Business Today

Keep a watch

A bird's eye view of what's hot and what's not on the government's policy radar.

By Aman Malik | Print Edition: August 12, 2007

Stay home bound?

The government is planning to temporarily restrict Indian companies from approaching the overseas markets for loans. The reason: several companies are simply realising the gains arising from interest rate difference of 2.5 per cent between the overseas and domestic markets. In cases where approval has been given, Indian companies might be told to bring home foreign loans only in phases, in a bid to check money supply and inflation. Such a move will also dissuade Indian companies from using ECB proceeds in treasury operations.

Capital control
On the other hand, the government has made it easier for foreign firms to access Indian bourses by relaxing the guidelines for issuing Indian Depository Receipts (IDRs). The eligibility criteria for issuing IDRs has been changed from the net worth-and turnover-based ceilings being followed so far, to one based on net worth and market cap limits.

However, the government has mandated that in order to issue IDRs, firms will need to have had a continuous trading record or a presence on a stock market in its parent country for a minimum period of three years.

It seems that capital controls do serve a purpose. They shepherd capital flows-a necessity when the markets are not right for a fully convertible currency. The problem is that the tool is prone to misuse.

Retail service rules in the work

Faced with a flood of proposals from retail service providers for entering the country, the government is reportedly mulling over a set of new policy guidelines. The guidelines for foreign direct investment (FDI) for retail service providers are likely to be different from those provided to retailers (the policy in its present form allows 51 per cent FDI in single-brand retail). A policy on this front could help big companies like Carrefour and Tesco, who might then be able to bundle all their services in the retailing business. These include merchandising, the key aspect. By bundling the services into a single brand, it will be able to thwart attempts by retailers to enter through the backdoor using the franchisee arrangement.

Retail Rules

  • FDI policy for retailing is already in place-single brands are allowed with 51 per cent foreign equity
  • New policy planned for services in the retailing sector
  • Companies like Carrefour will benefit from this initiative, as they can enter with a single application

Telco woes: Static Noise?

Anil Ambani
The telecom industry is in a tizzy, quite literally over thin air. At the heart of the matter is the bundling of spectrum with licences, an issue that has set off a battle royale between CDMA and GSM operators with each group alleging that the other is inefficiently using the already scarce spectrum. Also under fire from all corners is the Telecom Regulatory Authority of India (TRAI) which wants to review key licence conditions and cap the number of telecom operators in a circle (a position, the ministry shares).

This has prompted at least eight MPs to write to the regulator, opposing any such cap under the pretext of scarce availability of spectrum. The Department of Telecom (DoT), meanwhile, has recommended that that three GSM (including the state-owned BSNL/MTNL) and two CDMA operators be allowed to offer 3G services in a telecom circle at a base spectrum auction price of Rs 2,800 crore.

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