New Delhi: As price increases take a back seat, makers of personal and home care products are expected to post modest growth in both sales and net profit for the quarter ended June.

During the quarter, most companies cut prices in a move expected to hit their sales and profitability.

Also See Growth Curve (Graphics)

To minimize the impact, they relied on cost-management strategies such as tinkering with product size or weight, change in the product mix and better supply chain and distribution efforts to plug inefficiencies.

A Mint survey of five brokerages—India Infoline Ltd, DSP Merrill Lynch Ltd, ICICI Securities Ltd, Angel Broking Ltd and Citigroup Global Markets India Pvt. Ltd—shows that such efforts will help consumer products companies post decent results, but the growth will not be as impressive as it had been in the past several quarters.

Price cuts to boost demand will affect the value led growth most companies saw in 2008 say analysts

Arguing that the impressive growth seen in previous quarters was because of steep price increases, a report by India Infoline says: “With the impact of year-on-year price increases tapering off in many categories, most companies are likely to report a moderation in revenue growth in first quarter of 2009-10.”

Because of a consistent rise in commodity prices and the rising inflation, most consumer goods companies had increased the prices of their products in 2008. This had helped them boost profitability.

But with the decline in inflation and commodity prices, most companies had to cut prices. Besides, the slowdown in the economy also hit consumer demand and price cuts were used by most companies to induce demand. These efforts will affect the value-led growth most companies saw in 2008, brokerage analysts say.

Sales and profit growth could be in a wide range. Top companies in the sector, including Hindustan Unilever Ltd (HUL), ITC Ltd, Britannia Industries Ltd, Nestle India Ltd, Dabur India Ltd, Marico Industries Ltd, Godrej Consumer Products Ltd (GCPL) and GlaxoSmithKline Consumer Healthcare India Ltd (GSKCH), are likely to see their sales and profits grow by 3% to 24.5% and 6.9% to 59%, respectively, the brokerages say.

A report by ICICI Securities says that the impact of price cuts is likely to get partly offset by the decline in commodity prices and some incentives announced by the government. This is expected to aid margin expansion.

“With softening of commodity prices and benefits of lower excise, we expect operating profit margin for the FMCG (fast moving consumer goods) universe to expand in Q1FY10. Hence, operating profit growth of 21.5% year-on-year would be much higher than sales growth.”

The report, however, adds that the quantum of margin expansion will vary across companies.

Analysts say the trend of price cuts and companies’ efforts to expand their volumes and market share are likely to continue over the next few quarters.

“Going ahead, most companies are likely to resort to three alternatives—enhance margins by maintaining prices, increase promotional activity and advertising spends while maintaining the price levels or resort to price cuts,” says a report by Angel Broking.

Low prices apart, rural demand is expected to boost volumes, say analysts.

While the sector is seeing volume growth of only 6-7% in the metros, in the rural markets sales are growing by at least 20%.

According to Merrill Lynch, the fastest growing companies in June quarter will be Godrej, Nestle and Colgate.

“We forecast June quarter profit growth of 19% led by sales growth. This is marginally better than the 17% profit growth in March quarter. The improvement is led by Nestle (higher margin), ITC (higher cigarettes margins, strong growth in paper and reduced FMCG losses), Asian Paints (improved volume and margins) and Godrej (margin expansion),” Merrill Lynch says in a report.

According to India Infoline, sector leader HUL is likely to report a recovery in volume growth, but decline in exports is likely to have dragged down overall sales growth.

ITC is expected to report growth in cigarette sales by volume after at least seven quarters of decline, owing to a favourable base and the absence of an excise duty increase this year.

According to estimates by Merrill Lynch, Godrej is expected to post an impressive 59% profit growth during the quarter on sharp margin expansion on lower input costs. Nestle is expected to post 19% sales growth and expand margins as costs remain benign for key materials such as coffee, wheat and vegetable oils.

The first visit of Hillary Clinton as the US secretary of state to India, within the first six months of the Obama administration, is being considered significant for several reasons. First, it is the clearest indication that the new US administration is committed to building and expanding on the relationship established by the previous administrations, especially the Bush administration. Second, given Clinton’s own political gravitas in the US—her presidential run and her reputation as an avid supporter and friend of India (evident in her role as co-chair of the India caucus and her charm offensive in Mumbai)—this messenger is as important as the message she brings. Third, even her itinerary, which deliberately (if somewhat inconveniently and artificially) leaves out Pakistan, is perhaps reflective of the efforts being made by the US to de-hyphenate the relationship and focus on India alone. Clearly, this administration is determined to “reset” US India relations at a higher plane.

