Govt likely to completely ban FDI in tobacco sector
After making it mandatory to carry larger pictorial warnings on cigarette packets, the government is now working on a proposal to completely ban foreign direct investment (FDI) in the tobacco sector. At present, FDI is permitted in technology collaboration in any form, including licensing for franchise, trademark, brand name and management contract in the tobacco sector. However, it is prohibited in manufacturing of cigars, cigarettes of tobacco and tobacco substitutes. According to sources, the Commerce and Industry Ministry is proposing to even ban FDI in licensing for franchise, trademark, brand name and management contract in the sector. It would eventually mean that FDI would be totally banned in tobacco segment in any form. The ban would eliminate the possibility of indirect flow of overseas funds to the tobacco sector, even through foreign technology collaboration including licensing for franchise, trademark and brand name, they said. The ministry has already circulated a draft Cabinet note to seek views of different departments including health, finance, commerce and Niti Aayog. The move also assumes significance as India is signatory to the Framework Convention on Tobbaco Control, under which it has the responsibility of reducing consumption of tobacco products. It is now mandatory for all tobacco products to carry larger pictorial warnings covering 85 per cent of the packaging space. Major cigarettes manufactures including ITC, Godfrey Philips and VST had raised serious concerns over this move. Kevin Klein Jersey
GST will smooth the way for e-commerce companies: Report
Implementation of GST will help resolve various issues concerning taxation and logistics with regard to e-commerce business, which has been recording rapid growth in the country, says a study. The e-commerce space has rapidly evolved but several challenges have surfaced primarily in areas of taxation, logistics, payments, internet penetration and skilled man power, the CII-Deloitte report on ‘e-commerce in India A Game Changer for the Economy’ said. “In taxation, for example, the lack of a uniform tax structure leads to several issues such as double-taxation or impediments in the free flow of goods across the country. However, the ensuing Goods and Services Tax (GST) is expected to help in overcoming these challenges through a uniform tax structure,” it said. Clearly defined rules for e-commerce transactions in GST and a consultative approach while framing these rules will be favourable to both, the government as well as e-commerce companies, it added. It also said timely and effective implementation of programmes like Digital India, Make in India, Startup India and Skill India will support the e-commerce ecosystem to overcome the challenges related to ineffective rural internet penetration and lack of skilled manpower. The report has recommended several measures including in the areas of direct and indirect taxes to promote this sector. It said documentation requirements should be simplified for applying tax treaty provisions such as declaration by the payee, as opposed to tax residency certificate; and simplified mechanism should be in place to obtain lower or nil withholding tax certificates for the companies, without requiring payer details. “Unutilised business losses of e-commerce companies should not be lost even if the shareholding of the company changes by more than 49 per cent. Increasing the number of years within which the tax holiday can be availed by startups in the e-commerce industry,” it suggested. The indirect tax environment in terms of policy as well as administration would also be the key towards unleashing the potential of the industry in India. “The indirect tax laws need to be evolved and re-designed to consider the changing business dynamics of e-commerce since the activities involve high volume and low-value supplies,” it said adding a central committee needs to be constituted to oversee the implementation of a conducive environment. States and local bodies should ensure that a comprehensive tax is uniformly interpreted, and implemented for facilitating the growth of the sector, besides GST laws should take into consideration the actual nature of the transaction to determine tax liability of the sellers. Jack Eichel Authentic Jersey
Euphoria over, payment banks try to tackle tough questions over limited scope, stiff competition
Five years from now, if everything goes as planned, it may simply take a few clicks on a smartphone for a migrant labourer to send money to his wife residing in a far-flung village. The wife, in turn, will not have to travel to a bank to withdraw the money wired by her husband. Instead, she could walk to the nearest kirana store, buy her groceries and pay the shop keeper using her cellphone. This process of carrying out banking transactions via cellphones underpins the basis of payments banks launched in India eight months ago. Payments banks (PB) are stripped-down deposit-taking institutions formed to reach customers mainly through their cellphones rather than traditional bank branches. While on paper PB appears to be a grand plan to drive down banking services to the grassroots, there is widespread scepticism about its success. There is already a growing buzz that a few players of the eleven who got in-principle licences from RBI in August 2015 having a relook at the viability prospects of PB even before launch. At least one company, Cholamandalam Investment & Finance Company, is said to have pressed the exit button, according to people familiar with the matter. It appears that most players were not fully aware of what it took to set up a profitable PB at the time of applying for licence. A good number of the original applicants (around 40 of them) had signed up for a PB licence to jack up their group valuations. They seemed oblivious to factors such as need for advanced technology (in business), large capex, equity base restructuring and prospects of “delayed break-even and profitability.” In the case of Cholamandalam, it appears to be late realisation that they were entering an unviable business. A