Foreign Trade Policy Highlights

by Adarsh Hathi
April 11th, 2008

Source: Business Standard

DEPB scheme extended to May 2009
Commerce Minister Kamal Nath, in the Foreign Trade Policy 2004-09, today extended the Duty Entitlement Passbook Scheme (DEPB) scheme for exporters to May 2009. The scheme was originally to expire on March 31 this year, but was extended to the new financial year. Last month the Cabinet had withdrawn DEPB benefits on items such as cement, steel, manganese and ferro chrome to improve the supply situation in the domestic market, in order to tackle rising inflation. 

Income tax benefits on EoUs extended
The Foreign Trade Policy also extended by a year the 100% income tax benefit for exports from export-oriented units (EoUs). The benefit, which was to end on March 31 2009, will now end on March 31, 2010. Various export organisation, including the Federation of Indian Export Organisations (FIEO), had been lobbying for an extension. There are more than 2,300 EoU units in the country.

Export promotion council for telecom
Commerce Minister Kamal Nath announced that a new Export Promotion Council for the telecom sector would be set up to provide institutional support to exports from the sector. Nath also said that the information technology sector would be brought under the special focus initiative this year, with specific items in the sector being made eligible under the High Tech Product Export Promotion Scheme. This would enable funds to be specifically earmarked for this sector under the Market Development Assistance and Market Access Initiatives schemes.

More duty credit for toys and sports goods exports
Exports of toys and sports goods will be given an additional duty credit of 5%. This is in addition to the 2.5% duty credit allowed on the freight on board price under the focus product scheme for certain notified products. Separate funds for market promotion will also be given under the Market Development Assistance and Market Access Initiatives schemes.

Relief to sectors hit by rupee appreciation
Interest subvention to sectors hit by appreciation of the rupee, and to small and medium enterprises, has been extended by a year. In the last financial year the government announced a slew of measures to bail out the rupee-hit sectors. Exporters were given a 2% relief on pre-shipment and post-shipment credit in various sectors. The new Foreign Trade Policy also reduces the average export obligation under the Export Promotion Capital Goods (EPCG) scheme in sectors which have seen decline in exports in the last year.

Customs duty under EPCG reduced
Customs duty payable under the Export Promotion Capital Goods (EPCG) scheme has been reduced to 3% from 5%. Also all exports under the scheme will be  eligible for incentives under various promotional schemes. The new trade policy also says that export obligations under the scheme for big trading houses shall be calculated as an average of the last five years’ exports instead of the present three years.

Measures taken to facilitate exports
To ensure timely refund of terminal excise duty and central sales tax, a 6% interest will be paid to exporters if they are not refunded within a month of the due date. Also, export on consignment basis has been extended to coloured gem stones. Moreover, waste or scrap generated during manufacturing in an SEZ can be freely disposed in a domestic tariff area (DTA). Surat Hira Bourse has also been recognised as a port for jewellery export.

Setting up of a joint task force
Kamal Nath also said that a joint task force with representatives of the central government state governments, panchayati raj institutions, industry and exporters would be set up. The task force would prepare a detailed action plan to successfully implement the objectives of the Foreign Trade Policy. 
 

filed under: India Business News

Note on the changes in the Indian FDI Policy

by Adarsh Hathi
January 31st, 2008

The Indian Government announced significant changes in the foreign direct investment regulations. The changes are likely to increase the foreign investment inflow.

However, the government avoided opening up multi-brand retail for foreign investment and did not relax FDI norms for domestic passenger airlines from the current 49 per cent.

Below is the summary of the major Foreign Direct Investment (FDI) changes:

Civil Aviation:

Continues with the existing FDI cap at 49% on the automatic route and 100% for the Non Resident Indian (NRI), subject to no direct or indirect participation by foreign airlines ; Upto 74% FDI allowed on the automatic route for Non Scheduled airlines, Chartered airlines and Cargo airlines with no direct or indirect participation by foreign airlines in non-scheduled and chartered airlines. NRI investment to be allowed upto 100% on the automatic route; FDI upto 74% to be allowed on the Ground Handling Services and 100% NRI investment to be allowed on the automatic route;  FDI up to 100% for maintenance and repair organisations, flying training institutes, technical training institutions, and helicopter services/seaplane services

Petroleum & Natural Gas:

Deletes the condition of compulsory divestment of up to 26% equity in favour of Indian partner(s)/public within 5 years for actual trading and marketing of petroleum products; Increases equity cap from 26% to 49% in petroleum refining by public sector units.