Although the Clinton visit is certainly significant, it is important to bear in mind that she is not the only person driving the dramatic policy shift; she is merely trying to coordinate it. In fact, she is not the first senior member of the Obama administration to visit India. Indeed, she is also not the second, but only the third. Leon Panetta made history of sorts when he became the first Central Intelligence Agency chief to inaugurate his foreign travel with a visit to India soon after his confirmation in March. Similarly, national security adviser general (retd) Jim Jones also travelled to India after visiting Afghanistan and Pakistan in June and met not only national security adviser M.K. Narayanan, but also Prime Minister Manmohan Singh and defence minister A.K. Antony. In fact, it was Jones who delivered the formal invitation to Singh to visit Washington DC in October. Jones also discussed Iran, Afghanistan-Pakistan (Af-Pak) and, importantly, military-to-military cooperation.

The Jones visit, which went practically unnoticed in India, is particularly crucial for at least a couple of reasons: Jones, who has never been described as a “Democrat” and could easily have been in a McCain administration, is considered to be bipartisan, commanding the respect of both parties as well as the US military. Moreover, he interacts with US President Barack Obama on an almost daily basis and his advice carries a lot of weight, while other cabinet members (including Clinton) meet the President more infrequently. The Clinton trip is likely to build on these earlier and equally important visits.

First of all, we would like to express our gratitude to you for sending in a question that we’ve always wanted to answer, giving us (and our readers) a respite from thinking about the recent economic upheaval. Amen to that.

And now, back to business and a question of our own: How do you feel about the prospect of putting on a perky face and a big voice and trying to chitchat and “ho, ho, ho” your way into your team’s heart?

Panicked? Depressed? A little of both?

Or do you simply feel worried, knowing how much people generally dislike phonies? If so, we’re with you. Competence and vision are all well and good—and congratulations on having those qualities—but the inescapable fact is that authenticity matters too. And if you take your boss’ recent advice, you’ll no doubt be quashing your own.

Except—and this is a big “except”—you have no choice. Your boss is trying to help you, and he’s right. Over time, many introverts stagnate in large organizations. They can work hard, deliver to expectations or even beyond, but rarely seem to get their due.

Note that we’re talking about big companies. Almost anyone with a great idea can soar at a start-up, and small companies often give individuals more latitude to be themselves as long as the results are there. But in a big, bureaucratic enterprise, atmospheric conditions give extroverts a marked advantage.

The reasons are myriad. Big companies are constantly looking for people to move across divisions or around the world, and extroverts, by right or not, simply appear more prepared for such opportunities. With their charisma and superior verbal skills, they’re thought to be more “out front”, able to communicate powerfully and motivate their people, especially during tough times. Extroverts also tend to make relationships with more ease—another boon in gummy environments. And finally, extroverts tend to outshine introverts in large companies because early on their outsized personalities earn them opportunities to make presentations to higher-ups, which is always a good way to accelerate the career-changing process of getting out of the pile.

Indeed, big companies are so oriented towards extroverts that introverts who stay within them often experience dynamism not unlike the one experienced by many women and minorities in a corporate environment. They have to constantly over-deliver just to stay even.

There are, of course, exceptions. Everyone can tell the story of a reserved, shy, anti-social or otherwise introverted individual who has risen through the ranks to run something big. But in every such case we know of, the introvert has something special going on, such as a brilliant, anticipatory mind for technology and its trends, an uncommon understanding of emerging markets or a unique ability to critique deals. These savants become so indispensable to their companies’ competitive success that they move upward in the ranks. Despite their differences, their value virtually demands it. Indeed, that’s why many introverts who end up in senior management positions are often the brains of their organizations, while someone else runs operations.

Now, it could very well be that you are one of those rare introverts whose competency will eventually carry the day, and you can just keep acting naturally. But if that’s not the case, we’re back to where we started. If you want to take charge of your career in your current company, you’ve gotten not just your marching orders, but sound mentoring advice. Start getting out there, mixing it up, speaking more often and connecting more routinely with your team and others in the organization while deploying all the positive energy and personality you can muster.

Will your team notice and recoil? Possibly. Remember, they’re on phoney alert. Our suggestion, though, is to go right ahead and tell them what you’re doing, which is really just trying to bring more of your inner self to the office so you can work together effectively. You might even ask for their feedback. You’d be better off to seek it. Ultimately, any and all candour you can bring to your public transformation will hold you in good stead.

