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Sri Lanka wants to undo deal to lease port to China for 99 years

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Sri Lanka’s new government led by President Gotabaya Rajapaksa wants to undo the previous regime’s move to lease the southern port of Hambantota to a Chinese venture, citing national interest.

Former Prime Minister Ranil Wickremesinghe in 2017 changed the terms, saying it would be difficult to pay the loans taken to build the project. He agreed to lease the port for 99 years to a venture led by China Merchants Port Holdings Co. in return for $1.1 billion. That helped ease the Chinese part of the debt burden raised to build the port, Wickremesinghe said in an interview in 2018.

“We would like them to give it back,” Ajith Nivard Cabraal, a former central bank governor and an economic adviser to Prime Minister Mahinda Rajapaksa, said in an interview at his home in a Colombo suburb. “The ideal situation would be to go back to status quo. We pay back the loan in due course in the way that we had originally agreed without any disturbance at all.”

The port is emblematic of the controversy dogging Chinese President Xi Jinping’s Belt and Road initiative from Kenya to Myanmar, including accusations that the world’s second-largest economy is luring poor countries into debt traps. In Sri Lanka, where the transaction to lease the port was opposed by Rajapaksa’s party, Mahinda took Chinese loans during his 10-year rule as president to build the project in his home district.

“This is a sovereign agreement” and it’s unlikely that it will be scrapped or altered in a big way, said Smruti Pattanaik, a research fellow at the Institute for Defence Studies and Analyses in New Delhi. “The Chinese may reconsider some clause, if it is considered crucial for the Rajapaksa regime.”

An attempt to rework the transaction will help the new Sri Lankan government, led by Gotabaya and his brother Mahinda, showcase their drive to change contracts seen as hurting national security, a key campaign platform for Gotabaya, a former defense secretary.

“China-Sri Lanka cooperation, including the Hambantota port project, are built on the basis of equality and consultation,” China’s Foreign Ministry said in a faxed statement from its spokesperson’s office. “China looks forward to working with Sri Lanka to make Hambantota a new shipping hub in the Indian Ocean and developing the local economy.”

China’s infrastructure-building in Sri Lanka became part of Beijing’s Belt and Road Initiative, prompting concern in India about its geopolitical rival using a port close to its southern coastline for future military or strategic uses. Gotabaya is in India on Friday for his first state visit overseas.

China has dismissed worries over any military dimension to its investment in the Hambantota port, which lies on the main shipping routes between Asia and Europe, and said it was mutually beneficial that would aid Sri Lanka’s economy.

“Sri Lanka will have to offer it something equally, if not more, attractive in financial terms for Beijing to agree to the cancellation of the lease agreement,” said Brahma Chellaney, a professor of strategic studies at the Center for Policy Research in New Delhi. “With the Rajapaksa family back in power, China hopes to expand its footprint in Sri Lanka.”

A similar port deal under the Belt and Road program in Myanmar was drastically scaled to $1.3 billion from $7.5 billion, while in Malaysia the government canceled $3 billion worth of pipelines and renegotiated a rail project in 2019, cutting that one’s cost by a third to $11 billion.

“Bilateral agreements once you’ve signed those, are serious agreements,” Cabraal said in his house adorned with pictures of local and foreign leaders. “At the same time, we’ve got to look after the national interests. And if one government had bartered it away, there is a necessity for the new government to find ways and means by which it can be done amicably.”

For its part, China Merchants, whose $93 billion of revenue dwarfs Sri Lanka’s gross domestic product, has been able to use its experience stretching from China to Europe to help kick start the Hambantota port, which once hardly attracted any ships.

China Merchants’ Hambantota joint venture also last month said it had entered into an agreement with Japanese shipping conglomerate Nippon Yusen KK, for vehicle transshipment through the port.

New Ports Minister Johnston Fernando wasn’t immediately available for comment.

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Rupee slips 7 paise to 71.26 against USD as China virus fears spooked investors

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The rupee depreciated by 7 paise to close at 71.26 against the US dollar on Thursday as the spread of a deadly new virus from China spooked investors.

However, softening crude prices and strong domestic equity market restricted the rupee’s fall, forex dealer said. At the interbank foreign exchange market, the local currency opened on a weak note at 71.21. During the day, it swung between a high of 71.16 and a low of 71.35.

The Indian currency finally settled at 71.26, registering a 7 paise decline over its previous close.

