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SIVASIVA (FCA, Future CA) (4935 Points)

03 August 2013

Indian delegation studying provincial tax system of South Africa

A 32-member delegation representing various states of India is currently studying South Africa's provincial tax system to assess if it can be implemented back home.

Delegation leader A R Rathore said India is introducing reforms in its tax system, for which authorities need to research and consult widely.

"The Empowered Committee of Finance Ministers from India is tasked to introduce state-level taxes. KwaZulu-Natal (KZN) is one of the three provinces we have visited in SouthAfrica this year," Rathore said.

"We have been to Gauteng, Limpopo, but we have also toured Germany and Canada in search of best practise."

Rathore said KZN was chosen because of the special relationship that existed between this province and India since the time Mahatma Gandhi launched 'Satyagraha' for the first time during his tenure here as a young lawyer.

The province is home to about 70 per cent of South Africa's 1.4 million Indians, largely descendents of sugarcane plantation workers.

"We have interacted with South Africa's National Minister of Finance, Pravin Gordhan and his senior management team and KZN MEC for Finance Ina Cronje and her top management to engage in this country's taxation system," Rathore said.

"We have gathered useful information and we now have rich experience which we take back to India with us to work on our tax reform system," he added.

Cronje said the discussion with the Indian delegation has further strengthened ties between KwaZulu-Natal province and India.

"They had come to discuss with us how our systems work, what comes from National Treasury and specifically how our provincial tax system works. It was an exchange of ideas and we hope they have benefited from it," said Cronje.

The delegation also met the head of the KZN Provincial Treasury, Simiso Magagula.

source: economictimes

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Cabinet okays 10% IOC disinvestment; to fetch Rs 3,695 cr

The Cabinet has cleared the proposal for sale of 10 per cent government stake in Indian Oil Corporation BSE -1.46 %(IOC), which may fetch around Rs 3,695 crore to the exchequer at the current market price.

"The CCEA has approved the disinvestment of 10 per cent paid-up equity in the IOC. The disinvestment will be through Offer for Sale (OFS) method in the domestic market," an official statement said.

The IOC BSE -1.46 % scrip closed at Rs 192.90, down 1.46 per cent on the BSE. At the current market price, the sale of the 19.16 crore shares would fetch Rs 3,695 crore to the exchequer.

Government holds a 78.92 per cent stake in IOC and following divestment the stake would come down to 68.92 per cent.

The Disinvestment Department has already selected five merchant bankers -- Citibank,HSBC, UBS Securities, SBI Capital and J M Financial -- to manage the stake sale of the oil major.

IOC, the nation's largest refiner, has a paid up equity capital of Rs 2,428 crore as on March 31, 2013. It posted a net profit of Rs 5,005 crore in 2012-13, up from Rs 3,954 crore in the previous year.

The company's profit peaked at Rs 10,221 crore in 2009-10. IOC sells fuel at below-market prices, for which it is partially compensated by the government.

It is primarily engaged in refining, transportation and marketing of petroleum products and petrochemicals with an installed refining capacity of 54.2 million metric tonnes.

The company is also now venturing into exploration and production of crude oil and distribution of natural gas.

The government's disinvestment target through PSU stake sales in the current financial year is Rs 40,000 crore.

Forex reserves up at $280.163 billion as on July 26: RBI

India's foreign exchange reservesshot up by USD 960.2 million to USD 280.17 billion on the back of a healthy rise in currency assets in the week ended July 26, Reserve Bank said today.

The total reserves had slid by USD 985 million to USD 279.20 billion in the previous reporting week.

Foreign currency assets (FCAs), a major component of the forex reserves, were up by USD 914.1 million to USD 252.05 billion for the week under review, the apex bank said.

FCAs, expressed in US dollar terms, include the effect of appreciation or depreciation of the non-US currencies, such as the euro, pound and yen, held in the reserves.

During the week, the gold reserves were unchanged at USD 21.55 billion.

For the period under review, the special drawing rights (SDRs) were up by USD 30.8 million to USD 4.374 billion, while India's reserve position with the IMF was up by USD 15.3 million to USD 2.182 billion, the RBI data showed.

RBI duels with forex market to keep rupee off record low

The Reserve Bank of India intervened in the foreign exchange market on Thursday to stop the rupee's slide toward a record low as its defence of the currency, built around draining cash from money markets, came under rising pressure.

With the RBI struggling to hold the line, investors are sceptical whether the government will take swift, credible action to reduce a gaping current account deficit despite Finance Minister P Chidambaram's assurances.

"The market wants real action," said Param Sarma, chief executive at NSP Forex, a consultancy firm in Mumbai. "The government and RBI want to keep rupeeunder control to check inflation and to ultimately reverse tightening measures so they can support growth."

Sarma, along with many others, believes the government could opt to issue a bond aimed at drawing inflows from NRIs, as the central bank has voiced its opposition to a sovereign bond issue.

The rupee has lost 11.4 per cent since the start of May, and by mid-morning it was quoted at 60.54 per dollar, as RBI dollar selling brought it off a session low of 60.8325 and forestall a move back toward a July 8 record low of 61.21.

The need to shore up the economy with economic reforms is becoming more urgent given the prospect the Federal Reserve will at some point start removing its US monetary stimulus, making the global investment environment even more difficult for India.

Goldman Sachs downgraded Indian equities to "underweight" from "market-weight" late on Wednesday, noting the RBI's liquidity tightening measures are adding to the woes of an economy that grew at a decade low of 5 percent in the last fiscal year and is showing "no signs" of a pickup in investment demand.

A survey of the manufacturing sector released by HSBC on Thursday showed the slowdown in Indian factory activity deepened in July as order books shrank by the most in over four years.

Investors worry Prime Minister Manmohan Singh's weak, minority coalition will be prevented from taking bold action as it faces political gridlock ahead of general elections due by next year.

"Although the government has taken many policy initiatives on the infrastructure front and pushed through various reforms so far this year, markets may get worried about the potential policy paralysis ahead of the general elections," said Goldman Sachs in its downgrade note.

"The various government policy reforms are the key to kick-start the investment cycle and unclog the structural bottlenecks at the expected pace, especially on the infrastructure front."

ECHOES OF '91

Both Citigroup and Deutsche Bank have this month downgraded country's economic growth forecasts, citing in part the prospect that the RBI's measures will dampen investment.

Chidambaram said on Wednesday the government was looking into various options to attract inflows, including relaxing overseas borrowing rules and curbing some imports.

The economy is stuck in a quagmire of low growth, persistent inflation, a wide current account deficit and a rapidly weakening currency, but policy measures to tackle any one of these will likely worsen the others