual tenure of such loans," the RBI stated.

This decision provides a significant boost to Brickwork Ratings, enabling it to continue its operations within specified parameters and aiding banks in their loan assessment processes.

RBI Tweaks Norms for Remittances to IFSCs Under LRS

The Reserve Bank has also issued another circular, amending norms related to remittances to International Financial Services Centres (IFSCs) under the Liberalised Remittance Scheme (LRS).

Upon review, the RBI has decided that "authorised persons" may facilitate remittances for all permissible purposes under LRS to IFSCs for availing financial services or financial products as per the International Financial Services Centres Authority Act, 2019, within IFSCs.

Currently, remittances under LRS to IFSCs can be made only for investments in securities within IFSCs, except those issued by entities or companies resident in India (outside IFSC), and for payment of fees for education to foreign universities or institutions located in IFSCs for pursuing courses.

These amendments are aimed at enhancing the operational flexibility of banks and other entities, thereby promoting a more efficient financial ecosystem.

Prime Minister Modi Invites Austrian Companies to Invest in India, Emphasizes Potential for Bilateral Collaborations

New Delhi: Prime Minister Narendra Modi on Wednesday extended an invitation to Austrian companies to invest in India, highlighting the immense potential for bilateral collaborations across multiple sectors, including infrastructure, energy, and emerging technologies.

Modi arrived in Vienna, the capital of Austria, from Moscow after meeting with Russian President Vladimir Putin on Tuesday evening. This visit marks the first by an Indian prime minister to Austria in over 40 years.

During his visit, Modi and Austrian Chancellor Karl Nehammer jointly addressed a gathering of renowned Austrian and Indian CEOs at a round table business meeting held at the historic Hofburg Palace.

"Prime Minister Modi highlighted the significant potential for collaboration between Indian and Austrian companies in various sectors, including infrastructure, renewable energy, green sectors, new and emerging technologies, fintech, startups, and innovation, among others," stated the Indian Ministry of External Affairs in a social media post.

The Prime Minister specifically invited Austrian companies to explore investment opportunities in India, underscoring the country's robust economic growth and favorable business environment.

To further foster innovation and entrepreneurship between the two nations, the India-Austria Startup Bridge was launched in February 2024, aiming to create a seamless platform for startups from both countries to collaborate and thrive.

Indo-Austria bilateral trade for the year 2023 (January-December) was valued at USD 2.93 billion. Indian exports to Austria stood at USD 1.52 billion, while imports from Austria amounted to USD 1.41 billion.

This visit and the discussions held during the round table meeting are expected to strengthen economic ties and pave the way for increased investments and technological exchanges between India and Austria.

Union Minister Khattar Urges Chhattisgarh to Reconsider Cess on Hydropower Projects

New Delhi: Union Minister for Power, Manohar Lal Khattar, has requested the Chhattisgarh government to refrain from levying a cess on hydropower and Pumped Storage Projects (PSP), as such charges increase the power tariff for consumers. Khattar was in Raipur on Wednesday, where he chaired a review meeting on the state of the power sector in Chhattisgarh. He also urged the state, whose Aggregate Technical and Commercial (AT&C) losses are close to the national average of 13.5 percent, to strive to reduce these losses to below 10 percent. This reduction would minimize the financial burden on power distribution companies (DISCOMs) and the state.

Khattar Advocates for 100% Household Electrification in Chhattisgarh

During the review meeting, the minister called for the electrification of 100 percent of un-electrified households, particularly the Particularly Vulnerable Tribal Groups (PVTG) households. The progress of the Revamped Distribution Sector Scheme (RDSS) in Chhattisgarh was reviewed. Khattar highlighted the importance of initiatives taken under the Ease of Living (EoL) program to enhance consumer experience regarding electricity services. He also emphasized the importance of providing reliable, quality, and affordable electricity for all consumers. The role of RDSS in improving the financial viability of DISCOMs and reducing technical losses was also discussed.

Expedite Clearances for NTPC’s Captive Coal Blocks, Says Khattar

The minister advised the Chhattisgarh state government to expedite resolving issues related to the projects of state-run NTPC, which are either conceptualized or under development. Referring to NTPC’s captive coal blocks in Chhattisgarh, the minister asked the state government to address land acquisition and mining lease-related issues to facilitate the development of these coal blocks.

