Tax dispute scheme's ambit expanded; Rs 2.5-k cr capital for state-run insurers.
State-run ports in the country, termed ‘major ports’, will get to determine the tariffs for various port-related services as well as the terms for private developers who team up with them once the Major Port Authority Bill, 2020 cleared by the Cabinet on Wednesday becomes law. As the Bill seeks to replace a 1963 Act, it will be curtains down for the Tariff Authority for Major Ports (TAMP); every port will now be governed by a Port Authority which will have the powers to fix reference tariffs for various port services.
The major-port sector hasn’t seen the required level of fixed assets creation to pare the country’s high logistic costs owing to legacy issues including the TAMP’s archaic regulatory grip. The Cabinet has also approved changes to the ‘Direct Tax Vivad se Vishwas (No dispute but trust) Bill, 2020’ to broaden its scope to cover disputes pending in various debt recovery tribunals or arbitration, other court cases and revisions issues.
Further, it cleared a proposal to infuse Rs 2,500 crore into three state-run non-life insurers—National, Oriental and United–that the government has proposed to merge. According to official sources, the new law for major ports could make the tariffs fixed by each port authority as reference numbers for the purpose of bidding for PPP (public private partnership) projects. One reason why investment in port services via the PPP route has not been very remunerative for the private investors is the high revenue share — close to 40% in some cases — that port trusts pocket. The sources said that the the Rules being framed in regard to the proposed Act would likely address this long-standing issue as well. One idea is to make the revenue share a fixed component and award the projects to the party that offers to quote the lowest tariffs.
“The idea is to ensure fast decisions are taken at the port level itself. The Bill will be introduced in ensuing session of Parliament,” shipping minister Mansukh Lal Mandaviya said. The Bill also proposes the creation of an adjudicatory board at the apex level for review of port authority’s decisions. It will have the mandate to resolve the disputes between port authorities and the PPP operators. Currently, there is no such facility within the regulatory set-up for ports and disputes are resolved through the means of courts and arbitration. Also, in case of PPP projects under stress, the board will try and find solutions before the project is referred to the insolvency tribunals (NCLAT). The board will also receive complaints lodged by users of port services and seek to address them.
In January 2018, the Cabinet took a slew of steps to spur private investments via the PPP route in state-run ports. It allowed investors to share royalty with the port authorities on discounted tariffs, rather than as a percentage of gross revenue based on tariff ceiling fixed by the regulator at the time of bidding. Other steps announced then included easier exit akin to what investors in highway projects enjoy, immunity from post-model concession agreement (MCA) threat to project viability from regulatory orders and changes in environmental and labour laws and imposition of or hikes in indirect taxes.
The Direct Tax Vivad se Vishwas Bill Bill, which was tabled in the Lok Sabha last week, seeks to cut down on nearly 4.8 lakh tax disputes involving an amount of Rs 9.32 lakh crore (up to November 30, 2019) by giving the taxpayers the facility to escape interest on the disputed tax amount and any penalty. All direct tax-related cases pending before the commissioner (appeals), Income Tax Appellate Tribunal, high courts or the Supreme Court as on January 31, 2020 are eligible for the scheme. The scheme provides that if a taxpayer avails it by March 31, 2020, then he would get complete waiver of interest and penalty. However, a taxpayer who chooses the scheme post this cut-off date will have to pay the disputed tax and 10% of it extra.
The in-principle approval for capital infusion in insurers came “in the light of the critical financial position and breach of regulatory solvency requirement” at these companies, according to an official statement. IRDAI chairman Subhash Khuntia, too, had flagged the issue of low solvency level last year. Bulk of the funds will likely be provided to National Insurance and United India, as their solvency ratio has hit precariously low levels, a source told FE.
Against the minimum stipulated level of 1.5, National Insurance’s solvency ratio dropped to just 1.04 at the end of FY19, while United India’s hit 1.05 in the second quarter of the current fiscal. Oriental Insurance’s ratio stood at 1.56 in the first quarter of this fiscal.
The infusion amount has already been earmarked in the revised estimate for the current fiscal in the latest Budget, although it wasn’t allocated when the government had firmed up Budget estimates for FY20 in July last year. For the next fiscal, however, the Budget has allocated a record Rs 6,950 crore for infusion into the insurers to keep them adequately capitalised.
Among other decisions, the Cabinet has approved a proposal to introduce the Pesticide Management Bill, 2020 in Parliament to protect the interests of farmers. It also approved protocol, amending the agreement between India and Sri Lanka for the “avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income”. An MoU between India and Iceland was also cleared for sustainable fisheries development.