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Financial reporting in India got an unexpected push from the finance Minister Arun Jaitley in Budget 2014, with his announcement that IFRS will be implemented from 2016-17. The International Financial Reporting Standards, a harmonised set of accounting rules followed by most of the world, were all but ready a few years ago. But staunch opposition from a few top corporates meant the project was shelved, many fearing that it would never see the light of day. Foreign investors, among others, have been asking for its implementation so that accounts of Indian companies are prepared under the same rules as their global peers. But the announcement is only a beginning. For IFRS to become reality, much needs to be done in the next couple of years. Failing that, it may meet the same fate it did the last time round in 2011. For that, the apex accounting body, the Institute of Chartered Accountants of India, and the Ministry of Corporate Affairs will have to work in tandem to sort out the deficiencies.The ICAI has been preparing for IFRS for at least seven years now, says K Raghu, President of the Institute. Corporates also have had ample IFRS training for its accountants back in the days when it was considered imminent. So skills updation for those who matter need not be a big challenge. The challenge will be to ensure the rules for implementation are laid out clearly.First, there needs to be clarity on taxation. Taxation was one of the major reasons why industry resisted the last time round, says Amarjit Chopra, a former president of the ICAI. Indian companies file their returns based on the profit in their books of account, which is then adjusted to comply with tax rules on deductions and exemptions. IFRS, with its focus on conservatism leading to earlier write-downs, may have the effect of dramatically altering the initial profit that is so used. If profits are less than what the tax department expects, they will make disagree with the accounting. If it is higher, they will lap up the extra revenue.To address this, the government had come out with a set of tax accounting standards, with guidelines for most disputable areas. There are still many issues that need to be sorted out. The government must work on bringing clarity to these.Secondly, there is the interplay with corporate law. The Companies Act has rules regarding issues such as what can be paid out as dividend. If IFRS implementation drastically reduces profits, it will also mean that companies will not be able to pay shareholders like they would have earlier. Jamil Khatri, Global Head of Accounting Advisory Services at KPMG explains how Europe found a way around (the impact on distributable profits). In the EU, he says, since IFRS was mandated only for consolidated financial statements, the impact on distributable profits that are based on standalone legal entity financial statements, was managed. Certain other countries, he added, modified their company law to allow companies to pay dividends after adjusting for the effect of the major changes due to IFRS. Finally, the standards themselves will have to be relooked. India has not adopted IFRS as is. India has framed a set of accounting rules, known as Ind AS, which are compliant with the IFRS. Since then, some of the original IFRS standards, prominently the one on how to recognise revenue, has undergone a change. Indian authorities will have to make a corresponding change in Ind AS for convergence to be meaningful.Then there is the question of who it will have to apply to. ICAI president Raghu says the cost of complying may be prohibitive for small and medium enterprises. So the Institute will most likely come out with a set of easier to implement guidelines for these enterprises.IFRS can be an important step in India’s bid to attract foreign investment. And with the government now openly backing it, the implementation seems nearer than ever. But these niggles need to be taken care off.
