Insurance bill introduced in RS
New Delhi |
The UPA’s biggest financial sector reform measure in its four-and-a-half year tenure, the Insurance Laws (Amendment) Bill, which seeks to hike the foreign direct investment limit in the sector to 49% from the existing 26%, was finally introduced in the Rajya Sabha.
The pension and banking sector reforms, along with increasing the FDI cap in the insurance sector, were the top reforms initiatives of the Manmohan Singh government. Since the banking sector reforms are unlikely to take place now with the UPA in its last leg, by introducing the insurance bill in Rajya Sabha, Manmohan Singh has ensured the new government that comes to power in May 2009 can make it a statute without a fresh Cabinet approval. Both Congress and BJP support the bill. Pension reforms are in a better state as reforms like getting fund managers to manage pension funds have begun without the need for parliamentary approval.
The stakes involved are significant. The sector had a turnover of Rs 26,287 crore in the quarter ended September ‘08. “A simple calculation shows that raising the FDI limit to 49% may increase the total FDI just in the life insurance segment by almost 2.5 times from the current levels of about Rs 2500 crore”, said TR Ramachandran, CEO, Aviva India.
Its debut in the Rajya Sabha too was marked by strong opposition that led to the House’s adjournment. “There is hardly any reform in it. The sector has already been opened,” former finance minister Yashwant Sinha told FE. With the global financial crisis hurting many insurance firms, this is hardly the time to bring in the legislation, he added. Government managers now expect the bill to be referred to the parliamentary standing committee on finance.
Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance Company Ltd
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But companies are upbeat about the bill that proposes nearly 120 changes. “The big advantage is it will give access to global capital. Life insurance is a capital-intensive industry and the hike in the FDI cap will definitely help,” said Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance Company Ltd.
Former RBI governor and economist C Rangarjan said, “It is a step in the right direction and must be seen as a long-term measures, irrespective of the crisis. We need to facilitate investment and not worry about whether or when it will come in.”
NS Kannan, executive director, ICICI Prudential Life Insurance, also said, “Any reform in terms of increase in the foreign ownership limit for the insurance industry is directionally desirable. Given that life insurance is a capital-intensive industry, this move will help industry access larger international capital over a period of time. This FDI would be long-term foreign capital and not volatile money.”
Finance Minister P Chidambaram in his budget speech in July 2004 had said the intention of the government was to raise the FDI cap in private insurance companies to 49%.
The bill was taken to the Cabinet on December 21, 2006 but following opposition from the Left parties, it was referred to a group of ministers headed by external affairs minister Pranab Mukherjee. It was finally revived in September this year following the exit of the Left parties from the UPA and was approved by the Cabinet in October.
To fast-track this reform agenda, UPA has split the original insurance bill–a money bill--into two separate legislations. Accordingly, the Life Insurance Corporation (Amendment) Bill, 2008, which proposes to hike the minimum capital of the state-run insurer to Rs 100 crore from the existing Rs 5 crore, was introduced separately in the Lok Sabha.
For modernising and strengthening the intellectual property office, the government also approved a Rs300-crore plan for implementation during the 11th Plan (2007-2012). As part of this scheme, 414 new posts have been created in intellectual property office....
Standard Chartered Bank expects the rupee to strengthen further against the dollar in the next financial year. It has projected the local currency at Rs 45 per dollar in 2009-10. Standard Chartered Private Bank global head of NRI Shiv Khazanchi said in Kolkata: "We expect India's balance of payments to improve to $10 billion in 2009-10 from a negative $11 billion in 2008-09. With this, the rupee is also likely to appreciate to Rs 45 per dollar in 2009-10."
On the other hand, Basix Forex director KN Dey is expecting the rupee to depreciate firmly over the next 12 months. “Given the global demand for dollar and the promise of economic stability in the US under the new president, we wouldn't be surprised to see the rupee depreciating 10% over the next one year. This is, of course, counting on the possibility of the general elections here in the first quarter of the next year.”
