New Delhi, December 21
The Union Cabinet today discussed the issue of amending various insurance laws, including that of raising the FDI cap in the sector, and referred the matter to a Group of Ministers (GoM).

The raising of FDI cap — from 26 per cent now to 49 per cent — was part of comprehensive amendments to the insurance laws.

The issue has been referred to a GoM, Finance Minister P Chidambaram told reporters after the Cabinet meeting.

He also exuded confidence that the GoM would not take more than two sittings to give its views on the matter.

The proposed changes include amendments in the Insurance Act of 1999, LIC Act, 1956 and IRDA Act, 1999, among others.

The UPA government had for the first time proposed raising the limit of foreign direct investment (FDI) to 49 per cent in its maiden Budget of 2004-05. However, no decision has been taken so far in view of the opposition by UPA's allies Left parties.

The K.P. Narasimhan committee had advised on removing the FDI provision from the IRDA Act and suggested that the government should be able to notify future increases in the limit without going to Parliament.

But that is not likely since the cap has been imposed through the IRDA Act itself, official sources said.

The amendments also sought to change provisions in insurance laws related to investments, sufficiency of assets, tariff advisory committee and shareholders or policyholders' funds. Insurers have also sought greater flexibility for raising capital from the financial markets to meet solvency margins on the lines of banks. — PTI

Bhubaneswar, December 21
Arcelor Mittal today signed a pact with the Orissa Government for setting up a 12 million tonne steel plant at an investment of Rs 40,000 crore, virtually ending Jharkhand's hopes of hosting the world's largest steelmaker.

The MoU was signed by Orissa Steel Secretary L.N. Gupta and Group management Board member of Arcelor Mittal Malay Mukherjee in the presence of Chief Minister Naveen Patnaik.

Mittal Steel had earlier signed an MoU with the Jharkhand Government for setting up a plant in that state, but the project could not make much headway owing to indecisiveness on allocation of iron ore mines.

Under the MoU with Orissa , Arcelor Mittal, which was created after Mittal Steel acquired its key rival, Arcelor, would set up the project in the tribal-dominated Keonjhar district in two phases of six million tonnes each.

This is the second mega steel project proposed in the iron ore-rich state after the South Korean steel giant POSCO's 12 million tonne plant at an investment of Rs 52,000 crore near the port town of Paradip.

Arcelor Mittal's proposal would also include facilities for coke oven, steel making, rolling mills and a 750-MW captive power plant.

"We have always said that we want to have an operational presence in India. The Indian economy is demonstrating excellent growth and steel consumption is set to increase considerably in the future," a company release quoted Arcelor Mittal President and CEO Lakshmi N. Mittal as saying.

Orissa being rich in minerals was an ideal location for such a greenfield venture, he added. — PTI

Chandigarh, December 21
Sick of arm-twisting tactics used by top MNCs, seeking cash investments and tax sops in lieu of setting up their mega projects in the state, the Punjab Government has decided to ensure that the total value of sops offered remain substantially less than the investments to be made by these companies.

With the Tatas again approaching the Punjab Government for setting up a Rs 400-crore commercial vehicle project, the latter proposes not to offer sops of value more than the investment to be accrued from the project.

For this project, the government proposes to offer free land — almost 900 acres in Ropar district — to the company. Since the project would be a mega project, the company would get exemption from stamp duty and electricity duty. Besides the site at Ropar, the company will also be offered sites at Nabha and Laddowal.

The race between various state governments for wooing investments from top MNCs in their respective states had given an upper hand to these companies and they began asking for cash investments and free land from the government. Before the German auto major Volkswagen and Tata Motors settled down for Maharashtra and West Bengal, respectively, for setting up their projects, the companies had approached Punjab and asked for cash investment, free land and tax sops from the government.

Volkswagen had promised an investment of Rs 1,700 crore and asked for Rs 1,500 crore as investment from the Punjab Government, besides 500 acres of land free of cost. Tata Motors had demanded Rs 500 crore as cash investment from the government, besides 900 acres of land free of cost for its small car project worth Rs 800 crore. This is one of the reasons the Punjab Government lost out on both these projects.

Top officials in the Punjab Government informed TNS that though the government was keen to invite these companies, but the sops asked for were financially unviable.

"Incentives like exemption on electricity duty and stamp duty are already granted to all mega projects. Since these high-profile projects would not provide any real term benefit to the state, in terms of massive employment generation, as compared to the investment sought, we propose that the incentives offered should not be more than the actual investment by the companies,” said a top official in the government. The two auto majors had demanded Rs 2,000 crore investment and free land, but would have led to employment generation of just 25,000.

