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Saturday, January 22, 2011

Olbermann’s MSNBC Exit Was Weeks in the Making

On Thursday, NBC’s news division staged an elaborate presentation for advertisers, seeking to sell commercial time in NBC’s news programs over the next year. All the members of MSNBC’s prime-time lineup spoke at the lunch with one exception: Keith Olbermann, the network’s biggest star.

For the last several weeks, Mr. Olbermann and the network have been in negotiations to end his successful run on MSNBC, according to executives involved in the talks who requested anonymity because the talks were confidential. The deal was completed on Friday, and Mr. Olbermann made the announcement on his final “Countdown” hours later.

Friday’s separation agreement between MSNBC and Mr. Olbermann includes restrictions on when he can next lead a television show and when he can give interviews about the decision to end his association with the news channel.

The executives involved in the discussions confirmed that the deal carries limitations for Mr. Olbermann in terms of when he can next work on television, though he will be able to take a job in radio or on any forum on the Internet. The deal also prohibits the host from commenting publicly on the deal, the executives confirmed.

Mr. Olbermann did not respond to requests for comment Friday or Saturday. None of the executives who discussed the deal would reveal the exact length of the restrictions.

The decision was completed one year to the day from the last time NBC decided to end a relationship with an on-air star: Conan O’Brien. Mr. O’Brien agreed in the deal not to start up a new television show for nine months, and not to grant interviews for five months. The executives involved in the discussions with Mr. Olbermann said his agreement was not dissimilar to Mr. O’Brien’s.

Many of Mr. Olbermann’s fans responded to the decision by accusing Comcast, the incoming owner of NBC Universal, of forcing him out for political reasons. Several of Comcast’s top executives have been financial supporters of Republicans; Mr. Olbermann is largely credited with establishing MSNBC’s liberal voice.

Comcast issued an official statement Friday denying any involvement in the decision, saying it had no operational control of the company yet, and adding: “We pledged from the day the deal was announced that we would not interfere with NBC Universal’s news operations. We have not and we will not.”

But the company is still drawing criticism for the move. Marvin Ammori, a law professor at the University of Nebraska, said in an e-mail Friday, “Keith Olbermann’s announcement tonight, the very same week that the government blessed the Comcast-NBC merger, raises serious concern for anyone who cares about free speech. Comcast proved expert in shaking down the government to approve its merger. Comcast’s shakedown of NBC has just begun.” Professor Ammori is a former adviser to the nonprofit group Free Press, which opposed the Comcast-NBC deal.

Months before Comcast was expected to gain control of NBC Universal, Comcast officials were worried about the perception that they might interfere with MSNBC for political reasons.

One executive, who asked not to be identified because Comcast had instructed employees not to speak about the situation, said the company dreaded the prospect of being blamed if Mr. Olbermann were to quit soon after the takeover.

Mr. Olbermann had butted heads with his superiors long before the Comcast deal, including Phil Griffin, the top MSNBC executive. According to several senior network executives, NBC’s management had been close to firing Mr. Olbermann before, most recently in November after he revealed that he had made donations to several Democratic candidates in 2010 — one of them, coincidentally, was Representative Gabrielle Giffords, who has been the subject of many of his recent shows after being shot in an assassination attempt.

Mr. Griffin said the donations had violated NBC News standards. Mr. Olbermann was suspended.

India May Decide on CounteIndia May Decide on Countering Rio's $3.9 Billion Riversdale Bid Next Weekring Rio's $3.9 Billion Riversdale Bid Next Week

India may decide next week whether to counter Rio Tinto Group’s A$3.9 billion ($3.9 billion) offer for Riversdale Mining Ltd., said a group of state-run companies asked by the government to consider putting forward a proposal.

International Coal Ventures Ltd., combining government-run metal and energy companies, may consider a bid for the Sydney- based coal producer with mines in Mozambique at a board meeting in New Delhi on Jan. 27, Chairman C.S. Verma said.

“Our bid price for Riversdale will be higher than Rio Tinto’s if it is to be a viable bid,” Verma said in an interview in Kolkata today, declining to elaborate.

Indian companies are seeking coal mines overseas to secure raw material supplies for making steel and generating power as international costs increase. Rio Tinto, which has offered A$16 a share, yesterday said it received unconditional approval from the Australian Treasurer to buy Riversdale. The Riversdale board has recommended the offer to shareholders, Rio said Jan. 10.

Tata Steel Ltd., which holds 24.2 percent of Riversdale according to data compiled by Bloomberg, said on Dec. 27 it had no “discomfort” with Rio’s offer.

Coal India Ltd. holds about 28 percent of ICVL. Steel Authority of India, the nation’s second-biggest producer of the metal, also has 28 percent, while NTPC Ltd., its largest power generator, NMDC Ltd., its top iron-ore producer, and steelmaker Rashtriya Ispat Nigam Ltd. own about 14 percent each.

“Once the proposal goes through, funding will not be a problem because all of us have money,” Coal India Chairman Partha Bhattacharyya said today.

State Bank of India Net Increases 14%, Beating Estimates, on Loan Demand

State Bank of India, the nation’s largest lender, posted third-quarter profit that beat analysts’ estimates as accelerating economic growth boosted loan demand.

Net income rose to 28.3 billion rupees ($619 million) for the three months ended Dec. 31, from 24.8 billion rupees a year earlier, the Mumbai-based bank said in an e-mailed statement. The profit compared with the 27 billion-rupee average of 29 estimates compiled by Bloomberg News.

The profit gains may help Chairman Om Prakash Bhatt meet a target of 18 percent credit growth for the year ending March 31, when his five-year term at the helm ends.

Analysts at brokerages including Macquarie Research’s Suresh Ganapathy said the earnings were better than expected, but sustaining the growth will be difficult.

“On both margins and asset-quality fronts, the bank has positively surprised,” Ganapathy said by telephone today.

The lender, which accounts for almost a fifth of India’s banking assets, plans to raise 200 billion rupees from a rights offer by March 31 as it seeks more funds to lend to companies.

The bank’s shares rose 2.4 percent to 2,596.9 rupees yesterday.

Deposit Growth

Net interest income, or revenue from borrowers after deducting interest paid to depositors, widened 43 percent to 90.5 billion rupees from 63.2 billion rupees a year earlier. The net interest margin, a measure of lending profitability, grew to 3.4 percent from 2.56 percent.

State Bank’s deposits climbed 14 percent to 8.79 trillion rupees from 7.71 trillion rupees a year earlier. The lender has increased the interest rate it pays for the funds four times since August.

The bank posted a pretax loss of 7.25 billion rupees from trading in bonds and currency in the quarter, compared with a shortfall of 935.4 million rupees a year ago.

State Bank appears set to be able to meet the central bank’s provision for bad loans, said Sampath Kumar, an analyst at IIFL Ltd. The bank’s provisions for bad loans widened to 64.07 percent as of Dec. 31, from 62.78 percent on Sept. 30, according to the statement.

ICICI Bank Ltd., India’s largest non-state bank, reports its quarterly results on Jan. 24.

Friday, January 21, 2011

A Creator Prepares to Take the Reins at Google

SAN FRANCISCO — Things that get Larry Page excited: tossing around programming lingo with engineers, picking the brains of scientists and championing ideas that belong in science-fiction novels, like cars that drive themselves.

Things he would be happy to live without: long meetings, press conferences and a regimented schedule.

But Mr. Page, the Google co-founder, will have to get used to those things quickly as he prepares to take over the chief executive role from Eric E. Schmidt in April.

The move will test whether Mr. Page, a reserved person who thrives on intellectual challenges, has developed the skills to handle the daily grind of running a business, along with the internal politics and external showmanship that come with the job.

Google, which has proved its ability to mint money with its online advertising systems, is trying to maintain its status as an engine of innovation. Mr. Page, 38, said on Thursday that he wanted to reinject Google with the speed and nimbleness that it once had as a start-up, before it swelled to 24,400 employees and $29.3 billion in annual revenue.

The challenge for Mr. Page will be to keep that big machine humming while at the same time taking the company back to its roots. How well he does this could determine whether Google can come up with another giant hit — a feat that few successful technology companies have pulled off.

“In a good economy, the core business for Google runs itself,” said Jordan Rohan, an analyst at Stifel Nicolaus. “Expansion into new initiatives is a heavy responsibility.”

People who have worked with Mr. Page say his insatiable demand for quick decisions and innovative ideas will light a fire at Google, where product development has slowed as competition from Facebook and others has grown fiercer.

“When the founder is the C.E.O., it’s a person who usually has product sense and an appetite for making new things, as opposed to talent for selling things,” said Michael Hawley, a longtime M.I.T. professor who knows Mr. Page socially and has advised him on writing projects. “Larry is more the archetype of founder, innovator, hacker, inventor, interested in all of the magical things that digital technologies do.”

But others say that Mr. Schmidt’s two biggest job responsibilities — being the public face of the company and managing internal politics — are areas where Mr. Page has less experience.

Mr. Page, whom friends and colleagues describe as shy and private, has avoided public appearances, letting Mr. Schmidt handle speeches and interviews with reporters and analysts. Sergey Brin, Google’s other co-founder, has appeared at recent press conferences and Google events more often than Mr. Page has.

Still, Google insiders say, Mr. Page has already been playing a broader role outside the company than some people see. For instance, he has represented Google in some meetings with policy makers and regulators.

After Mr. Schmidt was hired in 2001, Mr. Page served as president for product; Mr. Brin is president for technology. Inside the company, the co-founders have long played a decision-making role, with Mr. Schmidt frequently deferring to them, former Google executives say.

