Economic Affairs – Bank Merger and other developments – August 16 to 30

Record production of Wheat and Rice is expected in 2018-19

The 4th Advance Estimates of production of major crops for 2018-19 have been released by the Department of Agriculture, Cooperation and Farmers Welfare on 19thAugust, 2019. 

As per 4th Advance Estimates, the estimated production of major crops during 2018-19 is as under

  • Foodgrains  –  284.95 million tonnes.
    • Rice  –  116.42  million tonnes. (record)
    • Wheat – 102.19 million tonnes (record)
    • Nutri / Coarse Cereals – 42.95 million tonnes.
    • Maize  –  27.23 million tonnes.
    • Pulses  –  23.40 million tonnes.
    • Gram – 10.13 million tonnes.
    • Tur  –  3.59 million tonnes.
  • Oilseeds  –  32.26 million tonnes.
    • Soyabean  –  13.79 million tonnes
    • Rapeseed and Mustard  –  9.34million tonnes
    • Groundnut  –  6.69 million tonnes
  • Cotton  –  28.71 million bales (of 170 kg each)
  • Sugarcane – 400.16 million tonnes (record)

Government removes Debenture Redemption Reserve requirement for Listed Companies, NBFCs and HFCs

The Corporate Affairs Ministry (MCA) has now amended its share capital and debenture rules to remove the requirement for creation of a DRR of 25 per cent of the value of outstanding debentures in respect of listed companies, NBFCs registered with the RBI and for HFCs registered with National Housing Bank (NHB) both for public issue as well as private placements

For unlisted companies, the DRR has been reduced from the present level of 25 per cent to 10 per cent of the outstanding debentures. Hitherto, listed companies had to create a DRR for both public issue as well as private placement of debentures, while NBFCs and HFCs had to create DRR only when they opted for public issue of debentures.

Through these amendments, the provisions relating to creation of Debenture Redemption Reserve (DRR) have been revised with the objective of;

  1. removing the requirement for creation of a DRR of 25% of the value of outstanding debentures in respect of listed companies, NBFCs registered with RBI and for Housing Finance Companies registered with National Housing Bank (NHB) both for public issue as well as private placements;
  2. Reduction in DRR for unlisted companies from the present level of 25% to 10% of the outstanding debentures.

The latest move is aimed at creating a level-playing field between NBFCs, HFCs and listed companies’ on the one hand and also between them and banking companies and financial institutions on the other, which are already exempted from DRR, an official release said.

The measure has been taken by the government with a view to reducing the cost of the capital raised by companies through issue of debentures and is expected to significantly deepen the bond market, the release added. The rules, while retaining DRR requirement for Unlisted Companies, provide for reduction from a DRR of 25% to a DRR of 10% for such companies, so as to safeguard interests of investors

What is Debenture Redemption Fund

A debenture is a debt security that lets investors borrow money at a fixed interest rate. This instrument is considered unsecured, because it is not backed by an asset, lien, or any other form of collateral. Therefore, to protect debenture holders from the risk of default by the issuing company, Section 117C of the Indian Companies Act of 1956 implemented the debenture redemption reserve mandate. This capital reserve, which is to be funded by profits issuers generate every year until the debentures are redeemed, must represent at least 25% of the debenture’s face value. Now this requirement has been relaxed for certain type of companies as described above. (Courtesy : Investopedia)

Preemptive action by government on onion prices

Onions for retailing by Safal is being made available at present from the government stock built under Price Stabilisation Fund (PSF).  It was decided by the Central Government that retail price of onion at Safal would not be allowed to exceed Rs 23.90/- per kg (for Grade A variety) i.e., the price prevailing at their outlets as on 21st August, 2019. For this, Safal will continue to receive onions from the government buffer at the same rate at which it was offered on 21st August, 2019. Safal was also asked to double the quantity of its retailing operations for onions.NAFED and NCCF were also directed toretail onions at prices similar to that of Safal through their outlets and mobile vans. Further, onions from the government buffer would be offered at cost price to large retailers for supplies to public at reasonable prices. The price situation would be monitored regularly by the department for appropriate intervention. Government will also consider strict action against hoarding and profiteering activities and evaluate the need for imposing minimum export price (MEP) on onion if the situation so demands.

What is SAFAL?

