One-time spectrum fee to net~27,000 crore
BS REPORTER
New Delhi, 8 October
The empowered group of ministers (EGoM) on telecom headed by Finance
Minister PChidambaram today decided to impose a one-time fee on
incumbent operators prospectively for spectrum beyond 4.4 MHz in GSM
and 2.5 MHz in CDMA.
As a result, telecom companies, including Bharat Sanchar Nigam Ltd,
Bharti Airtel, Vodafone, Idea Cellular and Reliance Communications and
others, will have to fork out ~27,517 crore to the government.
The cut-off date for calculating the fee will be the one on which the
Cabinet clears the EGoM decision.
The Cabinet is expected to take a final decision by October 16, well
before the last date for submission of bids by prospective operators
for the 2G spectrum auction.
The decision is a rejection of the opinion of the Attorney General of
India, who had said a one-time charge should be levied on spectrum
beyond 6.2 MHz but retrospectively from July 2008. He had also
responded in the negative to a query from the EGoM as to whether a
onetime spectrum charge could be levied prospectively for zero
spectrum to 4.4 MHz or to 6.2 MHz to bring about a level playing
field.
The ministerial group decided that operators who did not wish to pay a
one-time charge for spectrum beyond 4.4 MHz could surrender it.
Based on an analysis by the Cellular Operators' Association of India
(COAI), the top five GSM operators, BSNL, Bharti, Vodafone, Idea and
Aircel, would have to fork out ~17,166 crore while for the entire GSM
industry the burden would be ~18,000 crore. The calculations are based
on the spectrum auction base price of ~14,000 crore for five MHz.
Ironically, the bulk of the brunt will be borne by the state-owned
BSNL, which despite its financial state and falling market share would
have to fork out nearly 40 per cent of the total amount GSM operators
would have to pay.
In the CDMA space, according to rough calculations by operators,
Reliance Communications, which has spectrum beyond 2.5 MHz in all
circles except five, and Tata Teleservices, which has spectrum in 11
circles beyond the limit, will have to together fork out less than
~10,000 crore.
The EGoM also took a decision to refund the licence fee of ~1,658
crore paid by operators whose licences got quashed recently by a
Supreme Court order in case they did not win in the 2G auction. If
they win, the amount will be adjusted with what they pay for auctioned
spectrum.
The group also cleared a deferred payment schedule for spectrum,
entailing 33 per cent upfront payment for GSM and 25 per cent for
CDMA. However, there will be a moratorium of two years if the balance
licence period is greater than 15 years, one year if it is between 10
and 15 years and none if the balance is less than 10 years.
The operators, while not elated, are relieved as it could have been
worse if a proposal to charge retrospectively was cleared. Says COAI
Director General Rajan Matthew, "It could have been worse, of course.
But it will adversely impact the telcos' rate of return. We might have
no option but to go to the TDSAT unless the government gives us some
concessions when they give us unified licences." That might be the
official line but incumbent GSM operators privately admit it has come
as a big relief. "The dual technology operators now have to pay the
same as most of us. The staggered payment scheme has reduced the
upfront burden," says a director in a telecom company.
AUSPI, which represents dual technology players, was disappointed.
Ashok Sud, the secretary general, said, "Our stand was the government
should charge a onetime fee only beyond 6.2 MHz. We now have to see
what our members want to do."
EGoM rejects AG's opinion on retrospective levy; Cabinet to take final
decision by Oct 16
Three options given byDoT forlevying one-time fee
>Option 1 Charge for all spectrum
>Option 2 Charge for spectrum above 4.4 MHz for GSM and 2.5 MHz for CDMA
>Option 3 Charge for spectrum above 6.2 MHz for GSM and 5 MHz for CDMA prospectively
The Attorney General's opinion
>Charge for spectrum above 6.2 MHz retrospectively, with effectfrom July2008
The decision taken byEGoM
>Charge for spectrum above 4.4 MHz in GSM and 2.5 MHz in CDMAwith prospective effect(from the date on which the Cabinetapproves the decision) WHO PAYS WHAT
Operators' outgo due to the levyofone-time fee
Operator One-time fee (~ cr)
Bharti Airtel 4,649
Idea Cellular 1,868
Vodafone 2,988
Aircel 269
BSNL 7,392
CDMAplayers such as Reliance Communications &Tata Teleservices 9,500
Total 27,517
There are some players who will have to fork out small amounts, which
is not reflected in the chart. The figures are based on the auction
base price of ~14,000 crore for five MHz for GSM operators Sources:
COAI and telecom operators
Auditors raise eyebrows at DLF take on Vadra dealings
NIVEDITAMOOKERJI New Delhi, 8 October
Auditors and chartered accountants that Business Standard has spoken
to are not convinced with real estate company DLF's clarification that
it had given a 'business advance' to Robert Vadra, son-in-law of
Congress President Sonia Gandhi, and that there was no quid pro quo
between the two.
