| Cabinet paves way for sale of Suuti stake |
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New Delhi, 9 January The government on Thursday decided not to dismantle the Specified Undertaking of Unit Trust of India ( Suuti) for now, paving way for sale of its stake in three private companies. The undertaking holds an 11.54 per cent stake in ITC, 23.58 per cent in Axis Bank and 8.27 per cent in Larsen & Toubro — worth ₹ 34,351 crore by Thursday's market value. Divesting part of these could help the government meet its target of raising ₹ 14,000 crore through sale of residual stake in non- government companies. However, sources said, it might not opt to offload the entire Suuti stake in these companies. Of its target of mopping up ₹ 40,000 crore through disinvestment in 2013- 14, the government has so far managed to raise less than ₹ 3,000 crore, including ₹ 1,637 crore from sale of stake in Power Grid Corp recently. Also, an empowered group of ministers headed by Finance Minister P Chidambaram earlier in the day deferred stake sale in Indian Oil Corporation on opposition from the petroleum ministry. The Union Cabinet on Thursday also cleared a proposal to refund the ₹ 11,258 crore Bharat Sanchar Nigam Ltd ( BSNL) and Mahanagar Telephone Nigam Ltd ( MTNL) had paid in 2010 for Broadband Wireless Access ( BWA) spectrum, in return for the airwaves held by them. Ahead of the Lok Sabha elections, the Cabinet Committee on Economic Affairs ( CCEA) also okayed a proposal to spend ₹ 10,000 crore on adding 10,000 seats in the existing central and state medical colleges. The Centre will provide ₹ 7,500 crore for the programme, while states will contribute ₹ 2,500 crore. "The proposal of the finance ministry ( with regard to Suuti) has been approved," Information & Broadcasting Minister Manish Tewari told reporters after a Cabinet meeting on Thursday. The Cabinet had in March 2012 agreed that Suuti should be wound up and its assets transferred to the proposed National Asset Management Company ( NAMC). Retaining Suuti will make divestment in the three private companies relatively easy, as a Cabinet clearance will have to be taken for stake sale after the assets are transferred to NAMC. The government is also in the process of selling its residual stake in Balco and Hindustan Zinc. It holds 49 per cent equity in the former and 29.5 per cent in the latter. The law ministry recently opined the government could go ahead with sale of its stake in Balco. BSNL and MTNL to get ₹ 11,000 crore in return for their 4G spectrum UNLOCKING VALUE Suutis holding in the three private firms Shares held Share Market value by Suuti price* (₹) of Suuti stake ITC Ltd 896.7 million 315.45 ₹ 28,287 cr L& T 50.5 million 971.60 ₹ 4,913 cr Axis Bank 97.2 million 1,184.95 ₹ 1,151 cr Total ~ 34,351 cr *Closing price on BSE on Thursday Source: BSE, Finance ministry OTHER KEY DECISIONS 4 > MTNL/ BSNL To revitalise BSNL and MTNL, the Cabinet cleared the proposal to refund ₹ 11,258 crore the two telcos had paid for BWA spectrum in 2010, on surrender the airwaves DUTY ON REFINED OIL An increase in import duty on refined edible oil to 10% was approved. The move is expected to fetch the government ₹ 600 crore revenue TV RATINGS REGULATOR To streamline the way TV channels are rated, the Cabinet approved a proposal to bring out an extensive regulatory framework |
| Corruption, blackmoney catch govt eye before polls |
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New Delhi, 9 January In what can be construed the Aam Aadmi Party ( AAP) effect, the Centre has expedited measures against graft and black money. After cracking down on Cyprus for not sharing information, the government is getting tough with other non- cooperating jurisdictions and setting up offices abroad to tighten the noose around evaders. Prime Minister Manmohan Singh has cleared the long- pending proposal to set up income- tax overseas units (ITOUs) in eight more countries, finance ministry officials said. Interestingly, the decisions came after the results of Assembly polls last month, characterised by Congress' defeat in four major states and the impressive debut of AAP in Delhi. ITOUs, which facilitate and expedite the exchange of information process under double- taxation avoidance agreements ( DTAA), were established in Mauritius and Singapore earlier. Later, the government announced to create ITOUs at Cyprus, France, Germany, Japan, the Netherlands, the United Arab Emirates, the UK and the US. The decision, however, has come only now. India has been putting pressure on tax havens to share information in whatever way it can. DTAAs are being renegotiated and new Tax Exchange Information Agreements are being signed. When it blacklisted Cyprus for not sharing information, the move was to send a strong message to other tax havens that India could take a similar action against them. Acting upon the list shared by France giving names of Indians with secret bank accounts in HSBC Geneva, the tax department has been issuing notices to people who are not sharing information. In this case, Finance Minister P Chidambaram recently wrote to Switzerland as without its help the Indian government cannot make much headway. Switzerland is one of the countries along with the UAE, Samoa and Seychelles, giving taxmen a tough time in dealing with people who have stashed money aboard. " We are taking whatever measures could be taken to unearth black money. The finance minister's letter can build ground for a Cyprus- like action against Switzerland, but it may not be required as the country may share information now," said an official requesting anonymity. Corruption is also a key item in the five- point agenda of Congress VicePresident Rahul Gandhi. In the Budget Session of Parliament next month, the last session before the general elections, the government is planning to ensure the passage of some anti- corruption legislations, which have been flagged by Gandhi and are part of the Congress agenda. These include Whistleblowers Protection Bill, Judicial Accountability Bill, Prevention of Corruption (Amendment) Bill, Citizens Charter Bill, Timely Delivery of Services Bill and Public Procurement Bill. India has also prevailed up on Mauritius to insert a clause on limitation of benefit in their DTAA to address round- tripping of funds. For full reports, visit www. business- standard. com NPLAIN POLITICS N PM clears long- pending proposal to set up units in tax havens |
