fe Bureau New Delhi, Dec 6

SC or Prez may take final call on changes to Fema

While the legal eagles in the government maintain that the regulations notified by the Reserve Bank of India (RBI) in this regard which are necessary for implementation of the decision to allow 51% FDI in multi-brand retail dont require Parliaments assent, others quoting Section 48 of Fema contend that any change in the rules/regulations made under the Act requires the approval of both Houses. The power given to the RBI to change the regulations under Fema is a delegated one. Parliament indeed has the authority to decide if the delegated powers have been used in a way it thinks desirable, said Ajay Dua, former secretary at the department of industrial policy and promotion (DIPP). Quoting Sections 46, 47 and 48 of Fema, he added that any rule change notified by the government or change in regulations by the RBI would need the consent of both Houses of Parliament in the ensuing session. Only those change that are of procedural/clarificatory in nature (as is the case with press notes issued) can be made without Parliaments assent. This means that if the Rajya Sabha votes in favour of the motion against FDI in retail or if any modification of the Fema regulations sought by a member is accepted by the Upper House, then a joint session of both Houses will take a final call A public interest litigation on this issue is pending with the Supreme Court already, on which the court on October 15 asked the central government to carry out the necessary amendments in Fema rules and get them notified by the RBI. The petitioner, ML Sharma, had alleged that the government had allowed FDI in multibrand retail without making necessary changes in the law and that it was trying to bypass Parliament. Attorney general GE Vahanvati had assured the top court on behalf of the government that all rules and regulations would be followed. The apex court had remarked that policy making was the domain of the government, but the executive must hear the voice of the legislature The next hearing in the Supreme Court is scheduled on January 22. Senior BJP leader Yashwant Sinha has no doubts about how Fema amendments are carried out. Anyone who has read Section 48 of Fema will know that for modifications in rules/regulations, the consent of both Houses of Parliament is required. Every MP has a right to make amendments or modification. External affairs minister Salman Khurshid doesnt quite agree. Fema is not being amended; there is a delegated legislation (which is being amended). An amendment requires a vote in the House. That is not what is happening. So Fema is not being amended but consequential changes, subordinate legislation which normally are placed on the table of the House (and) as time passes, (they) get amended. Basudeb Acharia, CPM leader in the Lok Sabha: We will definitely go ahead with Fema modifications sometime next week, after the Rajya Sabha debate on FDI. There is ample time for our party to challenge the Fema modification in the Lok Sabha. His statement is on the basis of the norm that any change in Fema rules/regulations can be sought to mod-

2 News

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l FRIDAY l DECEMBER 7 l 2012

NLESS BSP supremo Mayawatis decision to vote in favour of the government on the issue of foreign direct investment (FDI) in retail and a possible change in the SPs stance come to the governments rescue in in the Rajya Sabha on Friday, the question of whether amendments of rules/regulations under the Foreign Exchange Management Act or Fema need the approval of Parliament would finally be left either for the Supreme Court to decide on or the President who might call for a joint session of both Houses for a reconciliation of their views.

ified by the members within 30 days of the same being placed in the House. The government tabled the changes on November 30, but the Speaker while clubbing the debate on FDI decision and Fema amendments had restricted the window for members to seek modifications to four days. This, sources say, is the Speakers discretion that cannot be challenged in court. CPI leader Gurudas Dasgupta said his party hasnt decided yet whether it mould move an amendment to the modification in the regulation. Fema was an act passed in the winter session of Parliament in 1999. It replaced the Foreign Exchange Regulation Act.

Shome is new adviser to finance minister

Parthasarathi Shome

fe Bureau New Delhi, Dec 6: Noted economist Parthasarathi Shome, who reviewed the recent changes in Indias direct tax laws, has been appointed as the adviser to finance minister P Chidambaram in the rank of minister of state, the government said on Thursday Shomes appointment . is co-terminus with Chidambarams term in the North Block. This would be Shomes second stint as an adviser to the finance minister, in which capacity he had served for four years from 2004. Before his recent stint as the chief executive at Indian Council for Research on International Economic Relations (ICRIER), Shome had an international assignment as the chief economist with Her Majestys Revenue & Customs (HMRC), United Kingdom in the three years from January 2008. Shomes review of the General Anti-Avoidance Rules (GAAR) and the changes in law regarding indirect transfer of Indian assets introduced in Union budget 2012-13 was keenly watched by the business community for their impact on their future investments. Shome had suggested a more pragmatic and investor-friendly approach in his recommendations reflecting certainty and predictability in tax laws.