Union Minister Khattar assured the Centre’s continued support and cooperation in the overall development of the state. The meeting was attended by Vishnu Deo Sai, Chief Minister of Chhattisgarh, Vijay Sharma, Deputy Chief Minister of Chhattisgarh, and Tokhan Sahu, Union Minister of State for Housing and Urban Affairs. Senior officials from the Ministry of Power, Ministry of Housing and Urban Affairs, the state government, and Central Public Sector Enterprises (CPSEs) were also present at the meeting.

India's Battery Energy Storage Capacity Surges Over Four-Fold to 219 MWh by March 2024

New Delhi: India's battery energy storage capacity grew more than four-fold to 219 megawatt hours (MWh) as of March 2024, according to a report by Mercom Capital.

As of March 2023, India's overall battery energy storage capacity stood at 47.6 MWh, the US-based research firm stated in its report on Wednesday.

Policy measures such as the deviation settlement mechanism, grid connectivity regulations, and ancillary services regulations are being issued to ensure efficient renewable integration and grid stability, the report noted.

These measures are driving the demand for utility-scale energy storage, the report titled "India's Energy Storage Landscape" highlighted.

The Viability Gap Funding (VGF) program aims to install 4 gigawatt hours (GWh) of battery energy storage systems (BESS), supported by a budget of Rs 37.6 billion (USD 452 million).

The VGF, energy storage obligations (ESO), and bidding guidelines for energy storage projects—whether standalone or combined with renewable energy—are boosting the country's pipeline of energy storage projects.

According to the report, India began adding energy storage capacity in 2013 with small pilot projects, and as of March 2024, the country's cumulative installed energy storage capacity stood at 219.1 MWh.

Notably, 120 MWh of the installed capacity was added in the January-March period of this year alone.

Solar photovoltaic (PV) systems combined with BESS accounted for 90.6 percent of the total installed capacity.

"India is an emerging market for energy storage, still in the early stages of development. Despite rapid growth in renewable energy, energy storage has lagged, potentially leading to curtailment and a lack of grid flexibility and stability. To meet energy transition goals and manage the exponential increase in renewable energy, the government must prioritize energy storage to avoid issues faced by other countries with growing intermittent power but insufficient storage capacity," said Mercom Capital Group CEO Raj Prabhu.

The highest BESS capacity was installed in Chhattisgarh, accounting for 54.8 percent of the cumulative installed capacity, the report stated.

The country's operational pumped hydro storage capacity totaled 3.3 GW as of March 2024, with nearly 76 percent of the country's operating capacity located in Telangana and West Bengal.

Power Grid Board Approves Increased Borrowing Limit to Rs 15,000 Crore for FY 2024-25

New Delhi: The State-owned Power Grid Corporation of India (PGCIL) board on Wednesday approved a proposal to increase the borrowing limit to Rs 15,000 crore from the previous Rs 12,000 crore for the fiscal year 2024-25 through various financial instruments.

In addition, the board has set the borrowing limit at Rs 16,000 crore for the fiscal year 2025-26. During the meeting held on July 10, 2024, the Board of Directors of Power Grid sanctioned the borrowing of up to Rs 16,000 crore for FY 2025-26 from multiple sources, including domestic bonds (secured/unsecured, non-convertible, non-cumulative, redeemable, taxable/tax-free under private placement), according to a BSE filing.

The board also increased the current borrowing limits from Rs 12,000 crore to Rs 15,000 crore for FY 2024-25. This increase will be facilitated through the issuance of secured/unsecured, non-convertible, non-cumulative, redeemable, taxable/tax-free bonds under private placement from domestic and other sources.

These approvals by the Board of Directors are subject to the ratification of shareholders at the upcoming annual general meeting, the filing stated.

This strategic move by Power Grid aims to bolster its financial flexibility and support its ongoing and future infrastructure projects. By expanding its borrowing capacity, PGCIL can ensure adequate funding for its ambitious expansion plans, thereby enhancing its ability to meet the growing demands of the power sector.

The approval of higher borrowing limits reflects Power Grid's commitment to maintaining a robust financial position while continuing to invest in critical infrastructure. This step is expected to enable the company to capitalize on emerging opportunities and drive sustained growth in the power transmission sector.

Indian PSUs Embrace Digital Solutions, Presenting Opportunities for Industry 5.0 Startups

New Delhi: Indian public sector undertakings (PSUs) adopting digital solutions are emerging as a promising customer base for Industry 5.0 startups, says Barath Shankar Subramanian, partner at leading venture capital firm Accel.

With India emerging as a key manufacturing hub, startups have a golden opportunity to innovate alongside large enterprises, Subramanian told PTI.

“This is a pivotal moment for Indian startups to seize their advantage on the global stage. Indian startups stand on the brink of an Industry 5.0 revolution, driven by global demand for resilient and diversified supply chains,” he said.

