NEW DELHI: A few weeks before the Reserve Bank of India announces the monetary policy, Finance Minister Arun Jaitley has made his preferences clear in the raging debate over whether governor Raghuram Rajan should cut interest rates on December 2.
“Reduction in the cost of capital will give a good fillip to the Indian economy,” Jaitley said at the Citi Investor Forum, but added that the decision was the RBI’s to make.
The finance minister also listed the reforms that his government will roll out, including the constitutional amendment Bill for goods and services tax, the insurance amendment Bill and changes to the land acquisition law to speed up infrastructure projects. Wholesale inflation dipped to a fiveyear low of 1.77 per cent in October while retail inflation was down to 5.5 per cent.
The retail inflation for October was below RBI’s January 2016 target of 6 per cent. The downward trend has triggered a call from industry and some economists to cut rates.
“Inflation, especially food inflation, has moderated in the last few months and global fuel prices have also come down. Therefore, if RBI, which is a highly professional organisation, in its wisdom decides to bring down the cost of capital, it will give a good fillip to the Indian economy,” Jaitley said in his keynote address.
Most experts expect Rajan to begin easing interest rates only sometime in late 2015 after making sure that inflation has stabilised at lower levels.
But he will have to present a very cogent case as there is rising resentment against higher interest rates in the face of an uncertain recovery, a benign outlook for inflation and falling global commodity prices.
The industrial sector posted a dismal July-September quarter, posting highest 2.5 per cent rise in September. “We have changed our rate call to build in 50 bps of rate cuts by the RBI in first half of 2015 from our earlier call of RBI on hold. We expect the RBI to cut (rates) by 25 bps each in February and April,” Goldman Sachs said in a note on Monday.
Outlining the reform measures that were on the anvil to boost the economy, Jaitley said the government has opened up railways to foreign direct investment.
“Indian Railways was built by the British, they did not build the highways, they built railways. In terms of rake size I don’t think it increased beyond 15 per cent thereafter. And therefore, the quality of service also has to be improved. Trains have to be introduced on selective routes. Some routes could be assigned even to the private sector,” he said.
On the goods and services tax (GST), Jaitley said he is in touch with various state governments and most of the contentious issues had already been resolved. But there were two areas — liquor and petroleum products — where the states want to have taxation authority. Two states wanted entry tax and octroi to be out of the purview of GST, Jaitley said. However, he was confident that these “issues will be sorted out soon”.
(Source: The Economic Times, November 18, 2014)
FOREIGN DRUG MAKERS URGE GOVERNMENT TO REVIEW IPR THINK TANK
NEW DELHI: Foreign drug makers are urging the government to review the membership of a think tank it has set up to formulate intellectual property rights (IPR) policy in the next few months, saying that it lacks representation from innovator firms and needs to be more balanced. Their Indian rivals counter that by saying the panel is supposed to draw up a framework that would be in the country’s best interests.
“At the least, we could have expected this body to include a representative from the research-driven industry or an IP owner that has some skin in the game!” the Organisation of Pharma Producers of India (OPPI) has written to the Department of Industrial Policy and Promotion. “We ask DIPP to please review the constitution of this think-tank and allow the inclusion of some members that could bring more balance to the discussion.”
OPPI’s members are mostly pharmaceutical companies from the US and Europe. “We have written to the government seeking more balance in the membership of the panel,” OPPI director general Ranjana Smetacek confirmed to ET.
The panel set up by DIPP last month is headed by former Intellectual Property Appellate Board chairperson Prabha Sridevan and includes lawyers Pratibha M Singh and Punita Bhargava, apart from Unnat Pandit of Cadila Pharmaceuticals, Asian School of Business director Rajeev Srinivasan and Narendra K Sabarwal, retired deputy director general, World Intellectual Property Organization.
A similar point has also been raised by the US pharmaceutical and biotech groupings— PhRMA (Pharmaceutical Research and Manufacturers of America) and BIO (Biotechnology Industry Organization)–in their submissions to the US Trade Representative’s office. USTR Michael Froman is scheduled to visit India later this month and will meet Nirmala Sitharaman, minister of commerce and industry, during his trip.
