Allahabad HC refuses interim relief to power firms from RBI directions

The Allahabad High Court (HC) on Monday refused to provide relief to privately-owned stressed power projects from the Reserve Bank of India’s (RBI’s) February 12 circular.
The circular had directed lenders to undertake insolvency resolution of defaulting companies within a strict timeline. The central bank had also put in the condition of one-day default, asking banks to identify stress even when repayments were overdue by a day. Resolution proceedings would have to be completed in 180 days. The deadline ended on Monday.
The court has, however, allowed companies to seek the legal route with their individual grievances. Monday’s order sets the clock ticking on 34 stressed assets that have a cumulative debt of Rs 1.74 trillion. A dozen of these are expected to face insolvency proceedings now.
The Independent Power Producers Association of India (IPPAI) had filed a petition in the Allahabad HC seeking exemption from the RBI notification. The court then directed the Ministry of Finance to hold a meeting with all stakeholders, including the Ministry of Power, the RBI, and private power companies, and to prepare a report. The report was the Centre’s submission in the HC.
The Centre said it would seek regulatory relief for a dozen power projects with an overall debt exposure of around Rs 1 trillion. It also constituted a high-powered committee (HPC) under Cabinet Secretary P K Sinha. Representatives from the ministries of railways, finance, power, coal, and key sector lenders are part of the committee.
The court has directed this committee should come out with a resolution plan in two months from its constitution (on July 29). It has asked the Centre to start consultations with the RBI under Section 7 of the RBI Act and conclude it in 15 days.
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According to Section 7, the central government may issue directions to the RBI as it may “consider necessary in public interest” after consultation with the RBI Governor. However, a senior government official said that Section 7 of the RBI Act only relates to the management of the central bank and not policy issues. The government has so far never invoked Section 7 to issue directions to the RBI.
The court asked the bankers to move the RBI under the Section 7 of the Insolvency Bankruptcy Code for getting their resolution plan approved or the deadline for it extended from the central bank. It has also asked all the lenders and the government to identify and resolve the stressed assets under Sections 35AA and 35AB of the Banking Regulations Act.

Section 35A of the Banking Regulation Act, 1949, enables the Union government to authorise the RBI to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process.
Around 11 projects of State Bank of India (SBI) and three of the Power Finance Corporation (PFC) have been identified for a resolution plan. These would have to start the resolution process soon.
Punjab National Bank (PNB) is working with SBI on a resolution plan for some of these stressed power assets, industry sources said. The PFC has the highest exposure of Rs 300 billion, followed by PNB (Rs 279billion) and SBI (Rs 240billion).
SBI has looked at 13-14 accounts that would entail changes in management, investment, etc. Of these, seven to eight accounts are close to getting consensus among the banks, SBI Managing Director Arijit Basu had said last week.
Banks will have the additional burden of provision, depending on the haircut they have to take for each of the case, public sector bank executives pointed out.
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Lenders have decided to take four cases to the bankruptcy court. There is also room for banks to withdraw case referred to the National Company Law Tribunal, with the consent of 90 per cent of lenders, another SBI executive said.
The power ministry has suggested two schemes for resolution of stress in the sector — Samadhaan, by SBI and PFC, and Pariwartan from the Rural Electrification Corporation (REC) which has suggested setting up an asset restructuring company (ARC). Samadhaan is about identifying 10 assets and taking over “sustainable debt” and then selling the asset to some ARC.
“Eighteen stressed power assets are in the NCLT, eight have been resolved, and 11 were identified for Samadhaan. Four of these have not found to be viable and will be referred to the NCLT,” Rajnish Kumar, chairman, SBI, said earlier in the day. The Supreme Court tomorrow will hear a transfer petition filed by the RBI to get all the cases filed against its February 12 circular by all affected sectors to a single bench in Delhi.

Jet Airways posts Q1 loss of Rs 13.23 bn due to higher fuel expenses

Jet Airways Ltd, India's second-largest airline by market share, posted a first-quarter loss, hurt by higher fuel expenses.
The airlines posted a loss of Rs 13.23 billion ($188.76 million)in the three months ended June 30, compared with a profit of Rs 535 million a year earlier.

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Aircraft fuel expenses for the quarter surged 53 per cent to Rs 23.32 billion.

