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Today's Hot Stories - January 19, 2013

10 Headlines for Today

(1) Congress leaders pitch for Rahul Gandhi as PM candidate
(2) No rollback of increase in diesel prices: Oil minister Veerappa Moily
(3) ‘Muslim Patrol' vigilantes force London women to cover up
(4) Lenders want Mallya to pump Rs 1k cr more into KFA
(5) AAI pays Rs 171.90c dividend
(6) China’s economy grows 7.8% in 2012, a 13-year low
(7) Saina sinks in semis of Malaysia Open
(8) Bhupathi in men's doubles 3rd round
(9) Andy Murray advances at Aus Open
(10) There should be competition for charity: Salman

5 Stories for Today

(1) Corruption in politics riling people, Sonia Gandhi warns party
(2) Mali fighting: Refugee count could rise to 700,000
(3) Sebi eases rules for share auctions
(4) Boeing suspends 787 deliveries
(5) Diesel price hike may boost refiners, divestment drive

(1) Corruption in politics riling people, Sonia Gandhi warns party

Taking serious note of middle class protesters taking to the streets over corruption, Congress president Sonia Gandhi said the lifestyles of leaders is giving rise to questions about the source of their wealth.

Speaking at Congress's chintan shivir (brainstorming session) here, Sonia said, "Celebrating weddings, festivals and happy events is one thing, what of lavish and ostentatious displays of wealth, pomp and status? Does this not beg the question, where is this wealth coming from?"

Her direct remarks caused a hush to descend on the meeting. "Our citizens are rightly fed up with the levels of corruption that they see in public life at high levels, but equally with the corruption they have to deal with in their daily lives,'' she said.

Sonia urged the party not to lose touch with the middle classes that backed the Congress in the 2004 and 2009 general elections. The party cannot afford "our growing educated and middle classes to be disillusioned and alienated with the political process".

The candid references to the middle class drift away from Congress, the need to keep alliances intact, a commitment to make women feel safer, and an admission that the party's base has eroded in traditional strongholds were key aspects of her speech as she set out the political tasks for her party.

Some of her comments were also seen to reflect her concern over the government's response to the outpouring of public anger over the Nirbhaya gang rape and criticism of police action against young protestors. "We have to recognize the new changing India, peopled by a younger, more aspirational, more impatient and more demanding generation. Our people are expecting much more from their political parties. Today's India is better informed and better equipped to communicate. This is a phenomenon, a churning that we must understand and continue to respond to."

Taking cognizance of the growing concern about women's safety, she said, "Atrocities on women, both in urban and rural India, are a blot on our collective conscience and a matter of great shame."

Sonia's carefully crafted speech referred to the principal political challenges before the party and the government at a time when UPA 2's credibility is seen to have taken a beating due to corruption scandals, an anemic economy and demoralizing electoral losses. "Is it not the case that we have squandered many opportunities that people are willing to give us simply because we have been unable to function as a disciplined and united team," she said.

The Congress chief admitted that the party has been on a losing ticket in traditional strongholds and needs to work on its alliances. The need to seek alliances was, however, couched alongside a call for Congress not to give up its effort to revive its fortunes. "We must admit that we now face increased competition and inroads have been made into our traditional support bases," Sonia told delegates, adding that being out of office for long in some states is impacting morale and organisational ability.

On the theme of young and discontented voters, Sonia said there were one crore new job seekers every year and they needed avenues and opportunities. "Our youth is getting more assertive, it wants its voice to be heard," she said.

The leadership's concern over the anti-Congress tenor of movements such as those led by Anna Hazare and Ramdev is clear as the government had often found itself lagging while dealing with such bouts of unrest.

The decision to underline the worries over middle class is rooted in a genuine fear that the 2014 battle may be made or marred in towns and urban centres that Congress swept with ease in 2009.

(2) Mali fighting: Refugee count could rise to 700,000

Predicting a worsening of West Africa's refugee situation, a UN agency says up to 700,000 people are expected to be uprooted by the ongoing turmoil in Mali.

"We believe there could be in the near future an additional 300,000 displaced inside Mali and up to 400,000 additional displaced (refugees) in neighbouring countries," United Nations High Commissioner for Refugees (UNHCR) spokesperson Melissa Fleming told reporters here.

West African, French and Malian forces are fighting Islamist insurgents, including the al-Qaida in the Islamic Mahgreb (AQIM), that took over northern Mali last year.

It is estimated that around 150,000 Malians have fled the fighting to countries like Mauritania, Niger, Burkina Faso and Algeria, while some 230,000 are internally displaced within Mali.

In the latest fighting, Islamic rebels pushed south and seized Konna, about 550 km north from Mali's capital Bamako, on Jan 10, prompting the country's former colonial ruler France to intervene and check the rebel advance.

More than 8,000 French citizens live in Mali, which straddles the arid areas of the sub-Saharan Sahel - comprising Senegal, Gambia, Mauritania, Mali, Burkina Faso, Niger, Chad, northern Cameroon and Nigeria - whose chronic food insecurity has been aggravated by the recent fighting.

