MARKETS LIVE: Sensex slips at open, Nifty below 10,350; banks extend losses

Benchmark indices opened lower following Asian stocks that were on the defensive on Friday as worries over the US investigation into the Trump Organization tested investor nerves, already frayed by fears US tariffs could hurt the global economy and trigger a trade war.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2 per cent in early trade. Japan’s Nikkei was down 0.3 per cent.


Back home, The YSR Congress Party on Thursday moved a no-confidence motion in the Lok Sabha against the Narendra Modi government. The no-confidence motion can be accepted only if it has the support of at least 50 members in the House. The YSR Congress has nine MPs in the Lok Sabha. It has appealed to other opposition parties to support the motion. If accepted, it will be the first no-confidence motion moved, the first of this government’s tenure.

Meanwhile, India’s trade deficit narrowed to $12 billion in February, its lowest in five months, amid concern that a global trade war could hit its exports because of US President Donald Trump’s decision to hike import taxes on steel and aluminum.

Government is worried that its exports could be hit in the coming months by Trump’s decision to impose tariffs of 25 per cent on steel and 10 per cent on aluminum.

MARKETS LIVE: Sensex slips at open, Nifty below 10,350; banks extend losses

Alarm bells in BJP after UP bypoll defeat; talk of alliance in Opposition

The defeat of the Bharatiya Janata Party in all six Lok Sabha seats where by-elections were held this year has sounded alarm bells in the party in Uttar Pradesh ahead of the 2019 Parliamentary polls, while stoking speculation about the Opposition stitching an alliance together to take the BJP on after tasting success in the recent bypolls.

The BJP failed to break the jinx of repeated failures in Parliamentary by-elections in 2018 when it was defeated yesterday in Gorakhpur, the bastion of Chief Minister Yogi Adityanath, and Phulpur, earlier held by deputy Chief Minister Keshav Prasad Maurya.


The ruling party’s candidates in the two constituencies lost to the Samajwadi Party (SP), triggering a debate on whether political outfits opposed to the BJP could forge a mega alliance before the 2019 Lok Sabha polls.

ALSO READ: UP bypoll fallout: BJP withdraws two candidates for Rajya Sabha elections
The SP, supported by the BSP, romped home in the bypolls.

SP’s Pravin Nishad defeated Upendra Dutt Shukla of the BJP by 21,961 votes in Gorakhpur, a seat which had been with the BJP since 1989. Nagendra Pratap Singh Patel of SP cornered the Phulpur seat, drubbing the saffron party’s Kaushalendra Singh Patel by 59,460 votes.

As the results of the two by-election were declared yesterday, Adityanath said there was a “lesson” to be learnt from the outcome, and cited over-confidence and the inability to understand the implications of the pact between SP and BSP as the prime reasons for the BJP’s defeat.

ALSO READ: After by-poll loss, BJP leader Giriraj says Araria will become ‘terror hub’
UP Congress spokesperson Ashok Singh told PTI the outcome had brightened the prospects of the formation of a “maha gathbandhan” (grand alliance) ahead of the 2019 polls to defeat the saffron party.

“We will ponder seriously about a larger alliance keeping the next Lok Sabha polls in mind,” he said.

The Congress had contested the 2017 UP Assembly polls jointly with the SP and might want to tackle the polls together next year, too, another senior party leader told PTI, requesting that he not be named.

ALSO READ: UP bypoll result fallout: Yogi miffed with babus, mass transfers in offing
The outcome of the March 11 bypolls has sparked talk in political circles about a continuing pact between the SP and the BSP — once bitter critics in Uttar Pradesh.

SP chief Akhilesh Yadav thanked BSP head Maywati, his former arch-rival, for the support the Bahujan Samaj Party gave the SP candidates in the by-elections.

“Foremost I want to thank BSP leader Mayawati for her and her party’s support in this important fight,” he told the media yesterday.

Though he did not take any questions on prospects of an alliance in the next Lok Sabha polls, saying that all he wanted to do for the present was thank the parties which had helped SP in its “grand” victory, there is conjecture about the parties coming together to fight the BJP.

