Banks to lend more to power projects; oil & gas may take a backseat

During FY11, bank financing for power and steel segments would continue, while the oil & gas segment will take a backseat, say bankers

FY10 witnessed bank finances going into power as well as the oil & gas segment. While the power sector would continue to attract more money in FY11, finances for the oil & gas segment are expected to slow down.

“Last year, we had done a lot of financing in power and the oil & gas sector. Finance for power will continue, but oil & gas will reduce. Steel is another sector that will witness major financing,” said Vishal Gupta, vice president for project advisory and structured finance, SBI Capital Markets Ltd (SBI Caps). SBI Caps is a major consortium leader in most of the projects across segments in India.

The focus of bank finance is likely to shift away from the oil & gas segment, as most of the projects in this segment have already achieved financial closure. Ergo, during FY11, not much activity in terms of financing in expected in the oil & gas segment.

“Finance in this segment will reduce because no new refineries are coming up. The Reliance group has already rolled out its refineries; HPCL Mittal Energy Ltd’s refinery at Bhatinda and the Bina Refinery Project have achieved financial closure. For FY11, there will not be a major bunch of deals coming up for financing. Every industry typically sees major orders coming up in every two to three years, it is a cyclical trend,” said Mr Gupta.

Echoing the same, Ramesh Kelkar, deputy general manager, large corporate, Union Bank of India, said, “With us, there is no proposal pending, as of now there are no new projects coming to us for financing.”

Mr Gupta also pointed out that there would be a thrust in the exploration segment for financing. “But it will be more focused on dollar financing, there will not be much to be done in rupee financing,” he added.

However, more investments are likely to go into the oil & gas segment during FY12 as oil companies approach the production stage. “Those oil companies which are right now in the find (exploration stage) stage will require a huge amount of finance to get into production. But this may not happen in FY11, it might happen the next year,” Mr Gupta said.

“Oil & gas exploration is still in the nascent stage in our country and the risk perception is high. The segment lacks the necessary boost required. There is also less clarity in the financial module. Lot of exploration is going to happen, so there is a scope for financing. In the exploration segment we will see some real action taking place in the next two to three years,” added Mr Kelkar.

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    Shadi Katyal

    1 decade ago

    Power is a necessity and we have shortage all round but if equal attention is not given to Oil and Gas resources what do we intend to run the power plants on Cow chips.
    Yesterday some one had an article that coal development will take 5 years and thus resources should be utilised some where else.
    Are we putting the horse before the car

    When you have butter, why seek ghee?

    The finance minister is looking at various options to contain the fiscal deficit. Here’s a look at a number of solutions that he readily has at hand.

    There is an ancient Tamil saying that a person holding butter in his hand goes looking out for ghee. It means that a person should look at what he has in hand before searching for other solutions.

    The Budget deficit is at an uncomfortable level, and the finance minister should be looking for solutions. The Central deficit is over 6.5% and the combined deficit of the States and Centre is over 12%.  New demands for subsidies are cropping up all the time.

    Clearly, the finance minister will have to look at various options to increase revenues.  

    The first step to be taken is to examine the solutions at hand carefully.

    Let’s look at the issue of service tax, which is now being levied on a large number of services. Though a strong case can be made to increase the ambit of service tax so that it includes a number of services, a number of anomalies exist in the current system.

    For example, under legal consultancy services, services provided by individuals are exempted from service tax. But if corporate legal entities are being taxed, why are individuals who provide the same services outside the tax net?

    In the case of barbers and beauticians, individuals are taxed. Again, in the case of legal services, why are individuals excluded?

    Another glaring anomaly is with regard to the medical profession, which is wholly excluded. It is common knowledge that lawyers and doctors are among the highest earners in India. If the services of hair-dressers and beauty parlours are taxed, it would indeed be appropriate if lawyers and doctors earning above the exemption limit of Rs10 lakh are also taxed.

    If the tax net is expanded in this fashion, it will fetch an additional income of about Rs10,000 crore for the government and help in reducing the fiscal deficit.

    Efforts have been made to justify the exemption for doctors on the grounds that they render services to the poor. Even if this argument is accepted, there is a strong case for applying an exemption limit of Rs10 lakh for medical professionals.
    Only the doctors working for five-star hospitals and private clinics, earning above Rs10 lakh should be taxed.

    Let’s shift our focus to the legal profession. The reason given for not taxing lawyers is not tenable. To say that they are serving the court is specious reasoning. Lawyers are not being paid by the court or at rates fixed by the court.

    The cases mentioned above are clear opportunities for the finance minister to raise more revenues.

