Foreign firms in race for big Indian power project
(AFP) Three foreign bidders are in the race with six local companies
to build a four-billion-dollar power plant in India, an official said Tuesday,
amid a drive to improve the country’s infrastructure.
Sumitomo Corporation, China Light and Power and Israel Electric Company have
submitted bids for the 4,000-megawatt project in Andhra Pradesh state, said a
senior New Delhi-based government official involved in the bidding process.
The bids will be opened on October 24, and the contract to build and operate the
plant awarded as early as next month, said the official, who spoke in a
telephone interview on condition of anonymity.
China Light and Power and Israel Electric have teamed up with local partners for
the Krishnapatnam project, he said.
The six Indian companies independently bidding for the contract are Tata Power,
Reliance Energy, Larsen and Toubro, Essar Power, National Thermal Power
Corporation and Sterlite Industries.
A senior official at the Andhra Pradesh Power Generation Corp., in an interview
from the state capital Hyderabad, said the criteria for deciding the winner
included the price at which the developer will sell the electricity.
The Krishnapatnam project, to be fired by imported coal, is one of several
4,000-megawatt plants proposed by India.
The country is struggling to close an ever-increasing gap between electricity
supply and demand as the economy surges ahead at a yearly pace of nine percent.
“As the economy grows faster and bigger, the intensity of energy usage is
rising, in addition to the existing shortfall,” said Harsh Srivastava, senior
vice president at infrastructure consultancy Feedback Ventures.
“As people get richer, they are buying more air-conditioners, washing machines
and other appliances,” Srivastava said. “You need to generate more electricity
to keep them running.”
The government plans to add 100,000 megawatts of electricity generation by 2012
to supply “power to all” in a nation of 1.1 billion people where industries,
farmers and households cope with chronic power cuts.
India’s per capita power consumption is among the lowest in the world.
People in a large number of its 650,000 villages have no access to electricity
while many middle-class urban houses and companies rely on diesel-fed
“India has one of the weakest electricity infrastructures in the world, and at
the same time hi-tech industries for whom power cuts are intolerable,” the chief
executive of Schneider Electric, Jean-Pascal Tricoire, told AFP during a visit
to India in October.
“If a power cut stops a lift from working in one of the many prestigious
buildings you see being built now in India, then that building loses its value.
A one-hour power cut in a stock exchange costs millions of dollars,” he said.
The government has been trying to lure private investment to boost electricity
generation as it battles a shortage of funds and borrowing constraints.
The government estimates that 475 billion dollars of investment is needed by
2012 in infrastructure including electricity generation, road, rail and air
transport, telecommunications, water supply and irrigation.
The power sector has found it hard to attract private investment since what has
come to be known as the Dabhol debacle, involving now-bankrupt US energy giant
Enron built a three-billion-dollar, 2,184-megawatt natural gas power plant in
Dabhol in Maharashtra state. But the plant closed in 2001 after the state fell
behind on payments amid a dispute over the price of power.
That deal had been awarded without competition or transparency and the
electricity was priced so high the state could not afford to buy it, said
“India has now learnt the lessons of Enron,” he said. “Bigger projects are being
planned to bring economies of scale and competitively bid out. Coal may be the
dirtiest fuel but it’s cheap and available.”
An employee from Japan’s electronics giant Sanyo displays
the world’s smallest and lightest 720p high-definition digital camcorder “Xacti
DMX-HD700”, equipped with a 7.1 mega-pixel CCD and a 6.3 - 31.7mm/F3.5 - 4.7
zoom lens to store 3-hour high high-definition movie on a card sized SD memory
card, at the company’s headquarters in Tokyo 15 October 2007. The pocket-sized
camcorder, weighing only 189g, will go on sale 19 October AFP PHOTO
Skilled labor crisis in India
(AFP) A shortage of quality skilled labor could thwart India’s rapid
economic expansion, its central bank chief Y. V. Reddy warned Wednesday, calling
for urgent education reforms to solve the problem.
“The sustained acceleration in the services and the manufacturing activities is
leading to incipient pressures on the supply of good quality skilled labor,” the
governor of the Reserve Bank of India told a Washington economic forum.
