The Tribune, Chandigarh, India

	Vodafone case fallout Govt may amend existing laws to plug the loophole Sanjeev Sharma/TNS New Delhi, February 20 The Income Tax Department’s claim of Rs 11,000 crore in the Vodafone transaction may not be the only case of revenue loss but claims of Rs 50,000-60,000 crore down the line may be at stake in other cases too. The review petition filed by the government in the Supreme Court on the Vodafone judgement, which had quashed the Income Tax claim, may have been prompted by the fact that the judgement may set a precedent for all such transactions. While the review petition has been filed to seek a legal remedy and allow the government to tax all such transactions, it looks likely that in case it does not get relief, the government may amend the existing laws to plug the loophole. There are several such transactions that have been on the radar of the Revenue Department while it was pursuing the Vodafone case. Apart from this, several other transactions may come up in the future. There have been some reports that China had made some amendments in its FDI regulations to tax offshore transactions. Some experts have pointed out that though the share transfer may have taken place between offshore companies, the underlying asset was in India. The huge valuation given was not for the shares but for the asset in India for which due diligence was carried on for months. It is also pointed out that once rules are amended, the assessing officer can also pass orders restrospectively and the companies concerned will have to go to court again. Vodafone, reacting to the tax authority’s review petition on Supreme Court’s ruling that Vodafone was not liable to pay any tax on the Vodafone-Hutchison transaction on January 20, said, “The Supreme Court clearly and unambiguously ruled that there was no tax to pay on the Vodafone-Hutchison transaction.” The Vodafone statement said, “The Chief Justice of India, SH Kapadia, said the transaction was a “bona fide structured FDI investment into India which fell outside India’s territorial tax jurisdiction… consequently, the Indian Tax Authority had no territorial tax jurisdiction to tax the said Offshore Transaction.” Similar acquisition cases that are being tracked by the IT Department include AT&T, SABMiller-Foster, Sanofi Aventis-Shanta Biotech, Sesa Goa, General Electric, among others.
	Govt to report nationwide inflation data today New Delhi, February 20 Starting tomorrow, the government will release the nationwide Consumer Price Index (CPI) on a monthly basis for better reflection of retail price movement and to help the Reserve Bank take effective monetary policy steps to deal with inflation. The new CPI, according to experts, will eventually replace the Wholesale Price Index (WPI) for policy actions to deal with the price situation. The monthly CPI will be in addition to the three retail price indices - for agricultural labourers, rural labourers and industrial workers - prepared by the Ministry of Labour. The new data will be prepared by the Ministry of Statistics and Programme Implementation (MOSPI). "CPI uses defined basket of goods and services that represents purchasing pattern of a particular household. Since this is driven from the consumption side, it provides a relatively realistic view on how consumers are affected," Deloitte, Haskins & Sells Director Anis Chakravarty said. He said for these reasons a reliable indication of demand side pressures and inflation is received from utilising CPI as a measure. Welcoming the new index, experts said it will take time, may be few years, before the CPI will replace WPI as benchmark for the government decision making and RBI's monetary policy. WPI, as per Chakravarty, "poorly reflects the cost of living because it does not focus on the prices at which the consumer is purchasing the goods". The WPI measures the price changes from the production side and not from the consumption side and hence it provides a skewed picture, he added. Globally also the consumer price index is taken as the main benchmark. — PTI
	Indian, Pakistani businessmen bullish on trade ties Tribune News Service New Delhi, February 20 Businessmen in both India and Pakistan are quite excited about the prospects of a quantum jump in trade between the two countries following the visit of a large Indian business delegation, led by Commerce Minister Anand Sharma, to the neighbouring country last week. A strong economic engagement between India and Pakistan is vital for peace and prosperity in South Asia, the SAARC Chamber of Commerce and Industry said today. ''We must strengthen our economic linkages with Pakistan...this will not only reduce tension between India and Pakistan but also improve the quality of life in both the countriers,'' said Vikran Sahney, president of the SAARC Chamber of Commerce and Industry, who was part of the Indian delegation. He said various chambers of commerce in Pakistan too have now publicly expressed their desire to open trade links with India. ''The common man in Pakistan wants an increase in economic linkages with India. The Pakistan Government will have to open trade sooner rather than later,'' Sahney said, sharing his impression of the visit, which took the Indian delegates to Lahore, Karachi and Islamabad. Federation of Indian Export Organisation (FIEO) chief adviser Jagmohan Bhanot, who too was part of the delegation, said the benefits of Sharma's visit to the neighbouring country were huge for both the nations. ''Once unhindered trade becomes a reality between the two countries, tension will automatically reduce between them,'' he said. Bhanot said he had met a cross-section of people in Pakistan and everybody desired to visit India. He said the younger generation in Pakistan wanted to know from him how he felt being in Pakistan. ''I told them that I feel absolutely at home...we need to promote linkages in all fields, particularly in the economic field,'' he added. Pakistani businessmen also by and large favour normalisation in trade ties between the two countries, though they feel that New Delhi is still not allowing some Pakistani products to be supplied to India due to its non-tariff barriers. Pakistan is in dire need of direct investment to overcome its energy crisis and unemployment, and increase its per capita income, allowing direct investment from Indian investors, who have already made huge investments in other countries.