The current global financial crisis, probably the worst since the international economic depression of the 1920s, has brought several financial giants to insolvency. Panic-stricken lenders and investors have called in their cash, leaving companies cash-starved, with almost no means of getting refinancing on acceptable terms—and this has further resulted in repayment defaults. While less severe in India, repayment defaults are also becoming a cause of concern for financiers here.

Typically, a lender ensures repayment of debt by creating a security in its favour on the borrower’s assets. This allows a lender to have direct recourse for recovering a debt by liquidating the borrower’s assets, rather than filing contentious recovery claims. It is a settled position that a lender whose security interest is registered—in other words, a secured lender—gets priority in recovery of dues over a lender with an unregistered security interest. However, as an exception to this general rule, amounts owed to the state treasury, such as property taxes or excise dues, may in certain situations get priority over the dues of secured lenders.

Under Indian law, if state dues have been secured through a first charge created specifically by a statute, such dues are paid out first and only then are the balance proceeds used to pay secured creditors (except in cases of winding up). It is, therefore, important for banks and financial institutions to recognize the priority accorded to state dues.

A case at hand is the recent Supreme Court decision in Central Bank of India v. State of Kerala (27 February). In this case, on the borrower’s default, the lender obtained a decree for sale of the borrower’s assets from the debt recovery tribunal. However, before the decree could be executed, the local tax authority attached the borrower’s assets and issued notices for auction to recover the outstanding sales tax dues. The lender challenged the auction notices on the ground that its dues as a secured creditor should get priority over the sales tax dues of the state. The Supreme Court remained unimpressed with the lender’s challenge and held that sales tax dues of the state would get priority in payment, since the Kerala General Sales Tax Act, 1963, contained a clause creating a first charge in favour of the state on sales tax dues. Significantly, the court observed that though the Banks and Financial Institutions Act, 1993, and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002, were enacted with the aim of ensuring expeditious recovery of dues by lenders, these statutes did not create a charge in favour of lenders or give priority to the dues of any lenders with relation to the state. Thus, one would have to analyse the relevant statute (including state-specific statutes) in every case to determine if state dues would get priority.

Mumbai / Bangalore: The cost of bank loans for firms engaged in the business of hotels and hospitality may decline, with the Reserve Bank of India (RBI) proposing to keep such loans out of what is considered to be banks’ commercial real estate (CRE) exposure.

According to 7 July draft guidelines released by RBI, bank loans to entrepreneurs for acquiring real estate for their business would not be classified as CRE exposure. The central bank had sought comments and suggestions from banks on the proposed guidelines by 16 July.

Currently, bank loans to companies for acquiring real estate for hotels and hospitality are treated as CRE exposure and attract a risk weight of 100%. Depending on the risk weight, banks are required to set aside capital for loans.

Under RBI norms, banks’ capital-adequacy ratio, a measure of financial strength expressed as the ratio of capital to risk-weighed assets, is 9%. This means that for loans carrying 100% risk weight, banks need to set aside Rs9 worth of capital for every Rs100 they lend.

If these projects are not treated as CRE, their risk weights would vary according to the ratings of the borrower or the ratings of the project for which the loan would be given.

For instance, if a firm has an AAA rating, the loan would attract a risk weight of 20%. The risk weight could go up to 50% for an A-rated company.

For 20% risk weight, banks would be required to set aside Rs1.8 worth of capital for every Rs100 loan; and for 50% risk weight, the capital requirement will be Rs4.5.

Lower capital requirement brings down the cost of funds for banks and makes loans cheaper for the borrowers. According to bankers, the rate may come down by 100-200 basis points. One basis point is one-hundredth of a percentage point.

“The new guidelines, if implemented, will benefit companies in the business of hotels and hospitality that are currently classified under CRE,” said Rajesh Shah, senior vice-president (credit), Axis Bank Ltd, India’s third largest private bank. “Indian Hotels Ltd, East India Hotels Ltd and ITC Ltd, which have good ratings, will be able to take advantage of Basel II norms.”

The rating-based capital requirement rules are being implemented under international capital norms known as Basel II. Under Basel I, all risk weights were 100%. But Basel II, being implemented by Indian banks, starting 1 April, encourages banks to rate their loans and set aside capital accordingly. Commercial real estate exposure, however, never falls below 100% risk weight.

