Policy Tracker - Livemint.com

Hike in spectrum usage charges likely to net extra Rs4,000 cr

Shauvik Ghosh — Mon, 23 Nov 2009 17:28:00 GMT

New Delhi: The department of telecommunications, or DoT, is considering increasing the spectrum usage charge paid by telecom operators by 1 percentage point, according to two DoT officials.

The move is expected to earn the government around Rs4,000 crore more per year, according to two analysts tracking the sector. This is apart from additional earnings the government will get from rolling out high-speed 3G, or third-generation, spectrum early next year. The analysts did not want to be named as they are not authorized to speak to the media.

Also See Costlier 2G

The DoT officials said the government is now looking into its proposal.

Telecom service providers pay between 2% and 6% of their adjusted gross revenue, or AGR, to the government as per the universal access services (UAS) licence agreement with DoT. The spectrum usage charge depends on the amount of spectrum each operator has in each of the circles it operates in.

In December, the Telecom Regulatory Authority of India, or Trai, had agreed to endorse DoT’s recommendations on hiking the spectrum usage charge. The plan, however, was not implemented as it was dependent on the auction of 3G spectrum, which got delayed by almost a year due to differences between the ministry of defence and DoT over the vacation of spectrum as well as the general election in April-May.

The decision to increase the charge comes with a large amount of uncertainty as the telecom regulator is already looking into the 2G spectrum committee report that discusses a range of issues, including the delinking of spectrum from the licence and the auctioning and trading of spectrum.

As per the telecom commission’s decisions in December, phone operators offering only 3G services would be liable to pay a flat 3% of their AGR. In the case of mobile phone service providers already offering 2G services and looking to offer 3G services, there would be no additional charge as they will already be paying a higher levy after the hike in spectrum-linked fees.

India is the second largest telecom market in the world after China and the fastest growing market. By end-October, the country added at least 16 million subscribers taking the total number to 525.65 million, including 488.4 million wireless or mobile phone subscribers.

But the rate of growth of DoT’s earnings from spectrum has fallen from 79% in 2006-07 with a revenue of Rs2,090.39 crore to 13% in 2008-09 with revenue of Rs3,454.55 crore.

“The arbitrary pricing of spectrum, which is not based on any study or analysis, is a bad idea,” said Mahesh Uppal, a regulatory expert and a director at Com First (India) Ltd, which deals with telecom policy. “Any price on spectrum determined by means other than market forces is a bad idea as it comes with other arbitrary influences, including bureaucratic or political. The other argument is that spectrum pricing linked to revenue does not give any incentive for the efficient use of what is a limited national resource,” he said.

An executive with a new telecom operator, who did not want to be named due to the sensitivity of the issue, questioned the fairness of the proposal.

“What about those who do not get 3G spectrum and only have 2G spectrum? Also, the new operators will have to pay a higher fee while the incumbent operators have been paying the lower fee for so many years,” he said.

The country’s largest mobile operator, Bharti Airtel Ltd, for instance, paid Rs316.87 crore as spectrum usage charge for the quarter ended September.

Graphics by Sandeep Bhatnagar / Mint

shauvik.g@livemint.com

BofA-Merrill fears delay in financial reforms

Nishant Kumar and Pratish Narayanan / Reuters — Mon, 23 Nov 2009 09:17:00 GMT

Mumbai: India, whose protected financial sector helped insulate it from the worst of the global economic meltdown, should not be complacent in its push for financial sector reforms, a top Bank of America-Merrill Lynch executive said on Monday.

“One thing that does worry me is that the conservative nature of Indian regulation. That may persist longer than it would otherwise have done because of the financial crisis,” said Kevan Watts, who heads the combined Indian operations of Bank of America and Merrill Lynch.

The rousing re-election of the Congress party-led government in May, which freed it from dependence on communist allies, lifted hopes of an acceleration in long-delayed financial reforms.

But the global financial meltdown has dampened Indian appetite for financial liberalisation, especially as limits on foreign banks and active regulation of the financial sector were seen as sheltering it from the worst of the downturn.

“The danger is, that if you like, India will rest on its laurels of having circumvented the crisis well,” Watts told the Reuters India Investment Summit in Mumbai.

India has for years talked about allowing a greater role for foreign banks and giving equal voting rights to foreigners in private-sector banks, currently limited to 10% irrespective of their actual holding.

No foreign firm is allowed to operate in the pension sector and private Indian players have only a limited presence.

The life insurance market was opened nine years ago, but companies are not allowed to raise debt or go public in their first decade of operation, putting the onus on shareholders to fund costlier growth.

Foreign ownership in the life insurance sector is capped at 26%.

Watts said financial reforms could help India’s large savings to make its way into productive investments.

India has about $400 billion in domestic savings, but little is funnelled through the banking channel currently to fund, for example, the country’s huge requirements to build infrastructure.

Capital Flows

Watts, who has spent nearly three decades with Merrill Lynch and has been based in India for about 18 months, said swings in foreign capital flows were a concern, but taxing them was not a solution.

“I think volatility of fund flows is certainly something I would be worrying about if I was advising the government,” said Watts, who early in his career worked for the British treasury.

“When you start taxing things, there are a lot of unintended consequences,” the Oxford alumnus said, adding, “Critically for India, any unilateral move of that kind would really damage its reputation globally.”

He said India should instead use existing mechanisms, such as sterilising inflows by issuing special bonds. India’s central bank has in the past used market intervention bonds to absorb excess liquidity generated by large foreign capital inflows.

