Government to set up new agency to probe corporate accounting frauds

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The government will soon set up a specialised agency to investigate large corporate accounting frauds. It is keen to establish a robust mechanism for faster inquiries into scams such as the one at Satyam Computer Services, which overstated earnings for several years under a previous management.

The proposed agency is likely to examine accounting frauds of certain classes of listed companies or those of Rs 500 crore and more.

To be formed under the Companies Act provisions, the agency will be mandated to investigate auditing and accounting frauds, either suo motu or on referral by the Centre.

 

“The threshold for accounting frauds to be probed by the upcoming agency is likely to be Rs 500 crore and above. It could also probe frauds of certain classes of listed companies,” said a senior government official. “Currently, there’s a lack of specialisation required to probe complex accounting frauds. The agency will ensure swifter probes.”
First suggested in the aftermath of the Satyam fraud, in which the auditor was also implicated, the upcoming agency will have an overarching role to regulate chartered accountants as well as set standards. It will have forensic auditors on its panel as well.

At present, the Institute of Chartered Accountants of India (ICAI) has authority to investigate and take disciplinary action in cases in which an auditor is involved. Any fraud below the threshold set by the government could still be investigated by the professional association.

ICAI has requested the corporate affairs ministry to not dilute its authority. If the government is keen on setting up an authority, ICAI has suggested that this look at high-value accounting scams above a threshold of Rs 1,000 crore.
“We have made a representation to the government that ICAI’s mandate should not be diluted and authority to initiate probe and take disciplinary action against auditors should rest with the institute,” ICAI president Manoj Fadnis told ET.

In recent years, ICAI has probed auditors of companies such as Reebok, Sesa Goa, Satyam and the Saradha Group among others. These inquiries followed references sent by the Serious Fraud Investigation Office (SFIO).
“The agency will strengthen the government’s mechanism and will ensure faster enquires into accounting frauds. For the auditing profession as well, it will be a very positive step as the agency will oversee quality of profession,” said Lalit Kumar, partner at J Sagar Associates. “But the government also has to ensure that ICAI’s mandate is not diluted.”

A recent study by Assocham and Grant Thornton India said there was a 45 per cent increase in Indian corporate fraud in the past two years. The proposed agency will have powers to penalise audit firms in case they are found guilty of misconduct. Penalty could also include the disbarment of such audit firms.

The agency will also be solely in charge of setting up and revising accounting standards and will have professionals from industry and several government bodies on its panel. “The agency will make recommendations on formulation and laying down of accounting and auditing standards for companies,” a senior government official told ET. “It will also monitor and enforce compliance and oversee quality of service of professionals in the industry.”

ET VIEW

No Duplication Please, Overhaul SFIO

Duplication makes no sense. India already has a specialised agency, the Serious Fraud Investigation Office (SFIO) to do cutting-edge investigation on financial frauds. The Institute of Chartered Accounts of India, on its part, can take disciplinary action against errant auditors. True, the SFIO’s functioning has been dismal so far, and what is needed is to transform the agency to take on new and complex probes. It should hire professionals laterally including cyber security experts, forensic auditors and tap the best talent from other investigating agencies. Ideally, it should draw together a team depending on the case. But to attract the best talent, it also needs to pay market-linked salaries.

Source: http://economictimes.indiatimes.com/articleshow/49927368.cms

Failure to implement reforms may hamper India investment: Moody’s

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A failure to implement reforms in India could hamper investment amid weak global growth, global ratings agency Moody’s Investors Services cautioned on Wednesday.

It said it was highly unlikely that major reforms would be enacted in the upper house of parliament where the ruling coalition is in a minority. The agency said despite overall supportive domestic conditions for the country’s companies, potential headwinds loom from a loss of reform momentum.

The Modi administration so far this year has been unable to enact legislation on key reforms, including a unified goods and services tax and the Land Acquisition Bill, it said.

The government hopes to get the GST Constitution Amendment bill approved in parliament and is keen to push the legislative business. It has reached out to the opposition parties to forge a consensus and ensure the passage of the crucial GST bill. The Narendra Modi government has identified implementation of GST as a key reform initiative. The government has unveiled a flurry of reforms after the rout in Bihar assembly elections and Modi has promised to accelerate the reforms drive.