Safal is primarily engaged in retailing of fresh fruits & vegetables, But with unique product offerings like Frozen Peas, Frozen Mixed Vegetables, Frozen Sweet Corn, Frozen Jackfruit, It is a pioneer brand in Frozen Vegetables segment across India. Safal is the largest retail chain of fresh fruits and vegetables in Delhi. At present it operates about 400 retail outlets in Delhi, Noida, Ghaziabad, Faridabad, Gurgaon and 23 retail outlets in Bangalore which cater to more than 1.5 lakh customers per day. Safal provides around 120 SKUs of fresh fruits & vegetables along with a wide range of Safal Value Added products, Dhara products and Mother Dairy products. Courtesy : Mother Dairy

MCA issues circular to remove doubts/ambiguities in “appointed date” and “acquisition date” with respect to mergers/amalgamations

Companies do have the flexibility to choose the ‘appointed date’ of a merger/amalgamation based on occurrence of an event, the Corporate Affairs Ministry (MCA) has said. However, the event concerned should be relevant to the mergers between the companies, it said.

The clarification, which came in the form of a circular, will allow the companies concerned to function independently till such event is actually materialised.The MCA has further clarified that the term “appointed date” used in section 232 (6) would be deemed to be the “acquisition date” for the purpose of conforming to IndAS standard dealing with business combinations.

The clarification would lead to harmonisation of practices in ascertaining the ‘appointed date’ of merger/amalgamation and provide due clarity on the accounting treatment, thereby allowing stakeholders to align the “appointed date” of merger/amalgamation in accordance with their business considerations or legal requirements. This would also contribute significantly in the ease of doing business, the MCA has said.

What is Ind-AS?

Ind AS or Indian Accounting Standards govern the accounting and recording of financial transactions as well as the presentation of statements such as profit and loss account and balance sheet of a company. For long, there has been a heated debate about Indian companies moving to the globally accepted International Financial Reporting Standards (IFRS) for their accounts. But firms have resisted this shift, stating that this will lead too many changes in the capture and reporting of their numbers. Ind AS has been evolved as a compromise formula that tries to harmonise Indian accounting rules with the IFRS. Read More

Power Minister Shri RK Singh launches SARAL

To achieve rooftop solar targets, it is important to develop an ecosystem that ensures information symmetry, access to financing and clear market signals. Thus, the MNRE has developed the State Rooftop Solar Attractiveness Index–SARAL that evaluates Indian states based on their attractiveness for rooftop development. SARAL is the first of its kind index to provide a comprehensive overview of state-level measures adopted to facilitate rooftop solar deployment.

SARAL has been designed collaboratively by the Ministry of New and Renewable Energy (MNRE), Shakti Sustainable Energy Foundation (SSEF), Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Ernst & Young (EY). It was launched during the Review Planning and Monitoring (RPM) Meeting with States and State Power Utilities. SARAL currently captures five key aspects –

  1. robustness of policy framework
  2. implementation environment
  3. investment climate
  4. consumer experience
  5. business ecosystem

It encourages each state to assess the initiatives taken so far, and what it can do to improve its solar rooftop ecosystem. This will help states to channelize investments that can eventually help the sector grow.  In addition, such an exercise is likely to create a more conducive environment for solar rooftop installations, encourage investment and lead to accelerated growth of the sector.

The State of Karnataka has been placed at the first rank in the Index that evaluates Indian states based on their attractiveness for rooftop development. Telangana, Gujarat and Andhra Pradesh have got 2nd, 3rd and 4th rank respectively.

The Ministry of New and Renewable Energy (MNRE) has set a target of 175 GW of renewable energy capacity by 2022, of which 100 GW solar power is to be operational by March 2022, of which 40 GW is expected to come from grid connected solar rooftops. The Indian Grid Connected Rooftop PV (GRPV) segment is slowly gaining momentum with substantial interest from entrepreneurs, developers, financial institutions, development banks, end users and government entities. On a very positive note, rooftop solar PV has already achieved grid parity for commercial and industrial consumers and is fast becoming attractive for residential consumers as well.

‘Sabka Viswas’ tax dispute resolution scheme may go live from Sept 1

In the Union Budget 2019-20, the Finance Minister announced the Sabka Vishwas-Legacy Dispute Resolution Scheme, 2019. The Scheme has now been notified and will be operationalized from 1st September 2019. The Scheme would continue till 31st December 2019. Government expects the Scheme to be availed by large number of taxpayers for closing their pending disputes relating to legacy Service Tax and Central Excise cases that are now subsumed under GST so they can focus on GST.

The scheme aims to resolve nearly 1.5 lakh cases involving an amount of ₹3.75 lakh crore pending before Commissioner (Appeals), CESTAT, High Courts and the Supreme Court. These cases are related with Central Excise Duty, Services Tax and central cesses which have now been subsumed in Goods & Services Tax.

That is why these cases are called as legacy cases. Central Excise duty is still applicable for five petroleum products (crude oil-petrol-diesel-aviation turbine fuel-natural gas).

The Finance Ministry has come out with a detailed frequently asked questions (FAQs) for the scheme and now is expected to come out with detailed rules and forms. It is also working on a dedicated portal for the scheme.

