| First
International Financial Services Centre (IFSC) to
take off in Mumbai |
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The
government plans to setup India’s first international
financial service centre (IFSC) in Mumbai. The setting
up of the IFSC will mark the opening up of SEZs
for the service sector. The service providers in
the zone will cater to overseas clients requiring
banking, insurance, factoring and forex hedging.
According to existing rules, IFSCs will be eligible
for 100 per cent income tax exemption for three
years. |
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In
line with offshore banking units (OBUs)
planned in SEZs, the IFSCs will also enjoy
50 per cent tax exemption for the next two
years. The commerce department plans to
expand the income tax benefit to 100 per
cent tax exemption for five years, followed
by 80 per cent thereafter. These provisions
have already been incorporated in the central
legislation on SEZs, which has been cleared
by the Cabinet.
Once
the proposed SEZ legislation is enacted,
the commerce department will notify a list
of services which will be eligible for income
tax concessions. It will also frame a comprehensive
set of rules for the SEZs ,
pulling out
the
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Our Say |
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| The
government’s move is definitely
in the right direction since the
proposed SEZ will lead to employment
generation and economic activity
that will have its spin-off effects.
While tax exemption is available,
new technologies will flow in
to benefit Indian industry, which
is touted to become a supplier
of financial services for the
entire world, supporting transactions
taking place anywhere.
In
addition there is scope for developing
exclusive service sector SEZs
for various sectors, including
tourism. |
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special chapter in the EXIM Policy and provisions
under the customs and excise laws.
In
addition to the export processing zones (EPZs) which
have been converted into SEZs, the government has
also provided clearance for 23 greenfield projects.
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| More
Power added to Power Sector Reforms |
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Public
Sector monopolies like Bharat Heavy Electricals
Limited (BHEL) have always had an advantage when
it came to bagging contracts in the power sector
in the domestic market. One of the main reasons
for this was the purchase preference policy (PPP)
followed by the government. The mechanism gave public
sector equipment suppliers a “10 per cent
edge” over foreign companies in quoting for
projects. |
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Our Say |
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| With
the new Electricity Act opening
up various opportunities across
all the segments in the power
sector- be they generation,
transmission or distribution-
a continuation of such restrictive
policies would have been completely
against the spirit of such new
developments.
Suspension
of PPP will help foreign players
bag more projects now. Contracts
like the National Thermal Power
Corporation (NTPC), National
Hydroelectric Power Corporation
and Power Grid would also stand
to gain. With no element of
artificiality, the bids will
tend to be lower. Plus more
parties would bid for the tender,
and offer better technologies.
It
should also encourage more equipment
companies to set up shop in
India. They can at last look
forward to a level playing field
and increasing their portfolio
of projects in the country. |
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The
power ministry recently issued a note to the cabinet
to do away with this policy, in order to pave the
way for a level playing field. The cabinet has since
forwarded the note to the finance ministry for its
opinion. The government has introduced the PPP way
back in 1992. Initially, it was decided that the
regime would continue for a period of three years.
However, it was extended till March 1997, on the
condition that it would lapse automatically after
that date. But, for various reasons, it carried
on and was extended till March 2004. |
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