GDP growth is sustainable, says FM

Buoyant domestic demand and strong export growth have propelled the steep 12.4 percent rise in industrial growth in July 2006, although a low base during July 2005 has also played a role in helping show higher growth this year. The index of industrial production (IIP) rose 4.7 percent in July 2005 as a result of contraction in mining output and electricity generation. The high growth in July has helped raise the IIP growth for April-July to 10.6 percent, as against 8.9 percent during the corresponding four-month period last year.

While attributing the high growth to a sharp turnaround in mining and electricity, finance minister P. Chidambaram said, " High growth (in non-food credit) does not seem to be necessarily putting pressure on interest rates". However, he predicted that the growth story was here to stay with companies lining up investment for expansion and setting up new facilities. Economists and government officials too find reason in the FM's argument since the capital goods sector - a barometer of future growth since more machinery means more production - registered a 15.4 percent increase in July and rose nearly 20 percent in April-July 2006.

Similarly the intermediate goods sector grew 7.9 percent, while consumer goods and durables reported an over 17 percent increase in July on the back of higher spending. While the prognosis appears sound given the all-round buoyancy in industry.

The RBI has projected 7 to 7.5 percent GDP growth this fiscal, while the prime minister's economic advisory council has estimated a 7.9 percent increase in economic activity.

-The Times of India

'Construction industry to be included in services sector'

The government will include the construction industry in the ambit of the services sector in order to increase services exports to 15 percent, the ninister of commerce and industry, Mr Kamal Nath, has said.

Underlining the importance of the Services Export Promotion Council, at the CII's national conference held recently in Delhi on 'Boosting Services Exports', Mr Kamal Nath said, "This is a major step forward for boosting exports from the services sector by identifying new areas". The growth in the services sector is driven by domestics demand. Whether it is entertainment, education or the media, home-grown companies have led the growth. Manufacturing and services have become the economic backbone of the country. The Government will do all it can to facilitate the future growth of the sector, he said.

"We are putting the right policies in place through a mix of taxation and opportunities to invest" he said. The country needs to create more jobs to absorb the 37 million people projected to be unemployed by 2012. For this, universities and institutes of higher education need to be expanded to create more knowledge workers. There is also need for more vocational institutes as well as institutes for upcoming sectors such as retail, tourism and aviation, he added.

-Business Line

Holcim again named 'Leader of the Industry' in the Dow Jones Sustainability Index

Holcim Ltd has again been named 'Leader of the Industry' in the Dow Jones Sustainability Index and has thus been acknowledged as the company with the best sustainability performance in the building materials industry for the second year in succession. This renewed recognition underscores the fact that Holcim's sustainability performance satisfies the high expectations placed on global corporations. Holcim has been included in both the Dow Jones Sustainability World Index and the Dow Jones STOXX Sustainability Index (Europe) for four years.

The continued integration of sustainability into daily business, the climate-related and recycling strategies as well as the ongoing reduction of CO2 emission all played a part in securing Holcim's leadership position. Holcim also received top grades in corporate governance and the social dimension, in particular for its strong stakeholder relations.

Launched in 1999, the Dow Jones Sustainability Index was the first global index to track and assess the financial performance of leading sustainability-driven companies worldwide. The Dow Jones World Index comprises the top 10 percent of the biggest 2,500 companies globally. The Dow Jones STOXX Sustainability Index (Europe) includes 20 percent of the best placed companies in the Dow Jones STOXXSM 600 Index. Analysis is based on an annual assessment of general and industry specific sustainability criteria undertaken by SAM Group.

-Holcim press release

Environmental clearance procedure to be simplified

The central government is set to replace its two-year old environmental clearance procedure for large-scale construction projects, a move that is being welcomed in Mumbai by all quarters. But post 26/7, the city is divided on whether the new Environmental Impact Assessment (EIA) process that replaces it will be good enough to achieve what it aims for.

The 2004 law had led to tremendous delays: it mandated every construction project valued at more than Rs 500 million or discharged 50,000 litres of sewage per day to prepare an EIA report, hold a public hearing, and finally get the project plan cleared by a central committee.

High land values in cities like Mumbai and Thane ensured almost every project had to get New Delhi's clearance. Thus, in September alone, as part of the clearance process, over 80 public hearings are scheduled to take place for construction works ranging from MHADA redevelopment projects to city malls to the building of the new American consulate in the Bandra-Kurla complex.

