War chest to buy energy assets abroad
India is planning to set up a sovereign fund of about $20 billion to help state-owned ONGC to compete with its Chinese rivals in acquiring oil and gas assets abroad.
The oil and finance ministries are currently discussing the proposal in the backdrop of ONGC’s failure to acquire any assets last year and Beijing marching ahead, a senior oil ministry official said.
“We have proposed a $20-billion sovereign fund, but it is up to the finance ministry to work out the numbers and the model. There is unanimity of views in the government that such a fund should be set up as the country’s energy demands are expected to increase and acquisitions abroad are the only way to ensure energy security,” the official said. India’s foreign exchange reserves stood at $278 billion in the first week of this month.
Officials said the Chinese model would be studied closely by the government. China with $2.4 trillion of reserves has set up a $300 billion sovereign fund for energy and mineral assets.
R.S. Sharma, chairman and managing director of ONGC, said “such a fund would be very helpful in competing with China”.
Industry sources said “Beijing with its huge foreign exchange reserves gives low-interest loans to its companies to aggressively pursue the acquisition of overseas energy assets.”
ONGC Videsh Limited, the overseas arm of ONGC, can take investment decisions on its own up to a sum of Rs 300 crore. Beyond this, ONGC Videsh needs cabinet approval, which makes the bidding exercise time consuming.
Besides, in the absence of a sovereign fund, ONGC does not have the financial muscle to bid aggressively.
Officials said Chinese firms spent $32 billion last year buying oil, coal and metals assets abroad. ONGC, on the other hand, acquired only Britain’s Imperial Energy for $2.1 billion in December 2008.
In the past two years, Chinese firms have outbid ONGC in acquiring stakes in Swiss oil exploration firm Addax Petroleum, Iraq’s Halfaya and Zubair oilfields and Algeria’s Berkine Basin oilfields.
Earlier, government panels had proposed a sovereign fund to buy overseas assets. A committee headed by National Manufacturing Competitiveness Council chairman V. Krishnamurthy has asked the government to “establish a centralised fund for the acquisition of foreign companies or assets in various sectors.”
Mar 18, 2010
Mar 8, 2010
Move to list six PSUs
Around six profit-making PSUs are likely to hit the market in 2010-11, with the finance ministry setting a revenue target of Rs 40,000 crore from divestment.
“It could be four to six PSUs that would be listed, apart from a few follow-on offers this fiscal,” sources in the finance ministry said.
The sources said talks with the respective ministries overseeing the state-owned firms were at an advance stage, and a decision could be taken in the next two months.
Standing in the listing queue are Bharat Sanchar Nigam Ltd, Coal India Ltd, Rail India Technical and Economic Services, Cochin Shipyard, Telecommunications Consultants India and Manganese Ore India Ltd.
These firms meet the government’s criterion for listing entities that have made profits in the last three years, the officials said.
“This year, if we can put in Rs 25,000 crore (through stake sale), next year’s (budget target of) Rs 40,000 crore is modest. There need not be any serious backlash from employees or other stakeholders in the divestment process because it is a very marginal listing process. I don’t anticipate any problem on this,” revenue secretary Sunil Mitra has said.
Sources said the ministry was also considering a follow-on offer for two to three listed firms during the next fiscal.
This would be in addition to the follow-on offer of Engineers India Ltd, which is likely to hit the market in the July-September quarter.
As part of this move, MMTC, Hindustan Copper, Rashtriya Chemicals, National Fertilizers, and State Trading Corporation are on the government’s selloff agenda.
Since last year, ownership has been broad-based in Oil India Limited, NHPC, NTPC and Rural Electrification Corporation, while the process is on for National Mineral Development Corporation and Satluj Jal Vidyut Nigam.
NMDC’s follow-on offer is from March 10 to March 12, and the government plans to sell 8.4 per cent equity. Satluj has filed for application to make an open offer last month and is targeting to raise Rs 1,200 crore.
The market capitalisation of the five companies which have been listed since October, 2004 has increased 3.8 times from the book value of Rs 78,841 crore to a massive Rs 2,98,929 crore, finance minister Pranab Mukherjee had said in the budget, making a case for making the divestment programme broad-based.
The 13th Finance Commission has recommended divestment of the government’s stake in various entities, which should fetch Rs 3,81,000 crore to the exchequer.
Meanwhile, Sebi has allowed Coal India to offer shares to its employees, including those of its subsidiaries. The coal major, which is planning an IPO later this year, wants to reserve about 1 per cent of its shares for its employees. The government, which owns 100 per cent equity in Coal India, is planning to divest a 10 per cent stake through the proposed IPO.
Around six profit-making PSUs are likely to hit the market in 2010-11, with the finance ministry setting a revenue target of Rs 40,000 crore from divestment.
“It could be four to six PSUs that would be listed, apart from a few follow-on offers this fiscal,” sources in the finance ministry said.