Source: The Financial Express |
Rules eased for entry of foreign cos into India
Source: The Hindu Business Line |
Multinational and foreign companies will now find it less cumbersome to establish a place of business in India, as the Government has done away with some red tape.
The Ministry of Corporate Affairs (MCA) has removed the requirement of foreign companies/foreign nationals to get consular verification in their country of origin for establishing place of business or setting up a subsidiary in India. This benefit will be available to only those foreign companies incorporated in a country that fall outside the Commonwealth but a party to the Hague Apostille Convention 1961.
Official sources told Business Line that this move was expected to bring down the time taken to incorporate a company in India by such entities significantly. “There was a general grievance from the field that such companies have to wait for long to set up a subsidiary in India as they faced difficulties on what documents were required to be filed and the authorities from whom the documents had to be authenticated,” sources said.
It would take almost eight months to set up a subsidiary in India. However, now with this move the process will be shortened. Problems were mainly faced in the corporate affairs regional offices of Pune and Bangalore.
For foreign companies incorporated in a country falling outside the commonwealth, but a signatory to the Hague Apostille Convention 1961, documents certified by the Government official of that convention country would be entitled for recognition in India without any further verification. A notarised list (notarised in the country of origin) of the directors and the Secretary of the company, apart from name and address of the person resident in India who will be authorised to accept notice on behalf of the company, need to be submitted to authorities here.
In the case of foreign nationals residing outside India in countries signatory to the Hague convention and seeking to register a company in India, the Ministry of Corporate Affairs has said that their signatures and address on the Memorandum of Association and proof of identity, where required, should be notarised before the notary of the country of their origin and duly verified in accordance with Hague Convention. This would be sufficient for recognition of documents in India.
“This move of the Corporate Affairs Ministry removes the cumbersome and often costly formalities for legalisation of foreign public documents originating from countries that are signatories to the Hague Convention. The process has been eased for foreign companies/foreign nationals,” said Mr Virender Gaada, Past President of the Institute of Company Secretaries of India (ICSI). The purpose of the Hague Apostille Convention 1961 was to abolish the requirement of diplomatic and consular legalisation for public documents originating in one convention country and intended for use in another.
Source: The Hindu Business Line |
ANTI-DUMPING DUTIES
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Under the work programme of Doha Round of WTO Negotiations, negotiations are held in the Negotiating Group on Rules (NGR) which are aimed at clarifying and improving disciplines under the Anti Dumping Agreement (AD Agreement) and the Agreement on Subsidies and Countervailing Measures (ASCM).
Article 2.4.2 of the AD Agreement contains provisions for determination of dumping margin in an anti dumping investigation by use of three kinds of comparison methodologies. Zeroing is understood to mean where an investigating authority, while determining dumping margin, does not take into account those transactions where the export price exceeds the normal value and instead assigns a zero dumping margin value in such comparisons. This leads to an inflated dumping margin determined for the product as a whole.
India has been opposed to the use of zeroing methodology as it leads to inflated dumping margin and consequently higher anti dumping duty. The Chairman of the NGR has issued a draft text on 30 November, 2007 proposing amendments, inter-alia, in the AD Agreement by introducing a new Article 2.4.3 whereby zeroing can be used in certain comparison methodologies. Similarly, in the provisions relating to collection of anti dumping duties covered under Article 9 of AD Agreement, the draft text of the Chairman of NGR proposes certain changes which allow the use of zeroing. During the discussions on the Chair’s draft text in the NGR, India, Japan, Brazil, several ASEAN Members, China and several other Members have opposed the NGR Chair’s proposed amendment in the text to allow zeroing and have requested for issue of a revised text. |
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Govt mulls lowering FDI cap in newspaper fax editions
The Department of Industrial Policy and Promotion (DIPP) has sought a review of foreign direct investment (FDI) in facsimile edition of foreign newspapers in India.
Ministry officials said the matter is being reviewed with the objective of bringing down the FDI cap from 100 per cent to 26 per cent in line with the limit for news media. This decision for the review was taken while discussing the proposal of US-based Dow Jones and Company for setting up a wholly-owned subsidiary to carry out publishing the facsimile edition of Wall Street Journal (WSJ) in India.
