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PM Modi, K P Oli jointly inaugurate Motihari-Amlekhganj petroleum product pipeline

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Prime Minister Narendra Modi and his Nepal counterpart K P Sharma Oli on Tuesday jointly inaugurated the Motihari-Amlekhganj petroleum product pipeline via a video link.

The over 60 km-long pipeline is the first-ever cross-border petroleum product pipeline in the South Asia region, according to a video presentation made before the inauguration.

As of now, tankers carry petroleum products from India to Nepal as part of an arrangement which is in place since 1973.

"This India-Nepal energy cooperation project is a symbol of our close bilateral relations. It will help to enhance the energy security of the region and substantially cut down on transit costs," the Prime Minister's Office had said on Monday.

Divorce insurance: Is it time for Indians to secure alimony settlements?

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Ashmit Gupta, a 38-year old Kolkata businessman who has filed for a divorce, must arrange Rs 30 lakh for the alimony his ex-wife has sought. While he has investments worth Rs 10 lakh that will pay a part of that amount, he is still to arrange Rs 20 lakh within the next few months.

Countries like Egypt are now contemplating a law to make divorce insurance mandatory to ensure that men are able to pay alimony to their ex-spouses without having to face a financial burden. Considering the financial costs linked to a divorce and subsequent payments to the spouse, it could be time for Indians to seek insurance to cover divorces as well.

While India still has among the lowest divorce rates, the numbers have doubled over the last one decade. As per Census 2011, there were 1,362,316 divorces in India. While the number is low compared to other countries, it is still a significant number.

If the average alimony amount per divorce stood at Rs 15 lakh, it is a whopping Rs 2.04 lakh crore in settlements itself for the 1.36 million divorces. Over and above that are the legal expenses and child support which would run into several lakhs of rupees.

It is estimated that the alimony payment amount in India has risen by 35 percent over the last five to seven years.

Taking an insurance policy that pays for the divorce proceedings is a financially-prudent idea. Usually taken at the time of marriage, this insurance product will provide for all financial costs pertaining to a divorce.

The premium payable depends on the earning capacity of the individual and the income profile of the couple. There is usually a period of initial two to three years during which a claim is not admissible.

As a starter, policies with a standard cover of Rs 25 lakh or 30 lakh could be offered. These would be priced at less than Rs 15,000 per annum. If any individual seeks additional insurance, top-up plans could be offered.

The amount and duration for which alimony is payable depends on how long the marriage existed. Marriages that last more than 10 years are even entitled to get a lifelong alimony.

In India, there is no cap on the amount of alimony that can be sought by the wife. In case of a lump-sum settlement, the amount could go up to one-third of the husband’s net-worth.

With Indian couples being far more open to the idea of a divorce than a decade ago, it is imperative that the financial costs will also be considered. Having insurance products available for this purpose could help sort out the financial matters and help the couple focus on other crucial matters including property division and child custody.

India Inc's foreign borrowings more than double to $4.98 billion in July: RBI

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India Inc's foreign borrowings grew over two-fold to $4.98 billion in July over the same month a year ago, according to Reserve Bank data.

Indian firms had raised $2.18 billion in borrowings from overseas markets in July 2018.

Of the total money borrowed by the domestic companies, $3.37 billion was through the automatic route of external commercial borrowing (ECB), $1.56 billion via approval route of ECB and the rest of $50.9 million was raised by issuing masala or rupee denominated bonds.

In the ECB category, the major borrowers tapping the automatic route were Adani Ports And Special Economic Zone Ltd -- which raised $750 million for rupee expenditure and $650 million for refinancing of earlier ECB, ONGC Videsh $500 million for other purposes.

Larsen & Toubro and HPCL-Mittal Energy raised $150 million and $125 million, respectively for rupee expenditure.

Among others, Aditya Birla Housing Finance; L&T Finance; GACL-NALCO Alkalies & Chemicals and India Infoline Finance raised $100 each for on-lending purposes.

In the approval route of ECB, Reliance Industries raised a total of $912.87 million in three different tranches to meet rupee expenditure and import of capital goods while REC Limited raised $650 million for on-lending.

Toyota Financial Services India was the only company that raised $50.86 million by issuing masala or rupee denominated bonds in the overseas market for the purpose of sub-lending.