Foreign investors have so far bought more than $15 billion of local equities in 2009, after selling $13 billion in 2008, helping send Indian stocks up about 75% and lifting the rupee to its highest in more than a year.

The capital inflows are part of a trend globally that is seeing investors chasing faster growing emerging markets, given sluggish recovery and low interest rates in developed economies.

This has raised concerns inflows may create asset price bubbles and drive currencies to uncompetitive levels. That has prompted some economies, including Brazil and Taiwan, to impose controls and others, such as Russia, to say they were considering such steps.

Watts said India should also encourage more domestic participation in its equity markets to counter the impact of foreign investment flows.

Indian institutional investors lack muscle to counter rapid fund flows. For instance, government pension funds are not allowed to invest in equities, while investment by private pension funds is limited to just 5% of their assets.

Financial reform is “not about whether foreigners can own 49% of life insurance joint ventures or 26%,” he said. “Perhaps the most important thing that the Indian government can do is to encourage the further development of domestic Indian institutional investors,” he said.

Fuel-efficiency standards for automobile sector by 2011

PTI — Mon, 23 Nov 2009 07:39:00 GMT

New Delhi: The Government is in the final stage of notifying the fuel efficiency standards for automobile sector in the country which will be enforced from 2011, environment minister Jairam Ramesh said on Monday.

“We are right now engaged in finalising administrative formalities on how these standards has to be notified either through the Energy Conservation Act or the Motor Vehicles Act,” Ramesh said at the inaugural session of the two-day 4th Environment Friendly Vehicles (EFV) conference here.

He said there is no two views that “we should move to a mandatory fuel efficiency standards regime by 2011” as the transport sector contributes about 15 to 20% of the total greenhouse gas emissions in India. How it should be done is being debated within the government, he said.

At present, transport sector is placed at number three after the power and agriculture sector as far as the national emissions are concerned.

“But the rate at which the automobile sector is growing our own estimations are that by the year 2030 it could account close to 25% of our GHG emissions. Hence not only because of the air pollution point of view but also the climate change point of view, environment-friendly transportation assume special importance,” Ramesh added.

Ramesh said by 2011, it will be mandatory for automobile manufacturers to sell vehicles with energy-efficiency tags, adding the information on the labels will have to be certified by the Bureau of Energy Efficiency (BEE).

The industry has already come on board for voluntary certification and in two years will take on the mandatory norms.

“The labelling of vehicles will not be based on one standard but different standards for different categories of automobiles such as small cars and commercial vehicles.

“Also, instead of California route which mandates curtail on emissions, we will follow a conventional route of legislating the KMP (kilometre per hour) figure,” Ramesh said.

The government’s decision on mandatory fuel efficiency standards holds importance against the backdrop of the next month’s Copenhagen summit on climate change where India can showcase its commitment to emerge with solutions to tackle global warming.

The environment minister also discussed about the recently notified air quality standards, which he said put India on par with Europe and in many cases were much more stringent than those in the US.

Govt to amend new sugarcane price rule

Mayank Bhardwaj and Nigam Prusty / Reuters — Fri, 20 Nov 2009 10:37:00 GMT

New Delhi: The government on Friday said it would amend a new sugarcane pricing rule, bowing to protests held in the capital by farmers demanding higher prices for their produce.

The government would delete the contentious part of the new cane pricing rule, Union railways minister Mamata Banerjee told reporters after a meeting of senior ministers.

Cane farmers believe the new cane price rule, which puts the onus on state governments if they decide to raise the cane floor rates fixed by the Union government, will curtail their bargaining power.

“We have agreed to farmers’ demand in larger interest,” Banerjee said, adding the government would introduce a new legislation in parliament on Monday to change the rule.

Farmers from Uttar Pradesh (UP), which produces almost half of the country’s cane, have been on warpath for about three weeks to press for higher prices, forcing Prime Minister Manmohan Singh to consider changes in fixing cane prices.

The truce would pave the way for crushing, which had been delayed, said Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd.

The severe protest has hampered crushing in the state raising fears of more imports by India, a major factor in helping global sugar prices double this year.

“The delay of almost six weeks has tightened supplies further. Everyone was depending on UP mills to start on time to tide over the situation,” Yatin Wadhwana, head of Sucden India, told Reuters.

India, the world’s top consumer and the biggest producer behind Brazil, has placed an import order of a record 5 million tonnes of raws, pushing New York-traded raw sugar to 28-1/2-year highs.

ICE benchmark March raw sugar futures on Thursday fell 0.56 cent to settle at 22.74 cents per lb on investor sale caused in part by a rebounding dollar.

Traders say indications of lower output and a delay in crushing would put further upward pressure on global prices.

“Had mills been crushing in UP for six weeks now, supplies would have improved by at least 150,000 tonnes. When stocks are low, any delay adds to shortage,” Wadhwana said.

Union agriculture minister Sharad Pawar early this month said India would consume up to 7 million tonnes more sugar than it would produce in 2009-10 and the imported raw sugar being processed in the new season would not be enough to bridge the deficit.

India’s sugar year runs from October to September.

Analysts, who expect the country to import 2-3 million tonnes more, say purchases would largely depend on output in the year to September 2010.

The US Department of Agriculture on Thursday forecast India’s sugar output at 17.3 million tonnes in 2009-10, while industry and government officials see production at 16 million tonnes, largely due to fall in cane area in UP.

Lower cane production clipped sugar output by 43% to 15 million tonnes in 2008-09, prompting the government to abolish import tax on sugar in early 2009.

“Sixteen million tonnes will not be enough. To add to our woes, delay in crushing in UP has squeezed supplies further,” said said Veeresh Hiremath, a senior analyst with commodity brokerage Karvy Comtrade.