A key part of Mr. Schmidt’s role was as peacemaker. This meant softening the founders’ sometimes harsh feedback to employees, carrying out their wishes and smoothing over differences when they arose, all while managing the competing demands and interests of the executives reporting to him.

The former executives, who spoke on the condition of anonymity in order to preserve relationships with former colleagues, said that a big question was whether Mr. Page would be able to play that internal management role effectively, and if not, whether he would hire a chief operating officer — which Google has not had — to handle it.

In an interview, Mr. Page said those management skills were something he observed during the decade he spent learning from Mr. Schmidt. “He’s a global statesman, all the way,” he said. “Eric’s very good at bringing people together, getting people to agree.”

In the interview, Mr. Page and Mr. Brin provided a few hints about their priorities when Mr. Page returns to the top. Mr. Page acknowledged that his role would change but said his passion was still creating products.

“Google is a product company, so there’s a number of elements obviously involved in running the day-to-day operations of Google, but at its heart, we are a product and technology company,” Mr. Page said.

The two said they wanted to focus on introducing real-time information and social networking features into their Web search products. Google has been criticized for being slow to embrace the social Web. Mr. Brin said that what Google had done so far, like incorporating Twitter posts into search results, “is really just the tip of the iceberg.”

Mr. Page said he wanted to speed up decision-making and product development inside Google. One way that might be done is cutting through big-company processes that have slowed things down.

For example, Google engineers sign up to present their projects at regular Tuesday meetings, a process started by Mr. Schmidt. But these grew so big and the wait list so long that the founders grew tired of them. They started their own technical review meetings on Fridays, with far fewer people invited, Google employees said.

But even if Mr. Page makes it easier for engineers to hatch new ideas, there is no guarantee that the next Facebook will grow out of Google. The vast majority of new tech endeavors fail — Wave, a collaboration tool that began as an independent project inside Google and was shut down last year, is one example.

Google employees said they hoped Mr. Page’s biggest impact would be in providing a jolt of inspiration. He gave a glimpse of that, along with a rare public display of emotion, in a commencement speech at the University of Michigan, his alma mater, last year.

“I think it is often easier to make progress on mega-ambitious dreams,” he said. “I know that sounds completely nuts. But, since no one else is crazy enough to do it, you have little competition.”

Hindustan Copper to Increase Production This Fiscal Year as Prices Gain

Hindustan Copper Ltd., India’s sole miner of the ore, plans to increase production by 14 percent this fiscal year, aiming to benefit from record prices.

The state-run company, which owns mines in four Indian states, expects to produce 32,000 metric tons of copper in the 12 months ending March 31, compared with 28,000 tons a year earlier, Chairman Shakeel Ahmed said in an interview today in his Kolkata headquarters. Higher output and prices should lead to a gain in full-year profit, he said.

Copper rose to a record in London yesterday on speculation demand will outpace supply as the global economy extends a recovery. The price increased an average 33 percent to $7,767 a metric ton on the London Metal Exchange this fiscal year from $5,859 a ton a year earlier.

“Our profit and sales growth will be directly proportional to an increase in copper prices,” Ahmed said. “Profit after tax for the nine months ended Dec. 31 has already crossed the full-year income of last year.”

Hindustan Copper, which plans to sell shares this year, fell as much as 1.6 percent to 276.65 rupees and traded at 280.95 rupees as of 9:44 a.m. in Mumbai. The shares have lost 15 percent this year, compared with a 7.2 percent decline in the key Sensitive Index of the Bombay Stock Exchange.

The company will spend 36.8 billion rupees over six years to increase its mine capacity from 3.2 million tons to 12.4 million tons, Ahmed said.

Buoyant Outlook

The outlook for copper prices remains buoyant this year because supply lags behind demand by almost 500,000 tons, Ahmed said. Prices are unlikely to decline to less than $8,000 a metric ton and may even reach $10,500 a ton in the next three years, he said.

India’s government, which owns 99.6 percent of Hindustan Copper, plans to sell a 10 percent stake, while the company will sell an equivalent proportion of new shares. The share sale has been delayed from September.

“I can’t comment on the date of offer and the amount we are looking at raising,” Ahmed said.

The company doesn’t expect the delay to affect its expansion because it plans to sell excavated waste rock to builders of roads and railways. Hindustan Copper has 215 million tons of rock waste that can be sold over 10 years, Ahmed said.

“The money earned from rock wastes will be used to fund our expansion,” he said. “Our expansion plan will start from this fiscal and go up to 2017.”

Wipro Replaces Computer Services Heads After Sales Growth Misses Estimates

Wipro Ltd., India’s third-largest software exporter, replaced the co-heads of the company’s main computer-services business after posting sales that missed analysts’ estimates.

T.K. Kurien will take over as the chief executive officer of the information technology business, Wipro’s largest, from next month after Girish Paranjpe, 52, and Suresh Vaswani, 51, resigned as joint CEOs, the company said in a statement today. Billionaire Azim Premji remains chairman and managing director.

Premji promoted Paranjpe and Vaswani less than three years ago to lead Wipro through the global financial crisis. Their resignation may hurt client relationships and “disturb” Wipro’s growth momentum, said Rahul Jain, an analyst with Dolat Capital Market Ltd. in Mumbai.

“Both the CEOs quitting is a bit of a negative surprise for Wipro,” said Sandeep Muthangi, an analyst at India Infoline Ltd. in Mumbai. “Senior-management attrition has been fairly high at Wipro, and this could be a precursor for another round of high-level attrition. It also seems very abrupt to me.”

Third-quarter revenue increased 12 percent to 78.3 billion rupees ($1.7 billion), the Bangalore-based company said, missing the 80.5 billion rupee average of 47 analyst estimates compiled by Bloomberg. Profit rose 10 percent to 13.2 billion rupees, in line with estimates.

Shares Fall

Wipro fell 4.5 percent, the biggest decline in three months, to 455.95 rupees at the 3:30 p.m. close of trading in Mumbai. The company joined Infosys Technologies Ltd. in indicating that a weaker global economic recovery may undermine growth in India’s software-services market.

Vaswani worked at Wipro for more than 25 years, serving at different times as chief executive officer of Wipro’s joint venture with Acer Inc. and president of Wipro Infotech.

Paranjpe joined Wipro more than 20 years ago. He and Vaswani were promoted to joint CEOs of Wipro’s IT business in 2008. The two are also resigning from their positions on the company’s board of directors.

“It hurts the company,” said Dolat Capital’s Jain. “What’s important is who replaces them. The immediate momentum has been disturbed.”

Wipro engaged two CEOs for the IT business to get “diversity in thinking” during the “uncertain environment” in 2008, Chief Financial Officer Suresh Senapaty told reporters in Bangalore.

‘New Environment’

“Now if you go into the new environment there’s a unanimous view that there is growth, there is an uptick in IT spend and outsourcing,” he said. “From that point of view, all you need to do is drive growth, and therefore it was thought appropriate by the company that we need to have one CEO.”

The operating profit margin for the main IT division was “flat” in the quarter, Senapaty said. Wipro’s 10 percent growth in third-quarter profit was slower Infosys’s 14 percent increase and market leader Tata Consultancy’s 30 percent.

“Wipro is lacking in terms of growth,” said Jigar Shah, a Mumbai-based analyst at Kim Eng Securities India Pvt. “The company is doing well, but not as well as its peers.”

Wipro provides computer services such as designing and building software programs and back-office support to companies including BP Plc, William Morrison Supermarkets Plc and Pitney Bowes Inc. The Indian company added 36 clients in the quarter, compared with 29 three months earlier.

Forecast

Revenue from the information-technology services business may increase as much as 5 percent from the prior quarter to $1.41 billion in the three months ending March 31, Wipro said. The company derived 43 percent of the unit’s revenue from the U.S. and 21 percent from Europe last quarter.

Orders won by Wipro during the quarter included a three- year contract from Vodafone Essar Ltd. to build and manage its fixed-line phone-services business.

Wipro, which also makes soaps, light bulbs and hydraulic equipment, had a net addition of 3,591 employees at its technology unit last quarter, ending the period with 119,491 workers, the company said in the statement.

Pakistan army enlists drama to rally public

Pinned down by gunfire, Naeem Asghar kisses a grenade for luck. The Pakistani soldier is outnumbered, but staggers to his feet to mount a one-man charge. A shot rings out and he falls with a silent cry, still clutching the grenade. Credits roll.

The dramatised version of Mr Asghar’s final moments is one of the more memorable scenes in a slick new television show aimed at rallying public support for the Pakistan army’s campaign against the Taliban.

Titled Beyond the Call of Duty: Invincible Spirits, Immortal Souls, the series takes the military’s long-running propaganda war with Islamist militants into new territory with 11 episodes billed as true stories of valour.

“There’s an officer who leaves his wife in the labour room. She delivers the child, the officer kisses the child, names him then leaves for the war and comes back in a coffin,” said Colonel Syed Mujtaba Tirmizi, executive producer. “There’s not an iota of fiction in it.”

The programme, in which real soldiers serve as extras, is making its debut at a sensitive time. The army is chafing at US pressure to launch an offensive in North Waziristan, which Washington sees as pivotal to its campaign in Afghanistan.

The assassination of Salman Taseer, a prominent liberal politician, by one of his bodyguards this month has raised fears over the degree of extremist sentiment within the security forces. Suspicions linger among diplomats that Pakistan’s intelligence agencies continue to back Afghan insurgents.

