IndUS Business Journal

How India will protect nuclear liabilities of US firms

Feb 19, 2016 0

By Amit Bhandari

A $48-billion (Rs 3.26 lakh crore) penalty claimed by the US government from Volkswagen for cheating on diesel-car emissions is about 200 times as large as the $225 million (Rs 1,500 crore) insurance pool set up by Indian insurance companies to compensate US nuclear companies for mishaps in India.

If a US nuclear company were to build a reactor in India that suffered a catastrophe, and people were to die in India, the US government’s position seems to be that American suppliers shouldn’t face civil or criminal liability. The US believes the Indian civil nuclear liability law, which calls for both penalties, is unduly harsh. Rather than say so directly, US officials keep repeating that the “Indian law is inconsistent with the international liability regime”.

The Indian civil nuclear liability law holds the equipment supplier responsible for any incident caused by the supplier or its employees. The Indian liability law differs from those of other countries because it was drafted keeping in mind the 1984 Bhopal tragedy – where, despite 5,000 deaths and effects across generations, no one was held criminally liable.

The penalty demanded in the Volkswagen case is about 100 times the compensation of $470 million – ($907 million in 2014 dollars) – paid by US firm Union Carbide after the Bhopal Gas tragedy, which also left 70,000 people maimed or injured. Volkswagen’s cover-up caused no injuries or deaths.

Although the Indian government wants to protect US nuclear companies against the Indian liability law, critics argued that these companies are using India’s eagerness to avoid any liability, if something goes wrong.

India wants to build more nuclear power plants in an attempt to reduce the share of coal in electricity generation. Increasing the use of nuclear power is also a part of the country’s strategy to tackle climate change.

India currently has 5,780 MW of nuclear power in operation and plans to add another 17,400 MW, making it possibly the largest market for nuclear power after China, and a financially lucrative prospect for Western firms faced with limited domestic sales.

However, the 2011 Fukushima nuclear disaster has heightened concerns of nuclear safety and accident costs. The fallout of that disaster will also make it hard to change India’s liability laws.

The US’ large settlements extend to corporate wrong-doing beyond its borders

Large settlements in the US are a regular feature. In October 2015, the Justice Department arrived at a settlement with oil major BP, which will pay a penalty of $20.8 billion to cover the economic and environmental damage arising from a 2010 oil spill in the Gulf of Mexico.

Volkswagen could, in theory, face fines of as much as $37,500 per vehicle for each of two violations of the law; up to $3,750 per “defeat device”; and another $37,500 for each day of violation, a Reuters report said.

In April 2010, a deepwater oil-drilling rig operated by BP, the Deepwater Horizon, suffered an explosion which killed 11 men, and the well it was drilling leaked over five million barrels of oil in the Gulf of Mexico.

This was the largest-ever settlement in the history of the Department; the Volkswagen penalty could be larger.

A number of companies have paid tens of billions of dollars in fines over the past decade for breaking US law.

Top US banks, such as Bank of America, JP Morgan, Citigroup and Morgan Stanley, have paid multi-billion dollar fines for their roles in the 2008 global financial crisis, caused by reckless business practices of large Western banks.

The remit of the US Justice Department extends beyond its borders and to foreign firms as well. In May 2015, five global banks–Citicorp, JP Morgan, Barclays, UBS and the Royal Bank of Scotland–agreed to pay fines adding up to $2.5 billion, for manipulating a widely-used financial benchmark set in London. This brings the total penalty paid by these banks for their role in this manipulation to $9 billion.

UK-based HSBC was fined for “illegally conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan and Burma”–countries under US economic sanctions.

During the financial year 2015, the US justice department collected $23 billion in penalties in various civil and criminal cases, slightly lower than the collection for 2013, when it had a record haul.

Indian firms also fined in the US

While the US nuclear industry wants to avoid any liability in India for acts of omission or commission, Indian companies have often been slapped with large fines for violations of US law.