    Keeping the above factors in mind, let’s examine the various categories on which the current burden of service tax falls:

    Cosmetic and plastic surgery services

    These include services provided or to be provided to any person, by any other person, in relation to cosmetic surgery or plastic surgery, but does not include any surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma.{break}

    Company Secretaries

    These include services provided or to be provided to any person by a practicing Company Secretary to a client in his professional capacity in any manner.

    However, the services provided by a Company Secretary representing a client for any proceedings initialled by issue of a notice, before any statutory authority, are fully exempt from tax.

    Clubs or associations

    These include services provided or to be provided to its members by any club or association in relation to provision of services, facilities or advantages either for a subscription or any other amount.

    Beauty parlours

    Services provided or to be provided to any person by a beauty parlour to a customer in relation to beauty treatment—this includes hair cutting, hair dyeing, hair dressing, face and beauty treatment, cosmetic treatment, manicure, pedicure or counselling services on beauty, face care or make up or such other similar services.

    Dry cleaners

    Services provided or to be provided to any person in relation to dry cleaning.

    Health clubs and fitness centres

    These include services provided or to be provided to any person by a health club and fitness centre in relation to health and fitness services.

    Legal consultancy services

    These include services provided or to be provided to a business entity by any other business entity. Services shall be related to advice, consultancy or assistance in any branch of law.

    In this case a ‘business entity’ includes an association of persons, body of individuals, company or firm but does not include an individual.

    Real-estate agents

    These include services provided or to be provided to any person, by a real-estate agent in relation to real estate.

    In this case, a ‘real-estate agent’ means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real-estate consultant.

    A ‘real-estate consultant’ means a person who renders in any manner, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate.

    (The writer is former SEBI chairman, former chairman-Disinvestment Commission and former member, Planning Commission of India)

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    1 decade ago

    Doctors and Lawyers do pay income tax.

    Many of them are SELF EMPLOYED.

    Hence service tax if imposed should be only for hospitals and legal firms that exceed an annual turnover of more than Rs.50 Lakhs.

    Even then,as being followed now, service tax will be passed on to the patients and the clients making them only to pay more and suffer.

    On the other hand,it is worth considering levying service tax on ALL RETIRED I.A.S OFFICERS,JUDGES most of whom render services after retirement to several corporates in India and Abroad by getting into the board,doing liason/agency works,acting as advisors and get extra income IN ADDITION TO THE PENSION including getting REAPPOINTED as COMMISSION CHAIRMAN,CHAIRMAN OF INQUIRY COMMITTEES,PLANNING COMMISSION MEMBERS etc. which results in the drain of the tax payer money along with other perks enjoyed by them such as free air travel, continuance of security, staff etc.


    Even the SECURITY PROVIDED to anyone after their retirement is a SERVICE by the Govt. and need to be taxed from their PERKS other than the PENSION.



    The FACT is that in INDIA still the OLD RULE and SEVERAL YOUNGSTERS born after the Independence in 1947 have not been given the opportunity in KEY DECISION MAKING or POLICY MAKING and they have now crossed the age above 60 !.

    The OLD STILL RULES ,ruining India and the revamp is essential both in the administration and in the Tax Structure .


    1 decade ago

    The service tax is going to be added and the customer has to bear this additional expenditure even though most of the times " NO SERVICE IS RENDERED" by either doctors nor lawyers.


    1 decade ago

    any addition on this account will be passed on seeking justice

    Bankim Shah

    1 decade ago

    gr8 ideas.
    keep it up.

    hope they reach to ministries, activists, right forums

    best luck

    Shadi Katyal

    1 decade ago

    The one question which comes to mind is that how long this populism is going to go on and bankrupt the nation. Deficit budget is the cause of price rises and thus catch 22. This has to be controlled first before even thinking of new taxes.
    India is one of the most taxed nation and burden is mostly on the middle classes.Some of subsidies will have to be abolished and some of the surcharges will have to go.
    Look at all the Yojna but does the money thus spend even reaches the poor. where is the accountability of any such projects?
    Since govt is Mai Baap everyone wants some subsidy from sarkar and thus we are making fools of ourselves with such populism.
    Govt must put its foot down on all states for their budget deficit.
    Progress of nation is by lower taxation and thus savings and investment and not by methods used in past 60 years of taxation and subsidies.


    1 decade ago

    I do agree with Mr.Ramakrishnan. I wud be happy if he had includes all
    the "so called Janasevaks" as they
    also provide service to 'themselves' not Janata.