Commodity Exchange:

Allow upto 49% foreign investment in commodity exchanges, which includes 26 % foreign direct investment (FDI) AND 23% foreign institutional investment (FII), while a single investor’s holding will be capped at 5%. This should attract foreign investment into the commodity exchanges.

Credit Information Services:

Allows foreign investment upto 49% in credit information services subject to specific approval of government and RBI clearance; Foreign Institutional Investment (FII) will be permitted upto 24% in listed Credit Information Companies within the overall limit of 49% for foreign investment; Deletes ‘Credit Reference Agencies’ from the list of Non Banking Finance Companies (NBFC) activities permitted for FDI up to 100% on the automatic route.

Mining of Titanium bearing minerals:

Allows FDI up to 100% with prior government approval in mining and mineral separation of titanium-bearing minerals and ores, its value addition and integrated activities with the condition that value addition facilities are set up within India alongwith transfer of technology.

 

filed under: Foreign Investment

Millennium India Acquisition Company to invest Rs. 159.92

by Adarsh Hathi
November 2nd, 2007

Source: Press Trust of India
The government has cleared 12 Foreign Direct Investment (FDI) proposals that will bring in Rs 212 crore, of which the largest chunk will be by US-based Millennium India Acquisition Company.

Meanwhile, 13 proposals, including two from B A G Films, were deferred by the government, according to an official statement here.  

The US-based company will bring in Rs 159.92 crore of FDI to acquire stakes in two non-banking finance companies.

Subsidiaries of these NBFCs are engaged in security market as stock broker, distribution of mutual fund units and commodity trading.

Among the proposals cleared by Finance Minister P Chidambaram on the recommendations of the Foreign Investment Promotion Board are two from media house India Today Group to bring in foreign direct investment in its upcoming publications — a newspaper and a magazine.

UK-based Associated Newspapers Ltd will bring in Rs 18.02 crore as FDI for launching a newspaper ‘Mail Today’ along with Living Media Ltd, the holding company of India Today Group.

For this purpose, a joint venture would be set up in the name of Mail Today Newspaper Pvt Ltd. Living Media would hold 74 per cent and remaining 26 per cent will be owned by the UK-based media house, official sources told PTI.

Associated Newspapers Ltd has reputed publications like The Daily Mail and London Metro. Another joint venture - Itas Media Private Ltd will be set up by Living Media and Axel Springer of Germany to bring out a magazine ‘Auto Bild India’. While Axel Springer will bring in Rs 2.66 crore to hold 49 per cent in the JV, Living Media will own 51 per cent.

The German media company has 150 newspapers and magazine across 27 countries in the world. PTI

filed under: India Business News, Foreign Investment

SEBI enhances limit for Overseas Investments by Mutual Funds

by Adarsh Hathi
September 26th, 2007

Source: Securities and Exchange Board of India Press Release

In order to facilitate overseas investments by mutual funds in line with the announcement in the Union budget 2007-08, SEBI vide circular dated September 26, 2007 has increased the limit for overseas investment by each mutual fund from US $ 200 million to US $ 300 million. Further the sub-ceiling linked to the net assets of a mutual fund as on March 31 of each year has been dispensed with.  This shall be subject to the overall limit for the overseas investments by mutual funds would be US $ 5 billion already announced by the Reserve Bank of India.
Further, the requirement of existence for 10 years or experience of investing in foreign securities for being eligible to invest in overseas Exchange Traded Funds (ETFs) has been dispensed with.

Mutual Funds can now also invest in following new categories of overseas instruments
·        ADRs/GDRs issued by  foreign companies
·        Initial and follow on public offerings for listing at recognized stock exchanges overseas
·        Foreign debt securities in the countries with fully convertible currencies, with rating not below investment grade
·        Money market instruments rated not below investment grade
·        Repos- only as pure investment avenues where the counterparty is rated not below investment grade; repos should not however, involve any borrowing of funds by mutual funds
·        Government securities where the countries are rated not below investment grade
·        Derivatives traded on recognized stock exchanges overseas only for hedging and portfolio balancing with underlying as securities
·        Short term deposits with banks overseas where the issuer is rated not below investment grade
·       Units/securities issued by overseas mutual funds registered with overseas regulators and investing in approved securities or Real Estate Investment Trusts (REITs) listed in recognized stock exchanges overseas or unlisted overseas securities (not exceeding 10% of their net assets)

filed under: India Business News

Legal Sector to witness tremendous growth

by Adarsh Hathi
July 13th, 2007

Source:   Press Trust of India
  
Chennai, Jul 13 (PTI) Notwithstanding Bar Council of India’s opposition to the opening up of legal services as per the GATT agreement, some experts in the sector say it would lead to a boom, similar to that in the IT industry.   

