More than 80 Bills are pending since 2008. There is not much hope that they will see the light of day soon
The government has made a fantastic job of tabling Bills in Parliament and then sitting on them. While the scam-tainted government waits for the problems to dissolve themselves, its failure to implement important Bills and formulate policies seems to be giving the market a hard time.
Broking firm Macquarie Securities has released a report where it has analysed some of the crucial Bills and the factors that have affected India Inc's market performance. Not only have they found many of these Bills inadequate and that they have been watered down during revisions, the firm feels that there is "little hope" that the government will come to a decision any time soon.
"There has been a spate of policy decisions from the government lately that are aimed at clearing the pile ahead of the monsoon session of Parliament and the UP (Uttar Pradesh) elections next year. In our view the government has not fared well in making these decisions as some of them appear superficial," said the report.
Of the approximately 80 bills that are pending, three-quarters have built up over the past two years alone. Some of the important Bills and reforms pending are-Mines and Mineral Development Act that will see 26% of mining profits being shared with locals affected, Microfinance Institutions (Development and Regulation) Bill which has seen a deadlock between states and the RBI (Reserve Bank of India), The National Identification Authority of India Bill, the Bill on establishing a real estate regulator, amendments on banking laws & labour laws, the Direct Taxes Code, the Goods and Services Tax, pension reforms, FDI (foreign direct investment) in retail and reform in land acquisition laws.
The report has also commented on the government's attempts to project 'a semblance of activity'—like the Cabinet reshuffle and the states' power minister's conference.
"The only change of any significance was the replacement of Jairam Ramesh with Jayanthi Natarajan which was also reflected in the performance of stocks like Sterlite (STLT) and Coal India (CIL) in an otherwise unresponsive market. (As far as the) State power minister's conference (is concerned)—while it would certainly be a major positive for the sector—it should be noted that (the) Government power policy rarely gets implemented as planned. Most private sector participants appeared cautious about the implementation of such measures," says the report.
The few policies the government has formulated have failed to produce desired results. The government has failed to curb inflation, and another hike is expected from the RBI. The hike in fuel prices, which happened after almost a year of delay, is likely to add to the core inflation rate. The hike has offset the reduced subsidy with a revenue loss from duty cuts. The much-awaited draft Bill on food security was passed only recently, but the media is awash with all its shortcomings.
The country is already feeling the heat of governance deficit. If the indecision hits the market harder, the government has only itself to blame.
Parsvnath has requested for withdrawal of in-principle approval, citing economic (in the realty market) slowdown, Direct Tax Code and imposition of MAT as the reason for the same, the commerce ministry said
New Delhi: Several realty firms, including Parsvnath, have sought the government's nod to shelve their special economic zone (SEZ) projects amid continued tax uncertainties, reports PTI.
Among others, Parsvnath SEZ-a Parsvnath Group subsidiary-has offered to surrender six SEZs in Uttar Pradesh, Rajasthan, Haryana, Tamil Nadu and Maharashtra that had earlier been granted in-principle approval by the government.
"The developer has requested for withdrawal of in-principle approval, citing economic (in the realty market) slowdown, Direct Tax Code (DTC), imposition of minimum alternate tax (MAT) as the reason for the same," an official in the commerce ministry said.
Parsvnath's request for pulling out from the SEZ projects and other applications will come up before the inter-ministerial Board of Approval (BoA), which is scheduled to meet on 22nd July.
Besides Parsvnath, other developers that want to exit from their SEZ projects include Juventus Builders and Developers, Alok Infrastructure, Oval Developers, Airmid Developers and NG Realty.
Parsvnath had got in-principle approval for leather and handicrafts SEZs at Agra and Moradabad, respectively, a gems and jewellery tax-free zone in Jaipur, a food processing SEZ in Sonepat, an auto component zone in Pune and a multi-product SEZ in Kanceepuram.
The draft DTC has proposed withdrawal of exemptions for new units that come up after the tax code is implemented and replacement of tax exemption on profits for developers with sops on investments.
The DTC is expected to be implemented from the next fiscal.
The industry has also expressed concern over the imposition of Minimum Alternate Tax (MAT) of 18.5% on the book profits of SEZ developers and units.
Under the SEZ Act, SEZ units get 100% tax exemption on profits earned for the first five years, a 50% exemption for the next five years and another 50% exemption on re-invested profits in the following five years.
SEZ developers, on the other hand, get 100% tax exemption on profits for ten years, which they can choose in the block of the first fifteen years.
Five developers have approached the BoA to de-notify their tax-free enclaves.
In addition, as many as 45 SEZ developers, including Raheja SEZ, Navi Mumbai and GP Realtors, have sought more time to execute their projects.
SEZs in India have emerged as manufacturing and export bases.
Meanwhile, two developers-Radiant Corporation and Anique Infrastructure-have requested permission to set up new tax-free enclaves in Andhra Pradesh and Gujarat, respectively.
Exports from SEZs increased by 43% to Rs3,15,868 crore in 2010-11 vis-à-vis the same period of the previous fiscal. A total of 6.76 crore jobs were also generated.
PFC has received approval to raise Rs5,000 crore through tax-free bonds, Rs7,000 crore through infrastructure bonds and the remaining Rs11,000 crore from another bond issue or ECBs
State-run lending agency Power Finance Corporation (PFC) plans to raise over Rs22,000 crore through infrastructure and tax-free bond issues during the current financial year (2011-12) to part fund its borrowing requirements.
PFC has received approval from the government to raise Rs5,000 crore through tax-free bonds and Rs7,000 crore through infrastructure bonds during the fiscal and the remaining Rs11,000 crore may come from another bond issue or external commercial borrowings (ECBs).
The company's borrowing target in the previous fiscal (2010-11) was Rs 27,000 crore.
PFC, which has so far allotted three independent transmission projects (ITPs) to successful bidders, will finalise two more such projects this financial year (2011-12).
PFC gained 2.65% to close at Rs216.85 per share on the BSE today