Companies & Sectors
Media companies hope for implementation of GST in Union Budget

A uniform, simplified taxation system will benefit TV and newspaper businesses that have been growing fast through the launch of regional channels and editions

When Union finance minister Pranab Mukherjee presents the Budget on Monday, media companies will be hoping that he will give them a uniform and simplified tax system that will help to ensure growth and reduce their losses. The implementation of GST tops their wish-list.

After the annus horibilus (Latin for a 'horrible year') 2009, the media sector made a turnaround in 2010, in terms of advertising revenues and growth. Media analysts and company representatives say that in order for this performance to continue, it is imperative that the government reduces the tax burden on the sector and implements the Goods and Service Tax (GST).

"Entertainment tax in India is among the highest in the world-in some cases as high as 25%-and it differs from state to state," said an analyst from Pinc Money. "If a seamless, uniform structure is put in place, it benefits the sector tremendously." This view is supported by nearly all broadcasters and media houses. Jawahar Goel, managing director, DishTV India, remarked in a television interview recently that the media sector's main expectation from the Budget is rationalisation of taxes.

No wonder they are hoping that the GST is implemented, for the sake of uniform and single-point taxation across categories all over India. Last year, many new channels were launched, and this trend has continued this year. So, lowering of taxes and reforming distribution norms is something they are very eager about.

"GST becomes especially important now, when most of the brands are looking for regional expansion," the analyst said. Last year, almost all the newspapers diversified into new local editions and television companies launched local language channels. This is why a simplified pan-Indian model of taxation will be a huge benefit.

Another important issue is raising the FDI cap in all segments. Joy Chakraborty, chief revenue officer of Zee Entertainment Enterprises, said in a statement, "Raising the FDI limit can be a big boost for international media distributors to enter the country with controlling stakes. They could play a catalytic role in the corporatisation of this industry, which would result in greater transparency and increased subscription revenues."

With the roll-out of Phase-III radio reforms and the conditional access system (CAS), radio channels too, are looking forward to GST implementation and raising the FDI cap. Recently, Prashant Pandey, chief executive officer, Entertainment Network India, said that the FDI cap for radio must be raised beyond the 26% limit. However, the music industry wants the government to revert to the old royalty fee structure for radio broadcasts.

The new rules by the Copyright Board say that radio stations have to pay 2% of their net advertising revenues as royalty to the music industry. Earlier, stations had to pay a fixed amount per hour as royalty. Savio D'Souza, secretary-general of the Indian Music Industry, said, "Already, the industry is crippled by piracy. Reduced royalty fees will lead to our death."

The cable and DTH industry, which has to go for complete digitisation as per TRAI instructions, is particularly eager about the abolishing of customs duties on imported set-top boxes and the reduction of license fees. Therefore, they will be looking at the Direct Tax Code (DTC) announcements closely.

Dual taxation on copyright, that is both service tax and VAT, is another issue. MK Anand, chief executive officer, UTV Interactive, said, "Dual taxation (that is, service tax and VAT) on transfer of copyright in relation to cinematographic films is affecting the industry at large, and lack of clarity from the government on the applicability of service tax and VAT on the same transaction is fuelling speculation." He said that the industry is eagerly awaiting implementation of GST, which will ensure clarity and end double taxation.

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Huge volatility ahead of the Union Budget: Friday Closing Report

The stock markets remain highly volatile ahead of the Union Budget, to be presented on Monday. Both, the Sensex and Nifty ended the day in the green; however, markets will get a clear direction only after the Budget

Tracking the gains in the Asian stock markets this morning, post the easing of crude prices, the domestic market opened in the green. The market was jittery ahead of the announcement of the Economic Survey and the Railway Budget, which resulted in the Sensex dipping into the red in early trade and the Nifty was almost there. However, buying support soon lifted the indices higher and they stayed range-bound till 1pm.

With no mention of any credible projects for rail infrastructure that related companies could benefit from, the market pared early gains and slipped to the day's low in post-noon trade. Buying support in fast-moving consumer goods, banking and auto lifted the market into the green in continuing volatile trade and closed positive, snapping a three-day fall.

The Sensex and Nifty opened with a gap-up at 17,775 and 5,321, 10-day opening lows. Although the market ended positive today, the indicators have started finding some direction. The market is headed for a fall. The manner in which the market has lost in the past few days shows that the gains are very slow. This shows that the bears still have control on the market.

The Sensex and the Nifty hit an intra-day low of 17,470 and 5,233, respectively. The intra-day high for the Sensex was 17,812 and for the Nifty it was at 5,338. The Sensex closed 69 points up at 17,701 while the Nifty gained 41 points at 5,304. The advance-decline ratio on the National Stock Exchange was 600:795.

The market will get a clear direction after the close of trade on Monday, when the Union Budget is going to be presented. However, all rallies are likely to be short-lived.

The market breadth on the key indices was mixed today. While the Sensex closed with 17 losers and 13 gainers, the Nifty had 33 advancing stocks and 17 in the declining list. The broader indices lagged behind today with the BSE Mid-cap index declining 0.22% and the BSE Small-cap index falling by 0.31%.

BSE Fast Moving Consumer Goods (up 2.20%), BSE Bankex (up 1.86%) and BSE Auto (up 0.75%) were the top gainers in the sectoral space while BSE IT (down 0.72%), BSE Capital Goods and BSE TECk (down 0.49% list) were the top losers.