The military has long produced films lionising heroes of wars with India, but its decision to hire a public relations company to portray its present-day struggle reflects a sense among officers that recent sacrifices have gone unrecognised.

After years of appeasing the Taliban in north-west Pakistan, the military launched its biggest offensive in 2009, starting in the Swat Valley before advancing into South Waziristan and other parts of the tribal areas.

The army says Mr Asghar, a volunteer from peasant stock, was one of more than 2,670 men killed battling militants since 2001. Approximately 1,460 US troops have died in Afghanistan. Pakistan says it has more than 140,000 soldiers from its half-million strong army committed to the campaign.

The stories, which air on state television on Fridays, aim to tug viewers’ heart strings in a conflict where people have often been caught between the military’s scorched-earth tactics and insurgents. Characters include a widow who lost her policeman husband and son to Taliban attacks, a reluctant teenage suicide bomber and a girl who escaped after being gang-raped and forced to marry an elderly Afghan warlord. Programmers have scheduled a pause in February to ensure audiences are not distracted by the cricket World Cup.

In spite of the rapid growth of Pakistan’s privately owned media, criticism of the military is largely off limits and the shows do not broach allegations of human rights abuses.

General Ashfaq Kayani, Pakistan’s army chief, ordered an inquiry in October after video footage appeared to show uniformed men executing civilians, lending credibility to reports of extra-judicial killings during operations. Human rights groups believe security agencies have been involved in the disappearances of hundreds of people in the western province of Baluchistan.

Officers hope the drama will show the military’s gentler side. “People think the army goes and kills everybody. It’s not that easy. We can’t start killing and bombing our own people,” said Brigadier Syed Azmat Ali. “When this programme goes out you will see half of Pakistan crying.”

Thursday, January 20, 2011

OPEC Pressured to Lift Output as Africa, Asia Oil at $100: Energy Markets

OPEC is facing growing calls to boost oil production as crude prices in Asia and Africa surpass $100 a barrel for the first time in two years.

Nigeria’s Bonny Light grade, from which traders gauge the cost of West African oil, rose to $100.12 a barrel on Jan. 17, passing $100 for the first time since October 2008, according to data compiled by Bloomberg. Malaysia’s Tapis and Indonesia’s Minas breached that level a week ago, trading at $104.36 and $104.01, respectively this week.

The International Energy Agency, an adviser to consuming nations, said Jan. 18 that “three-digit oil prices risk damaging” the economic recovery, signaling that the Organization of Petroleum Exporting Countries should raise output. OPEC responded the same day by saying that global supplies are sufficient to meet demand.

With “some Asian crudes well above $100 a barrel, the risks of OPEC acting must be higher,” said Lawrence Eagles, New York-based head of oil research at JPMorgan Chase & Co. “We would not be surprised to see the public rhetoric from consuming countries accelerate in the coming weeks. Behind the scenes pressure will no doubt be mounting in parallel.”

Oil producers as well as consumers may suffer if crude stays at about $95 to $100 a barrel, the Paris-based IEA said. Stockpiles held by companies in the most developed economies were at 2.742 billion barrels, “near the top of their five-year range,” it said.

‘Enough Oil’

OPEC, responsible for 40 percent of global supply, issued a statement on its website saying “there is more than enough oil on the market,” and promised action in the event of a supply shortage. The group is next due to review production quotas in June, skipping its usual first-quarter conference.

“Any assumption that there is tightness in the market is incorrect,” OPEC Secretary-General Abdalla El-Badri said in the statement. “In reality, commercial stocks remain well above the five-year average and forward cover stands at around 60 days. There is more than enough oil on the market.”

Crude oil fell $2, or 2.2 percent, to $88.86 a barrel yesterday on the New York Mercantile Exchange, bringing its gain from a year ago to 14 percent. North Sea Brent futures, used to price two-thirds of the world’s crude, declined $1.58, or 1.6 percent, to $96.58 a barrel, for an advance of 27 percent in the past year. Brent reached a 27-month high of $99.20 on Jan. 14.

Bonny Light

African and Asian oil grades typically trade at a premium to other oils because of their lower sulfur content and higher gasoline and jet fuel yields. Nigeria, Angola and Gabon supply 15 percent of U.S. crude imports, according to data from the U.S. Energy Department in Washington.

When Brent first exceeded $100 a barrel in February 2008, Bonny Light had breached that level the previous week. Tapis and Minas had broken through $100 three months earlier.

Global oil benchmarks may reach $100 at “any time,” the IEA’s chief economist, Fatih Birol, said in a Jan. 18 interview with Maryam Nemazee on Bloomberg Television.

“If the oil price goes up, the vulnerability of our economy is going to increase significantly, and this can derail the recovery,” Birol said.

Officials at OPEC, including El-Badri and Iranian Oil Minister Masoud Mir-Kazemi, this year’s president, say $100 oil may not curtail economic growth.

“The increase in oil prices toward $100 is not worrisome enough to warrant a call for an emergency meeting,” Mir-Kazemi said in Tehran on Jan. 16. “None of the OPEC members considers this figure as being unreasonable.”

Rather than heed the IEA’s suggestions, OPEC will likely await proof that consumers require additional barrels, according to PVM Oil Associates Ltd., a London-based broker.

“OPEC is more cautious and wants to respond to solid signals such as greater demand for physical oil and low stock levels, rather than responding to a greater demand for oil futures,” David Hufton, PVM’s managing director, said in a report yesterday.

Banks Want Pieces of Fannie-Freddie Pie

As the Obama administration prepares a report on the future of Fannie Mae and Freddie Mac, some of the nation’s largest banks are offering a few suggestions.

Wells Fargo and some other large banks would like private companies, perhaps even themselves, to become the new housing finance giants helping to bundle individual mortgages into securities — that would be stamped with a government guarantee.

The banks have presented their ideas publicly through trade groups. Housing industry consultants and people familiar with recent meetings at the Treasury Department say these banks view the government’s overhaul of the mortgage market as a potential profit opportunity. Treasury officials have met with executives from several institutions, including Wells Fargo, Morgan Stanley, Goldman Sachs and Credit Suisse, according to a public listing of the meetings.

The administration’s report, to be released later this month, is expected to be sweeping and could address basic questions like whether a government guarantee is needed at all for middle-class homeowners. While other arms of the government are dedicated to making loans available to lower-income borrowers, Fannie and Freddie have helped lower rates for the bulk of homeowners. Some Republicans are trying to narrow this broad role, and on Thursday, several conservative researchers released a proposal on how to do so.

But banks, for their part, have told the administration that removing the guarantee would wipe out the widespread availability of the 30-year mortgage, fundamentally reshaping the American housing market. Though some other countries do not promote long mortgages, some analysts warn that such a change would be devastating to the market here. At firms like Goldman, analysts are predicting that a government guarantee on a broad swath of mortgage securities will survive in some form.

A spokesman for the Treasury declined to comment on the administration’s plans, but one former Treasury official warned against the banks’ proposal.

“I don’t think that private shareholder-owned entities should issue federal government guarantees,” said Michael S. Barr, who worked on housing issues at the Treasury Department until the end of last month and then returned to his job as a law professor at the University of Michigan. “I think that creates the same conflict we had in the past.”

Mr. Barr said that banks with the largest mortgage businesses had suggested that they be allowed to issue the government’s guarantee, setting themselves up as a second-generation of Fannie and Freddie. As for the two housing giants, Mr. Barr said, “No one argues for Fannie or Freddie to continue in their current form. It’s just not politically plausible.”

Fannie and Freddie have been barred from lobbying the administration or Congress about their future since they were placed in government conservatorship more than two years ago. The companies are able to receive unlimited aid from the Treasury Department until the end of 2012. In the meantime, they are administering some of the government’s housing programs and enabling the housing market to sputter along through their guarantee of most new mortgages.

The administration’s paper about the future of housing policy will probably address what should be done with Fannie’s and Freddie’s existing assets, a combined $1.5 trillion portfolio. That is entirely separate from the discussion about the future business model. Lawmakers will eventually decide if Fannie and Freddie will survive and if they can compete in the new model.

One trade association, the Mortgage Bankers Association, has suggested to the Treasury Department that the government might want to auction off Fannie and Freddie’s assets, including their brands and their mortgage data, to private companies.

Wells Fargo has been most public in its support of the proposals, but JPMorgan Chase and other large banks helped develop the plans within trade groups. Michael J. Heid, the co-president of Wells Fargo Home Mortgage, testified before Congress last year that allowing private companies to issue the guarantee would add “innovation and efficiency” to the process.

Asked about the proposals from the trade associations, Kristin Lemkau, a JPMorgan spokeswoman, said: “While we are members of these groups, we have not endorsed any specific proposal.”

Still, some housing experts critical of the idea warn that giving the large banks a bigger role could lead to an even greater concentration in a market already dominated by a few big players. And they warn that the banks are unlikely to add the affordable housing assistance that Fannie and Freddie provided. Furthermore, they do not see why private entities should profit from the government’s good credit standing.

Several housing consultants pointed out that the banks’ latest proposals resemble ideas that banks circulated in Washington several years before the financial crisis. Back then, companies like General Electric, Wells Fargo, JPMorgan and the American International Group lobbied through a group called FM Watch, warning that Fannie and Freddie had too much power, had taken on too much risk and had unfair advantages in the marketplace. FM Watch disbanded in 2008, when Congress passed legislation requiring more regulation of the two housing giants.

