The Tribune, Chandigarh, India

Sensex dives below 17k; hits 3-month low on rupee woes
Tax treaty, GAAR concerns take toll on markets
Sanjeev Sharma/TNS

New Delhi, May 4
A weakening rupee just within breaching distance of 54 to the US dollar and concerns over the reworking of the Mauritius tax treaty weighed on the BSE Sensex, which fell 320 points and closed below the 17,000 mark for the first time in four months.

The Sensex which had lost 168 points in last two trading sessions, plunged further by 320 points, or 1.87% to 16,831.08, its lowest level since January 30. There was heavy selling by FIIs across the board with sectors like banking, capital goods and auto leading the fall.

The rupee fell to a low of 53.84 per dollar, at the 2012 lows, which analysts say is because of the rising current account deficit of US $300-400 million every day on account of high oil prices. Weakening foreign inflows both from direct investors and FIIs have put even more pressure on the rupee.

Minister of State for Finance S.S. Palanimanickam said in Parliament on Friday that India was considering a review of the double taxation avoidance treaty with Mauritius to raise revenues. This sparked fears of fresh selling by FIIs as the majority of investments in India are routed through Mauritius. According to estimates India loses US $600 million in tax revenues annually because of this route.

Dipen Shah, head of fundamental research, Kotak Securities, said there are concerns over taxability of foreign investors (GAAR), the depreciation of the rupee in the past few days and also the weak global markets on the back of weaker than-expected US data. “We believe further clarity on these issues and reforms initiatives from the government will be the prerequisite for the markets to move up sustainably”, he said. The Finance Bill comes up in Parliament early next week and investors are looking for some clarifications on GAAR.

Analysts say the weakening rupee may have the impact of making imports more expensive, stoking inflation, but will be beneficial for exporters such as IT firms, which were up in trade today.

Prabhudas Lilladher said in a research note there was significant selling by foreign funds on weak earnings and a depreciating rupee. The rupee dropped to a over four-month low as India's policy uncertainty and worsening economic fundamentals are raising concerns that a rout is in the making, which the RBI will not be able to prevent, it said.

Oil ministry fines Reliance Ind over $1 bn; arbitration way out

New Delhi, May 4
After slapping a hefty penalty of over US $1 billion on Reliance Industries Ltd (RIL) for failing to meet gas output targets, the petroleum & natural gas ministry said Friday the company's five-month old arbitration notice on the issue was not valid and a fresh notice was required if it were to contest the fine.

The oil ministry had on May 2 written to RIL disallowing $1.005 billion out of the $5.756 billion investment it had made on developing the Dhirubhai-1 and 3 (D1&D3) gas fields in the Bay of Bengal KG-DWN-98/3 (KG-D6) deep sea block as current output of 27.52 million standard cubic meters per day was way short of the target of 80 mmscmd for this time of the year. The fall in output, which the ministry blamed on Reliance Industries not drilling its committed quota of wells, had led to a large chunk of production facilities lying unused or underutilized, a top ministry official said Friday.

RIL had anticipated such a move and had on November 23 slapped an arbitration notice on the ministry saying the production sharing contract allows operators to recover all their investment and cost recovery was no way linked to level of production.

The ministry, based on an opinion of the Solicitor General Rohinton Nariman, had rejected the arbitration saying no dispute had arisen. Reliance Industries last month moved Supreme Court seeking appointment of arbitrators.

"At that time there was no dispute. And this isn’t just us but even Nariman saying so. Now that we’ve initiated the process of restricting cost recoveries, they have a right to resort to a dispute resolution mechanism as set out in the production sharing contract," he said.

"But it (Reliance Industries) will have to issue a fresh arbitration notice. The previous one is not valid as that was issued based on apprehensions and on media reports of a possible action. If they want to contest our move, they will have to issue a fresh arbitration notice," another top official said.

The oil ministry's 7-page notice, signed by Giridhar Aramane, joint secretary (exploration) in the oil ministry, that was faxed to RIL and its partner Niko Resources’ Mumbai offices, stated that $457 million of cost would be disallowed in 2010-11 and $1.005 billion in the 2011-12 fiscal year.

The official clarified that the US $1.005 billion was cumulative cost recovery disallowed and should not be seen as additional penalty. The cumulative cost disallowed is higher than the $778 million that the ministry had been previously contemplating. — PTI

US slaps $80,000 fine on Air India

Washington, D.C., May 4
Ailing Air India has been slapped a fine of $80,000 by US authorities for failing to post customer service and tarmac delay contingency plans on its website and adequately inform passengers about its optional fees. AI also failed to post its customer service and tarmac delay contingency plans.

This is the first penalty assessed for a violation of the United States Transportation Department's new airline consumer rules that took effect last August.

"Our new airline consumer rules help ensure passengers are fully informed about airline services and fees and what to expect if their flight is delayed on the tarmac," US Transportation Secretary Ray LaHood said Thursday.