BJP govt changed Rafale deal to favour industrialist: Rahul Gandhi in UK

Congress president Rahul Gandhi on Friday raked up the multi-billion Rafale deal in the UK, accusing the BJP government of changing the contract to benefit an industrialist who was in debt.
In an interaction with the National Indian Students and Alumni Union (UK) at the London School of Economics, Gandhi spoke of alleged corruption in the Rafale deal, accusing Prime Minister Narendra Modi of favouring a businessman who had no experience in manufacturing aircraft.

Gandhi has been attacking the BJP government for allegedly inking the deal at a much higher price than the one the previous UPA regime had negotiated to benefit "one businessman".
Facing allegations of getting undue benefits from the multi-billion dollar Rafale deal, Anil Ambani-led Reliance Group has sent legal notices to several Congress leaders asking them to "cease and desist" from levelling such charges.
Gandhi, in response to a question on tackling corruption, said: "Hindustan Aeronautics Limited (HAL) has been building aircraft for 70 years... HAL has no debt. HAL has by far the best experience in building aircraft in 70 years".
"Our government signed a contract with Dassault, and gave the contract to HAL. The price we were paying was approximately 5.2 billion (Rs 520 crore).
"Then something happened, Prime Minister Modi went to France, changed the contract from 126 planes to 36 planes, changed the pricing structure from 5.2 billion to 16 billion and magically, Mr Anil Ambani was given the contract," Gandhi said.
The Congress president alleged that "Mr Anil Ambani is Rs 450 billion in debt".
"Mr Anil Ambani has never made a plane in his life, and the company that got the contract, one of the biggest defence contracts in the world, was formed one week before, luckily this is absolutely amazing. So that's the interesting question about corruption," Gandhi said.
Reliance Group has denied the allegations relating to the deal under which France's Dassault is supplying the fighter jets and has entered into a joint venture with an Anil Ambani-led group firm to meet its offset requirement of the contract.
Ambani recently wrote to Gandhi on the deal saying his party has been "misinformed, misdirected and misled" by "malicious vested interests and corporate rivals" on the issue.

Encourage Bhutan to deploy more soldiers in Doklam: Parl panel to govt

A parliamentary panel adopted a report on the Doklam issue on Saturday recommending that India should encourage Bhutan to deploy more soldiers on the northern parts of the sensitive region.
Troops of India and China were locked in a 73-day stand-off in Doklam in the Sikkim sector from June 16 last year, after the Indian side stopped construction of a road in the disputed tri-junction by the Chinese Army. Bhutan and China have a dispute over Doklam.

Congress president Rahul Gandhi is a member of the Parliamentary Standing Committee on External Affairs, headed by party MP Shashi Tharoor. Gandhi was not present in the meeting today.
Earlier this month, the panel could not adopt the draft report as most of the BJP members skipped the meeting and the quorum could not be reached, according to sources.
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Some members of the panel who were present in today's meeting said the report was adopted with minor modifications.
The draft report, circulated among the panel's members on August 6, did not clarify whether the committee was favouring increasing the deployment of Indian troops in the region.
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BJP members of the panel had demanded that statements recorded before the committee by the defence secretary and the incumbent and former external affairs secretaries not be made public.
A member of the committee said today that "nothing sensitive and crucial information" shared with the panel by officials has been made public.
The committee members had travelled to Sikkim and Arunachal Pradesh to take stock of ground situations and meet senior officials there.
It has been briefed several times on the issue by the former and current foreign secretaries and other officials.
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The foreign ministry officials had informed the panel that Bhutan was firmly with India on the issue.
During earlier discussions, Rahul Gandhi had questioned External Affairs Ministry officials on China's objective and why Beijing chose Doklam to create a confrontation, the sources earlier said.