The two main components of the Scheme are dispute resolution and amnesty. The dispute resolution component is aimed at liquidating the legacy cases of Central Excise and Service Tax that are subsumed in GST and are pending in litigation at various forums. The amnesty component of the Scheme offers an opportunity to the taxpayers to pay the outstanding tax and be free of any other consequence under the law. The most attractive aspect of the Scheme is that it provides substantial relief in the tax dues for all categories of cases as well as full waiver of interest, fine, penalty, In all these cases, there would be no other liability of interest, fine or penalty. There is also a complete amnesty from prosecution.

Small start-ups will continue to get tax holiday

The Central Board of Direct Taxes (CBDT) has clarified that small start-ups with turnover upto Rs. 25 crore will continue to get the promised tax holiday as specified in Section 80-IAC of the Income Tax Act, 1961(the ‘Act’), which provides deduction for 100 per cent of income of an eligible start-up for 3 years out of 7 years from the year of its incorporation.

Section 80-IAC contains a detailed definition of the eligible start-up which, interalia, provides that a start-up which is engaged in the eligible business shall be eligible for deduction, if (i) it is incorporated on or after 1st April 2016, (ii) its turnover does not exceed Rs. 25 crore in the year of deduction, and (iii) it holds a certificate from the Inter-Ministerial Board of Certification.  

Why there was a difference between DPIIT and CBDT understanding of Start-ups.

CBDT further clarified that all the start-ups recognised by DPIIT which fulfilled the conditions specified in the DPIIT notification did not automatically become eligible for deduction under Section 80-IAC of the Act. A start-up has to fulfil the conditions specified in Section 80-IAC for claiming this deduction. Therefore, the turnover limit for small start-ups claiming deduction is to be determined by the provisions of Section 80-IAC of the Act and not from the DPIIT notification. It was explained that this was the major reason as to why there was a wide difference between the number of start-ups recognised by the DPIIT and the start-ups eligible for deduction under section 80-IAC of the Act.

Ocean Energy is now Renewable Energy

In a decision that would give boost to the ocean energy in India, government has approved a proposal to declare ocean energy as Renewable Energy today.

Accordingly, the Ministry of New and Renewable Energy has clarified to all the stakeholders that energy produced using various forms of ocean energy such as tidal, wave, ocean thermal energy conversion etc. shall be considered as Renewable Energy and shall be eligible for meeting the non-solar Renewable Purchase Obligations (RPO).

Ocean Energy

Oceans cover 70 percent of the earth’s surface and represent an enormous amount of energy in the form of wave, tidal, marine current and thermal gradient. A variety of different technologies are currently under development throughout the world to harness this energy in all its forms. Deployment is currently limited but the sector has the potential to grow, fuelling economic growth, reduction of carbon footprint and creating jobs not only along the coasts but also inland along its supply chains.

  • Total identified potential of Tidal Energy is about 12455 MW, with potential locations identified at Khambat & Kutch regions, and large backwaters, where barrage technology could be used.
  • The total theoretical potential of wave energy in India along the country’s coast is estimated to be about 40,000 MW – these are preliminary estimates. This energy is however less intensive than what is available in more northern and southern latitudes.
  • OTEC has a theoretical potential of 180,000 MW in India subject to suitable technological evolution.

Types of Ocean energy

Slowdown deepens as Q1 GDP growth falls to 5%

India’s economy reported its weakest growth in more than six years at 5% in the June quarter and slowed for the sixth straight quarter, prompting the government to unleash a spate of stimulus measures to spur economic activity.

India had already lost the “fastest growing major economy” tag to China in the March quarter, when it grew at 5.8%. China’s economy grew 6.2% in the June quarter despite the ongoing trade war with the US. Indonesia grew at 5.05% in the same period.

India’s latest GDP growth number, which missed the 5.7% rate estimated by economists by a wide margin, may prompt the Reserve Bank of India (RBI) to further reduce its full-year growth forecast. It also creates ample room for the central bank to respond to the sustained economic slowdown with deeper interest rate cuts. It has already cut the repo rate by a cumulative 110 basis points this year.

“Quarterly GDP estimates show that India’s GDP growth, while high, has shown some slowdown. This is due to both endogenous and exogenous factors. Impact comes, especially, from global headwinds due to deceleration in developed economies, Sino-American trade conflict etc.,”

Krishnamurthy Subramanian, chief economic adviser in the finance ministry.

PSB merger for achieving $ 5 trillion Economy

  • Big banks with enhanced capacity to increase credit
  • Banks with strong national presence and global reach
  • Banks with scale for building a $ 5 trillion economy
  • Enhanced risk appetite
  • Thrust on NextGen technology for banking Wider offerings with enhanced customisation
  • Better ability to raise resources from markets
Courtesy- MoF

PSB Merger in Pictures

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