Chennai's new Airport Terminal inauguration

The Airports Authority of India is gearing up to make Chennai airport a hub for air travel in south India.
The two new terminals at the airport will be inaugurated by vice-president Hamid Ansari on Thursday, but it will take more than a month to make them ready for passengers.
The existing terminals will be re-modelled to increase the total passenger-handling capacity to 40 million passengers a year. Now, more than 12.4 million passengers a year use the airport. The new terminals and upgrading of air side infrastructure cost Rs.2,012 crore.
“We commissioned the Centre for Asia Pacific Aviation to conduct a study and recommend suggestions to make Chennai a hub. It gave a few suggestions to augment passenger capacity of the airport to 40 million. We will get more space when old terminals are demolished and rebuilt to match the size of the new buildings and then there are plans to make better use of available land,” said Agrawal.
AAI would be redesigning its master plan to include these changes, he added.

“The new terminals will be thrown open to passengers in a month. They will be operationalised in a phased manner. There are some issues that need to be sorted out with airlines,” said Agrawal.
Airlines had earlier complained that there was no inline baggage scanning system and steep ramps made it impossible to handle baggage at the basement. A senior AAI official said “airlines should use better powered vehicles to transport baggage rather than use farm tractors.”

GST update

The Centre and state governments have reached a broad understanding on the structure of the proposed goods and services tax (GST), raising hopes of an early rollout of the UPA government’s ambitious indirect tax reform.
The central government has agreed to drop the contentious dispute settlement body in the Constitutional Amendment Bill and also decided on a partial rollout of GST, giving states the flexibility to join or exit the framework.
The key BJP-ruled states, however, continue to have some issues.
“There is broad consensus on the design of GST...Certain issues require more discussion,” Sushil Modi, Bihar’s Deputy Chief Minister and Chairman of the Empowered Committee of State Finance Ministers said.
A day earlier, differences over the issue of compensation for reduction in central sales tax rates had been ironed out.
The GST proposes to replace the plethora of indirect taxes with one single levy, a system that will help all stakeholder governments, business and consumers by preventing leakage, cascading of taxes and lowering the incidence of tax.
On the second day of the meeting, the panel of state finance ministers approved the report of a sub-committee set up by Finance Minister P Chidambaram on GST design, and decided to set up panels to look into three aspects of the tax regime: revenue-neutral rate and place of supply rules, exempted list of items, threshold for the tax and issues regarding dual control for small traders, and integrated GST that would be levied on inter-state sales and imposition of value-added tax on imports.
The panel also decided to bring petroleum products within the ambit of GST while keeping alcohol out of the proposed regime.
On Monday, the panel had agreed on a new compensation formula for phasing out central sales tax.
“There is 90%-95% consensus on all key issues...the groups have been set up as everybody wants to know the mechanics of how the structure would actually work,” said a senior official who was present at the meeting.
However, some BJP-ruled states continue to have reservations.
“There is no consensus... Most states have concerns on all key issues,” said Raghavji, finance minister of Madhya Pradesh.
The Centre will now approach the Parliamentary Standing Committee on Finance for changes in the Constitutional Amendment Bill, including dropping the dispute settlement body and a new mechanism to describe consensus in the proposed GST council.
As per the agreed proposal, the Centre’s vote will carry one-third weightage while the strength required to pass a proposal would be three-fourth of the members in the council. States will also have the power to raise tax rates in times of calamity.
The Constitutional Amendment Bill, tabled in March 2011, will allow the Centre to tax goods at the retail level and states to tax services. At present, the Centre can tax goods at the factory gate and the latter cannot tax services.
The Bill has been opposed by some states as they see the dispute settlement body and GST Council as encroachment on their autonomy.