Indian drug makers said the government shouldn’t be swayed by such demands.
“This is a national policy that India is framing. Foreign companies can send their inputs to the think tank if they want to be heard. For that they don’t need to be part of the core group,” said DG Shah, secretary general, Indian Pharma Alliance, a grouping of leading domestic manufacturers.
In its submission to the USTR, PhRMA favoured the development of a comprehensive IPR policy in India. It complained that the process has lacked transparency and opportunity for meaningful stakeholder input, particularly IP holders.
“Justice Prabha Sridevan, former chairperson of Indian Intellectual Appellate Board (IPAB), is chairing the think tank and she has a rather broad mandate, according to the terms of reference,” said Lila Feisee, vice president, international affairs, BIO, in her submission to the USTR. “Ms. Sridevan has been outspoken in her defence of her interpretation of Indian patent law, which has generally favored local generic industry.”
Shah defended Sridevan. “Questioning the bona fide of a quasi-judicial entity in such a manner is totally unfair. She has delivered some of the finest judgements, including on the compulsory licence of cancer drug Nexavar,” he said.
As IPAB chairperson, Sridevan had upheld the grant of India’s first compulsory licence (CL) for Bayer’s cancer drug Nexavar, but had struck down one of the three grounds that had been cited. In her judgement of March 2013, she said that the patent controller had erred in concluding that a multinational will have to manufacture its drug locally to meet the “working” requirement and avoid a CL. This clause had been cited by many innovator drug firms as ‘troubling’.
(Source: The Economic Times, November 18, 2014)
KELKAR PANEL FAVORS PSC REGIME AND WAIVING OF IMPORT DUTY ON LNG
NEW DELHI: An experts’ panel on petroleum reforms, headed by Vijay C Kelkar, former Union finance and petroleum secretary, has recommended continuing with the existing production-sharing contract (PSC) regime in the hydrocarbon sector, opposing the Rangarajan-proposed revenue-sharing contract (RSC) model.
The panel’s report, Road map for reduction in import dependency in the hydrocarbon sector by 2030, has made a total of 52 recommendations, based on 30 meetings held over 18 months. It was set up in 2013 and gave its first report in January this year. The final report follows a consultation paper in August, seeking comments from stakeholders.
Its suggestions, the panel says, have the potential to bring down India’s annual oil import bill by $70-80 billion, around half the present total.
“The committee has reservations against accepting the biddable RSC model, due to the inherently misaligned risk-return structure, which leads either to lower levels of production due to resultant reduced exploration efforts and lower recovery ratios or to high windfall gains to operators, encouraging contract instability due to political economy factors,” the panel said.
Under the PSC regime, oil companies can recover their costs from the sale proceeds of oil and gas before sharing the profit with the government. The Comptroller and Auditor General of India had criticised this approach, arguing it encourages companies to unnecessarily increase capital expenditure. Under an RSC model, companies state upfront the amount of oil or gas they will share with the government from the first day of production.
Kelkar told Business Standard the committee had recommended two variants of a PSC regime, based on the feedback received from stakeholders. Either one linked to an investment multiple, with a modified contract administration, including self-certification of costs by the contractors or a PSC with biddable supernormal profits tax.
The panel has suggested making Rs 7,000 crore available to the Directorate General of Hydrocarbons (DGH) for creation of a national data bank on domestic basins; delegating quasi-judicial power to DGH, on the lines of the Securities and Exchange Board of India; introducing an Open Acreage Licensing Policy by 2016; offering equity participation to foreign firms in nomination fields; exempting oil firms’ production from mature fields from subsidy sharing; ensuring absence of retrospective changes to contracts, to boost investor sentiment; encouraging coal gasification and shale gas exploration; and developing petroleum clusters of oilfield service providers on the east and west coasts.
The panel recommended market-linked gas pricing, a decision the new government has taken. The petroleum ministry has raised natural gas prices by 33 per cent to $5.61 a unit, based on an average of global well-head prices. The panel also pitched for contract extension up to the economic life of a block, a key demand of Vedanta Resources subsidiary, Cairn, which operates the Barmer block in Rajasthan. Kelkar has also made out a case for fiscal reform such as including oil and gas under the proposed national goods and services tax framework and waiving of customs duty on import of liquefied natural gas for all purposes.
