OPINION, P8 ECONOMY, P2 WTO DISPUTES ONGC not a milch cow, don’t ask it to cut crude prices ` fall due to dollar appreciation against others too, but NRI bonds are a good idea THANKS TO GRAB Amid trade tension, Suresh Prabhu to visit US in June EDITORIAL INTERNATIONAL, P14 Uber to focus on India, West Asia as it posts quarterly profit NEW DELHI, FRIDAY, MAY 25, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOL.XLIV NO. 72, 26 PAGES, `6.00 (PATNA `6.00, RAIPUR `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: 34,663.11 ▲ 318.20 NIFTY: 10,513.85 ▲ 83.50 NIKKEI 225: 22,437.01 ▼ 252.73 HANG SENG: 30,760.41 ▲ 94.77 `/$: 68.35 ▲ 0.08 `/€: 80.08 ▲ 0.05 BRENT: $78.72 ▼ $1.08 GOLD: `31,164.00 ▼ `12.00 COSTLIER CRUDE ● POLLUTION PROTEST Burden may fall again on ONGC, OIL (%) 59.2 47.9 39.7 37.3 SAURABH KUMAR New Delhi, May 24 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12 0 2015-16 2014-15 2013-14 34,186 76,969 1,64,409 (` crore) 1,47,007 1,42,022 Total OMC under-recoveries 2012-13 *Under-recoveries of oil marketing companies made good by budget subsidy and discounts by upstream players **ONGC, OIl India and GAIL (India) share of subsidy burden disappeared in FY17). Fellow state-run explorer Oil India and gas marketer GAIL (India) also used to share the oil subsidy burden with the government. ONGC, which has a mandate to up capex to increase India’s hydrocarbon output, also contributes in good measure to the exchequer by way of taxes and dividends: In FY17, the company paid a corporate income tax of `7,316 crore and a dividend of `9,518 crore,68% ofwhich went to the government. Rating agency Moody’s in a note earlier this week had said thatwith the rise in crude oil prices, the risk that the government may ask stateowned explorers to share the burden looks imminent. “We expect the companies (ONGC and Oil India) could be asked to bearpart of the fuel subsidy if oil prices stay above $60 per barrel for the fiscal year ending March 2019 (fiscal 2019), because of the government’s widening fiscal deficit,” said the note. While Brent crude was at $78.76 a barrel on Thursday during intra-day trade,the Indian crude basket was at $77.23 a barrel. Moody’s Investors Service in a note onTuesdayexpressed concerns that India’s fuel subsidy bill is set to increase with the risk of government urging the upstream companies such as ONGC and Oil India to share the burden, a practice discontinued in June 2015. At one point, these companies had borne as much as 40% of the country’s annual subsidy bill. However, the threat of an increase in the government’s subsidy expenditure is mitigated by the fact that the two key auto fuels would remain decontrolled and the LPG and kerosene subsidies are relatively small. Continued on Page 2 JUDGE RULES Special Feature Why you need to buy a Super Top Up health cover Super Top Up plan is a comprehensive and economical shield against unforeseen medical costs incurred that are beyond the cap of a basic health policy ■ Personal Finance, P13 QuickPicks Global group taps US biotechs to speed up work on Nipah vaccine A GLOBAL coalition set up a year ago to fight epidemics has struck a $25-million deal with two US biotech companies to accelerate work on a vaccine against the brain-damaging Nipah virus that has killed at least 11 people in India, reports Reuters. The Coalition for Epidemic Preparedness Innovations said on Thursday that Profectus BioSciences and Emergent BioSolutions would receive up to $25 million to advance development and manufacturing of a shot against the bat-borne disease. There is currently no vaccine for Nipah. PAGE 7 CCI orders probe against Grasim over violations THE CCI has ordered a probe against the Aditya Birla group firm Grasim Industries for an alleged abuse of dominant position with regard to the sale of viscose staple fibre, reports PTI. The ruling has come following three separate complaints filed with the fair trade regulator. Since the “subject matter” of the three complaints was same, CCI had clubbed them and passed a common order. After finding prima-facie evidence of competition norm violations, the CCI has directed its investigation arm to conduct a probe against the company. PAGE 5 ED chargesheets Nirav Modi, others for laundering `6,498 cr THE ENFORCEMENT directorate (ED) filed its first chargesheet in the over $2-billion PNB fraud case involving Nirav Modi and his associates, stating that over `6,400 crore of bank funds were allegedly laundered abroad to dummy companies by him and others, reports PTI. It alleged that a sum of $50 million was "diverted" to Modi's father Deepak Modi who is reported to be based in Antwerp in Belgium. A total of 24 accused, including Nirav Modi, have been listed in the chargesheet, filed under section 45 of the PMLA. PAGE 3 Trump can’t