About six of 150 sugar mills in the state have started crushing cane, said CB Patodia, chairman of the Uttar Pradesh Sugar Mills Association.

“We believe the issue will be resolved soon and expect crushing to gain momentum in 3 to 4 days,” he said.

Joint committees to be set up in states for input on GST

PTI — Thu, 19 Nov 2009 18:14:00 GMT

New Delhi: The Empowered Committee of State Finance Ministers will form joint committees at the level of the states for inputs on the proposed goods and services tax before its planned introduction next year.

“A joint committee at the level of the states will be made and that will be a part of the exercise for preparation to implement GST. The committee will be made along with other representatives of state associations and industry associations,” chairman of the empowered committee Asim Dasgupta said after a meeting with the Confederation of All India Traders.

Traders want GST to be imposed only by the states with the centre getting a cut of the revenue. The empowered committee recently came out with its first discussion paper on GST, on which stakeholders need to give comments and suggestion within a month. Dasgupta said that the IT structure also needs to be ready by mid-January for implementing the proposed indirect tax structure. The new tax structure that will do away with most of the indirect taxes at the Centre and the states level is scheduled for implementation from 1 April, 2010.

Asked about tax rates under the regime, he said: “The rates will take another month to be finalised.”

On spirits as a commodity being out of the GST regime, he said: “In the first phase of implementation we have kept it out as many states are very dependent on revenues from liquor sale.”

Opposition protests sugar cane policy, govt blinks

Santosh K. Joy — Thu, 19 Nov 2009 17:51:00 GMT

New Delhi: The Congress party-led United Progressive Alliance (UPA) government on Thursday yielded to a protest by a united opposition against its new sugar cane pricing policy and promised an all-party meeting on Monday to discuss the issue.

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The Sugarcane Control (Amendment) Order 2009, an ordinance passed in October, has changed the government’s sugar cane pricing policy by fixing a uniform price, which would financially burden the states should they announce prices that are higher than the Centrally fixed price. Earlier, the sugar mills paid the difference.

The opposition, led by Samajwadi Party chief Mulayam Singh Yadav, Rashtriya Lok Dal president Ajit Singh and Bharatiya Janata Party (BJP) chief Rajnath Singh, protested the move in the Lok Sabha. Speaker Meira Kumar adjourned the House.

“We are ready for a talk if the anti-farmer component of the ordinance is removed,” said BJP’s Arun Jaitley, leader of the opposition in the Rajya Sabha.

After the opposition’s protest and a demonstration by farmers in front of Parliament, which was attended by almost all non-UPA parties except the Bahujan Samaj Party, Prime Minister Manmohan Singh called a meeting that included finance minister Pranab Mukherjee, home minister P. Chidambaram and law minister Veerappa Moily. A separate meeting was held in the agriculture ministry later in the day.

“We are open for discussion on all issues,” parliamentary affairs minister P.K. Bansal told reporters in the evening.

United front: RLD president Ajit Singh (left) with SP chief Mulayam Singh Yadav at a farmers’ rally in New Delhi. Shabaz Khan / PTI

The opposition is also demanding that the government stop imports of sugar from Brazil, claiming it is against the interest of farmers.

UPA ally Dravida Munnetra Kazhagam and Trinamool Congress supported the opposition. Congress general secretary Rahul Gandhi met Manmohan Singh in the afternoon to discuss the situation.

“We demand at least Rs250 (per 100kg) as the cane price,” said Anil Singh, secretary of the National Alliance of Farmers’ Associations.

Protesting farmers had threatened during their demonstration on Thursday that they would burn their produce unless mills double last season’s price of Rs140 per 100kg.

Anti trust and India

Samanth Subramanian — Wed, 18 Nov 2009 19:45:00 GMT

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New Delhi: Yet again, one of the world’s premier technology companies, Intel, is facing severe antitrust regulation, particularly in Europe. This news emerges even as India’s own Competition Commission prepares to create an environment of regulated competition in the country. The mechanics of lopsided competition are clear: If a giant company crushes all of its smaller competitors, we as the consumers lose out.

But how does an authority decide when a company is violating competition law? How do you differentiate the advantage derived from simply having a better product from that derived from anti-competitive policies? And with the antitrust environments in Europe and the US already being so different, what sort of environment can we expect to emerge in India?

Our guest on Just to Clarify today is Vinod Dhall. Dhall is the former chairman of the Competition Commission of India.

Vodafone, Bharti come under tax scanner in Uttar Pradesh

Sangeeta Singh and Shauvik Ghosh — Wed, 18 Nov 2009 18:23:00 GMT

New Delhi: Telecom firms Vodafone Essar Digilink Ltd and Bharti Airtel Ltd will be examined by special auditors for wrongfully availing of Cenvat (Central value-added tax) credit and non-payment of service tax in the Uttar Pradesh (UP) circle, an official said.

Closer look: A file photo of an Airtel showroom in New Delhi. A team of cost accountants will look into the books of Bharti Airtel and Vodafone Essar Digilink for five years to check for discrepancies. Madhu Kapparath / Mint

“This is a special audit covering all aspects of audit with a focus on wrongful availment of Cenvat credit by the two companies,” Suchitra Sharma, commissioner, Central excise and service tax, Lucknow, said. Sharma also said that while the Central excise commissioner’s office undertakes routine audits of companies, this is a special one that will be done by an outside agency.

Cenvat is an input tax on the purchase of raw materials and capital goods. Service providers in India are entitled to claim a set-off of various input levies (such as excise and countervailing duty) on the purchase of capital goods and inputs used in producing output services. This set-off, claimed from the government, is commonly known as Cenvat credit.