The accounting and audit fraternity clearly wants to disassociate
itself from the DLFVadra saga. While those who spoke to this newspaper
for the story did not wish to be named, many other large audit firms
refused to talk on the matter, citing "client confidentiality" or
providing a "no comment" reply.
A senior partner of a leading audit firm pointed out accounting rules
did not permit companies to give interest-free loans even to their
subsidiaries, let alone others. Even as DLF claimed a business
advance, and not an unsecured loan, was given to Vadra's company, the
realtor had not done enough to give specifics about the business for
which the advance was paid, he said.
Another chartered accountant, who also did not wish to be named,
argued if an advance amount was refunded without the business
maturing, there was always a doubt about the nature of the
transaction. He was referring to the Faridabad land deal, in which DLF
found legal infirmities at a later stage and Vadra's company Sky Light
Group refunded the ~15-crore 'advance'. DLF had not shown any papers
yet on any of the deals with Vadra, he said, adding the company might
however do that over the coming days.
According to analysts, the going rate of interest for loans in the
real estate sector is anything between 14 and 18 per cent. In this
case, no interest has been charged.
Another auditor, who did not wish to be named, said for DLF to give a
business advance to Vadra's company, there must have been prior
linkages between the two. "Interest is not the only aspect to look at
here. The alleged nexus between Vadra and the real estate company
should be investigated, too," he added.
A senior representative of an accounting firm pointed out the
difference between an unsecured loan and a business advance. Broadly
speaking, while any loan is a contractual agreement between two or
more parties accompanied by an interest at the time of payback, a
business advance is usually not a contractual pact and mostly there's
no interest attached to it. While a loan is usually given against a
security from the borrower, an unsecured loan is not accompanied by
any such security. He added business advances were not very unusual in
the industry. "Companies do give advances to suppliers or customers in
the hope of a return without a contractual agreement." DLF had on
Saturday said its business relationship with Vadra or his companies
was transparent and at an arm's length basis. "Our business
relationship has been conducted to the highest standards of ethics and
transparency, as has been our business practice all around." The
company denied it had given any unsecured loan to Vadra or his
companies, claiming an amount of ~65 crore was given as a business
advance for the purchase of two pieces of land from Sky Light Group.
DLF gave an advance of ~50 crore to Sky Light Hospitality against a
piece of land at Sikohpur village, Gurgaon, in 2008-09, the company
said. DLF bought the land for ~58 crore, according to its statement.
Subsequently, Sky Light Group offered DLF an opportunity to purchase a
large land parcel in Faridabad in 2008-09, and DLF agreed to advance
~15 crore in instalments. "After concluding that the said land had
certain legal infirmities, we decided against its purchase.
Accordingly on DLF's request, Sky Light Group refunded the advance of
~15 crore in totality," said DLF in its statement.
DLF said "at no stage was an interest-free loan ever given to Sky
Light Group. There were two sets of business advances against purchase
of property, one of which amounting to ~50 crore resulted in a
satisfactory conclusion of purchase of commercial land and the second
advance of ~15 crore was fully refunded." DLF shares fall
DLF shares fell on Monday after anti-corruption activists accused the
company of improper dealings with Robert Vadra, son-in-law of Congress
President Sonia Gandhi. Vadra and DLF have denied the allegations. DLF
shares closed down 7.2 per cent at ~224.25 on the BSE. The Sensex
declined 1.2 per cent.
Data compiled by BS Research Bureau TOUGH TIME BSE price in ~
BACKPAGE, P14
UPAallies smile as Congress left red-faced overVadra issue
________________________________________
Economists divided on CRR cutin RBI policy
NEELASRI BARMAN Mumbai, 8 October
While bankers have demanded the Reserve Bank of India (RBI) cut its
cash reserve ratio (CRR) specification, economists are divided about
what is likely to happen.
Business Standard spoke to 10 economists and five did not expect a CRR
cut, as they felt the liquidity position was comfortable. CRR is the
proportion of their funds that banks have to keep (free of interest)
with RBI. It is currently 4.5 per cent of their net demand and time
liabilities. Those who expected a CRR cut at RBI's second quarter
review of the monetary policy on October 30 said this would help bring
down lending rates.
"With FY13 growth looking set to slow below RBI's 6.5 per cent
(expectation), we expect RBI to cut CRR by 50 basis points (bps), to
bring down lending rates," said Indranil Sen Gupta, India economist at
Bank of America Merill Lynch, in his report today.
