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Government Trying to get Out of Paralysis

December 4, 2011

For the past few months we hardly posted anything on this site except few tweets recommending to BUY Blue Chips when the Market Dips. Good News!!!. Last weekend Group of Ministers held a session in Mumbai to send feelers that Government is doing everything it can to get the Economy moving. We don’t believe them. Dalal Street Analysts flew to Delhi and spoke to Economic Advisors to the PM and lobbyists in Delhi who point to a clear unfreezing of the paralysis which had gripped the Government over the 6 months.

Five Major Areas where the Government is Determined to Move ahead are,

Coal for Electricity By putting more pressure on Coal India, by lowering duties on imported coal, by importing more coal, by incentivising coal producers to produce coal, the Government is trying to get more coal into the Power ecosystem. Government has instructed MMTC and STC to import 35mt of coal during FY12 which is an increase of ~25% over FY2011

SEB to Hike Tariffs The Government is using public sector lenders REC, PFC, etc (“stop lending to SEBs which don’t raise prices”) and PGCIL (“blackout states where the SEBs don’t raise prices”) to coerce Chief Ministers into accepting price hikes. Tamil Nadu and Rajasthan have fallen into the line over the past fortnight. The key states generating concern now are West Bengal and Uttar Pradesh.

Speedy Environmental Clearances The Ministry of Environment is under new management and seems to be under orders to take a more constructive stance regarding clearances.

FDI in Retail The Government has cleared the Foreign Direct Investment in Retail. It is now upto various state Governments to adopt it or live with high prices under the regime of Cheating Local Kiarana Banias.

Develop Airports The regulator is about to launch a Consultation Paper. We reckon that he will be inclined to make this paper (and the regulatory regime for airports) develop friendly.

Infrastructure & Highways The Bureaucrats are busy developing a transparent auctioning system for all LARGE & MEGA Tenders in the sector to avoid SCAMS & CORRUPTION. It will take a while for that to be in place.

All of that being said, the Government is finally taking baby steps that should lift investment sentiment even if (as seems likely) the situation in the West goes from bad to worse.

Update: The much cheering FDI in MultiBrand Retail is suspended till a consensus is reached amongst all stakeholders. we believe evolving a consensus amongst all stakeholders is a cumbersome process and will take its own time and will be a drag on the sector.

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