PHD
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PHD CHAMBER OF COMMERCE AND INDUSTRY
Major Economic
Policy Announcements During the Month
President Approves Finance Bill
17th May, 2005 The Finance Bill 2005 has been enacted
into law, with the President, Mr A P J Abdul Kalam, giving his assent to the
Bill.
The Finance Minister, Mr P Chidambaram,
had through the Finance Bill, 2005, proposed major tax reforms to improve the
tax-gross domestic product ratio, expand the taxpayer base, increase tax
compliance and also make the tax department more efficient.
The Bill contained 124 clauses, including
certain controversial proposals, such as the fringe benefit tax and the banking
cash transaction tax. Both these proposals
evoked protest, prompting the Fianance Minister to bring in certain
modifications.
4 Percent Tax Sop to SEZ Goods Sold to DTA
18th May, 2005 The Finance Ministry has notified that
goods produced or manufactured in a special economic zone and brought to any
other place in India are exempted from the 4 percent additional duty of
customs.
19th May, 2005 The new guidelines for public provident
fund (PPF) accounts, issued through a notification by the government, has said
that new accounts cannot be opened in the name of Hindu undivided families
along with an association of persons.
Those who already have accounts in the
name of HUFs, or an association of persons or a body of individuals can
continue to operate normally. They, for
instance, can deposit money annually until maturity, which is 15 years, say
government officials.
19th May, 2005 The
government has lowered the export obligation of small scale units engaged in
export-oriented production under the export promotion capital goods (EPCG)
scheme if they import capital goods.
A small scale industry would now have to
export six times of duty saved compared to an ordinary unit exporting eight
times of duty. To boost exports of agri-based
products, the government will provide duty entitlement of 5% of total value of
exports to SSI units under Vishesh Krishi Upaj Yojana.
21st May, 2005 Foreign
companies operating directly or through joint ventures in India will now be
required to furnish information about their reinvested earning to the Reserve
Bank of India.
The measure aims at bridging the gap in
information on reinvested earnings, while collating data on foreign direct
investments in the country.
The information will have to be provided
by all companies, irrespective of whether they are using the automatic route or
not.
21st May, 2005 RBI has slapped severe restrictions on
interest rate derivatives which companies use to hedge market risk and cut
borrowing cost. The move could raise
borrowing cost for corporates, rob several hedging tools and make life
difficult for bankers.
Exporters can Now Source Inputs from SEZs without Advance Release Orders
24th May, 2005 Exporters
with advance licences can now directly procure inputs (import) from special
economic Zones on the strength of their licences without having to furnish any
Advance Release Orders (AROs). The
Government has made an amendment to the Foreign Trade Policy 2004-09 to this
effect.
The Government has also now permitted
duty-free replenishment certificates and diamond imprest licence holders to
procure inputs from SEZs without converting the licences into AROs.
Meanwhile, the Government has empowered
the Board of Approvals in the Commerce Ministry to fix the sector-wise
investment criteria for establishment of export-oriented units. Currently, only projects with a minimum
investment of Rs. 1 crore in plant and machinery are considered for being set
up as EOUs. This condition, however,
does not apply to existing units and units in electronic hardware technology
parks and software technology parks. It
is also not applicable for handicrafts, agriculture, floriculture, aquaculture/animal
husbandry/information technology, services, brass hardware, handmade jewellery
and such other sectors as decided by the Board of Approval.
27th May, 2005 The
Cabinet Committee on Economic Affairs today approved the sale of 10 per cent
stake in Bharat Heavy Electricals Ltd (Bhel) through a public offer.
It also decided to go ahead with a stock
split for the public sector company’s shares with a face value of Rs.10 each to
make it more affordable for retail investors.
A portion of the shares to be disinvested
is proposed to be reserved for the company’s employees.
28th May, 2005 The
government hiked the price of natural gas by 12% to Rs. 3,200 per thousand
standard cubic meters (tscm) for power and fertilizer units. This will enrich Oil and Natural Gas
Corporation (ONGC) by Rs.1,600 crore although it hits power distribution
utilities, GAIL and other companies including IPCL, which will have to fork out
this amount.