Drug manufacturer Ranbaxy paid penalties of $500 million (Rs 3,400 crore) in 2013 for falsifying data about its drugs and for not following proper manufacturing practices–more than twice the value of the nuclear liability insurance pool to be created in India.

In 2013, tech firm Infosys paid a $35 million penalty in a civil settlement on allegations of visa misuse; the firm maintained that the “claims are untrue and remain unproven”.

India has started levying penalties too

India, too, has started levying big fines. For instance, in 2013, a group of Indian cement companies was fined Rs 6,698 crore by the Competition Commission of India for working as a cartel and over-charging consumers. This amount, levied for unfair business practices rather than causing deaths and injuries, is 4.4 times the proposed liability cap for nuclear incidents.

Similarly, Delhi-based real estate firm DLF has been recently ordered to pay a penalty of Rs 630 crore for unfair business practices.

(In arrangement with IndiaSpend.org, a data-driven, non-profit, public interest journalism platform. Amit Bhandari is a media, research and finance professional. The views expressed are those of IndiaSpend.)

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ADB to fund $1.5 billion for Bangladesh-Myanmar railways

Feb 19, 2016 0

Dhaka–The Asian Development Bank (ADB) will fund $1.5 billion for building a rail line that will connect Cox’s Bazaar, Bangladesh’s beach resort, to neighbouring Myanmar as part of a larger Trans-Asian Railway network.

Bangladeshi Prime Minister Sheikh Hasina in 2011 opened construction work on the rail line but it has been on hold due to lack of funds, Xinhua reported.

“The ADB has been prioritising Bangladesh’s policy for development through regional connectivity,” the country’s Economic Relations Division (ERD) Joint Secretary Saifuddin Ahmed said in a report on Friday.

“The project under Trans-Asian Railway corridor will set up rail links with Myanmar. The ADB wants to fund it because of its tremendous prospect,” he said.

Some 100 km of rail lines will connect Bangladesh with Myanmar through Ghumdhum border.

“We’ve had two meetings with the ADB mission on this project. The ADB has agreed to give $1.5 billion in loan at two percent interest.”

Bangladesh has a 300 km-border with Myanmar and the country expects to connect by road and rail with Kunming in China through Myanmar.

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Indian Business Briefs and Policy News

Feb 18, 2016 0

India Permits Sharing of Active Telecom Infra

The Department of Telecommunications has decided to allow sharing of active telecom infrastructure, such as antennae, feeder cables, and transmission systems. This is expected to lower costs for operators and lead to faster roll out of networks. This would help operators enhance their network coverage area and fill the gaps, enabling them to improve quality of service.

Foreign Exchange Management Act Norms Rationalized

Make-Modi-MEA-TwitterWith a view to rationalize the regulations in light of evolving business environment and changing practices in cross-border transactions relating to external trade and payments, the Reserve Bank introduced nine updated regulations under the 1999 Foreign Exchange Management Act (FEMA). The Central Bank’s initiative contributes to promote the ease of doing business in India.

Cabinet OKs Formation of JV Cos. For Rail Infrastructure Projects

Cabinet has okayed formation of joint venture companies with the state governments to mobilize resources for undertaking various rail infrastructure projects in the states. The joint venture companies would ensure greater participation of state governments in the implementation of railway projects both in terms of financial participation as well as decision-making process and will facilitate faster statutory approvals and land acquisitions.

India, U.S. Sign Agreement to Improve Systems at DGCA

India’s aviation regulator, the Directorate General of Civil Aviation (DGCA), and the United States Technical Development Agency (USTDA) signed an agreement for India Aviation Safety Technical Assistance. “….this is aimed at bringing in more systemic improvements in the area of operation, airworthiness and licensing. It will include components on general aviation and business aviation,” the Government said in a release.

