NEW DELHI: Rebutting the department of industrial policy and promotion’s (DIPP) contention that import surges due to bilateral free trade agreements (FTAs) harmed India’s manufacturing sector, the commerce department, part of the ministry to which the DIPP belongs, has said India needs to persist with the strategy of embracing such pacts to integrate itself more seamlessly to the world trade order.
In a letter to DIPP secretary Amitabh Kant, who has been vocal against FTAs and comprehensive economic partnership agreements (CEPAs), Rajeev Kher, his counterpart in the commerce department, said that instead of attacking (past) FTAs without any factual basis, it is better for the government to look ahead and use such partnerships for the benefit of Indian manufacturing industry. Citing an internal analysis of the department, Kher said despite the extant pacts with Japan, South Korea, Asean and Malaysia, 80% or more of imports into India from these countries/ regions have taken place through the ordinary (most favoured nation) route, sans any duty benefits that the respective FTA/CEPAs allow.
Kher is also learnt to have said India cannot afford to keep itself out of the global trading order, thereby losing the advantages of being part of the emergent regional value chains. The letter, officials said, could also be sent to the commerce and industry minister Nirmala Sitharaman.
Of course, the commerce department also recognises that India’s success in foreign trade will hinge on improving the competitiveness of its exports and attracting investments. Infrastructure bottlenecks need to be removed in order that India’s ranking in the list of countries on the ‘ease of doing business’ index can be improved.
As per the commerce department’s analysis, only 22% of imports from Japan are through the FTA route (with attendant duty benefits), while the corresponding figures for South Korea, Asean and Malaysia are 21%, 17% and 3.47%, respectively.
Factors including high transaction costs in obtaining the certificate of origin (to prove that a particular item is wholly produced, processed or manufactured in a particular country) as well as difficulties in meeting the stringent value-addition norms could be the reasons for these imports not getting the duty benefits under the concerned FTA.
The commerce department is now compiling data on how Indian exports have fared under these FTAs/CEPAs with these countries/blocs.
On the DIPP’s claim that FTAs are leading to an inverted duty structure (where the duty on the final product is nil or low while raw materials/intermediates have a high duty), thereby disincentivising local manufacturing and domestic value addition, the commerce department is learnt to have said that most segments affected by an inverted duty structure are outside the FTA ambit.
The recent Union Budget proposed to address the inverted duty issue and reduced the basic customs duty on some products.
In addition, the commerce department has now recommended the removal of inverted duty structure (owing to FTAs) on plastic machinery, injection moulding machine and related products as well as pressure vessels and reactors.
Besides, the department said FTAs help manufacturers import many intermediaries and capital goods at low/nil duties, in turn aiding manufacturing in the country.
“The DIPP’s argument is based on the wrong assumption that all imports are finished goods. Also, there is no data on manufacturing on harmonised system (HS) code basis and item-wise. We only have data on imports HS code-wise, and without such specific data on manufacturing, it will not be possible to establish what DIPP is trying to say,” an official said.
(Source: The Financial Express, July 24, 2014)
TRAI RECOMMENDS EASIER LICENSING NORMS FOR DTH COMPANIES
NEW DELHI: The broadcasting regulator has recommended a new licensing regime for direct-to-home TV service providers under which the tenure of permits will be doubled to 20 years, renewable for 10 years at a time, and the licence fee on adjusted gross revenue will be reduced to 8% from 10%. The norms will benefit DTH operators, including TataSky, Dish TV and Sun Direct.
Trai, the broadcasting and telecom regulator, on Wednesday further suggested that the adjusted gross revenue should be calculated excluding service tax, entertainment tax and sales tax or value-added tax paid to the government from the gross revenue. All existing DTH providers should be allowed to migrate to the new licensing regime at any point of time during their current licence tenure.
The regulator said six private DTH operators are providing pay TV services to more than 37 million subscribers. Trai has also made recommendations on cross-holdings and control of the broadcasting and distribution sectors, which suggests that vertically integrated broadcasters, or entities that run TV channels as well as distribution platforms such as cable and DTH, must be subjected to a set of additional rules, and that they should be allowed to control only one distribution platform operator (DPO), including cable and DTH firms.
Trai chairman said it will release its recommendations on crossmedia ownership within two weeks. All recommendations made by Trai will need to be ratified by the government. Trai’s recommendations come after the information and broadcasting ministry sought its suggestions last year on certain terms and recommendations for the extension of the period of DTH licences, including an interim arrangement, since the first licence was to have expired in September 2013. Under the proposals, the onetime entry fee for DTH operators is to be retained at Rs 10 crore.
