20.02.2007

• FIIs may be out of FDI aviation cap
• We all know that there is a cap of 49% for FDI in aviation.
• The RBI has clarified that the sectoral cap is not a composite limit. This means that FIIs can invest beyond the stipulated 49% limit through secondary market (meaning stock markets) purchases.
• What are zero tax companies? How do you bring them to tax?
• Normally, a company is liable to pay tax on the income computed in accordance with the provisions of the IT Act, but the profit and loss account of the company is prepared as per the provisions of the Companies Act. There were a large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the IT Act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies were popularly known as zero-tax companies.
• In order to bring them to tax, MAT (Minimum Alternate Tax) was introduced through Section 115J w.e.f 1988-89. According to this, if taxable income of a company in respect of previous year and onwards is less than 30% of its book profit, the total income of such company chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30% of such book profits.
• The Rio Carnival
• It starts on Saturday, and ends on Fat Tuesday, or Mardi-Gras. The first records of Carnival festivities in Rio de Janeiro date back to 1723. Immigrants from the Portuguese islands of Açores, Madeira and Cabo Verde introduced here the Entrudo. The idea was basically getting everybody soaked wet. People would go out in the streets with buckets of water and limes, and everybody could be a potential victim. Even Emperors took part in the fun.
• Carnival 2007 happens from February 17 (Saturday) through 20 (Tuesday).
• The Carnival is known more for its samba dancers.
• King Momo – is the lord of misrule. King Momos, King Momus, (Rei Momo in Portuguese or Rey Momo in Spanish) is considered the king of Carnivals in numerous Latin American festivities, mainly in Brazil and Colombia. His appearance signifies the beginning of the Carnival festivities. Each carnival has its own King Momo, who is often given the key to the city. Traditionally, a tall, fat man is chosen to fulfill the role.
• Superb revenue collection for the country
• As against the budgeted estimates of Rs. 4,42,153 crores for 2006-07, the expected collections are at Rs. 4,95,000 crores.
• This figure is about gross revenue collections. It includes all direct and indirect taxes.
• 7 more companies given the Navaratna status
• Bharat Electronics, National Mineral Development Corporation, Rural Electrification Corporation, Power Grid Corporation of India Limtied, Power Finance Corporation, Hindustan Aeronautics and National Aluminium Company.
• This takes the total tally of navaratna companies to 16.
• Facultative Reinsurance
• Also known as fac cover, it is a contract to purchase reinsurance for a specific project. Since most of the risk is borne by the reinsurer, the terms of cover are also decided by the reinsurer. An insurer buys fac cover if it has to provide cover to a project too big for its balance sheet. In India, most of the oil refineries require a facultative reinsurance cover as any large claim could result in wiping out the balance sheet of an insurance company, if the risk were to be retained by the insurer.
• Some sensible comments made in the context of the Samjhauta express bombings in the ET editorial
• New Delhi should realize that Pervez Musharraf does not have complete control over Pakistan-based terrorist groups. Large sections of Pakistani society, which view secular modernity with suspicion, are in the thrall of political Islam. Communal carnages in India, like the 2002 post-Godhra pogrom, together with the Indian state’s failure to deliver substantive justice to victims of communal riots, have only legitimized the specious two-nation theory that has been its ideological ballast. New Delhi, even as it continues to engage Islamabad vigorously, must deliver on its constitutionally ordained promise of secularism. That is important if it is to be seen as a trustworthy partner in peace by all of Pakistan.
• Fertilizer subsidy in India
• As against the budgeted Rs. 18,752 crores, we are spending about Rs. 33,000 crores on this subsidy.
• The subsidy administration mechanism leaves much to be desired. How much of this subsidy actually reaches the deserving – small and marginal farmer is anybody’s guess. The payout to the fertilizer companies are based on a cost-plus formula. This is a perverse incentive for ‘gold-plating’.
• Need for labour reform
• With the economy booming for the last few years, absolute poverty has been cut in half and the country seems to be on the threshold of achieving middle-income status soon.
• But, India’s manufacturing sector still accounts for less than 15% of the GDP and employs less than 15% of the work force.
• Most manufacturing jobs in India are in the informal sector, characterized by low productivity and wages and to which labour laws do not apply. In India, small and informal firms employ about 40% of our workers. India’s organized manufacturing sector employs about 13% of the total labour force of about 45 crores (450 mn).
• There are currently about 47 central and 157 state laws affecting labour markets.
• What is needed is a simplification of all these.
• The fiscal turnaround in states
• The combined revenue deficit of the state governments is budgeted to decline to 0.1% of GDP in 2006-07, down from a massive 2.7%.
• States’ combined fiscal deficit, too, is projected to drop to less than 3% for the first time in the last decade to 2.8% in 2006-07.