Representatives of the industry say the entities they are now proposing would be less risky because the government would have strict oversight of them as well as the ability to require hefty amounts of capital to back the mortgage bonds. They also say that companies would pay a fee for the government guarantee, which would cover losses above a certain level. That level has not yet been determined.

In at least one version being proposed, the private companies would have to be separate enough from banks that they could not be pulled down by a bank’s collapse. Also, the proposals say the government would guarantee only the mortgage bonds, and not the private companies. However, the government never explicitly guaranteed the survival of Fannie and Freddie or their mortgage bonds; nonetheless it ultimately stepped in to back both.

Still, another trade group, the Housing Policy Council, an arm of the Financial Services Roundtable, expects banks to look for ways to become licensed to help issue government-guaranteed mortgage bonds.

“I wouldn’t be surprised if some banks did,” said John H. Dalton, president of the council and the former president of Ginnie Mae, an arm of the government that backs mortgages.

John P. Gibbons, an executive vice president of capital markets at Wells Fargo Home Mortgage, said the bank is not eager to own one of the new private companies playing this role, but that it would consider doing so if it thought it was necessary for the market.

“In general we still support those positions because we think they are ways of bringing private capital back into mortgage finance,” he said.

It is unclear just how profitable the new business may be. Mr. Heid, the Wells Fargo executive, told Congress that private investors in the companies should receive a “reasonable” return, but he did not say how much.

Jay Brinkmann, chief economist of the Mortgage Bankers Association, which has a similar proposal to the Housing Policy Council’s plan, said his group is “not trying to protect profits for a handful of banks.”

“I don’t think anybody is going to be making the kind of profit that Fannie and Freddie were making in their heyday,” he said.

Even if large banks are not allowed to give a government guarantee, they might have control over the private companies by investing in them or by placing representatives on their boards.

There is a risk that small banks would be shut out of the market and consumers would face higher costs on their mortgages, said Mark Willis, resident research fellow at New York University’s Furman Center for Real Estate and Urban Policy.

“Some fear that a market ruled by a few large banks will limit access to the secondary market by smaller, local institutions,” said Mr. Willis, who visited Treasury officials in November to discuss the issues.

Mr. Willis pointed out that the mortgage market has become more concentrated since the financial crisis, as several prominent originators — like Wachovia and Washington Mutual — hit trouble and were sold to larger banks.

If the government decides to continue offering a guarantee for a broad swath of securities backed by mortgages to middle-class homeowners, it does not have to use a private company. A government agency could issue that guarantee, much the way the Federal Housing Administration does now for borrowers with lower incomes or other factors that disqualify them from conventional loans.

The banks’ proposals also throw out Fannie and Freddie’s longtime role in affordable housing. Part of the reason the housing giants enjoyed such broad support from lawmakers was because they aided low-income borrowers. Banking associations say that distorted and endangered the two companies and that any new companies should not be saddled with those responsibilities. Instead, the banks say, the private companies could pay a fee to the government to support such lending.

Singh’s tenure beset by indecision

When Manmohan Singh, India’s prime minister, became the first premier to return to office after serving a full term since Jawaharlal Nehru, hopes for his tenure were high.

The expectation was that Mr Singh who, as finance minister 20 years ago oversaw the liberalising of the Indian economy from tiers of stifling regulations, would use his renewed mandate to open the economy further, and improve India’s governance.

However, almost two years on, Mr Singh’s extended tenure is characterised by an aversion to tough decisions. A shopping list of reforms, from raising caps on foreign investment in pension and insurance sectors to paring down food, energy and fertiliser subsidies, remains almost untouched in spite of a cushion of galloping economic growth and a disorganised opposition.

A cabinet reshuffle on Wednesday, where ministers of dubious performance have shunted from one ministry to another but none dropped outright, typifies an indecisiveness, and a lack of political authority at the top.

Ashutosh Varshney, a professor of political science at Brown University in the US, describes the reshuffle as “lacking a political message” and reflecting deeper problems within the ruling coalition. Other commentators have spoken of Mr Singh as “rearranging the deckchairs on the Titanic” and pursuing a “losing strategy” when the state is facing severe criticism for a series of embarrassing high profile corruption scandals that have brought parliament to its knees.

Many are wondering why 78-year old Mr Singh, and Sonia Gandhi, the president of the Congress party, undertook a reshuffle at all if they were not prepared to show more gumption to tackle the country’s ills.

Mr Singh has not helped his own cause. He has termed the reshuffle “minor” even though by any measure it is extensive. He has moved about 37 people among an administration of about 78 ministers of various rank. The prime minister has also signalled more “expansive” changes after the budget session of parliament which begins next month. This leaves open the question as to whether he intends a shake- up of the so far untouched finance, home, foreign and defence portfolios.

His ministers have defended Mr Singh’s deft, “surgeon-like” qualities, as required at the top of the world’s largest democracy, and reject suggestions that the Congress-led government is paralysed by internal divisions over policy and corruption.

Salman Khursheed, minister of water resources, describes the reshuffle as “the beginning of something bigger” but says it also reflects the “political constraints of the time” when the Congress party has to pander to regional allies rather than enjoy the freedom of an outright majority.

“Just because [the prime minister] hasn’t dropped members of his team doesn’t mean a message has not been sent,” Ashwani Kumar, the newly appointed minister of science, says.

Prof Varshney acknowledges that Mr Singh has upgraded some low-profile portfolios that were previously populated by a succession of mediocre ministers. One is environment, now under the control of Jairam Ramesh; another is water affairs – critical in a region where India’s rivers are shared with Pakistan, China and Bangladesh – now filled by Mr Khursheed.

Others include highways where Kamal Nath has made way for C.P. Joshi and petroleum where Murli Deora, a Mumbai politician viewed as a pawn to corporate interests, has been replaced by Jaipal Reddy.

This generous interpretation is not widely shared. Sanjaya Baru, a former adviser to the prime minister and now the editor of Business Standard, says this week’s cabinet manoeuvres reflect “political constraints that Mr Singh cannot overcome”.

Such constraints have weighed most heavily on the prime minister’s strongest suit, the economy, over the past 18 months, making him look tired and ineffectual.

Business lobby groups had expected a march towards the liberalisation of the defence, retail and financial services sectors, labour market reform and state disinvestments to help sustain growth projections. They also forecast more rapid implementation of badly needed infrastructure projects, and the reduction of costly subsidies.

On the day of the coalition’s re-election, Sensex, the Bombay Stock Exchange’s benchmark index, roared upwards on hopes for an economic cabinet ‘dream-team’, the envy of many G20 countries and led by a man of impeccable personal integrity.

The talents of Mr Singh, Pranab Mukherjee, the finance minister, P.C. Chidamabaram, the home minister, Montek Singh Ahluwalia, the deputy chairman of the planning commission, and Kamal Nath, now minister of urban affairs, have not shone as they might.

Instead, last year marked a low point in decision-making with the cabinet signing off on 112 resolutions, less than half of the number achieved annually during the coalition’s first period of office.

Among them were a watered-down nuclear liability bill, and steps towards greater parliamentary representation for women.

Bank Bonds Off to Worst Start Since 2007 as Inflation Rises: India Credit

Indian banks’ dollar bonds are heading for their worst January since before the credit crisis as the fastest inflation in Asia spurs customers to buy gold and property, while deposits fail to keep pace with loans.

The notes returned 0.36 percent this month, their weakest start to a year since they delivered 0.29 percent in January 2007, according to HSBC Holdings Plc’s Indian Dollar Bond Index, which is 71 percent bank debt. HSBC data show a 0.71 percent return for lenders in South Korea, where inflation at 3.5 percent is less than half India’s 8.4 percent.

“The shift of the Indian household sector from deposits to inflation hedges such as property and gold is creating a liquidity crunch in the banking sector that’s unlikely to be solved in the near future,” Kristine Li, senior director of Asia-Pacific credit strategy at Royal Bank of Scotland Group Plc, said in an interview in Singapore. “If banks’ loan growth decelerates, asset quality concerns are likely to return.”

India’s central bank is under pressure to sustain the fastest pace of monetary tightening in Asia after the ballooning cost of food staples pushed inflation to almost double the Reserve Bank of India’s “medium-term” 4.5 percent target ceiling. Bank deposits increased 16.5 percent in the two weeks ended Dec. 31 from a year earlier, lagging a 24.4 percent increase in lending, according to RBI data.

The cash squeeze in Asia’s third-largest economy spurred banks’ loan-to-deposit ratios to a record 75.7 percent in December. Indian lenders borrowed an average 923 billion rupees ($20.3 billion) a day from the central bank in the fourth quarter, the most since 2000.

Wider Spreads

Relative yields on State Bank of India’s $1 billion, 4.5 percent bonds due July 2015, rose 22 basis points this year, while the spread on Axis Bank Ltd’s $350 million, 5.25 percent notes due September 2015, widened 19 basis points, according to data provided by RBS. The spread on ICICI Bank Ltd.’s $750 million of 5.5 percent notes due March 2015 rose 15 basis points, or 0.15 percentage point, RBS prices show.

The cost of insuring Mumbai-based State Bank’s debt with credit-default swaps rose 23.7 basis points to 183.5 this month, putting the contracts on track for their steepest monthly increase since May, prices from data provider CMA show. Swaps on Mumbai-based ICICI climbed 34.4 basis points to 232.6, also heading for their steepest monthly rise in eight months.

The difference in yields between India’s debt due in a decade and similar-maturity U.S. Treasuries was 482 basis points yesterday, widening from 463 at the end of last year.