    Shibaji Dash

    1 decade ago

    Personal compulsions, historically , in most countries have had a significant but invisible role in determining who should be taxed and how much if at all to be taxed and what should be the exclusion, exemption, rate etc. Regan had unhappy experience in his wife's tax assessments when he was in Hollywood. On becoming President he went tong and hammer against the tax regime he inherited. If Sir PC had not been the FM service tax would have been imposed on lawyers. Doctors - even the rich ones- were spared as otherwise it would have been difficult to justify non-levy of service tax on the lawyers. We can't expect the present FM to undo what Sir PC did as it would be impolite and politically not correct since Sir PC has the formidable reputation as a very competent minister even as Home Minister. It's only a question of time before the inequities and consequent loss of revenue as pointed out by Mr Ramakrishna- GVR as he used to be called--are done away with.

    Will Rin Tide over this?

    When a brand is washing a competitor’s dirty linen in public, the latter should not work itself up into a lather

    Full-on comparative advertising is always fun to watch. More so, when a brand doesn’t bother to conceal its rival’s identity. And compares itself to the competitor, no-holds-barred. Rin just did that to Tide. The fun starts now, as the ASCI (Advertising Standards Council of India) gets drawn in. A court case is likely to be filed, even as the controversy rages on in the ad circles. Very cannily, Hindustan Unilever (makers of Rin) released the commercial over the long Holi weekend, when the courts were shut. So by the time the rival could take action… the damage was done.
    Here’s what happens in the TVC: Two spiffy housewives (who else?) are seen awaiting their school-going kids at a bus-stop. In one’s shopping bag is Rin, and the other carries Tide. Lady Tide gloats about her brand’s fragrance and safedi. Lady Rin only smiles. When the boys arrive, Baba Tide sports a shabby shirt but Baba Rin’s kameez is rocking white. A pretty insipid commercial otherwise, but one that will get a lot of publicity due to the head-on collision between the detergent giants.
    So then what motivated Unilever to take such a controversial step? Clearly, Tide is fast encroaching into Rin’s traditional ‘safedi’ segment. Therefore drastic action was called for. Another factor which Unilever would have considered: It’s practically impossible to prove who washes whiter… even if a hundred bucket washes are done in front of a jury (hilarious!). 
    But here’s the real risk involved in using comparative advertising: Research studies carried out in Western nations indicate that this method is almost always driven by the brand/marketing manager’s ego, rather than business acumen. And when used on television or radio, there is a serious risk of the advertiser giving away free publicity to the rival brand. This is because unlike press advertisements (which automakers usually employ to contrast their vehicles’ features with those of the competitors), viewers and listeners are usually busy doing other things while watching TV or listening to the radio. They could be chatting, on Facebook, at a family dinner, or even having sex. Which means, they may inadvertently mistake the commercial as that of the rival brand! 
    So what must the Tide brand managers do, apart from making frantic calls to their lawyers? Well, nothing, really, they shouldn’t lose their shirts over this, that’s their best bet. However, if the suits do succumb to the trick, the Tide ad should be a sequel: They must communicate that the only reason the Rin lad’s shirt is white is that the poor boy is a wimp… he locks himself up in the classroom, too chicken to handle sports.
    Whatever. Looks like this summer shan’t be restricted to the cola wars.

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    Manoj Mantri

    1 decade ago

    There is a really funny comparative print advt that Smith and Jones Masala Noodles has released which says
    "Ab Maggi bhi bolein Smith and Jones Masala Noodles Tadka Marke is Asli Masala"
    This is continuation of their tvc
    personally i luved it coz Smith and Jones is a fantastic product but more imp it is kewl

    charles coelho

    1 decade ago

    my only concern is that in fight of 2 big bulls , this Ad-war cost will have to be borne by consumers in coming days.


    1 decade ago

    Mr Moolchandani, in his great wisdom and understanding of national identity and marketing fundamentals, should also know that Hindustan Unilever is an Anglo-Dutch (ring a bell? British Raj, British & Dutch East India Companies?) company and hence Rin is not an Indian brand either...


    1 decade ago

    Mookchandani Sahib,
    Please see the latest decision by court on this.. You will realise what is wrong and right.
    Also, I would suggest you to come out of your shop and have a bigger look on global brands which are here for customers benefits.
    Till the time we will not allow them to come and give us better products we will have to wash our clothes with just salt... i think you would love that...
    go ahead and get some of it in one bucket and tide in another and compare for urself rather rin showing it.

    Praveen Moolchandani

    1 decade ago

    Although comparative advertisement should have its limits, its not wrong considering the fact that today's audiences/consumers require real info and not blurred comparisons between brands. The RIN ad clearly rips off the clutter and does a great job. The maharaja era advertisement laws in India require a change. Moreover, not many Indians feel good about foreign brands like Tide entering India and posing a threat to Indian companies. Shameful Indian PM Manmohan Singh should do something about it. Globalization doesnt mean loosing your identity to privatization and foreign competition. I am happy Rin slapped Tide hard.

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