Reports on Friday quoted Mali's army as saying it has recaptured Konna from the Islamist rebels.

In December 2012, the UN Security Council authorised a one-year military peacekeeping mission in the country. The Economic Community of West African states ( ECOWAS) has also pledged troops in the operations against Islamist insurgents.

Mali's institutions have been vulnerable since the military coup in March 2012 that overthrew President Amadou Toumani Toure.

A predominantly Muslim, West African nation that gained independence from France in 1960, Mali, after decades of stability, has been plagued by ethnic and separatist tensions, drug trafficking, and increasing weakening of insitutions, particularly its army.

Islamist groups, especially AQIM, joined with Tuareg rebels and took advantage of the chaos following a military coup to seize northern Mali in April 2012.

The northern rebels have around 4,000 fighters from the separatist Tuareg of the National Movement for the Liberation of Azawad (MNLA) and jihadist groups, including AQIM and the Movement for Oneness and Jihad in West Africa (MOJWA).

The UN special envoy for the Sahel, Romano Prodi, said the French air and ground intervention in Mali was the only way to stop Islamists creating "a terrorist safe haven in the heart of Africa".

(3) Sebi eases rules for share auctions

India's regulations for share auctions have been eased to help firms meet rules that at least 25 percent of their shares be publicly traded by end-June.

India is trying to improve the public ownership of shares and is taking steps to make it easier for firms to sell blocks of shares.

Measures including eliminating the requirement for upfront payments by bidders taking part in auctions, were announced after a Securities and Exchange Board of India (Sebi) board meeting on Friday, and will also allow certain investors to make changes to their bids and track average bidding prices.

Analysts said the changes to rules governing offers for sale (OFS) - a share auction system introduced in 2012 - will make it easier for controlling shareholders to cut their stakes.

Investment bankers estimate that roughly $2 billion in shares will need to be sold to meet the public shareholding rule announced two years ago.

The changes should also help the government, which is looking to raise 300 billion rupees by selling stakes in state companies by the end of the fiscal year in March, to meet its deficit-cutting targets.

"As we get closer to the public shareholding deadline, any improvement in the framework is going to encourage companies to meet the requirement. It will also help the divestment drive," said Gesu Kaushal, executive director at Kotak Investment Banking.

"There will also be more openness on the part of the foreign investors to come in with these flexibilities."

The new rule replaces regulations that had required investors to deposit either 25 percent or 100 percent of their order value up-front with a custodian.

Investors will now be allowed to bid in OFS auctions without making a deposit but will only be allowed to make upward changes to their bids. Investors who deposit 100 percent of their order value up-front can now modify or cancel their orders, SEBI said.

Issuers and bankers had been lobbying Sebi to remove the deposit requirement, and to be allowed to make changes to their bids, arguing it would increase participation for large share sales from domestic as well as overseas portfolio investors.

SEBI also said bidders putting a deposit for 100 percent of their orders upfront would be able to track cumulative orders and bids, which would allow them flexibility to change their orders.

Previously, exchanges would disclose "indicative prices", or the average prices of all the bids received, only towards the close of the auction.

(4) Boeing suspends 787 deliveries

The American aerospace giant Boeing halted deliveries of its 787 Dreamliner but said it would continue to build the aircraft while safety experts examine its battery and electrical systems.

The announcement made on Friday capped a week in which all 50 787s in service around the world were grounded on orders from multiple aviation authorities to investigate the cause of two incidents, including a fire, linked to its batteries.

"We will not deliver 787s until the FAA approves a means of compliance with their recent Airworthiness Directive concerning batteries and the approved approach has been implemented," a Boeing spokesman said.

"Production of 787s continues," he said. Dreamliners had been flying in Chile, Ethiopia, India, Japan, Poland, Qatar and the United States until their flights were stopped after a global alert issued by the US Federal Aviation Administration.

Boeing's chairman and chief executive Jim McNerney in a statement to employees defended his company and the aircraft against "the negative news attention over the past several days."

"As everyone inside the company knows, nothing is more important to us than the safety of the passengers, pilots and crew members who fly aboard Boeing commercial and military aircraft," he said.

"We have high confidence in the safety of the 787 and stand squarely behind its integrity as the newest addition to our product family."

His comments came as US and Japanese experts began examining an All Nippon Airways 787 forced to make an emergency landing at Takamatsu in southwest Japan on Wednesday because of a smoke alert apparently linked to a lithium-ion battery, the plane's main electrical power unit.

"We removed the battery yesterday and are today inspecting the plane and its components, alongside the US officials," said Japan Transport Safety Board spokesman Mamoru Takahashi.

A picture released by the JTSB showed scorch marks on the blue casing of the battery. Much of what looked like wiring around the eight cells of the battery -- the plane's main electrical power unit -- was disfigured.

It was the second incident involving the battery, and one of several problems since the beginning of the year, including a taxiing 787 sprouting a fuel leak in Boston.

The problems have cast a cloud over the aircraft heavily dependent on pioneering electrical systems and lightweight composite materials that is meant to be Boeing's future.

