India reform...some progress Update on investment approvals and subsidies:: JPMorgan

 Our OW on India is controversial. Part of the case is that reform is
under-appreciated. This report is an update on the progress on diesel
subsidy reduction and project approvals by the Cabinet Committee on
Investment (CCI).
 The Finance minister, Mr. Chidambaram, took office on 31 July 2012.
His pro-reform stance is clearer than his predecessor Pranab Mukherjee.
Reform includes the politically expensive policy to reduce diesel
subsidies. Diesel was 23% of FY13 US$31billion subsidy bill. Since
September 2012 the diesel price increased by Rs 7.31/litre and the
subsidy declined from Rs17.1/litre to Rs6.42/litre. In January the
government committed to increase the diesel price by Rs0.5/litre every
month.
 PSU banks estimate that 215 projects worth USD130billion are awaiting
approvals. These projects are spread across power, roads, ports, cement
and steel. YTD CCI approved 31 oil blocks and 13 power projects. The
oil blocks should free investments worth US$13.4bn and generate
additional investment of US$2.5bn in exploration activities over the next
3-5 years. The power projects involve investment of ~US$6bn. The next
significant market event is resolving the coal price pooling, with an
announcement due in May.
 Subsidy reform is limited to transportation fuels. Food and fertilizer
subsidies are forecast to increase. The next general election is scheduled
for April 2014. The political window for reform is narrow

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