| Reserve Bank of India eases FDI exit rules |
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Mumbai, 9 January The Reserve Bank of India has eased rules for foreign direct investment ( FDI), allowing exits subject to a lock- in period and without an assured return. This is expected to facilitate greater FDI flow. Till now, a company could only issue equity shares or compulsorily and mandatorily convertible preference shares or debentures as eligible instruments under FDI policy. These instruments were not allowed any optionality clause, obliging abuyback of securities from the investor. The permission to allow exit is subject to certain conditions. The lock- in period will be at least a year. If FDI regulations prescribe a higher lock- in, as the three- year norm in the defence and construction sectors, the higher duration applies. The lock- in shall be effective from the date on which shares or convertible debentures were allotted, RBI said. After the lock- in period, a non- resident investor can exit without any assured return. For a listed company, the nonresident investor can get out at the market price prevailing at the stock exchanges. In the case of an unlisted company, an investor can exit in equity new sectors. |
| Reserve Bank of India eases FDI exit rules |
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Mumbai, 9 January The Reserve Bank of India has eased rules for foreign direct investment ( FDI), allowing exits subject to a lock- in period and without an assured return. This is expected to facilitate greater FDI flow. Till now, a company could only issue equity shares or compulsorily and mandatorily convertible preference shares or debentures as eligible instruments under FDI policy. These instruments were not allowed any optionality clause, obliging abuyback of securities from the investor. The permission to allow exit is subject to certain conditions. The lock- in period will be at least a year. If FDI regulations prescribe a higher lock- in, as the three- year norm in the defence and construction sectors, the higher duration applies. The lock- in shall be effective from the date on which shares or convertible debentures were allotted, RBI said. After the lock- in period, a non- resident investor can exit without any assured return. For a listed company, the nonresident investor can get out at the market price prevailing at the stock exchanges. In the case of an unlisted company, an investor can exit in equity new sectors. |
| Tax rules yet to catch up with new FPI regime |
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Mumbai, 9 January The tax department is yet to issue a circular acknowledging the change in the regulations governing foreign investments into India. This creates a situation where foreign investors as defined by the stock market regulator have no mention in the nation's tax laws. While the Securities and Exchange Board of India ( Sebi) has revamped its Foreign Institutional Investor ( FII) framework and notified the new framework under the Foreign Portfolio Investment ( FPI) route, the tax regulations are yet to be amended accordingly. "Ideally, it should have been issued in a synchronised manner. As we speak, there is no such thing as an FII. But sometimes, the left hand does not know what the right hand is doing," said one person with a law firm, which advises foreign investors. "There is a need for a notification from the tax authorities on the issue so that all regulations are in line," said a senior official with a custodian, which holds securities for foreign investors. Sebi had said it had received aletter saying similar tax treatment would be meted to FPIs. "As regards FPI regulations, the communication from the Department of Economic Affairs to the CBDT ( Central Board of Direct Taxes) and to Sebi, conveying the decision that all three categories of FPIs would be given similar tax treatment as available to FIIs presently, was noted," it said in astatement after its board meeting on December 24, 2013. However, experts say this requires a formal notification from the tax department as well. The Income Tax Act still refers to foreign institutions as FIIs, a category made redundant by the new FPI regime. The term FII is used in sections including 115 AD 194 LD and 196D. These sections deal with issues such as tax deduction at source and capital gains tax. "Any person who is responsible for paying to a person being a Foreign Institutional Investor shall, at the time of credit of such income to the account of the payee, deduct income tax thereon at the rate of five per cent," says section 194LD. Suresh V Swamy, executive director ( tax and regulatory services), at PricewaterhouseCoopers pointed out the government has announced its intention to revamp the tax regime in accordance with the FPI framework. However, a notification is required to give this the effect of law. "There is still a need for some clarity from the point of view of taxation. The tax department will have to come out with a circular on migration from the FII to the FPI regime. That should, however, only be an operational issue since the intention seems to be to extend the FII benefits to FPI as well," he said. Yogesh Chande, consultant at Economic Laws Practice, said a notification is required for the tax laws to be in line with the changes brought about by the Sebi decision. "A notification should happen soon. In the interim period, it is expected that foreign investors will be guided by what Sebi has said," he said. Still operate under old FII framework; notification needed to bring these in line with FPI framework TAXING TIME FOR NEW REGULATION |Sebi changes foreign investor regulations, introduces FPI framework to replace FII rules |Has already brought new rules into effect with a notification |Tax rules still follow FII framework |Government has written to CBDT, saying same tax rules to apply |But a formal notification required for regulations to be in line with each other |
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