Govt May Cap FDI For Credit Bureaus At 49%

Mumbai: The government is expected to limit foreign direct investment (FDI) in credit information bureaus at 49 per cent, as it prepares guidelines for entry of foreign companies in this sector. The sector has become attractive because of the booming retail financial services market. The government has been considering either 49 per cent or 74 per cent cap, but is more inclined to go ahead with a lower cap to begin with, banking sources said. Credit information bureaus collect borrower data from banks and financial institutions, both positive and negative, for use by financial institutions subscribing to it. India already has credit bureau called Credit Information Bureau India Ltd (CIBIL), in which 62.5 per cent is owned by Indian lenders including State Bank of India, ICICI Bank, Housing Development Finance Corporation (HDFC) with 10 per cent stake each. The foreign shareholders in CIBIL include Citicorp Finance, Dun & Bradstreet and GE Strategic Investments. CIBIL is a pure credit information bureau, whereas Experian is a provider of a range of services based on the core credit data. Experian earns only 10 per cent of its revenues globally from credit information with the balance coming from its various value-added services.

Domestic Currency Surges To Eight-Year High,Last Seen In 1999

The rupee surged to an eight-year high of 43.04/05, last seen in 1999. Banks swapped dollars for rupees to meet immediate needs, giving a boost to the domestic currency. The rupee opened at about 43.14/15 and touched an intra-day high of 43.01/02. On March 26, the rupee had ended at 43.30. The six-month forward premia ended at 5.31 per cent (5.45 per cent) and 12-month forward premia closed at 4.04 per cent (4.15 per cent). Rupee liquidity dried up, pushing call rates to an intra-day high of 25-30 per cent, forcing banks to borrow Rs 27,395 crore under the RBI''s repo window at 7.5 per cent. Advance tax outflows of around Rs 35,000 crore also sucked out cash from the system. With the financial year drawing to a close, banks are selling dollars in the market to meet cash requirements. The apex bank is believed to have bought $8 billion from the forex market between November and January. Dealers said that most exporters would have covered their positions for the next six months (the forward premia has been ruling high).

Service Tax Mop Up Likely To Top Rs 38,000 Cr This Fiscal

Service tax mop up in 2007-08 is expected to exceed the target of Rs 50,200 crore, according to officials of the tax administration. The revised target of service tax collections for the year that is coming to a close is likely to be exceeded by around Rs 200 crore. Because of the buoyancy in tax collections, the original target for 2006-07 of Rs 34,500 crore was revised to Rs 38,160 crore a few months ago. Now, even this is likely to be exceeded, according to Mr P.K. Jain, Commissioner of Service Tax. The target for service tax collections for the year 2007-08 has been fixed at Rs 50,200 crore, but the tax departments see this as an easy target. They said that service tax on works contracts, rent on commercial property and cab services would add to the revenues.

Rupee Closes At 20-Month High Against Dollar

Mumbai: The rupee closed at a 20-month high of 43.30 against the dollar on March 26 owing to a liquidity shortage in the banking system. The home currency opened at 43.50/52 but finally rose by 26 paise to close at 43.30 against the previous close of 43.56/57 on March 23. The dealers expect the rupee to trade in the range of 43.10-43.15 this week. In the forward premia, 6-month closed at 5.45 per cent (3.97) and the 12-month closed at 4.15 per cent (3.37).

New SEZs Not Likely To Have Golf Courses, Amusement Parks

The government is looking at coming out with new rules for housing and recreational activities in upcoming SEZs. Large-scale recreational activities, such as construction of golf courses and amusement parks, may not get approval in new SEZs. Also, only 25% of the approved housing may be allowed during the initial phase, with the remaining construction being permitted in phases depending upon the progress made by the SEZ developer. The changes are likely to be incorporated in the rules for setting up SEZs, a government official said. The rural development ministry is also in favour of the proposal as it would limit land requirement for projects. Due to widespread farmer unrest and violence, the government wants to tread cautiously while allocating land for SEZs. According to the proposal, setting up of golf courses or other recreational facilities with large land requirement may be included in a negative list of activities permitted in a SEZ. The entire land acquisition for SEZs would also be undertaken by limiting the minimum area of land for core functions and a small portion for allied functions. The changes may also require an SEZ promoter to construct just 25% of the approved housing for the project in the first phase. The approval for the remaining construction may be given in three phases depending upon the development of the SEZ. The changes are likely to be included to restrict land requirement for non-core functions. The proposed authority would first vet land requirements suggested by a SEZ developer before forwarding it for approvals. Non-core activities, such as setting up recreational facilities, may be axed at this stage.