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Sahara group chief Subrata Roy surrendered two days after the Supreme Court issued a non-bailable warrant against him for failing to show up in court. He will stay in police custody till 4 March. Roy was summoned in a case relating to Sahara’s non-compliance with the SC’s judgment, directing two group firms to deposit Rs 24,000 crore with markets regulator, the Securities and Exchange Board of India. His request to be exempted from personal appearance was rejected.Gender BenderHonda Motors appointed a woman board member, Hideko Kunii, 66, a professor at the Shibaura Institute of Technology, to the all-male roster for the first time in its 65-year history. She will also be the first woman director at a big Japanese carmaker; neither Toyota nor Nissan has ever chosen a woman for their top boards. Kunii will be the second director from outside Honda to serve on its board.Sticky WicketIndian batting legend and Rajya Sabha member Sachin Tendulkar, it appears, had no ideas when it came to development projects for suburban Mumbai. Entitled to Rs 5 crore a year under the Member of Parliament Local Area Development Scheme (MPLADS) since 2012, Tendulkar failed to put the funds to use in his chosen area. While the funds for last year have already lapsed, those for current fiscal face the same fate.On ‘The Italian Job’Italy’s youngest-ever prime minister Matteo Renzi, 39, and his young 16-member cabinet were sworn in amid widespread scepticism that the team does not have the political maturity to tackle the country’s formidable challenges. In the lower house, Renzi got 378 votes in favour and 220 against, while in the Senate he won by 169 to 139, a thinner-than-expected result. A former mayor of Florence, the centre-left leader has already pledged tax cuts and investments worth over €100 billion.In A New RingFormer World Boxing Council heavyweight boxing champion and Ukraine opposition leader Vitaly Klitschko, 42, will run for the presidential elections in May 2014. For the 6-foot-7 father of three, this isn’t the first foray into politics; he made a bid to become the mayor of Kiev in 2005 — the first of three failed runs for the post. Klitschko represents the group of Ukrainians who seek closer ties with the West and a relationship with the European Union. In a New Ring Former World Boxing Council heavyweight boxing champion and Ukraine opposition leader Vitaly Klitschko, 42, will run for the presidential elections in May 2014. For the 6-foot-7 father of three, this isn’t the first foray into politics; he made a bid to become the mayor of Kiev in 2005 — the first of three failed runs for the post. Klitschko represents the group of Ukrainians who seek closer ties with the West and a relationship with the European Union.Vegas In Tokyo?Gambling mogul Sheldon Adelson is willing to invest $10 billion to put up a casino in Japan, the world’s third most prosperous economy, as it gets closer to legalising casino gambling. The chief executive of Las Vegas Sands (LVS), the largest casino developers in the world, wants to build gambling resorts in Tokyo and Osaka.Fraud FalloutSaradha Group chairperson Sudipta Sen has been sentenced to three years’ imprisonment and a fine of Rs 10,000 after he confessed to flouting provident fund guidelines. This is the first sentence handed down to Sen, who faces a string of complaints in connection with a Rs 20,000-crore ponzi scam that duped around 1.7 million investors. Sen admitted that various arms of the group did not deposit money deducted from employees’ salaries to their provident fund accounts.Stepping On The GasBillionaire entrepreneur and CEO of Tesla Motors, Elon Musk, 42, made $1.1 billion in the course of a day after the company’s shares gained nearly 14 per cent on 25 February. The haul brought his net worth to $11.7 billion, up 47.8 per cent since January 2014. Musk owns 23 per cent of the electric car manufacturer.(Photographs by Bivash Banerjee, Getty Images, Reuters, Bloomberg, Honda)(This story was published in BW | Businessworld Issue Dated 24-03-2014)
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“By the end of the decade, latest, we will drive more revenue from new cloud business than software licenses”—Luka Mucic, chief financial officer, SAP, at an event promoting the firm’s cloud strategy “Relations between India and America should not be seen within the limits of just Delhi and Washington. It’s a much larger sphere. Democracy is in our DNA”— Narendra Modi, prime minister, in an interview to a television channel “I remain very confident, despite the change in government, that if we remain firmly on the path, we will get back to 8 per cent growth in about 2-3 years”— P. Chidambaram, former finance minister, at an event “Why are Japanese officials and the Chinese president visiting India? Because they want land in the country to be reserved for them. That is what the Modi government is doing”— Medha Patkar, activist, during a protest march against the Rajasthan Land Acquisition Bill, 2014 “The model of alliances is fractured. See what happened to Qantas, Emirates and British Airways”— James Hogan, CEO, Etihad, dismissing the global airline alliances pursued by some rivals, while supporting the growth of investment in equity stakes and codeshare deals “Inflation is coming down. Macro indicators are improving but still have some way to go before we can declare that we are out of the woods”— Raghuram Rajan, governor, Reserve Bank of India, at a pre-policy meeting with economists (This story was published in BW | Businessworld Issue Dated 20-10-2014)
