Economy News Notes

‘Not to impact Indian arm'

• Digital imaging firm Kodak India on Thursday said the bankruptcy filing by its parent in the U.S. would not impact operations here and it would continue to do normal business.
• Kodak India declined to disclose its total number of employees and sales performance. It has presence in three segments — commercial printing, consumer digital imaging and motion picture in the country.

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Indian air not clear for foreign airlines

• As the centenary celebrations (1911-2011) of civil aviation in India taper off, all the airlines recently faced a rap from the aviation regulator for cutting corners on safety-related issues due to mounting losses and perceived lack of funds but the carriers can heave a sigh of relief as the government on Tuesday decided to consider allowing foreign airlines pick equity in Indian airlines.

  • It would provide access to global routes, managerial expertise and synergy benefits. It brings us closer to the vision of making India a global aviation hub a la Dubai and Singapore.
  • Even if foreign airlines come forward to pick up stake in Indian carriers, they should also be ready to pick up debts and other liabilities.
  • Norms of the Securities and Exchange Board of India (SEBI) will also be applicable to foreign airlines, meaning they would need to pick up shares of the Indian carriers from the open market as well.
• As per the existing norms, foreign airlines, if allowed, will be able to pick up to 49 per cent stake in publicly quoted carriers, aviation analysts say. In such a scenario, only Jet Airways, Kingfisher and SpiceJet would qualify. Other private carriers such as GoAir and IndiGo are completely privately-owned.
• The Federation of Indian Airlines (FIA) has also favoured the current policy disallowing foreign airlines to invest in Indian carriers.

  • In a global environment where restrictive foreign ownership in the airline industry is the norm, not allowing foreign carriers to invest protects Indian carriers for being targeted for acquisition
  • The FIA pointed out that “sovereignty and national interest are usually the reasons that most countries do not allow fair free open-market competition in their respective airline industries.''
• The current FDI guidelines state that no Indian airline operator would enter into an agreement with a foreign carrier giving the latter “the right to interfere in the management of the domestic operator or to have effective control in the management.''

Regulator to vet gas marketing margin

• The oil regulator, Petroleum and Natural gas Regulatory Board (PNGRB), has been asked by the Government to look into the issue of “marketing margin” being charged by private and public sector companies, including Reliance Industries Limited (RIL) and GAIL India, for not only natural gas but also liquefied natural gas (LNG) and coal bed methane (CBM) gas.
• The Petroleum Natural Gas Regulatory Board has now been entrusted with the task of determining the quantum of marketing margin chargeable on sale of natural gas to end-consumers by a marketing entity on the basis of the marketing costs incurred by it

Bankers seek changes in tax laws to woo fixed deposits

• Bankers (including State Bank of India (SBI) Chairman Pratip Chaudhuri) pitched for changes in tax laws to incentivise fixed deposit savings in banks, suggested various steps for attracting funds for infrastructure development and sought an improvement in the country's bank credit to GDP (gross domestic product) ratio as it would lead to higher input, employment and taxes as well.
• Chief executives of public and private sector banks pointed out that while country's savings rate was at a reasonable level of about 32 per cent, only a third of such savings reached banks
• They also said that a significant suggestion to promote savings would be the removal of tax deducted at source (TDS), which is now levied on interest income accruing from bank deposits.

  • Now, in bank deposit, if a depositor has given the PAN number, then in no way deposit interest can escape from the income-tax net. 
  • So, anybody who has furnished the PAN number, should not have to pay any TDS because that interest would any way be captured into income.
• Alongside, bankers also sought a tax break on earnings frm term deposits so as to provide a level playing field with mutual funds.

  • Level-playing field means that bank deposit interest for deposit of five years should be given the status of a capital.
• Another major demand by bankers was that at a time when banks were facing higher NPAs owing to distressed sectors such as power, aviation and textiles, the provisioning that is made for NPAs should be completely tax exempt.
• Bankers also suggested that there should be a separate taxation window for pension funds and long-term funds and stressed the need to support infrastructure funding. A demand was made to make banks eligible entities to issue tax free infrastructure bonds