OPINION, P8 COMPANIES, P6 INTERNATIONAL, P14 TO THE RESCUE FACEBOOK DATA SCANDAL Jaypee group founder Jaiprakash Gaur joins debt-ridden JAL board Zuckerberg's testimony in Europe to be streamed live online EDITORIAL If rural economy is so stressed, how is consumption brisk? It's not just states like UP that perpetuated sugar crisis, Centre's FRP played a big role MUMBAI, TUESDAY, MAY 22, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XXXXXV NO. 364, 20 PAGES, `7.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 34,616.13 ▼ 232.17 NIFTY: 10,516.70 ▼ 79.70 NIKKEI 225: 23,002.37 ▲ 72.01 HANG SENG: 31,234.35 ▲ 186.44 `/$: 68.12 ▼ 0.11 `/€: 80.08 ▼ 0.02 BRENT: $78.36 ▼ $0.15 GOLD: `30,881 ▼ `40 RISING OIL PRICES IN THE NEWS CDR cell seeks clarity on role from RBI States make a killing, Centre gains little in terms of excise revenue SAURABH KUMAR New Delhi, May 21 ONCE-CRUCIAL CORPORATE debt restructuring (CDR) cell has sought clarity from the Reserve Bank of India (RBI) regarding its role after the central bank dissolved all restructuring schemes of the past through its February 12 notification, reports Shayan Ghosh in Mumbai. A senior IDBI Bank official said the RBI has not yet responded. One of the primary concerns raised by the cell is over the status of the companies that have undergone successful CDR restructuring but have not yet exited the cell. THOUGH TAXES ARE around 100%ofthe‘baseprice’ofpetrol or half the retail price (the case ofdieseliscomparable)andboth the Centre and state governmentstreatthetwoautofuelsas a milch cow,it is only the states thatbenefitfromaspikeintheir prices.Since the Centre’s excise duty on petrol and diesel are specific (quantity-wise), rather thanadvalorem,itcould,ifatall, only lose revenue if prices skyrocket in sync with the global trend and hit consumption levels.The state governments, on the other hand, tend to gain immensely when prices soar thanks to the advaloremvalueadded tax (VAT), sales tax, and additional cesses/surcharges levied bythem on these fuels. According toan FE analysis, even the small Delhi government raked in an additional `1.2 crore a day on Monday from taxes on petrol and diesel alone, compared with what it fetched on January 1 this year. This is because the base price or price to the dealer of petrol and dieselwere higherby16% and 21% on Monday from their respective January 1 levels.The corresponding figures Daily gains as extraVATrevenue* from costlier petrol and diesel DELHI `1.2 crore MAHARASHTRA WEST BENGAL TAMIL NADU `9.4 `2.4 `7.1 crore crore crore (*Collections on May 21, 2018, versus January 1, 2018, thanks to 16% and 21% increases in prices to the dealers of petrol and diesel between the two days; figures are approximations; Source: PPAC/IOC data, FE analysis) for the bigger states are naturally higher (see chart). Curiously, not only the Opposition parties but even industry associations are putting pressure on the Cen- tre, rather than states, to cut taxes on auto fuels given the recent surge in their prices (Indian basket of crude went up 12.4% between May 1 and Monday and the rupee has depreciated 2.2% against the US dollar in the period, resulting in near-corresponding increases in domestic fuel prices). Ficci said on Monday, “...there is a scope of bringing down the excise duties. While suchamovewillhaveanimplication on the fiscal revenues at this juncture,there is a need to do the fine balancing act.” StateVATis generallylevied on the price charged to the dealers by refiners inclusive of the excise duty; dealer commissions is included in the VAT-able price by some states. While central excise duties remained static at `19.48 per litre on petrol and `15.33 per litre on diesel since Octoberlast year when these taxes were cut by `2 per litre, the state-level taxeshavevirtuallyrisenintune with the fuels’ price increases. While four states — Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh — reducedVATratesfollowingthe OctoberexcisecutbytheCentre, higherprices ensured that even their revenues were not only quicklyrestored butwent up. Continued on Page 2 TAKEOVER FIGHT EASING TENSIONS China relieved trade Three Fortis directors resign war with US ‘on hold’ REUTERS Mumbai/London, May 21 on Sunday. The previous day, Beijing and Washington said they wouldkeeptalkingaboutmeasuresunderwhichChinawould import more energy and agriculturalcommoditiesfromthe US to narrow the $335-billion annual US goods and services trade deficit with China. Speakingatadailybriefing, Chinese foreign ministry spokesman Lu Kang said both countries had clearly recognised that the reaching of a consensus was good for all. “Chinahasneverhopedforany tensions between China and the US, in the trade or other arenas,”Lu said. But Chinese mediawas also Both sides realise quick to point out how the country had successfully reaching a defended its interests. consensus ‘good MeiXinyu,acommerceministry researcher, wrote on the for all’; mixed