India, home to 1.2 billion people, is facing a “surge” in inflation because it recovered from the global recession faster than other countries, central bank Governor Duvvuri Subbarao said on Jan. 17.

Onion Prices

The benchmark wholesale-price index rose 8.43 percent in December from a year earlier after a 7.48 percent gain in November, the commerce ministry said on Jan. 14. The cost of onions surged 70 percent in the week to Jan. 1.

“India has had two years of inflationary pressures building in the market and bank bonds are selling off as a result,” Kenneth Akintewe, who helps oversee $261 billion of global assets at Aberdeen Asset Management Asia Ltd., said in a phone interview from Singapore yesterday. “It’s hard to see pricing pressures significantly abating any time soon.”

State-run banks will need to raise more capital to sustain credit growth, Chakravarthy Rangarajan, the prime minister’s chief economic adviser, said in New Delhi on Jan. 7.

The government is targeting economic expansion of 9 percent over the next two decades to cut poverty. While the World Bank estimates there are 828 million people in India living on less than $2 a day, the country’s 100 billionaires have wealth equal to a quarter of gross domestic product and the number of millionaires will triple by 2018, according to Forbes magazine and Merrill Lynch & Co. and Cap Gemini SA estimates.

Gold Demand

As rising salaries boost the wealth of India’s middle- class, demand for gold is rising in the world’s biggest user of bullion. Gold imports probably rose to a record in 2010, driven by investment demand, Ajay Mitra, managing director for India and the Middle East at the World Gold Council, said Jan. 12.

Bullion gained 30 percent last year, reaching a record $1,431.25 an ounce on Dec. 7, as investors bought the metal as a protector of wealth.

Property prices in some parts of India surpassed their pre- crisis peaks in 2007 as urbanization accelerates, Mahesh Nandurkar, a real-estate analyst at CLSA Asia-Pacific Markets in Mumbai, said in November.

“The more wealth creation you get, the greater the demand you’re going to see for other assets,” Aberdeen’s Akintewe said.

Government Notes

The yield on India’s government bonds held at the highest in almost a year yesterday before the central bank reviews policy rates next week. The yield on the 8.08 percent bond due in August 2022 fell 2 basis points, or 0.02 percentage point, to 8.21 percent, according to the central bank’s trading system. Earlier, it touched 8.23 percent, the highest level since Feb. 5.

The rupee fell, approaching its weakest level in seven weeks. The currency retreated 0.2 percent to 45.53 per dollar, according to data compiled by Bloomberg.

India’s inflation means the real interest rate returns on bank deposits are “very low or even negative in some cases,” Nondas Nicolaides, a senior banking analyst with Moody’s Investors Service, said yesterday in a phone interview in Singapore.

“This pushes people to invest their money elsewhere instead of placing it as deposits in banks,” he said. “However our concerns are partly mitigated by the limits Indian banks have in place in terms of overall capital markets exposure as well as real-estate exposure.”

Deposit growth lags loan expansion even after banks raised deposit rates for various maturities by between 100 basis points and 150 basis points since August.

“The valuations of Indian bank’s dollar bonds are rich,” Royal Bank of Scotland’s Li said. “After turning in an excellent performance since early November, we recommend investors take profits.”

Wednesday, January 19, 2011

Solar Firms Frustrated by Permits

Ken Button, the president of Verengo Solar Plus, a residential solar panel installer in Orange, Calif., says his company — and his industry — are being strangled by municipal red tape.

Fifteen Verengo employees, Mr. Button said, are dedicated solely to researching and tailoring permit applications to meet the bureaucratic idiosyncrasies of the dozens of towns in the company’s market. And because most jurisdictions require applications to be submitted in person, Verengo employs two “permit runners” whose only job, Mr. Button said, is to “take those permit packs and physically drive them around, stand in line, and pay the fees.”

“We have 50 different permitting authorities within 50 miles of our office,” Mr. Button said. “They all have different documentation requirements, different filing processes, different fee structures. It’s like doing business in 50 different countries — just in Southern California.”

His lament is being echoed by solar companies across the country.

In a new study, the industry estimates that the permit dance adds an average of $2,500 in costs to each installation, and streamlining things could provide a $1 billion stimulus to the residential and commercial solar power market over the next five years.

The analysis, which will be released publicly on Thursday, was prepared by one of the nation’s largest solar leasing companies, SunRun, and endorsed by Verengo and at least a dozen other service and installation firms.

At a time when the Obama administration has vowed to redouble its efforts to create a green economy — and, more recently, to remove regulatory roadblocks and promote growth — companies that sell and install solar panel systems for residential and commercial customers are clamoring to be among the first in line.

“This is in essence a hidden tax on solar,” Mr. Button said.

The industry’s analysis, which has been shared with officials at the White House and the Energy Department, urges the federal government to create incentive programs that would nudge municipalities to adopt common codes, fee structures and filing procedures. Germany, Japan and some other countries that aggressively promote solar power have already used such streamlined permitting.

Administration officials said that they were seriously studying the issue, and that they planned to reveal initiatives and funding opportunities to address it.

The analysis suggests that permit standardization could make solar power — still typically an expensive proposition even with various subsidies — competitive for roughly half of the nation’s 128 million homes within just two years. Today, only about 80,000 households have installed solar power in the United States.

The Energy Department has already begun tackling the lack of standardization in the solar industry, in part through its Solar America Board of Codes and Standards, established under the department’s Solar Energy Technologies Program in 2007.

The solar ABC’s, as the program is known, links policy makers, solar panel manufacturers, installers and consumers to create a central clearinghouse for information on solar building codes and best practices.

But the analysis urges the Obama administration to do more to encourage local officials to adopt the codes and procedures outlined by the solar ABC’s — including the creation of a prize program similar to the Race to the Top Fund, a $4.35 billion program created as part of the 2009 stimulus package to encourage and reward states for efforts to reform education.

Such a contest would provide grants to cities in specific solar states that show the most progress adopting standards. The paper also calls for the creation of a common online permitting tool and funds for local education and advocacy efforts aimed at further streamlining solar panel installation. It also seeks to standardize formulas for calculating permit fees, which can range from nothing in some communities to more than $2,000 in others.

“There’s a huge range from one town to another,” said Bill Condit, the head of operations for Trinity Solar, one of the largest solar providers in New Jersey. “Basically there is no standard.”

Tales of wild variation — and attendant frustration — abound.

Asian stocks fell with the regional benchmark index falling the most in two weeks, as Chinese economic reports prompted speculation the country will d

Asian stocks fell with the regional benchmark index falling the most in two weeks, as Chinese economic reports prompted speculation the country will do more to fight inflation and U.S. earnings disappointed.

BHP Billiton Ltd., the world’s No. 1 mining company that counts China as its biggest market, dropped the most in two months as commodity prices slumped. China Merchants Holdings International Ltd., which has interests in ports moving about a third of the country’s container traffic, dropped 2.5 percent. James Hardie Industries SE, the biggest seller of home siding in the U.S., declined 1.9 percent in Sydney, set for its longest losing streak since July 2009.

The MSCI Asia Pacific Index fell 1 percent to 139.09 as of 11:28 a.m. in Tokyo, with about four stocks declining for each that rose. China reported economic growth accelerated to 9.8 percent in the fourth quarter even as the rate of inflation slowed to 4.6 percent from 5.1 percent in November.

“It’s fair to say that this data will add to pressure on China to tighten further,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Ltd., which manages about $93 billion. “The figures aren’t overly worrying, but with growth continuing along at a fairly solid pace and inflationary pressures still evident, it’s all consistent with further tightening.”

The Asia Pacific gauge yesterday closed at its highest level in 2 1/2 years after Apple Inc. and International Business Machines Corp. reported earnings that exceeded analysts’ estimates.

Hong Kong’s Hang Seng Index fell 1.1 percent while the Shanghai Composite Index slipped 0.8 percent.

Japan’s Nikkei 225 Stock Average sank 1.1 percent and South Korea’s Kospi Index slipped 0.4 percent. Australia’s S&P/ASX 200 Index dropped 1 percent, while New Zealand’s NZX 50 Index declined 0.2 percent.

Futures on the Standard & Poor’s 500 Index were little changed. The index declined 1 percent yesterday in New York, its biggest drop since November, after Goldman Sachs reported fourth-quarter net income decreased to $3.79 a share. Estimates of 22 analysts surveyed by Bloomberg averaged $3.79 a share.

Utilities Needing $45 Billion Follow Ambani for China Loans: India Credit

Indian power developers are seeking financing from China to fuel expansion as rupee interest rates soar and local banks say they can’t keep up with demand to fund about $45 billion of equipment orders from China needed by 2017.

Lanco Infratech Ltd., based in Hyderabad, Adani Power Ltd., SRM Energy Ltd. and Moser Baer Projects Pvt. have said they’re talking to China’s export banks for loans, after billionaire Anil Ambani’s Reliance Power Ltd. borrowed $1.1 billion from China Development Bank Corp. in December.

Utilities are turning to China as they buy boilers and turbines to help meet India’s 100,000 megawatt capacity-addition target in the five years ending March 2017. India’s National Stock Exchange three-month interbank offered rate of 9.19 percent compares with 4.357 percent for Shanghai’s interbank offered rate, Shibor. Average yields for top-rated five-year Indian corporate bonds have risen to 9.13 percent from 8.94 percent on Dec. 31, according to the Fixed Income Money Market and Derivatives Association of India, or FIMMDA.