India, Israel Negotiates On Maritime Alliance

New Delhi: India and Israel have accorded to explore areas of cooperation in road safety programmes. The decision was taken when the Israeli Deputy Prime Minister and Minister of Transport and Road Safety, Mr Shaul Mofaz, called on the Union Minister of Shipping, Road Transport and Highways, Mr T.R. Baalu. Mr Baalu outlined to the visiting dignitary the various investment opportunities available in India in the road and port sectors. The visiting dignitaries were also informed that Hindustan Shipyard Ltd was at an advanced stage of completing a joint venture with a leading Israeli company for bidding for 15 interceptor boats/vessels. The two sides also discussed the progress made on the earlier proposal for a Maritime Agreement between the two countries.

Call Rates Surge To 22 Pc

Mumbai: The overnight price of money (call rates) increased to 22 per cent on March 20, as banks began borrowing heavily from each other to cover shortage of funds. A few foreign banks were reportedly on the verge of defaulting on their cash reserve ratio. The strain on liquid cash also buoyed the rupee to close at 43.75 against the dollar - an 18-month high. The call rates, which were at 6-6.10 per cent on March 1, increased to 9.5-10 per cent on March 16 as advance tax outflows began taking a toll on liquidity. Banks borrowed Rs 35,250 crore via the RBI''s repo window under the liquidity adjustment facility. Higher corporate profitability has meant that the outflow at the end of the fourth quarter has been higher. The scourge of a nearly week-long closure of banks due to a strike call and the subsequent holidays has also prompted banks to cover up cash requirements. Banks do not have excess of SLR securities to borrow from the RBI via the repo window, so they are headed to the call money market. Bankers also said that the increase in CRR on December 9 and February 13 by a total of one percentage point to six per cent has drained Rs 27,500 crore from the system. To curb inflation, the RBI also put in place an enhanced market stabilisation scheme to absorb excess cash by conducting auctions of dated securities as well as Treasury bills. With inflation surging to 6.46 per cent for the week ended March 3, liquidity management has become the apex bank''s priority.

National Tax Tribunal Bill Approved

New Delhi: A Bill providing that no member of the National Tax Tribunal shall be transferred by the Centre without the chairman''s concurrence was permitted by the Lok Sabha on March 19. The National Tax Tribunal (Amendment) Bill to amend the relevant Act passed in 2005 wants to bring about changes to decrease the qualifying period of a member of the Income-Tax Appellate Tribunal and of the Customs, Excise and Service Tax Appellate Tribunal for appointment as member of the National Tax Tribunal, from seven years to five years.

CST Rate Reduced To 3-pc On Track

New Delhi: The government will bring down the central sales tax (CST) rate to 3 per cent from 4 per cent from April 1 through a notification, as announced by Finance Minister P Chidambaram in his Budget speech. Against the reports, a finance ministry official said the CST rate reduction was on track and would happen as per schedule. Chidambaram''s request to not refer the Taxation Laws Bill to the Parliamentary Standing Committee on Finance for scrutiny has been accepted by Lok Sabha Speaker Somnath Chatterjee. The FM met the Speaker to request that due to the time-bound nature of the CST phase-out, the Standing Committee route be bypassed. The Bill seeks to phase out the CST over a period of three years and bring it to zero by March 31, 2010. The abolition of the tax will pave the way for an integrated Goods and Services Tax, to be introduced from April 1, 2010. As the Budget is generally passed in May by Parliament, the CST rate cut is expected to happen from April 1 through a notification. The rate cut was finalised by Chidambaram and the Empowered Committee of State Finance Ministers prior to the Budget presentation on February 28. The package for compensation to states for revenue loss due to the CST phase-out would consist of non-monetary as well as monetary measures. The CST, being an origin-based tax, is inconsistent with value-added tax, which is a destination-based tax. The CST results in cascading, since it is not rebatable against VAT.

