Export boosters, without side effects
Sebi to frame PSU offer price norms this week
CSE broker ban in Sebi court
Reliance in talks to offer CDMA handsets

New Delhi, Nov. 25: 
The government is mulling a package of fiscal and administrative measures to ratchet up foreign trade, which includes allowing 100 per cent export-oriented units tax benefits on raw materials, regardless of whether products made out of them were exported or not. The aim is to hand out state doles in a way that fulfils multilateral trading norms.

At present, rules allow 100 per cent export units to sell about a quarter of their total output at home. Raw materials used up for this attracts the full value of local taxes. However, raw materials used up for exports are taken to be duty free.

The government is also working out ways to recompense exporters for the loss of tax incentives on forex earnings and on export of goods and services which they were enjoying under sections 80HHB, 80HHBA and 80HHC of the Income Tax Act. These are being phased out over a five-year period as they are incompatible with WTO norms.

The finance ministry wants the number of fiscal export incentives to be reduced and combined, while giving exporters the same amount of tax benefits. “But mere combination will not be all. We are studying the way the European Union gives incentives to its exporters which are WTO compatible and will be giving similar benefits under various heads like promotion of environmental concerns and research grants,” officials said.

Section 10A of the Income Tax Act, which gives exemption to software exporters in free trade and special economic zones and in technology parks (which the Shome Committee wanted to strike down), is likely to continue as the phenomenal growth in software exports is showing signs of reaching a plateau. The committee had argued that these special zones had far better infrastructure and, therefore, did not suffer from the problems that normal exporters faced.

However, section 10B which gave special benefits to 100 per cent software exporters is likely to be withdrawn as tax regulators feel this status is a way of bringing in back-door licensing.

To make things easier for exporters and importers, there is a move to allow self-classification and valuation of goods. Goods will not normally be examined if they fall within a set of established parameters and if there are no intelligence tip-offs which necessitates their checking.

The moves come in the wake of a 2.3 per cent fall in exports. Although the fall is due to a world-wide recession, the central government is worried as the country’s main competitor, China, has not reported any similar fall.

“The package wants to not only try stem the fall in export growth, but also try to improve the competitiveness of Indian products vis-a-vis their main rivals — Chinese and Asean producers,” officials said.

Indian manufactured goods, mainly textiles, leather goods, low end tools, bicycles, scooters and farm machinery are being pushed out by Chinese producers, who are under-selling them at markets which were traditionally buyers of items made in India. India is also seeing a fall in gems and jewellery exports, a mainstay for the country, due to lower consumer spending in the west.


Mumbai, Nov. 25: 
The Securities and Exchange Board of India (Sebi) board will meet on November 28, to decide on the issue of pricing open offers for listed public sector units (PSUs) in which the government is divesting its stake.

This is the second time this month that the Sebi board will meet to discuss the issue. The board had earlier met on November 1. Disinvestment secretary Pradip Baijal, who had attended that board meet, will also be present this time around to argue the case on behalf of his ministry, sources said.

The market regulator appears bent on sticking to its stand that the present provisions in the take-over code are favourable to the small investor and hence should not be disturbed. However, the disinvestment ministry has argued that open offers for public sector companies should be at the same rate at which the government divests its stake in the concerned PSU.

The government’s stand would mean that the Sebi board will have to amend the take-over code. The finance ministry, which has two nominees on the board, has so far not revealed its stand on the matter.

A compromise formula which envisages the same price to be paid for both the bid and the open offer has found no takers in Sebi, the source said. Under the new formula, either the bid price, or the market price will have to be set as a cut-off price, whichever is higher. However, Sebi officials say one of the main reasons prompting the disinvestment ministry to demand an equal pricing is the fear of price rigging by operators and rival bidders.

A higher market price certainly would mean that the issue of price rigging will remain.

The Sebi take-over code requires the new promoter to make an open offer at an average price of the acquired company in the last six months. Sebi officials here argue that the norm of “six month average” for public offers is in the interest of the investor.

The open offer price should be comparable with the market price or otherwise promoters can take advantage and acquire companies or increase control in PSUs for a song.

Sebi sources further argue that amending the take-over code would be against the interests of the small investor. The news of the disinvestment of PSUs are in the public domain, and, therefore not a price sensitive information available to a select few,” they argue.