Last Updated : Aug 30, 2019 01:06 PM IST | Source: PTI 8.65% interest on EPF to be notified soon: Santosh Gangwar

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The labour ministry will soon notify 8.65 percent rate of interest on Employees' Provident Fund (EPF) for 2018-19 as the finance ministry does not disagree on this rate, said Labour Minister Santosh Gangwar on Friday.

A notification by the labour ministry is required regarding the interest rate for crediting the interest amount into accounts of over 6 crore subscribers.

Besides, it would enable retirement fund body Employees' Provident Fund Organisation (EPFO) to settle on withdrawal claims on this rate. Now, the EPFO is paying an interest rate of 8.55 per cent for 2018-19 under PF withdrawal claims. The 8.55 per cent interest rate on PF deposits was fixed for 2017-18.

"The finance ministry does not disagree with 8.65 per cent interest on EPF for 2018-19. I believe that it will soon be notified," Gangwar told reporters on the sidelines of a conference on private security guards at FICCI here.

In February, the EPFO's apex decision-making body Central Board of Trustees, headed by the labour minister, had decided to raise the interest rate on EPF to 8.65 per cent for 2018-19, which was the first increase in the past three years.

In April, the Department of Financial Services (DFS), a wing of the finance ministry, had given its concurrence to the EPFO's decision to provide 8.65 per cent rate of interest for 2018-19.

The rate was raised to 8.65 per cent for the previous financial year from 8.55 per cent provided in 2017-18. The EPFO had earlier reduced the interest rate for 2016-17 to 8.65 per cent as compared with 8.8 per cent for 2015-16.

After the finance ministry's concurrence, the income tax department and the labour ministry are required to notify the rate of interest for 2018-19. Thereafter, the EPFO would give directions to its over 136 field offices to credit the rate of interest into subscribers' account and settle their claims accordingly.

According to the EPFO estimates, there would be a surplus of Rs 151.67 crore after providing 8.65 per cent rate of interest for 2018-19 on EPF. There would have been a deficit of Rs 158 crore on providing 8.7 per cent rate of interest on EPF for the previous financial year. That is why the body decided to provide 8.65 per cent rate of interest for 2018-19.

Real Estate sector boost expected this week, policy changes in the works

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The package, aimed primarily at home buyers and real estate developers, is expected this week, the paper quoted government officials as saying.

"There have been discussions on a task force for real estate similar to the one for infrastructure projects announced last week. The finance minister spoke about promoting rental housing sector. A new policy is in the works," one of the officials told BS.

Measures being considered include the creation of a task force, easing of interest subvention norms, new rental housing policy, lifting the affordable housing category cap, cutting processing time for housing applications under partial guarantee scheme, and expanding credit reach to small exporters, they added.

The task force will identify and revive stalled projects while the recent circular by the National Housing Board (NHB), prohibiting interest subvention for housing loans, would be under review.

Finance Minister Nirmala Sitharaman might also lift the affordable housing category cap in metro cities from the present Rs 45 lakh to Rs 1 crore.

The development follows long-standing demands for regulatory and tax changes as the sector suffered a steady decline in demand and a sharp liquidity crunch over the past four years.

Sitharaman, in her budget, proposed "several reforms to promote rental housing … a model tenancy law to be finalised and circulated to the states."

While announcing the first set of economic measures on August 23, Sitharaman also promised two more packages. The expectations are stronger after the finance minister and Urban Development Minister Hardeep Puri met with industry representatives.

Apart from real estate, the other anticipated announcement is goods and service tax (GST) e-wallet provision for exporters, the report added.

In June, Commerce and Industry Minister Piyush Goyal said that exporters should be able to take more and more export credit in foreign currency. The ministry is now looking at raising the share of foreign currency in total export credit much beyond the present level of about 50 per cent.

"The same has been forwarded to the RBI for consideration as its foreign exchange reserves can be used for providing a line of credit for swap to good banks for this purpose. This will result in cheaper foreign currency loans," a senior official said.

The ministry has also discussed in detail the possibility of easing norms for banks when it comes to lending export credit by extending the cap on banks from the present two percent, the official pointed out.

India's July petrol imports hit highest in at least eight years

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India's July crude oil imports declined from a year earlier, while petrol imports climbed to their highest since at least April 2011, data from the oil ministry's Petroleum Planning and Analysis Cell (PPAC) showed on Wednesday.

