Category Archives: Indian Business

Govt tries to woo foreign retail investors!

The government on Tuesday eased norms for foreign retail investors to buy directly into Indian shares and bonds, including opening a separate $1 billion window for corporate debt, to boost inflows at a time when the rupee is testing fresh lows almost on a daily basis.

Apart from the $20 billion investment window for foreign institutional investors, qualified foreign investors (QFIs), which were permitted to invest directly in equities earlier this year, will now be able to buy up to $1 billion (around Rs 5,500 crore) in corporate bonds in what the government termed as “testing waters”.

On an overall basis, so far in 2012, net investment by FIIs is nearing the $12 billion mark compared to around $8 billion in 2011. But, they have withdrawn funds from India since the Budget, reflecting the “safe mode” in which FIIs are operating, given the weak global economic environment and the poor sentiment on India. So far in May, they have been net sellers of the $1.7 billion.

Although the QFI route was a New Year gift from the finance ministry, there hasn’t been any queue outside the window prompting the government review the guidelines. To begin with, retail investors from the 27 countries that make the European Union and the six that are part of theGulf Coordination Council, will now be eligible to invest directly. Earlier, the QFI route was only open to investors from the 34 members of the Financial Action Task Force (FATF), the global anti-money laundering club.

The change has been necessitated by the response from investors in the Gulf, said Thomas Mathew, joint secretary in the finance ministry. “The changes are aimed at making the QFI scheme more attractive to potential investors and enhance flow of foreign capital into India,” the finance ministry said.

The government will also clear apprehensions over taxation policies. The Central Board of Direct Taxes (CBDT) will shortly issue clarifications on issues concerning taxation on QFI investments. Although the finance ministry has put on hold General Anti-Avoidance Rules (GAAR), there has been apprehensions among the global investors over tax policies, especially after the Budget.

The finance ministry also decided to do away with the restriction on number of days a QFIs can keep fund in their bank accounts in India, a move to ease norms for such investments. Earlier, if the funds were not invested in five days, they had to be remitted to the overseas account of the foreign investor. Given that this was proving to be a dampener for genuine investors, and raising transaction costs, the cap has been dispensed with.

QFI have also been permitted to open separate bank accounts instead of the earlier practice of investing through a common pooled bank account of depository participants. “We are looking at 6-18 months to see the optimisation of QFI inflows,” Mathew said. The government has also lined up roadshows in five Gulf countries, including Kuwait and the UAE, too woo foreign retail investors.

[This story was originally published on Times of India] TNN | May 30, 2012, 05.26AM IST

Petrol price hiked by Rs. 7.54; mixed reactions from industry

The petrol price was hiked on Wednesday by a record Rs.7.54 per litre as rupee had a free fall, an unpopular decision that was attacked by allies of UPA government who demanded its immediate rollback holding it as unacceptable. The hike, the third in one year, came a day after end of the Budget Session of Parliament and Prime Minister Manmohan Singh speaking of the need to take “difficult decisions” on the third anniversary of UPA-II.

The decision of the oil marketing companies effective midnight tonight is the steepest hike in petrol price ever, the previous increase being Rs. 5 per litre.

Petrol price in Delhi has been hiked by Rs. 7.54 per litre to Rs. 73.18 a litre. In Mumbai it will cost Rs. 78.57 per litre as against Rs. 70.66 a litre. In Kolkata, Rs. 77.88 per litre and Chennai Rs. 77.53 a litre.

Oil firms had twice raised rates by Rs. 5 per litre – on May 15, 2011 when prices in Delhi were hiked from Rs. 58.37 a litre to Rs. 63.37 per litre and on May 24, 2008 when rates were raised to Rs. 50.56 a litre.

Finance minister Pranab Mukherjee maintained that the decision was taken by oil companies as petrol is a deregulated commodity.

The government had decontrolled petrol price in June 2010 but rates were last increased on November 4 last year. This despite oil price rising by 14.5% and 3.2% fall in value of rupee against the US dollar.

on Tuesday, oil minister S Jaipal Reddy had stated that the depreciation in rupee had necessitated an immediate increase in fuel prices.

But rates of diesel, kerosene and cooking gas have not been revised as a high-power ministerial panel headed by Finance Minister Pranab Mukherjee and having representatives of key UPA allies like TMC and DMK, hasn’t met for almost a year now.

Price of diesel, kerosene and cooking gas were last raised in June last year.
Mixed reactions from industry

The steep hike in petrol prices has evoked mixed reactions with a section of industry saying the move would further burden the comman man even as policy makers and experts felt the increase would benefit the economy in the long run.