Sebi issues clarifications on RGESS notification

fe Bureau Mumbai, Dec 6: Sebi has asked mutual funds as wellas stock exchanges and depositoriestocreatewidepublicity fortheRGESSschemeamong investors. Following up on the notification brought out bytheSebilastweek,themarket regulator has given a few clarifications as well. For example, for RGESS eligible close-ended mutual funds schemes, advice given by AMCs to the depository for extinguishment of units of close-ended schemes upon maturity of the scheme shall be considered as settled through depository mechanism and therefore RGESS compliant. Stock exchanges shall furnish list of RGESS eligible stocks,ETFs,MFschemeson their website. Further, the list shall also be forwarded to the depositories at monthly intervals and whenever there is any change in the said list. For this purpose, MFs shall communicate list of RGESS eligible MF schemes and ETFs to the stock exchanges. For deals undertaken by investors through their RGESS designated demat account, depositories may seek necessary transactional detailsfromstockexchangesregarding actual trade value, tradingdate,settlementnumber, etc, for the purpose of enforcing lock-in and for generating reports mandated vide MoF notification on RGESS. On receipt of such request from depositories, stock exchanges shall provide the details to depositories on an immediate basis. According to the earlier notification, the eligible securities brought into the demat account will automatically be subject to lock-in during the first year.

Cos rush to develop Roadmin asked to seek Rangarajan captive coal blocks on advice on classification of bank loans cancellation threat Ministry wants RBI to classify banks advances to sector as secured
Noor Mohammad New Delhi, Dec 6: Threat of losing coal block allocation has rejuvenated power companies, which have been sitting on allocated coal blocks forseveralyears. Forexample,allocateesof the Mandakini B coal block in Orissa have started tendering for the development of the associated power plantaftertheinter-ministerial group (IMG) recommended cancellation of the allocation in its meeting on November 7. The panel made the recommendation onthegroundthattherewas an undue delay in developmentof theblockbytheallocatees.Theblockwasjointly allocatedtostatesof Meghalaya,AssamandTamilNadu in 2007 for meeting fuel requirement of a 1,320-1,600 MW power plant. In their haste to wrap up bidding quickly, allocatees also dispensed with the mandatory requirement of assessing technical capability of interested bidders andstraightawayinvitedfinancial bids. Moreover, while the national tariff policy stipulates minimum 45 days from the date of issue of request for proposal for submission of bids, the allocatees have to decided to complete the process in just twelve days. But their haste does not seem warranted, given that the associated coal block will need seven years to develop. Unless coal is available from the block, the power plant cannot be run. The coal ministry has issued show-cause notice to some 58 private and public sectorcoalblockallocatees, asking them to explain the reporteddelayinundertakingdevelopmentblock.The IMG, constituted by the Centre, has recommended de-allocation of over a dozen captive coal blocks during its ongoing review. Coal minister Sriprakash Jaiswal has ruled out the possibility of restoring allocation of deallocated coal blocks. Timsy Jaipuria New Delhi, Dec 6: Keen to boost credit flows to the road sector, Prime Minister Manmohan Singh has asked the roads transport and highways ministry to seek the advice of his economic advisory council headed by C Rangarajan on the ministrys demand for the RBI to classify the banks advances to the sector as secured. In the absence of collateral, these advances are now treated by the RBI as unsecured,leadingtoawaningof lender interest in highway projects. The land on which a road is build belongs to the governmentandhenceaconcessionaire company cannot pledge it to the lenders as a collateral. The PMO has asked secretary road trans, portandhighways, AKUpadhyay to send a note to Ran, garajan on the issue. Singh asked his economic advisory council to look into the issue. The government is also considering an amendment in the model concession longer than the repayment schedule of the loan sanctioned by the bank, the interest of the banks stands fully secured,theofficialsaid. NHAI chairmanRPSingh highlighted that there is an implicit guarantee to the banks as per the current MCA to extent of 90% of the debt due in the event of termination of the concession even due to concessionaire default and therefore to such extent the accounts need to be classified as secured. Experts say that once these changes come through it will a great relief for both the banks and road companies. Currently developers , are charged higher rate of interestbythebanksonsuch advances since they are unsecuredandoncetheclassification changes then they will save on to 0.5%-1%, which in itself is substantial. Along with this, banks will now be less apprehensive to lend further to the road developers, said Vishwas Udgirkar partner, infrastructure, at Deloitte.