Simply put, Industry 5.0 is the new buzzword in industrialization and automation, combining human collaboration with technology and AI to achieve highly efficient workplace outcomes.

In the realm of enterprise software, particularly within manufacturing and industrial sectors, Indian startups are on the brink of "significant opportunities," according to Subramanian.

Unlike their Western counterparts, these startups navigate a landscape relatively unburdened by legacy systems. This absence not only streamlines their go-to-market strategy but also fosters adaptability, allowing innovative solutions to gain traction swiftly, Subramanian said.

“Notably, Indian public sector undertakings are emerging as a promising customer base, with their growing openness to adopting digital solutions, as evidenced by the substantial average contract values reported by established players,” he added.

Leveraging domestic opportunities, Subramanian pointed out, can help Industry 5.0 startups penetrate international markets as well.

The difference in average contract values (ACVs) between Indian and US/EU customers is still quite large, with Indian ACVs being one-third or one-fourth of those in the West. Yet, by focusing on building strong relationships and demonstrating value to Indian businesses first, startups can use this success to expand into markets such as the Middle East, EU, and Southeast Asia where contract values are much higher, Subramanian said.

His advice to founders: identify large corporations where chief data officers or chief information officers wield significant authority and resources.

"The CXOs can help startups validate problem statements and participate in co-creating the product,” he said.

Entering the global market in the second or third year, particularly through Indian customers with an international presence, offers a faster route for expansion compared to entering entirely new markets and acquiring customers, Subramanian emphasized.

These systems trigger alerts for timely interventions, significantly improving workplace safety. "Detect is helping companies like Vedanta and Tata Steel stay on top of safety and optimization," Subramanian said.

Zetwerk, in his view, has revolutionized the business-to-business manufacturing ecosystem. It is a universal manufacturing network that not only optimizes production but also slashes costs and streamlines supplier operations.

"Our seed-stage Atoms startups building in Industry 5.0 - Spintly and Asets - are already driving significant impact. Spintly offers a frictionless, fully wireless, smartphone-based physical access control solution for commercial and residential buildings."

"They already have over 250,000 users on the platform, are working with large global partners like JLL, Anarock, and Brookfield Properties, and global smart infrastructure companies like Cisco Meraki and others to offer integrated solutions to enterprise customers," he added.

Asets has launched an AI-powered, cloud-based multidisciplinary CAD, simulation, and engineering design platform that helps Engineering Procurement Construction (EPC) and end-owner companies accelerate their early-stage engineering by 10x.

Their customers benefit from the rapid deployment of engineering resources, lowering effort time and costs related to engineering projects, Subramanian said.

Federal Reserve Chair Jerome Powell on Wednesday reinforced the message that the Fed is increasingly focusing on a slowing job market, in addition to its efforts to tame inflation. This shift signals a likely move towards cutting interest rates soon.

"We're not just an inflation-targeting central bank," Powell told the House Financial Services Committee during the second of two days of semi-annual testimony to Congress. "We also have an employment mandate."

On Tuesday, addressing the Senate Banking Committee, Powell suggested that the Fed had made "considerable progress" toward its goal of curbing the worst inflation spike in four decades. He noted that cutting rates too late or too little could unduly weaken economic activity and employment.

Congress has given the Fed a dual mandate: to maintain price stability and to promote maximum employment.

"For a long time," Powell said on Wednesday, "we've had to focus on the inflation mandate." As the economy roared out of the pandemic recession, inflation reached a four-decade high in mid-2022. The Fed responded by raising its benchmark rate 11 times in 2022 and 2023. Inflation has since plummeted from its 9.1% peak to 3.3%.

Despite the economy and job market continuing to grow, defying widespread predictions of a recession due to higher borrowing costs, growth has weakened this year. From April through June, U.S. employers added an average of 177,000 jobs per month, the lowest three-month hiring pace since January 2021.

Powell told the House panel on Wednesday that to avoid damaging the economy, the Fed likely wouldn't wait until inflation reached its 2% target before starting to cut rates.

Most economists expect the Fed's first rate cut to occur in September. Powell, however, has declined to specify when he envisions the first cut happening.

The government's disinvestment agenda remains active, albeit at an uneven pace, according to a senior official. Several public sector undertakings (PSUs) are nearing the final stages of strategic sale but are awaiting approval from higher political authorities, the official stated.