He says India is the only BRICS country (Brazil, Russia, China and
South Africa being the others) where lending rates are at their 2008
peak. "Unless lending rates come off, FY13 growth will find it very
difficult to do our 5.6 per cent growth forecast, let alone 6.5 per
cent," said Sen Gupta.
Last month, RBI had cut CRR by 25 bps. However, State Bank of India
(SBI) was the only bank to cut its base rate by a corresponding 25
bps, to 9.75 per cent. "We are entering a busy season and we expect
bank credit to pick up. There should be adequate credit available and
at a low cost. If you cut CRR, it is possible for banks to bring down
the lending rates," said Brinda Jagirdar, general manager (economic
research), SBI.
According to Sen Gupta, the lending rate of banks should drop further
by 25-50 bps by December. However, some economists feel a cut in the
repo rate (at which RBI lends to banks) would be better. "At this
point, a cut in the repo rate will result in more effective monetary
transmission, compared with a CRR cut. There is still worry that
another 25 bps of CRR cut will not result in a sufficient injection of
liquidity to counter the gradually increasing tightening over the rest
of FY13," said Saugata Bhattacharya, chief economist, Axis Bank.
RBI had cut the repo rate by 50 bps in April. It is now eight per
cent. CRR was at six per cent at the beginning of the calendar year
and was brought down to 4.5 per cent in three tranches. The cuts in
CRR had helped inject liquidity worth ~97,000 crore into the system.
Today, banks borrowed ~61,180 crore under RBI's Liquidity Adjustment
Facility. In the past month, the daily average borrowing by banks
under the liquidity adjustment facility has been a little over ~50,000
crore.
In the run-up to the Oct 30 review, some feel a repo cut makes sense
CRR SCORESHEET
Economistand their expectations on cut
CRISIL
DK Joshi
Bankof America Merill Lynch
Indranil Sen Gupta
(50 bps)
State Bankof India
Brinda Jagirdar
(50 bps)
KotakMahindra Bank
Indranil Pan
YES Bank
Shubhada Rao
CARE Ratings
Madan Sabnavis
(25 bps)
Bankof Baroda
Rupa Rege Nitsure
(25 bps)
ICICI Securities PrimaryDealership
A Prasanna
Axis Bank
Saugata Bhattacharya
Anand Rathi Financial Services
Sujan Hajra
(25 bps)
No Yes
The cuts in cash reserve ratio had helped inject liquidityworth
~97,000 crore into the system TRACKING MOVEMENT
RBI cash reserve ratio
Jan 4,2010 Oct8,2012 6.50 6.00 5.50 5.00 4.50 4.00
4.50 5.00
In %
FinMin trying to ease RBI fears on new bank permits
BS REPORTER
New Delhi, 8 October
The finance ministry is exploring options to speed up the process of
issuing new bank licences, though the Banking Laws (Amendment) Bill is
yet to be passed by Parliament.
The Reserve Bank of India (RBI) is not in favour of giving out
licences without amending the law suitably. Officials said the finance
ministry was trying to address the concerns of the regulator.
"We are looking at all measures that can expedite the process…. RBI's
concerns are genuine and we are looking at some arrangement to address
those till the Bill is passed," said an official.
Officials said the matter was being discussed with RBI. The regulator
was expected to come out with guidelines in two to three months.
Many in the government, including Prime Minister's Economic Advisory
Council Chairman C Rangarajan, are of the view that new licences can
be issued according to current banking regulations and the law could
be modified in due course.
Industrial houses such as Larsen & Toubro, Reliance Anil Dhirubhai
Ambani Group, Aditya Birla Group and Shriram Group had expressed
interest in setting up banks.
Finance Minister P Chidambaram ruled out a probe into the "private"
deals between Robert Vadra and realty major DLF, saying allegations by
civil rights activists lack specific charges of corruption. "...
unless there is a specific allegation of quid pro quo or corruption, I
am afraid private transactions cannot and ought not to be allowed to
be questioned on the basis of imputations and insinuations," he said.
Those who made the allegations have made their statement, so did the
company concerned and the individual concerned. "Beyond that, I have
no facts," he said. BSREPORTER 'No probe into Vadra-DLF deal'
Retro taxchanges may not have to waittill Budget
BS REPORTER
New Delhi, 8 October
Finance Minister P Chidambaram today said his ministry need not wait
till the Budget to announce measures on the Parthasarathi Shome
committee's recommendations on retrospective amendments to the Income
Tax Act.
The resolution of pending and anticipated tax disputes would be good
for the country, the economy and investors, he said at the Economic
Editors' Conference here.
Chidambaram did not mince his words about the health of India's
economy. He said it was challenged and faced the risk of a severe
slowdown in the absence of reforms. The sustained slowdown, he warned,
would cast a shadow on job generation and income for a large part of
the population.
