Fw: Cygnus Daily Business Update 24 Mar,10
G.V.Sandeep
Global Economy
No tax on payment to UK, US affiliate for professional support
Payments made by an Indian arm of a multinational to its US or UK-based affiliate for professional support service will not be taxed here in India, the Authority for Advance ruling has said in a recent ruling. The decision brings more clarity on taxation of fee for technical services, not explicitly provided for in the India-UK tax treaty. This comes as a relief to MNCs that receive professional or management services from their affiliates situated in UK or US and clears the uncertainty to an extent created by the Karnataka High Court ruling in the case of Samsung. E&Y (EMEIA) Services Ltd is a limited liability company incorporated under the laws of England and Wales, and was formed specifically to provide support in various fields such as area, global and market development to all the member entities of the Ernst & Young Global (EYG) and does not have a permanent establishment or fixed base in India. The services EMEIA’s essentially provides market development and global support services to all member entities of EYG to ensure high quality professional services to their clients. Members the reimburse costs incurred for providing these services to EMEIA, UK. Though, the payments gave rise to business profits but in absence of a permanent establishment they will not taxable here, the AAR contended.
Indian Economy
Better to act now as pressures can build
The RBI, citing inflationary pressures and an improving economy, hiked key rates by 25 basis points late on Friday, a month earlier than expected, and another increase is seen at its policy review on April 20. In the medium term, high inflation would threaten sustained economic growth. Referring to emerging pressures in Asia's third-largest economy, the factory capacity utilisation in India had risen to 72 per cent, slightly off the record level of 76 per cent scaled in 2007/08. Real estate prices were reaching pre-financial crisis levels, reflecting a further increase in demand-side pressures. Economists polled by Reuters after Friday's rate hike say the central bank is likely to raise policy rates to a slightly higher level this year than earlier expected. Most now see rates being raised by a total of 100 basis points by the end of 2010. The government expects the economy to grow by about 8.5 percent in 2010/11 and at 9 per cent after that. India's wholesale price index rose a faster-than-expected 9.89 per cent in February from a year earlier, driven by firm food prices. But many officials hope inflation will ease somewhat in coming months as winter-sown crops come onto the market.
Industry News
Agri biotech
Tropical Maize Gets Vitamin A Boost
An international team of researchers has used conventional breeding to increase beta-carotene production in maize by up to 18 fold. The research results have been reported in the journal Nature Genetics. The researchers identified rare variations of a gene known as crtRB1 that result in much higher beta-carotene production, and they introduced these variations into tropical maize varieties that are commonly grown in developing countries. Beta-carotene is a precursor to vitamin A in the human body. According to the article, the HarvestPlus (HP) research program has set a target level of 15 micrograms of beta-carotene per gram of grain as being sufficient to prevent vitamin A deficiency in areas where maize is a staple crop, including many parts of sub-Saharan Africa, Latin America, and India. This gene can reach about 57 per cent of the HP target. Rice breeders around the world have made every effort to find similar [natural] variation in rice but have not been successful.
Agri Commodities
Experts predict a small, but thriving, wheat crop
Indiana farmers are growing less wheat this year but the crop so far is thriving. Agronomist says wet fields and other weather conditions last fall delayed the soybean harvest and also pushed back the planting of wheat in the same fields for the winter growing season. In the southern two-thirds of Indiana had some of the worst planting delays. The U.S. Agriculture Department estimates Indiana farmers planted 300,000 acres of wheat this year. That's down about 36 percent compared to the 470,000 acres planted last year and a 35 percent drop from the five-year average of 460,000 acres.
Automobile
Maruti lines up Rs 2.5k-cr investment
Maruti Suzuki is stepping up investments in India, where a long line of global rivals are looking to loosen their vice-like grip on the small-car market. The company, nearly 55% owned by Japan’s Suzuki Motor, will invest around Rs 2,500 crore for supplementing engine and plant capacities and setting up an R&D centre at Rohtak in Haryana. Recently, the company had announced plans to invest Rs 1,750-crore to expand annual capacity at its Manesar, Haryana plant by 2.5 lakh units in two years. Currently, Maruti’s Manesar and Gurgaon plants can together make 10 lakh cars. Maruti, which sells every second car in India, will also increase engine manufacturing capacity to 7 lakh units from 5 lakh a year in two years to produce the K-series engines. The company’s investment push comes in the face of increasing competition from rivals such as Toyota, Honda, Nissan, Ford and Volkswagen in the lucrative small car segment, which accounts for 80% of the Indian car market.
