Govt to simplify SEZ approval |
Union Commerce Minister Kamal Nath, flanked by L. B. Singhal, Director General, EPCES (left), and T. Vasu, Chairman, at a meeting of the Export Promotion Council for EoUs and SEZ units in New Delhi
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The commerce ministry has initiated steps to reduce the time taken to develop Special Economic Zones (SEZs) by simplifying procedures to get the tax-free industrial enclaves notified. Developers will now be able to get their land classified as an SEZ at the initial stage of approval by submitting legal documents that prove land ownership.
With exports falling sharply in the last six months, faster development of SEZs is seen as one way of increasing overseas sales of Indian goods and services, an official said. In the past, formal approval — the first step in notifying an SEZ — was based on a statement by a developer confirming possession of land. Actual documents proving ownership were not required at this level of approval.
Thereafter, the developer had to submit a series of documents including proof of ownership of land, a non-encumbrance certificate and vacancy and contiguity certificates to get the zone notified. Now, all these documents will have to be submitted at the first stage. Experts point out that the move will help serious zone developers since only firms that actually own the land will now apply. “This shows that the ministry is serious about taking the SEZ policy forward,” said Tapan Sangal, senior manager, PricewaterhouseCoopers.
“This move will also ensure that investments flow in to the zones quickly. Moreover, the pace of job creation in the zones will also become faster,” said L B Singhal, director general of Export Promotion Council on EoUs and SEZs. Since 2006, about 550 SEZs have been given formal approval. But the commerce ministry was concerned that only 320 were notified. This was because many of the developers adopted a wait and watch policy in the wake of the global economic crisis.
Source : Business Standard |
FIPB relocated in ministry rejig |
Just days ahead of the swearing in of a new finance minister, the government has decided to bring the Foreign Investment Promotion Board into a new division within the ministry: the infrastructure & investment division. FIPB approves all proposals from abroad for joint ventures, mergers and takeovers of an Indian company. Significantly, the internal order issued by the ministry specifically states that the new division will handle all investment proposals in the print media, besides issues related to foreign investment policy and foreign investment in non-banking finance companies, among others.
In the print media, FDI is capped at 26% in news & current affairs. The government in February this year significantly relaxed the rules for foreign investment and ownership in all sectors. But there has been controversy over interpretation of the rules. As FIPB decides on all foreign investment rules for various sectors, corporates and overseas investors in the world’s second-fastest growing economy will keenly watch its relocation. Foreign investment policies, meanwhile, will continue to be framed by the department of industrial policy & promotion in the ministry of commerce & industry.
“Apart from the synergy between infrastructure and foreign investment, the ministries of commerce and finance should be working as a single entity on FDI issues,” said KPMG associate director Ravi Shingari, an expert on tax and regulatory aspects of foreign investment.
The new UPA government is expected to steer a large number of key policy initiatives starting this month to restore the economy’s growth momentum, which had flagged due to the impact of the global economic crisis. Policy analysts have interpreted FIPB’s move to the new infrastructure & investment division as a way to ensure greater synergy in investment plans, as most big-ticket inflows are expected in the infrastructure sector. Joint secretary in the ministry Govind Mohan will now head the division.
The decision will not, however, impact the working of the capital market division, another key arm of the ministry, headed by joint secretary KP Krishnan. The finance ministry, RBI and capital markets regulator Sebi form a troika that largely determines the content of policymaking in the economy.
SEZs, foreign trade agreements and India’s relations with the G-20 and WTO will be handled by joint secretary Alok Sheel, who will now head the reconstituted multilateral relations division. Some work of the earlier foreign trade division, which used to house FIPB, has been subsumed within this division. Another new division, to be known as the multilateral institutions division, would handle issues related to the IMF, World Bank, ADB and Africa. Anup Pujari will oversee this new division. |
NRI remittances up 20-fold at $4 bn |
 In an indication that the diaspora continues to repose faith in India amid turbulent times, net inflows from non-resident Indians witnessed a stupendous, over twenty-fold rise to $4 billion in fiscal '09 as these constituents sharply increased their exposure to various NRI deposit schemes. Notably, inflows in March '09 itself crossed $1 billion, the highest since October '03, and testament to the fact that Indians abroad increasingly sought financial safety of their shores.
