#1. States with pending dues barred from trading electricity on power exchanges
The central government has barred 13 states from buying or selling electricity on power exchanges until they clear their current bills from power plants. These states, which include Maharashtra, Madhya Pradesh, Karnataka, Tamil Nadu, and Rajasthan, together owe about Rs 5,100 crore in current dues to power generators. The power distribution utilities have also accumulated dues of over Rs 1 lakh crore, which are being settled through a bailout plan.
Why it’s important: The state barred from power trading could see power outages if they do not pay up. The Centre has sent a clear signal that they have to clear accumulated dues and pay bills on time regularly.
#2. Government raises windfall tax on fuel exports, cuts it on domestic oil production
The central government has increased windfall profit tax on diesel exports to Rs 7 per liter from Rs 5 earlier. It again imposed Rs 2 per liter tax on export of jet fuel after scrapping it earlier this month. The Central Board of Excise and Customs has, however, reduced windfall tax on locally produced crude oil to Rs 13,000 a ton from Rs 17,750 earlier.
Why it’s important: The third round of the revisions of the new windfall tax comes at a time when global crude oil prices have fallen below $ 90 per barrel to a six-month low. The move that will provide relief for producers like ONGC and Vedanta.
#3. Mutual funds raise stakes in industrial, financial services sectors, IT, power out of favor
Mutual fund managers have increased holdings of financial services, industrials and consumer discretionary stocks, sectors that are most likely to benefit as economic activity and consumer demand pick up, data for July showed. They slashed their exposure to IT services and energy companies due to fears of a recession and high global energy prices.
Why it’s important: Fund managers are favoring stocks that benefit from faster growth and increasing demand. Consumer confidence is returning as inflation fears moderate just in time for festive spending.
#4. Reserve Bank wants gradual bank privatization to maintain financial inclusion
Bank privatization in India should be a gradual process as big sales of public sector lenders can do more harm than good, a research paper by Reserve Bank of India has said. The government had announced a plan to privatize two state-owned banks in the 2021-22 budget. A gradual approach would ensure that large-scale privatization does not create a void in fulfilling important social objectives of financial inclusion and monetary transmission, the research note said.
Why it’s important: Private banks are more efficient in maximizing profits, but public sector lenders do better at promoting financial inclusion, delivering farm loans, and achieving monetary transmission.
#5. Canadian pension fund in talks with Vodafone to buy stake in Indus Towers
Canadian pension fund CDPQ is in talks with Vodafone to buy the residual 21 percent stake the UK telecom firm owns in Indus Towers, India’s largest mobile tower installation company. A formal due diligence is expected to start as the stake sale process has been revived in recent weeks.
Why it’s important: If the sale takes place, it will mark Vodafone’s exit from passive telecom infrastructure business in India. It would be the largest India deal by the pension fund, which has bought major stakes in the country’s toll roads and power utilities.
#6. User base likely to decide antitrust scrutiny on digital M&As
Acquisitions and mergers of digital businesses may face scrutiny by the Competition Commission of India only if they have a threshold level of a consumer base and user data, and have signed deals and received payments, because such parameters will determine significant business operations in India, commission chief Ashok Kumar Gupta has said.
Why it’s important: A draft competition law being reviewed by a parliamentary committee targets global digital M&As. The antitrust scrutiny will likely look at market-facing factors such as number of users and contracts, and the aggregate amount of payment received by the concerned firms.
#7. Electric scooter makers may face penalties on fires caused by faulty batteries
The government may impose financial penalties on electric scooter makers over suspected use of unsafe batteries that caused fires. It had earlier sent notices that asked companies why they should not be penalized for a spate of deadly scooter fires caused by faulty batteries. The firms have responded.
Why it’s important: The penal action is unlikely to be severe as the e-mobility space is in its nascent stage in the country that has ambitious targets to transition to electric vehicles to reduce greenhouse gas emissions.
#8. Retail inflation may fall within tolerance band by first quarter of next financial year
The fall in consumer price inflation to 6.7 percent in July from 7 percent in June was a heartening development, and it may ease to 5 percent by the first quarter of 2023-24 before hitting the target of 4 percent, the Reserve Bank of India’s state of the economy report has projected.
Why it’s important: The central bank has been increasing policy rates since May to tame inflation. It is likely to continue to tighten monetary policy till the rate of price rise softens to its tolerance levels.
#9. Tax officers told not to summon corporate brass in a routine manner
The Central Board of Indirect Taxes and Customs has told field officers to be judicious while issuing summons to top management of companies such as chief executive officers, chairman and managing directors, and chief financial officers. Arrests can only be made after written permission from senior officials, it instructed.
Why it’s important: The move follows complaints by industry that taxmen are making excessive use of the provisions in law aimed at deterring evasion. It would provide some relief to the companies in question.
#10. Mahindra mulls buying Maharashtra factory of General Motors
Mahindra & Mahindra is exploring the possibility of acquiring General Motors’ Talegaon factory in Maharashtra. Mahindra executives made several visits to the facility in the past few weeks. The visits came after the US carmaker’s term sheet with Chinese automaker Great Wall Motors expired on June 30.
Why it’s important: The development comes soon after Tata Motors agreed to buy Ford’s plant in Gujarat. Some foreign automakers have decided to exit production in India after discouraging growth in the auto sector in the past few years.