Bharti Airtel said the notice was a routine one and that it was compliant with all rules.

“At Bharti Airtel, we strictly follow all statutory, regulatory and fiscal guidelines. We have received a letter from the Lucknow office of the Central excise department on the utilization of Cenvat credit in Uttar Pradesh. This is a routine inquiry and the company will comply with all requirements as per law,” said a spokesperson.

Vodafone Essar Ltd, which owns Vodafone Essar Digilink, declined to comment on the issue. A Vodafone executive, who didn’t want to be identified, said the company hadn’t received any notice.

“The special audit in the case of Vodafone and Bharti will essentially look into the aspect of leakage of revenue that has been found in the books of accounts of these companies,” said a professional close to the development, who did not want to be identified. “A team of cost accountants will look into the books of these companies for five years. In a similar inquiry for the Delhi circle earlier this year, a recovery of Rs125 crore was made.”

Sharma said the government has already completed its own audit and had hired professionals for a closer look at the accounts.

The lack of clarity in the definition of capital goods under the Cenvat credit rules has been creating confusion, especially for telecom operators, according to Siddharth Mehta, senior manager (indirect tax) at audit and consulting firm KPMG.

“Although I am not aware of this particular audit, telecom service providers have been facing problems in interpreting what qualifies for Cenvat credit and what does not— both under capital goods and inputs,” he said. “For instance, while some service providers consider facilities such as towers and shelters as capital goods, the rules do not consider them as capital goods on a strict interpretation.”

Mehta also said the broad objective of the credit scheme under Cenvat in principle is that credit to service providers be available for all goods used in providing taxable services.

“The way out now is implementation of the goods and services tax (GST), under which the credit regime is expected to be liberal and applicable to all business activity,” he added. The Union government wants to implement a uniform GST across the country by 1 April, a step that’s being resisted by some states.

The department of telecommunications (DoT) already has audits running on the two firms along with other major incumbent operators Idea Cellular Ltd and Tata Teleservices Ltd after the Telecom Regulatory Authority of India suggested this be done. All the reviews pertain to fiscal 2007 and 2008. The audits were called after brokerage firms pointed to some discrepancies in revenue reported by Reliance Communications Ltd (RCom). RCom has disputed the findings of the DoT-ordered special audit.

At the end of September, Bharti Airtel, India’s largest telecom firm, had 7.2 million of its 110 million total mobile subscribers from the UP (east) operating area. Vodafone Essar had 8.2 million mobile subscribers from this operating area out of its total 82.8 million subscribers.

sangeeta.s@livemint.com

Govt not worried about rise in capital inflows

Manoj Kumar and Rajesh Kumar Singh / Reuters — Wed, 18 Nov 2009 10:34:00 GMT

New Delhi: India would have the tools ready to deal with an influx of foreign capital inflows if they become disruptive, Union finance minister Pranab Mukherjee told reporters on Wednesday.

With Western economies still crawling out of recession and interest rates at or near historic lows, funds have been flooding into faster-growing Asian markets.

Indian officials had said on recent occasions that they welcomed fund inflows, but Mukherjee on Wednesday also noted that India is ready to deal with the flows if they become a problem.

“It is not a matter of concern as we have the system of monitoring,” he told reporters.

“And whenever we will find that there are some distortion, then we will have the arrangement to counteract it,” he said on the sidelines of an event.

“Therefore, it would not be disturbing,” Mukherjee added.

Higher capital inflows have been instrumental in driving up stock and property prices and prompting Asian central banks, including the Reserve Bank of India (RBI), to adopt measures to curb a surge in real estate prices.

Foreign investors have bought more than $15 billion of local equities in 2009, after selling $13 billion in 2008, helping send Indian stocks over 75% higher.

The influx of foreign funds is also pushing up the rupee.

The RBI has said there was a risk that if it raised interest rates ahead of other central banks, it could attract more inflows and complicate policymaking.

Higher capital inflows have resulted in currency appreciation mainly in Asia and Latin America, prompting central banks contemplate a range of measures to hold back the tide.

Late on Tuesday, an Indonesian central bank deputy governor said it was considering curbs on foreign holdings of its short-term debt, but the government said on Wednesday it has no plan to limit foreign holdings of its debt.

Talk of controls has surfaced from Turkey to South Korea either by taxing investments or by curbing lending from overseas.

Brazil last month slapped a 2% tax on financial inflows while South Africa loosened exchange controls allowing companies to hold cash overseas.

India has refrained thus far from imposing any such curbs.

Sebi to insist on margins upfront in cash

N. Sundaresha Subramanian and Anirudh Laskar — Tue, 17 Nov 2009 18:40:00 GMT

Mumbai: India’s capital markets regulator plans to make it mandatory for brokers to collect money upfront as margin from all investors before initiating trades in cash segment. At present, this is left to the discretion of brokers.

“It’s not very transparent how brokers manage risks if there is a client default. To avoid this, we are working out ways to make client-level margining compulsory in the cash segment,” a senior official of Securities and Exchange Board of India, or Sebi, told Mint, speaking on condition of anonymity.

For trades in derivatives segment, brokers are required to collect a margin upfront from investors.

According to the National Stock Exchange’s website, clearing members and trading members are required to collect upfront initial margins. The Nifty futures margins level is 10% and the margin requirement for stock derivatives varies from 15-35%, depending on the volatility of stocks.

For the cash segment, there is no such clear directive, though there is a suggestion that margins could be a part of risk management.