consultant who has worked with the group on other mandates says Cholamandalam should have applied for a small finance bank instead. “They opted for PB without really knowing what the beast was.” Though Cholamandalam is active in the NBFC space, it does not really have pan-India presence or enough technological muscle to set up a PB. That apart, the need to infuse more capital and the long waiting period to profitability may have discouraged the south-based group to abandon their plans, according to the people familiar with the matter. Cholamandalam declined to comment. Besides Cholamandalam, Aditya Birla Nuvo, Reliance Industries, Paytm, Sun Pharma founder Dilip Shanghvi, Fino Paytech, National Securities Depository Limited, India Post, Tech Mahindra, Airtel and Vodafone have received in-principle approvals to start PBs. These players have been given 18 months to set processes in place before seeking ‘final approvals’ from RBI. The rub for Cholamandalam and a few others having second thoughts is that PBs are grossly inadequate or restrained with strict conditions to meet their banking ambitions. For one, PBs are allowed to accept deposits only up to Rs 1 lakh and for another, they are not allowed to lend. A large chunk of the float funds PBs would hold (up to 75 per cent) will have to be invested in government securities and they are required to pay at least 4 per cent interest to customers. On paper, PBs make a clean 300 basis points profit spread (rate differential between two coupon-bearing instruments/products) if they invest in G-Secs (bearing 7 per cent coupon currently) and pay 4 per cent interest to depositors. But that’s just a theoretical possibility. Who will keep a PB account in these times when new generation private banks are offering savings bank rates in the range of 4.5 to 7 per cent? PBs would be forced to offer higher rates to depositors if they desire to expand. But this will skim their treasury margins significantly. Also, it may take years, lots of work and many a feet on the ground for PBs to corner bulk deposits. “If there’s no volume, there’s no money in payment banks,” says Naresh Makhijani, partner & head (financial services), KPMG. “PBs will have to adopt a lean model and raise small deposits from a large number of people. Players who have got inprinciple licences are hoping to make the most out of their captive clients.” A mixed bag That doesn’t mean PBs are staring down the barrel of an empty future. India is the epitome of “bottom of the pyramid banking” only 59 per cent of households have access to banking services in India, according to the 2011 Census). PBs will also rely on remittances to augment revenues. The flow of money from urban centres to villages is huge, fuelled by a wide base of migrant wage-earners working in metros and cities. These remitters now use informal hawala channels, post office and PSU bank branches to dispatch money home. While hawala circles charge 8-9 per cent as commission, India Post and PSU banks levy 5 per cent and 1.5 per cent respectively on the value of money sent. PBs will be able to offer these services at much lower cost. PBs will also look at tapping the ‘inward remittances channel’ by tying up with foreign banks and remittance service providers. In 2015, India received $69 billion in remittances, which is nearly three times FDI. “You’ll have to play the business as per your strengths. It will have to be linked with your existing line of business – as an add-on service,” says Rishi Gupta, MD and CEO of Fino Paytech, which has tied up with five remittance service providers to corner the flow of remittances into India. Pushing sales Payments banks also have options to generate income by way of distributing third party products. To diversify their product suite, players have also teamed up with banks. Here PB would function as an extension, accepting larger deposits (above Rs 1 lakh) and distributing credit and investment products on behalf of the bank. PB can also take up retail forex mandates, bill payment services and card acceptance mechanisms to third parties. Paytm founder Vijay Shekhar Sharma says there are many more options besides payments to
Not chasing GMV, will aim to add and retain high-quality users: Snapdeal CEO Kunal Bahl
Snapdeal will no longer rely on Gross Merchandise Value a proxy for sales as its metric of choice, its chief executive officer said, as the company reorients its strategy for a time when the money from investors used to drive up GMV is proving hard to come by. Instead, Kunal Bahl said, Snapdeal will aim to add and retain high-quality users, defined as frequent shoppers purchasing high-margin products. Bahl, who famously declared that his company would dethrone Flipkart by GMV in fiscal 2016, is now saying that his new goal is to grow the number of daily users on his marketplace 20-fold in five years. “We believe that GMV (the value of goods sold) is an important metric. But it’s an outcome metric. It’s not what you chase as a company,” Bahl told ET. “GMV by itself is not necessarily a good metric that demonstrates anything else outside the value of goods transacted.” Bahl’s shift in priority comes at a time India’s ecommerce industry is seeing a marked slowdown in GMV. There has been a marked slowdown in GMV as companies cut down on discounts to build healthier margins and stronger balance sheets. Money is proving harder to come by, too, as investors tighten purse strings and push the larger Internet companies to cut down on burn rates. The Indian ecommerce industry’s annualised GMV run-rate plunged to about $15 billion (about Rs 1 lakh crore) in March from about $20 billion in October, according to data collated by RedSeer Consulting, an emerging markets-focussed research and advisory firm. The New Delhi-headquartered Snapdeal recorded GMV of $4 billion in August, when Bahl said in an interview to ET that he was “very, very clear (that)… we’re going to be No. 1 by March 2016. I think we’re going to beat Flipkart by then”. Snapdeal, which counts Japan’s Soft-Bank, China’s Alibaba and Taiwan’s Foxconn as investors, would have had to at least double its GMV to achieve