A day after resolving the contentious CST issue, state finance ministers formed three subcommittees to look into other matters like IT infrastructure for smooth rollout of the goods and service tax regime.
“The deadlock over GST issue is now over. It is historic as there was a general consensus for introduction of GST,” Sushil Kumar Modi, the chairman of empowered committee of finance ministers, told reporters.
Though there was broad consensus over many features of the GST Bill, the empowered committee decided to set up three subcommittees to resolve issues, which could not be agreed upon by the finance ministers of different states, he said at the conclusion of the two-day meeting of state finance ministers.
While one sub-committee will deal with integrated GST (IGST), another subcommittee to address issues relating to revenue neutral rates (RNR) and Place of Supply Rules (PSR). The second subcommittee will deliberate mostly on service tax rules, said Modi, who is also the finance minister of Bihar.
As state finance ministers sought complete withdrawal or reduction of dual control system to protect interest of small and medium traders, the empowered committee also decided to put the issue for verification of a sub-committee.
“The three sub-committees will give their reports within three months,” Modi said adding the sub-committee on dual control will have to deliberate on the issues relating to exempted items and threshold for imposition of GST. The empowered committee also resolved to suggest to the finance ministry to incorporate provision of allowing the states to opt out of the GST fold if they desired. “In the present GST Constitution Amendment Bill there is no such provision. We cannot force states to accept GST,” Modi said.
Modi said the states demanded the centre should not hold rights to impose tax on declared goods like coal and LPG.

RBI cuts rates at last

RBI Governor Duvvuri Subbarao met markets more than half way by lowering the benchmark interest rate and banks’ cash reserve ratio, but declined to say if the move heralded the beginning of a lower interest rate cycle. The reduction in two key variables could lead to lower borrowing costs, although bankers caution it may not be too much given the fight among banks for deposits that is raising their cost of funds. The lower rates may ease the pinch for corporates, but again not significantly enough for them to dust off their investment plans or build new factories.
Subbarao’s rate and reserve decisions were overshadowed by the red flags he raised on the record high current account deficit and stubbornly high food inflation, which could force him to reverse his stance in the coming months.
Subbarao cut the repo rate — the rate at which RBI lends to banks — by 25 basis points to 7.75% as expected. It threw in a bonus 25-basis point cut in cash reserve ratio to 4%, which left markets pleasantly surprised and will ease the pressure on the central bank from industry and the government for a supportive monetary policy to aid faltering growth.
The CRR cut will release Rs 18,000 crore into the banking system, and ultimately help the cause of lower interest rates.

Industry reactions to RBI’s moves were mildly positive, even though in the markets, which had penciled in a 25-basis-point rate cut, the initial enthusiasm did not last long. The benchmark BSE Sensex handed back early gains to end the day 0.6%, or 112 points, lower at 19,990. Ten-year government bond yields fell 4 basis points to 7.84% as Subbarao signalled CRR cuts and more bond purchases to improve liquidity. The rupee rose 14 paise to 53.77 per dollar.

RBI lowered its estimate for GDP growth for this fiscal year to 5.5% from 5.8% and that for wholesale price inflation to 6.8% from 7.5%. But the governor, throwing enough hints at the prospect of more troubles for an economy that has been living beyond its means, appeared to suggest that further rate cuts were not a given.
Even as inflation for December fell to a three-year low of 7.18%, with the price rise for manufactured products less than 5%, food prices are climbing. The increase in consumer prices for December got back into double digits, fuelling inflationary expectations. Furthermore, proposed periodic increases in diesel prices and those of items such as coal and power in the months ahead could stoke further price increases.
For RBI, which has long been concerned about high fiscal deficit and runaway inflation, there is now a new demon to slay — the current account deficit, which is the excess of spending overseas than earnings that hit a record high of 5.4% in September and, according to some experts, may have hit 6% in December.