Rupee leaps from life-time low to snap weeks of decline despite headwinds

The rupee staged a spirited recovery from its life-time low to end higher by a whopping 24 paise at 69.91 against the US currency in a highly volatile week on bouts of dollar selling by exporters and corporates.
After a seemingly endless stream of gloomy news and falling values, sentiment has finally started to show signs of improvement globally against the backdrop of the upcoming visit of Chinese delegates to the US in order to re-ignite trade talks.
Easing contagion risk on emerging-market currencies after last week's carnage also added a positive vibe on the trading front.
The domestic currency larely withstood the headwinds of surging crude prices and trade deficit worries.
The benchmark Brent crude surpassed the significant $75-mark a barrel once again on re-emergence of a supply shock.
Excess volatility and movements in the US dollar had a major impact on the domestic unit initially.
The rupee got hammered to hit a low of 70.24 before rebounding from a fag-end wallop, snapping a two-week losing streak.
The Indian currency had its most turbulent week in more than two years witnessing record lows after doing little to quell investors' fears of a prolonged downturn ahead - a shock resembling 2013 currency crisis.
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It crashed to a historic low of 70.40 against the dollar last week in the wake of Turkey's currency crisis.
The rupee had depreciated by a staggering 2.26 per cent, or 155 paise.
The US dollar shed windfall gains scored on the back of haven demand amid turmoil in emerging market assets.
India's foreign exchange reserves fell by $33.2 million to $400.847 billion in the week to August 17 mainly due to fall in foreign currency assets, according to RBI data.
Meanwhile, foreign investors and funds pumped in over Rs 75 billion into the Indian capital markets so far this month on better corporate earnings coupled with improvement in crude oil prices.
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On the energy front, crude prices snapped their seven seven straight weeks of decline - the longest losing streak in three years as supply risk jumped back into the limelight on growing concern over Iranian sanctions cutting off a major supply source.
The benchmark Brent crude surged over $1.02, or 1.4 per cent to end at $75.75 a barrel.
Earlier this week, staging a smart recovery, the rupee sharply higher at 69.83 from last Thursday's closing value of 70.15 at the inter-bank foreign exchange (forex) market.
The fresh breakout pushed the local unit to hit a high of 69.53 on fresh dollar selling also supported by a strong rally in local equities.
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However, succumbing to a mid-week sell-off spooked by global trade war jitters, the rupee retrated sharply to breach the 70-mark once again to touch a low of 70.24 briefly before recuperating all losses to end at 69.91, revealing a sharp gain of 24 paise, or 0.34 per cent.
The RBI, meanwhile, fixed the reference rate for the dollar at 70.1377 and for the euro at 81.1699. The 10-year benchmark yield ended modestly higher at 7.87 per cent. Globally, the US dollar shed windfall gains scored on the back of haven demand amid turmoil in emerging market assets.
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The Federal Reserve Chair Jerome Powell comments at the Jackson Hole sent the US dollar lower against all of the major currencies on Friday after he confirmed that steady rate hikes are the best way to protect the US economic recovery, though investors were not impressed.
The euro climbed to its strongest level in three weeks despite persistent rise in Italian yields.
The British pound also extended its recovery but the lackluster rally signals that investors are still worried about Brexit.
The dollar index, which measures the greenback's value against a basket of six major currencies dropped to 95.08 from 96 earlier.

MoD clears Rs 460-bn purchase of missiles, guns and naval helicopters

The defence ministry’s apex procurement body, the Defence Acquisition Council (DAC), accorded approval on Saturday for acquisitions worth about Rs 460 billion. This includes missiles and two types of helicopters for the Navy, and artillery guns for the Army.
The biggest procurement green-lighted today is the Rs 217.38 billion purchase of 111 naval utility helicopters (NUH), which will be built by a competitively chosen Indian private sector company.
"This is the first project under the MoD's prestigious Strategic Partnership (SP) Model that aims at providing significant fillip to the government's 'Make in India' programme. SP Model envisages indigenous manufacturing of major defence platforms by an Indian SP, who will collaborate with foreign OEM (original equipment manufacturer), acquire niche technologies and set up production facilities in the country," stated the defence ministry on Saturday.

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The search for a suitable foreign OEM began more than a year ago. On December 1, the Navy chief, Admiral Sunil Lanba, said: "We have floated an RFI (request for information) and we have gotten responses from five OEMs. They are being examined."
On July 30, the defence ministry had promulgated the "implementation guidelines" for choosing an SP in the helicopter category, clearing the way for this procurement.
The basic SP policy framework is a part of the Defence Procurement Procedure of 2016 (DPP-2016). However, equipment-specific selection criteria need to be separately drawn up for each of the four weapons categories the SP policy covers -- fighter aircraft, helicopters, submarines and armoured vehicles. The guidelines for fighters, submarines and armoured vehicle categories are still awaited.
Multi-role helicopters
In another procurement that the Navy chief had identified as "the most important helicopter for us", the DAC cleared the purchase of 24 naval multi-role helicopters (NMRH) that operate from the decks of capital warships, providing early warning and locating and destroying enemy submarines.
The Navy's NMRH fleet currently consists of less than a dozen vintage Seaking helicopters that are increasingly difficult to maintain. While the acquisition of replacement NMRH has dragged on for over a decade, the helicopter hangars of the Navy's frontline warships have remained effectively empty.
"To enhance the capability of Navy at sea, approval has also been granted for procurement of anti-submarine capable, 24 in number multi role helicopters, which are an integral part of the frontline warships like the aircraft carriers, destroyers, frigates and corvettes. Availability of MRH with the Navy would plug the existing capability gap," said the defence ministry.

