Parliamentary panel for hiking I-T exemption limit to Rs3 lakh

“There is a consensus among the members that annual tax exemption limit be raised to Rs3 lakh,” sources said after a meeting of the Parliamentary Standing Committee on Finance, chaired by senior BJP leader Yashwant Sinha

New Delhi: A Parliamentary committee scrutinising the Direct Taxes Code (DTC) Bill will recommend raising of the annual income tax (I-T) exemption limit to Rs3 lakh and hiking the limit on tax breaks for investments to Rs2.5 lakh following a broad consensus amongst members, reports PTI.

“There is a consensus among the members that annual tax exemption limit be raised to Rs3 lakh,” sources said after a meeting of the Parliamentary Standing Committee on Finance, chaired by senior BJP leader Yashwant Sinha.

Some members had earlier suggested that the annual income tax exemption limit be raised to Rs5 lakh from Rs1.8 lakh at present, in view of high inflation and erosion in purchasing power of the rupee.

The DTC Bill proposes the tax exemption limit at Rs2 lakh and also provides for revising the tax slabs for all the three categories.

At present, income in the bracket of Rs1.80-Rs5 lakh attracts 10% tax, 20% for Rs 5-Rs8 lakh. It is 30% for above Rs8 lakh.

Members also felt that the limit for the total tax saving deductions, which include investment in provident fund, life insurance, children education and infrastructure bonds, should be raised to Rs2.5 lakh from Rs1.2 lakh, sources said.

At present, investments up to Rs1 lakh in specified instruments are deducted while calculating the tax liability.

In addition, investments up to Rs20,000 in infrastructure bonds are also exempted from tax.

The Standing Committee on Finance has decided to finalise its report on DTC by 2nd March, enabling Parliament to consider the ambitious reforms in direct tax regime in the budget session beginning 12th March.

“The committee will present its report to Parliament in the third week of March”, sources said.

The DTC, which will replace the Income Tax Act, 1961, was referred to the Committee for scrutiny in August 2010.

The government, pending approval of the DTC Bill by Parliament, is likely to introduce some measures concerning taxes in the next Budget to be presented by Finance Minister Pranab Mukherjee in the Lok Sabha on 16th March.

Yesterday, Congress leaders in their wish-list asked Mr Mukherjee to present a “please all” Budget and raise income tax slabs.

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GoM clears new urea investment policy; incentives on gas price

The GoM headed by finance minister Pranab Mukherjee recommended to the Cabinet that the government provide subsidy on gas price within the range of $6.5-$14 mmBtu. The ministry has proposed that the government compensate companies if gas price exceeds $14 mmBtu

New Delhi: A Group of Ministers (GoM) on Friday approved a new urea investment policy that promises incentives on natural gas price to fertiliser companies for reviving, expanding and setting up of new plants, to boost domestic production, reports PTI.

The GoM headed by finance minister Pranab Mukherjee recommended to the Cabinet that the government provide subsidy on gas price within the range of $6.5-$14 million metric British thermal units (mmBtu).

The policy aims at giving urea manufacturers a minimum 12% post-tax return on capital.

“The policy on urea has been approved with caveats,” petroleum minister Jaipal Reddy told reporters here after the GoM meeting.

Although the GoM has cleared the policy, it asked the fertiliser ministry to place its pending issues before the Cabinet, sources said.

The ministry has proposed that the government compensate companies if gas price exceeds $14 mmBtu. It also suggested changes in the method of calculating the price of delivered gas to fertiliser units, the source said.

In 2008, the government had announced a ‘New Investment Policy’ to boost urea production, but the scheme failed to attract fresh investment in the sector.

With widening demand-supply gap of urea, the government in 2010 decided to frame a new policy. Last year, the Committee of Secretaries (CoS), headed by Planning Commission member Soumitra Choudhary, was set up to frame a new policy on urea.

To make the investments financially viable and at the same time limit the profits, the CoS suggested higher floor and ceiling price (domestic cost of production) for greenfield and brownfield projects as compared to the 2008 policy that failed to attract fresh investment in the sector.

The CoS has suggested the government to give incentives for setting up of greenfield (new plants), brownfield (expansion of existing plants) and revamp facilities.

With gas being the main feedstock of urea and accounting 80 per cent of the cost of manufacturing, the committee suggested that the government should bear the entire cost of gas till $14 per mmBtu.

In case of using gas of higher price, urea price will go up by $20 per tonne for every dollar increase in the fuel cost, it added.

According to experts, the country would save around Rs4,800 crore if six expansion plants with a capacity of over six million tonnes are set up following this new policy.

Fertiliser companies did not offer any immediate comment on the approval of the new policy.

According to the new policy, based on the cost of imported urea, which is known as import parity price (IPP), floor and ceiling prices for greenfields are fixed at $310 a tonne and $340 a tonne, respectively.

For brownfield investments, floor price is fixed at $290 a tonnes, while ceiling price at $320 a tonne.