While exposure to best rated firms could free up capital for banks as the capital-adequacy requirement would go down, under Basel II, they would need to set aside additional capital to take care of operational risks.

“Loans extended for construction of a cinema theatre, establishment of an amusement park, hotels, and hospitals, cold storage, educational institutions, restaurants, etc., to those entrepreneurs who themselves run these ventures would not be classified as CRE exposure,” RBI’s draft guidelines said.

In the case of a hotel, it said, the cash flows would be mainly sensitive to the factors influencing the flow of tourism, not directly to the fluctuations in real estate prices.

Under the guidelines, only those loans will be considered as CRE exposure where the lending is collateralized by mortgages on commercial real estate such as office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, industrial or warehouse space and hotels, and where the prospects for repayment depend on the income generated by the asset. However, even on these loans, if the repayment depends on the borrower’s operating profit or the quality of goods and services, the exposure may not be classified as CRE.

Besides, banks’ investments in mutual funds, private equity funds and venture capital funds that park money in real estate companies would be classified as CRE exposure.

Though such exposure would not be directly linked to the creation or acquisition of CRE, the repayment from such investments would essentially come from the cash flows generated by commercial real estate.

The proposed guidelines aim at bringing clarity in the classification of banks’ CRE exposure and help banks in differentiating certain kinds of infrastructure lending.

All special economic zone (SEZ) funding is currently classified as infrastructure lending, but RBI has proposed that loans disbursed for purchase of land for setting up and developing SEZs would be classified as CRE exposure. Such loans, however, would carry all concessions available for infrastructure lending.

Banks prefer a project to be classified under infrastructure lending because the risk weight of an AAA-rated infrastructure project is only 20%.

“Banks have an internal cap on how much they can invest in infrastructure projects and how much they can invest in CRE projects. Now we will have to consider which project falls into what category,” said an executive director of a Mumbai-based bank who didn’t want to be identified.

Param Desai, a research analyst with Mumbai-based brokerage Angel Broking Ltd, said, “These guidelines, if implemented, will make it easier for borrowers to get construction finance for a larger variety of projects. Construction finance has been a major concern for most developers during the downturn because most banks are cagey to lend to projects, unless they have a definite action plan and deadline to finish.”

The June quarter results of Colgate Palmolive (India) Ltd saw a sales growth of 15% while net profit, at Rs102.78 crore, was up 43% compared with the year-ago period. Profit before tax rose to Rs125 crore, an increase of Rs33.7 crore from the year-ago period. Of this increase, Rs5.5 crore was accounted for by a rise in “other income”, but the bigger reason was a Rs11 crore decline in advertising and sales promotion expenses. Had advertising expenditure remained at the year-ago level, the increase in profit before tax would have been 25%.

The growth in net sales is slightly lower than the 16.4% year-on-year (y-o-y) notched up during the March quarter, but the net profit growth is higher than the March quarter’s 38.6%. Volume growth was the main driver of revenue, rising by 12% y-o-y.

The trend of lower advertising expenditure was seen even in the March quarter, with a 4% decline y-o-y. In the June quarter, the decline has been a huge 16%. As a percentage of sales, advertising expenses fell from 17% of sales in the June 2008 quarter to a mere 12.5% of sales in the June 2009 quarter. The upshot is that operating margins have widened considerably by 557 basis points to 22.5%. One basis point is one-hundredth of a percentage point.

But the lower advertising expenditure doesn’t seem to have affected sales growth. The company’s share in the toothpaste market has increased to 52.3% by volume. Analysts say that a less intense competitive scenario has helped reduce advertising spending.

The company’s extremely high return on equity, free cash flow and negative working capital and its position as a defensive stock par excellence has led to high valuations, with its current price of Rs644 at between 23 and 26 times fiscal year 2010 earnings, according to various earnings estimates. The stock has easily outperformed the Bombay Stock Exchange’s FMCG Index this year and should continue to do so, given its low dependence on the progress of the monsoon and the fact that 65% of its sales are urban. The stock’s valuation, though, caps its upside.

The first day of trading after an initial public offering (IPO) is much like the first day for a horse at a race. You eagerly wait to see your horse run like the wind. But things may not turn out as expected. Even the IPOs of well-known companies may lose steam on the very first day of trading. It is true that in the long run, companies that have good potential eventually make a comeback. But falling prices of shares immediately after listing make even the most optimistic bull look like a jittery mouse.

Johnny: So the initial few days after the listing are very crucial for an IPO. Is there any way to ensure that the prices do not fall below the offer price immediately after listing?

