| IKEA may come to India with full global range | ||
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New Delhi, 21 January Seven months and many hiccups after Commerce Minister Anand Sharma and IKEA CEO Mikael Ohlsson sealed the deal at St Petersburg to bring the world's largest furniture chain into India, the Foreign Investment and Promotion Board ( FIPB) today fully cleared the Swedish group's proposal to invest ₹ 10,500 crore in the country, in a hurriedly called meeting. This was the largest investment proposal in single- brand retail so far. The € 25- billion firm can now set up furniture stores in India, along with restaurants and cafes, in line with its global concept. Though FIPB had struck off 50 per cent product categories from IKEA's wish list while giving it conditional nod on November 20, the chain has now been allowed to bring all the products it wants to. Since FIPB can on its own approve only the investments of up to ₹ 1,200 crore, it has recommended the IKEA proposal to the Cabinet Committee on Economic Affairs ( CCEA). Before leaving for Davos to attend the World Economic Forum, the commerce minister termed this " a positive development". He said: " The government is committed to playing a constructive role in encouraging FDI, especially in areas that create job and provide technological advancement. Globally, IKEA has a business model that integrates in its embrace SMEs and domestic industry, making it part of the global value chain." IKEA was taken by surprise at the quick development. Later in the evening, it said in a statement " according to the latest news reports, FIPB has approved the IKEA group's proposal in line with the IKEA concept". This was an important milestone in the application process, the company said. Juvencio Maeztu, IKEA's country manager for retail ( India), said: "We consider this a very positive development. We are now awaiting CCEA approval and a notification so that we can initiate the process of establishing IKEA stores in the country." IKEA's first India store might come up in 2014- 15, people in the know said. The IKEA proposal had mentioned the firm had a vision of establishing 10 stores over 10 years and around 25 over a longer period. These stores are likely to be spread over 100,000 sq ft. TWISTS & TURNS |Jun ' 12: IKEA files application with DIPP to invest ₹ 10,500 cr in setting up stores in India; tells govt 30% mandatory sourcing from MSMSEs impractical |Sep ' 12: Govt notifies amended single- brand retail policy, saying 30% sourcing has to be done from India, preferably from MSMEs |Nov ' 12: IKEA gets conditional FIPB nod to invest ₹ 4,200 cr in India; cafés, over 50% product categories stricken off |Dec ' 12: IKEA tweaks FIPB application in keeping with FIPB requirements, DEA raises queries; FIPB meet refuses to discuss issue; Department of Revenue raises concern over treaty shopping |Jan 21, ' 13: After 3 rescheduled meets, FIPB finally clears IKEA's full proposal | ||
| Govt raises Customs duty on gold by 2 percentage points | ||
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New Delhi/ Mumbai, 21 January The government today increased the Customs duty on gold and platinum by two percentage points to six per cent. With this, the duty on gold has gone up five- fold since January last year, when it stood at one per cent. The move is aimed at curtailing imports of the metals. Gold has been one of the biggest contributors to the spiralling current account deficit, at 5.4 per cent of the gross domestic product in the JulySeptember quarter. The government also allowed gold exchange- traded funds ( ETFs) to deposit part of the physical gold held by them with banks and proposed arelaxation in banks' gold deposit schemes to encourage individual investors to put their idle gold in circulation. India imported 969 tonnes of gold in 2011 ( calendar year) and 604 tonnes in 2012 till September, according to the World Gold Council. Announcing the steps, Economic Affairs Secretary Arvind Mayaram told reporters the steps would lead to moderation in imports, as the additional gold held by individuals and mutual funds would come out in the market and the demand would be met from within the country. Mutual funds would get amarginal interest for depositing the gold with banks. The duties would be reviewed after some time if there was a moderation in gold imports, he added. Banks have been advised to notify the changes in gold deposit schemes in the next two- three weeks. RBI would modify its guidelines, while Sebi would issue a circular with the changes. The moves are expected to free part of the ₹ 11, 674- crore gold held in ETFs by mutual fund houses for productive use by the gems and jewellery trade. Gold deposit schemes are offered by six banks, including State Bank of India and Canara Bank. It is on- lent by banks to gems and jewellery traders. At the end of the deposit period, the depositor is entitled to physical gold or its equivalent in cash at market prices. Bankers, however, say the schemes have not gained much traction as storage of gold is ahurdle. SBI officials say the bank has not yet on- lent the entire gold deposited with it. To make gold deposit schemes attractive, the government proposes to reduce the minimum quantity and the tenure ( to six months from three years at present). On fears the import duty rise would stoke gold smuggling, Revenue Secretary Sumit Bose said the government had options to deal with that. After today's duty hike, gold has become ₹ 350 per 10 g costlier. In Mumbai's Zaveri Bazaar, gold rose after the announcement to ₹ 30,415 per 10 g. Traders delayed invoicing of orders to make additional income. The metal rose ₹ 315 in New Delhi to ₹ 31,250 per 10 g. Gold futures spread shrinks The spread ( the difference between the near- month and far- month futures contracts on MCX) fell from ₹ 730 to ₹ 550, as prices in the current contract rose after the duty hike announcement, while profit booking in the April contract led to some moderation in prices. ETFs allowed to park gold with banks; move aimed at curbing import of the metal Gold price movement in 2012- 13 (₹/ 10 g) Gold imports Year $ billion 2008- 09 21.30 2009- 10 28.80 2010- 11 40.70 2011- 12 56.50 2012- 13 38.00* *Till Dec 12 Source: WGC, CEIC; Compiled by BS Research Bureau Recent duty revisions March 2012 (Budget): Further raised to Standard gold: Ad valorem 4% Non- standard gold: Ad valorem 10% Source: Bombay Bullion Association January 2012: Basic Customs dutyraised from ₹ 300 per 10 g to Standard gold: Ad valorem 2% Non- standard gold: Ad valorem 5% Gold ETFs allowed to deposit physical gold with banks |Gold lying in stock will be brought into circulation |Gems & jewellery sector's requirement to be partially met |The country's demand for gold imports will be brought down Changes to be made to Gold Deposit Scheme for individuals |Minimum quantity of gold that can be deposited will be cut |Minimum tenure of deposit will be reduced from three years to six months MANAGING CURRENT ACCOUNT DEFICIT | ||
| States' CST loss might dominate panel meet | ||
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Bhubaneswar, 21 January The contentious issue of compensating states for CST ( Central Sales Tax) loss is set to dominate the twoday meet of the empowered committee of state finance ministers here on GST ( Goods & Service Tax). The meet is scheduled on January 28- 29. "The issue of compensation against CST loss has emerged as the major bone of contention between the Centre and the states. All states have been vehemently demanding compensation. The issue is going to dominate the agenda at the upcoming meet of state finance ministers," said a source. In the last meeting of the empowered committee in the capital in December, states had said the Centre should not prune CST payout on the plea that some governments have benefited by raising the floor rate of VAT ( value added tax) to five per cent from four per cent. While most states have raised the base VAT rate to five per cent, some have even increased the general rate of 12.5 per cent, also called the revenueneutral rate. At a recent pre- Budget meet convened by the finance ministry with state finance ministers, Odisha reiterated its demand for CST compensation. State finance minister Prasanna Acharya held that Odisha had lost about ₹ 800 crore in the last two years on account of the CST rate reduction to two per cent from four per cent. To settle the row, a committee was constituted with representatives from central and state governments to address the contentious issue of compensation. The report will be considered in the coming meet of the empowered committee. | ||
| India to take up domestic brokers' issue with US govt | ||
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Mumbai, 21 January The Union government has initiated talks with its American counterpart to relax some rules to enable Indian brokers to tap US citizens with lesser regulatory obstacles. Stringent US federal securities laws have made it difficult for any non- American intermediary to solicit investors in the world's largest economy. For instance, such intermediaries should have a broker- dealer registration and also need to register the underlying securities they offer. A senior finance ministry official said certain regulations in this regard need to be relaxed. "Any money that you ( brokers) take from US investors puts you into trouble with the SEC ( Securities and Exchange Commission, the US capital markets regulator). Indian brokers won't also be able to raise funds through the QFI (qualified financial investor) route, as it would amount to solicitation," said Sandeep Parekh, founder, Finsec Law Advisors. "US regulations have extra- territorial effects unlike ours, which don't apply to those not registered with Sebi (our SEC counterpart)," said Siddharth Shah, head- funds practice, Nishith Desai Associates. In November, the SEC had penalised four Indian brokers for providing services to investors in the US without being registered. SEC says these firms were guilty of holding conferences in the US and offering Indian securities to US investors despite being unregistered brokerdealers. Following this incident, most Indian brokers have stopped tapping US investors aggressively. "If you solicit a trade in the US on non- registered securities, you are running a big risk. It is a very tough market for any non- US broker," said Anand Tandon, chief executive, JRG Securities. The government is concerned that the newly introduced QFI route here will be a non- starter for investors from the US, given the securities regulations there. " Given the bilateral ties, we believe some of these issues can be resolved. We expect some measures to be announced in this regard during the IndoUS dialogue in March," said an official in the capital markets division of the finance ministry. He said the recent SEC charges on Indian brokers was also likely to be brought up and the possibility of reversal of penalties explored. Turn to TSI, Page 2 > Stringent US federal securities laws have made it difficult for any non- American intermediary to solicit investors in the world's largest economy SEEKING EASIER NORMS |Govt believes relaxations possible given Indo- US bilateral treaty |Expects new measures during Indo- US dialogue in March |Issue of Securities and Exchange Commission's, ( the US capital markets regulator) charge against four Indian brokers to be raised |Domestic brokers encountering legal hurdles in US |Experts believe US unlikely to tweak rules | ||
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Company Secretary, Chennai
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