The prospect of an anti-BJP alliance meeting with electoral success was also highlighted in Bihar, where Lalu Prasad’s RJD retained the Araria Lok Sabha seat. Its nominee Sarfaraz Alam beat the BJP’s Pradeep Kumar Singh by over 60,000 votes, dealing a blow to the JD(U)-BJP alliance, which went to the hustings for the first time after Nitish Kumar returned to the NDA fold last July.

There is growing concern in the BJP which has lost all the Lok Sabha by-elections held in 2018.

“This defeat is definitely an unexpected one,” said UP BJP spokesperson Rakesh Tripathi.

He said the possible causes would be analysed at length.

“There were some shortcomings which will be reviewed at the micro-level,” he said.

Another senior UP BJP leader said the results had sounded “alarm bells” in the party.

Apart from Gorakhpur and Phulpur (UP) and Araria (Bihar), the party was defeated in the bypolls in Ajmer and Alwar (Rajasthan) and Uluberia (West Bengal).

In Rajasthan, both the seats were won by the Congress — Raghu Sharma in Ajmer and Karan Singh Yadav in Alwar.

The BJP was defeated in Uluberia, too, with the seat going to Sajda Ahmed of the Trinamool Congress.

Wednesday’s shocker for the BJP came days after its surprise win in three northeastern states, including Tripura, where it scripted history, demolishing the Left citadel of 25 years and forming its first government in the state. Together with its regional allies, the BJP also formed its governments in Nagaland and Meghalaya.

A consolidation of OBC, Dalit and Muslim votes powered SP candidates to victory in Gorakhpur, a seat represented by Adityanath for five successive terms, and Phulpur, which elected Maurya in the 2014 Lok Sabha polls.

The two leaders had won their seats by margins of over 3 lakh votes, with Phulpur going to the BJP for the first time.

In the 2014 Lok Sabha elections, Maurya defeated his SP rival Dharam Raj Singh Patel by a record margin of 3.08 lakh votes, while Aditynath bagged Gorakhpur, defeating SP’s Rajmati Nishad by 3,12,783 votes.


Alarm bells in BJP after UP bypoll defeat; talk of alliance in Opposition

Global trade war: India’s export promotion schemes challenged by US at WTO

The Trump administration in the US has challenged India’s export promotion schemes at the World Trade Organization (WTO). India has promised to fight back the charge that it was misusing export subsidies and is set to reply within the next 60 days according to WTO rules.
US Trade Representative (USTR) Robert Lighthizer’s office announced early Thursday that the US has requested dispute settlement consultations with India at the WTO over Merchandise Exports from India Scheme and Export Oriented Units Scheme among others. Similar action has been initiated over sectoral schemes including Electronics Hardware Technology Parks Scheme, special economic zones and the Export Promotion Capital Goods Scheme.
“These subsidies provide benefits to Indian exporters that allow them to sell their goods more cheaply to the detriment of American workers and manufacturers,” the USTR said. It has also cornered India at the multilateral platform, stating WTO rules prohibit nations from providing export subsidies. However, India is set to argue that the law invoked by the US — the Agreement on Subsidies and Countervailing Measures (ASCM) — allows it a window of eight years to phase out these subsidies.
The central issue
graph Developed nations including the US have long argued that export subsidies provide unfair competitive advantage to recipients, pointing out that WTO rules prohibit them. The ASCM aims to gradually lower and finally prohibit export subsidies provided by nations so that global trade becomes equitable.
However, a limited exception to this rule is for specified developing countries that may continue to provide export subsidies temporarily until they reach a defined economic benchmark of a $1000 per capita income. India was initially within this group, but was informed last year by the WTO secretariat in a report that it had crossed the threshold back in 2015.