Jinny: Well, many companies use what is called a “greenshoe option”. Although a greenshoe option in itself can’t put life into a dead IPO, it can be a very useful tool for stabilizing prices immediately after the listing of shares.

Johnny: Can you elaborate on what exactly a greenshoe option is?

Jinny: A greenshoe option is a well-known term in the world of stock markets. In legal parlance, it is also known as an “over-allotment option”. As you may be aware, in a public offering a company sells its shares to investors, which get listed on a stock exchange for subsequent trading. Green Shoe Co., an American company, was the first to use this kind of option in their public offering, hence the name greenshoe option. This option gives the issuer company a right to sell more shares to investors than originally planned in their public offering if the demand situation requires such an action after the listing. The greenshoe option can greatly help in stabilizing the prices after listing. For public offerings in the Indian stock market, a company interested in using the greenshoe option has to follow the guidelines prescribed by the Securities and Exchange Board of India (Sebi), the stock market regulator. As per Sebi, the size of excess allotment or the greenshoe option shall not exceed 15% of the total issue size.

Johnny: You have whetted my appetite by giving an overview, but now you have to tell me how the mechanism of a greenshoe option actually works.

Jinny: A company wanting to use a greenshoe option has to first and foremost appoint a “stabilizing agent” by entering into an agreement with one of its merchant bankers managing the public offering. A stabilizing agent plays a crucial role in the working of a greenshoe option. In fact, it is the stabilizing agent that is in the driver’s seat during the stabilization period. For his services, a stabilizing agent earns a fee from the company. According to Sebi guidelines, the stabilization period shall not exceed 30 days from the date when trading permission was given by the stock exchanges.

Johnny: Thirty days may not seem very long, but they are very crucial for newly listed shares. But what does the stabilizing agent do during the stabilization period?

Jinny: As I said earlier, the entire process of a greenshoe option works on over-allotment of shares. Say, for instance, that a company is planning to issue only 100,000 shares, but in order to utilize the greenshoe option, it actually issues 115,000 shares, in which case the over-allotment would be 15,000 shares. The company does not issue any new shares for the over-allotment.

The 15,000 shares used for the over-allotment are actually borrowed from the pre-issue existing shareholders and promoters with whom the stabilizing agent enters into a separate agreement. For the subscribers of a public issue, it makes no difference whether the company is allotting shares out of the freshly issued 100,000 shares or from the 15,000 shares borrowed from the promoters. Once allotted, a share is just a share for an investor.

For the company, however, the situation is totally different. The money received from the over-allotment is required to be kept in a separate bank account. The main job of the stabilizing agent begins only after trading in the share starts at the stock exchanges. In case the shares are trading at a price lower than the offer price, the stabilizing agent starts buying the shares by using the money lying in the separate bank account. In this manner, by buying the shares when others are selling, the stabilizing agent tries to put the brakes on falling prices. The shares so bought from the market are handed over to the promoters from whom they were borrowed. In case the newly listed shares start trading at a price higher than the offer price, the stabilizing agent does not buy any shares.

Then how would he return the shares? At this point, the company by exercising the greenshoe option issues new shares to the stabilizing agent, which are in turn handed over to the promoters from whom the shares were borrowed.

Johnny: Thanks, Jinny. The greenshoe option can be of great help in avoiding listing blues.

What: The greenshoe option is a useful tool for stabilizing the prices of shares immediately after listing.

How: The issuer company issues more shares than originally planned; these are subsequently bought back after the listing if shares trade at a price lower than the offer price.

How much: The size of the excess allotment shall not exceed 15% of the issue size.

Which investments are most likely to perform best in a bull market?

Many investors have turned bullish in recent months, and, based on the stock mutual funds they're choosing, they evidently think they know the answer. Since 1 January, nearly $30 billion (Rs1.4 trillion) of net new money has poured into funds that invest in speculative emerging-market stocks. In that same period, investors have pulled money out of stock funds focused on the US market and developed foreign markets.

At first blush, moving money into emerging markets may seem a smart bet. Since stocks began to rebound in early March, the MSCI Emerging Markets Index has soared 63%, compared with a 39% climb for the Standard and Poor's (S&P) 500 index of US shares.

There's just one problem: History shows that asset classes that perform best in one bull market—as emerging-market stocks did in the run-up from 2003 to 2007—rarely repeat that feat in the next. For example, the foreign stock boom of the late 1980s gave way, after a brief bear market in 1990, to big gains in financial stocks in the early 1990s and then to the surge in technology stocks in the middle to late part of the decade.