Although the government has opted not to set specific divestment targets for the budget, the Department of Investment and Public Asset Management (DIPAM) is aiming to advance strategic sales in companies such as Shipping Corporation of India (SCI) and NMDC Steel Limited (NSL).

“NMDC Steel's strategic sale is progressing well. Most of the work is complete; only financial bids need to be invited. It is a prime candidate for privatization. However, without approval from the Prime Minister's Office (PMO), no progress can be made. There is some uncertainty,” the official told Moneycontrol on condition of anonymity.

The NSL divestment faces significant political challenges. Workers’ unions have opposed the move. The company employs 5,887 people and holds assets worth Rs 36,929 crore.

Interestingly, Home Minister Amit Shah, during an October 19, 2023, election meeting in Chhattisgarh's Bastar region, stated that the Nagarnar steel plant would not be privatized. This is significant because the Nagarnar plant is integral to NSL, which was spun off from NMDC to operate the 3 million tonnes per annum facility. NSL was listed on the BSE in February 2023. “Now, we are awaiting top-level decisions on whether the plant will be commissioned or privatized,” the official said.

The stake sale in SCI is also expected to be completed this year, pending the calling of financial bids. However, this too will depend on political decisions, the official noted.

One issue delaying disinvestment was the listing of SCI's non-core arm, Shipping Corporation of India Land and Assets Limited (SCILAL). This obstacle was overcome when the Maharashtra cabinet waived stamp duty on the sale of Shipping House, its headquarters. With SCILAL now fully demerged and listed as of March 19, the path has cleared for SCI's strategic sale.

“It is challenging to privatize during Modi 3.0 due to strong opposition and the coalition government,” the official pointed out.

Projects & Development India Ltd and HLL Lifecare are among the smaller companies also up for strategic sale and are at an advanced stage, with financial bids already invited. However, a stake sale in BEML Limited is delayed due to unresolved land issues with the states.

Disinvestments for FY25 will not have a specific target outlined in the budget. Instead, an estimate of Rs 50,000 crore is expected under non-debt capital receipts, including asset monetization and disinvestment. PSU dividends are accounted for separately under non-tax revenue receipts.

As of July 10, the NSL scrip was down 1.83 percent at Rs 56.71 at 11:37 am. SCI fell over 2 percent to Rs 262.85 per share, while BEML declined by 1.40 percent to Rs 4,899.55.

While a majority of the expansion is going to take place in Bengal’s Jamuria near Asansol and Kharagpur, Shyam will widen its footprints in Odisha and Madhya Pradesh as part of the grand plan which will call for another Rs 3,000 crore fresh investment

City-based Shyam Metalics & Energy Ltd is going to invest over ?5,000 crore in Bengal over the next three-five years as part of its national expansion plan to emerge as a metal conglomerate from the East.

Instead of focusing on a single line of business within a diverse metal spectrum, as traditionally pursued by entrepreneurs and corporate houses over the years, Shyam intends to grow in carbon steel, stainless steel as well as aluminium foil — and that too simultaneously.

While a majority of the expansion is going to take place in Bengal’s Jamuria near Asansol and Kharagpur, Shyam will widen its footprints in Odisha and Madhya Pradesh as part of the grand plan which will call for another ?3,000 crore fresh investment.

“We have a unique business – It is like a FMCG basket of metals – we have carbon steel, stainless steel, aluminium foil, ferro chrome and power (captive). My dream is to make Shyam Metalics a metal conglomerate from the East,” Brij Bhushan Agarwal, vice-chairman and managing director, of the company said.

The company has already invested close to ?4,500 crore in Bengal in the last two to three years and its bet on the state is going to go up. One of the noteworthy aspects of Shyam’s investment include the revival of Ramsarup Industries, which became sick in the aftermath of the financial crisis of Lehman Brothers in 2008.

Shyam acquired the company, which was in shambles, in a joint venture from the bankruptcy court in 2022.

It is now in the process of investing ?2,000 crore in Kharagpur where Ramsarup’s 350-acre plot plant is located. Apart from building a blast furnace, the plan is to set up a ductile iron (DI) pipe plant there.

The stainless steel expansion is taking shape in Indore where Shyam acquired Mittal Corp, again through bankruptcy court, by outbidding Jindal Stainless, India’s largest manufacturer. Agarwal said the foray into this segment was logical given its portfolio in ferro chrome.

“All the raw material required for stainless steel is available in-house. We have to only buy nickel. There is a lot of synergy already. Stainless is part of the overall business,” Agarwal explained, adding that sustainability is not in question.

Shyam chose Odisha, home to India’s highest alumina reserve, for the aluminium foray, apart from Pakuria in Bengal and Giridih in Jharkhand.