While the demographic profile of India, the world’s most populous nation, placed
it favorably in terms of manpower availability, “emerging talent supply
shortages” have become a critical problem, he said.
Reddy listed the shortage of skilled manpower and absence of modern
infrastructure as “the most critical barriers” to the India economy, which
expanded by 9.4 percent last year, the fastest in 18 years.
Noting that the impressive performance of India’s star services sector stemmed
from the availability of skilled and cheap labor, the central bank chief said
India could not afford to lag behind in education reforms to build its talent
pool and remain competitive in the global economy.
“Only 10 percent of the relevant age group is getting enrolled into institutions
of higher learning in the country as compared with 40 to 50 percent in most
developed countries,” he said at the conference hosted by the Peterson Institute
for International Economics.
In addition, only less than half of the Indian secondary school students pursued
college education, he said.
Moreover, the quality of education imparted in several colleges and universities
in India “remains less than adequate to meet the emerging demands for skilled
“In order to reap the benefits of the demography dividend, substantial expansion
and reforms in the education sector would be needed on an urgent basis,” he
Reddy, the central player in India’s monetary and exchange rate policy and
financial reform, also lamented the “less than adequate progress” in key
infrastructure sectors, including power and roads.
“Urban infrastructure is a vital element in the growth process,” he said,
calling for “strengthening the management of cities” in India.
IMF lowers global growth forecast
(AFP) The International Monetary Fund on Wednesday slashed its 2008
global economic forecast, warning that turbulence stemming from a crisis in the
US housing sector could crimp growth worldwide.
The world economy is expected to expand 4.8 percent next year after a 5.2
percent pace projected for 2007, the IMF said in its twice-yearly World Economic
Outlook (WEO) report.
The downgrade comes in the wake of turmoil in global financial markets in August
that prompted the IMF to reverse course after an unusual update in July in which
it raised its 2008 global growth forecast to 5.2 percent.
The greatest threat to the world economy is the financial market unrest stemming
from the high-risk US subprime mortgage sector, where loans were given home
buyers with poor credit histories.
This has affected banks and lenders worldwide and made credit conditions more
difficult, said the report, released ahead of the annual meetings of the IMF and
the World Bank that open Saturday in Washington.
“Risks to the outlook lie firmly on the downside, centering around the concern
that financial market strains could continue and trigger a more pronounced
global slowdown,” the IMF said.
“Thus, the immediate task for policymakers is to restore more normal financial
market conditions and safeguard the continued expansion of activity.”
The financial turmoil will figure high on the agenda of a meeting of Group of
Seven finance ministers in Washington Friday, US Treasury Under Secretary David
“The issues raised by the recent turmoil are complex and require careful
analysis,” McCormick said. “We must undertake this work quickly but we cannot
rush to judgment.”
Attending the G7 meeting will be finance ministers and central bank chiefs of
the seven leading industrialized nations: the United States, Japan, Germany,
France, Britain, Italy and Canada.
The IMF report said that, despite the heightened risks, the global economy is
poised for “solid” growth in 2008.
“The expansion is projected to remain above the long-term trend, notwithstanding
recent financial market turbulence, with emerging market and developing
countries leading the way,” the IMF said, citing mainly low inflation levels and
robust gains in trade volumes worldwide.
In a July update of the April WEO, the IMF had raised its global growth
forecasts for both 2007 and 2008 by a 0.3 percentage point to 5.2 percent.
The latest WEO holds this year’s forecast at 5.2 percent. But the IMF reversed
course and downgraded its 2008 outlook following the financial market turmoil of
“Global credit market conditions have deteriorated sharply since late July as a
repricing of credit risk sparked increased volatility and a broad loss of market
liquidity,” said the 185-nation Fund, whose mission is to promote global
The IMF said it partly based its 2008 global forecast on the assumption that
this year the US Federal Reserve would cut interest rates by a further half
point and that the European Central Bank and the Bank of Japan would refrain
from raising rates.
In September the Fed, in its first rate cut in four years, lowered its target
for the federal funds rate by a half point to 4.75 percent to ease a credit
crunch that had spread worldwide in August, pummeling stock markets.
The IMF said the world’s largest economy is facing a rising risk of recession
due to a severe, two-year downturn in the housing sector that could crimp
The Fund shaved its US economic growth forecast by 0.1 point to 1.9 percent for
this year and by a sharper 0.9 point to 1.9 percent for 2008.