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The contraction in India's services sector moderated last month but new business declined and input prices rose, a business survey showed on Wednesday (5 March). The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, rose to 48.8 in February from 48.3, but remained stuck below the 50 mark that separates growth from contraction for the eighth month. India's services sector accounts for about 60 percent of gross domestic product. The weak PMI follows lower-than-expected GDP growth of 4.7 percent at the end of 2013, suggesting there may be worse to come for the economy as India heads into an election due by May. "The PMI reading remains below the water line and points to weak growth conditions," said Leif Eskesen, chief economist for India & ASEAN at survey sponsor HSBC. Indeed, hiring remained muted and all 22 economists polled by Reuters last week said they don't expect any substantial improvement in investment before the general election. As new business orders shrank for an eighth month firms focused on completing existing work and barely increased headcount - the employment sub-index slipped to 50.1 from 50.9. But firms did pass on higher costs to clients, suggesting consumer price inflation, which was at 8.79 per cent in January, could rise further. The Reserve Bank of India (RBI) has unofficially started targeting consumer prices to frame its policy and signs of faster rises will pressure the central bank to hike rates again. However, at its January policy meeting, the RBI said if inflation eases as projected, it does not expect further tightening of policy in the near-term. But HSBC's Eskesen said risks to inflation remain: "Despite the weak growth backdrop, the RBI will have to keep its inflation guards up to address lingering inflation pressures." (Reuters)
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The Indian rupee tanked 38 paise on Monday (29 September) to log nearly 7-month closing low of 61.53 against the Greenback following dollar demand from importers and some weakness in stocks ahead of the RBI policy review.Sustained capital outflows also kept the rupee under pressure while some weakness in dollar overseas, which was trading down by 0.14 per cent against its major global rivals, was not able to stem the rupee fall, a forex dealer said.At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced lower at 61.35 a dollar from previous close of 61.15. It immediately touched a high of 61.31 on initial firmness in local equities.Later, it fell back sharply to a low of 61.59 before concluding at 61.53, showing a fall of 38 paise or 0.62 per cent. This is its weakest level since March 5, 2014 when it closed at 61.75.Last Friday, the rupee rose by 19 paise or 0.31 per cent.In other Asian currencies, the dollar appreciated as well. The Japanese yen headed towards the 110 mark after US data showed the economy expanded at its fastest pace since 2011 during the April-June quarter.The Indian equity benchmark Sensex today eased by 29.21 points, or 0.11 per cent. FIIs had pulled out USD 39.95 million last Friday as per Sebi data.Pramit Brahmbhatt, CEO, Veracity Group said: "To start the week, rupee depreciated over half a per cent during the day. It tok cues from dollar which is trading strong. Also, the increased month-end dollar demand from oil importers forced rupee to trade low."Now all eyes are on the RBI policy review on Tuesday which will show the road ahead for the USD/INR pair. The trading range for the spot rupee is expected to be within 61.00 to 62.00." On likely RBI policy outcome, Rakesh Goyal, Senior Vice-President, Bonanza Portfolio said: "We expect RBI will enhance system liquidity by further reducing SLR by another 25 bps to 21.75 per cent and also, further reduction in HTM ceiling to 23.5 per cent of NDTL. We also anticipate that RBI might ease daily CRR limit for banks 85-90 per cent."In forward market, premium remained weak on sustained receipts by exporters.The benchmark six-month premium payable in February fell to 203-205 paise from 208-210 paise last Friday.Far-forward contracts maturing in August, 2015 also dropped to 454-456 paise from 463-465 paise.The Reserve Bank of India fixed the reference rate for dollar at 61.4273 and for the euro at 77.9328.The rupee fell back against the pound to 99.94 from 99.69 previously and also moved down further to 56.28 per 100 Japanese yen from 56.04. It, however, turned negative to settle at 78.16 per euro from 77.85.(PTI)
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EDUCATIONFather E. Abraham, S.J., Director, XLRIWe welcome the Finance Minister's proposal to easen and simplify norms to facilitate higher education loans for higher studies. This is a step in the right direction as it will encourage students to dream and aspire to take up professional programs. The proposal to set up 5 new IIMs and 5 more IITs will definitely bolster the professional education ecosystem in the country and also help the respective states in their economic progress. It is heartening to note that the government will be spending around Rs.28, 000 crores for sanitation in primary schools. The state of sanitation and hygiene in many of our primary schools is quite below par and definitely needs a lot of improvement. The proposal to establish Rs.10,000 crore fund for