NEW DELHI l TUESDAY l OCTOBER 22 l 2013 VOL XXXIX NO 201 18PAGES I Rs 4.00 READ TO LEAD P 5 C O R P O R A T E S DABUR PROMOTERS BURMANS ENTER HEALTHCARE, PARTNER UK FIRM, TO INVEST R200 CR P 6 Solving the conundrum: Inclusive banking & NPAs P U B L I S H E D F R O M : A H M E DA B A D, B A N G A LO R E , 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, KO C H I , KO L K ATA , LU C K N OW, M U M B A I , N E W D E L H I , P U N E In the news New telecom M&A draft allows big operators to merge IN a move that would enable big-ticket mergers in the telecom sector, the department of telecom (DoT) has decided to allow an entity formed by the merger of two or more mobile service providers to have up to 50% of the market share in a circle, reports Jayati Ghose in New Delhi. Moreover, firms holding 3G spectrum will be allowed to retain two blocks of the radiowaves per circle in any resultant entity after merger, according to the draft M&A guidelines being discussed by the DoT. ■ Page 3 SC allows clinical trials of five new chemical entities THE Supreme Court on Monday allowed clinical trials of five new chemical entities, subject to audio-visual recording of the informed consent of subjects and maintaining the confidentiality, reports fe Bureau in New Delhi. However, it refused to permit trial on 157 drugs, which are yet to be cleared by the technical and apex panels set up by the Centre. The SC asked the Centre how such trials were going to benefit the country and not MNCs. ■ Page 2 USFDA issues notice to Smruthi Organics for violating norms IN yet another instance of an Indian drugmaker failing to comply with US FDA norms, Smruthi Organics on Monday said it had received a notice from it highlighting violations of manufacturing norms at its Solapur plant. In a BSE filing, it said European Directorate for Quality of Medicines and FDA inspected its active pharmaceutical ingredients site from October 14-18. (R/kg) 47,570 31,890 30,775 Gold 240 (R/10 gm) 14 15 16 17 18 OCTOBER 19 21 Ila Patnaik ECHOES OF THE FUTURE Pranav Nambiar New Delhi, Oct 21 W ITH most states opposing the government’s suggestion to bring petroleum and potable alcohol within the ambit of the proposed goods andservicestax(GST),arollout of the new indirect tax system, planned for April 2015,couldbedeferred. A delay seems inevitable as consensus on other issues, including entry tax and octroi, eluded a meeting of the Empowered Committee (EC) of state finance ministers on Monday A few . states, including Madhya Pradesh and Maharashtra, wereagainsttheirabolition since these form a major source of revenue for them. In August, parliamentary standing committee chairman Yashwant Sinha had suggested that petroleum, petroleum products and liquorbeincludedintheGST. Sinha had also suggested changes in the design of the tax, recommending doing awaywithaseparatedispute resolutionauthority ,andhad also suggested that states be allowed to levy tax within a narrowband.Healsorecommended they be given the flexibility to adopt the GST when it suited them, much likeitwaswhenvalue-added tax(VAT)wasimplemented. The lack of consensus on key issues will delay the finalisation of the Constitution amendment Bill that needstobepassedbyParliament and also ratified by the states before GST becomes a reality . Taxes on petroleum account for about 13 % of the Centre’s tax revenues and a larger chunk of about 3040% of states’ revenues by way of VAT. VAT is typically leviedinarangebetween5% and 20% of the retail price of petroleumproducts. Briefing newspersons after the meeting, Abdul Rahim Rather, chairman of theempoweredcommitteeof state finance ministers conceded that there was opposition to some proposals. “Most states want petroleum, petroleum products and potable liquor to remain outside the framework of the GST,”Rathersaid. ■ Continued on Page 2 GST’S POTHOLED PROGRESS STATE TAXES IN DELHI VAT (%) Petrol 20.0 Diesel 12.5 Kerosene 5.0 LPG 0 ■ VAT is levied on the dealer price + excise duty, education cess+ dealer commission to arrive at retail price ■ LPG being a declared good under CST ACT, states can levy only up to 5% VAT As per original Clause 12A (proposed to be introduced into article 366 of the Constitution ), certain items like petroleum, petroleum products and liquor were to be kept outside the GST framework. That should be retained in the revised Bill too Abdul Rahim Rather, chairman, empowered committee of state finance ministers EOW suspects NSEL board meets staged INVESTIGATORS SAY ■ Attachment to begin soon ■ Board meets of NSEL completely orchestrated ■ Board meeting minutes not authentic ■ FTIL software usage questionable fe Bureau Mumbai, Oct 21 T HE police probe into the settlement fiasco at the National Spot Exchange (NSEL) has once again alleged that the board was responsible for mismanagement at the exchange. According to the Economic Offences Wing (EOW), there is evidence of board meetings being‘orchestrated’. According to an EOW official, investigations have shown that the board minutes of the spot exchange were ‘cooked up’, with even absentmembersof theboard signingtheboardpapers. “The board meetings of NSEL were