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HDFC Bank hikes MCLR by 0.20 pc in third consecutive increase in rates

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The country’s largest private sector lender HDFC Bank on July 7 announced a 0.20 percent hike in its marginal cost of funding based lending rate across all tenors.HDFC Bank hikes MCLR by 0.20 pc in third consecutive increase in rates

This is the third such move by the lender in as many months since May, and takes the overall quantum of the rate hikes to 0.80 percent.

The RBI has hiked rates by a cumulative 0.90 percent since shifting to rate tightening in the first week of May as it saw its core objective of inflation management getting under trouble. Analysts have been expecting more rate hikes from the central bank in the days ahead as price rise pressures are expected to continue.

HDFC Bank said the one year MCLR, to which many consumer loans are pegged, will now be 8.05 per cent as against 7.85 per cent earlier. The overnight MCLR will be 7.70 per cent as against 7.50 per cent, while the three-year MCLR will be 8.25 per cent, as per the bank’s website.

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How India can meet its power needs, and energy transition goals

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Regulatory actions in the power sector have increased multi-fold over the last few months. Prompt action to enable clean up in the ecosystem, clearing the way for clean transition is on the cardsHow India can meet its power needs, and energy transition goals 

Hetal Gandhi and Surbhi Kaushal

Inherent contradictions have long tangled the wires of India’s power sector, adding vulnerability to the Indian economy, and its commitment to clean energy.

To be sure, the government has drawn up an aggressive roadmap for the transition to clean energy. However, lack of infrastructure investments by bleeding distribution companies (discoms) are stymieing these plans.

As a result, states are not only underperforming on their central renewable purchase obligation (RPO) goals, but are also largely unable to meet the often-lower targets set for themselves

So, how can India meet its power needs, and energy transition goals?

Three things need to happen:

  1. A sharp increase in renewable energy (RE) installations
  2. Higher spending on grid infrastructure, and value chain to cope with the rising share of intermittent RE power
  3. Effective, and consistent policies to win the confidence of investors, and attract professional capabilities

Let’s examine these intertwined necessities.

CRISIL Research’s transition modelling and analysis indicates that in the first decade of energy transition, 80 percent of capacity additions would be for non-fossil fuels, versus the opposite in the decade till 2020. Thus, reaching 50 percent RE generation by 2030, as targeted under COP26, is ambitious. However, tripling the RE share (excluding hydro) from 11 percent now to around 36 percent is possible — and will be a feat in itself.

For this to happen, investments in grid infrastructure, smart meters, energy storage, and new business models to handle intermittent power are inevitable.

Such expenditure will have to be driven by India’s 45-odd state discoms. But financial inefficiencies stemming from bad karma and operational logjams have left them with little ability to do so. Add policy U-turns, poor implementation of annual tariff revisions, and inadequate disclosure of financials, and what you have is high vulnerability.

All that has meant debtor days (receivables from customers of the top 15 states, accounting for 85 percent of India’s power consumption) rising to 130-140 days as compared to an ideal benchmark of 30-60 days, and payments outstanding of Rs 2.2 lakh-crore (see table below).

The discoms’ dues to power generators stand at ~Rs 110,551 crore as on June 2022. Further, debt requirements are increasing with interest payments surging, even as operations bleed.

Non-receipt of such monies is why generators haven’t been able to shore up coal stocks despite a sharp 7.9 percent uptick in power demand in fiscal 2022.

Attempts have been made to course correct. With UDAY, nearly Rs. 2.2 lakh-crore of discom debt was transferred in 2016 to corresponding state governments, paving the way for investments, and borrowings to trim system losses (see table below).

However, political interventions to keep subsidising power, alongside systemic inefficiencies have erased potential benefits. Further, low demand during the pandemic, especially from high-paying industrial customers, amplified the payment crisis.

It was the short-term liquidity infusion of Rs. 1.35 lakh-crore through the Aatmanirbhar package that prevented a ballooning of this crisis.

Fast-forward to 2022. The government has approved the Revamped Distribution Sector Scheme (RDSS) to give discoms another chance to take corrective actions, and gain funding access.

Some corrective steps have failed, some partially succeeded and the results of the rest are awaited.