The Sebi move to have similar norms for both cash and derivatives follows the recent tightening of the rules governing brokers’ ability to act on behalf of investors. Till recently, brokers used to have clients sign sweeping power of attorney agreements, giving them a free hand on the securities. Sebi has found instances of misuse of these by brokers, leading to many investor complaints.

Currently, brokers themselves keep margins with the exchanges for transactions in the cash market but they cannot force clients to pay the margins. The margins deposited by brokers remain blocked till the settlement is completed.

Making client-level margins compulsory will make the system more robust, say market intermediaries. A member of the secondary market advisory committee of the regulator said the proposal has recently been discussed and once implemented it would improve the risk management of brokers.

“A 15-20% margining at client level will bring in more transparency and better risk management at brokerages. Right now, the brokers focus on their clients’ track record but do not insist on margins always,” said Ambareesh Baliga, vice-president, Karvy Stock Broking Ltd.

Anup Bagchi, executive director, ICICI Securities Ltd, said bringing the risk management of equity cash segment on a par with that of derivative segment is a sensible idea.

Client-level margining was in vogue till 2005 and was substituted by broker-level margining. According to Deepak Jasani, head of research, retail, HDFC Securities Ltd, brokers will gain as there will be more liquidity, but the collection and compliance costs will increase. Besides, the banking and depository infrastructure have to be in the right place to support real time fund and share transfers.

“To handle these issues, one way out is to have a threshold of trade beyond which client level margining may be made mandatory,” he said.

But some brokers are already collecting margins from their clients and for them it will be a only a matter of reporting such collections. “Though it’s at the discretion of brokers, we collect upfront margins for all our clients. These days volatility is high and open positions (trade orders without margins) expose us to greater risks,” said Dinesh Thakkar, chairman and managing director, Angel Broking Ltd.

According to him, the risk in cash segment is not as high as in derivatives. “Derivatives contracts stretch for a month, while the cash transactions come for delivery on the third day,” he said. Besides, since cross-margining is allowed any unused margin used in derivatives trade can be utilized for the cash segment.

Ashu Madan, president-equity broking, Religare Securities Ltd, a New Delhi-based brokerage, said when the proposal becomes a norm, it would make life tougher for all participants, including the customers. “Some of my customers make one transaction in three months. It will be unfair to expect them to keep the margin money idle with me all along,” he said.

The settlement process also could get affected, said Manish Sonthalia, portfolio manager, Motilal Oswal Financial Services Ltd, as it could create multiple levels of reporting on margins to exchanges and clearing houses. But introduction of client level margin could bring down the intra-day volatility in the market, he added.

n.subramanian@livemint.com

Policy | Orissa orders 50 iron ore mines to halt work

Bloomberg — Tue, 17 Nov 2009 17:20:00 GMT

Mumbai: Orissa, which is the source of about 13% of the nation’s iron-ore exports, has ordered 50 mines to halt operations for flouting environmental rules.

Another 78 producers of other minerals such as mica and limestone will also be closed, Ashok Dalwai, Orissa’s steel and mines secretary, said on Tuesday.

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Labour intensive sectors may get industrial parks

New Delhi: The Union government has decided to set up industrial parks for more labour intensive sectors in the line of leather parks which are presently in operation.

The minister of commerce and industry Anand Sharma on Tuesday said that the ministry has received the approval of the Planning Commission and such parks will come up very shortly. Later, industry secretary Ajay Shankar said that such parks will be established for sectors such as toys, sports goods, ceramic, electronic and home appliances. The government will assist with 50% of the infrastructure cost, which excludes cost of the land, subject to the maximum of Rs40 crore per park.

— Asit Ranjan Mishra

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Education | Education Bills to be tabled in winter session

Pallavi Singh — Tue, 17 Nov 2009 17:06:00 GMT

New Delhi: The human resource development ministry, which oversees education, is likely to table three key education reform Bills in the winter session of Parliament to be held between 19 November and 12 December.

The ministry is planning to table three proposed laws to curb educational malpractices, to set up a tribunal for education disputes redressal and establish a new higher education accreditation regime.

The laws need cabinet approval before they are introduced in Parliament. The ministry may first seek approval for at least two Bills first—the Prohibition of Unfair Practices Bill and the Education Tribunals Bill—at the cabinet meeting on 23 November. The third Bill—the National Authority for Regulation of Accreditation in Higher Education Bill — could be tabled before cabinet after Prime Minister Manmohan Singh’s visit to the US on 24 November.

Differences among ministries hold up biotech regulator Bill

Jacob P. Koshy — Tue, 17 Nov 2009 16:44:00 GMT

New Delhi: India’s plan to establish an independent biotechnology regulator is unlikely to take shape before late next year, three government officials said, speaking on condition of anonymity.

The National Biotechnology Regulatory Authority (NBRA), an independent entity to regulate a spectrum of biotechnology activities including vaccines, seeds and biological products, which require genetic engineering, requires parliamentary approval to come into being.

A draft of the enabling Bill was put up on the website of the department of biotechnology (DBT) in May for public comments, but officials say it is unlikely to be taken up in Parliament’s winter session beginning on Thursday.

Currently, the Bill is with the law ministry, which is yet to approve it. Before the draft Bill is tabled in Parliament, it also requires clearance from the Union cabinet.

GM controversy: A file photo of a cotton field in Haryana. Bt cotton, which contains a gene sourced from a soil bacterium, is the only commercially available genetically modified product in the country. Rajkumar/Mint

Some portions of the proposed Bill conflict with functions of the health and environment ministries and resolving them has put brakes on the Bill’s progress, said officials associated with it.

