NEW DELHI: The Congress has decided to back three crucial economic reform legislation that the National Democratic Alliance (NDA) will bring in the winter session of Parliament beginning November 24. These are the constitution amendment Bill for implementing the Goods & Services Tax (GST), the insurance laws (amendment) Bill and the coal ordinance.
NDA needs the support of the Opposition party to pass important legislation, as it does not have a majority in the Rajya Sabha.
Despite the earlier ambivalence of Congress-ruled states on GST, the party would not block the constitution amendment Bill for the new indirect tax regime, top party sources said. “Anxieties about how the states will be compensated – because many feel they will lose out if GST is introduced – remain. But this was a Congress initiative and we will not block it. We will, however, insist that the fine print is what we want it to be,” said a minister in the previous government and an advisor on parliamentary affairs.
The party will also support the insurance laws (amendment) Bill, which stipulates that shareholding of foreign investors (including foreign institutional investors) in an Indian insurance company – owned and controlled by Indians – should not exceed 49 per cent of paid-up capital.
After the Bill was referred to a select committee in the previous Parliament session, the 15-member panel is considering it at present. The select committee’s deliberations will reflect the stance of various political parties on the issue. The Anna Dravida Munnetra Kazhagam’s (AIADMK’s) position is not known, but given the current configuration of the select committee, the Bill will pass muster only if the Congress decides to back it.
The Congress says the insurance Bill is a move by its government, so it will be churlish to block it.
Similar is the case with the coal ordinance. Given that the ordinance has been occasioned by a Supreme Court order terming the coal block allocations during the Congress government’s regime illegal, it is unlikely that the party will oppose it. The Congress, though, would like the discussion steered away from the issue of illegality and to focus more on the way the coal mining sector can be restructured. Also, the party will not vote against Bills related to consolidation of banks, should those come up in Parliament.
However, the biggest Opposition party has made it clear that it will not countenance any changes in the land acquisition Act, especially the clause pertaining to retrospective compensation.
The retrospective clause in the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, returns the land to the original owners where the acquisition has been pending for a period greater than five years prior to the start of 2014. The qualifying criteria that must be satisfied are that compensation (for the land) should not have been paid to the land owners or physical possession of the land should not have been parted with (even if the authorities have altered the title in the revenue records).
Kamal Nath, the Congress member of Parliament from Chhindwara, said the Madhya Pradesh government, for instance, acquired land for dams and irrigation projects in the past, rendering a staggering number of families destitute. Later, the state either did not move or moved tardily in creating assets for public purposes; it diverted land for other purposes like commercial ventures, Nath said. According to him, retrospective compensation in the new land acquisition Act attempts to make amends for the wrongs done by its predecessor – the land acquisition Act, 1894 – across the country. Changes in this would be resisted by the Congress. Amending the land acquisition Act so that it makes it easier for industry to acquire land, on the other hand, is a promise that the Bharatiya Janata Party (BJP) had made in its election manifesto.
Any change in the land acquisition Act will need endorsement in the Rajya Sabha, where BJP has only 43 members in the 250-member House. Along with its current NDA allies, the number increases to around 100, which is substantially short of a simple majority. By comparison, the Congress has 68 members. The stand of either the Nationalist Congress Party (six members), which recently decided to give unconditional support to BJP in Maharashtra, or the Shiv Sena (three), which snapped its alliance with BJP, is not known. Also, there is no clarity on the AIADMK’s position, for it is only nominally a supporter of the government.
BJP has in the past said that not having a majority in the Upper House is not a problem and that it can get legislation passed by recommending that a session of the Lok Sabha and Rajya Sabha be held together. The party has more than simple majority in the Lower House, enough to offset the shortage of seats in the Rajya Sabha. However, this is easier said than done. To call a joint session, a House needs to have passed a Bill that falls in the other House. To resolve the logjam, the President of India has to be petitioned to call a joint session, which has a combined strength of 795 members of Parliament – 545 from the Lok Sabha (543 elected, two appointed) and a maximum of 250 from the Rajya Sabha. If the land acquisition Bill has to be amended to remove the retrospective clause, a joint session will be required to pass it before 2016. By that year, the complexion of the Rajya Sabha is likely to have changed in favour of the ruling alliance.
(Source: Business Standard, November 3, 2014)
SEPTEMBER QUARTER RESULTS SHOW INDIA INC LOSING STEAM
Aggregate results of companies that have declared results so far for the September quarter reveal a deceleration in the growth momentum that was visible in the previous three quarters.
