Private power firms likely to get tax holiday extension

A Committee of Secretaries (CoS) set up to iron out bottlenecks impeding the growth of independent power producers (IPPs), is understood to have favoured continuing the tax holiday to the sector, besides relaxing the Withholding Tax on external commercial borrowings by them.

In its last meeting on February 22, the CoS chaired by Principal Secretary to the Prime Minister’s Office (PMO) Pulok Chatterji, gave a patient hearing to independent power producers on various issues affecting their growth.

 

The electricity generators have also told the PMO that they are looking forward to the inclusion of power in the negative list of service tax and continuation of mega power benefits to the utilities during the 12th Plan period beginning from April 1. This includes exempting mega and ultra-mega power projects from customs and excise duty to reduce capital costs.

From a long wishlist, some of the proposals could find their way into the budget. It is learnt that the PMO is sympathetic to their demand for extending tax holiday under Section 80-1A of the IT Act for five more years, and exemption of customs duty on imported coal.

 

The power producers have also told the PMO that there is a need to do away with the mandatory requirement of Central Electricity Authority’s certification in case of mega projects as it has a cumulative effect on project completion and enhances the cost of electricity generation. As part of the mega power project benefits, the power generators have asked for excise exemption to goods supplied to mega projects prior to February 28, 2011, where the threshold limit of 1,000 MW was constituted by multiple units of varying sizes instead of a single unit.

Among their key budget proposals, power producers have sought the scrapping of the central sales tax in view of the finance minister’s earlier assertion to drop it in a phased manner. They have also demanded inclusion of electricity in the goods and service tax or GST besides asking for seamless processing of refunds under the GST regime.

 

The power industry captains have proposed abolishing the 5 per cent import duty on coal as the duty coupled with high ocean freight have rendered imports unviable. They have also demanded waiver of Withholding Tax in case of ECBs, saying this is an impediment in bringing in foreign investments in the power sector.

The producers have also asked the government to allow companies venturing into power sector to raise funds by issuing tax-free bonds and also exempting power distribution and generation companies from the Minimum Alternative Tax under Section 11-5JB of the IT Act to incentivise infrastructure development.

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G-secs decline while call rate eases

The government securities (G-Sec) declined on fresh selling pressure from banks and corporates while call rates eased at the overnight money market here today due to lack of demand from borrowing banks.

The 8.79 per cent (G-Sec) maturing in 2021 moved down further to Rs 103.05 from Rs 103.2250 yesterday, while its yield edged up to 8.32 per cent from 8.30 per cent.

 

The 9.15 per cent (G-Sec) maturing in 2024 dropped to Rs 106.17 from Rs 106.24, while its yield inched up to 8.35 per cent from 8.34 per cent.

The 8.19 per cent (G-Sec) maturing in 2020 fell to Rs 99.04 from Rs 99.17, while its yield looked up to 8.36 per cent from 8.33 per cent.

 

The 7.83 per cent (G-Sec) maturing in 2018, the 8.13 per cent (G-Sec) maturing in 2022 and the 8.28 per cent (G-Sec) maturing in 2027 were also quoted lower at Rs 97.35, Rs 98.10 and Rs 97.81, respectively.

The overnight call money rate finished slightly lower at 8.80 per cent from yesterday's close of 8.85 per cent. It moved in a range of 8.90 per cent and 8.70 per cent.

 

The Reserve Bank of India (RBI) under the Liquidity Adjustment Facility (LAF) purchased securities worth Rs 1,23,090 crore from 50 bids at the one-day repo auction at a fixed rate of 8.50 per cent.

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Survey: India top economy, income poor

 

India has become the fourth largest economy in the world due to a strong economic growth but still has a low per capita income, the Economic Survey revealed today.
"India has emerged as the fourth largest economy globally with a high growth rate and has improved its global ranking in terms of per capita income. Yet, the fact remains that its per capita income continues to be quite low," it said.

"India has moved up the ranks, but is still the poorest among the G-20," the survey added.
The per capita income of India stood at USD 1,527 in 2011, it said.

 

"This is perhaps the most visible challenge. Nevertheless, India has a diverse set of factors, domestic as well as external, that could drive growth well into the future," the survey said.

Between 1980 and 2010, India achieved a growth of 6.2 per cent, while the world as a whole registered a growth rate of 3.3 per cent. As a result, India's share in global GDP more than doubled from 2.5 per cent in 1980 to 5.5 per cent in 2010, it said.

Consequently, India's rank in per capita GDP showed an improvement from 117 in 1990 to 101 in 2000 and further to 94 in 2009. China, however, improved its rank from 127 to 74 during the same period.
G-20 or the Group of 20 nations was formed in 1999 after the East Asian crisis as a forum of finance ministers and central bank governors.

Meanwhile, the survey said any slowdown in eurozone, which accounts for 19 per cent of the global GDP, could impact the Indian economy. The International Monetary Fund (IMF) has forecast that the eurozone is likely to go through a mild recession in 2012.

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Citi to cut 100 jobs in India

Citigroup Inc said it would cut about 100 jobs in India, where it has been expanding rapidly, while reiterating that the country remained among its highest priority markets.

The third-largest US bank by assets did not give a reason for the cuts, but a source with direct knowledge of the matter said it was part of CEO Vikram Pandit's plan to slash 4,500 jobs worldwide.

Citigroup hired more than 1,500 staff in India in 2011, the bank said in a short statement announcing the layoffs.

Citi, one of the top three foreign banks in India along with Standard Chartered and HSBC, has about 7,000 staff in the country and operates across several businesses including corporate, consumer, investment banking and wealth management.

The headcount reduction will be across all of the bank's businesses, but is not likely to include managing director level executives, the source said.

Citi expects to boost its loans and deposits growth in India by about a fifth in each of the next two years, its India head, Pramit Jhaveri, told Reuters on November 22.

Facing weak markets and tougher regulation, global banks have outlined plans to cut more than 125,000 jobs this year, according to a Reuters tally. Until recently, Asia had largely been untouched by the jobs axe.

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Lakshmi Vilas Bank hikes interest rates on NRE term deposits

Private sector lender Lakshmi Vilas Bank has hiked interest rate on Non-Resident External (NRE) term deposits with immediate effect.

The hike in interest rates on NRE term deposits was based on the deregulation of interest rates by the Reserve Bank, LVB said in a statement.

According to the revised structure, the interest rates for deposits with a period of one year and above but less than two years has been revised to 10 per cent from the existing 3.82 per cent.

For term period of two years and above, but less than three years, it has been increased to 8 per cent from 3.51 per cent (existing).

For those deposits that are up to three years and above, the interest rates has been hiked to 7 per cent from 3.64 per cent, it added.

Lakshmi Vilas Bank currently serves 1.81 million customers. It has 274 branches and 381 ATM networks across the country, the statement added.

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