For revamping of projects, the floor price is fixed at $250 a tonne and ceiling price is $290 a tonne. However, the gas price in this case will be fully subsidised between $7.5-$14 per mmBtu.

Currently, global price of urea is ruling at $425-$472 per tonne.

A source said, “The units will continue to earn a minimum of 12% post tax returns considering a scenario of high cost of delivered gas price in India and global price falling below the ceiling price or even the floor price.”

Under the present investment policy, implemented in September 2008, the floor and ceiling prices of urea have been fixed at $250 and $425 per tonne, respectively.

The new policy provides for differential IPPs. The production from revamped projects is proposed to be provided with 85% of IPP subject to floor and ceiling prices.

Similarly, the production from expansion of these units will receive 90% and revival of closed units in public sector will get urea price equivalent to 95% of IPP.

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MCX IPO subscribed 54 times; gets bids worth Rs36,000 crore

The MCX IPO, which happens to be the first for the year 2012, got subscribed by 54.09 times on the last day of bidding—thus attracting the highest over-subscription level since the Anil Ambani-led Reliance group’s R-Power IPO in January 2008, which was subscribed nearly 73 times

New Delhi: Riding high on a record-breaking demand from retail, institutional and high networth individual (HNI) investors, the initial public offer (IPO) of the country’s top commodity bourse Multi Commodity Exchange (MCX) got over-subscribed by more than 54 times on Friday and attracted bids worth about Rs36,000 crore, reports PTI.

The first ever public offer by an Indian exchange has also emerged as the most successful IPO in about four years.

In terms of demand from retail investors, the MCX IPO is believed to have surpassed all previous records, as the shares reserved for the retail shareholders was over-subscribed nearly 24 times—higher than any public offer so far.

Overall, the MCX IPO, which happens to be the first for the year 2012, got subscribed by 54.09 times on the last day of bidding—thus attracting the highest over-subscription level since the Anil Ambani-led Reliance group’s R-Power IPO in January 2008, which was subscribed nearly 73 times.

So far, the Mundra Port & SEZ IPO in November 2007 is the most subscribed IPO of Indian market at 115 times, while MCX is probably the third most over-subscribed public offer in the Indian capital market’s history.

The over-subscription level for retail segment was, however, lower at about 14% in both R-Power and Mundra Port IPOs. In the HNI segment also, the demand for MCX IPO at 150 times is only next to R-Power's 190 times.

The portion reserved for institutional investors in MCX IPO has got over-subscribed 50 times, while the HNIs have submitted bids for over 150 times of the number of shares reserved for them.

The last highly successful IPO was of Coal India in October 2010, which got subscribed 15 times overall, but the retail portion was subscribed only about two times.

The shares are allotted on the basis of subscription levels in different segments after all the bids are received.

The bidding for the MCX IPO began on 22nd February and closed on Friday in a price band of Rs860-Rs1,032 per share, which could raise Rs663 crore at the top end of the price-band.

Out of this, shares worth nearly Rs100 crore have already been allocated to 12 anchor investors and the remainder of about 55 lakh shares are being sold to the public investors.

However, it has attracted bids for nearly 30 crore shares, creating demand worth about Rs36,000 crore.

Post its listing, MCX could have lakhs of retail investors as its shareholders of MCX unlike other exchanges which have majority stake with foreign and private entities.

Experts said that the robust demand for MCX IPO could also lead to other exchanges getting listed and help revive the primary market.

Brokerage firm SMC Global, a syndicate member for the offer, said that the MCX IPO has brought the much-needed smile on the face of the capital market and the IPO segment, which has remained grim for the past two years.

The applications continued to come in even after the deadline of 5 pm for the closure of the IPO this evening and the investment bankers sought extension of time for acceptance of the bids.

“Almost in all the metrics, MCX IPO has proved to be successful,” SMC Global’s Jagannadham Thunuguntla said, while adding that the offer generated demand worth about Rs36,000 crore ($7.3 billion).

“The participation is seen from all the investor classes,” he said, while adding that the issue could help revive the positive sentiments could spill over to the overall IPO segment and the secondary market as well.

“What Maruti IPO did in 2003 in helping the historic revival of the Indian capital markets, may be expected to be repeated by MCX IPO in 2012,” he added.

Maruti IPO was overall subscribed 9 times way back in 2003, while its retail segment was subscribed 2.5 times—which was one of the best at that time.

The MCX offer was subscribed 91% on the first day itself, while it was fully covered in early morning bidding on the second day.

In an unprecedented development, the retail portion of the IPO was fully subscribed before the other segments and by the second day more than half of the demand had come from retail investors and the rest from others.

The promoters FTIL (Financial Technologies India) currently holds 31.2% in MCX, which would come down to about 26% after the IPO.

FTIL, SBI, Bank of Baroda, GLF Financials Fund, Alexandra Mauritius, Corporation Bank and ICICI Lombard General Insurance are the investors divesting part of their holdings in MCX through the public offer.

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