The sources said talks with the respective ministries overseeing the state-owned firms were at an advance stage, and a decision could be taken in the next two months.
Standing in the listing queue are Bharat Sanchar Nigam Ltd, Coal India Ltd, Rail India Technical and Economic Services, Cochin Shipyard, Telecommunications Consultants India and Manganese Ore India Ltd.
These firms meet the government’s criterion for listing entities that have made profits in the last three years, the officials said.
“This year, if we can put in Rs 25,000 crore (through stake sale), next year’s (budget target of) Rs 40,000 crore is modest. There need not be any serious backlash from employees or other stakeholders in the divestment process because it is a very marginal listing process. I don’t anticipate any problem on this,” revenue secretary Sunil Mitra has said.
Sources said the ministry was also considering a follow-on offer for two to three listed firms during the next fiscal.
This would be in addition to the follow-on offer of Engineers India Ltd, which is likely to hit the market in the July-September quarter.
As part of this move, MMTC, Hindustan Copper, Rashtriya Chemicals, National Fertilizers, and State Trading Corporation are on the government’s selloff agenda.
Since last year, ownership has been broad-based in Oil India Limited, NHPC, NTPC and Rural Electrification Corporation, while the process is on for National Mineral Development Corporation and Satluj Jal Vidyut Nigam.
NMDC’s follow-on offer is from March 10 to March 12, and the government plans to sell 8.4 per cent equity. Satluj has filed for application to make an open offer last month and is targeting to raise Rs 1,200 crore.
The market capitalisation of the five companies which have been listed since October, 2004 has increased 3.8 times from the book value of Rs 78,841 crore to a massive Rs 2,98,929 crore, finance minister Pranab Mukherjee had said in the budget, making a case for making the divestment programme broad-based.
The 13th Finance Commission has recommended divestment of the government’s stake in various entities, which should fetch Rs 3,81,000 crore to the exchequer.
Meanwhile, Sebi has allowed Coal India to offer shares to its employees, including those of its subsidiaries. The coal major, which is planning an IPO later this year, wants to reserve about 1 per cent of its shares for its employees. The government, which owns 100 per cent equity in Coal India, is planning to divest a 10 per cent stake through the proposed IPO.
Ball set rolling for higher tax-free gratuity
The Centre has cleared an amendment whose logical conclusion is expected to exempt private sector employees’ gratuity up to Rs 10 lakh from income tax.
At present, gratuity below Rs 3.5 lakh is spared the tax. Companies can pay a higher amount but income tax will have to be paid on the sum above Rs 3.5 lakh.
The Union cabinet today cleared a proposal to raise the ceiling for payment of gratuity to private sector employees from Rs 3.5 lakh to Rs 10 lakh.
As a first step, the Payment of Gratuity Act will be amended which will officially permit companies to pay more, although many are already doing so.
The next step will be more crucial: amending the income tax act so that the exemption limit could be raised from Rs 3.5 lakh to Rs 10 lakh.
“The cabinet has approved the bill seeking to amend the Payment of Gratuity Act which will be introduced in the current session of Parliament,” Union labour minister Mallikarjun Kharge said.
“The proposed amendment will increase the maximum gratuity from Rs 3.5 lakh to Rs 10 lakh. The provision of the income tax act will be suitably amended for the benefit to continue,” he added.
The minister did not say when the income tax act would be amended. If the finance minister is willing, it can be done in this session itself.
The current exemption limit of Rs 3.5 lakh on gratuity payment means that an employee putting in 35 years of service (joining at the age of 25 and retiring at 60) can avoid paying tax if his basic salary is Rs 20,000 a month. If the income tax act is amended, the basic salary on which gratuity payment will be exempt from tax can go up to Rs 57,142 a month.
Those earning still higher can get more gratuity but will have to pay tax on the excess amount.
Gratuity is a statutory benefit paid by employers to employees who have completed not less than five years of continuous service. The number of years for eligibility varies in some organisations. All establishments employing 10 or more persons have to pay gratuity.
At the time of exit — either because of resignation or retirement or death — an employee or beneficiary will be paid 15 days’ salary, taking the last drawn salary as the basis, for every completed year of service.
The Sixth Pay Commission had recommended that the limit be raised to Rs 10 lakh for central government employees. The decision today is an attempt to bring parity between government and private employees.
In the last Parliament session, the Centre had amended the gratuity act to clarify the definition of an employee. Anybody who is earning a wage is classified as an employee. Teachers were also brought within the ambit of the act.
The Centre has cleared an amendment whose logical conclusion is expected to exempt private sector employees’ gratuity up to Rs 10 lakh from income tax.
At present, gratuity below Rs 3.5 lakh is spared the tax. Companies can pay a higher amount but income tax will have to be paid on the sum above Rs 3.5 lakh.
The Union cabinet today cleared a proposal to raise the ceiling for payment of gratuity to private sector employees from Rs 3.5 lakh to Rs 10 lakh.