block critics on Twitter REUTERS New York, May 24 A US JUDGE in New York on Wednesday ruled that President Donald Trump may not legally block Twitter users from his account on the social media platform based on their political views. Trump has made his @RealDonaldTrump Twitter accountanintegralandcontroversial part of his presidency, using it to promote his agenda, announce policy and attack critics. He has blocked many critics from his account,which prevents them from directly responding to his tweets. US district judge Naomi Reice Buchwald in Manhattan ruled that comments on the president’s account,and those of other government officials, were public forums, and that blockingTwitterusersfortheir views violated their right to free speech under the First Amendment of Constitution. Eugene Volokh,a University REUTERS Tuticorin, May 24 An evening in Paris French President Emmanuel Macron with Facebook CEO Mark Zuckerberg at the Elysee Palace after the ‘Tech for Good’ summit in Paris PTI TAMIL NADU said on Thursday that it was seeking a permanent closure of a big copper smelter run by London-listedVedanta Resources after 13 people died in protests demanding the closure of the plant on environmental grounds. “The government’s position is very clear, it doesn’t want the plant to run,” said Sandeep Nanduri,the top official of the district where the plant is located, after a meeting with senior state government officials. Continued on Page 2 UDAY TARGETS Discoms hit by payments delay With unpaid dues of `40k cr from state govt depts, discoms find it more difficult to meet targets ANUPAM CHATTERJEE New Delhi, May 24 STATE GOVERNMENT DEPARTMENTS' staggering dues to the country’s public sector power discoms — `39,442 crore in aggregate at last count,which is more than the discoms’combined financial losses in FY17 or around 10% of their total turnover in the year — have made their task of meeting the key UDAY targets more difficult. The aggregate technical and commercial (AT&C) losses of state-run discoms in the DISCOMS' LOSSES ■ AT&C losses of (` crore) 51,590 34,656 FY16 FY17 14,833 Apr-Dec FY18 state-run discoms stood at 23% in Q3 versus FY18 target of 18.8% ■ Losses would have been lower by close to 1 percentage point if dues were paid on time STATE DEPARTMENTS' DUES TO DISCOMS (` crore) Uttar Pradesh 10,722 Maharashtra 5,600 Kerala 4,910 country stood at 23% in Q3FY18 versus the FY18 target of 18.8%; theAT&C figure would have been lower by close to 1 percentage point if Andhra Pradesh 4,430 Telangana 3,803 the dues from state departments were received in time. Delayed receipts reflect adversely on AT&C figures because these deflate the rev- RELIEF FOR NOW enue against the units of electricity sold. Non-payment of bills sixty days after the due date is treated as default. A reduction in the gap between the average cost of supply and the revenue realised (ACS-ARR) — another keytarget set underthe Union government’s Ujwal Discom Assurance Yojana (UDAY) for revival of discoms — is also happening at a slower-thantargetted pace due to the state government departments’ mounting dues to the discoms.As for theACS-ARR gap, the target was to reduce it to 25 paise per unit by FY18,but the gap in Q3FY18, the latest quarterforwhich data is available,was 28 paise per unit. Of course, the ACS-ARR gap was much higher at 47 paise in Q3FY17. Continued on Page 2 ● INSOLVENCY NCLAT asks JAL not to transfer land back to Jaypee Infratech FE BUREAU New Delhi, May 24 Donald Trump, US President ofCaliforniaLosAngelesSchool ofLawprofessorwhospecialises inFirstAmendmentissues,said thedecision’seffectwouldreach beyondTrump.“Itwouldendup applyingtoawiderangeofgovernment officials throughout the country,” he said. The US department of justice, which represents Trump in the case, said,“We respectfully disagree with the court’s decision and are considering our next steps.” Continued on Page 2 No fresh bids for Bhushan Power: NCLAT IDBI Bank and Standard Chartered Bank. The transfer took place at the time when the banks started classifying JILas a non-performing asset (NPA) due to loan defaults. The RP’s contention was the land could have been sold or mortgaged by JIL to raise funds and complete the construction of flats. The company was required to deliver around 33,000 flats of which more than 25,000 areyet to be completed. However, the appellate tribunal onThursday,while staying the NCLT’s order,admitted the petition of the lenders — Axis Bank,ICICI Bank,and SCB — against the NCLT’s order. SURYA RAY New Delhi, May 24 Continued on Page 2 Continued on Page 2 JAIPRAKASH ASSOCIATES (JAL) has been asked by the National CompanyLawAppellate Tribunal (NCLAT) to not transfer 760 acres,mortgaged to its lenders, back to its subsidiary firm, Jaypee Infratech (JIL),till further