Karnataka Reverses Surplus Budget Record

The Janata Dal (S)-BJP coalition government in Karnataka has partially blotted its copybook by presenting a marginal deficit of Rs 23 crore in its budget for 2007-08, thus reversing the state''s record of three surplus budgets (2004-05 to 06-07) in a row. This has been necessitated by its decision to make good a political promise to ban the sale of arrack which will cost it Rs 1,300 crore in revenue for the part year from July and Rs 1,905 crore in a full year. The arrack decision has taken another toll, a drastic fall in the rate of growth of plan expenditure, from 47.8 per cent in 2006-07 over the previous year to 8 per cent projected for the next year (07-08) in relation to the current year. For its part, the government has claimed that despite the return to marginal overall deficit, both in terms of the revenue surplus (0.74 per cent) and fiscal deficit (2.87 per cent) estimated for 2007-08, it is well within the parameters laid down by the Karnataka Fiscal Responsibility Act. Finance minister B S Yediurappa plans to partially make good the revenue loss on account of arrack by expecting to earn Rs 150 crore more from higher licence fees for establishment selling Indian made liquor and Rs 75 crore from higher stamp duty. The government will also mobilise an additional revenue of Rs 75 crore by enhancing the tax of various classes of vehicles. The government intends to raise Rs 80 crore by levying 20 per cent tax on mollasses, ethyl alcohol, denaturated spirit and rectified spirit on which levy of excise duty has legal disputes.

Cabinet Approves 6-pc DA Hike For Central Govt Employees

In a big bonanza for central government employees and pensioners, the Union Cabinet on March 15 gave a go ahead to a proposal to release additional instalments of dearness allowance (DA) and dearness relief (DR) in cash at the rate of 6%. The new rates would be effective retrospectively from January 1, 2007. Additionally, the Cabinet cleared enhancing the age of superannuation for teaching positions in centrally-funded educational institutions from 62 to 65 years with provision for re-employment up to 70 years against sanctioned vacancies. It is understood that the Cabinet Committee on Economic Affairs (CCEA), which also met on Thursday, cleared a proposal to extend Rs 75 per tonne bonus on minimum support price (MSP) of Rs 750 for procurement of wheat for supply through PDS. The DA hike will raise the allowance component for central government employees from present 29% to 35% of the basic pay, minister for information, broadcasting and parliamentary affairs PR Dasmunsi told reporters after the Cabinet meeting. While the employees would take a fatter package, the move would cost the government an additional outgo by Rs 3,900 crore for the FY 2007-08 (14-month period including January and February 2007). The DA hike is the second in less than six months'' time. The Centre revises DA for its employees bi-annually, in January and July, on the basis of movement in the consumer price index for industrial workers. The government had last raised the DA and DR by 5% in September, 2006. The Cabinet also gave its approval to setting aside an expenditure budget of Rs 767 crore for the organising committee for Commonwealth Games, 2010. Also, a new post of Principal Commissioner, Commonwealth Games will be created to co-ordinate all matters relating to the Games on behalf of DDA.

Bond Yield Ease On The Rate View, Re Ends 44.24

Indian bond yield fell slightly on Wednesday as investors veered to a view that the RBI may rely on draining cash than raising interest rate to curb inflation. The yield on the benchmark 10 year ended at 7.96%, compared with the previous close at 7.97%. In the inter bank call market, the call rate hovered in the range of 5.20%- 5.40%. The RBI through its Liquidity Adjustment Facility (LAF) absorbed the recently capped limit of Rs3,000cr against the subscription offer of Rs37,175cr by banks on Wednesday. The rupee ended lower on Wednesday but pared early losses as investors shrugged off a fall in local stock on expectations for renewed flows into the country. The rupee ended at 44.245/265 per dollar, up from an early low of 44.365, but off Tuesday''s close of 44.205/220.