“There was confusion with the health ministry over whether some functions of NBRA will clash with its proposed Central Drug Regulatory Authority,” said one of the three officials, who is with DBT. It is one of the main reasons why the Bill has been delayed, he said.

All products that involve genetic engineering are now cleared by the environment ministry through a panel of experts, the genetic engineering approval committee (GEAC).

Bt cotton, which contains a gene sourced from a soil bacterium, is the only commercially available genetically modified (GM) product in the country. Several other GM plants such as brinjal, tomato, potato and rice are in advanced laboratory trials and are awaiting clearance.

GEAC has already given the go-ahead to Bt brinjal, India’s first GM food crop.

However, environment minister Jairam Ramesh said on 16 October that he would allow Bt brinjal on farms only after more detailed discussions.

Some experts said the lack of an authority contributes to making the approval process for GM crops opaque. “GEAC cleared Bt brinjal. Then the minister suggests more consultations. That implies he doesn’t trust his own ministry’s recommendations,” said C. Kameshwar Rao of the Foundation of Biotechnology Awareness, a Hyderabad-based non-profit organization. “So unless an independent authority comes soon, such confusion and mistrust of GM will continue.”

DBT has drafted the NBRA Bill. DBT secretary Maharaj Kishen Bhan is on an official visit to the US and was unreachable on his mobile phone.

An official with the law ministry said that some portions of the Bill were too “open-ended” and could lead to future conflict with the existing Environment Protection Act, 1986. “These have to be closed, and that will take some time.” He, too, didn’t want to be identified as he is not authorized to speak to the media.

The NBRA proposal has had a controversial history. Environment groups have protested such an authority on a variety of grounds, the most notable being that it wrests control from state governments over clearances to genetically modified crops.

“We have state-level mechanisms that ensure what kind of seed is available to the farmer. This piece of legislation overrules that,” said P.V. Satheesh of the Deccan Development Society.

The organization has been strongly against the introduction of GM food. “It compromises biodiversity as well as farmers ability to choose their seed,” added Satheesh.

UPA not to table food security Bill this session

Liz Mathew — Tue, 17 Nov 2009 14:45:00 GMT

New Delhi: The Congress party-led United Progressive Alliance (UPA) government will not bring the much-publicized National Food Security Bill—which aims to provide low-cost food to the poor—in the winter session of Parliament beginning on Thursday.

The enactment of the legislation, promising to provide 25kg of rice or wheat at Rs3 per kg to poor households, will be further delayed because the government has not been able to overcome stumbling blocks, said K.V. Thomas, minister of state for agriculture. “It is a simple promise but a huge task is involved in this,” he said.

Implementing the promise would lead to a huge financial burden, with the government’s food subsidy bill expected to increase by 65% to Rs70,000 crore. A dispute over the size of the below poverty line (BPL) population, doubts over the sustainability of food stocks for the programme and lack of adequate storage facilities are other hurdles.

“Although the ministry had started working on the Bill since the day after the President’s policy announcement speech, we have not been able to decide the size of the BPL population,” Thomas said.

President Pratibha Patil, in her speech in Parliament in June this year, said the National Food Security Bill would “provide a statutory basis for a framework, which assures food security for all”.

However, a dispute over the number of poor in India continues. A Planning Commission estimate puts the number of BPL families at 62.5 million, but state governments estimate that this number is closer to 107 million.

“The Planning Commission had concluded the number on the basis of 1993-94 poverty estimate and the 2001 Census. It has also said that the BPL population would have come down to 40 million by this year. But fresh data from the state indicate a steady rise in it,” said a ministry official, who declined to be named.

Under the Panchayati Raj Act, the power to classify households as BPL lies with local bodies. Thomas said some states such as Andhra Pradesh and states in the North-East have more ration cards, which entitle households to subsidized foodgrain and fuel, than the number of BPL families.

Once the government enacts the Bill, it will become legally bound to provide food security, irrespective of situations such as drought. The government has to work on some mechanism to ensure an adequate stock of foodgrain.

The proposed law is in addition to existing schemes that aim to provide the poor with subsidized foodgrain through the public distribution system.

One such scheme is the Antyodaya Anna Yojana, under which around 25 million socially backward families get 35kg of rice or wheat at Rs3 and Rs2 a kg, respectively. Some states such as Tamil Nadu and Chhattisgarh have their own schemes to sell rice at Rs2 per kg. “We also have to see how the government can carry all these schemes along with the proposed legislation,” Thomas said.

‘Leave SEZs alone’ request irks states

Asit Ranjan Mishra — Tue, 17 Nov 2009 14:33:00 GMT

New Delhi: A proposal by the ministry of commerce and industry asking state governments to exempt special economic zones (SEZs) from state and local taxes has drawn flak from some states.

In a brief prepared by it on issues concerning state governments and SEZs for a first-of-its-kind conference of state industry ministers convened by commerce and industry minister Anand Sharma on Tuesday, the ministry said: “Many state governments are to issue notifications for exemption of state and local taxes. In some states, there is a policy but in the absence of notification benefits are not being allowed. In some states, while developers are being allowed concessions, co-developers and units are not allowed the same.”

However, some states including Madhya Pradesh and Kerala are opposed to the idea. “Local bodies run on local taxes. If they will not impose such taxes then they can not build and maintain the necessary infrastructure. So such taxes should be allowed to be imposed on SEZs,” said Kailash Vijayvargiya, minister for commerce, industries and employment, Madhya Pradesh.

The commerce ministry, however, defended its stand citing the Constitution and an Act implemented by the Gujarat government.