WeChataccountoftheoverseas reactions from US edition of the ruling Communist Party’s official People’s business leaders Daily that the agreement preserved China’s right to develop REUTERS itseconomyasitseesfit,includBeijing, May 21 ing moving up thevalue chain. The deal also focused on CHINAON MONDAY praised a China’s “positive position” to significant dialling back of increase imports rather than a trade tensionwith the US,with “negative position” of getting the government saying agreeit to cut exports,Mei said. ment was in the interests of The official China Daily said both countries while state everyone could heave a sigh of media trumpeted what it saw relief at the ratcheting down of as China’s refusal to surrender. the rhetoric, and cited China’s The cooling of tension chief negotiator,vice-premier elicited mixed reactions from Liu He, as saying the talks had US business leaders dealing proved to be “positive, pragwith China, with some happy matic,constructiveandproducto see the prospect of damagtive”.“Despite all the pressure, ing tariffs fade, while others China didn’t ‘fold’, as US Presisaid it would be difficult for dent Donald Trump observed. Washington to rebuild Instead, it stood firm and conmomentum to address what tinually expressed its willingthey see as troubling Chiness to talk,” the Englishnese policies. language newspaper A trade war was“on said in an editorial. hold”aftertheworld’s “That the US finally largest economies shared this willingagreed to drop their ness, means the two The talks were positive, pragmatic, tariff threats while sides have successtheywork on a wider fullyavertedtheheadconstructive and productive. trade agreement, US on confrontation that Treasury secretary at one point seemed —LIU HE, CHINA’S VICE-PREMIER StevenMnuchinsaid inevitable,”it said. As the battle intensifies in the e-grocery space and players up their game, the Flipkart-Walmart deal could be a new force for the likes of Amazon, Future Group and Bigbasket to reckon with Forget SAP, FRP also too high for mills PRABHUDATTA MISHRA & BANIKINKAR PATTANAYAK New Delhi, May 21 FOR YEARS, SUGAR mills have denounced the state advised prices (SAPs) of cane, fixed by states like Uttar Pradesh,astoohightobearand demanded that they be BITTER-CANE (Annual average hikes in 5 years through 2017-18, in %) MSP 9 6 High-level team of doctors in Kerala to probe Nipah deaths THE UNION health ministry has sent a high-level multi-disciplinary team to Kerala's Kozhikode district to probe the rising number of cases and reported deaths due to the Nipah virus, reports PTI. The team from the National Centre for Disease Control has been asked to closely monitor the situation. The Nipah virus has so far claimed three lives, while one person is undergoing treatment and eight are under observation. 3.9 5 3.2 3.4^ 3 0 QuickPick 5.8 WPI inflation 4.4 Paddy 5.2 Wheat 5.4 2.2 8.7* Tur Cotton Cane *FRP fixed by the Centre; SAP is even higher; ^Of sugar allowed to pay farmers the more reasonable fair and remunerativeprice(FRP)setby the Centre.Not anymore. Generous hikes in cane prices by the Centre in recent years and a steep fall in sugar rates this marketing year through September have constrained mills’ ability to pay even the FRPto farmers forthe rawmaterialsupplies,letalone the SAP that is still higher. In fact, at 8.7%, the annual averageincreaseinthecaneFRP overthepastfiveyearsisdouble theriseinthebenchmarkprices of paddy and almost four times ofcotton(boththesecropsusuallycompetewithcaneforareas, mainly in Maharashtra). The hike in the FRP is also much higher than that of the minimum support prices of other keycrops such aswheat and tur (see the chart).Importantly,the averageannualhikeincaneFRP is two and a half times faster than the wholesale price inflation(WPI)of3.4%insugarinall theseyears. This suggests while cane priceshavebeenraisedsubstantially by the Centre, ex-factory sugar prices haven’t kept pace, straining the mills’finances. Continued on Page 2 State of play JD(S) leader and Karnataka CM-designate HD Kumaraswamy with Congress president Rahul Gandhi and former Congress president Sonia Gandhi in New Delhi on Monday PTI Continued on Page 2 THE INTELLIGENCE UNIT for the goods and services tax (GST) has unearthed a nexus among businesses that use fake bills to claim input tax credit (ITC). Given the value of the fictitious purchases is estimated to be around `2,500 crore, the undeserved ITCs pocketed by these firms are seen to be `450 crore at an average GST rate of 18%. Sources said that the fake bill provider is absconding but the government has started issuing summons to businesses that produced these counterfeit bills to claim tax credits. Continued on Page 2 Bhushan Steel FE BUREAU Tata to bad news? Though the NCLAT has said the Tata takeover of Bhushan Steel will depend upon the outcome of the court case filed by the Bhushan promoter Neeraj Singhal, the possibility of banks being able to write back `35,000 cr into