A tremendous growth could be witnessed in corporate legal sector and legal process outsourcing in the coming years, said Ritvik Lukose, vice president of Rainmaker T&R, a leading legal recruitment and training firm.

“The opening up is already there with many international law firms, predominantly from the US and the UK, associating with their Indian counterparts. Once WTO’s General Agreement on Trade of Services comes into force in the next one or two years, they would be able to set up offices here,” he said.

According to industry researcher ValueNotes, India’s revenue from legal services offshoring is slated to grow from USD 146 million in 2006 to USD 640 million by the end of 2010.

The industry employed around 7,500 people in India as of 2006 end and the number is expected to touch 32,000 by the end of 2010.

Bar Council of India (BCI) fears that this will pose a threat to the job security of the lawyers here.

“We are opposing the entry of foreign firms in toto. The government decided to sign the (GATT) agreement without consulting us. Majority of lawyers in the country are against it,” Dhanpal Raj, Chairman, Executive Committee, BCI, said.

The BCI is also against entry of foreign lawyers into the country. PTI

 

 

 

  
 

filed under: India Business News, India Legal News

India slashes duty on imported wines and spirits

by Adarsh Hathi
July 3rd, 2007

Source: Reuters India

NEW DELHI (Reuters) - India withdrew the additional customs duty on imported wines and spirits on Tuesday in an effort to resolve a dispute with the European Union and other leading trading partners over high duties on these items.

The EU and the United States had been pressing for a cut to wines and spirits duties which the European bloc said were as high as 550 percent on imported spirits and 264 percent on wines.

India’s base import duties on wine and spirits are 100 percent and 150 percent, which are within WTO rules, but some federal and state-level taxes push the tariffs over 500 percent.

A finance ministry statement said the government had decided to withdraw the additional customs duty on imported wines, spirits and liquor after discussing the issue with state governments.

But the government raised the basic customs duty on wines from 100 percent to 150 percent, as permitted by the World Trade Organisation, a rate which will continue to apply to spirits and liquors.

A European Union Commission report issued last year found “clear violations of WTO provisions”. Scotch whisky makers had asked the Commission to escalate the dispute after India left wine and spirit duties untouched in its annual budget in February, despite lowering duties on other imports.

EU spirits exports to India in 2005 amounted to 43 million euros ($56.4 million), while wine exports stood at just 7 million euros, according to a study by the Centre for European Policy Studies.

Demand for imported wines and spirits is rising in India as a fast-growing economy and higher wages boost the spending power of an expanding middle class.

filed under: India Business News

Indian Pharmaceutical firm sued by Sanofi Aventis

by Adarsh Hathi
June 22nd, 2007

Source: Business Standard

Multinational pharmaceutical company Sanofi Aventis and Debiopharm, SA has sued Dabur Pharma and its subsidiary, Dabur Oncology plc of UK, in a US court for challenging the patents on Sanofi’s Eloxatin, an injectable drug (Oxaliplatin)  used in the treatment of bowel cancer.

The case was filed in the US District Court for the District of New Jersey in response to Dabur Oncology Plc filing of an abbreviated new drug application (ANDA) for Oxaliplatin with Para IV certification.

Para IVs are generic drug marketing applications filed with the US Food and Drug Administration (FDA) with patent challenges. As per the US rules, when an
ANDA is filed with Para IV certification, it has to be notified to the patent holder. The patent holder can then sue the challenger within 45 days of notification, and the USFDA will refrain from approving any generic copies of the drug for the next 30 months.

“Dabur disputes the charges of infringement and intend to vigorously challenge these allegations and are confident of asserting non-infringement of the two patents,” the company said in a press release today.

The complaint alleges that the filing of the applications has infringed, and the proposed products will infringe US patent no. 5,338,874 and US patent no 5,716,988.

Oxaliplatin had sales of approximately 1.7 billion Euros (US $ 2.3 billion) and its generic versions are available in several European markets, the release added.

filed under: India Business News

Suzlon raises its offer price to 150 Euro/share for REPower

by Adarsh Hathi
April 10th, 2007

Source: PTI 

According to the Press Trust of India, India’s largest and the world’s fifth largest wind power major, Suzlon Energy has revised its offer price for REpower Systems to 150 Euro per share, with an acquisition of 7.7 per cent stake in the German firm.