Tata Motors (up 4.43%), ICICI Bank (up 3.55%), ITC (up 3%), State Bank of India (up 2.09%) and Jindal Steel (up 1.87%) were the major performers on the Sensex while Reliance Communications (down 5.40%), Reliance Infrastructure (down 4.58%), Mahindra & Mahindra (down 3.38%), Hindalco Industries (down 2.48%) and Sterlite Industries (down 2.23%) topped the losers' list.

According to the Economic Survey, the economy is expected to revert to the pre-crisis growth level of 9% in the next fiscal, buoyed by strong fundamentals. "Based on the performance of the economy over the last five years and analysis of the underlying trends... India's real gross domestic product (GDP) is expected to grow by 9% (+/-0.25%) in 2011-12," the pre-budget survey tabled in Parliament today stated.

Presenting her third budget in UPA-II in the Lok Sabha today, railway minister Mamata Banerjee spared the passengers of any increase in fares and proposed no hike in freight rates, while announcing 56 new train services, including nine non-stop Duronto trains and three Shatabdis. The budget has proposed the highest-ever plan outlay of Rs57,630 crore for 2011-12.

The minister also announced the introduction on a pilot basis of a pan-India, multi-purpose 'Go India' smart card, which would be a single-window package for passengers for seamless payment for tickets for long distances, suburban and metro journeys.

Markets in Asia finished on an optimistic note on easing crude prices. Oil prices retreated after the International Energy Agency assured it was prepared to release its emergency oil stockpiles to offset any shortfall resulting from the flare-up in Libya. The Hang Seng gained for the first time in four days, as investors went bargain-hunting after the index had plunged to a five-month closing low on Thursday. The Shanghai Composite settled unchanged after gaining 0.3% yesterday.

The Hang Seng jumped 1.82%, the Jakarta Composite rose 0.13%, the Nikkei 225 advanced 0.71%, the Straits Times surged 1.75%, the Seoul Composite gained 0.69% and the Taiwan Weighted advanced 0.68%. On the other hand, the KLSE Composite ended 0.04% and the Shanghai settled flat with a negative bias of 0.02 points.

Crude for April delivery jumped 2% to $99.20 a barrel in New York. It is up 14% for the week, the biggest jump for a benchmark futures contract in two years. In London, Brent for April delivery advanced 1.7% to $113.25 a barrel.

With no new proposals that would enthuse rail equipment companies, stocks of companies in the sector fell. Stone India declined 7.53%, Texmaco tanked 7.98%, Titagarh Wagons plunged 13.06%, BEML lost 2.90%, Kernex Microsytems declined 4.97%, Kalindee Rail Nirman tumbled 13.74% and Hind Rectifiers declined 13.84%. Bucking the trend, Container Corporation of India gained 3.15%.

Omaxe Infrastructure & Construction, a wholly-owned subsidiary of Omaxe (up 0.93%) has been awarded a project valued at around Rs136 crore by the Ministry of Defence. The project is for construction of dwelling units including allied services for officers, JCOs/OR at Deolali (Army) and Nasik (Air Force).

Kajaria Ceramics (up 1.55%) has acquired 51% stake in Gujarat-based Soriso Ceramic for a total consideration of Rs5.60 crore. Consequently, Soriso Ceramic is now a subsidiary of Kajaria Ceramics. The latter has an annual capacity of 2.30 million sq metres per annum of rectified ceramic floor tiles, the addition of which would take the Kajaria's total capacity to 30.60 million sq metres by March 2011.

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ICVL may buy coal assets in Australia

ICVL, the joint venture between five State-owned companies, is also participating in the bidding process for acquisition of equity in some underdeveloped coal assets abroad

International Coal Venture Ltd (ICVL) is reviewing several proposals for acquiring coal assets in Australia with a view to examining their suitability and viability, according to a statement made by coal minister Sriprakash Jaiswal in the Lok Sabha.
 
ICVL, a joint venture of five State-owned companies-Steel Authority of India, Coal India Limited, Rashtriya Ispat Nigam Limited, NMDC Limited and NTPC, has been formed for securing metallurgical coal and thermal coal assets in overseas territories.
 
The company is also participating in the bidding process for acquisition of equity in some underdeveloped coal assets abroad, said the minister.
 
However, Mr Jaiswal added that no acquisition has been made so far.
 
ICVL, at the time of its constitution, had set itself a target to buy at least one coal asset by the end of March, but has made no progress yet.
 
Steel and power companies in India are facing difficulties in securing coal mines, due to problems with environment clearances and stiff opposition from local communities.
 
Indian steel companies' demand for coking coal is met by imports, as the country merely produces coking coal. Demand for coking coal has been growing as State-owned and private players are ramping up production capacity.
 
ICVL has identified Indonesia, Mozambique, the USA and Colombia as target countries for acquisition of coal assets and proposals received from these countries are also under review, added Mr Jaiswal.
 
 Power companies are also facing shortage of thermal coal supply in the country. In its recent report, ICRA says, "The demand-supply gap in the domestic industry is likely to widen significantly over the medium- to long-term as many large-size, coal-based power projects are expected to be commissioned over this period. Many of these projects were conceived on the premise that domestic coal would be available to them in the required volumes."
 
 Since the last quarter, prices of coking coal and iron ore have been shooting up in international markets, as the floods in Queensland (Australia) has disrupted mining and shipments of coal, amid surging demand.
 
The coal will be sourced from assets-once they are acquired-and would primarily be used by the promoter companies of ICVL, the minister added.

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