Moody’s Investors Service says that most non-financial corporates it rates in India (Baa3 positive) will benefit from strong domestic growth and accommodative monetary policy, although weak global growth and a potential US rate hike will weigh on businesses.

“Healthy 7.5% GDP growth for India for the fiscal year ending March 2017 (FY2017) and a pick-up in manufacturing activity will be broadly supportive of business growth,” says Vikas Halan, a Moody’s Vice President and Senior Credit Officer.

“However, the corporates remain vulnerable to the volatile Indian rupee as against the US dollar and to low commodity prices, which has in turn led to a sharp decline in external trade,” said Halan while releasing the agency’s 2016 outlook presentation for Indian non-financial corporates.

The fall in commodity prices has benefited many Indian corporates given the country’s status as a net important of raw materials and its recent history of high inflation.

The resultant moderating inflation should result in lower borrowing costs for corporates and yields on corporate bonds, said Moody’s.

The ratings agency expects upstream oil and gas companies to benefit from lower fuel subsidy burdens, although low crude and domestic natural gas prices will continue to hurt profitability.

Refining and marketing companies meanwhile should benefit from healthy margins as demand growth outpaces expected capacity additions.

The agency’s negative outlook for the steel industry reflects elevated leverage and an extended period of low prices due to continuing steel imports, while the negative outlook for metals and mining companies reflects bleak global commodity prices.

In the real estate sector the agency expects demand to improve in 2016 on the back of lower interests rates, although approval delays could push back project launches for property developers.

It expects retail auto sales volumes to grow 6% in 2016 on the back of sustained growth in passenger vehicles sales and a recovery in commercial vehicle sales.

The telecom companies that the agency rates in India have reported improving revenue per user (ARPU) and EBITDA margins, however competition remains intense and the regulatory framework continues to evolve.

Govt to further simplify ITR forms, sets up committee

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The government is looking to further simplify income tax return forms to help taxpayers fill them without seeking help from experts and the revenue department has set up a committee in this regard.

The committee, according to sources, will be headed by a joint secretary level officer and would include chartered accountants and tax experts.

“The tax department is trying to further simplify the return form so that no outside help is needed by those who want to file returns on their own,” a source said.

The effort would be to come out with a simple formula for indexation to help assessees compute capital gains on sale of assets, the source added.

“The Committee would also look into the possibility of reducing the number of pages in the return form,” the source said.

The Income Tax department had in June come out with a simplified tax return form for salaried class. Filers now have to disclose the total number of savings and the current bank accounts held by them at any time during the previous year (excluding dormant accounts).

The form also has space to fill up the IFSC code of the bank and in an additional feature, tax filers have been given an option to indicate their bank accounts in which they would want their refund credited. The ITR also has sought the Aadhaar number of filers.

The tax department had come out with simplified ITR after experts raised objections to the 14 page form which was notified earlier in the year.

The earlier form sought details of bank accounts and foreign visits and following controversy, the Revenue Department announced putting them on hold.

Source: http://www.business-standard.com/article/pti-stories/govt-to-further-simplify-itr-forms-sets-up-committee-115112200147_1.html

France supports India’s global solar alliance

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France has said that it supports India’s plans to set up an international solar alliance to promote access to low-carbon energy. Prime Minister Narendra Modi is slated to launch the initiative at the forthcoming climate meet (COP-21) in Paris.

“We totally support the solar alliance initiative. Ambitious economic partnerships can be forged between countries under this initiative,” French Foreign Minister Laurent Fabius said at a joint press conference with Environment Minister Prakash Javadekar here on Friday.

Fabius said India will be a key player at the COP-21, as a solution to dealing with climate change can’t be found without its consensus.

“India will play a pivotal part in the talks because of several factors including its size and population and the fact that it will also steer a lot of other countries outputs,” he added.

As many as 190 countries are working toward a legally binding and universal agreement on climate, which aims to keep a check on global warming by cutting down on carbon emissions and embracing green technology. Fabius is on a tour of countries which, according to France’s judgment, could contribute to a successful climate meet in Paris beginning November 30. He met Prime Minister Modi and Javadekar on Friday and discussed issues of importance to India. South Africa and Brazil are next on his itinerary.