Govt. Approves Policy for Capital Goods Sector

The Government has cleared the policy for the country’s capital goods sector. The policy recommends integration of key capital goods sub-sectors and mandatory standardization, and advocates launching a technology development fund under the public private partnership (PPP) model to fund technology acquisition, transfer of technology, purchase of intellectual property rights (IPR), designs and drawings as well as commercialization of such technologies of capital goods.

Prime Minister Modi Launches Make in India Week

Lunching the largest-ever manufacturing summit ‘Make In India Week’ in Mumbai, Prime Minister Modi said the government is swiftly working towards a transparent and predictable tax regime to make the country a global manufacturing hub. Make in India is flagship initiative of the Government to encourage international companies to manufacture their goods in India.

Domino’s Opens 1,000th Store in India

Domino’s Pizza opened its 1,000th store in Delhi. India is Domino’s fastest-growing international market with more stores than any other market outside the United States. Domino’s is the largest pizza brand in India

Indians 3rd Biggest Investor in U.S. Realty Market at $8 Billion

Indians are the third biggest international investor community with $8 billion investment in the U.S. realty market, brokerage firm Sotheby’s International Realty said. “I think and I believe Indians that live in the U.S. are one of the largest group of millionaires in the America… they are already there and therefore they are investing in real estate,” said U.S.-based Sotheby’s International Realty President and CEO Philip A. White.

Boeing will Invest Billions of Dollars in India

Boeing plans to invest billions in India, but their investment is more than financial. According to Dennis A. Muilenburg, president and CEO of Boeing, the U.S. aircraft manufacturer is also looking to invest in capabilities, infrastructure, and partnerships to enable aerospace to be an economic growth engine. Boeing is engaged in a long-term commitment to build aerospace capacity in India.

Marriott Launches its First Dual Branded Hotel in India

Luxury lodging service provider Marriott International Inc. opened its first dual branded property-Courtyard and Fairfield-in Bengaluru with an investment of around $44 million. The new 336-room hotel is Marriott’s 31st hotel in India. Global luxury hotels have increased their focus on the Indian market on account of growing demand coming in from tier II and III cities.

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India’s GDP to grow next fiscal at 7.5 percent: Moody’s

Feb 18, 2016 0

Mumbai–US agency Moody’s Investors Service on Thursday forecast for India a “stable GDP growth at around 7.5 percent in 2016 and 2017”, saying the country is relatively less exposed to external headwinds, like the Chinese slowdown, and will benefit from lower commodity prices.

India is relatively less exposed to external factors, including China slowdown and global capital flows. Instead, the economic outlook will be primarily determined by domestic factors, Moody’s said in its report “Global Macro Outlook 2016-17 – Global growth faces rising risks at time of policy constraint”.

“Together with Turkey and China among the G20 emerging markets, India benefits from lower commodity prices: In 2014, net commodity imports amounted to 5.9 percent of India’s GDP, compared with net exports worth 1.3 percent, 3.3 percent and 4.3 percent for South Africa, Brazil and Indonesia respectively,” it said on Thursday.

“In the five years to the end of the decade, we expect GDP per capita (at market exchange rates) to increase by 34 percent in real terms in India, compared with only 3.6 percent in the G20 emerging markets, excluding China and India,” the report added.

Instead, the American agency cautioned that India’s economic environment is constrained by “banks’ balance sheet repair and elevated corporate debt” and the corporate pricing power being constrained by the impact of two consecutive droughts on food price inflation and households budgets.

India’s economy is powered by sustained growth in consumer spending, fostered by moderate inflation, still favourable demographics and strengthening investment, in particular foreign direct investment, Moody’s said.

“The 23.55 percent increase in public sector salaries proposed by the 7th Pay Commission is worth 0.7 percent of GDP. It is not yet known how this proposal will be implemented but higher public sector wages will most likely contribute to strong consumption growth,” the report said.

“The pay increase will also probably raise inflationary pressures. However, we assume the government will cut spending in other parts of the budget to maintain the deficit broadly in line with the 3.5 percent of GDP objective, thereby mitigating some of the inflationary effects,” it added.