encouraging entrepreneurship in the MSME sector is a bold move and will certainly encourage youth to take greater risk and undertake new ventures and thereby cater to needs of underserved sections of society. Rituparna Chakraborty, Co-Founder & Senior Vice President, TeamLease & President, Indian Staffing FederationGovernment proposal of setting up 100 smart cities with spend of Rs 7060 crores if executed shall bridge the dilemma of whether one should take people to jobs or jobs to people and rationalise wage disparities. India definitely doesn't need for engineers or MBAs and hence was disappointed that there was no mention of having more vocational universities and community colleges across the country. Average Indian kids need formal vocational training to make a livelihood rather than more of the elitist IIMs and IITs which fewer can get it. Farm to non-farm transition can't happen through IIMs and IITs. There was some redemption to that hearing the clear intent behind amending the Apprenticeship ACT. Transformation of Employment Exchange to Career Centers was much needed but its success would lie in building an efficient nationwide matching technology platform. Emphasis on infrastructure and manufacturing is the key but would fall short of expectation if it isn't backed by clarity around labour reform.Prof (Dr) Atmanand, Dean, MDI, Gurgaon & Independent Director, SAILLong term growth and investment oriented budget- A vision for new India The budget is growth and investment oriented with three pronged approach based on containing inflation through better fiscal management particularly on expenditure side. It stresses on building new vision for India through development of social and economic infrastructure in all economic sectors and rural infrastructure development has been emphasized more. The education and skill creation has been clubbed together for readying for future India. PPP model has been envisaged for financing infrastructure project for which banks and financial institutions will extend cheap loans. The emphasis is also been laid on energy security which is essential for economic as well as strategic development. The connectivity between cities as well as rural centers is also given quite an importance. However, the steps taken for attracting FDI may not produce desired results due to not much clarity about the retrospective taxation and transfer pricing issues. More is needed on this front. Revenue targets are reasonableShantanu Prakash, CMD, Educomp Solutions Ltd. The Skill India programme is an encouraging signal indicating priority for a much needed thrust in this area. We also congratulate the Finance Minister for making a strong pitch for online education to bypass the limitations of access to schools. It is expected that both these thrust areas will receive incremental allocations in the budgets to follow and that these small beginnings in these critical areas will convert to a long term policy with budgetary allocations to match.Ranjan Kaul, Managing Director, Oxford University Press India It is hearting to see the priority accorded to the Education sector, especially the focus around primary education. The government has at the same time committed to promote research and higher education in a big way through budgetary allocation and setting up of more IIT's and IIM's - this provides a much needed impetus to these twin areas that have remained largely stagnant over the past couple of years.Pavan Chauhan, MD and Co-Founder - Meritnation.comThe government's decision to focus on setting up more institutes for technical & professional education such as AIIMs, IIMs and IITs is an extremely positive step. We have a huge population and scaling successful models like IITs is critical to bring quality education to more & more people.This budget also shows that the government is taking decisive steps towards digitization & use of technology in education and beyond through its initiatives like paperless railways & e-governance. The Rs 100 crore allotted towards virtual classrooms is really heartening. Over the years it has been apparent that we do not have the requisite number or quality of teachers needed to educate our ever growing population. A lack of education coupled with low employability skills might make us lose out on our biggest opportunity, the demographic dividend. With virtual classrooms we believe quality education can be imparted to students who previously never had access to quality teachers. While we build the virtual classrooms it is important to train our teachers who will become the mentors of tomorrow. In this light the Rs 500 crore allocation for a teacher training fund is extremely positive. We are also happy that the FM is focusing on inclusivity of education. The "Beti bachao beti padhao" scheme will help make education more accessible to women. As someone once said, “If you educate a woman you educate an entire nation.T. Muralidharan, Chairman & Managing Director, TMI e2E AcademyOver all the budget has a few plusses and few minuses as far as skill sector is concerned. The big plusses are the clear plan to redesign the MGNREGA to create assets especially in agriculture which is the first step in preventing the misuse, which has been rampant till date. Unfortunately the demand of experts to include the Skill development training as a MGNREGA outcome has not been met. The second big plus of the budget is on the Apprentice scheme revamp promised by the Finance Minister and