[aaykarbhavan] SOURCE BUSINESS STANDARD

Govt pushes reforms through ordinances

BS REPORTER New Delhi, 24 December Aday after the winter session of Parliament had to be adjourned sine die without any crucial Bill being passed because of a disruptive Opposition, the Centre on Wednesday approved ordinances to raise the cap on foreign equity in private insurers and start eauctions of coal blocks. The Union Cabinet approved the promulgation of the Insurance Laws (Amendment) Bill to raise the cap to 49 per cent from 26 per cent and re- promulgation of the Coal Mines ( Special Provisions) Bill, 2014. It approved another ordinance to regularise e- rickshaws, a scoring point for the Bharatiya Janata Party against the Aam Aadmi Party, ahead of elections to the Delhi Assembly expected early next year. It also allowed foreign direct investment ( FDI) without any ceiling in the medical devices market, to help boost manufacturing in the country. The Narendra Modi government expects the insurance law to bring $ 6- 8 billion into the country in a few years, while the coal law would help state governments earn ₹ 7 lakhcrore from the auction of 204 coal mines over 30 years. A dissent note to the select committee recommendations on the insurance Bill had said promoters would dilute their equity instead of raising fresh one, defeating the purpose of trying to increase the capital base. The recommendations are the basis of the ordinance. A source said the ordinance would leave it to the board of the company to decide on whether to dilute or raise equity, but the basic intent of the ordinance was to infuse capital and increase the solvency of Indian shareholders. Turn to Page 18 > CABINET DECISIONS On insurance |Cabinet clears ordinance on Insurance (Laws) Amendment to hike foreign equity cap in insurance companies to 49% from 26% |Both dilution of equity and raising of fresh capital to be allowed |Decision to be left to the companies' boards |Ordinance to allow promoters to cut stakes, subject to conditions in rules to be laid later |None of the companies listed, so FIIs' infusion limited |Govt expects $ 6- 8 billion foreign investment in a few years |Investors wary of ordinance route On coal blocks |Cabinet approves re- promulgation of ordinance on e- auction of coal blocks |Centre says states to earn ₹ 7 lakh- crore from the auction of 204 coal mines over a period of 30 years |₹ 3.5 lakh- crore to come as bidding amount and ₹ 3.5 lakh- crore as the royalty amount "It [ the ordinance] announces to the rest of the world ... this country can no longer wait even if one of the Houses of Parliament waits indefinitely to take up its agenda." ARUN JAITLEY Finance Minister ECONOMY, P4 Vajpayee, Malaviya chosen for Bharat Ratna Former PM Atal Bihari Vajpayee and educationist Madan Mohan Malaviya were on Wednesday chosen for the country's highest civilian award, the Bharat Ratna. The announcement came ahead of Vajpayee's 90th birthday on Thursday. Related reports on 4 > On pharma |FDI up to 100 per cent in medical devices permitted Promulgation of these for coal mines, insurance approved for President's assent

 

