CABINET NOD TO PFRDA BILL
LAW WON’T SET TARGET FOR PENSION RETURNS
BS REPORTER New Delhi, 16 November
The Union cabinet today gave its nod to amendments in the Pension Fund Regulatory and Development Authority (PFRDA) Bill, which seeks to allow foreign players entry in the pension sector. Foreign direct investment (FDI) in the pension sector is likely to be kept at 26 per cent in line with the insurance sector. But, the cap will not be incorporated in the legislation.
The FDI cap will be communicated through an executive order to give flexibility to the government to change it whenever required. As a result, when the Insurance Bill proposing an increase in the FDI limit to 49 per cent is cleared, the government would have the flexibility to change the limit for pension, too.
The Bill also refrains from having a provision for assured returns to subscribers, as the government thinks it might involve huge, open-ended payments from its budget in case subscribers’ wealth doesn’t meet the minimum target.
“The government is of the view the FDI cap in pension should be 26 per cent, on a par with the insurance sector. However, it would like to retain the flexibility of changing the cap, which is why it has not been included in the Bill. The proposed legislation will not provide assured returns to the subscribers of pension schemes,” an official spokesperson said.
The clearance has paved the way for the Bill’s introduction in the Winter session of Parliament beginning on November 22.
The Bill has already been considered by a parliamentary standing committee. It will give statutory powers to the PFRDA to form rules on pension funds. At present, the PFRDA makes rules only for the new pension system.
The standing committee, headed by BJP leader Yashwant Sinha, had suggested prescribing the cap in the legislation itself and making a provision for minimum guaranteed returns. The government is of the view the foreign investment ceiling for the sector may not be specified under Foreign Exchange Management Act, 1999 (Fema) regulations.
Only for the insurance sector is the FDI cap determined, under the Insurance Act. For other sectors, including private sector banks, stock exchanges, depositories, asset reconstruction companies, clearing corporations and credit information companies, it is not determined under their respective legislation. The government also turned down the committee’s recommendation for allowing greater flexibility to subscribers for premature fund withdrawals from their accounts.
After the committee’s report came, the government has made only one amendment to the Bill. It proposed a pension advisory committee, with greater participation from employees and stakeholders, to have a look at the regulation on the lines of the insurance sector. Today’s approval was essentially for this amendment, as the rest of the Bill remains unchanged.
26% FDI cap in sector not incorporated in Bill as govt retains flexibility
THE GOVT HAS JUNKED THE RECOMMENDATION TO LET
subscribers have greater flexibility to make premature withdrawals of funds put in their accounts
ECONOMY, P4
Cabinet raises Exim Bank’s capital to `10,000 cr
Ashok Leyland to consolidate all group companies
TE NARASIMHAN Chennai, 16 November
COMMERCIAL vehicle major Ashok Leyland Ltd (ALL), aHinduja Group company, is planning to consolidate its associate companies into one.
This includes its light commercial vehicles (LCV) joint venture with Nissan and construction equipment manufacturing venture with John Deere. The company also said it was scouting for partners for building vehicle bodies in India and potential acquisition abroad. ALL is also planning to redesign sales strategy to regain lost market share.
KSridharan, chief financial officer, told Business Standard :“This (consolidation) will be one of the major steps we will take and it will be after the IFRS (International Financial Reporting Standards, which all companies have to adopt on a government-approved schedule) comes into effect. Six companies will be consolidated into one company and the financials of these companies will be taken into ALLs balance sheet.” The companies include Ashok Leyland Nissan Vehicles Ltd to manufacture LCV; Nissan Ashok Leyland Powertrain Ltd, manufacturers of powertrain to LCV vehicles, and Nissan Ashok Leyland Technologies Ltd, partner with Nissan to develop related automotive technology.
An ALL-Nissan developed LCV model, Dost, was launched recently and the partners have set a target of 140,000 vehicle sales over the next three years. Sridharan said production capacity was ready, but the supply chain needed to be ramped up.
Another JV is Ashok Leyland John Deere Construction Equipment Company Pvt Ltd. Its first product is to be rolled out next week. Then, there are Ashley Alteams India Ltd, a JV between Finland-based Alteams and ALL to manufacture aluminum die-casting, and Automotive Infotronics Pvt Ltd, to design and develop digital electronics products for the transportation sector. In all these joint ventures, ALL holds 48-50 per cent and its share of assets in these JVs were worth
`379.5 crore as on March 31, 2011, and earned income of around `51.3 crore, according to ALLs annual report.
ALL-John Deere is set to roll-out its first excavators from the Gummidipoondi facility near this city during the current calendar year.
Backhoe loaders would come first, followed by wheel loaders. “We will also supply engines to our partner,” said Sridharan.
ALL’s market share in the medium and heavy commercial vehicle segment was 22.2 per cent during the first quarter of the current financial year. It has said it is aiming for 25 per cent. The company has set a target of selling 100,000 vehicles in both the domestic and export markets.
“Non-availability of body building, for both buses and tippers, is one of the major growth constraints for the company and for the industry,” said Sridharan. He said ALL was open for strategic alliances for body building in India and for acquisitions outside India.
THE COMMERCIAL VEHICLE MAJOR ALSO WANTS PARTNERS FOR VEHICLE BODY MANUFACTURING,
and acquisitions abroad; sales strategy is being reviewed to stop market share slide
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