DIPP is an arm of the government which is responsible for formulating the Foreign Direct Investment (FDI) Policy in various sectors in consultation with ministries of specific sectors and also looks after promotion, approval and facilitation of FDI.
The issue came up for discussions at a meeting of the Foreign Investment Promotion Board (FIPB) on Friday. Sources added that the finance ministry, which also attended the meeting, was of the view that the FDI in facsimile editions is understood to be 100 per cent in line with other broadcasting services, except for news print media.
However, the DIPP countered the view of the finance ministry stating that the policy is not very clear on the 100 per cent FDI in fax editions stating that there is no established policy on this issue till date. Sources added that the proposal of Dow Jones has been postponed for the time being till the policy on FDI in fax editions is clear. This will be shortly done by putting up a Cabinet note which will outline the policy on FDI in the sector.
Incidentally, the FIPB cleared two proposals from Mauritius-based companies in the financial services sector, and one from a venture capital fund at today's meeting.
Earlier in July 2007, the government approved a 26 per cent FDI cap in the Indian print media and permitted facsimile editions of foreign newspapers after revising its earlier guidelines issued in November 2002. |
Automakers welcome excise duty cut, to slash prices
Car prices could come down by up to Rs 45,000 and bus and truck prices by as much as Rs 2 lakh if manufacturers pass on the full benefit from the 4% cut in excise duties announced by the government, officials said.
The automobile sector, hit by falling sales, got the much lobbied relief in the government’s fiscal stimulus package, and some companies were quick to announce price cuts.
Maruti Suzuki India (MSI), the country’s largest car maker, announced it was cutting prices effective from midnight. “We are looking at passing on the entire benefit to the customers. We shall be cutting down prices in the range of 3.5-4% from midnight and most of our vehicles will be cheaper by that percentage,” MSI chairman R C Bhargava said.
Tata Motors, India’s largest commercial vehicle and second largest passenger vehicle maker, also announced a transfer of all excise benefits to the customers. “Tata Motors will pass on to customers the benefits that will come in through the cut in Cenvat for all our products — passenger and commercial vehicles — immediately. We are working out the details to ascertain the exact quantum of details of the benefits to be passed on to the customers,” the company said.
Officials say cars and sports-utility vehicles (SUVs) could see cuts ranging between Rs 8,000 to 45,000, while in case of trucks and buses, the cuts could be between Rs 30,000 and Rs 2 lakh if manufacturers decided to pass on the full benefit of the duty cut to customers. Two-wheelers could see price cuts of between Rs 1,500 and Rs 3,000. “This will definitely help...cars and two-wheelers. It will help provide a soft landing, but it will not make negative growth positive,” said Venu Srinivasan chairman and managing director of TVS Motors.
Other carmakers said they were studying the impact of the move. Mahindra & Mahindra and Hyundai Motor India have in-principle decided to cut prices, but shied away from announcing an immediate cut.“We will be working out the exact amount of price changes in a day or two, but meanwhile we have decided that the top-end variants of our products like Scorpio, Logan will have bigger price changes than the entry-level models,” Rajesh Jejurikar, chief of operations for M&M’s automotive sector said.
HMI will decide new prices on Monday, its senior vice president for sales & marketing, Arvind Saxena said.
Companies such as Honda Siel Cars and Toyota Kirloskar Motor, whose products have a high import component, are looking at adjusting the excise benefits against the rising cost of imports because of weakening of rupee against dollar and other currencies.
“We many not go for a price increase in some models and will be offering competitive prices after the excise cut.” said Jnaneshwar Sen, vice president for sales and marketing at Honda Siel, which makes the City, Civic, Accord and CRV cars in the country.
“We will moderate the excise cuts against the already announced price increase of our vehicles. All other models — City, Civic, Accord — except for Honda CRV, which is a fully imported vehicle, will be considered for change in prices,” Mr Sen said.
The Indian unit of Toyota, which had been considering a 3% price hike for its Innova and Corolla Altis models again because of rising import costs, said it would now study the situation in the wake of the excise duty cut. |
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