Govt approves 100% FDI in medical devices NREFORM DRIVE N BS REPORTER Mumbai, 24 December The central government on Wednesday approved 100 per cent foreign direct investment ( FDI) in medical devices via the automatic route. The move came as a relief to the Indian health care sector, because at the moment, India imports about 70 per cent of its requirement for medical devices. Under the automatic route, there will be no need for Foreign Investment Promotion Board's permission to acquire an existing company or set up a new manufacturing unit in the medical devices sector. According to Vrinda Mathur, director at Grant Thornton India, the move will give India's medical devices sector the much- needed impetus and capital to focus on capacity building and product development. It will also "set the foundation for India to become a significant player in the global medical devices market just like pharmaceuticals", he said. "Easing of norms for medical devices industry by creating special carve out in the extant FDI policy on pharma sector will encourage FDI inflows in this area," said the official statement issued after the Union Cabinet meeting in New Delhi. "In this age of super specialisation, if medicines and pharma are one aspect, in which India has attained a certain amount of core competence, we still haven't achieved that in medical devices, particularly which are to be installed in human body for the purpose of treatment," Arun Jaitley said on Wednesday. According to various reports, the health care sector in India is expected reach $ 150 billion in 2017, from $ 80 billion in 2012. The health care sector in India is expected to reach $ 150 billion in 2017, from $ 80 billion in 2012, according to various reports PHOTO: THINKSTOCK The move will give India's medical devices sector the much- needed impetus and capital, according to Vrinda Mathur, director at Grant Thornton India   Govt suggests tougher penalties for employers violating PF rules SOMESH JHA New Delhi, 24 December The Union government has suggested stringent penalties for violation of Provident Fund rules, including non- payment of contribution to the Fund despite deducting it from employees. While the proposed Act will retain the condition of imprisonment of at least one year, it has enhanced the penalty limit on establishment to be paid along with serving the jail term. Under the new rules, employers might have to pay ₹ 70,000 as penalty, a sevenfold increase from the current ₹ 10,000 if they do not deposit employees money in the Fund despite receiving it from them, according to a proposal by the Union labour ministry. The ministry has proposed amending the Employees Provident Fund and Miscellaneous Provisions Act, 1952, for this provision, among other changes. In case of other violations, such as false representation of facts to avoid the payment of provident fund amount, a penalty of ₹ 35,000 has been proposed, up from the current ₹ 5,000. However, a clause has been included to allow compounding of offence in case a court orders imprisonment for violation of norms. But in case of repeated offence, an employer might have to necessarily face imprisonment of up to two years along with a penalty of ₹ 2,00,000. At present, the law provides for only imprisonment without any penalty. In this case, there will be no compounding of offence. "No compounding provision has been proposed since the employer is making a repeated contravention of the provision of the EPF and MP Act," an official said. Another proposal dilutes the judicial power of the Employees' Provident Funds Appellate Tribunal ( EPFAT) by permitting a bureaucrat to become part of the panel. According to the proposed Bill, an appellate tribunal will now have two members – either a high court judge or a district judge and a union government official of the joint secretary level with experience in labour issues. Under the present law, the tribunal has only one member who is either a High Court judge or a district judge. A three- member Principal Appellate Tribunal is also proposed to be created which will have two members from the central government and one from the judiciary. This body will act in case of difference of opinion among the EPFAT members. "As and when there is any difference in the adjudication in the two member Tribunal, the matter shall be transferred to the Principal Appellate Tribunal at Delhi to adjudicate the matter," the proposal says, adding that the majority principle will then kick in. An official told Business Standard during 2013- 14, out of the total workload of 3303 cases with the EPFAT, 494 cases were decided. Hence, a total of 2809 cases were still pending at the end of 2013- 14. Appelate Tribunal has only one member who is either a high court judge or a district judge   No entry forwilful defaulters likely SAMIE MODAK Mumbai, 24 December The Securities and Exchange Board of India (Sebi) is likely to bar wilful defaulters from launching Initial Public Offers ( IPOs), while their access to the secondary market is likely to continue. An entity is tagged a wilful defaulter if he or it defaults despite having the ability to pay or uses the loan for purposes other than specified. The market regulator might only restrict such entities from accessing the primary market but not issue any major curbs on their secondary market activities, said three people in the know. Sebi is also expected to issue apolicy dealing with entities classified as wilful defaulters. The government and the Reserve Bank of India ( RBI) have already started tightening the screws on such defaulters, as non- performing assets ( NPAs) in the system are on the rise. Currently, entities listed as wilful defaulters by RBI aren't allowed to come out with a public issue of debt securities. However, there is no restriction on them from launching IPOs. Sebi is in favour of restricting such entities from the primary market. It is likely to expand the conditions laid down in the Issue of Capital and Disclosure Requirements regulations, to restrict wilful defaulters from raising fresh equity from the public, said a Sebi source. Adding, it isnt keen on a total capital market ban. It means a company, if declared a wilful defaulter, may still be able to come out with a rights offering. Or a promoter entity categorised as a wilful defaulter will be allowed to make an open offer to fend off hostile takeovers. The issue of imposing restrictions on such defaulters was discussed at Sebi's board meeting last month. It was again taken up at the Primary Market Advisory Committee meet, earlier this month. Market experts are divided. "There should be a complete ban on wilful defaulters. Entities are so tagged for a reason. They default on loans despite having the capacity to repay. There should be no place for such entities in the capital market," said Prithvi Haldea, chairman, Prime Database. Some however, believe banning already listed companies might not be in the interest of public shareholders. " A listed company declared a wilful defaulter doesn't get proper access to bank finance. If it is also barred from raising equity capital through a rights issue or private placement, it could prove a death knell. Sebi should allow an existing company to tap the capital market on a case by case basis," said B Corporate Services, and head of the sectoral body for investment bankers. The curbs on wilful defaulters could hit companies which solely come out with IPOs to repay loans, said some bankers. Identifying such defaulters could also be contentious, said the Sebi source. The financial institutions give details in this regard to RBI. The list is made available to Sebi by the RBI and the Credit Information Bureau of India. Technically, a borrower is declared a wilful defaulter by RBI's intermediary, not by the central bank itself. The regulator is said to be debating whether it would be appropriate for it to take action based only on a list prepared by RBI's intermediary. IPO WINDOW Access to secondary market could, however, continue; Sebi discusses issue, likely to soon propose new policy guidelines DEFAULT SETTING |Entities declared wilful defaulters might not be allowed to come out with public issue |Listed companies declared wilful defaulters, however, might be allowed rights issue |Promoters declared wilful defaulters could be allowed to make open offer to prevent hostile takeovers |A borrower defaulting on loans despite having repayment ability is termed wilful defaulter |RBI, government have been tightening the noose around defaulters, as NPAs have reached alarming levels |Sebi, too, is expected to issue policy to deal with wilful defaulters in capital markets

 

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