Royal Enfield introduces Electra Twinspark 350
The iconic Royal Enfield has introduced its new Bullet model, 'Electra Twinspark 350' priced at Rs 89,846-Rs 93,846 (ex-showroom Chennai). The Eicher Group company conducted the soft-launch of the 350cc bike earlier this month as the new launch is part of its strategy to modernise its range of motorcycles fitted with unit-constructed engines.
Banking
Pvt banks to offer tax-free core bonds
India’s private banks and non-banking finance companies (NBFCs) appear set to join a list of select stateowned firms which will be allowed to offer tax-free bonds to investors, as the government seeks to broaden its avenues to raise long-term funds to build more roads, ports and power plants. The country will need over a trillion dollars over the Twelfth Plan period (2012-17 ) to improve its infrastructure. Private sector banks and NBFCs, particularly those providing finance to infrastructure sector, may be among the beneficiaries of the latest move. The Indian central bank, or the RBI, recently introduced a new category of NBFCs — ‘Infrastructure Finance Companies (IFCs)’ which will be largely lending to the infrastructure sector. These specialised NBFCs are tipped to be the first off the block in this bond issuance. The cost of funds raised through infrastructure bonds is low, as the rate of interest offered is low, but the effective return to investors is high because of the tax benefits. NUMBER of government owned entities have issued tax-free bonds at 7.5%. If a private sector entity floats such bonds, the cost could work out to 8-9 % which is still lower than raising money from banks at close to 11%. In the early half of the decade, infrastructure bonds were a hit with investors, but changes in laws in Budget 2005-06 made them less attractive and practically killed the retail market for such bonds which was worth Rs 15,000-20 ,000 crore then. Institutions such as the state owned Rural Electrification Corporation were regular issuers, earlier managing to raise funds at 6% rate. Only institutions like the government-backed IFCL now issue tax-free bonds that are picked up by institutional investors.
Bio Pharma
Panacea gets Rs 100 mn grant for swine flu vaccine
Panacea Biotec Ltd said on Monday that it received a financial assistance of Rs 100 million from the Department of Biotechnology, Government of India, for the development of the swine flu vaccine. The grant has been given as a long-term loan on a concessional interest rate of 2 per cent per annum and the firm has received its first installment of Rs 30 million, it said in a statement to the exchange.
Bulk Drugs
Albany Molecular seeks injunction against Dr Reddy's
Albany Molecular Research Inc along with Sanofi Aventis SA's US unit sought a preliminary injunction against Dr Reddy's Laboratories Ltd from distributing a copycat version of allergy drug Allegra-D. Albany Molecular, which provides drug discovery, development and manufacturing services, had sued the Indian generic drugmaker alleging infringement of patents related to the manufacturing process of the drug. Sanofi-Aventis holds the patents on the drug.
Piramal buys Cipla's i-pill for Rs 95 crore
Piramal Healthcare bought Cipla’s oral contraceptive brand, i-pill, for Rs 95 crore, to achieve its target of trebling its over-the-counter (OTC) drug business in three years. i-pill is an emergency contraceptive brand, that recorded Rs 31 crore sales last year, and competes with Mankind Pharma’s Unwanted 72, in a fast-growing, Rs 100-crore Indian market. The all-cash acquisition of the brand is part of Piramal’s efforts to grow its OTC drug business in India. The company expects to triple its OTC drug sales in three years from around Rs 100 crore now.
Education
Indian owned cookery college closes down in Sydney
Major cookery college, once listed among Australia's 100 fastest growing companies has announced voluntary liquidation leaving hundreds of students, including a large number of Indians, with uncertain future. Owned by an Indian migrant, Sydney-based Austech Institute for Further Education reportedly sent the news via e-mail leading to a demonstration by students who gathered to protest the decision and seek transfer to other institutes. A number of students had been offered discounts of as much as 10 per cent on this semester's tuition fee if they paid in advance. The federal education minister assured the students that they would not be left without options. They would be found placement in similar courses under the Tuition Assurance Scheme, or refunded their unused course fees through the Education Services for Overseas Students Assurance Fund. The regulator, the Vocational Education Training Accreditation Board, ordered the college to refund USD 2.1 million in fees to 350-odd new students but this edict was put on hold in January 2009 by the tribunal, which gave Austech a second chance. Eight months later, VETAB moved to cancel Austech's registration, citing its failure to comply with national training standards, but it launched another successful appeal.
Engineering
L&T bags orders worth Rs 1,500 crore
Engineering major Larsen & Toubro has bagged orders worth Rs 1,500 crore from various vendors for construction of hospitals, residential towers and factories. The company’s building and factories operating company, which is part of its construction division, has bagged new orders totalling Rs 1,500 crore. The company has received two orders worth Rs 627 crore from HLL Lifecare (a government of India Enterprise) for construction of hospital buildings and a Rs 342-crore contract is secured from Shree Ahuja Properties & Realtors for residential buildings, the filing added. Further, the company has bagged Rs 321 crore contract from Lucknow Development Authority.