completely orchestrated and the minutes are not authentic on many occasions... We have found out that, on some occasions, board members who were notevenpresentatthemeeting have put their signatures on the books... We believe that the board members were aware of all the developments at the exchange,” said the official. TheMumbaiPolicewing, meanwhile, has started the process of verifying the assets of the accused and will begin the process of attaching the assets soon. ■ Details on Page 9 Commercial law An effort to turn lawyers into creators, not suffocators, of business ■ Page 12 MAY 2013: A higher exemption threshold than earlier proposed to benefit small businesses discussed ■ Concept of compensatory value-added tax (CVAT) for inter-state trade in lieu of the integrated GST (I-GST) introduced ■ NIPFP has been asked to recommend a revenueneutral rate (RNR) AUGUST 2013: Yashwant Sinha panel suggests voting mechanism instead of consensus ■ Says drop dispute settlement mechanism ■ Recommends floor and ceiling rates OCTOBER 2013: Most states oppose inclusion of petroleum products in GST ■ Some states against inclusion of entry tax ■ Compensation to states of R9,000 crore discussed FLARE-UP ■ RIL is free to appoint an T HE impasse over the alleged hoarding of gas by Reliance Industries at the D6 block in the Krishna-GodavariBasincontinues with the oil regulator not agreeing to appoint a neutral, international consultant to validate the gas and ultimate reserves in the basin. While the oil ministry has agreed to allow RIL to appoint an international consultant to validate the reserves, it will lack legality as it would be outside the mandate of the managementcommittee(MC).Thisis becausethegovernmentfears thatallowingforasecondconsultant to validate the reserves might compromise the arbitration process of disallowing cost recovery . The MC comprises representatives from the operator of the field (RIL I in this case), regulator Directorate General of Hydrocarbons and the oil ministry . Sources in the oil ministry said that while RIL is free to appoint the consultant, it has international consultant to validate KG-D6 reserves. However, it would be without the blessings of MC ■ Such an appointment will lack legitimacy as a recent MC resolution notes that there is no need as per PSC for the MC to approve the appointment ■ Also, as the DGH has already engaged a consultant, the MC feels there is no need for appointing a new consultant ■ RIL states if the govt is citing the PSC to say that no global expert can be appointed then how was P Gopalkrishnan appointed, on whose advice RIL and BP were being penalised to be outside the purview of the MC as the productionsharing contract (PSC) does not allow for any such appointment a second time to validate the reserves. Earlier,theMChadwarned that engaging another consultant to verify the decline in gas production from the KG-D6 fields would compromise the arbitration process of disal- A T least six top carmakers have firmed up plans to enter the utility vehicles segment in 2014 with their multi, sports and compact vehicle offerings in the sub-R10-lakh bracket, reports Rachit Vats in Mumbai. After the UV onslaught over the last one year, more models will crowd the space. Maruti is expected to display the compact SUV at the Auto Expo in 2014. Hyundai, Ford, Tata and Honda too will bring in more segmentation with their offerings. ■ Page 4 OAL India (CIL) will kick off investor roadshows on Tuesday, ahead of its proposed follow-on public offering, even though a timeline for the FPO is yet to be finalised, reports Indronil Roychowdhury in Kolkata. At the current market price, the sale of an additional 5% stake will fetch the government about R9,000 crore. The CIL scrip closed flat at R287.70 on the BSE on Monday. Roadshows will start in the US and UK, with top officials, including the chairman, scheduled to meet investors in New York, Chicago, San Francisco and London in the first phase. ■ Page 9 lowance of cost recovery and thePSChasnosuchprovision. The DGH had earlier already engaged a consultant and, therefore, the MC feels thatthereisnoneedtoappoint a new consultant. The DGH had appointed international reservoir expert P Gopalakrishnan in 2011 to review the performanceatKG-D6. ■ Continued on Page 2 ■ After four years, KG-D6 output to see a hike from 14 mmscmd now to 17 mmscmd by March, P2 FII FIREWORKS THIS DIWALI I Six carmakers line up utility vehicles for 2014 C JANUARY 2013: EC forms three committees to look into Integrated GST and value-added tax (VAT) on imports, dual control, threshold and exemptions and a revenue-neutral rate and place of supply rules ■ Discussion on whether states can opt out of GST, phased roll-out agreed upon SECOND RALLY FROM DEC 2011 - TILL DATE FIRST RALLY FROM MAR 2009 TO NOV 2010 T could be a cracker of a Diwali with Major Mar 9, Nov 5, Points Gain Major Dec 20, Oct 18, Points Gain contributors 2009 2010 contributed in % contributors 2011 2013 contributed in % foreign funds Sensex 8,160.40 21,004.96 12,844.56 157.40 Sensex 15,175.08 20,882.89 5707.81 37.61 shopping for stocks ICICI Bank 262.95 1,269.70 1,511.35 382.87 