According to the Times of India, IT businesses working in the STPI have been qualified for tax exemptions for the first 10 years of operation with the offer expiring after March 31, 2009.

A senior commerce ministry official told the TOI that the ministry is recommending that the exemption be extended to 2011-12. However, the ministries of finance and commerce are divided over the issue. The commerce ministry wants the tax break on exports from STPI to continue and don’t want software companies in SEZs to avail of this benefit and on the other hand, the finance ministry wants to discontinue the STPI facility and allow the same in the SEZs.

Officials are worried that companies might not be able to competitively cope if the concessions are taken out.  The IT industry wants the STPI tax benefits to be extended for five more years. The industry is one of the country’s top earners while also providing more employment opportunities.

Jul. 1 - Short Eats – a roundup of small tasty bites of Indian news straight from the nation’s dailies.

Power Tariffs set to Increase in Bangalore
Power tariffs are set to rise by as much as 20 percent for all categories of consumers in Bangalore if the Karnataka Electricity Regulatory Commission (KERC) approves a proposal submitted by the Karnataka Power Transmission Corporation (KPTC) and five electricity supply companies on Tuesday. The Times of India reported that the city has no choice but to revise the power tariff to make up for a heavy loss of funds due to an untenable power purchase agreements worth Rs 3,000 crore, made by the state government to mitigate the power crisis during summer and prior to Lok Sabha polls.

Sea Bridge Naming Upsets Oppn Party
The naming of India’s first sea bridge in Mumbai after former Prime Minister Rajiv Gandhi upset several opposition parties in the state. The move to name the sea link between the main island and its suburbs after Gandhi came in response to a surprise proposal by agriculture minister Sharad Pawar of the Nationalist Congress Party (NCP). Criticizing the decision, Shiv Sena Rajya Sabha MP Bharat Raut said it was a long-standing demand of the Sena to name the sea bridge after revolutionary leader Veer Savarkar.

Time Limit Considered for Taj Tourists
The Archeological Survey of India is considering rationing the viewing time allowed on a single ticket to India´s most famous tourist attraction, the Taj Mahal. An average 2.5 million tourists are estimated to visit the 17th century Moghul monument annually. The inflow of tourists during the peak season between October to March can be staggering —ranging from 25,000 to 30,000 domestic tourists per day in addition to 8,000 to 10,000 of foreign tourists.

After Recession, Indian Capital Markets to See First IPO
Indian Financial Market soon to see its first Initial Public Offering after a long recession struggle. Adani Power Ltd, power project Company based in Gujarat will shortly launch its IPO in the third week of July, 2009 after the passing of the much awaited budget. The Company intends to raise Rs 2,200 crore through the IPO by offloading 33.7 crore equity shares and after the IPO promoter Adani Enterprises will hold a stake of about 73.5 percent in the power firm. The current major plans of the Company are implementation of two thermal power plants in Gujarat amounting to generate 6600 MW of electricity. For this purpose the company proposes its debt financing of Rs 22,000 crore through Sate Bank of India, ICICI Bank, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).

Indian government may allow FDI in coal mining sector
A positive sign for foreign direct investment in coal mining sector for foreign and domestic private companies has been indicated by the Indian government. The Government of India is planning to open the mining sector for private companies with an intention of reducing the gap between demand and supply of coal. At present only state-owned companies like Coal India Ltd (CIL) are allowed to mine coal in India but private companies are allowed only to mine only for their captive consumption.

The Bandra-Worli Sea Link is named after Ms. Gandhi’s deceased husband and former prime minister Rajiv Gandhi. It is the country’s longest bridge at 5.6 kilometers with an eight-lane capacity that shortens time between Bandra and Worli to eight minutes.

The massive bridge with its concrete deck and steel wires is also one of the largest cable-stayed bridges in the world. Currently though, only four lanes are to be open while the other lanes will be finished by the Hindustan Construction Company Limited in the next months.

Ms. Gandhi said in a statement during the inaguration: “It is a proud moment not just for Mumbai but also the whole country. This will be a jewel in Mumbai’s development.”

“We at the center and the state, however, need to do much more to boost infrastructure development.”

The construction of the bridge was been delayed by close to four years with the budget ballooning to 16.5 billion rupees.

The toll fee for cars will be priced at 50 rupees for one-way and 75 rupees for two-way. Buses and trucks will have be charged with 100 rupees for a one-way trip.

Hopefully, the new bridge will ease traffic as more Indians are now able to afford to buy cars. India’s infrastructure is due for an upgrade as it has been sorely ill equipped to handle  the country’s needs.

The new tax system, which will replace all major central and state taxes, is expected to lower tax rates by broadening the tax base and minimize exemptions, Vijay Kelkar, Chairman, of the 13th Finance Commission told the Economic Times.

Specific plans for the GST will be announced next week by the Finance Minister Pranab Mukherjee. The GST is set to include construction, real estate and railway activities under its regime to increase government revenue.