The US now points to this fact as proof of India knowingly bending the rules to bulk up its exports by continuously expanding export promotion schemes.
“The article 27 of the agreement also provides for special and differential treatment. At the time the agreement came into force, developing countries who were above the threshold were provided with a period of eight years in order to bring down their export subsidies. We had clearly assumed that the same period of eight years is available to countries, as and when they cross the threshold,” Commerce Secretary Rita Teaotia said on Thursday. “India has submitted a paper to the negotiating group on rules to this effect every year since then”, she added.
The US also refers to official figures by India saying that “thousands of Indian companies are receiving benefits totaling over $7 billion annually from these programs.’’ It further adds that exports from Special Economic Zones increased over 6,000 per cent from 2000 to 2017. Teaotia said India would ask the US how it reached such a figure.
The larger game
However, experts caution that the US has its sights on a much larger target. “The US is playing a far larger game whereby it is on one hand petitioning the Dispute Settlement Body while also single-handedly and consistently blocking the appointment of judges to the seven-member panel. Currently, three members have retired and a fourth is set to retire,” senior trade expert and Jawaharlal Nehru University professor Biswajit Dhar said. India had repeatedly raised this issue during the last ministerial conference of the WTO at Buenos Aires in Argentina, with Commerce and Industry Minister Suresh Prabhu urging swift action to resolve the impasse.
While the US focused on China for the larger part of Trump’s first year in office, India has been a target in the recent past. Trump voiced his disappointment against “unfair” treatment of American exports to the country even as India enjoys free access to the US market.
“This is part of a larger plan to destabilise the WTO structure and force India and other nations to come into a bilateral agreement with the United States,” Abhijit Das, head of the Centre for WTO Studies, said.

Global trade war: India’s export promotion schemes challenged by US at WTO

Aircraft grounding: IndiGo, GoAir to cancel more than 600 flights

The grounding of planes due to engine malfunction have led IndiGo and GoAir to cancel around 620 flights this month. IndiGo has decided to cancel around 480; the rest are of Go Air.
The airlines will give passengers an option to choose an alternate flight or get a full refund.
IndiGo and GoAir cancelled around 70 and 55 flights on Wednesday and Thursday. The passengers who were affected were accommodated in another airline. “We have around 16 departure daily on Delhi-Mumbai route. If two flights are cancelled, we have a network to accommodate the passengers on other flights,” said a senior IndiGo official.
The Directorate General of Civil Aviation (DGCA) on Monday grounded 11 Airbus A320 neo aircraft due to recurring malfunctions in their engines. Of the 11 aircraft, eight belong to IndiGo and three to GoAir. The malfunction has occurred with sub-population of engines manufactured by Pratt and Whitney (PW).

The problem stems from a component that can show early signs of wear and is located in an area that must withstand high pressure.
According to the information given on airline’s website, IndiGo has cancelled almost 488 flights from March 15 to March 31. IndiGo will not operate 36 flights between March 15 and March 21.
Another 18 daily flights would remain cancelled between March 22 and March 24. Around 16 daily flights would remain cancelled between March 25 and March 31, according to the airline. This takes the total number of cancelled flights to 488 till March 31.
GoAir has decided to cancel138 flights between March 15 and March 22, according to the airline.
The revised schedule of Wadia group-promoted GoAir showed that the airline has cancelled seven daily flights to 10 destinations between March 16 and March 24, apart from cancelling six services per week between March 15 and March 22. A total of 138 flights stand cancelled.
The airlines has mentioned that the passengers can choose for an alternate flight and also refund would be offered to the passengers.
While an IndiGo spokesperson told PTI the airline follows all the guidelines according to the relevant provisions of the applicable regulations, to the same query, a GoAir spokesperson said, “We follow the process as specified by DGCA in its CAR (Civil Aviation Requirement). The same has also been published on our website.”
The DGCA stipulates certain norms to be followed in case of cancelled flights and in the current situation, the grounding of a total of 11 A320 neos, powered by faulty P&W engines have been done after the regulator’s directive. While IndiGo and GoAir have a total of 45 A320 neo planes with P&W engines, 14 of them are on the ground.