Health Care
Pfizer, Glaxo sign 10-year vaccine deal for developing nations
Drugmakers Pfizer, GlaxoSmithKline signed a landmark 10-year deal to supply 60 million doses a year of cut-price pneumococcal Top 10 Drugmakers by sale vaccines to developing nations. The deal, brokered by the Geneva-based GAVI Alliance (Global Alliance for Vaccines and Immunization), is the first under a new scheme called an Advance Market Commitment (AMC) which guarantees a market for vaccines supplied to poor nations but sets a maximum price drugmakers can expect to receive. GAVI estimates that the introduction of new vaccines against pneumococcal disease -- which causes serious illnesses such as pneumonia and meningitis --- could save around 900,000 lives by 2015 and up to seven million lives by 2030.
Hospitality
ITC plans to open 25 hotels pan-India in next 12 to 18 months
Country's leading chain of hotels ITC Ltd plans to open 25 hotels pan-India in next twelve to eighteen months under its flagship brand Fortune. New hotels that are scheduled to be opened in next 3 to 4 months include Fortune Select Excalibur in Gurgaon and Fortune Select Loudon, in Kolkata. The brand Fortune which has four sub-brands like Fortune Select, Fortune Park, Fortune Inn and Fortune Resort could also witness some more sub-branding. The ITC group has chain of 115 hotels across India under four flagship brands like ITC-Luxury, Welcome Group, Fortune and Welcome Heritage.
ITSS
Google to phase out China search partnerships
Two days after shutting its Chinese portal over censorship, Google Inc said it plans to phase out deals to provide filtered search services to other online or mobile firms in China. It has already been shunned by at least one of those partner firms and was attacked by a state newspaper after pulling the plug on its mainland Chinese language portal Google.cn. It now reroutes searches to an unfiltered Hong Kong site. The Google dispute, which involves cyber attacks as well as Internet censorship, is one of many thorny trade, financial, political and security issues that are roiling US-China ties this year. Google's search services remained erratic across Beijing, frustrating users unsure about the future of its other services -- from maps to music -- over two months after its bombshell announcement it may quit China. While Google is the world's top search engine, it held only an estimated 30 percent share of China's search market in 2009, compared with home-grown rival Baidu Inc's 60 per cent. Activists who gathered at Google's Beijing headquarters to show support appeared to be Google's only vocal allies in China. Google said it is not providing direct access to censored searches, but will fulfill existing contracts with other firms.
Logistics
India launches ultra-luxury Maharaja train service
India has launched its most luxurious and expensive train service yet, seeking to attract well-heeled foreign rail enthusiasts prepared to pay the minimum $800-a-night price tag. For most visitors, rail travel in India is an indispensable part of any holiday, although an ability to overlook the often filthy toilets and deal with basic comfort and crowded carriages is required. The backers of the new service, which began its maiden journey from Kolkata to New Delhi on Saturday, have made every effort to ensure passengers get to see the country glide past the window with a minimum of inconvenience. The specially built new train accommodates just 84 passengers, has suites with private bathrooms and plasma televisions, two restaurants serving Indian and Western food, a bar, card tables and an observation lounge. Even the suspension has been designed to ensure a smooth ride on the sometimes rickety Indian lines and the 23 carriages have all been fitted with air conditioning and carpet throughout. Prices start at $800 for the most basic deluxe cabin and rise up to $2,500 a night for the presidential suite -- which occupies an entire carriage and includes two cabins with double beds and a toilet with a bathtub. The new Express joins a fleet of other luxury trains plying India's railway network, including the Deccan Odyssey in western Maharashtra, the Palace on Wheels in Rajasthan and the Golden Chariot in southern Karnataka. India's vast railway system, a legacy of British colonial rule, carries 18.5 million passengers every day in varying degrees of comfort -- a basic ticket on a 24-hour journey from Kolkata to Delhi can cost as little as $10. The advantage of the new service, say its promoters, is that the Maharajas' Express will travel throughout India, whereas the other services are restricted to individual states. Its first journey will be a week-long trip from Kolkata to New Delhi, via stops including the holy city of Varanasi and the Taj Mahal in Agra, but another itinerary will take it to the southwestern city of Mumbai.
Metals
Jindal to invest $10 bn in Orissa project
Jindal Steel and Power will invest $10 billion to set up a coal-to-liquid plant and a 2,000 MW thermal power plant in Orissa. The agreement with the Orissa government will be signed in the next two to three months for setting up the coal-to-liquid project. In the plant, different processes and technology will be used to convert coal into liquid fuels such as gasoline or diesel. The project includes the coal-to-liquid plant, the thermal plant and a coal washery. A coal block has already been allocated to the company in Angul district, over 160 km from here, by the central government. And the steel producer and power utility is now looking for about 2,000 hectares of land for the project.
