Essar Oil was eligible for a tax deferment incentive of up to Rs9,100 crore for 17 years, however it failed to start production from its oil refinery at Vadinar in stipulated time
The Gujarat government on Monday sealed bank accounts of Ruia-promoted Essar Oil to recover sales tax liability of over Rs8,000 crore from the company. The state government's action follows Gujarat High Court asking it to expedite the recovery process.
Terming the Gujarat government's action as 'surprise' and 'disappointment', Essar Oil, in a statement said, "As a statement of its bonafide intent, Essar Oil has already agreed to pay Rs1,000 crore within 30 days to the Gujarat government towards the sales tax liability. Essar Oil has written to the state government requesting that a Committee be formed which can jointly discuss the modalities of the payment of the balance principal amount of Rs5,169 crore and consider a remission of the past interest of Rs1,932 crore."
"The request for remission of interest amount is based on the fact that the company sought the sales tax scheme benefit only after the Gujarat High Court verdict in its favour in April 2008 and further no interest amount was mentioned in the Supreme Court order," the company said.
Earlier, on 25th June, a division bench of justices PB Majumdar and Mohinder Pal rejected the petition filed by Essar Oil. The bench said, "The state government is directed to expedite recovery process of the entire amount due. We fail to understand that why the company (EOL), which had collected sales tax from its customers and invested the said amount in its own project, ask for such benefit on equitable grounds."
Following the court directive, Gujarat finance department issued a demand notice to Essar Oil for repayment of sales tax deferment benefits utilised by the company.
The state government had put the company's tax dues at Rs8,091 crore, which included interest and penalty.
Essar Oil said it has been writing continuously to the state government to work out an amicable payment schedule after the company lost the case in Supreme Court on the sales tax matter. It had also submitted a detailed payment schedule to the Additional Chief Secretary (Finance) on the 5th April but the submitted proposal was rejected.
The company said it also submitted the payment schedule to the Gujarat High Court on 25th of June when it issued orders asking the state government to recover the monies.
In January 2012, the Supreme Court also rejected Essar Oil's plea seeking sales tax deferment benefits under the Capital Investment Incentive to Premier/Prestigious Unit Scheme, 1995-2000.
"The request for remission of interest amount is based on the fact that the company sought the sales tax scheme benefit only after the Gujarat High Court verdict in its favour in April 2008 and further no interest amount was mentioned in the Supreme Court order. Essar Oil is clearly the aggrieved party on this matter despite making investments of over Rs25,000 crore in the refinery and a total of Rs1 lakh crore of investments in the set up in the state of Gujarat," the company said in a statement.
Nifty to head for 5190 if it closes below 5,250
The market settled lower on global growth concerns on the back of a clutch of dismal economic reports from across the world. We had mentioned in our closing report on Friday that the Nifty has to keep itself above 5,250 else the uptrend may break. The index today went below the level of 5,265 but settled a little above it. We may now see the Nifty head for 5190 if it closes below 5,250.The National Stock Exchange (NSE) saw a volume of 61.02 crore shares which was below its 10-day moving average.
The market opened in the negative tracking its weak Asian peers which were weighed down by the dismal jobs data from the US and higher-than-expected fall in Chinese inflation, which ignited fresh concerns about the pace of global economic growth. The Nifty dropped 83 points to open at 5,283 and the Sensex resumed trade at 17,450, down 71 points from its previous close.
Meanwhile, the rupee declined by 48 paise to 55.90 against the dollar in early trade today, extending losses for the fourth day in a row. Global uncertainties and a lower opening of the domestic stock market were seen as reasons for the fall. The rupee closed at 55.42 against the dollar in the previous session on Friday.
Buying in select stocks enabled the market hit its intraday high at around 10.30am. At the highs, the Nifty rose to 5,301 and the Sensex crawled up to 17,486, albeit still in the negative.
Profit booking at the highs saw the key indices moving further southward in subsequent trade. Selling pressure in rate sensitive sectors like metal, telecom, capital goods and power led the indices to their intraday low in noon trade. At this point, the Nifty fell to 5,258 and the Sensex went back to 17,344. A lower opening of the European markets added to the woes of domestic investors.
The market was range-bound in the post-noon session and closed in the red for the second day in succession. The Nifty declined 42 points (0.79%) to settle at 5,275 and the Sensex dropped 129 points (0.74%) to finish trade at 17,392.
The advance-decline ratio on the NSE was in favour of the decliners at 555:1222.
The broader indices underperformed the Sensex today, as the BSE Mid-cap index tanked 1.20% and the BSE Small-cap index dropped 1.06%.
Today's decline resulted in all sectoral indices settling lower. They were led by BSE Metal (down 1.55%); BSE Power (down 1.54%); BSE Capital Goods (down 1.25%); BSE Auto (down 1.12%) and BSE Realty (down 1.05%).