Industry body Assocham said the hike would be another blow to the already crippled economy.

“This step will increase inflation and prove a big burden on the common man,” the chamber said, adding that an increase in petrol price is not likely to give much relief to the government’s swelling fiscal deficit.

The automobile industry too hit out at the price hike, saying the increase would hurt the sector which is already reeling under a slump.

“Petrol cars are not selling as such already. With this record hike, the situation will go from bad to worse,” Society of Indian Automobile Manufacturers (SIAM) Senior Director Sugato Sen said.

Planning Commission Member Abhijit Sen said the hike was due to declining value of rupee, which today incidentally breached the 56-level against the US dollar.

“It will have immediate impact on prices, but will not have knock-on impact on prices. This in one time price adjustment. It will not have cascading effect” Sen said.

Expressing similar opinion, crisil chief economist DK Joshi said, “Petrol does not have much impact on wholesale price based inflation as it does not have much weight in the index.

“It is not like diesel which is a transport fuel. The impact will be muted. But the increase has been very sharp. I think the WPI inflation will be impacted below 15 basis points”, he said.

Welcoming the petrol price hike, another industry body FICCI said that government should also deregulate the prices of other fuel products like kerosene, diesel and cooking gas.

“Rationalisation of petroleum products prices will provide the necessary incentives for the development of alternative and renewable sources of energy; encourage conservation; and more important improve the fiscal balance,” FICCI said.

The chamber said the increase had perhaps become inevitable with the continued slide in rupee value and “it can be mitigated by reduction in taxes both by the central and state governments”.

SMC Global Securities, Head of Research, Jagannadham Thunuguntla said the hike would benefit the state-run oil marketing companies.

“The government may think of diesel price deregulation following this as Parliament session is over,” he added.

(With inputs from IANS and PTI)

How the petrol price will look like now in major cities:

New Delhi
Now: 73.14
Earlier: 65.64

Now: 78.16
Earlier: 70.66

Now: 77.53
Earlier: 70.03

Now: 77.05
Earlier: 69.55

[This article is originally published on Hindustan Times]

2G spectrum case: A Raja gets bail, to walk out of Tihar jail after 15 months

Former telecommunications minister A Raja was on Tuesday granted bail in the 2G spectrum allocation case. He is the last of the 14 individuals charged in the case still in prison.

The bail was granted by Central Bureau of Investigation (CBI) special judge OP Saini. Raja has been in Tihar jail since February last year.

Raja’s counsel told reporters that the judge called Raja towards him and told him: “Your bail application is allowed.”

“The bail application is allowed,” Special CBI Judge O P Saini said.

The court granted bail to the DMK MP on a personal bond of Rs 20 lakh and two sureties of the like amount. The court while granting bail imposed conditions on Raja that he will not visit Tamil Nadu without its prior permission and will not go to the office of the Department of Telecom (DoT).

The court, in its 14-page bail order, also said that Raja would not try to influence any witnesses while on bail. Raja was arrested on February 2, last year.

The announcement triggered wild slogan shouting and cheering by his DMK supporters mainly from Tamil Nadu, who raised slogans in Tamil like: “Raja, vazhga!” (Long Live Raja!)

Besides the 14 individuals, three companies were also charged in the case.

“Thirteen people had already got bail, and Raja was the last to get bail,” the counsel said.

“Raja had not moved bail until all other 13 were granted bail,” he added. “Now all the accused are on bail. The case will go on.”

The counsel pointed out that Raja had got bail despite the CBI’s opposition.

The CBI had opposed Raja’s bail application, saying he faced charges of accepting bribes of Rs 200 crore, which makes his case different from former telecom secretary Siddharth Behura, who was granted bail by the Supreme Court last week.

Raja, in his bail application, has requested the court to release him on the ground of parity.

The agency said that important prosecution witnesses of department of telecommunications and other private people, especially connected to alleged bribe transaction of Rs. 200 crore from DB Group companies to Kalaignar TV, are yet to be examined.

It told the court that if the accused was released on bail at this crucial stage of trial, then he may influence the vital witness as some of them belong to his state Tamil Nadu.

Raja resigned as minister Nov 14, 2010 in the wake of the Comptroller and Auditor General reporting that his 2008 decision to allocate 2G spectrum on a first-come-first-served basis had caused the exchequer a presumptive loss of Rs 1.76 lakh crore. The CBI arrested him Feb 2, 2011.

The Supreme Court in February cancelled 122 spectrum licences allocated during Raja’s tenure. It also ruled that all natural resources should be allocated through an auction, which the government is now preparing to do in the case of the cancelled licences.