expansion of the scheme to MSME. The budget did not spell out any special incentive for employment creation. The focus seems to be on Skilling and on ramping up the manufacturing and infra industry through investments. Skilling increases supply of manpower. If the demand is not there, this effort will be counterproductive. The excess supply will impact the compensation and keep it artificially low, which is already happening as per a recent study done by a team of researchers from Tata Institute of Social Sciences and TMI.Ashish Dhawan, Founder and CEO, Central Square FoundationThe Union Budget announced today reflects the government's commitment to drive policy reforms in education focused on improving quality. We appreciate that the government has maintained a commitment to the important issue of education.Most significantly, the government has announced strategic interventions for school education that will have a direct impact on improving student learning. These include the School Assessment Programme (INR 50 crores), Madan Mohan Malviya New Teachers Training Programme (INR 500 crore) and setting up virtual classrooms under the Communication Linked Interface for Cultivating Knowledge (CLICK) (INR 100 crore). Explicit allocation of resources in these areas indicates a shift towards an outcomes-based policy direction. We are hopeful that investment in these areas will only increase over the next 5 years.The increased allocation for secondary education and the Skill India programme are encouraging steps to meeting the needs of large number of young people who are coming through our primary school system without a clear path beyond. Our secondary education should activate vocational tracks to address the challenge of high drop-out rates.It is also praiseworthy that the government has committed to scaling up and expeditious implementation of apex institutions such as IITs, IIMs, and AIIMS.While our government has dedicated resources to school and higher education, it is imperative to ensure that the central budgetary allocation to states is optimally used. To achieve this, the Centre should include a performance based component in its allocations to states that would be contingent upon implementation of education policies and lead to greater accountability and performance levels.Lakshmi Iyer - Director and Head of Education at Sannam S4 ConsultingWe all know education and job creation are big on PM Narendra Modi’s agenda. And Finance Minister, Arun Jaitley’s maiden budget speech had a number of sound bytes for avid observers of the education sector. Having said that, the budget seemed like a statement with a list of promises drawing on what was put out on the BJP manifesto. Case in point new IITs/IIMs, we already have 13 IITs and 16 IIMs and there is a caste system that exists between the older established ones and the newer ones added in the last decade. The Finance Minister has set aside INR 500 Cr for 5 new IITs and 5 new IIMs. We know the existing IITs and IIMs have problems that need fixing from filling faculty vacancies, adequate facilities for students and upping their game with respect to research output and competing on a global platform. Capacity building is not about buildings and labs, it is about teachers, quality, good value education and I wonder if we are going to continue making announcements of adding more without getting down to the business of stemming the rot in education.”The budget announcement on setting up Biotech clusters in Faridabad and Bangalore is promising and shows that the Government of India understands that India needs to get its act together in STEM areas. We need more Biocons coming out of this country. This initiative will hopefully give impetus to building world class science and engineering colleges in Faridabad which can offer a captive talent pool to the cluster. Till now science and engineering excellence have come from South India, hopefully this move by the Government will help India create new talent pools.With a Prime Minister at its helm who harnessed the power of social media to run a campaign to reach the top, there was expectation that online courses and e-learning will get some priority in this budget. FM Jaitley has announced INR 100 Crores for virtual classrooms. Online modes of learning is a necessity in India where capacity issues are posing us huge challenges. India is a top participant in popular MOOCs like Coursera, good to see that at the national level the Government is wanting to make a start. Again credentialising the competencies people gain in these virtual classrooms will be important. Perhaps an area where foreign institutions can actively play a role.Aakash Chauhdry, Director, Aakash Educational Services LtdInitiatives in the education sector by the new government seem highly motivating for engineering and medical aspirants in India. The push in the higher education sector and support extended for the middle class income group in the form of avenues and affordable options is encouraging.The budget is promising as it supports setting up of government medical colleges and establishment of centre of excellence in the form of IITs and AIIMS. Towards its execution, what is vital is a full proof plan bearing right kind of faculty, infrastructure, jobs and market ready curriculum.Great amount of mentor-ship is also important from the existing IITs and AIIMS to facilitate same amount of excellence and not rigid the new establishments as new bees.