Leading real estate developer and member of the Maharashtra Chamber of Housing Industry, Mr Niranjan Hiranandani, who has three residential projects among these, says he is not anti-environment, but adds: "India is full of bureaucracies and people are eager to stop things from getting done. A central committee looking at construction projects across the country was just not tenable. These are issues local planning bodies should be looking at."

It's a view that IIT professor and member of the Madhav Chitale committee, which looked into the 26/7 flooding, Mr Shyam Asolekar seconds: "A mature democracy should have fewer rules for any economic activity. The environmental clearance in its current form was only leading to delays, increased costs and corruption".

Secretary of the Maharashtra Pollution Control Board, Mr Dilip Boralkar, who is in charge of conducting the public hearings, said while the EIA report pushed developers to include rainwater harvesting and waste disposal systems in their projects, the hearings had become mechanical and a strain on his staff. "Despite our best efforts, hardly any citizens attended the hearings. It was mostly activists," he added.

But will the shorter clearance process prevent scenarios like '26/7' from recurring? Asolekar doesn't think so: "The value of EIA to real estate activity is debatable in the first place. Instead, there should be stronger land-use plans and environmental norms that local civic authorities like the BMC must impose. For example, the civic body should not allow any large-scale construction that violates the city's eco-system - its marshy areas, for instance - that have traditionally served as outlets for rainwater".

-Indian Express

Infrastructure projects: Not dime a dozen

It is no secret that substituting for, rather than supplementing, government resources is now the main attraction for the government in taking the public-partnership route in the construction of infrastructural projects.

The terms and tenures of build-operate-transfer projects are designed to yield a sufficient margin of profits to the private 'partners' to make it worthwhile for them to make large offers for the award of contracts to them. Many of the largest infrastructure projects are now awarded to the highest bidder rather than to the lowest tenderer.

The total cost of the 86 infrastructural projects taken up so far under public-private partnerships is about Rs 340 billion. Sixty-four of the 86 projects awarded, under construction or completed, relate to roads and bridges. The average cost of such a project is, however, only Rs 1.93 billion, a tad below the Rs 1.97 billion spent on each of the two rail projects. It is a different matter that the total outlay on roads and bridges, at Rs 122 billion, is second only to the Rs 187 billion that is being invested in upgrading/constructing 8 ports.

Interestingly, the average seaport costs two-and-a-half times the cost of an average airport; the two airport contracts that have been awarded cost less than Rs 10 billion each. Ports, on the other hand, averaged Rs 24 billion.

-Business Line

Need to improve performance of road sector

The central government seems to be concerned over the poor performance of one of its flagship programmes - developing road infrastructure. The sector has recorded a negative growth of 37 percent for the April-June 2006 period, compared with a growth of 9.4 percent for the corresponding period last year.

"There is need to initiate some corrective steps to improve the performance of the road sector", a government report presented to PM said. During April-June 2006, the upgradation work on 986 km of national highways was done, which was lower than the target of 1,143 km, it added. Upgradation work was also much lower than the 1,565 km of work done in the same period last year. This work includes improvement of low-grade sections, strengthening of existing weak pavements and improvement of riding quality. Further, 19 bridges were upgraded or constructed compared with 32 bridges last year, the report said.

The National Highway Authority of India (NHAI) alone has fallen short of its target by 55.8 percent. It has constructed and strengthened 152 km of highways, considerably less than the targeted 344 km, during the quarter ended June 2006. Road construction by NHAI registered a decline of 38.4 percent in the quarter compared with 247 km developed in the same period last year.

"A shortfall from the target set for the period and the achievement of corresponding period last year are causes of serious concern," the report said. Even as the National Highways Organisation and Border Road Development Board (BRBD) upgraded 834 km of highways, 4.3 percent higher than the set target, they still remained 36.7 percent lower than the upgradation of 1,318 km of highways developed by them during April-June 2005.

-Economic Times

RBI sounds caution on the great SEZ rush

The Reserve Bank of India has voiced concerns that the growth of special economic zones (SEZs) across the country could aggravate uneven development by pulling out resources from less developed areas. Moreover, the central bank has said that the revenue loss suffered by the state on account of tax breaks can be justified "only if the units in the SEZ establish backward and forward linkages with the domestic economy".