Growth in Japan, the second-biggest economy, was marked down to 2.0 percent in
2007 and 1.7 percent in 2008, 0.6 percentage point and 0.3 percentage point
lower, respectively, than the July estimates, reflecting in part a slightly
In the 13-nation eurozone, growth was reduced 0.4 point to 2.1 percent as a
result of the delayed effects of euro appreciation, trade spillovers from the US
and more difficult financing conditions.
By contrast, “growth is expected to remain very strong” among emerging market
and developing countries, the IMF said, with China continuing to set the pace,
at 10 percent in 2008, about 0.5 percentage points lower than in the July
Australian economy heading for sustained growth
(AFP) The Australian economy was likely entering a period of further
sustained growth, according to a survey released Wednesday, supported by strong
employment growth and business investment.
The Westpac-Melbourne Institute leading index, which indicates the likely pace
of economic activity in the next three to nine months, found the annualised
growth rate was 5.6 percent in August.
This figure compares with 5.3 percent in July and 5.4 percent in June and is
well above the long-term trend of 4.3 percent.
The coincident index, which measures current activity, rose 0.8 points in August
to an annualized 4.5 percent due to a strong labour market and growth in
industrial production, Westpac said.
Although slightly slower than July’s 4.8 percent it was still above the
long-term trend of 3.7 percent, it said.
Westpac chief economist Bill Evans said analysts had previously forecast that
growth in the leading index could be on a sustained downward path after a long
“However, this month’s reading points to clear recovery in the growth profile,”
“The recent low point in growth was well above long term trend, and the
subsequent reacceleration points to a sustained period of strong growth in the
Evans said the predictions were in line with the government’s mid-year economic
outlook, released Monday, which upwardly revised growth figures for 2007/08 to
4.25 percent from 3.75 percent.
“Those forecasts imply a strong pick up in growth from 2006/07 -- consistent
with the sustained message we have been communicating from the leading index,”
“Key drivers of the improved growth outlook are consumer spending supported by
strong employment growth and business investment.”
Evans said the government’s revision of employment growth forecasts -- from 1.50
percent to 2.25 percent for fiscal 2008 -- were too conservative and should be
closer to 2.90 percent.
Westpac said it was “entirely possible” that Australia’s central bank could
raise interest rates in November, despite the fact the country is in the middle
of an election campaign.
“Our view is that rates are likely to rise by 0.25 percent by the end of the
year, dependent on the inflation read and the state of the credit markets,”
India needs faster reform to lift growth
(AFP) India’s economy can expand at a sustained annual pace of 10
percent over the next decade, but faster growth depends on deeper reforms,
US-based investment bank Lehman Brothers says.
An economic boom marked by average annual growth of 8.5 percent in the past four
years, rising to 9.4 percent in the 12 months to March 31, is no “flash in the
pan,” the investment bank concluded in a report this week on the Indian economy.
The growth made India’s 900-billion-dollar economy the world’s 12th biggest last
year, thanks in large part to policy reforms carried out in the past decade,
said the 171-page report entitled “Everything To Play For.”
“Impressive though its economic transition has been, we judge that India could
grow sustainably even faster than at present, and faster than most other studies
have suggested, at 10 percent or so per annum over the coming decade,” Lehman
“This judgement is contingent on India continuing to actively pursue structural
reform,” it said.
Illustrating the benefits of reform, Lehman said India’s investment-to-GDP
ratio, at between 30 percent and 40 percent, was catching up with the rates
regarded as intrinsic to the East Asian economic miracle.
Foreign direct investment more than doubled to 19.4 billion dollars in the year
to March 31 from the previous 12 months. From less than 6.5 billion dollars
financed through the capital markets just five years ago, Indian companies
raised about 30.7 billion dollars last year.
India’s economic resurgence goes back to the reforms that began in 1991 when the
government, faced with a foreign exchange crisis, lifted socialist-style
controls that had stifled private enterprise, trade and foreign investment for
But progress in reforms has stuttered in the face of resistance from political
parties and unions.