Of course, nothing is certain in investing. And emerging-market stocks could wind up bucking historical patterns. Still, market watchers say it's dangerous to base an investment strategy for an extended bull run on early-stage results. In fact, stocks’ behaviour in the first two-five months after a bear market can be quite deceiving. That's because a pattern tends to emerge when the market transitions from bull to bear back to bull again.

James B. Stack, editor of the InvesTech Market Analyst newsletter, notes that the stocks that tend to lose the most in a bear market are the best performers in the previous bull market. “But then, coming out of those downturns, very often you’ll see those same sectors regain their leadership status,” simply because they fell the most, Stack said. “...will that continue? In many cases, it will not.”

Consider the last bull-to-bear-to-bull transition. Technology shares were the market’s darlings in the late 1990s, during the Internet stock bubble. But after crashing the hardest in the bear market of 2000 to 2002, technology shares looked as if they would pick up where they left off. In October and November 2002, technology stocks far outpaced the market overall. Technology shares in the S&P 500 gained nearly 43% in less than two months, while the index itself rose a more modest 15%. Yet, the technology resurgence proved to be short-lived, as the sector lagged behind the broad market through much of the bull-market period of 2004 to 2006. “Due to their bear market losses, technology stocks had an easy time rebounding,” Stack noted. “The problem is, moving forward, considerations like valuation take over. And that's likely what we'll see in this market.”

Already, market strategists are becoming concerned that the emerging-market rally that began in March has gotten ahead of the fundamentals. The MSCI Emerging Markets Index, for example, trades at a price-earnings (P-E) multiple of 16.1, which is 25% higher than its average P-E over the last five years. “I don't think you want to be joining the emerging-markets bandwagon right now,” said Sam Stovall, chief investment strategist at S&P “They're trading at valuations that aren't cheap anymore.”

So, if emerging markets aren't likely to provide the best returns, which sectors will? The answer will depend largely on what type of recovery is ahead, said Gordon B. Fowler Jr., chief investment officer at Glenmede, an investment firm in Philadelphia. For example, if a speedy economic rebound is in store, a bet on economically sensitive investments—such as financial shares and emerging-market stocks—could make sense.

But on the other hand, Fowler said, if you believe that even after a recovery “the economy will be weak over a sustained period of time and is not going to be driven by American consumption, then I think that leads you to a different group of companies—good growth companies with solid balance sheets”. And that search would lead investors to two asset classes that led the bull market of the late 1990s: large blue-chip growth stocks, which Fowler says are at reasonably attractive prices, and technology shares, which stand to benefit whether a global recovery is weak or strong.

Fowler points out that “after the last downturn, technology companies got religion and repaired their balance sheets”. In fact, technology firms in the S&P 500 now hold more cash relative to their overall assets than any other sector in the market. Stovall agrees that technology is likely to be one of the best performers of the next bull market.

Historically, he notes, the stocks that fare best in a new bull market are found in economically cyclical areas, which would lead investors to the technology, financial services and consumer discretionary sectors. But given the continuing uncertainty about the health of financial firms and consumer spending in general, Stovall says technology is likely to be the best bet.

Paul J. Lim is a senior editor at Money Magazine.

—Parth

You can cover your mobile phone under the “all risk” category of the householder’s policy or take a separate policy. The cover available under both is nearly the same. These policies provide a cover for a mobile phone against the risk of fire, theft, riots and strikes, malicious acts and accidents. The policy does not cover normal wear and tear, electrical breakdown and damage due to a deliberate act on the part of the insured. The compensation is equivalent to the cost of replacement of the instrument with a new instrument of the same specification, subject to the sum insured.

—Mayank Tyagi

A health insurance policy is taken to protect the insured from unforeseen medical exigencies. Therefore, pre-existing diseases are usually not covered in the year the policy is first bought.

Initially, the insurer doesn’t even entertain claims for sickness or disease within 30 days of the commencement of the policy. However, if the policy is renewed regularly for a couple of years, most insurers, including National Insurance, start giving cover for pre-existing diseases too.

—Sri Jaiswal

A comprehensive car insurance policy covers any loss or damage caused to the vehicle due to an accident or any other external damage. The coverage is very wide and includes loss due to fire, explosion, riots, strikes, malicious acts, theft, flood, earthquake, legal protection for death or injury claims from third parties and damage to third party property.