The SEZ Act 2005 provides incentives to reduce transaction costs and improve the competitiveness of exports. The simplification of procedures and tax breaks, as envisaged by the act, are expected to attract investments of about Rs 1,000 billion and help create 500,000 jobs. Developers are allowed to set up sector-specific and multi-product SEZs with a minimum area requirement of 1000 hectares for multi-product and 1,000 hectares for service sector SEZs.

To encourage exporters to move to SEZs, the act incorporates fiscal incentives for them. This includes full I-T exemption to the units for the first five consecutive years, and 50 percent exemption for the next five years. In addition, the units and developers will not have to pay customs duty on all imported inputs and excise duty on products sourced from the domestic market.

The tax breaks have raised concerns in the finance ministry over the potential loss of revenues as existing exporters will move to SEZs. At an empowered group of ministers' meet, finance minister, Mr P. Chidambaram had expressed concern that there would be a revenue loss, estimated at over Rs 1,000 billion. The government, however, plans to go ahead with SEZs, without fixing any cap.

-Economic Times

A house for Rs 100,000!

No income or any other reservation category, no BPL or APL cards needed. Just walk in to buy a house for Rs one lakh (Rs 100,000). The National Housing Bank (NHB) is working out a project with leading engineering and housing companies in India to make available such houses on a massive scale across India. NHB chairman, Mr S. Sridhar said he was convinced it was quite a do-able project. The houses will typically cluster around industrial towns, industrial clusters and will be 'cost-effective'. This means there will be no government subsidy to build them at all, unlike those given for the rural and urban housing projects for the poor.

The Rs 1 lakh tag for the houses is meant to duplicate the excitement generated by the people's car concept, popularised by the Tatas. Given the huge demand multiplier the project can generate, Mr Sridhar said it was deliberately decided to stick to this price line. The project is expected to use state-of-the-art materials to develop over 10,000 small apartments at each site, across the country. According to Mr Sridhar, it is only with such volumes that a builder can expect to get a decent return on the investments. "It will typically promote home ownership in a class of population, which typically is rental-oriented, spread out across cities and towns in pretty much desperate hygienic conditions", he said.

For the same reasons, it would be impossible to have single-storeyed houses as the cost would sharply spiral. The cost of acquiring additional land would also make it difficult to have adequate size land parcels for the project. The project has been flagged by NHB in its capacity of regulator for the housing sector. It would not be difficult to get financing for the projects, and refinancing support should also be forthcoming, he said.

-Economic Times

Mumbai plans Rs 600 billion infusion in infrastructure

Maharashtra finally has a Rs 600 billion (over $13 billion) plan ready for transforming Mumbai into the next Shanghai, with the money earmarked for infrastructure upgrade alone. The funds are proposed to be spent on 31 projects, and the state wants the central government and centrally sponsored schemes to pitch in with Rs 430 billion for 20 schemes. On its part, the state has offered to invest Rs 70 billion in the remaining 11 projects. Recently, the state government made a presentation to the Planning Commission on the infrastructure aspect of the Mumbai transformation project.

Prime Minister Manmohan Singh's dream of transforming Mumbai into a Shanghai will not just take this kind of money but also lots of time. Some of the key projects, including the Mumbai metro rail transport system, will be complete only by 2021, a water supply project by 2012, and a facelift for Dharavi by March 2008. The six projects for which the state has sought 100 percent central funding will need Rs 90 billion. These include the Mumbai Urban Transport Project costing Rs 37 billion, and the Brimstowad project for a storm-water drainage system costing Rs 18 billion.

The state intends to fully fund the setting up of a convention and exhibition centre at the Bandra-Kurla complex costing Rs 10 billion, rehabilitation of pavements dwellers at a cost of Rs 5 billion, and beautification of Marine Drive at a cost of Rs 1 billion. To strengthen the North-South corridors and East-West connectivity in the metropolis, nearly 17 high-speed junctions with signal-free road corridors, having dedicated bus lanes, will be developed under the urban transport project, and funded through the Jawaharlal Nehru National Urban Renewal Mission.

The project is estimated to cost Rs 26.47 billion, and is expected to be complete by June 2007. The Metro Rail Transport System project costing Rs 195 billion will also be taken up under central schemes.

-Business Standard

New titles from ACI

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American Concrete Institute
P.O. Box 9094
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MI 48333-9094
USA
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E-mail: bkstore@concrete.org
Website: www.concrete.org