“Every power company buying Chinese equipment is looking into borrowing from them as well,” L.R. Shrivastav, chief executive officer of New Delhi-based Moser Baer Power, said by telephone yesterday. “The equipment companies are facilitating our relationship with banks and if they offer a lower lending rate, we will take it, otherwise we will get a loan at home.”

India needs more power stations to reduce blackouts and drive its economy, which Prime Minister Manmohan Singh aims to expand by 10 percent a year. India will miss capacity targets through 2012 because there aren’t enough established equipment makers, Power Minister Sushil Kumar Shinde told reporters in New Delhi on Dec. 19.

‘Can’t Fund Everything’

SBI Capital Markets Ltd., a unit of the nation’s largest lender, the State Bank of India, lent $10 billion to power projects in 2010 and loan rates to private utilities ranged from 8 to 11 percent, according to Senior Vice President Rajat Misra.

“If foreign banks came, it would be a relief to Indian banks which are trying to fund infrastructure projects,” Misra said in an interview in New Delhi yesterday. “We can’t fund everything.”

Reliance Power of Mumbai, which has ordered $10 billion of coal-fired generators from Shanghai Electric Group Co. for Indian plants, took the loan from China Development Bank after signing a $12 billion financing agreement with Chinese lenders.

China Development Bank has lent more than $120 billion for the nation’s projects abroad, and while terms aren’t disclosed for its loans, it sold five-year bonds at a 3.31 percent coupon Jan. 14, China clearinghouse data show.

Such loans may boost India’s capacity and help Chinese power-equipment makers, which are hunting contracts abroad to offset slowing orders at home, according to Shubhranshu Patnaik, a senior director at Deloitte & Touche LLP in New Delhi.

Bonds, Rupee

Elsewhere in Indian markets, government bonds gained for the second day on speculation investors stepped up purchases with yields at eight-month highs. The yield on the benchmark 7.80 percent bond due May 2020 slipped 1 basis point yesterday to 8.18 percent, according to the central bank’s trading system.

The rupee declined 0.1 percent to 45.46 per dollar after earlier climbing to its highest level this week. The currency has lost 1.7 percent this month, the worst performer among the most-traded Asian currencies.

The cost of protecting the debt of government-owned State Bank of India, which some investors perceive as a proxy for the nation, has risen 24 basis points, or 0.24 percentage point, this year to 184, according to CMA prices.

Syndicated Loans

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Indian syndicated loans almost doubled last year to $88.4 billion and reached $4 billion so far this month, data compiled by Bloomberg show.

Indian utilities have agreed to orders and memorandums of understanding with Chinese power companies for a total of about $45 billion of equipment, according to estimates by Deloitte & Touche’s Patnaik.

Shanghai Electric Group, Dongfang Electric Corp. and Harbin Power Equipment Co. have made agreements with private Indian utilities and are pointing them to Chinese banks to fund the agreements, said Shrivastav.

Chinese companies signed $16 billion of deals with Indian businesses during Premier Wen Jiabao’s visit to India last month. Ahmedabad-based Adani Power placed orders for $3.6 billion of equipment, while Mumbai-based SRM Energy gave $1.4 billion of contracts during the visit.

China’s Experience

China’s energy reach is expanding elsewhere. Venezuela will use $6 billion from a joint development fund it set up with China to invest in electricity generation projects, Finance Minister Jorge Giordani said Jan. 18.

New Delhi-based Indiabulls Power Ltd. and Bangalore-based GMR Infrastructure Ltd. will buy only Indian technology. Abhijeet Projects Ltd., which placed a 6,600 megawatt order with Dongfang, will take on debt with Indian banks.

Many private companies have been lured by the experience and efficiency of China’s power companies, Sanford C. Bernstein & Co. senior research analyst in Hong Kong, Michael Parker, said in an interview on Jan. 4.

In fiscal 2007, China added 100,000 megawatts to its grid through its joint ventures with Siemens AG, Alstom SA and Hitachi Ltd., Martin Prozesky, a London-based analyst at Sanford C. Bernstein said in an interview on Jan. 10.

Those same manufacturers have formed joint ventures with Indian equipment companies.

“The Indian power sector pie is so big,” Satnam Singh, chairman of New Delhi-based Power Finance Corp., the state-run lender to Indian utilities, said Jan. 18. “There will be a share for everyone.”

India pushes for national microfinance rules

India’s central bank experts have called for a nationwide regulatory regime for microfinance institutions – including a cap of 10 per cent to 12 per cent on microlenders’ interest margins – to facilitate the extension of credit to poor borrowers while preventing exploitation.

The proposals, which are likely to serve as the framework for new Reserve Bank of India rules for the sector, come as the microfinance industry struggles to survive an intense regulatory backlash prompted by mounting concern that overlending by aggressive, for-profit microlenders has created serious hardships for the very poor borrowers they claim to be trying to help.

The Reserve Bank of India’s special committee, set up last year to study the microfinance industry and its practices, recommended that microloans to the poor be capped at Rs25,000 ($550) per borrower and employ flexible repayment schedules, with borrowers given a choice as to whether to make weekly, fortnightly or monthly repayments.

Though the committee ruled out any fixed interest rate cap given the “volatile” cost of funds to the industry, it said interest rates on microloans should be capped at 10 per cent over the cost of funds for large microfinance companies and 12 per cent above the cost of funds for smaller counterparts.

Microfinance companies were previously categorised as non-banking finance companies, the regulation of which did not include interest margin caps.

Indian microlenders have, in recent years “made profits which are in excess of what can be considered as reasonable, given the vulnerable nature of the borrowers,” the committee said, adding that microloan recipients need special protection, given their low levels of financial literacy and precarious economic circumstances.

“Borrowers in the microfinance sector represent a particularly vulnerable section of society,” the report said, noting that many live in “an environment which is fragile and exposed to external shocks which they are ill-equipped to absorb”.

Indian microlenders, which had been growing at a blistering pace in the past few years, have been in a tailspin since October, when the southern state of Andhra Pradesh imposed draconian curbs on micro-lenders activities after a spate of suicides by over-indebted borrowers.

Collection rates in the state – a hotspot of microlending – suddenly plummeted from about 98 per cent to only 10 to 20 per cent. Meanwhile, India’s commercial banks, which had been lending aggressively to micro-finance institutions, suddenly froze their credit lines, creating a major credit squeeze on the companies.

But Alok Prasad, director of the Microfinance Institutions Network, which represents India’s 44 for-profit microfinance companies, said he believed the RBI proposals represented a “sound, constructive” basis for the industry to move forward.

“You’ve got clarity, which is crucial,” he said. “With clarity, more regulation and more controls. It’s a package; you’ve got to live with that package. In my view, the industry has to temper and moderate a lot of things it was doing earlier.”

On Wednesday, the RBI also said commercial banks could restructure loans to microlenders without classifying them as bad debts, effectively extending a crucial financial lifeline to struggling microlenders.

It also requested that the Andhra Pradesh state government withdraw its current restrictive law on microfinance institutions, saying the state government’s concerns had been dealt with by its proposals.

Monday, January 17, 2011

Despite Anxiety Over Leave at Apple, a Deep Bench of Leadership

SAN FRANCISCO — For many people, Apple would not be Apple without Steven P. Jobs.

¶ The sudden decision by the company’s chief executive to take a medical leave for the third time in less than a decade raises anxieties about the leadership of the company he helped found more than three decades ago. It also puts the spotlight again on several senior executives who have been helping Mr. Jobs run the company, in particular Timothy D. Cook, the chief operating officer, who will take over day-to-day operations during Mr. Jobs’s leave.

¶ Whether Mr. Jobs returns, as he said he hoped to, or does not, as some investors fear, most experts believe that despite having a strong executive team, he will be hard to replace.

¶ “The company could not thrive if Steve didn’t have an extremely talented team around him,” said David B. Yoffie, a professor at Harvard Business School who has studied the technology industry for decades. “But you can’t replace Steve on some levels.”

¶ Mr. Yoffie and others said Mr. Jobs’s creativity, obsession with a product’s design and function, and management style, as well as the force of his personality, were unusual, not only in Silicon Valley, but also in American business. They said that it would take several people with different skills to fill Mr. Jobs’s shoes.

¶ “The person who can keep the trains running on time is a scarce commodity, but not as rare as someone who can do breakthrough innovation,” said Michael Useem, a professor at the Wharton School of the University of Pennsylvania and the director of its Center for Leadership and Change Management.

¶ Apple is widely believed to have both.

¶ Mr. Jobs is leaving Mr. Cook in charge, just as he did during a five-month leave in 2009.

¶ His performance during that time provides a heavy dose of reassurance for nervous investors. Mr. Cook, who joined Apple nearly 13 years ago and is otherwise responsible for the company’s worldwide sales and operations, steered the company successfully the last time around. He kept the development of products like the iPhone 4 and the iPad on track, increased Macintosh computer sales and improved Apple’s financial performance during an economic downturn.

¶ While Apple shares dipped when Mr. Jobs announced his 2009 leave, they rallied strongly during Mr. Cook’s tenure. Before joining Apple, Mr. Cook was vice president of corporate materials for Compaq, which was bought by Hewlett-Packard.

¶ While Mr. Jobs has remained intimately involved in the company despite his health, Mr. Cook’s responsibilities, and his position as apparent heir to Mr. Jobs, have strengthened.

