New Delhi, September 23
The Centre has assured it will fully compensate the states in the first year of introduction of Vat (Value Added Tax) for any loss in revenue that may arise out of introduction of Vat from April 2005.

“I am very happy to say that we are on the right path and proceeding at the right pace. Seventeen states have their Vat Bill ready. All is going well, we hope to introduce Vat by April 2005,” Finance Minister P Chidambaram told newspersons after a meeting of the Empowered Committee of State Finance Ministers.

Chairman of the Empowered Committee Asim Dasgupta said the Centre would compensate states fully (100 per cent) of the revenue loss during the first year, by 75 per cent during the second year and by 75 per cent of the revenue loss during the third year.

Mr Chidambaram said Central Sales Tax (CST) will be phased out gradually and the formula will be worked out after holding consultations with the technical experts committee on Vat.

The Technical Experts Committee is headed by M Govind Rao of the NIPFP.

The Finance Minister said that all states are likely to be ready with the requisite Vat Bill by November this year.

While Madhya Pradesh has already received the President’s approval on the Bill, four states have sent the papers, while others were processing the papers.

The Vat Panel is also expected to meet later, primarily to arrive at a consensus on the ticklish question of whether grant powers to states to impose service tax.

Finance Minister P. Chidambaram today clarified that the Securities Transaction Tax (STT) on trade in equities is to be levied prospectively from October in major bourses.

"The STT levy will be prospective," Mr Chidambaram said when asked by newspersons about the time from which the new tax would be levied on securities trading.

There are apprehensions in the market as to whether STT would be levied from the date the Finance Bill was passed or prospectively from the date when the stock exchange is ready with the systems.

The government, along with market regulator Sebi and stock exchanges, is in the process of putting in place necessary softwares for automatic STT deduction when shares are traded.

The software are expected to be ready for starting deduction of STT from October.

He also appealed to service providers to immediately pay up their taxes, saying that no penal action will be taken against those who get themselves registered before October 31,2004 and pay service tax.

Mr Chidambaram said a mega advertisement campaign is being launched by the Finance Ministry from tomorrow regarding service tax collection.

New Delhi, September 23
India’s merchandise exports may touch a level of $ 75 billion during the current financial year 2004-05, Union Minister of Commerce and Industry Kamal Nath said here today.

“The challenge is to strive for sustaining the growth rate at 20 per cent and above for the next five years. The export target for the current financial year 2004-05 is pegged at 16 per cent. But I am determined that we shall exceed this. I want it to be at least 20 per cent,” Mr Nath said while speaking at a meeting organised by the Forum of Financial Writers here.

India’s merchandise exports during April-August 2004-05 recorded a growth of 26 per cent over the corresponding period last year.

The Minister said: “Exports are vital for generation of employment and stimulation of economic activity, especially in the rural and semi-urban areas. An integrated approach to economic policy linked to external trade is, therefore, of critical importance to the health of the economy. And the Foreign Trade Policy is an important step in this direction.”

He said that the Special Economic Zone (SEZ) Act would be introduced shortly in order to boost the confidence of investors about the stability of India’s SEZ Policy.

Referring to the phase out of MFA quotas from January 2005, the Minister noted that there would be opportunities as well as challenges and emphasised that “the issues of capacity expansion, technology upgradation and R&D and infrastructural bottlenecks must be addressed on priority if we are to substantially increase our share of the world textile trade, post-MFA.”

On WTO issues, Mr Nath reiterated the crucial role played by India during the negotiations in Geneva last July, leading to the adoption of the Framework Agreement.

“We have succeeded in incorporating sufficient provisions to ensure that livelihood of our farmers is not affected. In non-agricultural market access (Nama), negotiations will create additional market access for our industries through tariff reduction in non-agricultural products of particular interest to developing countries.”

Removal of three of the four Singapore issues from the Doha agenda as an important achievement for India, while commencement of negotiations on trade facilitation would benefit India, as it would help reduce transaction costs in India’s exports.

India will also sign a free trade agreement (FTA) agreement in December this year with Latin American trading block Mercosur, the minister stated.