New Delhi will focus on ensuring that provisions on industrial financing and technology transfer are part of the legal text that gets accepted in Paris, an Environment Ministry official told BusinessLine .

Focus areas

“India and several other developing countries are pursing the matter of finance and technology transfer at the on-going negotiations and we will try and see to it that provisions on it are legally binding,” the official said.

When asked what kind of progress had happened on the issue of industrial finance and technology sharing by developed countries to enable developing countries to switch over to green technology, Fabius said it was a difficult issue, but progress was being made.

However, he said issues of financing and differentiated responsibility (more responsibility to bring down emissions countries, mostly developed, that have contributed more to climate change), would be an important part of the Paris deal.

(This article was published in the Business Line print edition dated November 21, 2015)

Singapore to focus more on economic activities in India: Experts

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“The emphasis would be on working with India in the areas we are good at, including skill development and town planning,” he told PTI in comments on India-Singapore ties ahead of Modi’s visit from November 23.

Singapore will further strengthen its bilateral trade ties with India through the “strategic partnership” the two countries will establish during Prime Minister Narendra Modi’s visit here next week, according to experts.

 

“The strategic partnership means bringing the relationship between the two countries to a higher level. This is likely to be focused on economic activities,” said Gopinath Pillai, Chairman of the Institute of South Asia Studies, a think-tank of the National University of Singapore.

 

“The emphasis would be on working with India in the areas we are good at, including skill development and town planning,” he told PTI in comments on India-Singapore ties ahead of Modi’s visit from November 23.

 

Singapore and India have enjoyed steadfast bilateral relations for the past five decades which were further enhanced under the 2005-Comprehensive Economic Cooperation Agreement (CECA), a free-trade pact promoting economic and trade activities.

 

Singapore is India’s second largest investor, especially in the power and port sectors.

 

CECA is further being reviewed and would encourage more international investments through Singapore into massive developments taking place in India.

The Indian government has this month further liberalised Foreign Direct Investment (FDI) in infrastructure, sending a clear signal of its economic reform programmes, Pillai added.

 

Depending on how the reviewed CECA is positioned, Singapore-based investors remain “gung-ho” on economic prospects in India and will use the treaty to venture into the Indian market, just as Indian companies and businesses are using Singapore as a springboard to spread across Asian markets, including China, he said.

 

The Indian leader’s visit to Singapore is also seen as timely and comes soon after one made by Chinese President Xi Jinping in early November.

 

Singapore, as a signatory to the Trans-Pacific Partnership and as negotiator of the China-led pan-Asian Regional Comprehensive Economic Partnership, can help India expand into Asia, according to Girija Pande, Executive Chairman of Apex Avalon.

 

Pande also pointed out that, Singapore with its links to the Asian supply chain, can also play an important role in ‘Make in India’ initiative, calling on the Indian Prime Minister to push for more commercial engagement with Singapore and the wider ASEAN region.

 

Singapore and India have many collaborative programmes between schools and colleges.

 

“Students from Singapore often visit Indian schools to get better understanding of the Indian communities and study approaches and vice versa,” he said.

 

Source:  http://economictimes.indiatimes.com/articleshow/49857019.cms

Finance ministry raises duty drawback rates for exports for engineering, marine, leather and textiles

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As exports fell for the 11th month in a row in October 2015, the government on Monday increased the refunds to exporters on duties on imports, particularly those relating to engineering products. This would also neutralise the impact of import duty hike in steel, used in engineering products.

Besides engineering goods, the government raised the duty drawback rates on composite products such as leather handbags, ready-made garments made of cotton wool and those made of cotton with lycra.

The Central Board of Excise and Customs raised the duty drawback rate by two percentage points for the engineering sector, which would allow higher tax refund to exporters of machinery and appliances, electrical machinery, tools and implements, among others.

“These revised rates are based on average incidence of customs and central excise duties and service tax related with the manufacture of export goods and involve substantial total drawback for exporters,” the government said in a release.