Latest figures by Reserve Bank of India show that net inflows through various NRI deposits surged from $179 million in FY08 to $3,999m in FY09. These include inflows through foreign currency non-resident-banks (FCNR-B ), nonresident (external) rupee accounts (NRE-RA) and non-resident ordinary (NRO) deposit schemes. While FCNR(B) and NRE(RA) are repatriable and hence comprise a part of India's external debt, funds in an NRO account are meant for local use by NRIs and are hence not repatriable. Bulk of the inflows of late have however been through NRE (RA) and NRO schemes.
Nevertheless, inflows through all these schemes result in forex flows into the country. NRIs are often known to shuffle their portfolios between FCNR(B) and NRE (RA) schemes, based on rupee -dollar movements. While a bank tends to bear currency risk on the rupee, the depositor is exposed to risk in dollar movement. As a result, when NRIs see the rupee strengthening against the dollar, there is preference for NRE(RA), while FCNR(B) is preferred when the rupee is perceived to weaken. "The current surge in NRE (RA) deposits is reflective of the view held by NRIs that the rupee will strengthen further,'' said a senior official with a large public sector bank.
The last time such a huge surge in NRI deposits took place was in Jun-October' 03, when the rupee was strengthening against the dollar. With interest rates also very high relative to their local markets, NRIs not only enjoyed an interest rate arbitrage back then, they also gained from currency arbitrage. |
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Press Notes 2, 3, 4 to be overhauled
The government is likely to significantly alter the controversial Press Notes 2, 3 and 4 in a couple of weeks to close loopholes that give firms leeway to exceed limits on foreign direct investment (FDI) in various sectors. The press notes, issued in February this year, simplified the method for calculating FDI and broadly stated that as long as Indian promoters hold a majority stake (that is, more than 51 per cent) in an operating-cum-investment company, they can bring in investments up to 49.9 per cent through FDI. This company would be treated as an Indian company and can invest through a joint venture in any other company that may be operate in sectors in which there are limits on FDI participation.
After the press notes were issued by the commerce and industry ministry, the RBI and the finance ministry’s department of economic affairs had raised serious objections. The RBI has said the press notes raised the possibility of “circumventing the definition of ownership and control by downstream investment” in sectors in which FDI is prohibited or government approval is required or sectoral caps are in place.
Soon after the press notes were issued, companies like retailer Pantaloon and media house UTV restructured their organisations to raise FDI in their businesses through step-down joint ventures. FDI is prohibited in multi-brand retail and is restricted to 26 per cent for media. In both cases, these investments would not have been permitted under earlier FDI guidelines. Once the February press notes are revised, neither of these two proposals is likely to go through.Before the February press notes were issued, all FDI was calculated on the basis of beneficial interest and this position is likely to be restored.
“Any operating-cum-investment company even with less than 50 per cent FDI would not be allowed to invest in step-down subsidiaries that are engaged in restricted categories such as retail,” sources said. The commerce ministry also faced some embarrassment when it transpired that the press notes inadvertently classified ICICI Bank and HDFC Ltd as “foreign owned” owing to their combined foreign institutional investor (FII) and FDI holdings of 65 and 74 per cent respectively. This, in turn, would have impacted these institutions’ downstream investments in insurance, which now violated the 26 per cent FDI limit in insurance.
Industry ministry sources then said a clarification would be issued to say the new press notes did not apply to the banking sector. The industry ministry has already begun consultations with the RBI and the finance ministry on the issue. Press Notes 2, 3 and 4 also included portfolio investment (through FIIs) in the total FDI limits. This is likely to be changed to the earlier position in which FII and FDI were distinct. Once this happens, ICICI Bank, HDFC Ltd and Max India (in which FDI and FII investments stand at 53 per cent), to use some examples, will revert to being categorised as Indian-owned companies.
Source: Business Standard |
Tata Motors rakes in Rs 2,500 cr from Nano bookings
Tata Motors said on Monday that it has received over 2.03 lakh bookings for the Nano, garnering nearly Rs 2,500 crore. The company sold a total of 6.10 lakh forms which means that the conversion rate was a little under one-third. ET was the first to report that total bookings would be around 2 lakh in its edition dated April 25. Although initial industry expectations were that bookings could be as much as 5 lakh, senior company officials maintain that the company has received a good response at a time when the car market is struggling for volumes.
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