The company has purchased 627,000 shares constituting 7.7 per cent of the pre-capital increase share capital of REpower Systems AG, at a price of up to Euro 150 per share, Suzlon Energy informed the Bombay Stock Exchange. 

With this acquisition, the company has revised the offer price of the voluntary public tender offer to Euro 150 from Euro 126 for acquiring up to 100 per cent share of REpower Systems AG, it added.

Suzlon Energy said its wholly-owned subsidiary, Germany-based SE Drive Technik GmbH and a company acting in concert with Suzlon Windenergie GmbH, its another step-down wholly owned subsidiary has acquired the said equity shares.

REpower Systems had received takeover bids from French nuclear power company Areva and Suzlon Energy.

Earlier in March, French nuclear reactor maker Areva offered 140 euros per share for REpower, raising its previous offer of 105 euros by a third, to top Suzlon’s bid of 126 Euro per share.

Suzlon in February teamed up with Martifer, a unit of Portugal’s largest builder, Mota Engil, to launch a bid for REpower. Martifer owns more than 25 per cent of REpower.

In a separate filing, Suzlon said its step-down US subsidiary, Suzlon Wind Energy Corporation, has signed a contract with Tierra Energy of Texas, to provide 42 units of S88-2.1 MW wind turbine generators, scheduled for delivery in 2008.

The shares of Suzlon were trading at Rs 970, down 1.75 per cent, on the BSE.

filed under: India Business News

SEBI allows 4 Hedge Funds to register as Foreign Institutional Investors

by Adarsh Hathi
March 29th, 2007

Source: Business Times 

The Security and Stock Exchange Board of India (Sebi) has allowed 4 hedge funds to register as foreign institutional investors (FII) category, albeit in a cautious manner.

The four foreign funds, viz, Milan, Italy-based Aletti Gestielle Societa, Toronto-based DGAM Emerging Markets Equity Fund, Karma Capital Management and Blackrock Advisors, have been granted FII registration by the regulator in recent weeks, triggering speculation that Sebi is slowly allowing hedge funds an entry into the domestic markets on a case-to-case basis, sources said.

The move, sources said, was aimed at making less attractive the practice adopted by Hedge Funds to invest in the Indian markets indirectly through the participatory notes (PN) route.

Several India-focused hedge funds already have exposure in the domestic equity markets (through the PN route), out of their offices based in Singapore as India has a double tax avoidance agreement with the city-state.

 

 

filed under: India Business News

US Court of International Trade allows India’s petition against customs bonds in the shrimp case

by Adarsh Hathi
March 22nd, 2007

Source: Financial Express

India wins shrimp anti-dumping battle against US court ruling

India has won a significant battle in its fight against the anti-dumping duty on shrimp with the United States Court of International Trade (CIT). The win allows India’s petition against customs bonds, which it had challenged at the WTO level. India is expecting a decision of the organization’s panel in the matter soon.

AJ Tharakan, national president of the Seafood Exporters Association of India (SEAI) which had filed the case against the bonds before the CIT along with Gourmet Fusion Foods Inc and International Creative Foods Inc, said that the decision of the court to hear SEAI’s case was a major victory for India which had been arguing that the bonds were against international trade practices.

The US Bureau of Customs Border Protection (CBP) had issued directives for collection of bonds matching the duty as security.

India argued that the CBP lacked statutory authority to require bonds as security for payment of anti-dumping duty was already secured by cash deposits. Hence, the promulgation of the bond directive was violation of the Act, arbitrary, capricious, an abuse of discretion and also not in accordance with the law.

CBP argued that the plaintiffs had lacked standing because they had failed to demonstrate that they were adversely affected by an agency action.

Equally, their interests were with the zone of interest protection by the statutes under which they brought their claim. However, the court ruled that the plaintiffs’ claims were ripe for review and they had standing to bring the action for scrutiny. Also, the SEAI had met the associational requirements to fight for the exporters.

It felt that, there was no ground to dismiss the complaint of the plaintiffs and seek grant of relief. The defendants had offered no supportive argument to their case. It was in this backdrop that it felt, the matter was to be subjected to judicial review.

Refusing to grant a stay in the matter, the court ruled that the CBP would get 30 days to file public administrative record which will include all public documents so that the matter could be heard.

 

filed under: India Business News, India Legal News