CST issue resolved

The Centre and states have resolved the contentious issue of CST compensation with the states agreeing for a lower payment of Rs 34,000 crore for phasing out the Central Sales Tax, a precondition for rollout of the Goods and Services Tax (GST).
“The amount of compensation for three years— 2010-11, 2011-12 and 2012-13—was about Rs 34,000 crore. The Centre has agreed to pay this compensation amount to states,” Bihar deputy CM Sushil Kumar Modi.
According to the resolution at the meeting on CST issue, the Centre would bear 100% of the loss accrued to states in 2010-11 fiscal on account of lowering of CST. However, for 2011-12 and 2012-13 fiscal, the Centre would give 75% and 50% of the losses to the states. CST, a tax imposed on the interstate movement of goods, was reduced from 4% to 3% in 2007-08 and further to 2% in 2008-09 after the introduction of value-added tax (VAT). The centre had then promised the states that it would bear losses due to reduction of CST. “However, the promises were not kept,” Modi said, adding the Empowered Committee accepted a central proposal to reduce the rate of compensation for early payment. The committee set up by finance minister P Chidambaram to resolve the CST issue had suggested that the payment of Rs 34,000 crore be made to the states towards losses on account of phasing out of CST.
The CST was to be phased out totally after the introduction of GST, which was originally scheduled to be launched from April 2010. Chidambaram recently said that even as GST Bill is unlikely to be passed by April 2013, he hopes to introduce it in the Monsoon session.
The GST rollout has missed several deadlines on account of differences over contentious issue of CST compensation and design of the GST structure between the states and the Centre. Introduced in the Lok Sabha in March 2011, GST Constitution Amendment Bill is with the standing committee on finance. Modi said that the states desire that the GST should be rolled out in next fiscal, failing which they would revert to the CST levy of 4%.
Finance ministers of 13 states—Gujarat, Assam, Jammu and Kashmir, Chhattishgarh, Karnataka, Madhya Pradesh, West Bengal, Punjab, Bihar, Tamil Nadu, Odisha, Delhi and Haryana attended the meeting while other states were represented by senior finance department officers. The Empowered Committee would deliberate on the GST issue on Tuesday, Modi said.
Chidambaram had earlier said he would outline amendments to the Constitution on GST in his Budget speech if there was consensus among states on the issue.

Sensex reclaims 20k

The Sensex breached the 20,000-mark for the first time in two years on Tuesday after the government postponed the implementation of the anti-tax avoidance rules until 2016, and declining inflation raised hopes of the Reserve Bank of India cutting interest rates when it meets this month-end to review its quarterly monetary policy.
The benchmark index hit an intra-day high of 20036.82  but closed marginally below the psychological mark at 19986.82, a 0.4% gain from the previous session amid low volumes. The Nifty also hit a two-year intra-day high of 6068.5 before closing lower at 6056.6. However, both the benchmark indices closed at their highest levels since January 6, 2011.
Half of the 30 Sensex constituents rose, with Bharti Airtel, ITC and ICICI Bank leading the charge. The worst performers were Coal India, Sterlite and Jindal Steel. TCS, which beat Street estimates with a 26% rise in its Q3 net profit, closed flat.
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SC on Telecom tangle

The Supreme Court extended the January 18 deadline for shutting down mobile networks by an additional two weeks. A two-judge bench, comprising Justices GS Singhvi and KS Radhakrishnan, said these companies can continue operations till February 4, the next date of the hearing.
Last week, the department of telecommunication (DoT) had asked the apex court to extend the January 18 deadline by three months as the government was making a last-ditch effort to offer a lifeline to the Indian operations of Russia’s Sistema and Norway’s Telenor.
According to the court’s earlier directive, all mobile phone companies whose permits were quashed in February last year were mandated to shut down their networks by January 18, unless they had obtained airwaves and new licences in the recently concluded spectrum auctions.
The two-member bench also hinted that it may not extend the permits of mobile phone companies if they did not bid for licences in the upcoming airwaves sale.
The court also asked the government to inform it on the base price for airwaves in the spectrum sale scheduled to begin on March 11.
The panel of ministers on spectrum has already cut the base price for airwaves in the upcoming auctions. The bench sought this information to ascertain if companies with quashed permits were likely to participate in the upcoming sale and indicated that mobile phone firms interested in bagging licences in the next auction would be allowed to continue operations in the interim period.
The bench also took the opportunity to caution the government that any revision of prices may lead to litigation. “Have you taken a decision to reduce the (reserve) price? It will cause more litigation,” Justice Singhvi said. “You charge a different price in October and a different price in March 2013, and 2014, for the remaining areas/licences. There will be more litigation inter-se parties,” Justice Singhvi cautioned, adding fresh litigation on this issue would not be its concern.
Last week, EGoM on spectrum had recommended a 30-50% reduction in the base price for airwaves in the 800 MHz band.