Agarwal said it already is the largest maker of aluminium foil for EV batteries and there is a plan to double it. The company is also entering the B2C segment with foils. While it is buying foil stock from the market at present, Shyam has plans for backwards integration to manufacture in-house from scrap.

Agarwal said he was confident to pursue multiple avenues of growth given India’s growing internal consumption. “There is a clear pathway to growth. I don’t see a risk,” he said.

Shyam Metalics, which has now cranked up market capitalisation in excess of ?20,000 crore, is hoping that strong internal accrual would be enough to roll the juggernaut and it would not have to leverage dangerously for expansion.

JSW Steel’s remarkable increase in CSR spending over the past seven years underscores its strategic commitment to long-term community benefits.

MUMBAI (India CSR): In the fiscal year 2023-24, JSW Steel had an adjusted CSR obligation of ?298 crore. The company met this requirement by allocating ?235 crore directly to various CSR initiatives. These funds were strategically deployed across critical areas such as health, education, environmental conservation, and economic empowerment, ensuring a broad and meaningful impact on the communities within its operational areas.

A Steady Growth in CSR Expenditure

The financial journey of JSW Steel’s CSR investments underscores a deliberate and thoughtful approach to social responsibility. Starting from an expenditure of ?63 crore in FY 2018-19, the company has progressively increased its CSR spending, reflecting a consistent upward trajectory. By FY 2023-24, the expenditure reached an impressive ?235 crore, showcasing JSW Steel’s dedication to enhancing its impact on society and contributing to sustainable development.

Table 1: CSR Expenditure Growth (FY 2018-19 to FY 2023-24)

Broad Impact Through Diverse Initiatives

JSW Steel’s CSR efforts span multiple critical areas, each designed to foster long-term community benefits. The company’s initiatives in FY 2023-24 had a wide-reaching impact:

• Health and Nutrition: Over 6.07 lakh individuals benefited from enhanced healthcare services and nutritional support, improving overall community health.
• Education: Educational programs reached approximately 5.54 lakh beneficiaries, significantly boosting educational quality and access.
• Water, Environment, and Sanitation: Around 2.49 lakh individuals benefited from initiatives focused on water conservation, environmental care, and sanitation improvements.
• Economic Development: Through skill development and livelihood programs, JSW Steel supported 18,821 individuals in securing better economic opportunities.

Table 2: Key Beneficiary Impact Areas (FY 2023-24)

Additional focus areas included art, culture, heritage restoration, waste management, and sports promotion. Specific initiatives, such as the restoration of the Mughal Gardens in Kashmir and sports programs, impacted 69,762 individuals.

Strategic Financial Stewardship

Table 3: CSR Financial Stewardship (FY 2023-24)

In addition to the ?235 crore directly spent on various CSR initiatives, JSW Steel showcased prudent financial stewardship by depositing the remaining ?63 crore into an escrow account. This amount is earmarked for future specified projects, illustrating a structured and strategic approach to fund management and commitment to ongoing community support.

Commitment to Long-Term Community Benefits

JSW Steel’s structured increase in CSR expenditure is not just a reflection of regulatory compliance but also a testament to its strategic planning and focus on sustainable community development. By steadily enhancing its financial commitment to CSR, JSW Steel aligns its business success with social progress, ensuring that its growth positively impacts the communities it serves.

The Andhra Pradesh government led by Telugu Desam Party (TDP) is likely to support the Centre’s plan for strategic disinvestment of Rashtriya Ispat Nigam Ltd (RINL), also known as Vizag Steel, to revive its fortunes, TDP sources said.

The stance of TDP, a key ally of the Bharatiya Janata Party-led government at the Centre, will give the much-needed comfort to the Centre to proceed with the privatisation planm which has been hanging on fire for years due to lack of cooperation from the state government.

N. Chandrababu Naidu, who was sworn in as chief minister of the state on June 12, is keen that investments flows to the state are accelerated, as he strives to bring the state’s economy back on track.

“We will support the Centre’s plan for RINL. We don’t have a problem,” a top TDP functionary said.

When asked about the TDP’s stand on the privatisation policy of the Centre, Naidu recently said he didn’t have a problem with that as it would bring growth and investment.

Like Neelachal Ispat Nigam Ltd (NINL) bought by Tata Group in January 2022, privatisation of RINL is crucial to reviving the fortunes of the plant and protecting the interest of the employees.

Currently, the RINL plant has a 7 million tonnes (MT) capacity, which can be expanded up to 17 MT if fresh investment is pumped in.