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Intriguingly, the ministry has not announced which procurement category these helicopters are being bought under. There are reports that the contract is being awarded on a single-vendor basis to US aerospace giant, Lockheed Martin. This comes just days ahead of the 2 + 2 US-India meeting in Delhi on September 6.
The usually credible defence blog, Livefist, writes: "The Indian MoD today cleared decks for the navy to contract for 24 Lockheed Martin-Sikorsky MH-60 Romeo maritime helicopters in a government-to-government deal with the Pentagon. The deal is expected to be worth $1.8 billion (Rs 12,500 crore)."
The MH-60 Romeo is built by Sikorsky, which Lockheed Martin -- already the world's biggest arms company -- acquired in November 2015.
The defence ministry is also silent on whether the 24 NMRH will be bought in flyaway condition, like the 36 Rafale fighters contracted in 2016, or whether there is a Make in India component to the deal.
With the Navy's requirement for NMRH pegged at 123 helicopters for the entire fleet, it is feasible to buy the initial 24 in flyaway condition, with the remaining 99 helicopters built in India. Contacted for a clarification, the defence ministry did not respond.
Artillery guns
In a badly-needed fillip to Army firepower, the DAC approved the manufacture of 150 indigenously designed and developed Advanced Towed Artillery Gun Systems (ATAGS) at an approximate cost of Rs 33.65 billion.
These guns, which the ministry terms "the mainstay of artillery in the near future" are being procured under the "Make – Indigenously Designed, Developed and Manufactured (IDDM)" category. The Defence Research and Development Organization (DRDO) has overseen their development and two private firms will build the guns in parallel -- the Kalyani Group and Tata Power (Strategic Engineering Division).
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The plan is to eventually induct about 1,500 ATAGS. The current order is a preliminary batch that will be used to continue gun development.
Finally, the DAC cleared the procurement of 14 Vertically Launched Short Range Missile Systems that will boost the capability of warships to shoot down and destroy incoming anti-ship missiles.

Nearing resolution of Rs 170-bn NPAs in power sector: SBI MD Arijit Basu

The country’s largest lender, State Bank of India (SBI), on Friday said about 7-8 power sector projects worth Rs 170 billion are likely to be resolved soon, as lenders are nearing a consensus on these.
There are about 34 stressed power projects and the combined value of their outstanding loans is about Rs 1.74 trillion.

“We have looked at 13-14 accounts that would entail changes in management, investment, etc. Of these, we are looking at 7-8 accounts very closely to get some consensus among the banks,” SBI MD Arijit Basu said on the sidelines of a banking event, organised by the Centre for Economic Policy Research (CEPR) and NITI Aayog.
When asked how many cases are being referred to the NCLT by the end of the August 27 deadline, he said: “We don’t see major spurt in accounts being referred to National Company Law Tribunal (NCLT). We have been bringing out the stress in the system... we have worked at resolution. We have not waited for the deadline.”
Banks have already referred many cases to NCLT, he said. The Reserve Bank of India (RBI), in a circular in February, had mandated banks to identify power projects with even a day’s default as ‘stressed assets’, and conclude the resolution proceedings in 180 days else refer them to NCLT. The circular came into effect on March 1, and the 180-day deadline concludes on August 27.
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On provisions against non-performing assets (NPAs) or bad loans, Basu said that some guidance has been given and the bank has already provided for them significantly in the first quarter.
“As far as recoveries are concerned, the current financial year has been significantly better; almost 80-90 per cent more than what we were doing in 2017-18,” he said.
When asked about public sector banks requiring more autonomy, Basu said SBI is a well governed bank with a very strong board.
“The board has not only strong internal directors but strong external directors. So, all decisions are board-driven. Corporate governance in SBI is strong and the regulator is also very clear on how a bank should be regulated,” he said.
On Thursday, former RBI governor Y V Reddy had called for putting an end to the problem of “dual control” of public sector banks.