Aircraft grounding: IndiGo, GoAir to cancel more than 600 flights

PSBs plan tighter lending norms for corporate loans above Rs 2.5 billion

Public sector banks (PSBs) will discourage multiple banking arrangements for companies with exposure of more than Rs 2.5 billion in the banking system and will move all such loans under the consortium of banks for better monitoring.
“In case of multiple banking arrangements there is no discipline. There will, preferably, be consortium lending for loans above Rs 2.5 billion,” M S Sastry, deputy managing director and chief risk officer, State Bank of India, said on Thursday.
All chief technology officers, chief risk officers and executive directors of PSBs met in New Delhi for a three-day workshop from March 12 to prepare a road map that banks can follow to strengthen their risk mechanism systems.
The banks will need approval from their respective boards and implement the measures agreed upon. These include strengthening information technology systems in three to six months.
The workshop was organised after the department of financial services asked banks to submit a report on how to strengthen risk management in the aftermath of Rs 129-billion letters of undertaking scam at Punjab National Bank.
ALSO READ: Nirav Modi fraud: Public sector banks expect PNB to honour LoUs
Existing accounts with exposure of above Rs 2.5 billion will also be moved to consortium lending, Sastry said.
Companies take loans from separate banks with different credit limits. Though the credit limits will remain the same, a consortium of lenders will be formed for better control and coordination.
“In a multiple-bank arrangement, banks are not aware of the transactions that take place between the borrower and other lenders. Under a consortium, the control will be better. All the loans will progressively be brought under consortium and we feel genuine borrowers will have no issue with such an arrangement,” said an executive director of a PSB present at the workshop.
The executive added there will be common documentation, same collateral and more financial control over transactions under consortium lending.
There will be a common loan document with standard covenants to be followed for consortiums and the cash management facility will be entrusted upon one bank in the consortium.

Earlier this year, the government had said that the number of lenders under consortium will significantly reduce from 20-22 banks to a maximum 10 banks for effective coordination between banks.
PSBs have decided to further tighten lending to corporates by asking promoters to give equity upfront and assessing the quality of equity by verifying the loss absorption capacity of firms.
ALSO READ: Except for PNB, no unauthorised LoUs issued by PSBs: SBI official
PSBs will also deter from funding the interest during the construction period.
The Reserve Bank of India (RBI) has allowed banks to fund project cost overruns without treating such loans as “restructured assets”. Banks fund additional interest during construction that may arise due to delay in completion of a project.
State-owned banks will organise branch-level risk awareness workshops to create awareness among employees. The bank staff will be encouraged to do whistleblowing in case they observe any wrongdoing. “Staff awareness will go a long way in strengthening risk management in banks,” Sastry said.
Banks will strengthen their ‘know your employees’ systems by monitoring behaviour of all staff through a centralised IT process. “This will work by taking feedback about staff in key roles from bank branch managers,” said a bank executive.
ALSO READ: ‘RBI to be Neelakantha’: Urjit on Nirav Modi PNB fraud; top 10 developments
PSBs further decided to strengthen their IT systems, including integration of core banking system (CBS) with SWIFT by April 30. Two executives at PNB’s Brady House branch in Mumbai were able to bypass the system by issuing fraudulent letters of undertaking as the bank’s CBS and SWIFT were not integrated.
A senior bank executive said that only three-four out of 21 PSBs have fully integrated SBS with SWIFT at present. “We are confident that both the systems will be integrated by all banks by April 30,” Sastry said. The banks will restrict SWIFT transactions during business hours of the branch and the reconciliation process of a bank’s foreign branch account, known as Nostro account, will be done thoroughly. Further, each bank will establish Onsite Cyber Security Operation Centre (C-SOC) to monitor all the IT systems. The banks will also bring all software applications under the control of corporate centre of their IT department to ensure there is no misuse of system.

PSBs plan tighter lending norms for corporate loans above Rs 2.5 billion

Income tax department asks 10 PSU firms to pay more tax

The income tax (I-T) department has asked top 10 public sector undertakings (PSUs), including State Bank of India and Oil and Natural Gas Corporation, to cough up more tax on demands of earlier years, some of which may be disputed.
According to sources, this is a pre-emptive measure to ensure its target for collection is met. The final date is Thursday for payment of advance tax by companies. “As advance tax accounts for a major percentage of total direct tax collection, we are anticipating growth of 18 per cent in this quarter,” said an official.
However, if advance tax revenue fails to meet the expected growth, these PSUs could be asked to pay taxes on past demands raised against them. A tax official says the rules provide for raising of reasonable assessment orders for the financial year, in a time-bound manner. A payer wishing to appeal against past tax demands will have to deposit a fifth of the total sought to get a stay, pending disposal of the case with the commissioner of I-T (appeals).
The latter is the first stage for a redressal. A further appeal may be had at the appellate tribunal and then the high court. The authorities may also ask for a deposit more than 20 per cent in certain circumstances, in case the tribunal or court has favoured the I-T demand.
Income tax department asks 10 PSU firms to pay more tax “If the judgment goes in favour of the payer, the amount paid will be adjusted or refunded by the department,” said Rahul Garg, partner at consultancy PwC.
Sources said inconsistency in the advance tax outgo by companies had prompted the department to take the present initiative.