As a first step, the Payment of Gratuity Act will be amended which will officially permit companies to pay more, although many are already doing so.
The next step will be more crucial: amending the income tax act so that the exemption limit could be raised from Rs 3.5 lakh to Rs 10 lakh.
“The cabinet has approved the bill seeking to amend the Payment of Gratuity Act which will be introduced in the current session of Parliament,” Union labour minister Mallikarjun Kharge said.
“The proposed amendment will increase the maximum gratuity from Rs 3.5 lakh to Rs 10 lakh. The provision of the income tax act will be suitably amended for the benefit to continue,” he added.
The minister did not say when the income tax act would be amended. If the finance minister is willing, it can be done in this session itself.
The current exemption limit of Rs 3.5 lakh on gratuity payment means that an employee putting in 35 years of service (joining at the age of 25 and retiring at 60) can avoid paying tax if his basic salary is Rs 20,000 a month. If the income tax act is amended, the basic salary on which gratuity payment will be exempt from tax can go up to Rs 57,142 a month.
Those earning still higher can get more gratuity but will have to pay tax on the excess amount.
Gratuity is a statutory benefit paid by employers to employees who have completed not less than five years of continuous service. The number of years for eligibility varies in some organisations. All establishments employing 10 or more persons have to pay gratuity.
At the time of exit — either because of resignation or retirement or death — an employee or beneficiary will be paid 15 days’ salary, taking the last drawn salary as the basis, for every completed year of service.
The Sixth Pay Commission had recommended that the limit be raised to Rs 10 lakh for central government employees. The decision today is an attempt to bring parity between government and private employees.
In the last Parliament session, the Centre had amended the gratuity act to clarify the definition of an employee. Anybody who is earning a wage is classified as an employee. Teachers were also brought within the ambit of the act.
Mar 2, 2010
Oil ministry in Parikh push for more cash
The petroleum ministry is likely to place the recommendations of the Kirit Parikh committee before the Union cabinet, adding fuel to the political fire over the petrol and diesel price hikes after the budget.
“The ministry will soon seek cabinet nod for implementing the Parikh report as the budget has not made enough provision for the revenue losses oil companies are suffering,” a senior petroleum ministry official said.
The official said the cabinet would take a final call on whether the report would be implemented fully or partially.
According to the panel’s suggestions, the subsidy burden of the government can be maintained at a “bearable” level if free market pricing of petrol and diesel is allowed along with periodic increases in the prices of cooking gas (LPG) and kerosene.
Trinamul Congress and the DMK have joined the Opposition in demanding the rollback of the fuel price hike. Petrol and diesel will cost about Rs 3 per litre more after the duty hike in the budget.
Finance minister Pranab Mukherjee has reportedly ruled out any rollback of duties. Mukherjee said the impact of a duty hike on inflation would be marginal in the long term and food inflation would soften in the next two or three months. However, analysts said the government would wait for the winter crop to hit the market before considering the Parikh proposals. The winter crop (rabi) is expected to bring down food inflation from the present rate of 18 per cent.
N.R. Bhanumurthy of the National Institute of Public Finance and Policy said, “Given the political economy situation, it appears unlikely that the (Parikh) report will be fully implemented in the medium term. However, the recommendations should be the long-term objectives of the government.”
Analysts said if the report was accepted, it would enable the government to cut expenditure as it would not have to make provisions for the fluctuations in global crude prices.
The petroleum ministry is likely to place the recommendations of the Kirit Parikh committee before the Union cabinet, adding fuel to the political fire over the petrol and diesel price hikes after the budget.
“The ministry will soon seek cabinet nod for implementing the Parikh report as the budget has not made enough provision for the revenue losses oil companies are suffering,” a senior petroleum ministry official said.
The official said the cabinet would take a final call on whether the report would be implemented fully or partially.
According to the panel’s suggestions, the subsidy burden of the government can be maintained at a “bearable” level if free market pricing of petrol and diesel is allowed along with periodic increases in the prices of cooking gas (LPG) and kerosene.
Trinamul Congress and the DMK have joined the Opposition in demanding the rollback of the fuel price hike. Petrol and diesel will cost about Rs 3 per litre more after the duty hike in the budget.
Finance minister Pranab Mukherjee has reportedly ruled out any rollback of duties. Mukherjee said the impact of a duty hike on inflation would be marginal in the long term and food inflation would soften in the next two or three months. However, analysts said the government would wait for the winter crop to hit the market before considering the Parikh proposals. The winter crop (rabi) is expected to bring down food inflation from the present rate of 18 per cent.
N.R. Bhanumurthy of the National Institute of Public Finance and Policy said, “Given the political economy situation, it appears unlikely that the (Parikh) report will be fully implemented in the medium term. However, the recommendations should be the long-term objectives of the government.”
Analysts said if the report was accepted, it would enable the government to cut expenditure as it would not have to make provisions for the fluctuations in global crude prices.
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