AshishSinha

NewDelhi,Oct7: Agroupof ministers(GoM)headedby finance ministerPranab Mukherjee will de-cide whether a clock auc-tionmodelshouldbeadopt-edforthethirdphaseof FMradio rollout in India. Sofar, FM stations have beenawarded through conven-tional sealed tender auc-tions. The unexpectedlyhuge revenues raised from3G-BWA clock auctionshave led to demands fromthe cabinet secretariat andthedepartmentof revenuethat the same model be fol-lowed for FM radio as well,

sourcestoldFE.Set up under instruc-

tions from the Prime Min-ister’s office, the GoM in-

cludes ministers of tele-com, information andbroadcasting (I&B), home,defence and law. The firstmeeting of the GoM is ex-pected later this month.

The government plansto auction 806 FM stationsacross 283 towns and feelsthat clock auctions willhelp it generate more rev-enue than conventionalauctions. However, theI&B ministry feels theprocess could make theFM radio sector financial-ly unviable due to in-creased licence fees, aview supported by someFM radio companies.■ ContinuedonPage2

VishakhaTalreja&RajatGuha

NewDelhi,Oct7: Thefes-tive season is around thecorner, but it could spellbleaktimesforIndia'sreal-ty sector, as unsold inven-tory piles up. With theprices of residential unitsexorbitantlyhighespecial-ly in Delhi and Mumbaiand a deluge of residentialproject launches quarterafterquarter,it’saclearde-mand-supplymismatch.

The lean July-Septem-ber quarter has beenmarked by oversupply. Ac-cording to Jones LangLaSalleIndia,around60,000residential projects werelaunched in the top sevenmetros during this period.However, the absorptionrate has been a dismal 15%,muchlowerthanthe20%ofthe last two quarters. Thetop seven markets includeDelhiNCR,Mumbai,Chen-nai,Bangalore,Hyderabad,PuneandKolkata.Theover-supply is mainly in Delhiand Mumbai where priceshavegoneup40-50%ascom-pared to last year, makingmanyprojectsunaffordableforaveragebuyers.

According to the RoyalInstitution of CharteredSurveyors (RICS), around250 million sq ft of residen-tial inventory remains un-sold across major marketsin the country. Most of theupcoming projects are lo-

cated in Navi Mumbai andThane near Mumbai, or inNoida and Gurgaon nearDelhi, where unsold homeinventory levels are at all-time highs. As reportedby The Indian Express,KhargharinNaviMumbaiitself has 131 new residen-tial projects, followed by 66projects in Kamothe, 41 inNew Panvel, 31 in Neruland21inKalamboli.

“On one hand, prices ofresidential units have goneupandontheother,interestrates have moved up too.Though there were end-userslastyear,thistimetheproperty market is unaf-fordable and most sales areinvestor-driven,” says Ab-hishek Kiran Gupta, head-research, Jones LangLaSalleIndia.■ ContinuedonPage2

Re hits 25-mth highon large inflowsThe rupee on Thursdayhit a 25-month high onrobust foreign capitalinflows. It closed at44.1950/2050 per dollarafter hitting 44.1250, itshighest since September8, 2008. Page 13■ NoreasonforRBItoweakencurrency,Page2

SesaGoaopenofferlikely to bedelayedSesaGoa’s proposedopen offer to non-promoter shareholdersin Cairn Indiamay notopen onOctober 11 asplanned earlier, sincenecessary the approvalsare still awaited. Page 4■Vedantacouldcutinvestmentby$2bn■CairnEnergygetsshareholdernod,Page4

Food inflationeases to 16.24%The foodprice index inthe year endedSeptember 25 rose16.24%, comparedwith16.44% in thepreviousweek, as prices ofwheat,pulses andcereals felland receding floodsimproved supplies. Page2

Bubble carExclusive!

Cheap, small & simple—an idea from the 1950sbubbles upagain■P18

In thenews

India’s Geeta, who clinched the gold, grapples with Australia's Bensted Emily in the55-kg freestyle event at the New Delhi Commonwealth Games on Thursday. PTI

NIIT’s RajendraPawar:

Themind readerP U B L I S H E D F R O M : A H M E D A B A D B A N G A L O R E C H A N D I G A R H C H E N N A I H Y D E R A B A D K O C H I K O L K A T A L U C K N O W M U M B A I P U N E