that, given that Flipkart had declared in June that it was aiming for GMV of $10-12 billion in 9 months to a year. Flipkart had achieved gross sales of $4 billion in 2014-15. Bahl’s latest assertion makes Snapdeal the first big consumer Internet company to publicly denounce the controversial metric that is being blamed for Indian ecommerce’s present troubles from unfettered growth. Several investors have already given up on GMV as their primary metric and are instead encouraging companies to focus on strengthening business fundamentals and maximising revenue per user. “GMV is in a way an old school of thought, because it was the easiest metric to understand,” said Sreedhar Prasad, partner, ecommerce and startups, at audit firm KPMG. “It is a very trivial metric for companies in the etailing business but it used to help size up a company. Today, metrics to track average order value, growth in number of orders and cost of new customer acquisition are the three important ones that matter.” Entering new categories Snapdeal is entering into categories that will win it repeat users and partnering with brands such as Maggi-maker Nestle and restaurant-discovery and food-ordering platform Zomato. “We have to be habit-forming service,” Bahl said. “This is what drives user acquisition and adoption of service. Traditionally, we never did books but now we are pushing into it.” GMV has been the primary barometer used by the industry and investors to determine the health of ecommerce companies. The metric measures a firm’s growth based on the maximum price of goods and services sold on an ecommerce company’s platform and not the actual commission earned by it, which could be much lower. “(GMV) doesn’t demonstrate what the health of the business is. It does not demonstrate how many people’s lives you are participating in. How frequently are those people buying from you? How much are they spending per transaction? What all are they buying? It does not demonstrate any of the nuances,” Bahl said. “Obviously, there will always be question marks because some people are still quite drunk on GMV, which is fine with us.” The Wharton graduate, who cofounded Snapdeal with IIT-Delhi alum Rohit Bansal in 2010, said the company’s main goal now is to get 20 million daily transactors on its platform over the next five years. It currently has 1million users transacting daily on its platform and in September had 87 million registered users for Snapdeal and its payments unit FreeCharge combined. “Some (users) will be new, some will be repeat customers. But at a 20 million scale, the number of new customers will be a small fraction. On any given day, two-thirds of our customers are repeaters,” Bahl said. Carolina Hurricanes Jersey
Private sector to play pivotal role in smart cities: Report
The private sector will play a pivotal role in the development of smart cities, according to a study taken up to gauge the challenges before Prime Minister Narendra Modi’s ambitious ‘Smart City’ and AMRUT projects. Conducted jointly by the World Economic Forum and PricewaterhouseCoopers ( PwC), it also said that problems in areas of water, waste management, energy and mobility would exacerbate if timely action is not taken. The private sector will play a pivotal role, with support needed to deliver much needed infrastructure and help address capacity issues across state governments and urban local bodies (ULBs), it stated. It further said that the global urban population is set to rise to over 66 per cent by 2050, and India is a significant contributor to it. While the country’s urban population currently totals around 410 million people (32 per cent of the total population), it is expected to reach 814 million (50 per cent) by 2050, as per the report. “But the growth of India’s urban population has not been accompanied with commensurate increases in urban infrastructure and service delivery capabilities. As a result, cities in India face a range of challenges in areas such as water, waste management, energy, mobility, the built environment, education, healthcare and safety,” it said. As per the report, these challenges may exacerbate further if timely and adequate action is not taken, and if neglected, it could even derail India’s growth. “This is why the plan announced by the Government of India for 100 smart cities and 500 Atal Mission for Rejuvenation and Urban Transformation (AMRUT) cities is so important,” it stated. Taking the leap to smart cities requires more than just government proclamation, the report added. Josh Hill Authentic Jersey
IFSC at GIFT City crosses $250-million business mark
Three banks which have started operations in the International Financial Services Centre (IFSC) have collectively done transactions worth $250 million, Gujarat International Finance Tec-City (GIFT) said in an emailed statement. Yes Bank, Federal Bank and ICICI Bank which have started their offshore units in this special economic zone have together issued buyers credit, foreign currency borrowing and other credit facilities worth $250 million in the six months to April even as GIFT now targets to corner a share of the NIFTY derivative trades which are executed through the Singapore Stock Exchange, Ajay Pandey, MD and group CEO at Gift City said. Besides the three banks mentioned above State Bank of India, Punjab National Bank, Corporation Bank, Kotak Mahindra Bank, IDBI Bank and IndusInd Bank will begin operating at GIFT IFSC in the next few months, the company said. “After crossing the US$ 250 million business mark at GIFT IFSC, the next target is US$ 500 million and then the US$ 1 billion mark in coming months. After banks, we expect a few insurance companies to start operations soon at GIFT IFSC,” Pandey said. In the first phase over 14 million square feet of built up area has been allowed in the GIFT SEZ and Non-SEZ area for development of office towers, residential apartments and social facilities. The second phase envisages a built-up area of 1.32 million square feet. Some local banks like Bank of India, Syndicate Bank, Gujarat State Co-operative Bank and Janalakshmi Bank have also begun normal banking operations outside the SEZ.
