India
Inc. finds it to be yet another example of 'micro-pain' points in
the Budget. The Finance Ministry, perhaps, finds it to be another
inventive way to stem the tide of exemptions which lead to massive
revenue losses.
The problem: A 'sore' paragraph in Section 80-ia of the Income
Tax Act states that exemptions in the given section will not apply
to any enterprise that is either being merged or de-merged in
the coming financial year. If Finance Bill 2007, which contains
this detail, goes through without amendment, companies like Bharti
and Reliance Communications (RCL) that are already in the process
of demerging their towers and other passive infrastructure assets,
will be affected.
The tax sops are significant-Section 80-ia has provisions that
allow projects investing in infrastructure a 10-year tax holiday.
| M&A Pains from Budget |
| In case of M&A after this financial
year, infrastructure sops cannot be passed on
Tax sops are significant-10 year tax holiday
Move seen to stem tax sops
New assets continue to enjoy benefits |
Surely, no one can complain that new assets cannot enjoy the
benefits. Is that the fm's line?
-Shalini S. Dagar
EASING TAXES ON MANUFACTURING
Competitiveness in the manufacturing
sector serves the twin purpose of fostering sustainable growth as
well as meeting the employment pressures of a growing population.
Surely, this consideration will have gone into the recent move by
the finance ministry to withdraw a notification (issued just before
the Budget) specifying 4 per cent additional duty on at least nine
it and telecom items (including mobile phones, USB memory, CD-ROM
drives and DVD-drives) produced locally in SEZs. IT and telecom
manufacturers (Nokia, Samsung, LG and Alcatel, to name a few), who
have brought in FDI of Rs 80,000 crore over the last two years,
were unhappy with the additional duty, which, they say, would have
put them at a disadvantage over importers. Given the low penetration
of computers in the country, the finance ministry can count on growth
to net taxes.
-Aman Malik
TRADE TO STAY ALIVE?
The beleaguered
Ratnagiri project (the erstwhile Dabhol project) does not cease
to generate controversy. Having undergone restructuring two years
ago, the project is crying for another round of it. The reason:
cost escalation of Rs 2,000 crore. The lenders to the project
(the largest stakeholders) are now suggesting that 750 mw of the
total capacity of 2,150 mw be traded. Why? The returns are not
regulated and, hence, will be higher since there is a shortage
of power in the country. The project sponsors, NTPC and GAIL (India),
are, however, unwilling to play along. Clearly, there are no soft
options.
-Balaji Chandramouli
RBI CHANGES TACK
Till a few years ago, absence of liquidity in the market was
an issue. Today, it is quite the opposite. Soaking up excess liquidity
is a key challenge for the central bank, which is now planning
to resume issuing longer term government securities next week
under the Market Stabilisation Scheme (MSS). The objective is
to drain long-term liquidity and divert short-term liquidity to
the inter-bank money market.
-Balaji Chandramouli
BOOST FOR COAL SECTOR
In a bid to encourage investment in liquefaction and gassification
of coal, the government may soon come up with a new policy on
the lines of the New Exploration and Licensing Policy (NELP) persued
in the petroleum sector. Interestingly, the Budget proposes to
bring underground coal liquefaction and gassification within the
ambit of approved users. Clearly, a leg up for the coal sector.
-Aman Malik
NEWSMAKER
KALPANA MORPARIA
Kalpana Morparia has
a new job at hand at ICICI Bank, the country's second largest.
After a career spanning over three decades in the ICICI Bank Group,
Morparia, currently Joint Managing Director, who is due to retire
in May, will get to oversee ICICI Holdings, which will be the
apex holding company for four subsidiaries-in the life insurance,
general insurance, asset management and venture capital spaces.
She will take charge on June 1, 2007, after she retires from the
bank.
"The plan is to take the company public in the next 6-9
months," says Morparia. In fact, that's what makes the assignment
challenging for her. She has to raise resources for the life insurance
subsidiary which is currently making losses, though it enjoys
the highest valuation in the market. The mutual funds business,
which also ranks among the top players in the country, faces tough
competition from UTI MF and Reliance MF.
Currently, 57-year-old Morparia heads ICICI Bank's Corporate
Centre and is responsible for ensuring strategic consistency between
the bank's various business units. Morparia, who did her BSc in
chemistry and microbiology, started her career in the erstwhile
ICICI Limited as a Senior Legal Officer and became General Manager
in 1996, handling the legal, planning, treasury and corporate
communications departments. Then, in 2001, she joined the bank's
board as Executive Director. Morparia, who also holds a law degree
from Mumbai University, will have to draw on all her experience
and acumen to see her new "baby" through in a market
characterised by cut-throat competition.
-Anand Adhikari
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