F E P R O F I L E B U S I N E S S

NEW DELHI, FRIDAY, OCTOBER 8, 2010V O L X X X V I N O 1 9 0 2 2 P A G E S I R s 4 . 0 0

P2 P12 P22

READTOLEAD

PROTECTIONISTPOLICIESARENOTACCEPTABLE:PRANABTELLSUS

N E W S

THREE INDIANS INFORBES’ LIST OFPOWERFULWOMEN

■ PranabMukherjee tohead six-member GoM

■ Cabinet secy, revenuedept push for e-auctions

■ Industry, I&B fear itwillmake sector unviable

WAVEMODEL

■ Large number ofproject launches

■ Price appreciationof 40-50% inmetros

■ Steady increase inhome loan interest rates

DAMPENERS

GoMtodecidemodeof auction for FM-III

CB Bhave got itwrongonmutual funds butdid a great job overall

ShobhanaSubramanian

Mutualmistake

EDIT P8

SitanshuSwain

Mumbai, Oct 7: The state-owned Oriental Insurancehas been saddled withclaims of Rs 400 crore fromfive banks, namely, StateBank of India, Bank of In-dia, Indian Bank, AndhraBank and IDBI Bank. Thebanksarelookingtorecoverthe money paid to the oilcompanies on behalf ofParamount Airways. Con-firming the development, asenior executive at OrientalInsurancesaid:“Wehavere-ceived the claim on accountof Paramount Airwaysand our surveyor is con-ducting the due diligence.We are also examining legalremedies for the issue.” Thedefunct Chennai-based air-line had defaulted on bankguarantees issued by thesefive banks.

Disturbed by the develop-ment, Insurance Regulatory& Development Authority(Irda) has banned the sale ofcredit insurance by generalinsurance companies, ex-cept state-owned ExportCredit Guarantee Corpora-tion (ECGC). Without men-tioning the Paramount case,

anIrdaorderlastweeksaiditbelieved that insurers wereunderwriting risks whichwere not governed by a prop-er regulatory framework orsanction.“Hence,inexerciseof powers under Section14(1) and 14(2)(i) of the IrdaAct, 1999, the authority or-dersallgeneralinsurersstopsaleof thesepoliciestillsuchtime the authority formu-lates detailed guidelines inthis regard,” Irda observed.

At over Rs 200 crore, Bankof Indiahasthelargestexpo-sure to Paramount’s bankguarantee, while SBI hasguaranteed around Rs 80crore and the others Rs 20crore each. Promoted by en-trepreneur M Thiagarajan,

the airline had taken creditinsurance cover from Orien-tal in 2008-09 for its multiplebank guarantees to cover itstransactions with state-owned oil companies.

A credit insurance is typ-ically taken by a company tocover its sellers’ dues and incase the buyer fails to payup,bankswhichhaveissuedguarantees can lodge aclaim with the insurancecompany to recover theamount. Although Orientalhas provided similar coverto other airlines includingJet Airways, this is the firsttime that such a large claim,linkedtoanon-exporttrans-action, has been filed.

Experts say the mannerOriental underwrote thecredit insurance policy infavourof Paramountmaynothavebeenentirelyproperandthe deal has been referred tothevigilanceofficeratOrien-tal Insurance. Sources sayOriental had not taken anyreinsurance cover for thispolicy.Irdahasalsosoughtde-tailsfromgeneralinsurersontheir total exposure undercredit insurance policies is-suedtobanksin10days.■ ContinuedonPage2

Banks askOrientaltopayRs400cronParamountdefault AnanditaSinghMankotia

New Delhi, Oct 7: India’s se-curity rules mandating tele-com equipment providers tosubmit source codes of theirsoftware and hardware areneither feasible nor fool-proof, says Nokia SiemensNetwork (NSN), the second-largest global provider ofsuch equipment. The NSNobservation also raisesdoubts on the reliability ofsource codes which Chinesevendors Huawei and ZTEhave agreed to submit.

In an exclusive interviewwith FE, Barry French,head of marketing and cor-porateaffairsatNSN,whoiscurrently on a visit to India,said: “The software andhardware code is a complexmatrix and gets continuous-ly updated with upgrada-tion in technology fromtime to time. Even if we sub-mit the source code today, itwould automatically be-comeinvalidoveraperiodoftime as the equipmentwould be upgraded.”■ ContinuedonPage2

Source coderulewon’twork: NokiaSiemens

■ Paramount Air’s bankloans to pay fuel bills werecovered byOriental

■ Carrier defaulted, forcingfive banks to seek claimsfromOriental Insurance

■ Oriental had takennoreinsurance for thehugeexposure toParamount

■ Irda has clamped downon credit insurance, soughtdetails from insurers

AIR COVER

Unsoldhomespile upaspricesput off buyers

Barry French,globalmarketing head, NSN

CORPORATES,NBFCSMEETRBITODISCUSSNEWBANKLICENCES■ CorporatesaspiringtosetupbanksonThursdaysuggestedtoRBIthatpromotersstartoffwithacapitalofRs1,000crore.Meanwhile, NBFCsrecommendedthatRBIallowpromotersofnewbankstoholdastakeintherangeof26-40%andinitiallyhaveacapitalofRs500crore.Theyalsosuggestedthatpromotersbegiven10yearstoreducetheirstaketo10%. Page13

INDICES Closing Up/down

BSESensex 20,315.32 ▼227.76

S&PCNXNifty 6,120.30 ▼ 66.15

(Reprinted from The Financial Express October 8, 2010, issue by Corporate Communications, NIIT for internal circulation only)