(5) Diesel price hike may boost refiners, divestment drive

India's move to raise the price of subsidised diesel should help with its plans to sell shares in state companies including Oil India Ltd to help bridge the government's fiscal deficit and gives a boost to private oil refiners looking to enter the market for bulk diesel sales.

New Delhi, which owns about 78 percent of Oil India, is likely to raise more than $500 million by selling 10 percent in the explorer and producer early next month, said sources with direct knowledge of the plan, declining to be named because details are still being worked out.

Raising the diesel price may also help revive a 10 percent stake sale in retailer Indian Oil, which hired six banks in 2010 to prepare for the sale only to shelve the issue as its earnings worsened because of the subsidies, although people familiar with the matter said such a sale was unlikely to happen soon.

Selling shares in state companies is a central plank of the government's plan to bring the deficit down to 5.3 percent of gross domestic product for the financial year ending March and avoid a credit downgrade from global ratings agencies.

The subsidy burden of India's state oil producers and retailers has also been a worry for overseas investors, who are usually the biggest buyers of large share deals in Asia's third-largest economy.

"The element of cynicism around the public-sector oil firms will reduce a great deal after this decision," said Jagannadham Thunuguntla, equity head at SMC Global Securities. "It augurs well for the divestment programme."

The government, which fixes the retail price of diesel, on Thursday told retailers to raise prices in small amounts every month, a move that should also improve revenues in the sector. At the same time, it removed price controls for bulk sales, which account for about 18 percent of total demand.

Indian stocks, bonds and the rupee all rallied on the government's decision with the rupee at its highest level in nearly two-and-half months on Friday.

"In aggregate the decision would help attract more investment in the oil and other sectors from foreign investors," said a senior finance ministry official, who declined to be named because of a restriction on speaking to the media in the run-up to the Indian budget release.

Refiners see benefits

While shares in India's state-run oil refiners rallied, the decision to sweep away subsidies for bulk sales could create an opportunity for private rivals Reliance Industries and Essar Oil, which may look to broaden their market share.

Large-scale diesel sales account for about 18 percent of the total demand of some 522 million barrels a year. State-run IOC, India's biggest refiner, owns about 80 percent of the market.

"If there is a level playing field, we will be in the market and we will be competitive. We are looking at being in the market in this segment," said L.K. Gupta, chief executive of Essar Oil, India's second-largest private refiner.

Reliance, owner of the world's largest refining complex, with 1.2 million barrels per day (bpd) capacity on India's west coast, could also look to sell more in its backyard.

"There will definitely be an impact on volumes," said IOC's director of marketing, M. Nene. "Earlier there were three players, now there will be three more," he added.

Private refiners might offer better credit terms, discounts and service to bulk customers, Nene added.

Along with IOC, state-run HPCL and Bharat Petroleum Corp sell to bulk customers, which include railways and defence industries in the state sector and cement companies, miners and power plants among private clients.

Serious competition in bulk sales is still seen some way off, with private refiners lacking the marketing infrastructure, and many big state-owned clients having annual contracts.

While a difference remains between bulk and retail prices, large-scale customers may be tempted to buy as much as they can in the market where subsidies continue.

"We have to be very vigilant at the retail level as we should not be permitting supply of diesel from the retail outlets to consumers who are not entitled to get such supplies," said Nene of IOC.

Nomura analysts said in a Friday note that "higher prices for bulk sales should reduce the bulk market size," as private companies would have lots of incentives to resort to retail purchases to cut costs.

State-owned sell-down

New Delhi wants to raise $5.5 billion by selling stakes in state-owned companies in the current fiscal year that ends in March. While the plan is far behind schedule, it got a boost from a $1.1 billion offering in miner NMDC Ltd last month.

Before the NMDC sell-down, the government had raised just $148 million in the current fiscal year. Besides Oil India, the government plans to raise more than $2 billion from a stake sale in power producer NTPC Ltd next month.

Most foreign buyers stayed away from a $2.6 billion stock auction in Oil and Natural Gas Corp Ltd in March last year. Uncertainty about its subsidy burden was one of the reasons for the poor response to the issue that was bailed out by state financial investors.

State-run upstream oil companies Oil India, ONGC and GAIL (India) Ltd, sell refined products and crude oil to state retailers at a discount, which hurts earnings and dims investor appetite.

"The biggest challenge in an offering by a public sector oil company is to answer all the investor queries around the subsidy mechanism and its impact on the earnings outlook," said a source involved in the Oil India share sale process.

"The government's diesel price move is surely a good step and brings clarity about their financials, which will boost demand for shares," said the source, who declined to be named as he was not authorised to speak to the media.

Analysts said producers such as Oil India would benefit most from the diesel price hike, given they have been selling crude oil and associate products at a discount and could be allowed to charge higher prices.

Shares in Oil India rose as much as 20 percent on Friday, adding $1.1 billion to its market value, while the main Mumbai market index was up 0.6 percent. The stock gave up some of its gains later and was trading up about 10.2 percent.

At the current market price, 10 percent of Oil India is valued at about $630 million. New Delhi usually auctions shares to investors at a discount to the market price to ensure demand.

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