From August 2011, foreign carriers operating to the US with at least one aircraft of 30 or more seats have been required to adopt contingency plans for lengthy tarmac delays as well as customer service plans, and to post these plans on their websites.

US carriers have been covered by this requirement since April 2010, the Department of Transportation said in a statement.

Also, both US and foreign carriers with a website that sells tickets to American consumers have been required to include on their homepages a prominent hyperlink that takes viewers directly to a page that shows all fees for optional services they charge, including baggage fees. — PTI

Kingfisher pilots threaten to unionise

Mumbai, May 4
After weeks of holding protests to press their demand for payment of salaries, pilots of Kingfisher Airlines are set to formally organize themselves. They said are in the process of registering an association that would be empowered to pursue legal remedies over nonpayment of dues and other issues, according to sources.

The pilots, who have been consulting legal experts, have been told to form an association like Air India’s. — TNS

US documents allege HSBC money laundering lapses

New York City, May 4
In April 2003, the Federal Reserve Bank of New York and New York state bank regulators cracked the whip on HSBC Bank USA, ordering it to do a better job of policing itself for suspicious money flows. Staff in the bank's anti-money laundering division, according to a person who worked there at the time, flew into a "panic."

The US unit of London-based HSBC Holdings Plc quickly rallied. It hired a tough federal prosecutor to oversee anti-money laundering efforts. It installed monitoring systems for operations that had grown unwieldy during the bank's US expansion. The aim, as HSBC said in an agreement with regulators at the time, was to "ensure that the bank fully addresses all deficiencies in the bank's anti-money laundering policies and procedures."

Nearly a decade later, the effort has failed to satisfy law-enforcement officials. The extent of that failure is laid out in confidential documents reviewed by Reuters that originate from investigations of HSBC's US operations by two US attorneys' offices.

These documents allege that from 2005, the bank violated the Bank Secrecy Act and other anti-money laundering laws on a massive scale. HSBC did so, they say, by not adequately reviewing hundreds of billions of dollars in transactions for any that might have links to drug trafficking, terrorist financing and other criminal activity.

In some of the documents, prosecutors allege that HSBC intentionally flouted the law. The bank created an operation that was a "systemically flawed sham paper-product designed solely to make it appear that the Bank has complied" with the Bank Secrecy Act and is able to detect money laundering, wrote William J. Ihlenfeld II, US Attorney for the Northern District of West Virginia, in a draft of a 2010 letter addressed to Justice Department officials.

Ihlenfeld compared HSBC unfavourably to Riggs Bank. In 2004 and 2005, that scandal-plagued Washington bank was fined after it was found to have violated anti-money laundering laws. — Reuters

Record foodgrain output in FY2012
TNS & Agencies

Farmers use a threshing machine to refine wheat during harvesting in a field on the outskirts of Amritsar. India's wheat production, one of the world's largest, is expected to cross some 86 million tonnes to set a new record for the 2011-12 crop year. — AFP

New Delhi, May 4
India will have an all-time high foodgrain production of over 252 million tonnes in fiscal 2011-12 with a record output of wheat, rice and cotton, Agriculture Minister Sharad Pawar said Friday.

Replying to supplementaries during question hour in the Rajya Sabha, he said the record foodgrain production of 252.56 million tonnes would be higher than the 235.88 million tonne output in FY11. "Production of wheat, rice and cotton has broken a 60-year record," he added.

Wheat production is expected to be a record 90.23 million tonne against 84.27 million tonne last year, while rice output is likely to be 103.41 million tonnes compared to 94.11 million tonnes in FY11.

Cotton production at 35.2 million bales (of 170 kg each) will be higher than 33.9 million bales last year.

Pawar said a committee of eminent industrialists like Mukesh Ambani, Jamshyd Godrej and M.S. Banga had given 15 recommendations including liberalizing agri-procurement, streamlining norms for private investment in agriculture supply chain and revisiting minimum support price (MSP) norms.

While it is argued that the involvement of private sector was expected to give fillip to the agri sector, he said the government is opposed to private companies taking land ownership for cultivation.

"It’s the government’s endeavour to protest ownership interest of farmers. The government won’t support suggestions like giving farmland on lease to private firms for cultivation of cash crops”, he said.

Workshop on economic opportunities for women opens today

Chandigarh, May 4
The Chandigarh Social Welfare Board is organizing a two-day workshop on the ‘Rights of Women for Higher Economic Opportunities’ on May 5 and 6 at Panjab University, at which economic and financial experts will address the delegates.

During the workshop, to be held at the Golden Jubilee Hall on the PU campus, participants will deliberate on strategies for economic freedom and empowerment of women, highlighting the need for their inclusion in financial decisions of the family. The workshop will also outline the necessity to have a personal bank account and the importance of financial instruments like stocks, mutual funds and bank FDs as well as insurance plans.

Prema Cariappa, chairperson of the Central Social Welfare Board, women & child development ministry, will inaugurate the workshop. — TNS