The FDI limit on broadcasters is to be changed from 20 percent to 24 percent and 49 percent to 74 percent for television service providers, according to the proposal submitted by The Department of Industrial Policy and Promotion (DIPP).

The DIPP’s proposal complies with the new rules governing direct and indirect foreign investment. Recently, the information and broadcasting ministry had approved the clearance of 22 new TV channels.

DIPP also added that the FDI regime for ISPs without gateways be made easier. According to The Economic Times,  100 percent FDI is allowed, but Foreign Investment Promotion Board (FIPB) approval is needed beyond 49 percent.

However, ISPs will need to divest 26 percent of their equity in an Indian public offering if they want to be listed abroad. The DIPP proposal wants that the FDI cap be raised to 74 percent; doing away with the difference between ISPs with and without gateways.

Nandan Nilekani will lead the National Unique Identification Authority as chairperson with the monumental task of organizing data from the nation’s more than 1 billion citizens. Infosys is one of India’s most successful software companies and it will be the first time a corporate CEO will be given a Cabinet minister’s rank and status in the UPA.

The national ID system will remove the need for Indians to carry multiple identification cards just to be able to do such tasks as availing of public services, getting a telephone connection, paying taxes, voting and claiming benefits.

If Nilekani does deliver a world-class system that will capture biometric data of a citizen besides his/ her photograph and personal details, various central ministries can decide whether they can use this platform to meet their requirements, said Planning Commission Deputy Chairman Montek Singh Ahluwalia told Indian Express.

“I expect the first set of cards to be issued by one of the partners in 12-18 months,” Nilekani told The Indian Express.

“AI’s restructuring plan along with the request for equity infusion-cum-loan has to be submitted to them within a month. Unless a series of measures are taken to improve the airline, it will not be possible for the government to keep supporting in unconditionally. This is one last chance Air India has got,” Aviation minister Praful Patel told the Times of India.

If the restructuring pushes through Air India will start offering low fares for its domestic routes. The company will only maintain its full services on some market segments that are sure to earn profit.

Switching AI’s business model to a low-cost carrier one stems from the success seen from budget airlines like Jet and Kingfisher. Despite the company’s merger with Indian Airlines, it is still not able to do a turnaround and post profits.

The airlines has already delayed it salaries to 31,000 employees for the month of June because of cash flow problems. It also requested that its top executives not receive their salaries for July in a bid to help the cash-strapped company.

For the period 2008-2009, AI posted a Rs 5,000 crore profit loss while its working capital requirement has been ballooning from Rs 2,369 crore in March to Rs 16,300 crore in May.

Jun. 25 - Kamal Nath, the recently appointed as minister of road transport and highways, has publicly acknowledged that India’s roads are a mess says that opening up the sector for massive investment and infrastructure spending as a key area for development.

Noting that currently India builds just two kilometers of highway every day, Nath has set a target to increase this to 20 kilometers a day and has established a new financial body, the Roads Finance Corporation, to increase road construction through securitizing the required income and possibly list on the Bombay Stock market to raise funds. The new government has earmarked US$92 billion for road and highway construction with immediate effect until 2012, while the government is inviting bids for over 200 national highway projects covering over 13,000 kilometers of road at this moment.

The Indian government intends to finance the construction of India’s new roads and highways by raising financing from the overseas, including pension funds and long term investors, in addition to opening up the sector to foreign development and participation. Funding from India’s road tax and fuel sales taxes, in addition to budgetary allocations would also assist the construction. The scheme has been likened in size to the post-World War II highway construction boom that occurred in the United States.

Further Reading
India Getting Serious on Road Infrastructure

Currently three quarters of India’s oil and gas consumption is imported, and the decision to approve tax breaks has been under review after the collapse of the nations National Exploration Licensing Policy (NELP) last year.

At immediate stake is the on-going development of the country’s KG Basin, operated in the private sector by Reliance Industries, as well as various state owned oil and natural gas corporations.

The KG Basin, which commences production later in the year, should provide up to 40 percent of India’s gas needs when it reaches full capacity. An eighth round of NELP negotiations is due to be launched, with the tax break issue much to the fore.

Bidders have welcomed the NELP scheme as it has provided a far more open and transparent scheme for bidding for tenders than had otherwise been the case.

The proposal includes a ten-year tax break for new hotels, service tax and excise duty exemptions and allowing hotels to be considered as infrastructure along with airports, sea ports and railways.

“I met with industry stakeholders and will be taking up their demands to the finance minister,” Mr. Selja told the Times of India.

Like the rest of the world, India’s tourism industry has not been doing well because of the global economic crisis which was further aggravated by the tourism fallout caused by the Mumbai terrorist attacks last November.

Mr. Selja is also including proposals to trim import duty on adventure sports equipment,  excise duty on food preparations and export status for earnings of inbound tour operators.

The proposals hope to expedite investments in the hotel industry and address the shortage. More importantly, it should boost the industry when it brings in Rs 50,000 crore needed to fund the construction of more for hotels in the next 4 years.