In the absence of collateral, these advances are now treated by the RBI as unsecured, leading to waning lender interest in the sector

agreement (MCA) for road projects to remove the restrictive cap of extension in theconcessionperiodby20% if revenues fall short of targets.This,thehighwaysministry feels, would enable the RBI to classify the advances to these projects in the secured category The decision . was taken on Thursday after Singh reviewed the progress of various projects in the transport sector railways, roads and shipping. Last month, the National Highways Authority of India (NHAI) discussed the problems in PPP projects in roads with the finance ministry and Planning Commission. A senior government official privy to the meet told

FE that the department of financial services had agreed to take up the issue of classification of bank loans to road sector with the RBI. Currently there is a re, strictiveclauseundertheArticle 29.2.1 of the MCA on the extension in the concession period by maximum 20% in the case of fall in the traffic/toll collection compared tothetargettraffic.Thisisan irritant as it prompts the banking regulator to keeps advances to the sector under unsecured category . The Planning Commission during the discussion pointedouttothedepartment of financial services that the concession period even with this cap would be much

Oilmin may move Cabinet note on raising LPG cap

fe Bureau New Delhi, Dec 6: The oil ministry is likely to move a Cabinet note soon proposing an increase in the cap of subsidised domestic cooking cylinder from the present six to nine per year once the Gujarat polls are over. The finance and petroleum and natural gas minister met on Thursday to work out the modalities of the proposed changes that has been forced on the government due to widespread opposition. Moving closer towards a targeted subsidy regime, the government in September restricted the supply of subsidised domestic LPG cylinders to six per household in a year. Any requirement above this will have to be bought at market rate, which is more than double the subsidised price of R410.42 per cylinder in Delhi. Though the cap would be raised to nine cyclinders, theadditionalcostof servicing these would be borne by the oil marketing companies (OMCs). Industry analysts believe that increased number of subsidised cylinders for households would leadtoanincreaseinoverall under recoveries of OMCs by around R9,500 crore.

Parliamentary panel pulls up govt for slippage in FY13 fiscal deficit target
fe Bureau New Delhi, Dec 6: A parliamentary panel has come down heavily on the government for the slippage in the fiscal deficit target for 2012-13 to 5.3% of the gross domestic product from the Budget estimate of 5.1%. Expressing dissatisfaction with the governments reply on containing fiscal deficit, the panel, chaired
REDIT Suisse has lowered Indias economic growth forecast marginally to 5.9% from 6% for the fiscal year ending March. The investment bank also reduced its growth forecast for FY14 to Reuters 6.9% from 7.2%, it said in a research note.

Credit Suisse cuts FY13 growth forecast

by senior BJP leader and former finance minister Yashwant Sinha, said the governments reply was elusive on specific details of the sectors/schemes

identified in curtailing growth in non-developmental expenditure during the fiscal and the progress made so far. The panel said keeping

in view the gloomy economic situation, estimated slowdown of gross domestic product growth rate to around 5.5% in 2012-13, widening current account deficit and the impact of lesser GDP growth on revenue mobilisation, it cannot but deplore the lackadaisical approach of the government towards achieving the fiscal deficit target.

FROM THE FRONT PAGE

Special...
Top bankers, on condition of anonymity, maintained that they willbecomfortableinsubscribing to these bonds only if they have SLR status. Owing to the slowdown in the economy and burgeoning non-performing assets in theiraccounts,bankshaveturned risk-averse, preferring SLR bonds. As per the Centres debt restructuring package, states will bear half of the liability of distribution companies or state electricity boards in a phased manner in two to five years by issuing bonds, while the balance will be restructured by banks by extending the repayment period from three to five years. State governments have two options: repay debt or adopt the debt recast plan and issue bonds. Banks have indicated that if state governments especially those that have already breached their Fiscal Responsibility and Budget Management (FRBM) Act target of 3% of gross state domestic product or are near to it choose to issue bonds, they would find it difficult to subscribetothem. The package was planned keeping in mind the FRBM target, which means states must bring down their overall borrowings.

Meanwhile, the DFS has also approached the RBI seeking a special dispensation to help state governments align their respective restructuring packages with the one formulated by the Centre. Currently ,thepackageforastatesuchasUttar Pradesh is slightly different from that of the Centre. We have asked the RBI to treat this alignment process under a special dispensationandnotasecondrestructuring exercise to avoid any complications,anofficialsaid. About eight states have so far come up with their restructuring plan and now they will sit with banks to finalise the terms of restructuringaspertheoneapproved by the Centre. Uma Shankar said theprocesshasstartedandif states ask for more time later, they would consider extending the application of the restructuring scheme that endsonDecember31.

Kospi.Whilenetinflowfromforeign institutional investors (FIIs) so far thisyearwas$20.7billion,SouthKorea saw $12.4 billion worth of stock purchasesbyFIIsintheperiod. Indollarterms,theIndianbenchmarks fared better than Asian marketsevenastherupeelostmorethan 3% of its value in the last 11 months and remained volatile. The dollarterm gains of the Nifty and the Sensexstandnear25%.