(Source: Business Standard, November 18, 2014)
DRAFT MINES BILL PROVIDES FOR SIMPLIFIED CONCESSION REGIME
NEW DELHI: The government has released a draft Bill redefining regulations for the minerals sector. The purpose is to make the concession regime more investor-friendly by simplifying procedures and providing for security of tenures. The new Mines and Minerals (Development and Regulation) (Amendment) Bill, 2014, that seeks to bring comprehensive amendments to the MMDR Act 1957, also proposes to increase efficiency by allowing transfer of reconnaissance and prospecting licences and associated data without restrictions.
While most of the provisions in the draft Bill are akin to the lapsed MMDR Bill 2011, which was introduced in Parliament by the previous UPA government, the new one also has some additional provisions and some omissions. The lapsed MMDR Bill had proposed that mining companies share 26% of profits with the project-affected people, but the new Bill is silent on this.
To improve transparency in allocation as well as to ensure a fair share of the value of minerals for the government, the new Bill prescribes competitive bidding by auction to be followed for allocation of mining leases (MLs) in respect of notified minerals. It is proposed that there need not be any reconnaissance permits or prospecting licences issued for such minerals.
Different set of regulations are proposed for suficial and deep-seated minerals, considering the mining of latter is a high-risk.
Also, the Amendment Bill seeks to make the offence of illegal mining in respect to notified minerals a cognizable offence. The state governments are asked to set up special courts for trial of offences under the Act, if necessary. In all affected districts, states shall, by notification, establish a trust to be called the District Mineral Foundation.
Though states are the licensing agencies, the Centre will be specifically empowered to frame rules to set timelines for the various stages in processing applications for grant of mineral concessions and renewals.
The mines ministry invited comments and suggestions on the draft Bill from states, the mining industry, other stakeholders and public. The comments should reach latest by December 10.
(Source: The Financial Express, November 18, 2014)
DoT, DEFENCE TO WORK ON SOLUTION TO SPECTRUM ISSUE
NEW DELHI: Defence Minister Manohar Parrikar and Telecom Minister Ravi Shankar Prasad today agreed to work in “consent, coordination and synergy” to resolve spectrum related issues.
“I had a very fruitful meeting with Defence minister and both of us agreed that while Defence’s need of spectrum for the country’s security is important, the growth of telecom as infrastructure sector is equally important. We need to work in consent, coordination and synergy,” Prasad told reporters after his first meeting with Parrikar on spectrum issue here.
Based on various recommendations and agreements, the DoT expects Defence ministry to clear about 165 Mhz of spectrum across frequency bands.
Out of all bands, there is immediate demand for 3G spectrum in frequency band 2100 Mhz.
Telecom regulator TRAI has recommended that spectrum in 2100 Mhz band, a part of which is with the Defence Ministry, should be put up for auction along with two sets of spectrum bands– 900Mhz and 1800Mhz in February next year.
Earlier, the Defence Ministry had vacated 15 MHz of 3G spectrum which was auctioned in 2010. The Defence had also vacated 15 MHz of 2G spectrum, which was allocated to new operators.
Under the agreement with DoT, the remaining spectrum — 10 MHz spectrum in 3G and 5 MHz in 2G — is to be vacated only after the alternate communication network is completed.
BSNL is creating exclusive alternate network for the Defence. The PSU issued an LoI in July and work is expected to complete in 18 months from the date of issue of LoI.
DoT is also working on the possibility to get another chunk of 150 Mhz vacated from Defence in 1700-2000 MHz frequency band that can be used for commercial 3G and 4G services.
Sources said that DoT has started working on auction of 3G spectrum in 17 out of 22 service areas.
Prasad, however, did not share if 2100 Mhz band will be put on sale in the proposed auction.
The next round of spectrum auction is proposed to be held in February 2015 and the government is estimated to garner at least Rs 9,355 crore from sale of radiowaves.
As per estimates, auction of spectrum in 2100 Mhz band in February can fetch bids worth Rs 5,000 crore.
(Source: The Financial Express, November 18, 2014)