Crude oil imports into the world's third-largest consumer declined 1.2% from a year earlier to 19.34 million tonnes, but increased 14.6% from the previous month.

Petrol imports rose to 230,000 tonnes in July, the highest since PPAC data going back to 2011.

Government data published earlier this month showed sales of gasoline, or petrol, were 8.8% higher from a year earlier at 2.52 million tonnes.

LNG imports, meanwhile, fell to their lowest since February 2018 at 850,000 tonnes.

India's imports of crude oil have stalled in recent months, with both coal and liquefied natural gas (LNG) also soft. This could be attributed to Indian refiners adjusting to the loss of cargoes from Iran after the United States did not extend waivers to buyers of Iranian crude beyond the beginning of May.

Meanwhile, imports of oil products rose by about 9% from a year earlier to 2.81 million tonnes. Year-on-year exports fell 5% last month to 5.07 million tonnes, the data showed.

Exports in Naphtha fell to their lowest since October 2015 at 400,000 tonnes.

Free trade agreements under review

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The news comes when India is in talks for a Regional Comprehensive Economic Partnership (RCEP) which was proposed by the Association of South-East Asian Nations (ASEAN) as the biggest trade proposal. It has 16 participating countries and was expected to conclude this year.

The review will decide the future of RCEP along with other FTAs. The report pointed out that the government is also targeting to increase the share of manufacturing in the economy to 25 from about 16 percent (at current prices) by 2022.

Another reason to assess the current trade arrangement was given by tax authorities who have seen imports being brought from FTA route-- to save on raised custom duties. It sometimes beat the idea of tariffs discouraging import of certain goods. Moreover, imports from non-FTA nations could claim treaty benefits if got from the FTA route.

Large companies could have been violating these rules which undermines the swadeshi movement under Make in India.

This week, the Solvent Extractors’ Association of India had also filed a petition on behalf of Indian palm oil producers against increased imports from Malaysia hurting the domestic market. They claim that lower custom duties under the Comprehensive Economic Cooperation Agreement (CECA) have negatively impacted domestic production and sales. A probe has been initiated after the complaint.

The review will help the country implement better trade pacts if they hurt domestic manufactures.

Developers urge higher cap in metros for affordable housing segment

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The National Real Estate Development Council (NAREDCO) has recommended to the ministry of finance that the upper price limit in the definition of affordable housing for metro cities be raised from the current Rs 45 lakh to Rs 1 crore, DNA has reported.

Since land and construction cost come at a premium especially in metros, the council has sought relaxation of the norms by amendments to the Real Estate (regulation and development) Act, 2016.

This imperative amendment would bring more locations and projects under affordable housing, benefiting investors, a NAREDCO spokesperson told the daily.

Confederation of real estate developers' associations of India (CREDAI) has also on its part recommended amendment of RERA in view of soaring property prices.

Currently, to avail credit subsidy benefits for affordable housing, a home must be priced at less than Rs 45 lakh and not exceed 60 sq metre carpet area or about 850 sq ft built-up area, including overall loading.

The affordable housing segment has seen rising demand which has been aided by lower goods and services tax (GST). As per a report by Livemint, this segment has emerged as the sweet spot for both builders and buyers, even in the current slowdown.

Fiscal stimulus plans face a revenue roadblock

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With the Reserve Bank of India easing monetary policy, the theatre of action seems to have shifted to Delhi, with industry lobbies and a section of economists demanding a fiscal stimulus to boost the sagging fortunes of the economy. However, revenue constraints may limit the government’s ability to spend beyond what has already been proposed in the Budget, unless it resorts to extra-budgetary methods to boost public sector spending.

The latest data from the Controller General of Accounts (CGA) shows that the gross tax collections of the Union government in the quarter ended June grew at 1.4 percent over the year-ago period, the slowest pace since the slump following the global financial crisis in fiscal 2010. In the quarter ended June 2009, tax collections had fallen by 11.4 percent over the year-ago period. The last quarter was the worst June quarter in terms of tax collections since 2009.

The year-on-year growth rate required in the remaining part of the year (Jul-Mar) to meet the budget estimate for fiscal 2020 is now 22 percent. But even if it misses the target for the year, it does not necessarily mean that the deficit target would be missed, at least on paper. In past years as well, the government has missed revenue targets, and often made up the shortfall to a great extent by delaying payments and through off-budget financing.