Companies often defer paying advance tax till payment accrues and this could be pushed to the next financial year. Beside, sales in some sectors have been adversely affected by implementation of the goods and services tax. Banks, pharmaceuticals and software are going through a rough patch.
Between April and December 2017, Rs 3.8 trillion of advance tax was collected, a rise of 12.7 per cent over the previous year. Total direct tax collection in the first 11 months of 2017-18 was 19.5 per cent higher, at Rs 7.4 trillion. The Central Board of Direct Taxes had revised the target for direct tax collection to Rs 10.05 trn (personal income tax and corporate tax), up from the budgeted Rs 9.8 trn.
Advance tax is a system of staggered payment across the year, in four quarterly instalments. According to the Income Tax Act, companies are required to pay 15 per cent of their total advance tax by June 15, followed by 30 per cent each in September and December, and the remaining 25 per cent in March. Payment is considered a barometer of a company’s performance.


Income tax department asks 10 PSU firms to pay more tax

LTCG relief: Govt extends indexation benefit to investors of unlisted firms

Giving some relief to investors, the government on Wednesday extended indexation benefit for computing tax liability on sale of shares listed after January 31, though capital gains arising from such transactions will continue to be taxed at 20 per cent.

The indexation benefit- which takes into account the impact of inflation on acquisition cost- will not be available on gains made from sale of listed securities, as per the amendments to the Finance Bill, which was passed by Lok Sabha on Wednesday.


The 2018-19 Budget had after a gap of 14 years reintroduced 10 per cent tax on long-term capital gains(LTCG) exceeding Rs 1 lakh from sale of shares.

Currently, 15 per cent tax is levied on capital gains made on sale of shares within a year of purchase. However, LTCG tax is nil for shares sold after a year of purchase.

LTCG on sale of unlisted shares is taxed at 20 per cent, while in case of short term capital gains it is 30 per cent.

The finance ministry had received various representations demanding removal of LTCG tax.

Nangia & Co Managing Partner Rakesh Nangia said the amendment addresses the concerns of the community in respect of capital gains arising on transfer of unlisted shares that get listed after February 1, 2018.

“The Finance Bill provides that the indexed cost of acquisition of such shares shall be considered for the purpose of computing capital gains. This amendment has partly addressed the concern, since the Cost Inflation Index may not completely account for the rise in the fair market value of such share,” Nangia said.

The amendment seeks to provide that the fair market value of shares which are unlisted on January 31, 2018 but listed on date of transfer shall be indexed as per cost of acquisition.

“This will also apply for unlisted shares which are substituted in tax neutral transfers (like amalgamation, demerger, gift, succession, etc) for shares which are listed on date of transfer,” EY India Tax Partner Raju Kumar said.

Besides, the government has introduced an amendment to ensure that the Public Provident Fund (PPF) accounts are not attached in case of loan default.

The amendment has been made in the Government savings Banks Act, 1873, through the Finance Bill, 2018.

Nangia & Co Director Direct Taxation Shailesh Kumar said the amendment intends to protect the retirement benefits/ social security of such person, who may have defaulted in repayment of debt for any circumstantial reasons.

The Finance Bill, which will now be taken up by Rajya Sabha, will become an Act once signed by the President.

Observing that Sensex and Nifty have lost more than 7 per cent since February 1, 2018, DGM Naveen Wadhwa said investors were expecting some relief from the government like deferment of new capital gains tax or increase in the threshold limit from Rs 1 lakh to Rs 2 lakh.

“The only noteworthy change is that of allowing the indexation benefit to shares which were unlisted as on January 31, 2018 but are listed on the date of transfer which happens to be on or after April 1, 2018,” Wadhwa said.


LTCG relief: Govt extends indexation benefit to investors of unlisted firms