	Finally, BlackBerry sets up server in Mumbai New Delhi, February 20 After much controversy, BlackBerry has finally set up its server in Mumbai following intense pressure from the government to provide a mechanism for lawful interception of its messenger services and Nokia has been asked to follow suit. During a high-level meeting at the Union Home Ministry recently, officials of the security agencies were informed that Canada-based Research in Motion has installed the servers in Mumbai. The servers have been inspected by a team of officers and permission for direct linkage for lawful interception was expected to be issued shortly, a presentation made at the meeting held in the office of the Home Secretary said. About the Nokia Push Mail, the Department of Telecom also prescribed a similar policy as in the case adopted by the BlackBerry, the presentation said. The government and BlackBerry manufacturers were in a logjam over its services in India as security agencies had raised a red flag over its operations citing non availability of method to intercept its messenger service and enterprise mail. However, there was a climbdown by the government on intercepting mail sent through BlackBerry Enterprise Services (BES) which decrypts the messages and sends it to email server of the service provider where it remains stored in decrypted form. Then the message is pushed to the BlackBerry device in encrypted form. — PTI
	Hero Cycles forays into luxury segment Unveils premium bicycles priced up to Rs 43,000 Ruchika M. Khanna Tribune News Service Chandigarh, February 20 Eyeing a growth in its business volumes and aiming to carve a niche in the premium bicycle segment, the world’s largest bicycle manufacturer, Hero Cycles, has forayed into the high-end bikes segment with the launch of its new range called Urban Trail. The company is also looking at launching its own retail chain during this year. While the first retail store of the company is expected to be launched in Delhi, the company proposes to have 30 company-owned and operated retail stores across the country by the end of this year. Talking to The Tribune here today, Pravin V. Patil, president, Urban Trail, Hero Cycles, said to begin with they will be manufacturing 70,000 units of these bicycles per annum. “We will be importing the parts and assembling it here. These carbon bikes will be priced between Rs 10,000 and Rs 43,000 for adults, while the children’s bikes will be priced between Rs 4,000 and Rs 7,000 per unit. Considering the fact that the high-end bikes presently being sold in the market are priced over Rs 70,000, our USP will be the low price and high quality,” he said. Patil added that they have been able to retail these at a much lower price because Hero Cycles has the benefit of volumes, with the company manufacturing 5.6 billion bicycles per annum. The market size of these premium bicycles in India is estimated at two lakh units per annum. The market for these bikes is growing at almost 20 per cent, whereas growth in the cycle industry has been rather sluggish, registering a growth of less than 10 per cent. He said though this year Hero Cycles was expecting a growth of just over 6 per cent in its sales turnover, the company’s foray into the premium bikes would help boost its growth manifold in the next fiscal. The company is expecting a sales turnover of Rs 1,700 crore this fiscal. The company president also said they would be retailing these bikes through 200 retailers. “We have already appointed 88 dealers for these premium bikes. Besides, we will be setting up 30 company-owned retail stores and appointing 30 franchisees to set up another 30 retail stores,” he said.