"I consider that it is my duty to place before the people the truth.
India's economy is challenged," he said, basing his assessment on the
Centre's fiscal and revenue deficits and India's current account
deficit.
As the recent FDI reforms drew flak from the Opposition, Chidambaram
cautioned Indias economy ran the risk of a sharp and continuing
slowdown without such steps. "The controversy over FDI in retail is
unnecessary and unjustified," he said.
The minister said the government would come out with a plan for both
the fiscal and revenue deficits for five years, starting from the
current fiscal. Pointing out that a high fiscal deficit, along with
supply-side constraints, had raised inflation, he said the RBI's
monetary stance and the Centres fiscal policies must be aligned.
He exuded confidence of meeting the Budget estimates of tax collection
(~7.71 lakh crore), disinvestment (~30,000 crore) and realisation from
the sale of telecom spectrum (Rs 40,000 crore).
This month, the Cabinet is likely to take up a disinvestment plan for
the remaining five months of the current fiscal. CHIDAMBARAM SPEAKS
|India's economy to grow twice as fast as global economy and four
times as fast as the advanced economies in FY13 |Global economy
expected to grow 3.5% & advanced economies 1.4% in 2012 |India should
aim at 8-9% growth rate in medium term |Will present full Budget next
financial year |No one will have confidence in Indian economy if there
is uncertainty about fiscal stability
Finance Minister P Chidambaram at the Economic Editors' Conference, in
New Delhi on Monday PHOTO: SANJAY K SHARMA
Warns of severe slowdown in the absence of reforms
NECONOMIC EDITORS' CONFERENCE N
Subsidy on LPG may be limited to a few
SANTOSH TIWARI
New Delhi, 8 October
The number of people availing of subsidy on liquefied petroleum gas
(LPG) cylinders is set to fall. And, the mode of this subsidy would
also shift — to a direct subsidy mechanism — sooner than expected.
If the finance ministry has its way, consumers may have to pay market
prices for LPG cylinders from early next year, or after the Budget,
with the subsidy reimbursed to customers directly. In the next phase,
the government would start targeting only particular sections to which
this facility would be extended.
According to the officials in the know, this LPG subsidy framework
would be implemented in a manner suggested by a task force headed by
Unique Identification Authority of India (UIDAI) Chairman Nandan
Nilekani.
They added with the capping of subsidised cylinders, the first phase
was complete, and work on the next phase would start next year. On
September 13, the government had limited the number of subsidised
cylinders per consumer to six a year. Against the subsidised price of
~410.43 per cylinder in Delhi, the marketlinked price is ~894.
To ensure a smooth transition from the current regime to the new LPG
subsidy regime, the Nilekani-led task force had suggested three-phased
implantation. In the first phase, it had recommended capping the
number of subsidised cylinders for all customers. The government has
already implemented this.
In the next phase, the government would target direct transfer of
subsidy to customers. One option to implement this is through the
Aadhaar platform, which UIDAI officials say could be developed in
three months with the help of oil marketing companies In the third and
final phase, the government would identify segmented customer groups
that can avail of the direct subsidy on LPG cylinders.
Officials say this is the most critical phase, adding a decision on
the implantation of the phases would depend on economic and political
considerations.
For full reports, visit www.business-standard.com
SAT upholds Sebi order on ex-director of Ranbaxy
PRESS TRUST OF INDIA
Mumbai, 8 October
The Securities Appellate Tribunal today upheld the Securities and
Exchange Board of India (Sebi)'s order slapping penalties on a former
independent director of Ranbaxy Laboratories and his wife for
violating insider trading norms.
Sebi had imposed a penalty of ~50 lakh on V K Kaul, who was a
non-executive independent director of Ranbaxy Laboratories between
January 2007 and December 2008, and a fine of ~10 lakh on his wife,
Bala Kaul.
On behalf of his wife, Kaul had traded in shares of Orchid Chemicals
and Pharmaceuticals Ltd ahead of large investments made by Solrex
Pharmaceuticals — part of Ranbaxy. The trading was done with the help
of unpublished price sensitive information.
In its order, the tribunal said Solrex's decision to buy shares of
Orchid Chemicals and Pharmaceuticals was UPSI for the insiders of
Solrex and they were prohibited from dealing in those shares till such
information becomes public.
"We, therefore, cannot find any fault with the findings arrived at by
the adjudicating officer that V K Kaul had traded in the scrip of the
target company (Orchid Chemicals and Pharmaceuticals) in the name of
his wife when he was in possession of UPSI that Solrex was to purchase
large number of shares of the target company for which funds were
being arranged by Ranbaxy," SAT said.
--
.
-
CS A RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
Company Secretary, Chennai
email csarengarajan@gmail.com
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