Senior Sebi officials are, however, reluctant to talk on the subject. It is believed that Sebi might take the finance ministry into confidence before taking a final decision.

The pricing issue broke out during the disinvestment of infotech major CMC. TCS, a division of Tata Sons had quoted a price of Rs 197 per share to acquire management control of the public sector infotech company from the government.

However, the Tatas were bound by the take-over code which specified a price of Rs 281, as it was guided by the Sebi’s norm of a six-month average of the price of the scrip.

A recent case in point is IBP. The scrip has gained 63 per cent in nine weeks, to close at Rs 408.20. In fact, the IBP scrip is close to its 52-week high. Whether the market price is far more than that the bidders and the government have apportioned is the main issue, which only time can tell. Operators, however, are certain that it certainly influence the pricing at the time of open offers.


Calcutta, Nov. 25: 
The Securities and Exchange Board of India (Sebi) will have to decide whether to bar tainted CSE brokers, Ajay Kayan and Shyam Sundar Dalmia, from entering the market. This follows an order on Saturday by the special court on the 1992 securities scam to attach their properties.

Though their personal properties have been attached, the court has not notified the broking outfits of Kayan and Dalmia, which leaves them technically unaffected by the order.

Thus, though Dalmia’s proprietary membership of stock exchanges automatically becomes defunct by the special court order, his firm, Dalmia Securities, remains unaffected by the order. Similarly, Kayan’s broking firm C. Mackertich Ltd has not been notified.

But, under the present situation, though the two brokers can technically continue to operate on the stock markets through these independent firms, the market regulator may decide to bar them from dealing in securities. The special court last week notified Dalmia and Kayan along with nine others, attaching their properties. The two leading brokers of the city bourse will soon appeal against the order and are now in Mumbai deliberating various options.

The duo were taken completely by surprise by the timing of the decision. “For nine years, the special court had not attached the properties of Kayan. On the other hand, Dalmia’s case was set to come up for hearing before the court in the second week of December,” sources close to the two brokers said.

The two will appeal for ‘denotification’ this week and unless their appeal is admitted, will have to enlist their properties, both moveable and immovable, with the special court within a time frame set by it. Banks, mutual funds and depository participants have also been asked to freeze their assets.

The recent move by the court has given Calcutta brokers the impression that the government has decided to round up the usual suspects. Kayan and Dalmia were both investigated by Sebi for their alleged connection with the stock market scam that broke out in March this year.

Sebi probed the dealings of Kayan’s broking firms this year for alleged bear hammering after the budget, while Dalmia’s broking outfits were investigated for their role in unofficial badla. The charges brought against them, however, could not be substantiated. This might well be the government’s way of getting its back on these brokers senior brokers in the city said.


Calcutta, Nov. 25: 
The Reliance group plans to set up assembly lines to manufacture mobile phone handsets based on code division multiple access (CDMA) technology.

Company sources said talks are under way with least three multinational mobile phone manufacturers, including Korea’s Samsung. They have, however, refused to comment on the amount likely to be invested, but indicated that the assembly line will be set up in the Kutch region.

“The assembly line will roll out the CDMA handsets to our subscribers at an affordable price,” they said.

At present, these handsets are available in the country, but in limited numbers and at prohibitive prices, compared with those based on the GSM (global system of mobile communication) technology. Sources said Reliance is trying to offer CDMA handsets at prices less than those of GSM handsets. “We are looking at all options so that the subscribers benefit in terms of getting sleek handsets at an affordable cost,” they added.

Reliance has, in fact, lined up ambitious plans for CDMA-based mobile telephony. A senior executive said the group has licences for 18 circles, covering almost the entire country. Hence, if the government allows basic operators full mobility, it will be in a position to offer its CDMA services almost everywhere in the country.

“Even now we are weighing options to provide two numbers to a customer on a single handset. For instance, a person can have two phone numbers, one for Calcutta and another for Siliguri, without having to pay an extra amount. So, in a way, we will provide limited roaming facility in our CDMA services,” sources said.

Reliance is on course to install around 600 base stations in the short-distance charging areas in the country to provide connectivity on the basis of CDMA technology.


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