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Singapore has outstripped Tokyo as the world's most expensive city for expatriates, according to annual rankings by the Economist Intelligence Unit released on Tuesday (4 March). Mumbai was the least expensive major city in which to live, partly due to government subsidies on some products and low local wages. The latest Worldwide Cost of Living Survey released also said the Indian financial capital was followed by Karachi, New Delhi and Damascus as the fourth-cheapest, which EIU said reflected the weakening of the Syrian pound due to the country's civil war. It cited a strong Singaporean dollar, the high price of utilities and the cost of car ownership as among the factors contributing to Singapore taking the top spot away from Tokyo, which for years has led the rankings. The calculations are based on the cost of living in US dollars. Paris rose six places to become the world's second-most expensive city, which the EIU said in part reflected a recovery by European economies. "Improving sentiment in structurally expensive European cities combined with the continued rise of Asian hubs means that these two regions continue to supply most of the world's most expensive cities," Jon Copestake, editor of the report, which looks at over 400 individual prices, said in a statement. "But Asian cities also continue to make up many of the world's cheapest, especially in the Indian subcontinent." After Singapore and Paris, the 10 cities with the highest cost of living, in descending order, were Oslo, Zurich, Sydney, Caracas, Geneva, Melbourne, Tokyo and Copenhagen. London was ranked 15th most expensive city while New York was in 26th place. (Agencies)
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Under the Companies Act, 2013, corporates having net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more during any financial year are required to spend certain percentage of their profit on activities relating to Corporate Social Responsibility (CSR). There has been confusion regarding whether such payments would be allowed as deduction in the computation of income. The industry was expecting certainty on this aspect through the insertion of a specific provision allowing the deduction of CSR expenditure. The Finance Ministry has now cleared the confusion by providing that no deduction of such CSR expenditure would be allowed under section 37 of income tax act (Act). The rationale for this disallowance is that the objective of CSR is to share burden of the Government in providing social services by companies having net worth/turnover/profit above a threshold. If such expenses were to be allowed as tax deduction for these corporates, this would result in subsidizing of around one-third of such expenses by the Government by way of tax expenditure. However, it has also been provided that CSR expenditure which is in the nature of expenses covered under section 30 to 36 of the Act (sections specifying types of expenditures which qualify for deduction while computing taxable income) would not attract any disallowance under this provision. Therefore, Industry may now have to strategize their CSR expenditure so as to see whether it may fall under the (allowable) provisions of section 30 to 36 of the Act and hence the CSR expenditure may still qualify for deduction. Some of expenditures which might also qualify for deduction as CSR expenditure may inter-alia include expenditure on Skill Development, Rural Development, Promotion of Social and Economic Welfare, etc. This strategy provide an additional advantage as many of aforesaid expenditures includes the benefit of weighted deductions. Sujit Parakh, Director, Tax and Regulatory Services, R&D and Government Incentives
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The level of bad loans at Indian banks is a "concern" but is not "scary", Reserve Bank of India (RBI) Governor Raghuram Rajan said in a newspaper interview published on Sunday. A prolonged economic slowdown has hit Indian banks' balance sheets, with stressed loans - those categorised as bad and restructured - amounting to about 10 percent of all loans. Fitch Ratings expects stressed assets to reach 14 percent of loans by March next year. The bulk of these bad loans are related to infrastructure projects, which have made banks circumspect over lending. "Is it of concern? Yes. Is it scary? No," Rajan told the Times of India, adding "...the point is there are two or three silver linings in the cloud of distressed assets." He said many delayed infrastructure projects were "getting back on stream" as the economy improved, and booming equity markets will also help banks raise the required capital. He also downplayed concerns that rising bad