DBT for Kerosene Subsidy
The Minister of State (I/C) for Petroleum & Natural Gas Shri Dharmendra Pradhan informed the Lok Sabha that the Government has decided to implement Direct Benefit Transfer in Kerosene (DBTK) in 33 districts identified by 9 State Governments. The States are gearing up for implementation of direct transfer of subsidy. Under DBTK, the consumer will pay the non-subsidized price of kerosene at the time of purchase. Subsequently, the amount of subsidy will be directly transferred to the bank account of the beneficiary. As a part of this scheme, implementing States will be given fiscal incentive equivalent to 75 % of subsidy saved in the first two years, 50 % of subsidy saved in third year and 25 % of subsidy saved in 4th year. In case the States voluntarily agree to undertake cuts in kerosene allocation, beyond the savings due to DBTK, a similar incentive will be given to those States/UTs. The calculation will be based on net savings in kerosene consumption at State level from the baseline. The baseline for calculation of savings shall be 90% of the 2015-16 allocation of PDS SKO. All State/UTs have been requested to join the Scheme either in identified districts or in the entire State. The Ministry is in touch with the State Governments to ensure that proper mechanisms are put in place at the earliest. Tavon Young Authentic Jersey
Ethanol Blending of Petrol
The Minister of State (I/C) for Petroleum & Natural Gas Shri Dharmendra Pradhan informed the Lok Sabha that in India, the Government has permitted Oil Marketing Companies (OMCs) to sell Ethanol blended petrol with percentage of ethanol up to 10% as per BIS Specification to achieve 5% ethanol blending across the country as a whole. During the sugar year 2014-15, OMCs have achieved a blending percentage of 2.3 per cent. The Government has fixed the price of ethanol. As petrol has been decontrolled with effect from June, 2010 OMCs take appropriate decision on pricing of petrol as per international prices and market conditions. Ethanol blending in Petrol results in saving of Petrol to the extent of its blending and consequent foreign exchange. The potential foreign exchange earnings for the Sugar Year 2014-15 amounts to around USD 285 Million. In order to improve the availability of ethanol and encourage ethanol blending, the Government has taken following steps : (i) The Government has fixed the delivered price of ethanol in the range of Rs.48.50 per litre to 49.50 per litre. (ii) Ethanol produced from other non-food feedstocks besides molasses, like cellulosic and ligno cellulosic materials including petrochemical route, have been allowed to be procured. (iii) Ministry of Petroleum and Natural Gas, on 1st September, 2015, inter-alia has asked OMCs to target ten percent blending of ethanol in Petrol in as many States as possible. (iv) The procedure of procurement of ethanol under the EBP has been simplified to streamline the entire ethanol supply chain. (v) Excise duty has been waived on ethanol supplies to OMCs for EBP by sugar mills during 2015-16. Above initiatives to incentivize Ethanol Blended Petrol (EBP) Programme are expected to increase blending of ethanol in the near future. Trenton Cannon Authentic Jersey
Setting Up of Refinery in Maharashtra
The Minister of State (I/C) for Petroleum & Natural Gas Shri Dharmendra Pradhan informed the Lok Sabha that Oil PSUs namely Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) have announced the plan to jointly set up an integrated refinery-cum- petrochemical complex with a refining capacity of 60 MMTPA (million metric tonnes per annum) in 2 phases in Maharashtra. Engineers India Limited (EIL) is carrying out detailed feasibility study. Oil PSUs and EIL are in the process of site selection for the refinery in consultation with Govt. of Maharashtra. Oil Companies take decision on equity structure and financing of the project depending on various financial and operational parameters. The estimated expenditure and other details of the project are finalized after the completion of Detailed Feasibility Study and selection of site. The implementation time for the proposed Refinery is estimated to be seven years after acquisition of land. Mackensie Alexander Jersey