New Delhi, December 21
Mukesh Ambani-promoted Reliance Life Sciences (RLS) today entered into a deal to acquire a majority stake in UK-based biopharmaceutical company GeneMedix Plc and also invest £32.1 million over the next five years.

The proposal would see the RLS make the investment in two tranches, of approximately £14.6 million and £17.5 million, to reflect the anticipated funding requirements of the business, it said.

Initially, RLS will acquire 74 per cent in GeneMedix through the investment of 14.6 million pounds, which will immediately allow the company to restructure its balance sheet by removing long-term debt instruments. — PTI

New Delhi, December 21

Finance Minister P. Chidambaram said today that India’s rising trade deficit was not a cause of worry as exports were growing positively and the foreign exchange inflow was keeping the deficit in control.

“India can live with current account deficit and trade deficit is not a cause of worry anymore,” Mr Chidambaram said here.

The recent trade data suggests that deficit in the first eight months of this fiscal had grown to $36.04 billion.

During the first-ever pre-Budget and pre-foreign trade policy joint interactive meeting of exporters convened by Union Commerce and Industry Minister Kamal Nath with the Finance Minister, exporters urged the government to ensure continuance of the duty entitlement passbook scheme (DEPB) and the textile upgradation fund scheme (TUFS).

The Federation of Indian Export Organisations (FIEO) and several Export Promotion Councils (EPCs) sought removal of the central sales tax as it made exports less competitive; zero duty on imports for export production under the Export Promotion Capital Goods Scheme (EPCG) to provide a level playing field and promote expansion and modernisation. They also sought exemption from service tax and the fringe benefit tax.

New Delhi, December 21
The Union Cabinet today extended by three months till March-end 2007 the deadline for telecom operators to comply with the revised guidelines for enhanced foreign direct investment (FDI) limit of 74 per cent. It also discussed various amendments to insurance laws, including hike in FDI cap, and referred the matter to a Group of Ministers.

"The Department of Telecom's note on FDI in telecom was discussed at the meeting. It has been referred to a group of officers headed by the Cabinet Secretary to redraft the norms with regard to remote access on PSTN (fixed line phone connection)," Finance Minister P. Chidambaram told reporters after the Cabinet meeting.

This is for the fourth time that the deadline has been extended to allow companies abide by the new guidelines for enhanced FDI in telecom since it was announced in February this year.

Mr Chidambaram, however, declined to divulge details on whether rest of the proposals of the DoT had been approved.

"The Cabinet Secretary will rewrite the remote access guidelines in line with the discussion in Cabinet today," he said.

The CCEA cleared the proposal to amend the market access initiative scheme to enhance its scope and effectiveness. The scheme was to act as a catalyst to promote India’s export on a sustained basis.

The Cabinet gave its approval for accession to an international pact that would make it easier to collect evidence from abroad in civil or commercial matters.

This would benefit the parties involved in the litigation by simplifying the process and assure greater certainty regarding admissibility of the evidence obtained before Indian courts.

The CCEA also gave its approval for the construction of new international terminal building at Ahmedabad Airport by the AAI with an estimated cost of Rs 290.92 crore with a foreign exchange component of Rs 27.35 crore in two phases.

New Delhi, December 21
Swiss firm Nuance Group's plan to set up duty-free shops in airports and Nokia Siemens Networks' proposal to make investment for manufacturing telecom equipment were among the 18 applications involving a total of Rs 64.66 crore FDI inflow cleared by the government today.

While Nuance Group plans to invest Rs 25 crore to manage duty-free shops in airports, Nokia Siemens Networks would make an investment of Rs 12.42 crore in manufacturing and marketing of telecom equipment.

The proposals were cleared by Finance Minister P. Chidambaram on the recommendations of Foreign Investment Promotion Board, an official statement said.

Nuance Group's proposal is to undertake operation and management of duty-free shops, food and beverage outlets at airports in Mumbai, Bangalore, Hyderabad and other places.

Besides, Italian company Ermenegildo Zegna Holditalia would set up a single brand 'zegma' retail stores in India.The proposal involves FDI of Rs 1.53 crore.

Parry Murray & Company of UK would set up a subsidiary in Chennai for trading of textile and other products for home furnishing sourced from third parties. The proposal involves FDI of Rs 0.2 crore.

