Back and forth

Written by fe Bureau | Updated: Jan 31 2010, 05:36am hrs
Week 4: January 25-30

Jan 25

Higher support likely for finance minister Pranab Mukherjee from Reserve Bank of India to balance his Budget. The RBI is expected to give the finance ministry close to Rs 5,000 crore more than the Rs 25,000 crore it paid the government as dividends in the current fiscal.

Jan 26

The petroleum ministry urges the finance ministry to give oil & gas producers and refiners a slew of tax breaks in the forthcoming Budget. It also makes a strong case for including auto and jet fuels in the proposed goods & services tax (GST), against the wishes of state governments. The move is prompted by petromins attempt to incentivise investments in the capital-intensive sector through further tax breaks, and avoid the complications of keeping a part of the petroleum industry in GST and the rest out of it.

Jan 27

The government allows Indian arms of foreign firms to use internal accruals for reinvestment in downstream sectors, provided they are reckoned as debt and comply with relevant external commercial borrowing (ECB) norms. The new regime would let these firms, owned or controlled by foreign companies, to bring in additional capital without breaching the foreign direct investment (FDI) caps, as the reinvested funds are not treated as equity capital. The move would greatly ease the cash flow of foreign companies present in India and enable them to compete with local firms on a level-playing field. Currently, FDI caps in key sectors impede the downstream investment plans of companies incorporated in India as wholly owned or majority-owned by foreign firms.

Jan 28

Software major Oracle Corp completes the takeover of hardware company Sun Microsystems Inc for $7.4 billion. The deal, announced nine months ago, would transform the IT industry. The two companies, which have a significant presence in India, together employ more than 26,000 people in the country. Oracle has more than 25,000 employees in India, while Sun Microsystem has 1,200 people. The Sun Solaris operating system is the leading platform for the Oracle database, Oracle's largest business. With the acquisition of Sun, Oracle can optimise Oracle database for some of the unique, high-end features of Solaris.

Jan 29

A day after Toyota Motor Corporation of Japan decided to suspend sales in the US of eight modelsincluding the Camry, Americas best-selling car, and the Corollafollowing a massive safety recall, its Indian subsidiary says there would be no such recall of these models in India. Toyota last week ordered the unprecedented US recall involving 2.3 million vehicles to fix accelerator pedals that could stick and cause acceleration without warning. Toyota is also halting production at six North American car assembly plants, beginning the week of February 1, and gave no date on when production could restart.

Jan 30

The Reserve Bank of India increases mandatory cash reserve of banks held by it by 75 basis points in a bid to suck excess liquidity to combat rising inflation. However, short-term lending and borrowing rates between RBI and banks were kept unchanged, leading to speculation that banks' commercial lending rates may not change. The apex bank also upped its economic growth projection to 7.5% from its earlier estimate of 6% for the current fiscal. The 75-basis point increase in CRR to 5.75% is expected to suck out at least Rs 36,000 crore from the system. The move is to check food inflation spreading to other sectors.

In a surprise move, the government postpones to the next fiscal auction of spectrum for 3G telephony which was expected to bring in Rs 35,000 crore to the exchequer. According to senior officials in the Department of Telecom, Law Minister Veerappa Moily, who is member of the EGoM, has opined that the auction should he held when the spectrum is available. Officials said that the auction is expected to take place in August-September this year. It is pertinent to mention that the Ministry of Defence had agreed to vacate the spectrum only during middle of this year.

Energy mogul Mukesh Ambani and steel czar Lakshmi Mittal make it to the Forbes list of billionaires combining massive fortunes with political clout. Through his industrial might, India's richest person, Mukesh Ambani, ranks eighth, says the US business magazines annual list, topped by Michael Bloomberg, mayor of New York City. Mittal ranks 13th.