9.5 Percent EPF Rate for 2004-05
29th May, 2005 The Employees Provident Fund (EPF) Board
has recommended 9.5 per cent rate of interest on the EPF accumulations for its
40 million subscribers for the year 2004-05.
The deficit of Rs.716.07 crores as a result of the decision, would be
met from the Rs.950 crore Special Reserve Fund.
30th May, 2005 After clearing the scheme of
corporatisation and demutualisation (C &D) of The Stock Exchange Board of India
(Sebi) has set a June 13 deadline for all the remaining stock exchanges (SEs)
to submit their demutualisation plans.
This deadline is, however, not applicable to the Mangalore Stock
Exchange (mgSE) as its certificate of registration has been cancelled by Sebi.
31st May, 2005 The
Cabinet Committee on the WTO today approved the revised offer in the services
sector. As per the offer to the WTO
under the General Agreement on Trade in Services, India will bind higher the
foreign direct investment limit in banking, telecom, retail and accounting.
While making the revised offer, India
would also consider the range and depth of improved offers that developed
countries would make, in modes and sectors of interest to India.
India will make revised offers in sectors
in which commitments were made in a Uruguay Round, or in which initial offers
were made in the ongoing Doha Round.
The sectors thus covered include business
services, construction and related engineering services, health-related and
social services, tourism and travel-related services, maritime services and
transport services.
1st June, 2005 The J J Irani Committee on company law has
recommended that one-third of the board of a listed company should comprise
independent directors.
The committee, which submitted its report
to the Company, Affairs Minister, Mr Prem Chand Gupta, here today, has also
suggested that corporates should be allowed to maintain pyramidal corporate
structures.
One-third of listed cos board should
comprise independent directors.
Pyramidal structure for corporates should
stay.
Concept of single person company mooted.
Shareholders should have larger say than
Government.
Shareholders should decide on directors’
remunerations.
2nd June, 2005 A
one-time buyback offer for shareholders of a delisted company has been mooted
to provide an exit route for shareholders who had not taken part in the
delisting exercise.
The Dr J J Irani Committee on company law
has suggested that any company that opted to delist its shares must be required
to come up with a buyback offer within three years of delisting.
3rd June, 2005 The
Prime Minister, Dr Manmohan Singh, has constituted the National Knowledge
Commission under the Chairmanship of Mr Sam Pitroda.
While Dr P M Bhargava would be the
Vice-Chairperson, the other members of the commission are Mr Nandan Nilekani,
Dr Deepak Nayyar, Dr Ashok Ganguly, Dr Andre Beteille, Dr Jayati Ghosh and Dr
Pratap Bhanu Mehta.
The Commission would advise the Prime
Minister on matters relating to institutions of Knowledge production, use and
dissemination. Its mandate is to
sharpen India’s “Knowledge edge”.
The Commission would also advise the Prime
Minister on how the country could promote excellence in the education system to
meet the knowledge challenges of the 21st Century; promote knowledge
creation in science and technology laboratories, improve the management of
institutions generating intellectual property, improve the protection of IPRs
(intellectual property rights) and promote knowledge applications in agriculture
and industry.
4th June, 2005 Public
sector banks in which the Government’s stake is pegged at a little over 51
percent, will not be allowed to go in for further public issues to raise
capital, the Finance Minister, Mr P Chidambaram, said.
External Borrowings Norm for NBFCs Eased
4th June, 2005 The government relaxed rules for external
commercial borrowings, allowing non-banking finance companies to raise overseas
loans, subject to approvals.
A finance ministry statement said that
housing finance companies, with approval from the Reserve Bank of India, would
be allowed to issue foreign currency convertible bonds.
The government also raised the repayment
limit of external commercial borrowings to $200 million from the current $100
million.
8th June, 2005 The Government has fully exempted
construction of ports and processing of gems and jewellery from service
tax. Service tax relief has also been
given to the shipping industry and for infrastructure projects. Individuals enjoying taxable services abroad
too have been spared, with the government whittling down its proposal to tax
imports of services.
Nine new services will come into the net
from June 16. A 10.2% service tax will
be imposed on services such as club membership, construction of residential
complexes, transportation of goods through pipeline and site formation, among
others. With the latest notification,
the number of services attracting tax has increased to 80.
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