¶ “I was with Tim Cook last week in New York and I walked away from that thinking, ‘This guy is more in charge and more in control of Apple than I think people understand,’ ” said Tim Bajarin, an analyst with Creative Strategies who has followed Apple for nearly three decades. “He clearly is the guy that if Apple needed additional leadership at the top, could actually carry it.”

¶ Analysts said that like Mr. Jobs, Mr. Cook is obsessed with details and involved in minute elements of the business. “Tim is obsessive about operational detail, and Steve is obsessive about product detail,” said Gene Munster, an analyst with Piper Jaffray.

¶ A handful of other executives, whose roles are complementary to that of Mr. Cook’s, are also expected to see their profiles rise in Mr. Jobs’s absence. They include Jonathan Ive, a London-born designer who is Apple’s senior vice president for industrial design and close to Mr. Jobs. “He’s arguably the most important person there outside of Steve,” said Shaw Wu, an analyst at Kaufman Brothers. “He’s responsible for the look and feel of the products, the way they interact with users.”

¶ Philip W. Schiller, the company’s marketing chief, is also expected to play a vital role. During Mr. Jobs’s last leave, it was Mr. Schiller who took over as Apple’s chief showman, taking the stage at events typically headlined by Mr. Jobs. Among other products, he unveiled the iPhone 3GS as well as an updated line of MacBook Pro laptops.

¶ And Scott Forstall, senior vice president for iPhone software, is also believed to have an increasingly influential role as software becomes the distinguishing factor on phones and tablets. He has been behind Apple’s push to unify the software that powers its mobile devices and its Macintosh computers.

¶ Despite his recurring health problems, Mr. Jobs has remained involved in decisions big and small. Last year, for instance, he took center stage in the company’s response to a public relations issue over problems with the iPhone 4’s antenna and participated in discussions with Facebook over the release of Ping, Apple’s social networking service inside iTunes.

¶ One area where Mr. Jobs’s influence will be hard to replace is at the negotiating table. Mr. Jobs has sought to sway many through the strength of his personality, for instance, playing a direct role in persuading media companies to make their content available on Apple’s products. That role is increasingly important, as Apple seeks to become an even bigger power in media distribution. Mr. Jobs has some recent victories on that front; for instance, when the Beatles agreed to sell their music on iTunes. He was also able to persuade Disney and the News Corporation to make some television shows available for 99 cents through the Apple TV device.

¶ “When Steve talks, people listen,” Mr. Yoffie said. “It would be hard for anyone in the industry to have a comparable level of influence.”

¶ No one expects Apple to suffer in the short term, as the company has a long product cycle. But some raise questions as to what will happen over the long term if Mr. Jobs does not return.

¶ “The problem here isn’t the operations of Apple and their ability to execute and keep doing what they’ve been doing,” Mr. Munster said. “As far as what they’ve got in place, no doubt they can deliver, but as far as inspiring products you haven’t thought up yet, that’s what you’re going to lose.”

¶ “The problem, really at the core,” he said, “is that Steve Jobs’s inspiration is irreplaceable.”

Rupee Loan Rate Gap at Two-Year High Sends Borrowers Abroad: India Credit

The widest gap between local and dollar money-market rates in more than two years is driving Indian companies to borrow abroad.

Usha Martin Ltd., a maker of steel cables used in machinery and bridges, plans to raise $125 million in dollar-denominated loans, Chief Financial Officer A.K. Somani said in a Jan. 6 interview. GAIL India Ltd., the nation’s biggest natural gas transporter, expects approval from U.S. Export-Import Bank for a $100 million facility, Finance Director Raj Kumar Goel said. New Delhi-based GAIL may also borrow $500 million by March, he said.

“Dollar loans are definitely cheaper than rupee loans,” Goel said in a Jan. 12 interview. “Overseas loans suit us better rather than overseas bonds, as with loans we don’t have to draw down the amount immediately.”

The gap between the three-month London interbank offered rate, or Libor, and the India National Stock Exchange’s interbank offered rate jumped to 886 basis points yesterday, the widest since November 2008. Demand for funds is rising as India builds infrastructure to support an economy that expanded 8.9 percent in the quarter ended Sept. 30.

Indian companies borrowed $23.4 billion overseas in 2010, more than triple the amount in 2009, though less than the record $24.3 billion in 2007. Foreign-currency bond sales also more than tripled last year to $8.7 billion.

“There’s interest and appetite among Indian banks and corporates to borrow in the international capital markets because of the lower interest rates,” Nondas Nicolaides, a senior banking analyst at Moody’s Investors Service, said in a phone interview on Jan. 14 from Limassol, Cyprus. “The banks would be willing to lend to those companies which usually have foreign-currency earnings capacity as well.”

Policy Outlook

The Reserve Bank of India raised interest rates six times in 2010 as growth recovered. Policy makers are scheduled to meet Jan. 25 and will probably raise the benchmark repurchase rate by 25 basis points to 6.5 percent, according to 10 economists surveyed by Bloomberg News.

Union Bank of India, a Mumbai based state-owned lender, raised 160 million Swiss francs ($166 million) in its first sale of debt denominated in the currency, according to data compiled by Bloomberg.

Bank of Baroda, also based in Mumbai, plans to meet potential lenders for a $125 million three-year loan, according to a person close to the matter yesterday. BNP Paribas SA and Standard Chartered Plc are arranging talks in Singapore and Taipei on Jan. 20 to Jan. 21, the person said, asking not to be identified as the information is private.

Essar Energy Plc, India’s second-largest non-state refiner, plans to raise about $500 million though the sale of convertible bonds, two people with direct knowledge of the transaction said.

State Bank

Average Indian dollar bond yields dropped to 5.10 percent from a four-month high of 5.22 percent last month, HSBC Holdings Plc indexes show. That compares with five-year funding costs in rupees for top-rated borrowers of 9.05 percent, according to the Fixed Income Money Market and Derivatives Association of India, or FIMMDA.

State Bank of India, the country’s largest lender, raised its base lending rate 50 basis points to 8 percent on Jan. 3.

Mumbai-based State Bank is also the lead arranger for Usha Martin’s loans, which will have maturities of five and seven years, according to the Kolkata-based company.

The cost of protecting the debt of government-owned State Bank, which some investors perceive as a proxy for the nation, has risen 19 basis points this year to 179 basis points on Jan. 14. That’s 60 points below last year’s peak on May 25.

Credit swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to debt agreements. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

Subbarao View

Elsewhere in Indian markets, the rupee fell for a third day, the longest stretch since November, as gold traders bought dollars. The currency traded 0.4 percent lower at 45.52 per dollar yesterday, according to data compiled by Bloomberg. It earlier touched 45.645, the lowest since Jan. 11.

“There was dollar demand from gold traders,” said Paresh Nayar, Mumbai-based head of currency and money markets at the Indian unit of FirstRand Ltd.

Central bank Governor Duvvuri Subbarao yesterday said inflation has caught up with India “sooner than other countries.” Speaking at an event in Mumbai, he pointed out a “surge” in inflation, and said the bank must balance price risks with supporting the economic recovery.

The wholesale-price index increased 8.43 percent last month from a year earlier, according to the commerce ministry on Jan. 14. The gauge gained 7.48 percent in November.

India’s government bonds dropped for a second day on speculation an increase in the retail price of gasoline will accelerate inflation. India’s three-year government bond yield of 7.76 percent compares with 12.8 percent in Brazil, 3.26 percent in China and 7.2 percent in Russia.

The yield on the most-traded 8.13 percent bond due September 2022 climbed two basis points to 8.21 percent yesterday, according to the central bank’s trading system.

“Both local liquidity and rates are tight,” said Ajay Mahajan, managing director at the Indian unit of UBS AG. “So the propensity to raise money offshore will be very high at the moment.”

Tata Consultancy Posts Record Profit on Software Orders

Tata Consultancy Services Ltd., India’s largest software exporter, reported record third-quarter profit after winning orders from Deutsche Bank AG and Hilton Worldwide Inc.

Net income rose 30 percent to 23.7 billion rupees ($520 million) in the three months ended Dec. 31, from 18.2 billion rupees a year earlier, Tata Consultancy said in a statement yesterday. The average of 31 analysts’ estimates compiled by Bloomberg was for a profit of 21.9 billion rupees. The earnings are based on Indian accounting standards.

The Mumbai-based company, which provides computer services and back office support to clients including Citigroup Inc. and General Electric Co., boosted revenue 26 percent in the past three months on higher demand. Tata Consultancy joins Accenture Plc, the world’s second-largest technology-consulting firm, in signaling corporations are boosting spending on software services and advisory businesses.

“The macro environment is quite conducive for Indian IT players,” said Rahul Jain, an analyst with Dolat Capital Market Ltd. in Mumbai. “We largely remain optimistic and bullish on the IT sector.” Jain has an “accumulate” rating on Tata Consultancy shares.

Tata Consultancy gained 1.5 percent to 1,137.4 rupees in Mumbai yesterday, compared with a 0.1 percent advance by the benchmark Sensitive Index, or Sensex. The stock advanced 55 percent last year, outperforming the Sensex’s 17 percent rise. Infosys Technologies Ltd., India’s second-largest software company, gained 32 percent in 2010.

Strong Demand

“Demand environment continues to be strong,” said N. Chandrasekaran, chief executive officer of Tata Consultancy, in the statement. “We are optimistic that demand for our solutions will continue to be strong going forward.”

The company added 35 clients during the quarter, according to the statement. It won a multiyear information technology consulting contract from Hilton and a software implementation project from Deutsche Bank.