In addition to this, you can get personal accident cover for owner/driver, paid drivers and passengers by paying extra premium.

A car insurance policy has some standard exclusion clauses. Mechanical and electrical breakdown, normal wear and tear and depreciation are not covered under the policy. Damage caused by a person driving the car without a valid licence, or under the influence of alcohol or drugs is also not covered. There is also a “copayment clause” under which you bear a portion of the claim, which means a lower premium for you.

—015Balbir Singh

A householder’s policy has two sections. The first one provides insurance cover for the structure and the second, for household goods. You can buy separate policies—one to cover the structure and the other to cover the contents. You can also buy a common policy covering both. A householder’s policy can be bought for a building only when it is used for residential purposes. So your first floor will not be covered. For that you can take a comprehensive cover under the shopkeeper’s insurance policy to insure the structure and office goods.

In the event of a mishap that may arise due to insured perils such as a fire, lightning or earthquake, the reconstruction cost of the building, subject to the sum insured, is paid to the policyholder.

For assured gains, invest in debt- based or fixed maturity schemes. Schemes that have investment in equities do not give assured returns.

Your investment is definitely safe as these banks are under state control. But you may find better deals in the banking sector and may convert your holding into other banks such as Andhra Bank, Allahabad Bank, Indian Overseas Bank and Yes Bank with two-three years’ perspective.

New Delhi: The petroleum ministry is not in favour of the power ministry’s strategy to help state-owned utility NTPC Ltd get inexpensive gas for two of its plants in Gujarat by tapping fuel supplied at a price that’s subsidized by the government.

Mint had reported on 9 July about the power ministry’s plans to ask the ministry of petroleum and natural gas, which oversees such matters, to redistribute inexpensive gas currently given to NTPC’s Anta, Auraiya, Dadri and Faridabad plants, to the two Gujarat plants—at Kawas and Gandhar—irrespective of which way the utility’s legal battle with Reliance Industries Ltd (RIL) over the supply of gas to the same plants goes.

The case between NTPC and RIL in the Bombay high court dates back to December 2005 and has to do with the terms of gas supply for the expansion of the utility’s two Gujarat plants for 17 years at a price of $2.34 (Rs114) per million British thermal unit (mBtu).

The reluctance of the ministry of petroleum and natural gas stems from the fact that the same gas—whose price is regulated by the government through the administered price mechanism (APM)—is utilized by its public sector unit GAIL (India) Ltd at a key petrochemical complex at Pata in Uttar Pradesh where it extracts methane and propane and supplies it as feedstock to oil marketing companies for making petrochemical products.

“The petroleum ministry says that the APM gas is rich gas and they do not want to divert it as it is used by GAIL at its petrochemical plant for methane and propane extraction. They are giving us a technical reason,” said a top NTPC executive who did not want to be identified.

A top GAIL executive who also did not want to be identified said: “We use the APM gas for extraction. The APM gas is already allocated. There is already a shortage at our petrochemical complex which we bridge through liquefied natural gas cargoes.”

A top petroleum ministry official declined to comment on his ministry’s opposition to the power ministry’s request but said, “We will discuss the issue with the power ministry.” The official didn’t want to be named. The price of this gas is currently at around $2.30 per mBtu. The power ministry’s plan was to ensure that NTPC effectively gets gas for its Kawas and Gandhar plants at a rate slightly lower than the $2.34 per mBtu at which RIL had originally agreed to supply gas to these plants.

It was also aimed at ensuring that NTPC gets to use the gas from RIL’s block (D6) in the Krishna-Godavari (KG) basin allotted to it without affecting its legal position in anyway.

The government had allotted gas from the KG D6 block to some NTPC plants, and the plants of a few other fertilizer and power companies. It has earmarked 2.67 mscmd (million standard cu. m per day) of gas from KG D6 to NTPC, of which 2.06 mscmd is to go to the utility’s two Gujarat plants. The plan was to make up the difference at Anta, Auraiya, Dadri and Faridabad using gas from off the east coast of India.

Mint had reported on 17 July about NTPC’s willingness to sign the gas sale purchase agreement with RIL for 2.67 mscmd at the government-mandated price of $4.20 per mBtu along with a marketing margin for projects other than Kawas and Gandhar.

However, the power ministry is still hopeful of pushing its plans.

Harishankar Brahma, Union power secretary, told Mint: “We want the APM gas for NTPC’s Kawas and Gandhar projects. We will again approach the petroleum ministry for the same. Let us see what happens.”