Moody’s said overall growth will fail to pick up steam over the next two years as the slowdown in China, lower commodity prices and tighter financing in some countries weigh on the economy.

The Indian economy grew 7.3 percent in the third quarter ended December 31, 2015 — down from the 7.7 percent expansion in the previous quarter, but marginally up over the 7.1 percent over the like period of last fiscal, official data showed last week.

Growth was pulled down by lower production in ‘agriculture, forestry and fishing’, ‘electricity, gas and water supply and other utility services’ and ‘financial, real estate and professional services’.

There was a 6 percent growth in electricity, gas, water supply and other utility services, as against 7.5 percent growth in the second quarter.

The government’s mid-year economic review, released in December, lowered the economic growth forecast for the current fiscal to the 7-7.5 percent range, from the previously projected 8.1-8.5 percent, mainly because of lower agricultural output due to deficit rainfall.

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Make in India Week gets $220 billion investment commitment

Feb 18, 2016 0

Mumbai– India’s biggest domestic manufacturing promotional fair till date – the Make In India Week – ended here on Thurday with investment commitments of over Rs.15 lakh crore ($220 billion), of which more than half, or Rs.8 lakh crore came to Maharashtra alone, an official said.

Industrial Policy and Promotion Secretary Amitabh Kant said investment of Rs.15,20,000 crore were committed during the event while business enquiries worth Rs.1,05,000 crore were generated.

Make-Modi-MEA-TwitterHost state, Maharashtra, bagged a whopping Rs.800,000 crore – more than 50 percent of the total investment proposals from across the globe – at the MIIW which attracted nearly a million visitors including 1,245 national and international speakers, and saw 8,245 meetings and 215 exhibitions with participation from 102 nations.

Addressing the closing ceremony, Amitabh Kant said: “Maharashtra will become gateway of India”, testifying to the success of the event held in the state capital, with possibility of employment generation of around three million here.

The MIIW created avenues for showcasing, connecting and collaborating for manufacturing in India, promoted an investment-enabling environment, provided an impetus to Design, Innovation, Youth and Startups and allowed a platform for global CEOs, think tanks, policy makers, diplomats and political leaders to converge, he said.

In his address, Chief Minister Devendra Fadnavis said that a Task Force, headed by the state industry minister, is being set up to ensure that the MoUs signed here are translated into actual investments.

A staggering 150 events were held during MIIW with participation of over 25000 people in different seminars or symposia which were addressed by top ministers, chief ministers, policy makers, industrialists, foreign bigwigs, academics and even spiritual gurus on wide-ranging issues concerning business and society.

The MIIW was held over a sprawling 2.30 million square feet air-conditioned area across 27 huge halls where 215 exhibitors showcased their strengths in 11 main sectors.

These included aerospace and defence, automobiles, chemicals & petrochemicals, construction machinery, food processing, infrastructure, IT and electronics, industrial equipment & machinery, MSME, pharmaceuticals and textiles.

Seventeen Indian states and three countries – Germany, Sweden and Poland – set up pavilions.

The Indian government took the opportunity to announce several major policies like the Electronics Development Fund, National Capital Good Policy, Investment Opportunities in Food Processing Industry, E-Toll policy for the 360 tolls plazas in the country, among others.

Among the visitors at the event inaugurated by Prime Minister Narendra Modi included his Swedish and Finnish counterparts, Stefan Lofven and Juha Sipila respectively, Poland’s First Deputy Prime Minister Piotr Glinski, Japanese Economy and Industry Minister Yosuke Takagi, Mexico’s Asia and Middle East Minister Cesar Fergozo, Indonesian Transportation Minister Ignasius Jonan, and Nepalese Industry Minister Som Prasad Pandey.