Mayawati...
If the government loses the vote in theRajyaSabha,itwouldfinditdifficult to implement the decision to allow foreign direct investment in retail. Although government functionaries argue the Upper Houses consent is not a must for endorsing the change in Foreign Exchange Management Act regulations notified by the Reserve Bank of India, thatdoesntseemtobethecase.The question of whether amendments of rules/regulations under Fema need the approval of Parliament would finally be left either for the SupremeCourt(whereaPILonthe issue is pending) to decide on. Sources said if the Rajya Sabha votes differently from the Lower House, the President might call for a joint session of both Houses for reconciliation of their views.

Markets...
At the current level of about 19500, the index is trading at 17 times its 2012-13earningsand14timestothat of 2013-14.Onastandalonebasis,the Sensex valuations (price to earnings multiple) look competitive to thatof JakartaCompositeandThailands SET but cheaper than both Taiwans Taiex and South Koreas

Ourpartywillvoteinfavourof the government tomorrow, BSP leader Mayawati said during the debate on the FDI policy change that is symbolic to Indias attempts at a second wave of reforms. The government had won a vote on the issue in the Lok Sabha on Wednesday thanks to the BSP and SP abstaining. Important Bills are pending, the government will get the excuse to escape important issues (if disruption in the House continues). Thats why looking at plus points, the BSP will vote in favour of the government, Mayawati said. The SPsaiditwouldabstainfromavote in Rajya Sabha too on the black law and asked the government to think over the issue. Participating in the debate, leader of Opposition in Rajya Sabha Arun Jaitley said opening up the retail sector for foreign control without reforms in the manufacturing sector was not the right thing to do. We (will) cease to be a manufacturing nation. We will be consumers and our children will be sales boys and sales girls, said Jaitley. The government had earlier looked set to lose the vote before the unexpected announcement from Mayawatitovoteinfavourof theretailreform.Mayawatisaidherdeci-

sionwaspartlybasedonthethefact thatindividualstateshavethelibertytodecidewhethertheywanttoallowforeignretailersontheirsoil. A home run for the government on retail reforms would enable Manmohan Singhs government to focus on getting the other reform Bills such as raising the foreign investment limit in pension and insurance sectors passed. The government is also trying to put in place a fast-track clearance window for infrastructure projects that would strike trade-offs betweendevelopmentgoalsandenvironment concerns.

Fertiliser...
IFFCO managing director US Awasthisaid:Itisverydifficultfor thefinanceministrytoprovidesubsidies to the companies for the next six months. The interim proposal will certainly help the companies since the borrowingcostwill get reducedbythepartinterestsharedby the ministry Most fertiliser com. paniesareaffectedadverselybylate subsidy payments and have reported losses, said Fertiliser Association of India secretary general SatishChander. The stressed companies are finding it difficult to sustain operations. Subsidies offset a large

chunk of the total cost of production/import of fertilisers: 50% in the case of gas-based domestic urea, 80% for imported urea, 39% for DAP or diammonium phosphate and 47% for MOP or muriate of potash. However, due to inadequate budgetary allocations, the funds generally get exhausted by the middle of the year. There is an urgent need for the government to provide extra subsidy The bank. ing arrangement would certainly help companies to reduce their cost of borrowings and increase the efficiency, Chander said. A similar arrangement was made in 2008-09, when fertiliser firms raisedRs22,000croreinbankcredit from State Bank of India and State Bank of Patiala in lieu of subsidy payments. Sources said the fresh proposal wouldseecompaniesraisingloans from state-owned banks this year, too. As per the 2012-13 Budget subsidy allocation, the government had provided Rs 13,398 crore for imported urea, Rs 19,000 crore for indigenous (urea) fertilisers, and Rs 28,576 crore for the sale of decontrolled fertilisers (DAP, MOP and complexes) at a subsidised ratetofarmers.Thesubsidyshortage is especially acute for phosphatic and potassic fertilisers.

House panel wants CCI to dispose cases faster

fe Bureau New Delhi, Dec 6: A Parliamentary panel has pulled up the Competition Commission of India (CCI) asking it to be more prompt in taking decisions on issues of price cartelisation and rigging. The parliamentary standing committee on finance, in its report on corporate affairs ministry, said that the CCI has been taking long time in making decisions. ... CCI has been taking unduly long time in arriving at their decisions. They are, therefore, of the view that CCI should be more prompt while deciding issues of price cartelisation and price rigging, resulting in faster disposal of cases, said the panel.

Compat hearing
Afterday-longhearingsonthe plea of 11 cement companies seeking stay on R6,307-crore penalty imposed by the CCI, the Competition Appellate Tribunal(Compat)adjourned themattertoJanuary29.