India Regulatory Brief: New Indian Accounting Standards, Changes to Environmental Law
India announces revised roll-out for new Indian Accounting Standards
On January 2, India’s Ministry of Corporate Affairs announced a revised plan for the implementation of the new Indian Accounting Standards (IndAS), which largely follow International Financial Reporting Standards (IFRS). If passed, the IndAS will bring Indian company accounting procedures in line with global corporate accounting standards.
The new IndAS is applicable to large companies on a voluntary basis for accounting periods beginning on or after April 1, 2015, and on a mandatory basis for accounting periods beginning on or after April 1, 2016. The new IndAS is expected to attract significant foreign investment. However, despite wide acceptance of the international financial integration benefits, few domestic companies have operational plans for the change, owing to transitional costs, compliance burdens, or pending evaluations.
Changes to environmental law
On January 5, Environment Minister Prakash Javadekar told of the establishment of “a new green regime in 2015”, confirming amendments to five key environmental laws to be introduced in the upcoming budget session of Parliament. If sanctioned, the amendments will alter the definition of ‘forests’ to withdraw legal cover for any man-made plantations or green zones notified after 1980; and further alter the process for filing appeals with the National Green Tribunal.
The amendments aim to improve ease of doing business in India by reducing the administrative burdens of the Forrest Conservation Act (FCA) approval process, said to hinder industry growth by delaying the execution of infrastructure and construction projects. The changes present significant opportunities for business, but may result in significant environmental disputes.
Subsidy for rooftop solar power panels to be lowered
On January 2, the Union Ministry of New and Renewable energy announced a reduction of up to 15 percent in the subsidy for the installation of rooftop solar power panels; an initiative stemming from the Centre’s bid to promote renewable energy nationwide.
Last year, the Haryana government made it mandatory for all buildings on plot size of 500 square yards or more to install rooftop solar power systems by September 2015. The Centre initially offered a 30 percent subsidy on installation costs on a ‘first-come-first-serve basis’, but has since announced that the subsidy is likely to be reduced by up to 15 percent.
Despite the subsidy reduction, the initiative forms part of a larger national government trend which is exploring domestic and international models for backing the renewable energy sector. The Centre’s encouragement of renewable energy represents a market shift which will open up opportunities for investment in the future.
Bupa set to increase stake in Indian venture
On 5 January, UK-based health insurance company Bupa announced it would increase its stake in Indian venture – Max Bupa – to 49 per cent from 26 per cent, becoming the first to do so since the government raised the FDI limit to 49 percent via the Insurance Laws Amendment Ordinance of 2014.
India’s insurance sector is projected to increase to US$400 billion by 2020, up from US$66 billion in 2014. Of the 52 companies offering insurance products in India, a mere 24 offer life insurance, yet India’s life insurance sector is among the largest in the world, holding 360 million life insurance policies. The ordinance forms part of the BJP government’s reform to enhance foreign equity participation in India and represents a significant opportunity for foreign firms to increase investment in the country’s under-serviced insurance market.
A market to watch:
Large property deals are on the up and up in Mumbai. Last year saw property deals worth over Rs 44 billion (approximately US$70 billion) in Mumbai compared to Rs 9.10 billion (approximately US$145 million) in the previous year. Experts have attributed the rise to various changes in the market including: increased awareness of development control rules, rising foreign investment and market consolidation.
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