ITC 199.55 354.00 990.66 77.40 and the rupee relatively Infosys 1,196.75 3,079.80 1,218.12 157.35 TCS 1,133.10 2,120.40 687.90 87.13 374.53 1,447.07 1,152.82 286.37 HDFC Bank 414.10 676.40 588.76 63.34 stable; with less than two L&T RIL 576.92 1,106.95 1,143.69 91.87 ICICI Bank 652.40 1,009.00 495.66 54.66 weeks to go, the Sensex is SBI 896.80 3,489.55 979.54 289.11 Tata Motors 174.90 378.70 432.39 116.52 now less than than 120 HDFC 251.16 735.80 831.48 192.96 RIL 713.55 905.35 398.41 26.88 points away from its allHDFC Bank 159.77 478.47 773.74 199.47 Infosys 2,667.35 3,316.15 363.87 24.32 ITC 79.10 177.15 691.24 123.96 HDFC 623.20 818.60 350.04 31.35 time high level of 21, TCS 231.20 1,077.50 606.20 366.05 Sun Pharma 249.82 631.35 336.06 152.72 004.96, which it hit on FIRST RALLY FROM 2000 November 5, 2010. On 24000 FII Equity ($ million) MAR 2009 TO NOV 2010 BSE+NSE volume (in crore) Monday, the Sensex 20000 1500 Sensex (RHS) closed at 20,893.89 while the Nifty settled above the 16000 1000 6,200 mark. FIIs have 12000 500 pumped $15 billion into Indian equities so far this 8000 0 year and a little over $39 -500 billion since the lows of December 2011 — a -1000 Mar 9, 2009 Nov 5, 2010 reference point to the current rally. In the SECOND RALLY FROM 2000 24000 previous rally, FIIs had DEC 2011 - TILL DATE Sensex (RHS) bought some $48 billion 20000 1500 of shares, Bloomberg 16000 1000 data show. Coal India starts roadshows for FPO in US today Exclusive! FinancialExpress/Apps fe Bureau New Delhi, Oct 21 12000 500 8000 0 -500 FII Equity ($ million) BSE+NSE volume (in crore) -1000 Dec 20, 2011 EDIT P6 Can Rajan swing IRFs? facebook.com/TheFinancialExpress ■ As 30% of taxes come from oil VAT, states want this out of GST 850 49,350 twitter.com/FinancialXpress Govt says no to fresh evaluation of whether RIL hoarded KG-D6 gas ■ Anjani Sinha not to be made approver Silver FinancialExpress.com I N T E R N A T I O N A L SHARP SLIDE IN JAPAN’S EXPORTS, DUE TO DIP IN DEMAND FROM ASIA, TAKES SHINE OFF ABENOMICS GST trips on oil, liquor and entry tax barriers ■ Board members of NSEL knew what was happening BULLION P 12 E D I T 4000 BPCL, Videocon strike oil off Brazil coast A significant oil discovery has been made in an ultra-deepwater block off Brazil where Bharat Petroleum and Videocon Industries together hold a 40% stake. Petrobras, which is the operator of the block, has confirmed the Farfan-1 oil discovery, Videocon said. BPCL also confirmed excellent productivity of good quality crude following a drilling test. PTI HDFC net rises 10% as total income grows 12.3% H DFC on Monday reported a 10% year-on-year increase in net profit to R1,266.33 crore for the quarter ended September 30, reports fe Bureau in Mumbai. The growth in profits was supported by a 12.83% increase in total income to R5,953.98 crore. However, core operating profit before sale of investments, dividend income and tax rose 16% y-o-y, said vice-chairman and CEO Keki Mistry. HDFC’s net interest income grew 12.7% y-o-y to R1,458.5 crore. ■ Page 8 L&T Infotech likely to buy Polaris FT unit for $400 m P OLARIS Financial Technologies is gearing up to sell its services business unit and L&T Infotech is believed to be the frontrunner in the deal estimated to be about $400 million. The Chennai-headquartered Polaris FT provides solutions for core banking, corporate banking, wealth & asset management and insurance, while, L&T Infotech provides IT services and solutions. Others in the race include Tech Mahindra and NEC, but the discussions are now moving towards possible closure with L&T Infotech, sources said. ■ Page 4 Nilesh Shah, Axis Capital deputy CEO WHILE it is difficult to predict market direction in the short term, our general view is that valuation of equities is attractive, barring select 10-12 stocks that have seen appreciation primarily based on FII interest. Most other stocks are offering value and are available at discounted prices in terms of low price-to-earnings or price-to-book. Generally, we have seen equities provide healthy return when bought during periods of low GDP growth and we feel we are in such a period. Nimesh Shah, Oct 18, 2013 0 ALL IN A DAY MOMENTUM of the market is fairly positive. For the first time, we are seeing small and mid-cap stocks participate in the up-move. There are good chances the markets could touch new highs considering that overall mood and sentiment is positive. ICICI Prudential AMC MD & CEO Vedanta Aluminium aims to triple capacity V EDANTA Aluminium will triple its capacity by 2015 to 2.3 million tonnes to cater for an expected surge in demand in India, its managing director said, even though its inability to source enough alumina at home has forced it to import the raw material. The company has been importing more than 1 million tonnes of alumina per year because plans to mine bauxite to feed its alumina refinery are on hold. Vedanta Aluminium's need for alumina, produced by refining bauxite, would nearly triple to 4.5 million tonnes in three years as it adds smelting capacity, managing director Sushil Kumar Roongta told Reuters.
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