Govt allows companies to raise $1 billion of ECBs in yuan

The decision to allow companies to raise yuan (renminbi), (equivalent of $1 billion) as an acceptable currency under ECB will benefit infrastructure firms like ADAG Group company Reliance Power and Lanco Infratech

New Delhi: In significant policy shift, the government on Thursday decided to allow corporates to raise external commercial borrowings (ECBs) in yuan (renminbi) equivalent to $1 billion, a move that will help companies trading with China, reports PTI.

“For the first time we are allowing yuan (renminbi), (equivalent of $1 billion) as an acceptable currency under ECB, basically for infra and capital goods,” Department of Economic Affairs secretary R Gopalan told reporters after a meeting of the high-level coordination committee on ECBs.

Giving rationale for the decision, he said, “Yuan wants to play much bigger role...certainly there is market for it.”

The decision to allow companies to raise ECBs in yuan will benefit infrastructure firms like ADAG Group company Reliance Power and Lanco Infratech.

Although the committee did not raise the overall ceiling of ECB which is currently at $30 billion, it did decide to relax the norms and raise the borrowing limits for various sectors to help the companies obtain funds from overseas markets at competitive rates.

Out of the total limit of $30 billion, ECBs amounting to $15.93 billion have been raised by the companies until August 2011.

The government, Mr Gopalan said, will also be looking at the possibility of reducing withholding tax on the ECBs.

“Withholding tax will be brought down, we are interacting with department of revenue,” he added.

The decision to relax ECB norms follows the suggestions made by top industry leaders at a meeting last month with finance minister Pranab Mukherjee to boost the economy.

The limit of external borrowings with tenure of five years or more under the automatic route has been increased from $500 million to $750 million. The decision will help the companies across all segments to access higher quantum of overseas funds, he said.

For the services sector, Mr Gopalan said, the ECB limit under the automatic route has been doubled to $200 million and for NGOs from $5 million to $10 million.

Referring to the overall ECB ceiling, he said, “If there is a requirement for additional money through ECBs, particularly in infrastructure sector, we can go beyond the $30 billion limit depending upon the requirement...We are quite positive. The cap remains at $billion 30 billion but this can be relaxed depending upon the requirement.”

On allowing high networth individuals (HNIs) to invest in infrastructure debt funds, he said, “The committee held a view that HNIs ... be permitted to invest in infrastructure debt funds without any ceiling under the ECB route.”

As regards refinancing of rupee loans through ECBs, he said, 25% of the amount raised from overseas sources could be used to repay debts for infrastructure sector projects.

The refinancing of buyers/suppliers credit through ECB, he added, would be permitted for infrastructure sector projects or capital goods segment.

On allowing ECBs for slum rehabilitation project around Mumbai international airport, he said, “The view was that we should not fuel real estate boom through ECB route, therefore it is not being permitted.”


Health insurance portability from 1st October

The scheme was proposed to come into force from 1st July earlier, but was deferred for three months due to certain outstanding issues with insurance companies

New Delhi: Health insurance portability service, which would allow policy holders to switch insurers, is all set to be implemented from 1st October, the Insurance Regulatory and Development Authority (IRDA) said on Thursday.

The scheme was proposed to come into force from 1st July earlier, but was deferred for three months due to certain outstanding issues with insurance companies, reports PTI.

“We are ready to implement the health portability plan from 1 October 2011,” IRDA chairman J Hari Narayan said here on the sidelines of a CII meet here.

Health portability will allow consumers to change their service provider without loosing the basic coverage of health insurance. As per portability rules, consumers will get credit for the time already spent for covering the pre-existing disease along with bonus accrued to him from his past insurer.

On the highest net asset value (NAV) guaranteed products, which are seen as a “risk products”, Mr Narayan said IRDA was planning to come up with regulations for it.

“The concern, which I have as regulator is the communication mechanism for highest NAV product that might lead to misconception of the buyer. Therefore, it is a risky product. We are getting details about the matter and we will take a regulatory decision soon,” he said without giving a timeline by when the rules would be out.

The highest NAV guaranteed products give consumers a guaranteed return based on the highest NAV that the policy has achieved during the entire term of the insurance plan.

At present, around 20% of the total Unit-Linked Pension Plans (ULIP) comprise sales from highest NAV products.

Referring to the IPO guidelines for life insurance companies, Mr Narayan said the guidelines are almost final.

“IPO guidelines are ready as far as IRDA is concerned. However, there are two more nuts that have to be tied up. First is the requirement of comments from Securities and Exchange Board of India (SEBI), which will come up in a day or two. Second is about a particular matrix for calculation of embedded value (of the company) that will be prescribed by Institute of Actuaries of India,” he added.

IRDA has already issued draft IPO guidelines.

According to industry body CII, India’s health insurance market is expected to touch Rs70,000 crore with a coverage of 500 million people by 2020.


OMCs hike petrol prices by Rs3.14 per litre

The fall in the rupee to a two-year low and crude prices ruling at $110-$111 per barrel have necessitated the price hike, a top official of a state-run retailer said

New Delhi: State-owned oil marketing companies (OMCs) today hiked petrol prices by Rs3.14 per litre as a fall in rupee increased the cost of importing the raw material (crude oil), reports PTI.

Petrol price in Delhi will be hiked by Rs 3.14 a litre to Rs66.84 per litre with effect from midnight tonight, a top official of a state-run fuel retailer said.

The current petrol price of Rs63.70 per litre corresponds to crude oil price of about $103 per barrel. But crude today is at $110-$111 per barrel. This difference coupled with rupee declining to two-year low of 48 to US dollar necessitated an increase in retail price, he said.

This is the second hike in four months. Oil companies had last hiked petrol price by Rs5 per litre on 15th May.

"We were losing Rs2.61 per litre or Rs15 crore per day on sale of petrol. After adding sales tax or VAT, the hike needed to level domestic rates with international prices came to Rs3.14 per litre in Delhi," another official said.

Petrol prices vary from city to city depending on VAT and other local levies.

Petrol price were freed from the government control in June last year but the retail rates have not moved in line with cost as high inflation rate forced the oil companies to seek 'advice' from parent oil ministry before revising rates.

Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) lost Rs2,450 crore this fiscal on selling petrol below the cost.

Besides petrol, the three firms are losing Rs263 crore per day on selling diesel, domestic LPG and kerosene below cost. Diesel is being sold at a subsidy of Rs6.05 a litre, kerosene at Rs23.25 per litre while domestic LPG rates are under-priced by Rs267 per 14.2-kg cylinder.

The rupee fell to 48 per dollar yesterday for the first time since September 2009. "Every rupee depreciation, the under- recovery (revenue loss) increases annually by around Rs9,000 crore," the official said.


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