In January 2022, Tata Group bought Odisha-based ailing NINL jointly owned by four central PSUs and two Odisha government PSUs for Rs 12,100 crore. Besides reviving the plant and protecting the jobs of staff, the Tatas are expanding the capacity of the plant with huge fresh investments.

RINL incurred a loss of Rs 2,859 crore in FY23 and its plant capacity was running much below the 7MT capacity.

Its net worth has fallen to just Rs 391 crore in FY23 from a high of Rs 13,659 crore in FY12, due to the accumulation of losses over the years. Its turnover declined by 19% on year to Rs 22,778 crore in F23. The company is now facing a severe working capital crunch.

The Centre was drawing up a fresh plan for the privatisation of RINL, under which the prospective buyer/s would have to commit to expand its 7 MT plant.

RINL has a massive land pool of 19,000 acres which includes a 6,000-acre green belt. Prospective buyers therefore won’t have to worry about creating a new green belt. However, all these lands are still directly owned by the Centre, which may keep a part of the huge land holding with the state-run company outside the deal’s ambit.

In line with the Centre’s new Public Sector Enterprise (PSE) Policy, the Union Cabinet in January 2021 had given in-principal approval for 100% disinvestment of the government’s shareholding in RINL along with RINL’s stake in its subsidiaries or joint ventures through strategic disinvestment.

Budget 2024-25 could see India pushing its success story in production linked incentives (PLIs) for electronics further with the announcement of a new PLI for sub-assemblies and components. Pegged to be in the range of Rs 35,000-40,000 crore, the scheme has been in the works since February at the Ministry of Electronics and Information Technology with a clear purpose to build an ecosystem for higher local sourcing of components, multiple sources told Moneycontrol.

The scheme, designed with extensive stakeholder participation, hopes to address local sourcing concerns that have dominated the PLI scheme.

It aims to develop an ecosystem of components and sub-assemblies, but an industry insider pointed out that finding companies to participate in the scheme will be a real challenge. Companies that are meeting nearly all criteria of the PLI scheme are falling behind on the local sourcing norms “because India doesn’t manufacture the high-quality components needed, it’s a real challenge”, said another source.

China’s dominance

Nearly 90 percent of the electronic component ecosystem is dominated by China. “You are trying to move an entire ecosystem from a country that has taken over three decades to build,” said a source. China’s dominance in the electronics components space has remained unfazed— the neighbouring country exports nearly $900 billion worth of electronic products annually while India manages to do around $15 billion.

In fact, until 2010, India and Vietnam exported a similar value of electronic items but since then Vietnam’s exports have leapt nearly nine times that of India’s, according to data compiled by ICRIER. “Other countries like Vietnam have surged because of no local sourcing requirements that have encumbered Indian players – so while a company might not be exporting from China, the same Chinese supplier is now coming in from countries like Vietnam, said a source. It is a problem that the ministries – including commerce, MEITY and finance – are mindful of, and have been pushing for a resumption of easier access to the Chinese ecosystem. However, the final decision on Chinese visas will be taken by the Cabinet Committee on Security, the Ministry of External Affairs and the Home Ministry.

The impediments

The push in the Budget 2024-25 is to increase domestic value addition. China and Vietnam have followed the same approach but they did it sequentially instead of a simultaneous approach. Industry players say that Indian companies are battling with the high cost of capital — nearly three times that of China; access to technology and a near absent skill-set. “The question is – even if you give PLI who will these companies work with?” the source asked. The scheme will have to look at joint ventures to begin with. Success stories of East Asian economies such as Hong Kong ($320 billion); Taiwan ($183 billion), and South Korea ($148 billion) as of 2020-21 show that “first globalise then localise” in the case of electronics sector has worked better, according to an analysis by ICRIER.

Sino-India reset

India’s relationship with China over the last few years has been difficult, hitting a new low four years ago with the escalation of tensions on the India-China border. What has followed since has been an overt attempt to keep Chinese money and people out of India. There has been a lot of talk about pressing the reset button to resolve differences. Significantly, in the first meeting between External Affairs Minister S Jaishankar and Chinese Foreign Minister Wang Yi, both sides agreed that the” prolongation of the current situation in the border areas is not in the interest of either side”.