A sample of 337 companies, excluding banks, finance companies, and oil and gas players, reported 11.8 per cent growth in aggregate revenue over the year-ago period, the slowest since the December 2013 quarter.
Net profit rose 24 per cent year-on-year in the September quarter, slower than in the previous three quarters. In ET’s edition dated October 6, the ET Intelligence Group had anticipated that the sales and profit growth of a sample of Nifty companies would recede in the second quarter of the current fiscal following lack of fresh demand impetus.
“The topline performance in the September quarter so far has been slightly below our expectations. Any major signs of economic recovery appear to be missing,” said Gautam Trivedi, MD and head of equities, Religare Capital Markets. Some industry trackers draw attention to the possibility of a steeper deceleration for corporate India during the quarter.
“We anticipated sales and net profit growth to drop for the quarter. But, the results so far indicate that the drop in the rate of growth could be more severe than expected,” said Dhananjay Sinha, head of research and strategist, Emkay Global financial Services.
The operating margin for the sample was 18.7 per cent, similar to the year ago level, but lower than the 20.2 per cent a quarter ago. This was because raw material expenses rose faster than sales growth during the quarter. Over the next fortnight, more companies in core sectors such as capital goods, construction, and power, which have been impacted by low demand, will announce their quarterly performance. Sinha believes that once all the results are out, the margin performance may be lower than anticipated.
A reason why the overall performance may decline as the results season progresses is the dominance of information technology (IT) sector in the available data, accounting for 31.5 per cent of total revenue of the present sample and half of the net profit.
Typically, by the time all companies are out with their earnings numbers, the IT sector’s sales and net profit contribution stands at over 15 per cent and below 30 per cent, respectively.
Till now, select companies from automobiles, IT and pharma have delivered better performance, while the results of companies in consumer-oriented sectors and capital goods were disappointing.
According to some analysts, it may take a while for the corporate performance to pick up. “A major turnaround may be possible by the end of the June 2015 quarter. We will wait for another quarter before updating our earnings forecast,” said Trivedi of Religare.
Auto companies such as Maruti Suzuki and Hero MotoCorp reported higher profit growth backed by improved sales volumes.
Pan-India cement companies such as ACC, Ambuja Cements, and UltraTech fared well due to better realisation in the southern region even though volume pick-up was slow.
(Source: The Economic Times, November 3, 2014)
NOW, PM TO MEET PSU BANK CHIEFS
NEW DELHI: Prime Minister Narendra Modi, who prefers to cut hierarchy and have direct interaction – be it bureaucrats or students – will next meet chiefs of public-sector banks.
The proposed meeting comes amid rising bad loans and reports of various irregularities in state-owned banks. The prime minister is likely to take stock of the banks’ performance – an exercise usually undertaken by the finance minister.
“Credit offtake has remained low. He wants to discuss with bankers how to increase it,” said a finance ministry official, who did not wish to be identified.
The credit offtake fell to Rs 72,100 crore between April 1 and August 22 this year from Rs 2.35-lakh crore in the same period last year. The incremental growth in credit since the start of the financial year slowed to 1.3 per cent from 4.7 per cent. While overall non-food credit grew a mere one per cent so far this year incrementally, credit to industry actually fell 0.6 per cent since April.
The meeting is likely to happen after the vacant posts of chairman and managing directors (CMDs) in public-sector banks in November. The National Democratic Alliance government had recently scrapped the selection of six bank chiefs recommended by the previous United Progressive Alliance regime, after a high-level panel found irregularities in the process followed.
Officials said as the morale of some CMDs appears to be down after the change in the selection process, the Prime Minister is also likely to give a pep talk to the bankers just the way he gave to the bureaucrats in his two interactions with them since assuming office in May.
In the meeting with secretaries of the Central government last Saturday, Modi had asked them to act fearlessly. The meeting came in the backdrop of sudden transfers of some high-profile officers to low-key ministries. Sources said it aimed at allaying fears in the minds of the officers.
Modi might also ask for a status report on his flagship financial inclusion programme, Pradhan Mantri Jan-Dhan Yojana, and discuss freely with banks the problems they are facing in rolling out the scheme.
G S Sandhu, secretary, Department of Financial Services will take a meeting on November 5 to discuss the progress of the scheme. Besides bank CMDs, it is also likely to be attended by insurance companies and the telecommunications department. Officials from the Unique Identification Authority of India will also be there to track seeding of Aadhaar with bank accounts.