After the additional hike in the duty drawback, the rate for certain engineering products could go up to close to eight per cent, sources said.

However, the government did not take into the account the 20 per cent safeguard duty imposed on hot-rolled steel. “It is a positive that the government has made up for the hike in duty on steel. But the smaller firms will have to bear the impact of safeguard duty, as it is not factored in new duty drawback announced ” said Ajay Sahai, director-general and CEO, Federation of Indian Export Organisations.

CRUX OF THE MATTER

  • Move expected to neutralise impact of import duty hike in steel
  • Duty drawback rates raised on engineering goods, leather handbags, readymade garments made of cotton wool and cotton with lycra, shrimps
  • Two percentage points rise in duty drawback for engineering sector to allow higher tax refund to exporters of machinery and appliances, electrical machinery, tools among others
  • Former CMD N Ramanujan had worked out a JV with Titan Watches when Xerxes Desai was heading it. But the government turned it down
  • The only operational plant at Tumkur, Karnataka, has 2 million-unit capacity of quartz watches
  • The watch model, Kanchan, used to sell at a premium in the grey market at Rs 1,000, when its legal price was Rs 700

Duty drawback is a refund of certain types of customs and Central excise duties as well as service tax on imports of inputs or raw materials that are used to manufacture goods for exports.

The revised rates of duty drawback notified by the finance ministry will be effective from November 23.

In a first, the government extended the brand rate of duty drawback to wheat. It also provided a mechanism to pay provisional drawback to exporters soon after export, for certain exports made under the claim for brand rate of duty drawback.

“This was pending for a long time. In a positive development, the government also allowed exporters claiming brand rate of drawback rate to avail provisional drawback rate until the brand rate is decided,” said Sahai.

The government added the expert committee would look into exporters’ concerns arising from new schedule of rates and make further recommendations to the government in January 2016. The government will also take into account feedback from export promotion councils to this effect.

Source:

http://www.business-standard.com/article/economy-policy/finmin-raises-duty-drawback-rates-to-arrest-export-slump-115111700035_1.html

Want to partner India in smart cities: Huawei

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Chinese technology major Huawei wants to partner India in helping it build Information and Communications Technology (ICT) infrastructure for the development of smart cities, a senior company executive said at the Huawei Innovation Day Asia, co-hosted with National University of Singapore, here last week.

 

The Centre has already announced the list of 100 cities which it plans to make ‘smart’ by providing efficient physical, social, institutional and economic infrastructure. The government has defined a smart city in the Indian context as a city that provides a decent quality of life to its citizens, a clean and sustainable environment, and supports the application of smart solutions.

 

“We will be able to help India build ICT infrastructure including wireless systems and the computing platforms for the smart cities,” said Joe So, Huawei’s chief technology officer for Industry Solutions at the company’s Shenzhen head office.

 

“We can help build the inter-dependency of the Indian system,” So said, stressing on Huawei’s strength in building ICT infrastructure.

 

Noting the similarities between India and China, especially in view of the huge population in their major cities, So said India’s smart cities should also adopt ICT. So pointed out the use of ICT in Chinese cities has helped reduce crime rates significantly. The Indian smart cities could also use ICT for similar use, said So at the Huawei Innovation Day Asia.

Elaborating, So said India would not be able to have one plan for building 100 smart cities as the country’s major regions are different from one another. Each city must be planned based on its structure and people’s needs such as New Delhi being a government and agencies centre and Mumbai being a commercial hub.

Addressing the Innovation Day Asia, Singapore’s minister for trade and industry S Iswaran said, “The ICT innovation will have a profound impact on the nature of jobs, the viability of business models, and the structure of economies.” Citing the Asian Development Bank’s figures, Iswaran said the continent’s urban population grew by 44 million every year and the Asian nations had to concern themselves with their citizen’s growing expectations for more efficient government services, as well as ensure environmental sustainability.

So said he’ll be highlighting Huawei’s technologies for India, its second largest market outside China, at the Smart-Safe City conference in Bangalore on December 19.

The company also announced its vision for the next generation of the smartphone: The “superphone”, and said it will be developed by 2020.
Source:http://economictimes.indiatimes.com/articleshow/49798484.cms