New Delhi, April 26
Interest rate on employees' provident fund will be increased to 8.6 per cent for the current fiscal, a move which will benefit around five crore subscribers. "The rates were brought down due to lower income (on investment in Special Deposit Schemes)...There is no question of minimum or maximum interest  rates. We distribute it as per our revenue. Next time, it will be 8.6 per cent," Labour Minister Mallikarjun Kharge said in the Rajya Sabha replying to a debate on working of Labour Ministry.

The Employees' Provident Fund Organisation (EPFO) had brought down the rate of interest to 8.25 per cent for 2011-12 from 9.5 per cent provided in 2010-11.

The retirement fund body EPFO has parked in excess of Rs 55,000 crore in the Special Deposit Schemes (SDS) aimed at providing better returns to non-government provident funds and other such funds.

Kharge said the rate of interest on funds depend on the revenues. Since the money belongs to workers, the government does not intend to reap any benefit out of the fund and returns every penny for the welfare of the subscribers.

"Even if the interest rate is less, the money is kept in safe custody," Kharge said.The interest rate was lowered last fiscal on the finance ministry’s recommendation that with the kind of returns, it was not possible to continue with the 9.5 per cent given in the year-ago period.

Stating that his ministry is taking pro-active steps to address issues related to labour, Kharge said, the government has enacted laws to protect workers and provide them additional benefits like assured job, food and medicines. On pending bills, he said, "Sometimes, we are  not able to enact good laws because of differences. Without cooperation,  no decision can be taken." — PTI

Mumbai, April 26
The Export-Import Bank of India (Exim Bank) is planning to set up a new fund of US $500 million (Rs 2,500 crore), which will provide MSMEs with long-term foreign currency loans, a top bank official said Thursday.

The Technology and Innovation Enhancement & Infrastructure Development Fund will support exports by micro, small & medium enterprises (MSMEs), he said.

"We’ll set up this fund with an initial amount of US $500 million over the next five years to support MSMEs in getting foreign currency loans, which will help them in exports," Exim Bank chairman & MD T.C.A. Ranganathan told reporters here.

He said the main purpose of this fund is to reach out to a large number of MSMEs to build capacities in the area of skill development, design and packaging, among others.

The government-owned financial institution will also soon launch a new programme to finance export-oriented creative industries, Ranganathan said.

"Many creative industries like animation, gaming software, content development in movies, media, and education among others have a lot of export potential. We want to support these industries for increasing exports from India."

According to the bank, India's share in export of creative goods was US $13.8 billion as against China's $97.8 billion.

Similarly, the bank is encouraging cluster approach to make export more competitive. Ranganathan said the bank has started giving partial guarantee to Indian corporates for raising overseas loan in that country's currency.

"We want to promote overseas loans in that domestic currency. For example, a Indian corporate house should be able to raise money in the currency of the host country to protect it from currency fluctuation," he said adding, this will make them self-dependent to enter overseas market and raise money. — PTI

New Delhi, April 26
The civil aviation ministry is learnt to have strongly opposed the budget proposal imposing a four-time hike in service tax on air travel, terming it a retrograde step that would hit fliers and airlines very hard.

Ahead of the passage of the Finance Bill in Parliament, Civil Aviation Minister Ajit Singh is understood to have shot off a letter to the finance ministry protesting the proposal on the grounds that the move would not only hit passengers but spell more trouble for the airlines which were already reeling under severe financial stress.

Singh is reported to have said the proposal to raise service tax from ten to 40% of the gross ticket value would hit air travel by making it costlier.

Under the budget proposal, the service tax was being made ad valorem implying that the tax would go up as the gross ticket price rises. At present, the tax has a cap of Rs. 100 per journey for domestic sector in any class and Rs. 500 for international.

Singh is believed to have said the move was also "a perceived departure" from the current specific rate of taxation to ad valorem, terming it as "a retrograde step".

This, he said, was being done especially when his ministry was advocating specific duty rate for value added tax on jet fuel instead of the varied sales tax rates imposed by different state governments.