The Bureau of Indian Standards should also come out with updated specifications for set-top boxes in consultation with Trai.
On cross-holdings in the broadcasting and distribution, Trai said there was a need to bring “uniformity” and suggested a “comprehensive definition of control to be adopted” across all segments of both sectors.
It proposed that both parties should be separate legal entities, with the relevant market for broadcasters in the entire country, and for DPOs, the state. A vertically integrated DPO will not be permitted to acquire over 33% share in the relevant market, and shouldn’t be allowed to control any other DPO on another category in the relevant market.
(Source: The Economic Times, July 24, 2014)
GOVERNMENT AIMS AT BENIFITING WORKERS, TO AMEND 3 LABOUR LAWS THIS SESSION
NEW DELHI: The ministry of labour and employment will soon seek Cabinet approval for amendments to three archaic labour laws, kickstarting a long-pending revamp of labour market rules with the aim of benefitting workers and increasing productivity.
The ministry is finalising changes to the Child Labour Act of 1986, the Minimum Wage Act of 1948 and the Apprenticeship Act of 1961, a senior official told ET. The proposed amendments will be put up before the Cabinet next week, after which they will be introduced in Parliament in the ongoing budget session, the official, who did not wish to be named, said. Parliament’s budget session ends on August 14.
“The ministry is keen to see these amendments going through in the current session and I see no hindrance in getting them passed in Parliament. We are finalising the amendments proposed to the above laws by incorporating the views of various stakeholders,” the official said. Meanwhile, in a written reply to the Rajya Sabha on Wednesday, minister of state for labour and employment Vishnu Deo Sai said, “Government is actively considering amendments to various labour laws. The interministerial/public/tripartite consultations is in progress.”
Although most of these politically-sensitive proposals were taken up by the previous UPA government, none could be concluded. However, this time round, they are unlikely to face any hurdles as the BJP-led NDA government enjoys a majority in Parliament and the Congress, or its allies, are unlikely to raise objections.
As part of the amendments proposed to the Minimum Wage Act, the ministry will set a national floor for minimum wages for workers across professions, resulting in a significant jump in salaries for workers in the unorganised sector. The minimum wages would be revised every five years by the Centre in accordance with the NSSO’s Consumer Expenditure Survey. It would also be revised every six months by state governments in accordance with the Consumer Price Index.
In the Child Labour (Prohibition and Regulation) Act, 1986, the proposed amendments will bar children between 14 and 18 years from taking up hazardous occupations such as mining related jobs. At present, children under 14 years can work except in prohibited sectors such as domestic work, automobile workshops, bidi making, carpet weaving, handloom and powerloom industry, and mines. The move is significant as child labour accounts for nearly 8.5% of the country’s 312 million-strong workforce. Of these, 43.53 lakh children are between 5 and 14 years of age, as per the Census 2011.
The government’s emphasis on skill development will also lead to amendment to the Apprenticeship Act over the next one month, in line with the announcement made by finance minister Arun Jaitley in his budget speech.
The key changes proposed include dropping the clause that mandates imprisonment of company directors who fail to implement the Apprenticeship Act of 1961 and doing away with an amendment proposed by the UPA mandating employers to absorb at least half of its apprentices in regular jobs, besides adding 500 new trades and vocations under the scheme, including skills for services sectors like IT-enabled services.
(Source: The Economic Times, July 24, 2014)
RBI RAISES FII SUB-LIMIT IN GOVT BONDS BY $5 BILLION
MUMBAI: The Reserve Bank of India (RBI) has raised the foreign institutional investors’ (FIIs’) sub-limit in government bonds by $5 billion, after the existing $20-billion limit was almost exhausted. The move is expected to stabilise yields, volatile in the recent past.
The overall limit for FII investment in government bonds has been kept unchanged at $30 bn. As a result on the rise in the sub-limit, that for long-term investors like insurance and pension funds will be reduced to $5 bn.
RBI said the incremental investment limit of $5 bn shall be required to be invested in government bonds with a minimum residual maturity of three years. Besides, all future investment against the limit vacated, when the current investment by these foreign investors runs off either through sale or redemption, shall also be required to be made in government bonds with a minimum residual maturity of three years.