Aricle 243Q of the Constitution provides for the incorporation of industrial township authority to manage the affairs of the industrial townships, the ministry said. “The state governments (should) ensure that local bodies do not make demand on the developers and units to pay taxes,” the ministry said in the prepared brief.

It also cited the Gujarat SEZ Act by which SEZs are kept out of the jurisdiction of any municipal council, corporation, notified area or panchayat.

However, state governments see the Centre’s proposal as an infringement into their domain of taxation which may lead to potential revenue loss. Kerala finance minister Thomas Isaac had expressed his reservations regarding any such direction by the Centre in an earlier interaction with Mint.

SEZs consider imposition of local taxes such as value-added tax (VAT) as double taxation as local sales from their units are subject to import duties. Besides, VAT is not applicable on imports.

The commerce ministry also asked the state governments to create enabling legal framework for SEZs. Till now, only a few states such as Gujarat, Haryana, Madhya Pradesh, West Bengal and Tamil Nadu have come up with their own SEZ Acts.

Parliament to debate women’s reservation, some pending Bills

Ruhi Tewari and Liz Mathew — Mon, 16 Nov 2009 18:13:00 GMT

New Delhi: The Congress party-led United Progressive Alliance (UPA) government is expected to push forward the long-pending and controversial Women’s Reservation Bill, 2008—which seeks to set apart 33% of legislative seats for women—in the winter session of Parliament beginning on Thursday.

Pending issues: A file photo of the Parliament building in New Delhi. Twenty-eight Bills are ready to be brought to Parliament, with the respective standing committees on these Bills having submitted their reports. Sunil Saxena/Hindustan Times

“The government said it will push for the Bill in this session. No leaders were opposed to the suggestion in today’s meeting,” said a party leader, who attended a meeting on Monday of chief whips and whips of all parties in Parliament. The politician didn’t want to be named.

The Women’s Reservation Bill, which requires a constitutional amendment, will ensure one-third reservation for women in the Lok Sabha as well as state assemblies. The UPA government introduced the Bill in the Rajya Sabha on 6 May 2008 during its first term in office amid vociferous protests.

Before that, the Bharatiya Janata Party-led National Democratic Alliance (NDA) government had brought the Bill to the Lok Sabha twice, in 2002 and 2003.

Also Read UPA to revisit legal reforms

Parties such as the Rashtriya Janata Dal (RJD) and Samajwadi Party (SP) have been opposing the Bill, demanding the introduction of a quota for other backward classes (OBCs) within the 33% reservation for women. The Bill was referred to the standing committee on personnel, public grievances, law and justice currently headed by Congress leader Jayanthi Natarajan. The panel is expected to submit its report in this session.

While this Bill might get a push, senior ministers and officials in the finance ministry give no indication that long due and crucial Bills such as the Banking Regulation (Amendment) Bill and the Micro Financial Sector (Development and Regulation) Bill (both of which lapsed) will be introduced in the winter session. That’s despite Prime Minister Manmohan Singh’s repeated signals of major financial sector reforms.

Other Bills likely to come up in this session include a new Bill for the creation of an Equal Opportunities Commission (EOC), which will also have the private sector within its purview, the Workmen’s Compensation (Amendment) Bill, 2009, the National Commission for Minority Educational Institutions (Amendment) Bill, 2009, and the Employees State Insurance (Amendment) Bill, 2009.

“MPs (members of Parliament) belonging to mineral-rich states are demanding the enactment of the Mines and Minerals (Development and Regulation) Amendment Bill, 2008. The government, however, did not respond,” the party leader who did not want to be identified, said.

This Bill aims at allowing transparency in competitive allocation of coal blocks to benefit consuming industries such as power and steel.

Mint had reported on 13 November that the government was likely to push for proposed pieces of legislation such as the Judicial Accountability and Standard Bill, 2009, as well as the Commercial Courts Bill, 2009, in the winter session, in accordance with its agenda for legal reforms.

However, these are just some of the pending Bills likely to come before Parliament.

According to PRS Legislative Research, there are as many as 46 Bills in the legislative queue. Out of these, 36 are pending in the Rajya Sabha from earlier sessions of Parliament and 10 were introduced in the previous session (of which three are with standing committees and the reports are expected by the end of the year).

Twenty-eight Bills are ready to be brought to Parliament, with the respective standing committees on these Bills having submitted their reports. These include the long-pending Seeds Bill, 2004, the Indian Medical Council (Amendment) Bill, 2005, Delhi Rent (Amendment) Bill, 1997, and Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005, among others. There are six pending Bills that have been re-referred to the newly constituted standing committees in the 15th Lok Sabha and whose reports are still awaited, including the crucial Insurance Laws (Amendment) Bill, 2008.

ruhi.t@livemint.com

GST would do away with cascading effect of levies: Pranab

PTI — Mon, 16 Nov 2009 12:41:00 GMT

New Delhi: The government on Monday said the proposed goods and services tax (GST) would help lower the incidence of taxes by avoiding cascading effect of multiple levies.

“Proposed GST would help achieve common market for goods and services at lower tax rates, avoiding cascading effect of these taxes,” finance minister Pranab Mukherjee said at CII conference on Competition Policy.

He said the empowered committee of state finance ministers has released a discussion paper on GST and all the stakeholders will deliberate over it.

As per the paper, there will be two basic state GST rates on goods, besides a special rate on precious metals. However, services will attract single rate.

It proposes replacing central levies like excise duty, service tax, special additional duty, countervailing duty by GST.

State levies like VAT, sales tax, entry tax etc would also be subsumed. Besides all this, central and state cesses and surcharges would be out, once GST comes.