However, it is worth noting that such methods are not sustainable, and over time, the government’s auditor (CAG) as well as the government’s creditors (bond markets) have become extremely wary of the government’s off-budget financing methods. They may not continue to look the other way as such accounting tricks are deployed each year to make deficit figures appear respectable. Already, speculation about a stimulus package has sent bond yields soaring (bond yields are inversely related to bond prices). If yields continue to rise, this could raise the government’s borrowing costs significantly, and negate the impact of a stimulus package.

The core challenge facing India’s public finances is its broken revenue generating system, which cannot be fixed without structural reforms. And the first item on the reform agenda must be the goods and services tax (GST).

The shortfall in the centre’s GST collections was as high as 22 percent in the last fiscal year, provisional data from CGA shows. Given the trend in monthly collections so far, the prognosis for GST collections does not appear bright for fiscal 2020 as well.

Despite pick up, GST collections remained below the required monthly rate in July


Hailed as the single biggest tax reform when it was implemented in July 2017, GST was expected to boost indirect tax revenues and improve compliance even while adding to growth

After two years of botched implementation, GST has failed to live up to its promise. A recent Comptroller and Auditor General (CAG) report shows how revenues have in fact slowed down after the introduction of the new tax.

The government’s revenues from goods and services (excluding petroleum and tobacco) in fiscal 2018, the first year of GST, fell 10 percent over the year-ago period (after these goods and services were subsumed under GST), the auditor’s report showed. With this, the growth in aggregate indirect taxes slowed down to 5.8 percent in fiscal 2018 from 21.3 percent in fiscal 2017.

While economic slowdown and GST rate cuts may partly explain the lacklustre growth in indirect tax collections, according to some economists, a complex structure may have also contributed to the disappointing revenues collected under GST. In an interview to Mint, the former chief economic advisor to the finance ministry, Arvind Virmani argued that a simpler single rate structure (along with exemptions and surcharges) would have simplified the compliance process and made tracing taxable transactions easier.

The complexity of GST returns that have to be filed by GST-payers and the technical flaws in the GSTN system has meant that tax compliance has not increased meaningfully in the post-GST era, the CAG report pointed out. The promise of a simplified tax compliance regime continues to remain elusive, it further added.

GST has not seen any significant improvement in tax compliance


The complex structure with many tax rates has made the system of input tax credit (ITC) --- the bedrock of the GST reform --- susceptible to fraud. Input tax credit is a refund businesses can claim for GST already paid on the goods and services purchased as business input. But a complicated tax rate structure with different tax rates applied to different goods and services (and in some cases different rates applied to the same product or service based on material or unit value) along with a complex set of rules has introduced several loopholes in the system.

For instance, GST rules allow real estate companies to choose between a lower rate of 5 per cent without input tax credit or a higher rate of 12 per cent but with input tax credit. Real estate companies can choose different options for different buildings (or towers) even within the same real estate complex provided they are registered separately under the Real Estate (Regulation and Development) Act. As a Business Standard report pointed out earlier this year, this allowed some real estate companies to game the system and claim higher input tax credit than they were entitled to, by opting for 5 percent tax on one tower and claiming refund for GST paid on the entire construction cost by opting for 12 percent GST on other towers.

Other reports of ‘briefcase firms’ have emerged which suggest that fake companies have been floated to issue fake invoices and fraudulently claim input tax credits.

When GST was first rolled out on July 1, 2017, it was visualized along with a self-regulating system of invoice matching, which was crucial for determining the final input tax credit (ITC) in a fair and correct manner. As per the original design, input tax credit was to be generated in the GST portal after reconciling invoice-wise details from returns filed by sellers with those filed by purchasers. But even after two years, such a system-verified and automated process has not become fully functional, the CAG report noted, underlining that this system is necessary to realize the benefits of the tax reform.

“It (automated invoice matching) would protect the tax revenues of both the Centre and the States, it would lead to proper settlement of IGST (Integrated Goods and Services Tax) and would minimise, if not eliminate, the tax official-assessee interface," the report said. “In fact, even “assessment" in the sense understood in the manual system may no longer be necessary (returns themselves can be generated by a system that matches invoices); and cases of evasion etc. can be traced by applying analytical tools and AI to the massive data that crores of invoices generate."