Oil & Gas
Cairn India discovers more oil in Rajasthan block
Highly placed sources in the Petroleum Ministry have said that Cairn India has discovered new oil reserves in Rajasthan oilfields. The company is likely to make an announcement shortly. New oil reserve will increase India's domestic oil production by about 23% in financial year 2011. This essentially means that these reserves are very big. Cairn India extracts oil from the Barmer region of Rajasthan. Cairn started output from Mangala - the nation's largest onland oil find in more than two decades in late August 2009. Cairn India said oil reserves in its Thar desert field in Rajasthan have increased to 4 billion barrels of oil equivalent.
Placement
Food processing & beverages creates highest jobs per Rs 10 lakh
The food processing and beverages sector creates maximum employment on every Rs 10 lakh invested in the segment followed by textiles, agriculture, wood, paper and leather. The 'Sectoral Analysis of Direct and Indirect Employment Potential' of the chamber said that the food processing and beverages sector creates about 120 new (direct and indirect) jobs on investment of Rs 10 lakh. Textiles, wood, paper and leather segments generate about 60 new jobs on similar investment, it said, adding agriculture creates 51 jobs on investment of Rs 10 lakh. It further said the food processing and beverages segment generates almost four times more jobs outside than within itself while trade hotels and restaurants lead to much small employment creation in other sectors.
Power
Govt won't allow NTPC to sell power in open market
The power ministry has ruled out any possibility of allowing state-owned power major NTPC to sell power in the open market. The government is of the view that NTPC should concentrate on other avenues in the power sector, such as wind and solar energy, rather than focusing on making profits through the open market selling. Also, any problem or a disaster-like situation can occur in a state, and if they need power, at that point of time, NTPC cannot expect them to buy it (at market price). NTPC had planned setting up merchant plants and the output from those plants would be sold in the open market at the market prices. At present, NTPC sells 100% of its generation to the state power utilities, distribution companies through long-term power purchase agreements. This exchange takes place as per the allocation finalised by the Union power ministry and based on the tariff determined by the Central power sector regulator, the CERC. As per the Electricity Act of 2003, a generating company can supply electricity to any licensee. It can tie up for a part of its capacity in long-term power purchase agreement.
Real estate
Luxury houses tempt buyers with lower tags
Luxury homes became more affordable last year, as the financial crisis eroded prices from Monaco to Barbados. Prime real-estate values at 56 locations declined by an average of 5.5%. Monaco was the most expensive market for the second year in a row, followed by London and Paris. Wealthy individuals put off making purchases in 2009 because of concern about the economy. Prices of properties in the countryside, coastal locations and ski resorts, often bought as second homes, fell by at least 12%. The biggest declines were in Dubai, in the western part of Portugal’s Algarve, in Palma on the Spanish island of Mallorca and in Dublin. Values in each of those markets fell at least 22%. Luxury apartments and houses in cities appreciated by an average of 0.4%, led by a jump in values in China, Hong Kong, Singapore and Jakarta.
Retail
Retailers tread warily into cash-and-carry
Retail firms are making a cautious entry into the cash-and-carry, or wholesale trading, format, betting on a huge demand base of unorganised independent stores, and in a bid to lure foreign investments. Nearly 80 percent of India's $450-billion retail sector is made up of small family-run shops, according to consulting firm A T Kearney. This represents a huge business opportunity for cash-and-carry ventures. Indian allows foreign retailers to enter retail through franchise arrangements with local players, and are allowed to own up to 51 percent in single-brand retail, while 100 percent ownership is permitted in cash-and-carry ventures.
Telecom
Intel India, BSNL announce tie-up
Software maker Intel India and telecom services provider BSNL joined hands for making personal computers and broadband accessible and available to the masses. The Intel and BSNL 'Meri Manzil Mera Pehela Kadam' initiative would cover rural areas across the country over the next few months. This programme will cover the entire spectrum of connectivity solutions from BSNL and range of devices based on Intel processors including the Intel Atom Processor based Netbooks and Nettops.
Global telecom industry capex to cross USD 224 bn by 2015
Telecom service providers across the globe are expected to hike their capital expenditures to USD 224.5 billion by 2015, riding on continued high demand for mobile services in developing countries. According to the market analysis report by US-based The Insight Research Corporation, mobile operators in developing countries would continue increasing their capital outlays to meet the pent up demand for service. In developing countries, capital expenditure growth slowed in 2009, but did not turn negative due to the buoyancy provided by the growth in mobile subscriber.
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