The Mint report for 8 Oct 2009

The Mint report for 8 Oct 2009

The group of state finance ministers meeting to discuss the goods and services tax or GST has decided to produce a draft discussion paper on the proposed tax. Now a team of officials from the finance ministry and state revenue organisations will prepare the document outlining their proposal for GST.

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While the discussion paper is set to be ready in a month, some states have requested the group of finance ministers to proceed cautiously so they can assess what GST will costs states and whether other provisions are in place.

The draft paper announced on Thursday is expected to discuss the implications of the different models that states had proposed for GST. In September the states had proposed three different rates of the tax.

In other news, an advisory body of the EPFO deferred a decision on investing the fund’s money in stock markets. The Finance and Investment Committee of the EPFO will now make a final decision on the 24 October. At issue is whether a state sponsored pension and insurance scheme like the EPFO should park between 3 and 5% of its funds in stock markets including index-linked funds. EPFO currently has a corpus of about Rs257,000 crore.

India’s inflation continues to rise. The wholesale price index went up 0.7% in the week ending the 26 September from a year earlier. In recent weeks, price pressures have been coming back in India and other Asian countries because of surging commodity prices. But despite the most recent rise, inflation has eased up. In the previous week, the wholesale price index was up 0.83%.

Car sales in India may be going up, but an increasing number of customers are buying their set of wheels not by taking a loan but with hard cash. Last year before the financial meltdown cash sales went up 35% for cars and 85% for two-wheelers. And even after interest rates fell cash sales have remained at the same level. Automakers say one reason could be rich rural buyers who don’t like to use credit. Maruti Suzuki is now drawing 12% of its sales from rural areas as opposed to about 9% last year. And Hyundai Motor says it has sold nearly 30% of its cars to people in the countryside in the eight months to August compared to about 20% in the same period the previous year. But some financiers say cash purchases will decline in the coming months with public sector banks promoting their loans and private sector banks becoming more willing to lend.

Vedanta Resources has posted strong second quarter output of zinc and iron ore for the second quarter. The company said refined zinc production rose 15.6% to 141,000 tonnes and iron ore output went up 27% to 3.26 million tonnes.

Larsen and Toubro has raised $600 million to fund its expansions into businesses like railways and defense. The money was raised by $400 million worth of shares and $200 million worth debentures that are convertible to foreign currencies. Larsen and Toubro expects to benefit from a government plan to spend $500 billion on infrastructure by 2012.

The Essar Group could sell stake in its oil and shipping units over the next couple of years. An official from Essar says they are considering a free float for the two companies as part of its global expansion plan. Esssar is currently buying oil refineries, steel plants, and coal and iron ore mines around the world to compete with rivals with RIL and ArcelorMittal.

Markets made modest gains on Thursday. The Sensex went up 37 points to close 16,844 and the Nifty climbed 17 points to end trade 5,002.