The finance minister also allayed fears that private sector would be left with little resources because of high fiscal deficit.

The low credit offtake and ample liquidity proves that these fears are misplaced, he said.

Power ministry to approach finance ministry for abolition of service tax

PTI — Mon, 16 Nov 2009 08:29:00 GMT

New Delhi: Power secretary H S Brahma on Monday said the ministry would soon approach the finance ministry for abolition of service tax on power transmission that could benefit end consumers by way of lower tariff.

“We took it up (the issue of abolition of service tax) with the finance ministry once but the response was not great. We are going to take it up soon,” Brahma told reporters on the sidelines of a CII event here.

In a meeting with the state power secretaries on Sunday, five states, including Andhra Pradesh, had asked power minister Sushil Kumar Shinde to approach the finance ministry for abolishing the service tax on power transmission.

At present, a service tax of 12.36% is charged from power transmission companies. The states, however, have been demanding total abolition of the tax.

BSNL, Bharti want 6% uniform licence fee, Rcom differs

PTI — Sun, 15 Nov 2009 08:18:00 GMT

New Delhi: Two major telecom players — Bharti Airtel and BSNL — want an uniform licence fee of 6% on revenues from all services like mobile, landline, long distance telephony, ISP among others.

A Department of Telecom panel had recommended 8.5% as the uniform licence fee.

Anil Ambani-led Reliance Communication, however, says licence fee should be decided based on the revenue slab of the company based on gross or adjusted gross revenue and the incumbent operators should be asked to pay higher licence fee for holding excess spectrum beyond contractual amount of 6.2 Mhz of spectrum for GSM players and 5 Mhz of spectrum for CDMA operators.

The operators responded to TRAI consultation paper on ‘overall spectrum management and review of licence terms and conditions´.

At present, fixed line and mobile operators pay 6-10%, depending on the circles, as licence fee while NLD, ILD and VSAT as well as Internet with Net telephony paying only 6% while pure ISPs pay no licence fee.

DoT mooted the idea of uniform licence fee after allegation came against RCom that the operator was passing higher revenue earning services to the low licence fee category thereby causing loss to the the exchequer.

BSNL and Bharti Airtel said that uniform licence fee will reduce the arbitrage and ensure the level playing field. Further, this will be easy to implement in a transparent manner and will maximise the revenues to the exchequer.

Limit on FDI in newspapers, news channels may rise to 49%

Shuchi Bansal — Fri, 13 Nov 2009 18:17:00 GMT

New Delhi: The government may be readying to relax foreign investment rules in newspapers and television news channels from the current 26% to 49% in a move that, if it goes through, will be welcomed by foreign media firms seeking an entry into one of the fastest growing economies in the world, and decried by some domestic media firms.

Two people familiar with the matter confirmed that the government was going ahead with this move, although they differed on the contours of the change.

A senior bureaucrat said the proposal was ready and that the government would announce the change—spanning print and broadcast—next month.

A second person, who generally keeps abreast of developments in North Block, where the ministries of finance and home are located, said a cabinet note on increasing foreign direct investment (FDI) levels in news channels is ready and that he has seen it.

This person added that a decision would be announced after a cabinet meeting that will be held shortly.

Neither person wanted to be identified given the sensitivity of the issue. The government’s decision—if it happens—will also likely generate a political storm.

Talking to Mint after a cabinet meeting on Thursday, information and broadcasting minister Ambika Soni had said that although some media firms were pushing for increased FDI, there was no consensus among the media firms. Responding to a question on the proposal to increase the limit to 49% in news, she said that the government was discussing the various sectoral caps in media recommended by the Telecom Regulatory Authority of India. “No decision has been taken on these yet,” she added.

Soni has, in recent weeks, hinted at a coming change in foreign investment rules in media—first at the Indian Magazine Congress on 5 November and then at the World Economic Forum’s India Economic Summit on 9 November.

A third person, the chief executive of a broadcast firm, said that he was aware of a proposal to increase the foreign investment level in news channels that the government was considering before this year’s general election.

The government had decided to defer its consideration of the proposal till after the elections, given that the issue could have hurt its prospects in the elections. This person, who too did not want to be identified, said he had not heard of the government’s new move.

Rajesh Jain, head of audit and consulting firm KPMG’s media practice, said: “If the 26% cap is indeed being pushed to 49%, it will have a positive impact on the foreign interest in the news broadcasting sector. Also, it would open up the opportunity beyond 26% for private equity investors as well. This will be a good thing for the companies, which need to raise money.”

However, he added that a lot would depend on the fine print of the guidelines such as editorial control.

Vivek Gupta, partner at boutique consultancy BMR Advisors, echoed Jain’s view on capital requirements: “The Indian consumer is highly value-driven and does not pay up easily for media products. So the companies need to make huge investments to reach scale.”

The government first allowed 26% FDI in news and current affairs in print media in 2002. The ceiling for non-news newspapers and magazines was fixed at 74% and the policy had several caveats. In the case of news and current affairs newspapers and magazines, the guidelines said the shareholding could not be dispersed and a significant stake was to be held by a single Indian promoter.

The policy also required key posts in the editorial board, including the chief editor’s, to be occupied by Indians.

Last year, the government changed some of the rules for magazines and allowed foreign news and business magazines to launch Indian editions. However, the FDI level in ventures launching such editions was not raised and only Indian companies registered under the Indian Companies Act were allowed to launch them.

The 2002 decision to allow 26% foreign investment reversed the 1955 cabinet resolution against foreign participation in news media.