India Inc All Set For $6.5b ECBs

India Inc is seriously looking at overseas for funding. Led by companies like Reliance Industries, R-ADAG, Hindalco and Suzlon, India Inc is expected to mobilize around $6.5 billion through external commercial borrowings (ECBs) in the next three months. Hindalco is planning to mop up ECBs to part-fund its Novelis acquisition while Suzlon Energy is planning an ECB issue to finance its over e1.02-billion bid for German wind power company REpower Systems. RIL and R-ADAG are planning to float ECBs for expansion. As the ECB route allows corporates access to a huge fund pool, companies with large capex requirements tap them the most.

Govt Extends Rural Job Plan To 5 More Districts

Kolkata/ Berhampur: The Central government will extend the National Rural Employment Guarantee Programme to another five districts in Orissa. The districts to be covered under the 100 day job guarantee in the rural areas in a year are Angul, Bargarh, Balesore, Bhadraka and Jajpur, said Chandra Sekhar Sahu, the Union minister of state for rural development. Herewith, the total number of districts to be covered under the Centrally sponsored scheme in the state will be increased to 24 out of total 30 districts in the state, Sahu told reporters. In the first phase of the programme, launched in 2005 last, 19 districts were covered. Finance minister P.Chidambaram in his Budget proposal for 2007-08 has proposed to extend the NREGP to another 130 districts across the country. The Union minister however clarified that the selection of the districts to be covered under the job guarantee programme was made by the Planning Commission and there was no role of the Ministry of Rural Development in it. A total allocation of Rs 12,000 crore was made in the Budget proposal under the scheme, which was up from the previous year''s Rs 11,300 crore when the programme was implemented in 200 districts. This year''s budget allocates Rs 2,800 crore for Sampoorna Gramini Rozgar Yojana (SGRY) for rural employment in the districts not covered by the NERGP. The allocation for the for the self employment programme of Swarnajayanti Gram Swarozgar Yojana (SGSY) for the year 2007-08 will be Rs 1,800 crore, which was up by Rs 800 crore.

EPF Rate Delay To Affect 2 Mn Subscribers

New Delhi: The failure of the Centre to settle on the interest rate for provident fund is likely to affect around two million subscribers. The Government on March 11, once again got cold feet on the issue and the meeting of the Central Board of Trustees (CBT) of the Employees'' Provident Fund Organisation (EPFO) decided not to take up the matter despite the fact that it was on the agenda. The CBT had changed the interest rate for provident fund last time in April 2006, 8.5% for 2005-06, as against the previous year''s 9.5%. The CITU said 1.5 lakh subscribers left every month. Central Provident Fund said this kind of stalemate on PF interest rates has had a precedent. Decision on interest rates could not be taken for the two years before 2006 too. Trade unions expressed worry over the government''s lackadaisical attitude in handling the issue. While the agenda clearly spelt out a discussion on interest rate of 8% for the fiscal 2006-2007, the EPFO gave a figure of 8.2% for the following year. The rate of interest till April 2006 was 8.5%. A decision has to be taken for the period after that. Naturally, the government will find it difficult to first reduce the interest rate from 8.5% to 8% for 2006-2007 and then increase it again to 8.2% for the following year.

Indirect Tax Increases By 22 pc In April-Jan

Indirect tax collections raised by 22.2% to Rs 1,90,424 crore during April-January 2006-07, as compared to Rs 1,55,859 crore during the corresponding period of the last fiscal. Customs and excise collections raised by 16.8% to Rs 1,79,265 crore till February this fiscal, as against Rs 1,53,463 crore in the same period last fiscal. Service tax collections increased 64.4% till January 2007 to Rs 28,877 crore, as compared to Rs 17,563 crore in the same period last fiscal. Service tax collections increased by 62.1% to Rs 3,203 crore in January 2007.