Some years ago, I happened to be working for an editor who, in his wisdom, decided to lump me with a human resource that in banking lexicon would be aptly defined as a non-performing asset (NPA). Thereafter, we were handled like twins would be by their parents. So whatever gains accrued to me were also proffered to the NPA because the editor wanted to be perceived as being even-handed. For the NPA it was a perfect situation; for me it was bitter and frustrating. I finally dealt with it by upping and leaving for another job.

Unfortunately, this is not an option you have with a permanent neighbour, say in the case of Pakistan. If you juxtaposed my former editor with the US, one can begin to fathom the hyphenated and troubled coexistence of the two largest countries in South Asia for the last six decades and more. On the one hand, you have a country which has, partly out of its own strategic choice, embraced terrorism, and on the other, a country that is steadfastly seeking a seat at the global high table. Not only has the hyphenation of these two countries led to three wars between them and wanton destruction, but has also provided an ideal lever for others to use to their advantage.

Matters took a turn for the worse as the global strategic outlook changed, especially after 9/11, coincidentally at a time when India commenced its economic ascendancy. In fact, under pressure from India, the US formally chose to remove the hyphenation a few years back when then secretary of state Condoleezza Rice declared a seminal shift in US foreign policy towards South Asia, ahead of signing the historic India-US civilian nuclear deal.

Since then, however, partly because of the circumstances— the rising incidence of cross-border terror attacks and Pakistan’s geographically strategic existence as Afghanistan’s immediate neighbour—and lack of out-of-the-box thinking, India has effectively reinserted the hyphen into the relationship. So much so that the measure of diplomatic success or failure has assumed very petty proportions. It would vary from whether the US had censured Pakistan or whether a key diplomat would visit India first and Pakistan later; even better if Pakistan is left out of the diplomat’s itinerary.

Hence, it was not surprising to read in the papers last week that secretary of state Hillary Clinton’s schedule did not involve a stopover in Pakistan, either before or after visiting India.

What is it that makes us think thus? In part, it is the bitter history of Partition and the cold-war legacy. Part of the reason is probably cultural, wherein we love to grab the high moral ground on all issues. This is more worrying since it is increasingly evident that India is often more content with rhetoric than substance. A good example being the public snub, which is now being claimed as inadvertent, of Pakistan President Asif Ali Zardari by Prime Minister Manmohan Singh during a bilateral meeting last month between the two countries on the sidelines of a regional summit in Yekaterinburg, Russia. For a moment, it did feel good; we told them off, didn’t we. But what did it achieve?

Similarly, after the audacious terror attacks in Mumbai last year on 26 November, there was a groundswell of rhetoric, some of which was most volubly echoed in the media. Now, more than eight months later, what do we have: a defiant Pakistani administration and the terror threat unabated.

Worse, nothing seems to have changed from India’s point of view. The US, except for periodic name calling for public effect, regime change notwithstanding, continues to prop up Pakistan. And, domestically India saw the worst year of terror attacks in 2008, culminating in the Mumbai attacks.

Is there a way out, then?

Yes, if India grasps some fundamental aspects about Pakistan and demonstrates some out-of-the-box thinking. First, it is not a homogeneous state and is riven with cultural and ethnic differences, which is why Balochistan, Punjab and Sind are pulling in different directions. So, what is good for one section is not for another. Secondly, there are multiple layers of authority in the country, with the army being the principal source of power. Thirdly, its people and the establishment differ fundamentally. While the establishment is totally sold on the American cause, the average Pakistani thinks obversely.

Every time India has demonstrated out-of-the-box thinking—remember Atal Bihari Vajpayee’s famous bus journey to Lahore, followed by the Pakistan military-inspired Kargil war—it has failed because the army was not on board. There is no institutional relationship that can facilitate a direct dialogue with the Pakistan army at the moment. It operates through the politicians, who effectively wield very little power with respect to game-changing decisions. It won’t be surprising, therefore, if Prime Minister Manmohan Singh’s clumsy out-of-the-box effort, too, fails for the same reason.

Should we give up all efforts and shutter down? Absolutely not. Ignoring the problem will not make it go away. The thing to do is that while diplomatic efforts have their place, purpose and time, the government should not overlook the gains that can accrue from continuing to push economic linkages and people-to-people contact—whether it be through official export of Bollywood films, sports or culinary skills. It may sound romantic and far-fetched at this point, but a groundswell of popular support for rapprochement may be precisely what could give it the requisite impetus.