However, the RDSS, along with amendments in the Central Electricity Authority (CEA), and the recent announcement of the Late Payment Surcharge (LPSC) waiver, can help the distribution sector build investor confidence.

Further, the recent open access rules will drive green power usage among commercial and industrial consumers. The LPSC waiver can enable discoms to regularise the significant dues to generators. It’s a win-win scheme — it prevents deterioration in discoms’ financials, and averts penalties, while assuring payments to generators over 48 months.

But there are several monitorables. How generators cope with the higher interest cost arising from receivables being staggered over 48 months, and how the government handles this funding bears watching.

For long, discoms have grappled with cash flows and dues. The ability to generate cash is crucial since subsidised electricity sales, systemic inefficiencies, and interest on legacy debt will not vanish overnight.

While the modalities of the LPSC scheme are awaited, funding for it would be a handy crutch for discoms. It will be the first step to transforming this segment of the power value chain.

Hopefully, it will lead to generation of ‘swachh’ power, paid for by ‘swachh’ discoms.

Why is there a growing unease between the govt and Big Tech in India?

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India is seeing yet another showdown between Twitter and regulators. The microblogging site has challenged the government's directives asking it to take down certain posts. Why is this growing unease?Twitter, India, new digital rules, IT rules

The confrontation between  companies and the Indian government over the country’s new IT rules escalated on Tuesday after  moved the Karnataka High Court challenging the IT ministry’s order to remove content and block multiple accounts on the US microblogging platform.

According to the writ petition, which has been seen by Business Standard,  contended that many of the blocking orders issued under section 69A of the Information Technology Act, 2000, were “overbroad, arbitrary and disproportionate”, and failed to give notice to authors of the content.

It also said that some were related to political content posted by official handles of political parties, the blocking of which amounted to violation of freedom of speech.  further argued that the content at issue does not have any apparent proximate relationship to the grounds under Section 69A.

Hours after the petition was filed, Minister of State for IT Rajeev Chandrasekhar said all foreign internet platforms have a right to approach the courts, but they also have an unambiguous obligation to comply with local laws and rules.

Twitter would risk losing its safe harbour protection under the intermediary rules if it refuses to comply with the blocking order while its executives could face jail terms of up to seven years.

Under the IT rules that took effect in February last year, Twitter’s Chief Compliance Officer faces criminal liability for Twitter’s non-compliance under Section 69A. Another provision requires strict confidentiality on all blocking requests from the government and actions taken by an intermediary.

[Byte of Avimukt Dar, Founding Partner, INDUSLAW]

Twitter is not the first tech company to take the government to court over the IT rules. Meta-owned messaging platform WhatsApp had approached the Delhi High Court in May last year requesting it to quash a provision that mandated companies to divulge the “first originator of information”.

WhatsApp said the traceability rule would break the very guarantees that end-to-end encryption provides and undermines peoples’ right to privacy.

The government says that the right to privacy is not “absolute” and it is “subject to reasonable restrictions”. WhatsApp claims 500 million users in India whereas for Twitter, India is its third biggest market although estimates of its users in the country vary from 24 million to 48 million.

Regulations shouldn’t just be fair, their enforcement must also appear to be fair. With that in mind, won’t the appearance of arbitrariness or bias in enforcement only weaken the government’s efforts to regulate 

Centre amends wheat flour export policy, panel to decide from July 12

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While no restrictions have been imposed on the export of wheat flour, an inter-ministerial committee will make recommendations on the same.Centre bans wheat export with immediate effect

India has tweaked its export policy for wheat flour, and an inter-ministerial committee will take a call on outbound shipments from July 12.

In a notification dated July 6, the government said no restrictions were being imposed on the export of wheat flour, maida, semolina and wholemeal atta.

The government said that supply disruptions in wheat and wheat flour have created many new players, leading to prices fluctuations and potential quality issues.

"Therefore, it is imperative to maintain the quality of wheat flour exports from India," it said.

Meanwhile, wheat flour exports between July 6 until July 12 will be allowed in case loading of the shipments has commenced before the issue of the notification and if the consignment has been handed over to the customs authority and registered by them.

The Russia-Ukraine war has disrupted global food and commodities supplies, including that of wheat.

India banned wheat exports on May 13 to ensure domestic availability but has been allowing shipments to select countries as assistance.

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