	Tata Nano set to roll into Bangladesh Dhaka, February 20 Tata Motors’ Nano cars are set to roam the streets of Bangladesh from early next month, the local distributor said today. "We plan to import up to 2,000 cars initially but the figure will be raised with increased demand in the country," said Abdul Matlub Ahmed, chairman of Nitol-Niloy Group. The Nano, one of the smallest as well as the cheapest cars in the world, was likely to cost around 500,000 taka in Bangladesh, Ahmed said. But the price may vary depending on the government's decision on customs duty. Used cars from Japan are most popular in Bangladesh for their high quality and reliability, but they are expensive. Previously, Indian cars could not access the Bangladesh market, except for some "Ambassador" taxi cabs. The Nano was scheduled to be launched in Bangladesh last October, but the pricing issue delayed it. Ahmed said his group was eager to set up a Nano assembly unit in Bangladesh by the end of next year, if demand for the car soars. Ahmed said he expected Nano sales in Bangladesh could reach 10,000 annually in the next couple of years. — Reuters
	Oil at 9-month high after Iran cuts supply Singapore, February 20 Oil prices jumped to a nine-month high near $105 a barrel today in Asia after Iran said it halted crude exports to Britain and France in an escalation of a dispute over the Middle Eastern country's nuclear programme. Benchmark crude was up $1.75 to $104.99 per barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. Earlier in the day, it rose to $105.21, the highest since May. The contract rose 93 cents to settle at $103.24 per barrel in New York on Friday. Brent crude was up $1.52 at $121.10 per barrel in London. Iran's oil ministry yesterday said it stopped crude shipments to British and French companies in an apparent pre-emptive blow against the European Union after the bloc imposed sanctions on Iran's crucial fuel exports. They included a freeze of the country's central bank assets and an oil embargo set to begin in July. Iran's Oil Minister Rostam Qassemi had warned earlier this month that Tehran could cut off oil exports to "hostile" European nations. The 27-nation EU accounts for about 18 per cent of Iran's oil exports. The EU sanctions along with other punitive measures imposed by the US are part of Western efforts to derail Iran's disputed nuclear programme, which the West fears is aimed at developing atomic weapons. Iran denies the charges, and says its programme is for peaceful purposes. Oil prices were also boosted by China's decision to boost money supply in a bid to spur lending and economic growth. — AP
	S&P warns Japan on debt, affirms AA- rating Tokyo, February 20 Standard & Poor's warned on Monday it could lower Japan's sovereign rating if the economy expands less than expected or if public debt continues to grow, as the country's unpopular government struggles to win support for higher taxes. The ratings agency affirmed its AA- rating on Japan with a negative outlook, but also warned that higher taxes wouldn't solve the structural problems that push up Japan's welfare spending and increasingly pressure state coffers. Japan's debt burden is the heaviest among industrialised economies, and it may not be able to postpone drastic spending cuts and aggressive tax hikes much longer as Europe's debt crisis threatens the global economy. One problem is that Japan's ruling Democratic Party lacks the majority needed to override opposition in parliament, so policy making often moves at a slow pace. "In this environment, it's difficult to get opposition parties to agree to policies that will increase the burden on the public," Takahira Ogawa, director of sovereign ratings at Standard & Poor's in Singapore, said on a conference call. S&P and Fitch both rate Japan AA- with a negative outlook. Moody's Investors Service ranks Japan at the same level, at Aa3, but has a stable outlook. All three agencies rate Japan three notches below the top AAA rating. Japan's rating could fall if real gross domestic product growth per capita drops below S&P's forecast of 1.2 percent, according to a statement released earlier. S&P also expressed concern that the government isn't doing enough to bring down its debt quickly enough. "We would also consider lowering the long and short-term ratings if the government's debt trajectory remains on its current course or begins to erode the nation's external position," S&P said. "On the other hand, we may revise the outlook to stable if the government were to implement robust and sustainable fiscal consolidation." — Reuters