Indian industrialists who attended include Ratan Tata, Cyrus Mistry, Mukesh Ambani, Kumarmangalam Birla, Anand Mahindra, Gautam Adani, Ajay Piramal, Y.C. Deveshwar and G.V. Sanjay Reddy among others.

Key foreign CEOs who attended MIIW included John Chambers of CISCO Systems, Markus Wallenberg of SEB, (Sweden), Doug DeVos of Amway, Hakan Bushke of SAAB, Edward Monser IV of Emerson, Mats H. Olsson of Ericsson and Karol Zarajczyk of Poland.

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National Textile Policy likely by April

Feb 18, 2016 0

Mumbai–Textiles Minister Santosh Kumar Gangwar on Thursday said the long awaited National Textile policy is nearing finalisation and is likely to be issued before the end of April.

Interacting with media persons after participating in the Make In India Week here, he said consultations with all stakeholders are in progress and he was confident that the new textile policy will be released during the budget session of parliament.

Textiles Minister Santosh Kumar Gangwar

Textiles Minister Santosh Kumar Gangwar

“The textile and apparel industry is one of the key sectors of India’s manufacturing segment as it contributes significantly to the economy in terms of employment generation, foreign exchange revenue and above all, its backward linkages to the rural economy that gives huge opportunities to millions of farmers, artisans, handloom and handicraft manufacturers,” the minister said.

He said India will be exporting around $185 billion of textile and apparel by 2025.

Considering the targeted growth in exports, Gangwar said India should be able to double the share of the global textile and apparel trade from the present level of 5 percent.

He said the dynamics of the market economy have thrown up both opportunities and challenges to the textile industry and different countries in the region have concentrated in areas where they have comparative advantage.

“Countries such as Bangladesh and Vietnam have entered the league of big players in the global market. The Indian textile industry should gear up to attain its desired position in the global market and the government is willing to provide all possible support by creating enabling frameworks,” the minister added.

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India’s Cipla acquires two US drug firms for $550 million

Feb 18, 2016 0

Mumbai–Drug major Cipla has acquired two US-based firms — InvaGen Pharmaceuticals and Exelan Pharmaceuticals — for $550 million, the company said in a regulatory filing here on Thursday.

“The acquisition was made by Cipla’s UK arm Cipla through a wholly-owned special purpose vehicle which would merge into InvaGen Pharmaceuticals after the acquisition. The combined revenue for the two companies for the year-ended 2015 is over $230 million,” the company said in a statement.

Umang Vohra

Umang Vohra

The company had informed Bombay Stock Exchange on Sep 4, last year that the cash consideration payable for Invagen is $500 million and for Exelan it is $50 million.

“The acquisition will further strengthen Cipla’s presence in US pharmaceutical market. InvaGen’s balanced portfolio, robust manufacturing base and strong R&D capabilities will act as lever to expand Cipla’s reach in the US market,” said Umang Vohra, global chief operating officer.

The acquisition is expected to scale to Cipla’s US business, currently 8 percent of total revenue and provide a launch pad to introduce its pipeline of products in the respiratory and injectables space, among other products.

This is the second landmark acquisition in Cipla’s 80 year history after the one in South Africa.

InvaGen pharmaceuticals also provides Cipla about 40 approved abbreviated new drug applications, 32 marketed products, and 30 pipeline products which are expected to be approved over the next four years, the company said.

Exelan was incorporated in the year 2011 and is engaged in the business of sales and marketing of generic pharmaceuticals for the government and institutional market.

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Recording, sharing videos now possible on Twitter’s Direct Messages

Feb 18, 2016 0

New York–Aiming to take Twitter to a new level amid an existential crisis, the micro-blogging website is now bringing video support to Direct Messages.

“The company keeps plugging away at basic features to bring the service up to speed with competitors like Facebook Messenger. Following the addition of a GIF button on Wednesday, Twitter is rolling out this feature globally to iOS and Android smartphones,” The Verge quoted the company as saying on Wednesday.

However, on twitter.com, user will be to send videos from within Direct Messages threads, but won’t be able to record them directly on the website.