The economic impact of the souring of the relations has been a slide for India. When the smartphone PLI scheme was announced on April 1, 2020, the intent was to ride the China plus one wave and the hope was that along with assembly, the entire ecosystem would shift from China to India. On April 17, 2020, Press Note 3 was released putting sweeping curbs on Chinese investments into the country, including bans on Apps. The trigger cited was national security concerns. Since then India’s trade deficit with China has expanded at a breathless pace — while India’s exports to China have remained around $16 billion annually since 2019, imports have increased from $70.3 billion in 2018-19 to over $101 billion in 2023-24. This has meant a cumulative trade deficit of more than $387 billion over the past five years.

Policy dilemma

The policy dilemma before the Indian government is how to deal with China. While India needs China to build its sourcing capabilities, it also has to keep its security concerns paramount. Electronics manufacturing is a success story that India needs to build upon to create highly skilled jobs in India. At the last count, 14 million Chinese were directly employed in the electronics sector compared to 140-210,000 in India. Even the Philippines has 21 times more workers in the electronics sector than India. As the government readies to announce a new PLI scheme, the big question is whether the government will allow joint ventures in this space because the tech know-how for components and sub-assemblies largely sits outside India. “We have to build scale. Assembly has done well. Electronics has been a successful PLI, we have to build on it. It is a well established principle that when you grow scale, value addition goes down initially,” said an industry source.

As India looks at becoming the third largest economy in the world, it faces the pertinent question of either allowing Indian manufacturing access to the cheapest inputs from anywhere in the world to build and scale, or to start from scratch even as it aspires to build for the world. India has announced a slew of programs, including Make in India and the PLI schemes, to build its manufacturing capabilities. It has been negotiating free trade agreements but even as such pacts have been signed, custom duties across a wide range of products have ratcheted up. While the government pursues two simultaneous goals of exporting to the world and boosting local value addition, it might want to step back to assess if India wants to shift gears and accelerate one over the other for the time being.

The Carbon Border Adjustment Mechanism (CBAM) aims to ensure that imported goods are treated the same as EU-produced goods to support global decarbonization, according to the Director-General of the European Commission. Following a visit to India to discuss tax and customs issues, Gerassimos Thomas, the Director-General, emphasized the significance of this initiative.

CBAM is the European Union's proposed tax on the carbon emissions associated with producing goods imported from countries like India and China. This initiative has sparked debates at various multilateral forums, including United Nations climate conferences, as poorer countries fear such tariffs will negatively impact their livelihoods and economic growth.

Thomas led a delegation of officials to New Delhi on July 1 and 2 to discuss tax and customs issues, focusing particularly on CBAM. He met with Indian government officials and business leaders to explore the potential impacts on Indian industries and to explain CBAM's objectives and timeline.

Thomas commended India's plans to decarbonize its economy, highlighting the shared commitment to collaborate with India on these efforts. "My mission was an excellent opportunity to engage in direct, in-depth, and meaningful interactions with my Indian counterparts and business representatives on a wide range of tax and customs matters, as well as CBAM. The importance of EU-India relations is growing, and both sides are eager to deepen this relationship to benefit businesses," Thomas stated.

Through CBAM, the EU aims to set a price on the carbon emissions associated with producing energy-intensive products such as iron, steel, cement, fertilizer, and aluminum in other countries. The goal is to reduce emissions from imports and create a level playing field for goods produced within the EU, which must adhere to stricter green standards.

Developing countries are concerned that the EU's planned CBAM tax will harm their economies and make trading with the EU prohibitively expensive.

"Europe is a net importer of CBAM goods and wants to ensure that we continue importing goods with the lowest possible carbon intensity to contribute to global decarbonization. CBAM ensures that imported goods are treated equally to those produced in the EU. It does not discriminate and has a very gradual phase-in to provide maximum predictability for investors and businesses," Thomas explained.

He emphasized the importance of his visit as an opportunity to listen, learn, and improve. "We listened to the challenges that Indian businesses face with the implementation of CBAM, learned about the possible impacts on Indian Micro-Small and Medium-sized Enterprises (MSMEs), and reiterated our commitment to adapt and improve the CBAM measure," he said.

Technical meetings with the Ministry of Power, including the Bureau of Energy Efficiency, will continue. An assessment report on the transition period will be submitted to the Council and the European Parliament before the end of next year. This report will be public, allowing Indian industry and authorities to comment and discuss the next steps with the European Commission.

Beyond CBAM, the visit underscored the mutual interest in deepening exchanges on respective carbon trading markets, pricing mechanisms, and EU cooperation with India in energy efficiency, renewables, and clean technology.

On taxation, Thomas discussed the 'Two-Pillar Solution' to address the tax challenges of the digital economy with his Indian government counterparts. India confirmed its commitment to 'Pillar 2'.