“USD/INR Pair traded in range of 71.20–71.30, as markets looks out for new triggers rupee keeps trading in range but with weak bias due to corona virus being spread in China, which can dampen investment infusion. Rupee can be range of 71.20-71.35 in coming sessions,” Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities said.

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Reliance outpaces industry in petrol, diesel sales from its outlets

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Reliance Industries Ltd (RIL) has outpaced industry in clocking double digit sales growth in petrol and diesel from its nearly 1,400-odd petrol pumps in the third quarter ended December 31, 2019.

In an investor presentation post announcing earnings for October-December 2019, Reliance, operator of the world’s largest oil refining complex, said it registered an 11 per cent growth in diesel sales and 15 per cent growth rate in petrol sales from its 1,394 fuel retail outlets.

This is compared to industry growth rate of 0.2 per cent for diesel and 7.1 per cent for petrol.

Its per outlet throughput at 342 kilolitres per month was also nearly double that of petrol pumps operated by public sector firms such as Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL).

“Superior product mix and high asset utilisation underpinned strong earnings,” it said in the presentation adding India’s oil demand grew 3.2 per cent in October-December with petrol demand rising 7.1 per cent and LPG surging by 15 per cent.

“Preference for petrol cars, improving road infrastructure and rural connectivity is driving petrol demand,” it said. A pick up in tourist movement post festive season provided support to ATF demand.

Reliance said there was a strong traction in retail and bulk fuel sales through its network.

“Growth driven by focus on large fleet customers (25 per cent year-on-year growth), fleet aggregators (114 per cent),” it said.

Its ATF sales were driving up via new customer acquisition and higher share from existing customers. “Improved ATF network competitiveness through logistical and supply source optimization,” the presentation said.

LPG sales was up 37 per cent with new customers and increasing penetration in new markets.

Reliance said its petrol retail sales revenues were up 5 per cent at Rs 3,725 crore in the third quarter. As much as 538 million litres of fuel was sold in the three month period.

Of the 1,394 petrol pumps that Reliance operates, 518 are company owned and the remaining dealer operated.

In April last year, Reliance agreed to sell 49 per cent in its petro retail business to UK’s BP plc for Rs 7,000 crore. Reliance-BP joint venture agreed to expand the network to 5,500 in the next five years.

The country currently has 66,817 petrol pumps, with public sector retailers owning 59,716. PSU retailers have plans to double this network and have already starting appointing dealers. Russia’s Rosneft-backed Nayara Energy, formerly Essar Oil, has 5,525 petrol pumps and has plans to scale them up to more than 7,000 in two-three years. Royal Dutch Shell has 169 outlets and is slated to add 150-200 more petrol pumps.

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Amazon’s $1-bn investment not a favour for India: Piyush Goyal

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Commerce minister Piyush Goyal on Thursday said global online retail giant Amazon.com Inc indulged in predatory pricing even as Bharatiya Janata Party leader Vijay Chauthaiwale took a dig at its founder Jeff Bezos for publishing “unduly” critical reports on the Modi government in The Washington Post, which he owns.

A day after Bezos, currently on a visit to India, announced fresh investments of $1 billion in India, Goyal said Amazon was not doing any favours to the country with its investment asked whether the huge losses made by the company were linked to “predatory pricing or some unfair trade practices”.

Goyal acknowledged Amazon’s investments in warehousing but asked whether the money was being brought in “largely to finance losses in an e-commerce market place model.” He added that this raised questions of “where the loss came from”.

There has been considerable pressure on the government from the affiliates of the Rashtriya Swayamsevak Sangh, its ideological parent, and also trader groups to reconsider the policy on FDI in online retail. Traders claim Amazon is taking away their business. Amazon’s position is that it serves as a platform in India and that many of the traders who complain are themselves on the platform.

Ashwani Mahajan of the Swadeshi Jagran Manch, an affiliate of the RSS, said Goyal’s comments indicate that the Centre may have become “more sensitized to the problems of opening up FDI (in online retail)”.

“There is a fear in every trader’s mind that these global chains will kill their business.”

Meanwhile, reacting to a statement by Bezos where he said the 21st century will be India’s; Chauthaiwale tweeted: “@JeffBezos, please tell this to your employees in Washington DC. Otherwise your charm offensive is likely to be waste of time and money.”

“I am a regular customer of Amazon and not against them. But I am definitely against what Washington Post is writing,” Chautaiwale said.

An Amazon spokesperson did not immediately comment on the matter.

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