Observing that taxation on the air transport sector was "already disproportionately high", Singh said if service tax in the present rate was implemented, it would "retard" the development of the airline industry.

"High tax regime on aviation will reduce the wider economic benefits available from aviation, resulting in a negative impact on economic growth and overall government's revenue basis", the minister said.

He also said the service tax, along with the education cess on all airport and aviation services, would add to the already high tax burden on the sector. — PTI

Zürich, April 26
The Indian rupee could hit 56 to the dollar, which would mark a record low, UBS said. It cited the prospect of slowing flows on the back of India's "severe" deficit drag, the need to "repair" its balance sheet and regulatory ambiguity that has reached a "crisis point."

"In these conditions, there is very little policy easing. So companies and government must now become more efficient if they want to retain/induce that extra dollar from overseas," UBS' economist Philip Wyatt says in the report.

Ratings agency Standard & Poor's on Wednesday cut India's outlook to negative from stable, citing slow progress on its fiscal situation, as well as deteriorating economic indicators. Stating that India's investment and economic growth have slowed, Standard & Poor's (S&P) revised its outlook for the Indian economy to negative and gave it a rating of BBB(-) from stable.

The lowered outloo k jeopardises India's long-term rating of BBB-, which is the lowest investment grade rating. S&P has threatened to downgrade India's rating in next 2 years if the fiscal situation does not improve.

According to Manpreet K. Doad, analyst at India Forex Advisors, the revised outlook is expected to raise international lending rates for India, signalling thehigher costs to be borne by corporates. Infrastructure industries, such as steel, power, cement, coal and infrastructure, are facing deeper challenges, as growth in these sectors has already slowed down. They are also facing issues in raising capital to fund capital expenditure plans.

The increased borrowing rates will be directly passed on to them, leaving them in a grave situation. International funding for ECB, buyers' credit and other sources of dollar funding will get costlier.

The rupee tumbled to the 52.65 levels after appreciating to the 52.46 levels on Wednesday. Looking at the forward premium, it is still trading high of almost 305 paisa for a year end, indicating that corporates are still buying in long forward. With foreign investors already holding back investments in India on the back of political and local issues, the revised outlook will deteriorate the future prospect. — Agencies

Ludhiana, April 26
Rising prices of cotton, acrylic yarn, pure wool, mixed wool, blended wool, which has risen by around 10-30% in the domestic market, have put the Punjab textile industry under strain. In addition to this the hike in cotton prices has left the textile industry more worried.

Rising cotton prices have started affecting the profit margins of textile units and they are left with no other option but to increase the price of their finished goods.

Apparel sales has dived by around 15%. With the decline in clothes sales, the textile units are not unable to increase the prices as a result they have to incur heavy losses.

“The rising cotton prices have made the Indian textile industry uncompetitive in the international market. On the other hand domestic market is continuously struggling with the escalating prices.

If the situation remains the same it’ll result in the closure of textile units in Punjab,” said Vinod Thapar, president of the Knitwear Club.

“The reason behind cotton prices in the domestic market being pushed up is the unbridled exports of cotton. The woes of the textile industry include not only prices of cotton but also those of other raw materials prices going through the roof in the recent past," said Santosh Maini, a textile unit owner.

"The rise in raw input prices will naturally result in prices of cotton fabric products going up further. The price hikes will be passed on to consumers as the textile units are finding it hard to absorb the increase in costs of inputs,” added another textile exporter.

Achal K. Gupta new MD of State Bank of Patiala
Achal Kumar Gupta has been appointed managing director of State Bank of Patiala. Earlier he was chief general manager, corporate accounts group of State Bank of India in Mumbai. He also worked as MD of SBI Mutual Fund.

JSW Steel FY12 output up 16%
JSW Steel said it has clocked a 16% growth in annual crude steel production at 7.43 million tonnes in FY2011-12. However, the Karnataka government’s ban on iron ore mining has put the brakes on the company’s plans. The steelmaker missed its initial production guidance of 8.75 mt due to shortage of iron ore in the state, where it operates its main production facility.