FDI policy set for revamp
Govt moves to bring in more clarity on definition of ' control'
SURAJEET DASGUPTA & VRISHTI BENIWALNew Delhi, 13 March
In its bid to bring more clarity on the definition of ' control' in the country's foreign direct investment (FDI) policy, in sync with that in the Companies Bill, the Department of Industrial Policy and Promotion ( DIPP) would soon move a Cabinet note to amend the policy.
This would be to clearly define the rights of a person or company, especially foreign, with controlling stake in an Indian entity. Accordingly, the Reserve Bank of India ( RBI), too, would amend the Foreign Exchange Management Act ( Fema) to include the new definition.
Besides, in what could be seen as a revamp of the FDI policy, a committee on ' improvement of capital flows — FDI and portfolio', under the finance ministry, has decided to bring rules to allow foreign investment in consultancy and advisory services for the construction & development sector. It has also allowed warrants and partly paid shares to be considered as instruments for FDI and imposed new equity limits for Indian investors in construction &development joint ventures, among other things.
The finance ministry has also asked RBI to immediately notify press notes 2, 3 and 4 of 2009 that specify the method to calculate foreign investment and the requirement of an approval from the Foreign Investment Promotion Board for transfer of control in companies with sectoral caps. These notes had become controversial as these said foreign investment through an investing Indian company would not be considered for calculation of indirect foreign investment if an Indian company was 'owned and controlled' by a resident Indian citizen. But, if an investing company was owned or controlled by a non- resident entity, the entire investment by the investing Indian company would be considered as indirect foreign investment. However, there were some exceptions, especially in relation to 100 per cent subsidiaries of investing companies.
Earlier, RBI had proposed doing away with sectoral caps, or administering those through sectoral regulators concerned.
The finance ministry had said that would require modification in the definition of 'control', besides notification of press notes 2, 3 and 4.
The Companies Bill says 'control' should include " the right to appoint a majority of directors, or to control the management or policy decisions excercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholder agreements or voting agreements or in any other manner".
In the construction & development sector, there are separate minimum capitalisation norms for JVs and wholly owned subsidiaries. However, under the new rules, to qualify as aJV, an Indian investor must have ashare of at least 25 per cent.
Also, to protect foreign companies' investments, the government is planning to allow FDI only through the escrow mechanism.
Besides, under the new rules of issuance of warrants for foreign investors, listed companies would have to follow the regulations of the Securities and Exchange Board of India, while unlisted ones would issue warrants with 25 per cent upfront payment and conversion within 18 months. For issuance of partly paid shares to foreign investors, both listed and unlisted firms would have to make 25 per cent upfront payment and the shares would have to be made fully paid- up within 18 months. PLUGGING THE HOLES
|The definition of ' control' will be brought in sync with that in the Companies Bill |The rights of a person or company, especially foreign, with controlling stake in an Indian entity will be clearly defined |RBI will, accordingly, amend Fema to include the new definition
Clear dues by Mar 31 or face action: I- T dept to defaulters
BS REPORTERNew Delhi, 13 March
Continuing the scaled- up effort to nab tax dodgers, the Income Tax ( I- T) Department today warned over 73,000 tax assessees who had filed returns electronically for the current financial year to pay their tax dues aggregating close to ₹ 4,000 crore by March 31 or face penal consequences.
In a statement, the department said an analysis of returns filed electronically in 2012- 13 revealed 73,388 taxpayers had defaulted on such payments, amounting to ₹ 3,859 crore.
"Filing a return without paying the admitted amount of tax that is payable will render such taxpayer an assessee in default under the Act's provisions. Such taxpayers who default in payment of self- assessment tax may invite penal consequences," the department warned.
It urged all taxpayers who'd filed returns in the current financial year and defaulted on payment of self- assessment tax of any amount to pay the dues before March 31.
The I- T Act requires payment of dues on all income chargeable to tax in the financial year concerned, before filing the return, the department reminded the assesses.
"Further, any taxpayer who files his return in the future, and on self- assessment indicates a certain amount of tax payable, should pay such tax while filing the return," the department cautioned.
The revenue department is plugging each and every source of revenue to achieve the ₹ 5.65- lakh- crore target under the direct taxes category for this financial year, which will end on March 31.
This is yet another measure on the part of the IT department to tighten the noose on the dodgers. It has already written to 70,000 permanent account holders, who had emerged as high value spenders from various pieces of information, to file returns.
It is also planning to make electronic filing of returns mandatory for taxpayers with taxable income above ₹ 5 lakh. At present, those with income above ₹ 10 lakh are required to file their returns in the electronic mode.
More than 73,000 tax assessees, who had filed returns electronically, warned to pay tax dues aggregating close to ₹ 4,000 cr
Depository banks approach Sebi
SAMIE MODAK & SACHIN P. MAMPATTAMumbai, 13 March
Depository banks have approached Indian regulators and the government for a review of the regulations governing the issue of depository receipts ( DRs). They have asked for the introduction of over- the- counter ( OTC) DRs or instruments, which would allow foreign investors to invest in Indian equities in their own local markets.
BNY Mellon, a global investment firm that acts as a depository (a holding entity for a security) for more than 2,700 American and global DR programmes, recently held meetings with the finance ministry, Securities and Exchange Board of India ( Sebi), and the Reserve Bank of India ( RBI) on the possibility of allowing such instruments, according to a statement from the company.
"In permitting OTC noncapitalraising DRs, India would join 67 other countries that provide investors with access in this way, including Brazil, South Korea, South Africa and Turkey," said BNY Mellon in a statement.
According to sources, two other institutions have also informally approached the regulator with a similar proposal.
The instrument would allow an overseas investor to ask his local broker to purchase shares of a company which can then be converted into DRs. Current regulations do not allow for issuing DRs where there is no capital raising by the company. Major depository banks have been pressing for the opening up of this route for 20 years or more, said a market source. While a rationale of greater foreign investor comfort with their own markets could have applied earlier, Indian trading and settlement systems are world- class now, the source added, suggesting even lesser rationale for the route in todays times.
According to BNY Mellon officials, this could potentially bring in billions of dollars of additional liquidity to the Indian markets from global funds, which have a specific mandate of investing through depository receipts. The firm noted that nearly half of such funds do not buy shares directly from the market.
Gregory Roath, BNY Mellon's Asia- Pacific head of depository receipts, said: " We are often asked, especially by US investors, to establish ADR (American depository receipt) programmes for Indian companies, but are restricted from doing so by current regulations. There is significant international demand for Indian equity in the form of DRs that simply cannot be satisfied via the routes now available. Many investors prefer the familiarity and convenience of DRs, are unable to invest directly, or are unable or unwilling to use derivatives." Avinash Gupta, senior director and leader ( financial advisory), Deloitte India, noted that there are advantages in the home market which would be difficult to beat for DR investors.
"While there could be advantages in some selective situations, factors such as analyst coverage and greater liquidity in India for securities of local firms suggests that there is a better rationale for direct investment rather than through such routes," he said.
DEPOSITORY RECEIPT REGIME REVIEW INDIAS TRYST WITH DEPOSITORY RECEIPTS
|Indias first depository receipt ( DR) programme for Reliance Industries established in 1992 |Since then 330 companies have created DR programme |13 listed on New York Stock Exchange or NASDAQ |24 listed on London Stock Exchange |Remainder used Luxembourg Stock Exchange or Singapore Stock Exchange
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Thursday, March 14, 2013
Re: [aaykarbhavan] Buainess standard news updates 14-3-2013
On Thu, Mar 14, 2013 at 6:52 AM, CS A Rengarajan <csarengarajan@gmail.com> wrote:
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