their books sent stocks soaring on Monday. Gain (%) 4.82 4.55 4.44 4.22 2.89 2.65 2.53 2.66 2.34 1.12 ICICI The online e-grocery: the rise, boom and beyond HIGH CANE ARREARS SBI ■ Personal Finance, P13 Jupiter India — two large investorswho togethercontrol about 12% of the company — had called forTuesday’s vote. They said the directors had not satisfactorily exercised “their respective fiduciary duties towards shareholders and have failed to maintain expected levels of corporate governance”,according to a fil- SUMIT JHA New Delhi, May 21 BOB Change in the attributes of schemes and mergers of some schemes will make meaningful comparison of the performance of the schemes in the new avatar difficult even if weighted average returns is shown Tejinder S Shergill, Sabina Vaisoha, additional (indepen- additional (independent) director, Fortis dent) director, Fortis led by rival Manipal Hospitals Enterprises. Fortis then said in May it plannedtoacceptanofferfrom Hero Enterprise Investment Office and Burman Family Officethatvaluedthecompany at `9,000 crore. Shareholders respondedbypushingthecompany’s shares down 5%. Eastbridge Capital and IDBI MF schemes: Checking past performance will be futile now Harpal Singh, mentor & chairmanemeritus, Fortis ing made by Fortis last week. A fourth director, Brian Tempest, still faces a vote at Tuesday’s meeting. Indian proxy advisory firms have previously questioned the independence of the Fortis board. “Shareholders need a decision-making body that is objective, independent, and does have a historical association with the promoter group or their companies,” Institutional Investor Advisory Services said in a note last month. Eastbridge and Jupiter believed that the fourdirectors were not independent and had been appointed by Fortis Healthcare’sfounders,asource close to the two shareholders told Reuters last week. Harpal Singh, one of the three directors who resigned, defended the company’s board decisions. Intel unit unearths fake GST bills biz Canara Bank Syndicate Bank Special Features Directors cut ● `450-CRORE ITC UBI THE US SUPREME Court on Monday agreed to consider reviving a lawsuit by Indian villagers seeking to hold Washington-based International Finance Corp (IFC) responsible for widespread environmental damage they blame on a power plant it financed, reports Reuters. The case revolves around the IFC's decision in 2008 to provide $450 million in loans to help construct the Tata Mundra Power Plant in Gujarat. IFC loans include provisions requiring that certain environmental standards are met. PNB US apex court to take up Tata Mundra dispute THREE DIRECTORS OF Fortis Healthcare have quit ahead of a shareholder vote on Tuesday todecidetheirfuture,thecompany said, the latest twist in a prolonged takeover for one of the country’s largest hospital operators. HarpalSingh,TejinderSingh Shergill and Sabina Vaisoha cited personal reasons for their resignations,comingdaysafter two major Fortis shareholders said the directors had not met theirfiduciaryduties. Their departures raised fresh questions about the direction cash-strapped Fortis will take as it considers bids fromfivepartieswhohaveproposed to buy whole or part of the company. Fortis has received more than a dozen competing offers since it first agreed in March to a proposal from a consortium Bank of India FRENCH LUXURY GOODS conglomerate LVMH-backed PE firm L Catterton Asia will acquire a 10% stake in the Kishore Biyani-led Future Lifestyle Fashions (FLFL) for an undisclosed sum, reports PTI. “L Catterton Asia will acquire an approximately 10% stake in FLFL through a mix of preferential allotment and secondary purchase of shares,” FLFL said. Future Group founder and CEO Kishore Biyani said this investment reinforces FLFL's position as India's leading lifestyle fashion company while opening up avenues of global collaboration for us. PSU Bank Nifty LVMH firm to buy 10% stake in Future Lifestyle ● NON-INVESTMENT GRADE Moody's downgrades PNB on fraud fallout PRESS TRUST OF INDIA New Delhi, May 21 MOODY’S INVESTORS SERVICE has downgraded Punjab National Bank’s rating citing impact of the recent $2-billion fraud on its capital as well as weak internal controls. However, the outlook to the rating has been retained as stable, reflecting Moody’s expectation that the negative impact of the fraudulent transactions is largely known. The agency downgraded PNB’s foreign currency issuer rating by a notch to‘ba1’,which is non-investment grade, from ‘Baa3’—meaningbelowinvestmentgrade.“Moody’sInvestors MOODY BLUES ■ Foreign currency issuer rating cut to ‘ba1’ — below investment grade ■ Outlook to rating has been retained as stable Service has downgraded the local and foreign currency depositratingofPNB toBa1/NP from Baa3/P-3. At the same time,Moody’s has downgraded the bank’s baseline credit assessment (BCA) and Adjusted BCAto‘b1’from‘ba3’,” it said. Continued on Page 2
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