loans would lead to a liquidity crisis in the Indian banking system similar to the one witnessed globally after the Lehman Brothers went bust in 2008. "Unlike the banking crisis in the West, where the worry was who would pony up the money, here there is no uncertainty," he said. "The government will do it. It has never let any bank it owns go under." New Delhi has been injecting funds into state lenders to help them meet minimal capital ratios mandated by Basel III norms. This year it will infuse 112 billion rupees. But analysts say more funds will be needed. With its finances in dire straits, the government plans to sell off a part of its holdings in the banks to help bridge their capital shortfall. While a sluggish economy is the main reason for a rise in distressed assets, a RBI report last week also blamed lending to certain "excessively leveraged" groups. The launch of a corruption investigation at state-controlled Syndicate Bank has raised broader concerns about weak oversight, graft and politically directed lending at state banks. Rajan said a change in the process of appointments at these banks will help address the issue. "When you are putting someone in charge of 5 trillion rupees of assets, you need an appointment process which is state-of-the-art," he said. "I think you can improve the process tremendously without going through the radical step of privatization." (Reuters)
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India has decided to acquire Boeing's Chinook and Apache helicopters, a defence ministry official said on Saturday, in a deal valued at $2.5 billion that could ease strained ties between New Delhi and Washington.The new nationalist-led government of Prime Minister Narendra Modi has grand plans to vastly strengthen India's military capability, in order to play its role as a regional power and meet challenges posed by a rising China and arch rival Pakistan."The defence aquisition council has cleared the last hurdle for signing of the contract with the USA in respect of Apache and Chinook," the official told Reuters, while declining to be named as he was not authorised to speak to media.The deal topped the agenda during a visit by U.S. Defence Secretary Chuck Hagel in August and is likely to help mend ties frayed by years of trade and diplomatic disputes. Modi is due to visit the United States next month.At a meeting on Friday, the government also approved the Indian Navy's proposal to purchase 16 multi-role helicopters, the official said. The deal could potentially benefit Sikorsky Aircraft, a unit of United Technologies Corp and European joint venture NHIndustries.Jaitley, however, cancelled a $991.65 million tender to buy 197 light-utility helicopters from foreign vendors and asked local manufacturers to produce them at home, the official said.Eurocopter, a unit of aerospace and defense company EADS, and Russian Kamov had been participating in the tender.The government also deferred a decision on a $2.5 billion proposal to acquire Israeli Spike anti-tank guided missiles.Analysts estimate that India, the world's largest arms importer, will spend $250 billion in the next decade to upgrade its Soviet-era military equipment and narrow the gap with China, which spends $120 billion a year on defence.India's military modernization plan includes a renewed push to develop a domestic weapons industry. India insists on "offsets" from foreign vendors to ensure technology is transferred or some of the deal's value remains in the country.The decision to scrap the troubled light helicopter tender comes weeks after Modi loosened the limit on foreign ownership in defence manufacturing to 49 percent from 26 percent to make "buy Indian" the default option for defence purchases."It has also been decided that the Indian Industry would be given the responsibility to produce nearly 400 Light Utility Helicopters (LUH) as per the requirement of the Indian Army and Air Force," said the official.A slew of kickback allegations, procurement delays and a recent spate of operational accidents have marred efforts to upgrade India's armed forces.A decision on the acquisition of light reconnaissance helicopters was deferred last year and tenders re-examined after Italian prosecutors alleged defence group Finmeccanica had paid bribes to Indian officials to win a separate $750 million deal to supply luxury helicopters for political VIPs.New Delhi partially banned Finmeccanica this week from bidding for future contracts. Finmeccanica denies any wrongdoing.Finmeccanica's AgustaWestland unit has a 32 percent stake in NHIndustries, which is 62.5 percent owned by EADS' helicopter unit Eurocopter, and Stork Fokker owns 5.5 per cent.(Reuters)
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