Regarding the UN Framework Convention on international tax cooperation, both parties agreed to avoid overlap between different tracks.

The EU and India have had a long-standing Customs Cooperation (CCMAA Agreement) since 2004. During this week's interactions, Thomas focused on the latest challenges in customs, including cross-border e-commerce and designer drug precursors. India agreed to reinforce bilateral ties and have closer cooperation on designer drug precursors under the existing CCMAA Agreement. Ongoing negotiations for an EU-India Free Trade Agreement (FTA) include an upgrade of this customs cooperation.

The Tamil Nadu Directorate of Vigilance and Anti-Corruption has initiated an investigation into allegations of significant irregularities that led to substantial losses for the state exchequer.

The Tamil Nadu government has authorized a probe into the multi-crore coal import scandal involving the Adani group and others. The Directorate of Vigilance and Anti-Corruption (DVAC) has launched a preliminary inquiry into allegations of serious irregularities in tender conditions and coal imports, resulting in considerable financial loss to the state government.

"Clearance has been granted by the government to initiate a preliminary inquiry and investigate allegations regarding coal imports by the Tamil Nadu Generation and Distribution Corporation (TANGEDCO). This sanction, under Section 17A of the Prevention of Corruption Act, 1988, follows a complaint filed by Arappor Iyakkam," sources confirmed to The Hindu on Tuesday.

Arappor Iyakkam, an organization dedicated to transparency and accountability in governance, alleges massive corruption in coal imports involving TANGEDCO officials, Adani Global Pte Ltd., and others, amounting to ?6,066 crore between 2012 and 2016. Despite evidence and complaints filed in 2018 and 2019, no action was taken by the DVAC.

"In a letter dated January 31, 2023, Arappor Iyakkam's convener, Jayaram Venkatesan, highlighted to Chief Minister M.K. Stalin the lack of investigation into the coal import scandal, which has burdened TANGEDCO with substantial debts. He alleged corruption amounting to ?3,000 crore solely by Adani Global Pte Ltd. during the previous administration," the sources added.

The Comptroller and Auditor General (CAG) also flagged discrepancies, noting changes in tender conditions favoring Adani Global Pte Ltd. and select firms post-2011, with turnover requirements adjusted significantly.

"Evidence indicates that Adani Global Pte Ltd. and others were awarded tenders at prices $15 to $20 higher per metric ton than prevailing market rates, as confirmed by Indonesian government data at the time. Poor-quality coal imports further exacerbated losses in thermal power generation," Mr. Venkatesan stated.

Amid delays in DVAC sanctions, Mr. Venkatesan sought permission to protest silently in the State Assembly on June 26, 2024, citing government inaction in investigating the scandal.

Sources indicated that a preliminary inquiry under the previous AIADMK government did not proceed due to lack of prima facie evidence. Following recent clearance from the current administration, a special investigative team led by a Superintendent of Police has been tasked to reopen and investigate the case.

Iron ore futures prices surged on Monday to their highest levels in nearly two weeks, buoyed by robust factory data from China, the world’s largest consumer, and expectations of additional stimulus measures in the near future.

The most-active September iron ore contract on China’s Dalian Commodity Exchange (DCE) closed daytime trading 2.5% higher at 840 yuan ($115.58) per metric ton, marking its peak since June 18.

Meanwhile, the benchmark August iron ore on the Singapore Exchange rose nearly 1.7% to $108.4 per ton, as of 0707 GMT, reaching its highest level since June 20.

The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) climbed to 51.8 in June from 51.7 in the previous month, surpassing analysts’ expectations of 51.2 and marking the fastest growth since May 2021.

In contrast, China’s official manufacturing PMI remained unchanged at 49.5 in June, indicating contraction and aligning with forecasts.

Analysts from Jinrui Futures noted a diminished expectation of a significant decline in hot metal output following recent property stimulus measures in Beijing.

Beijing recently unveiled initiatives to lower home purchase costs through reductions in mortgage rates and minimum down payment requirements. Investors and traders are also anticipating potential additional stimulus during the upcoming third plenum scheduled from July 15 to July 18.

Elsewhere, coking coal and coke prices on the DCE rose by 2.8% and 3.3%, respectively, while steel benchmarks on the Shanghai Futures Exchange also recorded gains. Rebar increased by 0.7%, hot-rolled coil by 0.6%, wire rod by nearly 0.8%, and stainless steel by almost 0.9%.

Everbright Futures commented in a note that the potential for further declines in steel prices in the second half of the year is limited, given current relatively low valuations and operational losses at many mills.