Telecom operator Uninor said it may decide to participate in the upcoming auction to get spectrum for the Mumbai circle and will continue its services in the financial capital following the Supreme Court granting an extension to operators whose licences were cancelled

LoC flare up

India demonstrated its renewed resolve to fight fire with fire along the volatile Line of Control, directing all its battalion commanders on the fiercely-contested boundary to retaliate with all their might if the Pakistan Army provokes them by violating the ceasefire or pushing militants into J&K.
The fact that the Army chief has issued an unequivocal warning to Pakistan to cease and desist from misadventures along the border is a confirmation that there is going to be no immediate de-escalation of tension, especially as a defiant Pakistan refused to own up to the beheading of an Indian soldier and mutilation of another’s body by its elite SSG commandos on January 8.
Speaking at the same time that Pakistan brushed aside India’s charges at the Brigadier-level flag meeting at the Chakkan-Da-Bagh crossing point in Poonch, Gen Singh accused Islamabad of resorting to “outright lies”.

General Bikram Singh said the Pakistan Army’s cross-border raid on January 8 was a “premeditated and pre-planned” operation that would have needed at least 10 days of preparation and reconnaissance. He added that the Indian jawan’s beheading was a “gruesome, most unpardonable act” that went against the basic ethics of soldering and tenets of the Geneva convention.
Although Gen Singh emphasized the current tension would not escalate into a conflagration, holding that several stages have to be crossed before the two countries go to a full-scale war, he did admit the first stage of the spiral had been reached. The blunt acknowledgment coincided with the hardening of the anti-Pakistan mood and it will test those in the government who want the tension to be defused for the sake of the peace process. The toughening of the popular sentiment found reflection in the Congress’s endorsement of the Shiv Sena’s opposition to the participation of Pakistani players in the India Hockey League as well as the BJP’s bellicose exhortation that Indian troops decapitate 10 Pakistani soldiers for each Indian killed.
Gen Singh said the Indian Army was quite clear that it “reserved the right to retaliate at a time and place of its choosing”. India has reasons to be furious. Gen Singh admitted that it was not the first time Indian soldiers had been beheaded by the Pakistan Army jihadi combine, with their heads being taken back as “trophies” across the LoC.

Infamous Pakistani terrorist and al-Qaida member Ilyas Kashmiri was part of the raid on an Indian post in the Nowshera sector in 2000, for instance, during which one Indian soldier of the 17 Maratha Light Infantry was beheaded and six others killed. More recently, two jawans were decapitated during the turnover between the 19 Rajput and 20 Kumaon Regiments in the Keran sector in July 2011. “We have to put pressure on Pakistan, nationally and internationally, to make its army accountable,’’ said Gen Singh, adding, “Though the beheading has angered us at the strategic level, it was a tactical operation and we will respond at the tactical level now. We do not plan to up the ante. We will uphold the ceasefire as long as the adversary respects it but will retaliate if provoked.”
The army chief admitted the January 8 cross-border raid had exposed “some tactical lapses” on the Indian side but said this was not the time for an inquiry to be conducted since it would affect the morale of the forces. For now, even as corrective measures are under way, “we won’t remain passive when attacked”, he said.