	Iran curbs could put OVL plans on the backburner Hyderabad, February 20 The ongoing sanctions imposed by the US and some European countries against Iran due to its nuclear programme may put some of the ONGC Videsh’s (OVL) plans in that country on the backburner, according to a top executive of ONGC. The chairman and managing director of ONGC, Sudhir Vasudeva, said things could be challenging for the state oil and gas explorer due to sanctions against the Persian Gulf nation. In Iran, OVL, the overseas arm of ONGC, is currently engaged in the Exploration Service Contract (ESC) for Farsi Offshore Exploration Block involving the Master Development Plan for the Farzad -B’ Gas Field in the Persian Gulf at an estimated investment of over $5 billion. "We are not in production phase anywhere in Iran. Only thing is our plans may go on the backburner. No project is in production phase and it does not affect immediately. But development plans can get affected depending on if the situation does not improve," Vasudeva said during his recent visit to Hyderabad. ESC for Farsi Offshore Exploration Block was signed in December, 2002. OVL as an operator with 40 per cent stake carried out seismic survey and drilled four exploratory wells in the Block during 2006-07 resulting in discovery of oil and gas. The other consortium partners are IOC with 40 per cent and OIL with 20 per cent stake. — PTI
	US airlines sue Exim Bank for giving loan guarantee to AI Washington, February 20 The US airline industry has sued the Export Import Bank (Exim) alleging that its financial support to Indian national carrier Air India, which itself is in deep red, will harm the American airlines. In a revised complaint filed before a US court on Friday last week, the Air Transport Association of America, Delta Air Line and Air Line Pilots Association International, alleged that Exim Bank’s decision to provide a loan guarantee of $3.4 billion to Air India, to help it buy 30 aircraft from Boeing, would badly affect several US airlines, the Delta in particular. Arguing that without the financial support from Exim Bank, Air India, which in itself is in deep red, would not have purchased these aircraft and thus would deploy them on those routes where it gives a tough competition to US airlines. "The bank's support for foreign carriers puts ATA's operator members, including Delta, at a competitive disadvantage because, among other things, the bank's foreign beneficiaries have access to cheaper capital to finance their aircraft purchases," the complaint said. The Exim Bank’s subsidies to foreign carriers have forced US airlines to cut between 4,100 and 7,500 jobs. The loss of those jobs has led to $372 million to $684 million in lost employee income, it alleged. The Air Transport Association of America also challenged the argument of the Obama Administration that orders placed by foreign airlines like Air India is creating jobs in the US. — PTI
	New telecom policy likely by April-end Tribune News Service New Delhi, February 20 Having announced the broad guidelines for the telecom sector last week, the government may come out with the final guidelines for the country’s fastest growing sector by April-end. Reports suggest that the Department of Telecommunications (DoT) is working on a time table, according to which, the new telecom policy, NTP 2011, could be cleared by the end of April this year. As per the DoT officials, once the NTP 2011 is cleared by the Union Cabinet, there would be a definite date by which it would be implemented. The draft Cabinet note of new telecom policy is expected to be circulated to concerned ministries by tomorrow, to which the responses are expected by March 6. As per the presentation made by DoT to Prime Minister Manmohan Singh and senior ministers, the draft note is expected to reach the Cabinet for consideration by March 21 and a final decision was expected by end of April this year. The new telecom policy is expected to bring in transparency and clarity in the telecom sector. Last week, Telecom Minister Kapil Sibal announced the broad guidelines for the telecom sector whereby the operators would be allowed to hold higher spectrum of up to eight MHz (except Delhi and Mumbai where the upper limit would be 10 MHz) and pay a uniform licence fee of eight per cent. The new rules would also bring in relaxed merger and acquisition norms and operators would also be free to acquire additional frequency beyond the prescribed limit through auction. Merger up to 35 per cent market share of the resultant entity will be allowed through a simple, quick procedure, Sibal said while reading out the changes in policies governing licences, spectrum and merger norms. Mergers and acquisitions (M&As) are bound to happen after the recent Supreme Court order which revoked 122 2G licences given during the tenure of former Telecom minister A. Raja and which has affected a number of startup telecom firms forcing some of them to even consider quitting the sector. TRAI, the telecom sector regulator, has been asked to formulate guidelines, following which the Ministry will take a final call on the issue.