A GIF button and a video support don’t do much to fix those longstanding issues but they may bring the website up to compete with Facebook and Google.

Recently, Twitter introduced a new timeline feature that allows users to never miss important tweets from people they follow by giving an option to see the best tweets first.

The rest of the tweets are displayed right underneath.

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Google CEO Sundar Pichai backs Apple over cracking shooter’s phone

Feb 18, 2016 0

By Arun Kumar

Washington– Google’s Indian-American chief executive Sundar Pichai sided with rival Apple in its battle over a court order to help the FBI access information on the encrypted iPhone used by a Pakistani-American shooter in San Bernardino.

Google CEO Sundar Pichai

Google CEO Sundar Pichai

Pichai Wedenesday directed followers to Apple Chief Executive Tim Cook’s open letter Tuesday night arguing that helping the FBI try to get into the phone used by Syed Rizwan Farook would sabotage the security of “tens of millions of American citizens.”

Farook and his Pakistani origin wife, Tashfeen Malik, gunned down 14 people at a social services agency Dec 2 in San Bernardino, California, before being killed in a shootout with police.

FBI Director James Comey said last week that investigators still haven’t been able to get at the information on Farook’s iPhone 5c.

A Riverside, California court Tuesday directed Apple to help FBI crack the phone by developing software to hack into one of its own devices.

In a series of tweets Wednesday evening, Pichai argued that even that would essentially put tech companies in the position of hacking their own customers:

1/5 Important post by @tim_cook. Forcing companies to enable hacking could compromise users’ privacy.

2/5 We know that law enforcement and intelligence agencies face significant

challenges in protecting the public against crime and terrorism 3/5 We build secure products to keep your information safe and we give law enforcement access to data based on valid legal orders 4/5 But that’s wholly different than requiring companies to enable hacking of customer devices & data. Could be a troubling precedent 5/5 Looking forward to a thoughtful and open discussion on this important issue

The government, Cook contends, is asking Apple to create a “backdoor” to its own security systems.

“Up to this point, we have done everything that is both within our power and within the law to help them,” Cook wrote in a letter published on the company’s website.

“But now the US government has asked us for something we simply do not have, and something we consider too dangerous to create.”

Reacting to Cook’s stand, Republican presidential front-runner Donald Trump said he was floored that Apple had not volunteered to aid the FBI. “Who do they think they are?” he asked on Fox News.

Speaking to reporters in South Carolina, Senator Marco Rubio said he hoped the tech giant would voluntarily comply with the government’s request, but acknowledged the court order is far from a simple issue.

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India to construct Rs.11,000 crore worth of railway infrastructure

Feb 17, 2016 0

New Delhi– The central government on Wednesday approved around Rs.11,000 crore worth of capacity augmentation in the railways through construction of additional infrastructure to cater to the growth in passenger and freight traffic.

The Cabinet Committee on Economic Affairs (CCEA) which met here under the chairmanship of Prime Minister Narendra Modi approved the construction of six railway lines and a railway bridge at a total cost of over Rs.10,700 crore.

According to the CCEA, the additional infrastructure will come up at various locations across the country.

The total cost of the approved projects will be funded through institutional financing.

“The proposals will cost over Rs.10,700 crore and most part of the expenditure will be met through extra budgetary resources (institutional financing),” Railway Minister Suresh Prabhu said at a briefing after the CCEA meet.

The six projects include doubling of Hubli-Chickajur line (190 km), Ramna-Singrauli stretch (160 km) and Katni-Singrauli railway line (261 km).

Other approved projects include construction of the third line between Anuppur-Katni (165 km) and Wardha (Sewagram)-Ballarshah (132 km).

In addition, the CCEA gave approval for the erection of an additional bridge and doubling of RampurDumra-Tal-Rajendrapul stretch.

The approved projects are expected to be completed within 4-5 years during the 13th plan period.

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