Opposition from leftist allies has forced Prime Minister Manmmohan Singh’s
Congress party-led coalition to shelve key reforms such as privatisation of
The government has also put in cold storage moves to raise the 26 percent limit
on foreign investment in insurance companies and open up the 300-billion-dollar
retail market to giants such as Wal-Mart.
“The question is not whether 10 percent economic growth is possible, but whether
reforms are possible in the present political situation,” said D.H. Pai
Panandiker, economist at the private think tank RPG Foundation.
“Opposition from the allies is holding up reforms and that in turn is holding
back faster growth,” he added in a telephone interview from New Delhi.
Lehman said India needed to develop its financial markets, reduce public debt,
ease restrictions for the banking, insurance and retail sectors and improve
infrastructure and cut back its notoriously cumbersome bureaucracy.
Public ownership of companies and banks remains excessive in India, which also
needs more flexible labour laws for companies to increase employment in a
country where half the 1.1 billion population is under 25 years old, it said.
“India has learned a great deal from its structural policy reforms of the past
decade and we suspect strongly that these lessons will be carried forward, and
built upon, in the coming years,” Lehman’s India head Tarun Jotwani said.
Some economists argue that India has now developed a momentum where it can lift
itself to 10 percent growth even without reforms.
“Reforms or no reforms, 10 percent is possible, because the economy has become
insulated from politics,” said T.K. Bhaumik, chief economist at leading Indian
conglomerate Reliance Industries.
“Going beyond that will require reforms, but whether further reforms are
possible is a million-dollar question,” he said in an interview from Mumbai.
NY oil price bursts through record 88 dollars
(AFP) New York crude oil prices burst through a record 88 dollars a
barrel Tuesday amid concerns of a potential conflict between Turkey’s government
and Kurdish rebels located in northern Iraq.
New York’s main oil futures contract, light sweet crude for delivery in
November, struck a record 88.05 dollars per barrel in intraday trading after
closing at a record high of 86.13 dollars on Monday.
Oil prices rocketed after Turkey moved a step closer Monday to a possible
incursion into northern Iraq as the government sought parliament’s approval for
military action against rebels of the separatist Kurdistan Workers’ Party (PKK).
Many of Iraq’s largest oil fields are located in the north of the troubled
The oil price spikes have also been stoked by concerns about global energy
supplies ahead of the northern hemisphere winter.
Financial markets out of ‘intensive care’: IMF
(AFP) The International Monetary Fund said Tuesday that financial
markets are recovering from global turbulence linked to a credit crunch that
began with a US subprime mortgage crisis in August.
“I think the intensive care room was basically August and perhaps early
September,” said Jaime Caruana, IMF director of monetary and capital markets.
Since then, the “situation has improved significantly in some areas,” he said at
a news briefing.
But, Caruana noted, “the adjustment process will require some time because it is
a question of confidence and it is a question of digesting the balance sheets.”
The IMF holds its annual meeting Saturday through Monday in Washington.
China’s 2007 trade surplus likely to exceed 250 billion
(AFP) China’s 2007 trade surplus is likely to exceed 250 billion
dollars while consumer inflation was likely to top four percent, state media
reported Wednesday, citing a central bank official.
“The major problems China’s economy is facing include overly rapid growth in
investment and loan and a too-large trade surplus,” the Shanghai Securities News
reported, citing Yi Gang, assistant governor of the central bank.
“To tackle the problems, we cannot solely rely on adjustments of the exchange
rate,” Yi said at a financial forum in Taipei.
The United States and other nations argue China’s yuan currency is being kept
undervalued, giving Chinese exporters an unfair advantage.
China posted a trade surplus of 185.7 billion dollars for the first nine months
of the year, more than the record 177.5 billion dollars for the whole 2006,
according to official figures released last week.
Propelled by soaring food costs, China’s consumer price index rose 6.5 percent
in August from a year earlier and was up 3.9 percent on year for the first eight
months of the year.
The inflation rate for August was well above the official full-year target of
3.0 percent and the highest since December 1996.
Yi said the government would need a package of policies, including boosting
domestic consumption, increasing imports, encouraging outbound investment, to
resolve the imbalance in the economy.
Expanding a scheme that allows qualified domestic institutions to invest in
overseas capital markets would also help address the problems, he said.