The country has already signed preferential trade agreement with Mercosur countries — Brazil, Argentina, Uruguay and Paraguay.

New Delhi, September 23
Japan’s Suzuki Motor Corporation (SMC) will set up a two-wheeler manufacturing plant in India by the end of next year through a joint venture in which it will have 51 per cent stake.

Talking to reporters after the Maruti Board meeting here today, Maruti Udyog Ltd Chairman Shinzo Nakanishi said: “The new plant will have a capacity of 2,50,000 units per year. To begin with, there will be one scooter and one motor cycle model.”

After meeting with the Minister for Heavy Industries Santosh Mohan Deb, the SMC has also agreed to offer 70 per cent stake to the MUL in a new car manufacturing plant it plans to set up in Haryana.

Announcing the grand investment plans for the next five years finalised at the meeting of the MUL Board, Managing Director Jagdish Khatter said MUL’s another joint venture with Suzuki — Suzuki Metal India — would produce diesel engines for domestic and international markets.

MUL has 49 per cent stake in Suzuki Metal and this would end the dependence of the domestic car giant on imported diesel engines from French company Peugot for its popular brands including Zen.

“A new joint venture Suzuki Maruti India will be floated for a new car plant, where 70 per cent equity will be owned by Maruti and the rest with Suzuki,” Maruti Udyog Chairman Shinzo Nakanishi said.

Today’s crucial board meeting is a culmination of an agreement reached between government and Suzuki yesterday after a short-lived spat between the two over Japanese firm’s “unilateral” announcement to invest Rs 1,000 crore in India.

The over Rs 6,000 crore investment, to be made in the next four to five years, would be for the new car plant, diesel facility and R&D, he said.

The new diesel engine manufacturing plant will be set up by Suzuki Metal India, a 49:51 joint venture of Suzuki and Maruti.

Mr Khattar said the new car company and MUL would co-exist, with production facilities of both companies sharing earnings and benchmarking with each other in areas of quality, cost and productivity.

“The Board of Directors of MUL has examined various options for expanding production capacity in view of the fact that the existing production facility in Gurgaon is operating at close to full capacity (three lakh units a year). The board has decided the best option will be to set up a joint venture company with SMC to manage and operate a new vehicle manufacturing plant,” MUL informed the Bombay Stock Exchange.

New Delhi, September 23
France, the second largest market in Europe, has initiated a dialogue with the Indian businessmen to convince them of the advantages of investing in their economically attractive country.

Ms Clara Gaymard, Special Representative of France for International Investment, is visiting India to give Indian businessmen all the right reasons to invest in France.

Addressing a select gathering of the Indian business community at the French Embassy here yesterday, Ms Gaymard, who heads the Invest in France Agency (IFA), said there is more to France than just good wine and good food.

She said that France has a proven appeal for foreign investors and ranks first worldwide along side China for total FDI inflows. She said France ranks number two in Europe for job creation from the FDI with special appeal in high value added sectors.

Enumerating reasons to invest in France, Ms Gaymard drew attention of the Indian businessmen to high labour productivity, relatively low cost labour and good quality of life.

She said the French government is taking several measures to contribute to the potential of France as a business location. These include tax exemption on personal income, more legal security to investors, streamlining procedure for the entry and work of top-level managers and for the entry of the families of the executives.

Mr Girard said that at present, only 25 Indian companies have their offices in France. “Recent investments by Indian companies like Jindal in the packaging sector, Ranbaxy in the pharmaceutical sector and Wipro in the software sector are in the first stage of a much broader movement. We are confident that Indian investment in France will pick up. France is the second destination worldwide for foreign investment after China. There must be a good reason,” he said.

Mumbai, September 23
Pharmaceutical company Strides Arcolab Ltd has entered into a 50:50 joint venture with the US-based Akorn Inc to finance its preparation of abbreviated new drug applications.

The two companies had entered into a memorandum of understanding in April 2004 to form the JV called Akorn Strides LLC. The JV is a Delaware-based limited liability company.