Mauritius-based Nalisfield Ltd would set up a subsidiary to make an investment of Rs 4.6 crore in India. — PTI

New Delhi, December 21
The Centre will shortly call a meeting of Chief Ministers to build a consensus on investing the funds under the new pension system (NPS) in stock markets and mutual funds, besides considering other options.

"The Cabinet today discussed the issue of investment options under the NPS. It has been decided to call a meeting of Chief Ministers so that they could also come on board to offer investment options under the NPS on the lines of non-government provident funds," Finance Minister P. Chidambaram told reporters after the Cabinet meeting.

The NPS has been operational for employees of the central government and 16 states since January 1, 2004.

The proposed meeting will discuss the investment options for the NPS. This could include investing up to 5 per cent of the NPS funds in shares and a specific percentage in equity-linked mutual funds for better returns to employees. — PTI 

New Delhi, December 21
Emphasising the need for a more exporter-friendly Export Promotion Capital Goods Scheme (EPCG), Ficci has sought relaxation of export obligation conditions under the scheme in its memorandum submitted to Directorate General of Foreign Trade for the forthcoming Foreign Trade Policy 2007-08.

Pointing out difficulties faced by exporters under the present EPCG scheme, Ficci said the condition of exporting over and above the average level of exports achieved by an exporter in the preceding three years is becoming difficult to comply with in view of the fact that exports are already growing at a very high rate (24 per cent on an average for the last 3 years).

Also, in many cases, Ficci pointed out that capital goods were imported under the EPCG to replace the old ones, which implies there was no creation of additional capacity in such cases.

Ficci said the problem was more acute for large exporters, where absolute level of exports was already high. It said the government could consider some special dispensation or window for large exporters to fulfil this particular export obligation condition under the EPCG.

Ficci has also suggested the import of capital goods at a reduced rate of custom duty of 1 to 2 per cent under the EPCG Scheme as against the existing 5 per cent.

Many exporters now find it unviable to import under the 5 per cent EPCG scheme as they have to undertake an onerous obligation of exporting to the amount of 8 times the duty saved on import of capital goods.

Most exporters prefer to import capital goods by paying full custom duty of 10 or 15 per cent, the CVD and Special CVD. As exporters can claim CENVAT credit of CVD and Special CVD later on, the extra duty paid by an exporter under the normal channel (and not under the EPCG licence) is only 5 to 10 per cent.

But, exporter does not have to undertake onerous export obligation. Besides this, there are other conditions also which are making EPCG scheme unpopular amongst the exporters, Ficci observed.

Ficci has also sought import of spare parts of capital goods under the EPCG scheme even if the related capital good is not imported under the scheme.

As per the current Foreign Trade Policy, import of spares under EPCG scheme is permitted only if the capital goods are also imported under the scheme. 

Mumbai, December 21
Power distribution in the troubled textile town of Bhiwandi on the outskirts of Mumbai will be handled by Torrent Ltd from January 15.

Mahavitaran, the state-owned power transmission and distribution company carved out of the Maharashtra State Electricity Board, decided to rope in the private company following accumulated losses of more than Rs 1,000 crore. Torrent has been given the franchise to distribute power in Bhiwandi for 10 years.

Government officials deputed to collect dues from electricity users had failed to do so in many parts of the town citing Bhiwandi's fragile communal situation. The powerloom industry which dominates Bhiwandi's economy is in dire straits and many users are bankrupt.

Torrent officials say they intend to recover old dues and bring down transmission and distribution losses from 44 per cent to 14 per cent in 10 years. The town has about 1.6 lakh power customers.

At present Mahavitaran realises between Rs 1.30 and Rs 1.60 per unit of power in Bhiwandi.

Torrent has given an undertaking to increase realisation to Rs 2.45 per unit in 10 years by bringing down transmission and distribution losses. Officials say, it should be easy to improve yields since 51 per cent of the town's users, including powerlooms are commercial users.

Mumbai, December 21
The rupee today closed higher by 10 paise against the dollar and was quoted at Rs 44.62/63 compared to the previous closing of Rs 44.72/73 on sustained heavy selling by foreign banks.

The rupee resumed marginally lower in the morning trade but rallied back, boosted by heavy foreign inflows into the equity markets. Market watchers expect further appreciation in the days to come. The RBI fixed the reference rate at Rs 44.73, up by one paise from yesterday's rate of Rs 44.74. — PTI