Worldwide spending on IT outsourcing by businesses and governments will grow 7.1 percent this year to $254 billion, after increasing 2.8 percent last year, Forrester Research Inc. said in a Jan. 10 report.

U.S. businesses and government will lead the growth, spending an estimated $101 billion on IT outsourcing this year, according to a Dec. 14 report from the Cambridge, Massachusetts- based researcher. Spending in the country will outpace gross domestic product growth as companies make up for orders delayed during the recession and replace older systems, Forrester said.

Economists surveyed by Bloomberg last month said U.S. GDP will expand 2.6 percent in 2011.

Revenue Gains

Tata Consultancy’s revenue in the quarter rose to 96.6 billion rupees, from 76.5 billion rupees a year earlier. That compared with the 96 billion rupees average of 46 analyst estimates compiled by Bloomberg.

Profit was also boosted by a foreign exchange gain of 521.6 million rupees, compared with a currency loss of 354.7 million rupees in the year earlier period, the company said.

The Indian rupee averaged 44.8574 against the U.S. dollar in the last quarter, 3.8 percent stronger than the 46.6453 a year before. Tata Consultancy uses foreign currency forwards and options contracts to hedge for currency risk, the company said in its annual report in April.

The company expects the rupee to average 45.07 per dollar in the current quarter, Chief Financial Officer S. Mahalingam told reporters yesterday.

Infosys’ Profit

Last week, Infosys posted a third-quarter profit that missed analysts’ estimates and Chief Executive Officer S. Gopalakrishnan said weaker economic recovery in developed markets, high unemployment and the risk of sovereign defaults may undermine industry growth.

Tata Consultancy added a net 12,497 employees during the quarter, for a total of 186,914, according to the statement. The company has exceeded its hiring target set for the fiscal year because of business demand, according to the statement.

Workers left Tata Consultancy at a rate of 14.4 percent in the third quarter. The company plans to hire as many as 15,000 employees in the fourth quarter.

The software exporter derived 55 percent of its revenue from companies in North America, 15 percent from the U.K., and 8.9 percent from continental Europe last year.

Sunday, January 16, 2011

Asian Stocks Rise, Extending Fifth Weekly Gain, on JP Morgan Profit, Yen

Asia stocks rose, extending a fifth straight weekly advance, after JPMorgan Chase & Co. reported record profit and the yen weakened to its lowest level in a month against the euro, boosting the outlook for export earnings.

Canon Inc., a Japanese camera maker that gets about 80 percent of its revenue abroad, increased 0.6 percent in Tokyo. Honda Motor Co., Japan’s No. 2 carmaker by market value, gained 0.5 percent. Samsung Electronics Co., the world’s largest maker of televisions, climbed 1.6 percent in Seoul. Gold producers declined in Sydney after the price of the precious metal slumped 1.9 percent on Jan. 14.

“Expectations about the U.S. economic recovery are rising, and market sentiment is looking up,” said Koichiro Nishio, a market analyst in Tokyo at Nikko Cordial Securities Inc. “This is also leading to improved expectations about Japanese company earnings.”

The MSCI Asia Pacific Index was little changed at 138.87 as of 10:37 a.m. in Tokyo, with three stocks advancing for every two that fell. The regional benchmark index climbed to a two- and-a-half year high last week after German Chancellor Angela Merkel said she was ready to take necessary steps to stem Europe’s sovereign debt crisis.

Japan’s Nikkei 225 Stock Average gained 0.4 percent in Tokyo and South Korea’s Kospi Index was little changed. In Sydney, Australia’s S&P/ASX 200 Index lost 0.4 percent, while New Zealand’s NZX 50 Index dropped 0.3 percent.

Futures on the Standard & Poor’s 500 Index slipped 0.1 percent today. The index increased 0.7 percent on Jan. 14 after JPMorgan’s profit overshadowed lower-than-forecast consumer confidence and retail sales. The previous day, Intel Corp. forecast sales that may exceed analyst estimates.

JPMorgan, Currency

JPMorgan, the second-biggest U.S. bank by assets, reported a quarterly profit of $4.83 billion. The bank is “hopeful” it can raise its dividend and buy back shares, Chief Financial Officer Douglas Braunstein said.

Canon increased 0.6 percent to 4,210 yen in Tokyo. Honda Motor Co., Japan’s second-largest automaker, gained 0.5 percent to 3,360 yen. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, added 0.3 percent to 2,950 yen.

The yen depreciated to as low as 111.12 against the euro, its weakest level in a month, boosting the value of European income at Japanese companies when converted into their home currency.

Samsung climbed 1.6 percent to 948,000 won in Seoul. LG Electronics Inc., the world’s third-largest mobile-phone maker, rose 1.3 percent to 115,500 won.

Estimated Earnings

The MSCI Asia Pacific Index rose 14.3 percent last year, compared with gains of 12.8 percent by the S&P 500 and 8.6 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 14.2 times estimated earnings on average at the last close, compared with 13.6 times for the S&P 500 and 11.2 times for the Stoxx 600.

Newcrest Mining Ltd., Australia’s largest gold producer, dropped 1.3 percent to A$37.78 in Sydney after gold futures for February delivery fell 1.9 percent on Jan. 14 to settle at $1,360.50 an ounce on the Comex in New York, the lowest closing price since Nov. 22.

Rival Avoca Resources Ltd. lost 2.7 percent to A$3.26 and St. Barbara Ltd. retreated 2.5 percent to A$1.935.

India’s petrol prices increase by 4.5%

India’s state-run fuel retailers have increased petrol prices by about 4.5 per cent, the second rise in a month, in a move that will add to the pressure on Asia’s third-largest economy as it struggles to fight record high inflation.

Sunday’s move comes on the back of soaring global crude oil prices, highlighting economists’ concerns that the rapid increase in commodity prices. is hitting the broader economy.

Indian Oil Corp, the country’s biggest retailer, is to raise prices by about Rs2.50 (five US cents) a litre, and Bharat Petroleum Corp and Hindustan Petroleum Corp plan increases of Rs2.53 a litre and Rs2.54 respectively. In late December they lifted prices by about 5.5 per cent.

Opposition parties criticised the government for allowing increases when millions of people were struggling to buy basic food products to survive.

The rightwing Hindu nationalist opposition Bharatiya Janata party demanded an immediate rollback of the measure. “This hike is totally unjustified. This is nothing but loot of the common man by the government,” said the BJP’s spokesperson.

Although state-run fuel retailers have been free to set their own prices since June, when India decided to end state control over prices and allow them to move freely with global markets, any increase is still informally approved by central government.

The latest rise will hurt millions of poor Indians who have been struggling to make ends meet in recent months amid spiralling food prices and strengthen expectations that the Reserve Bank will lift lending rates later this month to tame inflation.

“We expect the RBI to hike policy rates by 25 basis points in the January 25 policy meeting and by a cumulative 100 basis points in calendar year 2011,” said Tushar Poddar, chief India economist at Goldman Sachs.

India’s wholesale price index, the country’s main inflation indicator, rose 8.43 per cent year-on-year in December compared with 7.48 per cent in November.

However, the cost of food rose by as much as 18 per cent in the last month of 2010 and there are few signs it will abate in the coming weeks, say economists.

“Over the last four weeks, vegetable prices have spiked up to 70.7 per cent year-on-year as of the week ended January 1,” said Chetan Ahya, economist at Morgan Stanley. “The spike has been extreme in vegetables, including onions, tomatoes, eggplant, cauliflower and cabbage.”

New Delhi pressed over IFRS

India could delay an overhaul of its accounting rules – designed to deepen its ties with the world economy – following opposition from Indian businesses.

It is also under pressure to ditch plans to deviate from international norms in some of the new rules, amid fears this would impede efforts to create a coherent global standard for financial reporting.

The planned rule changes were supposed to bring India’s accounting system into line with the International Financial Reporting Standards followed in the European Union and other countries.

The Indian government had envisaged a phased transition from April.

However, the Federation of Indian Chambers of Commerce and Industry, one of the country’s most powerful business lobbies, recently asked for the implementation date to be deferred, arguing that the timing was “highly unworkable and unfair”.

Following intense lobbying, the government could agree to such a delay, according to a senior official at the corporate affairs ministry, which is overseeing the changes.

“There is a very real possibility that the implementation of the IFRS will be pushed back to 2012,” the official said.

While the finalised rules have not yet been published, they are expected to differ from IFRS in several areas, including agriculture and revenue recognition for property developers.

This has alarmed the International Accounting Standards Board, which sets IFRS.

It is asking India to follow the example of Brazil and South Korea in adopting the IFRS system in its entirety.

Sir David Tweedie, IASB chairman, could publicly disown the new Indian standards if the tweaks go ahead, according to a person familiar with the situation.

Ruth Picker, global IFRS head at Ernst & Young, said: “If an Indian company wants to say that its financial statements are in accordance with IFRS, then it needs to comply with IFRS as issued by the IASB.”

Jamil Khatri, head of IFRS at the Indian arm of KPMG, said the goal of making Indian accounts more familiar to foreigners might not be achieved “if the government implements only 60-70 per cent of IFRS”.

The IASB and the corporate affairs ministry declined to comment.

The senior ministry official said: “The divergences are very small and they don’t pose any serious threat to the IFRS model.”

The coherence of IFRS implementation is a sensitive topic because the IASB is trying to woo the US into adopting IFRS in place of its GAAP system.

A decision is due this year.

The G20 group of nations has called for the development of a single, high-quality set of global accounting standards in the wake of the financial crisis.