(Source: Business Standard, November 3, 2014)
PMO ADVANCES DEADLINE FOR UIDAI, NPR TO FINISH WORK BY MARCH
NEW DELHI: The Prime Minister Office has asked the Unique Identification Authority of India (UIDAI) and the National Population Register (NPR) to finish collecting biometric details of citizens by March next year. Earlier, the deadline was June,2015.
The decision was taken in a meeting attended by all the stakeholders in the second week of October. A review meeting was held on Friday in the Planning Commission. Two officials, who independently spoke to Business Standard, confirmed that the deadline has been advanced for both the UIDAI and the NPR, a wing of the Union home ministry.
But the new deadline has alarmed the bureaucrats in both the departments, especially the UIDAI which is currently without a head. Nandan Nilekani quit as UIDAI chairman earlier this year to contest the Lok Sabha elections on a Congress ticket.
“The deadline is most likely to be missed. The NPR has not started much work of collecting biometric details in the North-eastern states, where as the UIDAI is still in the process of tendering for big states such as Uttar Pradesh and Bihar,” said an officer. The tendering is done to empanel agencies, which will set up camps to enroll people.
Till October 28, a little over 700 million people have been issued Aadhaar, a 16-digit unique identification number. This number is generated after capturing an individual’s biometric details such as fingerprints and facial reading. The government has authorised both the UIDAI and the NPR to collect biometric data, but in their respective states. Once the biometric detail is collected, it is sent to the UIDAI for de-duplication. The UIDAI then generates the Aadhaar number.
The project was launched in September 2010, and the authorities were asked to collect the data of all residents aged above five years. Population of such people is estimated to be around 1.05-1.08 billion. The question is whether the authorities can complete the task against the new timeline.
Officials in the NPR indicated that it would be difficult to complete work in Assam and Meghalaya, as they were busy creating the National Register of Citizens. The UIDAI, which was recently assigned Uttar Pradesh, Bihar, Uttarakhand and Chattisgarh with a combined population of 340 million, has just begun work in these states. Till date, around 89.3 million residents have been issued Aadhaar in these states, which is 26 per cent of the target population.
Many say the decision to advance the deadline was taken in view of the government’s intention to link Aadhaar numbers with its various schemes such as the Pradhan Mantri Jan Dhan Yojana and the Mahatma Gandhi National Rural Employment Generation Act. This is besides pensions, scholarships, direct benefit transfer and passports and attendance system in the government offices.
(Source: Business Standard, November 3, 2014)
AMAZON SAYS IT FACES UNIQUE RISKS IN INDIA
BANGALORE: Amazon feels India’s laws and regulations are a risk for the company. The online retailer thinks the laws and regulations may be interpreted in a way that will make business in India more difficult than it is and, in a recent filing to the US Securities and Exchange Commission (SEC), even present the possibility that it could be forced to shut down its operations.
India as a risk factor is emerging for the first time in Amazon’s mandatory quarterly reports to the SEC. The report in June mentioned only China. But the latest September report adds India to the section titled ‘We may not be successful in our efforts to expand into international market segments’.
The report says, “For www.amazon.in, we provide certain marketing tools and logistics services to third-party sellers to enable them to sell online and deliver to customers. Although we believe these structures and activities comply with existing laws, they involve unique risks. There are substantial uncertainties regarding the interpretation of PRC (People’s Republic of China) and Indian laws and regulations, and it is possible that the government will ultimately take a view contrary to ours.”
The filing goes on to say, “If our international activities were found to be in violation of any existing or future PRC, Indian or other laws or regulations or if interpretations of those laws and regulations were to change, our businesses in those countries could be subject to fines and other financial penalties, have licences revoked, or be forced to shut down entirely.”
The e-tailing behemoth is in the midst of a tax tussle with the government in Karnataka, where the company has its India headquarters and also has warehouses in which merchants can hold their inventory. The tax authorities have raised objections to the way Amazon India and its sellers file their tax returns.
When TOI contacted Ajay Seth, commissioner of commercial taxes in the Karnataka government, on its stance, he said, “Amazon is acting like a commission agent engaged in dispatch of goods and generating tax invoice. Commission agents will have a tax liability as a seller. We have clarified the legal position to them. But they haven’t understood the law and they are trying to interpret it in a way that’s unique to them.”
India also does not allow FDI in online retail. So most players, including Amazon, have established complicated structures that seek to show that the companies are merely providing a technology platform and logistical support for retailers in India to sell their products online and distribute them. The Enforcement Directorate is probing these structures, and it’s far from clear how that will go.
(Source: Business Standard, November 3, 2014)