Unsurprisingly, the current system has led to tax leakages and errors in computation of tax revenues of both the Centre and the states. But it has also led to improper settlement of the IGST (paid for inter-state transactions), the auditor pointed out.

During fiscal 2018, Rs 2.12 trillion of IGST balance was unsettled due to incomplete information in the ledgers. This reflects delays in settlement of IGST to states. Owing to the huge unsettled balance in IGST, the GST Council in its 25th meeting held in January 2018 recommended advance settlement of Rs 35,000 crores to the Centre and the States on provisional basis, which left an unsettled balance of Rs 1.77 trillion. While the IGST funds are being transferred to states on an ad-hoc basis, these transfers are provisional in nature as the GSTN system has so far not allowed a calculation of the actual transfers that need to be made.

The CAG report also highlighted that during fiscal 2018, there was a shortfall of Rs 6,466 crores in transfer of GST compensation cess (meant for transfers to states) to the public account (where the government parks funds not belonging to it). The lower transfer to the public account inaccurately bumped up the government’s fiscal position at the end of the financial year.


If indirect taxes appear to be a mess, things do not appear bright on the direct taxes front either. While there was a spurt in the growth of direct tax collections after demonetisation, it slipped in fiscal 2019 according to the provisional tax receipt figures from CGA. The average growth in direct tax collections over the past five years was 12 percent compared to an average of 15 percent under the UPA II government (2009-2014).

Reforms such as the direct tax code which could have lent simplicity and stability to the direct tax system have remained pending for long years.

Unless the government reforms its tax structure to boost revenue collection, it will have to keep relying on off-budget funding or incur spending cuts. As a share of the budget estimate, the government’s spending in the first quarter of the current fiscal (quarter ending June) has already seen a sharp decline compared to the previous two years.

Government spent a smaller share of the annual estimated expenditure in Apr-Jun this year

capture 5

As the pressure to spend rises, and the government’s revenue projections become ever harder to achieve, would we witness new forms of tax adventurism once again?

'RBI policy to remain accommodative, more rate cuts likely in future'

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The Reserve Bank of India (RBI) policy stance is clearly pro-growth, which is critical to achieve the target of becoming a $5-trillion economy by 2025. Of late, the Indian economy has been going through a challenging phase. GDP growth, although still high in comparison to other major economies, has been falling short of expectations. Recently, the International Monetary Fund (IMF) cut the gross domestic product (GDP) growth forecast to 7 per cent from 7.3 per cent for FY20.

RBI itself has cut the GDP growth target to 6.9 per cent from 7 per cent for FY-20. It expects the first half of FY20 to clock growth of 5.8 per cent to 6.6 per cent and the second half to clock growth of 7.3 per cent to 7.5 per cent. But the risks are somewhat tilted to the downside.

The weakening of demand along with the liquidity crisis in non-banking financial companies (NBFCs) are the two biggest challenges right now, and the central bank has clearly focussed on these two issues. It raised the ceiling for banks' exposure to a single NBFC to 20 per cent of the bank’s Tier-I capital, from 15 per cent earlier. It also relaxed the definition of priority sector lending, so that banks can lend to those NBFCs that further lend to such sectors. RBI has also announced the setting up of a central payments fraud registry to track the systems for frauds. It is expected to come up with detailed guidelines by the end of August to tackle the NBFC crisis. These measures, taken to increase flows to NBFC, is credit-positive and should enhance lending.

The inflation is firmly below the target level of 4 per cent, but there are clear signs of decline in consumption. The private sector is still hesitant on committing capital expenditure. The global economic condition has also been unfavourable for quite some time. The uncertainties of Brexit and the US-China trade war are persistent, along with the political turmoil in the Middle East. In this backdrop, RBI has been taking proactive measures to spur demand growth. This was the fourth consecutive cut in the repo rate, which now stands at 5.4 per cent. The economy is expected to start coming back to its high growth path as the benefits of rate cuts are gradually passed on. And as the balance sheets of banks become cleaner, we believe that they will accelerate the passing on of rate cuts to consumers and businesses.

Given the global economic outlook and the challenges on the domestic front, the economy may take some more time to start performing as per expectations, and therefore the policy stance is expected to remain accommodative. The inflation outlook remains benign, and therefore one can expect more rate cuts in the future.

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