IFCI, LIC, IDFC others allowed to issue tax-saving infra bonds

Besides, IFCI, LIC, IDFC and IIFCL, NBFCs classified as infrastructure finance company by RBI will be able to issue tax-saving bonds. The volume of issuance during the financial year shall be restricted to 25% of the incremental infrastructure investments made by the issuer during 2010-11

New Delhi: With a view to attracting long-term investments for the infrastructure sector, the government has allowed Industrial Finance Corporation of India (IFCI), Life Insurance Corporation of India (LIC), Infrastructure Development Finance Company (IDFC) and India Infrastructure Finance Company (IIFCL) and certain non-banking financial companies (NBFCs) to issue tax-saving bonds during the current fiscal, reports PTI.

“The volume of issuance during the financial year shall be restricted to 25% of the incremental infrastructure investments made by the issuer during 2010-11,” the finance ministry said.

Besides, IFCI, LIC, IDFC and IIFCL, NBFCs classified as infrastructure finance company by RBI will be able to issue tax-saving bonds.

In 2010-11 the government in order to channelise savings for development of infrastructure sector, introduced the concept of long-term tax savings bond.

It provides tax exemption on investments up to Rs20,000 in long-term infrastructure bonds. This is over and above the existing tax saving limit of Rs1 lakh.

The finance ministry further said that infrastructure bonds should be of 10 years with a minimum lock-in of five years.

After the expiry of five years, the investors would have the option to either sell it in secondary market or seek redemption.

Earlier, the government had announced relaxation of norms for foreign institutional investment (FII) investment in infrastructure sector, besides allowing corporates to raise yuan-linked external commercial borrowings (equal to $1 billion).

The government proposes to double investment in infrastructure to $1 trillion during the 12th Five Year Plan (2012-17).

Last fiscal a host of companies like IFCI, REC and IDFC had raised about Rs8,000 crore through issue of tax-savings infra bonds.

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COMMENTS

B Rajaram

6 years ago

When can our government can think of numbers like Rs 5 lacs instead of Rs 20,000 etc. What does the government lose if Tax Free bonds for infrastructure bonds are taken by individuals with their retirement funds instead of earning interest may as well do so in these 5 year bonds. The kind of fund mobilisation needed demands thinking in a more relaxed manner than getting stuck in a couple of ten thousand, I believe.

USE garners 22% market share in currency derivatives

The exchange is completing its first year of operations on 20th September with nearly 438.95 million contracts traded, with its market share in currency futures growing steadily, stabilising at an average of 22% in recent months

Mumbai: United Stock Exchange of India (USE), the country’s youngest bourse that operates in currency derivatives, on Monday said it has garnered about 22% market share in the segment as it completes first year of operations on Tuesday, reports PTI.

The exchange is completing its first year of operations on 20th September with nearly 438.95 million contracts traded, said a statement by USE, adding that its market share in currency futures has grown steadily, stabilising at an average of 22% in recent months.

The average daily trading volume on the exchange is in excess of Rs10,000 crore. The exchange has successfully completed 245 trading and clearing cycles in its first year of operations, the release said.

USE launched on 20 September 2010 with opening day volume of 9.88 million contracts and established a world record for first-day trading at a new exchange. Since then, month-on-month volume has steadily increased.

“In the last one year, we have expanded our membership base that has helped us inch closer to our founding vision of emerging as India’s most preferred stock exchange, bringing together the entire financial community.

“As we enter our second year of operations, we look forward to playing a more crucial role in the ever-evolving and vibrant financial landscape,” USE MD and CEO TS Narayanasami said.

USE’s stakeholders include BSE, 28 banks and three major corporate houses. Recently, Standard Chartered Bank has also come on board as a shareholder, representing its first strategic investment in an exchange.

Till date, the exchange has received 550 membership applications and has 372 trading members registered with the Securities and Exchange Board of India (SEBI), with 52 SEBI-registered clearing members.

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Finance ministry wants ONGC, others to give Rs56,700 crore fuel subsidy

The finance ministry wants upstream oil and gas producers like ONGC to meet one-third of the Rs1,70,140 crore revenue loss that was projected prior to the June fuel price hike and duty cuts instead of about Rs1,14,084 crore actual loss the retailers may suffer on selling fuel below cost this fiscal

New Delhi: The finance ministry wants Oil and Natural Gas Corporation's (ONGC) fuel subsidy outgo to increase almost double to Rs47,640 crore this fiscal so that diesel, domestic LPG and kerosene can be sold at below market prices to consumers, reports PTI.

The finance ministry wants upstream oil and gas producers like ONGC to meet one-third of the Rs1,70,140 crore revenue loss that was projected prior to the June fuel price hike and duty cuts instead of about Rs1,14,084 crore actual loss the retailers may suffer on selling fuel below cost this fiscal.

Upstream oil firms bear one-third of the revenue that retailers lose on selling diesel, domestic LPG and kerosene at government-controlled rates. A similar amount is contributed by the government by way of cash subsidy while the rest is either absorbed by the retailers or passed on to consumers.

Sources privy to the development said the finance ministry wants upstream share to be fixed at Rs56,707 crore or one-third of the revenue loss estimated before the June price hike and cut in customs and excise duty. Of this, ONGC's share would be Rs47,640 crore and the rest would be split between Oil India and GAIL India.

It argues that the government has taken a hit of Rs49,000 crore by way of cut in customs duty on crude oil and petroleum products, and reduction in excise duty on diesel.

Post duty rejig and a Rs3 per litre hike in diesel, Rs2 per litre increase in kerosene and Rs50 per cylinder hike in domestic LPG rates, the revenue loss now is estimated at Rs114,084 crore. One-third of this comes to Rs38,024 crore, of which ONGC would have borne Rs31,943.5 crore.

ONGC in 2010-11 provided Rs24,892 crore fuel subsidy.

Company officials said they haven't got anything in writing from the government on subsidy sharing but confirmed there were talks of raising ONGC's outgo.

Some industry observers are linking the postponement of the follow-on public offer (FPO) of ONGC to hammering its scrip may see because of increased subsidy outgo.

But ONGC officials maintained that the decision to defer the share sale was taken by finance minister Pranab Mukherjee and the disinvestment secretary Mohammed Haleem Khan who felt the FPO may not garner the right value keeping in mind the market volatility.

The public issue through which the government is to sell 5% of its shareholding to garner between Rs11,000 crore to Rs12,000 crore, was to open on 20th September and close on 23rd September.

Sources said the FPO can happen by mid-October on the basis of the red herring prospectus filed by the company with the Registrar of Companies earlier this month. Beyond that, it would be required to update the RHP with second quarter earning numbers and refile it.

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