orders. TheAllahabad bench of the National Company Law Tribunal (NCLT) had ordered the land be transferred back to JIL as it had found the move to be “fraudulent, preferential and undervalued”. The resolution professional (RP) for JIL, in his petition to the NCLT, had alleged the transfer of land from JIL to JAL amounted to asset stripping. CASE FILE ■ Last week, NCLT had ordered JAL to return 760 acre of land to JIL ■ This land belonged to JIL but was transferred to JAL ■ JAL had mortgaged the land to its lenders ■ NCLT found the transfer fraudulent, preferential and undervalued The RP had alleged the land, valued around `5,0006,000 crore,was mortgaged to secure loans taken byJALfrom StateBankofIndia,ICICIBank, THE NCLAT ON Thursday declined a request from the committee of creditors asking TataSteelandUK-basedLiberty House be allowed to submit fresh bids for the bankrupt BhushanPowerandSteel.However,bids from both parties are to be evaluated, as per the NCLAT’s orders on May9. The decision is important since Liberty’s bid had come in only on February 20, well past the deadline of February8. TheNCLATalsodirectedthat the identity of the highest bidderwasnottobediscloseduntil it passed a final order. TRANSFER PRICING Acute staff crunch at tax dept threatens to delay APA process SUMIT JHA New Delhi, May 24 INDIA PUT IN place the regime of advance pricing agreements (APAs) — which allows setting the prices of cross-border transactions (transfer pricing) in advance — in 2012 and it has since been touted as a runaway success.But an acute staff crunch with the tax department is threatening to spoil the party. While as many as 220 APAs, including 20 bilateral pacts,between the tax departments have been signed so far, over 500 applications are remaining unresolved as there is not enough personnel to evaluate them. “We are concerned about the paucity of manpower and have communicated the same to the board (CBDT). But it is not easy to get the right personnel for a very niche field,”a senior tax department official said, on condition of anonymity. Currently, the international taxation divi- ILLUSTRATION: ROHNIT PHORE THE GOVERNMENT HAS reconstituted the Financial Stability and Development Council (FSDC) to include secretaries from the revenue department as well as ministry of information technology (MeitY), reports PTI. The inclusion of MeitY secretary in FSDC becomes significant given the offtake of digital transactions in the country, and the rising apprehensions around safety of personal data. The FSDC, chaired by the Union finance minister, was set up in 2010 by the then finance minister Pranab Mukherjee. 10.9 2011-12 IN THE NEWS FSDC to now have secretaries from MeitY, revenue dept AFTER A THREE-YEAR reprieve, state-run hydrocarbon explorers, especially ONGC, may again be asked to bearthebruntasafiscallywary government is reluctant to take the hit of a costlier crude. While chances are that the government would revisit the practice of the upstream companies giving discounts on crudesuppliestooilmarketing companies to partly compensate for the latter’s underrecoveriesonsaleofpetroleum products.PTI reported that the government may even seek a ‘windfall’ by telling ONGC to pay a tax,probably in the form of a cess that kicks in the moment oil prices cross $70 per barrel. FE could not confirm this independently. The ONGC stock fell 4.5% on Thursday to close at `167.65 on the BSE. For ONGC, the government’s plan could turn out to be really onerous; the staterun explorer had forked out `56,384 crore in FY14 to mitigate the subsidy burden on the fisc (it was freed from the obligation to give discounts to OMCs in June 2015 and so,its 2016-17 Future Business Leaders Share of oil subsidy* borne by upstream companies** 27,629 Empowerment of Government may ask upstream companies to resume giving discounts on crude supplies to OMCs Tamil Nadu seeks closure ofVedanta's copper plant sion of the income tax department, which handles APAs, consists of 15-20 officials, spread across various centres, while the workload demands staff strength many multiples of this. Although the average time taken forconcluding anAPAis much shorter in India (2.5-3 years comparedwith 3.5years in the US),the staff crunch has taken a toll on the efficiency of the APA framework.“In the US, the APA cell is manned by over 500 professionals,” the official added. The speed of concluding APAs in India appears to be creditable, considering that China has finalised just 113 APAs in the ten years between 2005 and 2014. “Its likely that more middle-sized firms would seek APAs going forward compared with the current trend where mostlylargefirmsoptforthese agreements,”ParthoDasgupta, partner at BDO India,said. Continued on Page 2
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