TCS (up 0.95%); Dr Reddy's Laboratories (up 0.82%) and Hindalco Industries (up 0.12%) were the only gainers on the Sensex today. The main losers were Hero MotoCorp (down 2.62%); Jindal Steel (down 2.56%); Tata Steel (down 2.32%); Bajaj Auto (down 2.30%) and Maruti Suzuki (down 2.28%).
The top two A Group gainers on the BSE were-Manappuram Finance (up 5.83%) and Engineers India (up 4.51%).
The top two A Group losers on the BSE were-JSW Energy (down 5.02%) and GMR Infrastructure (down 4.96%).
The top two B Group gainers on the BSE were-Goldstone Technologies (up 20%) and Quintegra Solutions (up 20%).
The top two B Group losers on the BSE were-Goenka Diamond & Jewels (down 19.95%) and SEL Manufacturing Company (down 19.94%).
The Nifty gainers were TCS, DLF (up 1.09% each); Dr Reddy's (up 0.29%) and Hindalco Ind (up 0.04%). The key losers were Reliance Infrastructure (down 3.56%); Jindal Steel (down 3.12%); Jaiprakash Associates (down 2.98%); Ranbaxy Laboratories (down 2.96%) and Tata Power (down 2.80%).
Markets in Asia closed lower on dismal economic outlook across the globe. Within the region, China's consumer price index rose 2.2% in June from a year earlier while producer prices fell 2.1% compared to analysts forecast for a 2% fall. Besides, core machinery orders in Japan fell 14.8% in May as manufacturers and service sector companies reduced orders.
The Shanghai Composite tumbled 2.37%; the Hang Seng dropped 1.88%; the Jakarta Composite declined 1.73%; the KLSE Composite shed 0.01%; the Nikkei 225 fell 1.37%; the Straits Times declined 1.66%; the KOSPI Composite lost 1.19% and the Taiwan Weighted settled 0.80% lower.
At the time of writing, the key European indices were down between 0.19% and 0.24% and the US stock futures were in the negative.
Back home, foreign institutional investors were net buyers of shares amounting to Rs571.77 crore on Friday while domestic institutional investors were net sellers of equities amounting to Rs223.47 crore.
Ruchi Soya Industries (RSIL) has signed a memorandum of understanding (MoU) with Thermax to set up a one megawatt fluidised bed biomass gasification plant. The gasification plant, to set up by Ruchi Soya at its Washim unit in Maharashtra, will be executed by Thermax on the technology acquired from the Energy Research Centre and Dahlman, Netherlands. The stock declined 1.23% to close at Rs88.55 on the NSE.
As part of its service footprint expansion in the country, auto component maker Bosch today introduced workshop concept in the two-wheeler segment here. Towards this end, the company has opened 10 (Express Bike Service (EBS) outlets in New Delhi on the lines of sole outlet at Delhi. The stock settled 1.50% lower at Rs8,795.05 on the NSE.
Indraprastha Gas raised the prices of compressed natural gas (CNG) by Rs2.90 per kg in the national capital and adjoining towns on the back of the fall in value of the rupee and rising cost of imported gas. The hike had been necessitated because the company is buying more of imported liquefied natural gas (LNG) after supplies from Reliance Industries' KG-D6 gas fields dried up. The stock which jumped 4.21% to Rs252.10 in intraday trade, settled 1.59% higher at Rs245.75 on the NSE.
Both metals and textiles industries have large number of players and consequently their NPAs too tend to be amongst the highest
Metals, textile and the electronics sectors accounted for the highest value of non-performing asset (NPAs) properties in FY12 according to a study by NPAsource.com. The textiles sector which had a 2.7% share of total banking credit, accounted for 4.5% share of the total banking NPAs, while the iron and steel sector with a 3.8% share of credit accounted for 4.7% of total NPAs.
Out of a total NPA properties valued at Rs6,376 crore in FY12, the metals sector had the highest amount at Rs1,188 crore or 18.6% share. It was followed by the textiles sector with Rs1,131 crore and the electronics industry with Rs734 crore, the study said.
Devendra Jain, chairman and managing director of Atishya group, the owner of NPAsource.com said, "The iron and steel segment accounts for the largest share of NPA properties in the metals sector. Both, the metals and textiles industries have large number of players and consequently their NPAs too tend to be amongst the highest."
The state-wise break-up of NPA properties in 2011-12 indicates Tamil Nadu, Gujarat, Maharashtra, Chhattisgarh and Uttar Pradesh as the top five states with the highest share of NPA properties.
The Financial Stability Report of Reserve Bank of India (RBI) released in June-end states that NPAs grew at 43.9% as at end March 2012, far outpacing credit growth of 16.3%. The micro and small enterprises segment which has a 9.8% share of the banking system credit has a disproportionately higher share in the banking system's NPAs at 17.9% as of 31 March 2012 as per the RBI report.
"Intense competition in domestic and global markets, high cost of borrowings and slowdown in economies across the world is going to lead to further rise in NPAs in the coming year too," said Mr Jain in a release.