“The bond market was expecting this for some time. This is a positive step. The yields can drop by another three to five basis points tomorrow. But this FII money will come only over a period of time. We also need to see the operational guidelines to be issued by Sebi (the capital markets regulator),” said Siddharth Shah, vice-president, STCI Primary Dealer.
RBI however, clarified that there will be no lock-in period and FIIs, qualified institutional investore and foreign portfolio investors shall be free to sell the securities (including those currently held with less than three years of residual maturity) to domestic investors.
“There was one segment of this limit, sovereign wealth fund, which was not getting utilised. So, expanding the limit for FIIs is a good move. This will help the bond market,” said Ashutosh Khajuria, president (treasury), Federal Bank.
The yield on the 10-year bond ended at 8.66 per cent on Wednesday, compared with the previous close of 8.69 per cent. The yield on the 10-year bond ended at 8.66 per cent on July 2 and since then in most of the trading days, the yield has been rising. The expectations of a new 10-year benchmark was leading to banks trimming their holdings in the existing 10-year bond.
The government’s total borrowing requirement for 2014-15 has been budgeted at Rs 6 lakh crore or 4.7 per cent of gross domestic product. The net market borrowing of Rs 4.61 lakh crore has been budgeted to finance 86.8 per cent of the fiscal deficit. Now that the FII limit has been enhanced, banks might resort to fresh bond purchases, due to which the borrowing programme is likely to sail smoothly.
(Source: Business Standard, July 24, 2014)
GOVT’S STAKE SALE PLANS SET FOR A DIWALI BOOST
NEW DELHI: The government’s disinvestment programme is set to get a boost this Diwali, with the finance ministry planning to hit the market to sell a five per cent stake in Steel Authority of India Ltd (SAIL) by October. This will be followed by a 10 per cent stake dilution in Coal India.
Apart from these two, the department of disinvestment has identified about a dozen other companies in which the government could offload shares this financial year. Since disinvestment in all identified public-sector undertakings (PSUs), except SAIL, is likely to begin from October, the government might have two issues on an average every month to meet its target of raising Rs 58,425 crore through stake sale this year.
Disinvestment in Coal India, the biggest issue of the year, is likely to fetch the government Rs 24,258 crore at the current market price. SAIL could add another Rs 1,800 crore to the government kitty.
“One or two big-ticket issues could come by October. SAIL will be the first to hit the market, followed by Coal India, and then the rest,” said a finance ministry official who did not wish to be named.
In the pipeline to go next for stake sale could be Power Finance Corp, Rural Electrification Corp, Tehri Hydro Development Corp (THDC) and SJVN. Among other issues likely to tap the market this year are NHPC, CONCOR, MMTC, NLC and MOIL. Most of the disinvestment will take place through the offer-for-sale (OFS) route. Besides THDC, there will be two more IPOs -for HAL and RINL.
Another big-ticket issue, of ONGC, is likely to make the exchequer richer by Rs 17,329 crore; this might take time as the firm has asked the government to resolve some issues before going for disinvestment.
The ministry official quoted earlier said all issues at Coal India had been sorted out and the government would be able to convince ONGC. too. He added the government might not get more than Rs 35,000 crore from both coal India and ONGC together, as the actual proceeds were expected to be lower than the current market valuation.
“A Cabinet note has already been floated for stake sale in many of these firms. Once the approval of the Cabinet Committee on Economic Affairs is obtained, road shows will be conducted,” the official added.
All these are expected to fetch a combined Rs 36,925 crore to the government this year. Also, it has projected Rs 15,000 crore from sale of its residual stake in Hindustan Zinc and Balco, and another Rs 6,500 crore from sale of Specified Undertaking of the Unit Trust of India’s (Suuti’s) stake in private companies.
If the first disinvestment of 2014-15 happens in October, the government will have to raise an average Rs 9,737 crore from the market every month. Since there are concerns of crowding of many issues in the second half, the ministry is trying to “space these out”. The government will also offer discounts to retail participants to encourage their participation.
SAIL, NHPC, MOIL and CIL will also help the government meet the Securities and Exchange Board of India (Sebi) requirement of having a 25 per cent minimum public shareholding within three years. There could also be some other companies where the government might dilute its holding this year, as there are more than 30 companies where it is required to bring its stake down to 75 per cent over three years.
Last year, the government could raise only Rs 25,841 crore, against the original plan of Rs 55,814 crore. A year before that, the actual mop-up was Rs 25,890 crore, compared with the Budget estimate of Rs 30,000 crore.
(Source: Business Standard, July 24, 2014)
http://goo.gl/ua5UUW
