Weekly News 29 April - 3 May 2024

Monday, 29 April 2024 (mint) Indian MNCs face global tax impact in EU, other nations

Indian multinationals with operations in 18 EU nations, the UK, Vietnam, and South Korea will now be subject to a 15% global minimum tax rule, following the implementation of tax reform rules in these countries effective from January 1, 2024, according to experts. The global minimum tax regime, agreed upon by 130 countries in 2021, aims to prevent tax avoidance by multinationals by levying a top-up tax on profits artificially shifted to low-tax jurisdictions. Deloitte's analysis suggests that Indian multinational groups will need to comply with these rules, even if India has yet to implement them domestically, resulting in potential top-up taxes for the financial year ending March 31, 2024.

The global minimum tax regime, also known as pillar two, allows countries to impose a top-up tax on intermediate holding companies or ultimate parents of entities showing profits in low-tax jurisdictions. Failure to pay the new tax could result in a top-up tax in the applicable jurisdiction. Businesses are now reviewing their structures to minimize the impact on their effective tax rates. While experts expect legislative amendments from the Central Board of Direct Taxes (CBDT) to implement the global minimum tax regime in India, the government's response to inquiries regarding the matter remains pending. Indian-headquartered groups with subsidiaries in low-tax jurisdictions are advised to evaluate the impact of the global minimum tax regime on their consolidated group financials.

Tuesday, 30 April 2024 (The Economic Times) Export Credit Access may Become Easier Amid Geopolitical Tensions

The government is actively exploring ways to enhance the competitiveness of exports amidst increasing geopolitical tensions, focusing on examining the export credit landscape. The Ministry of Commerce and Industry has initiated inquiries into exporters' financial requirements, challenges in accessing export credit, and potential avenues for improvement. India provides pre- and post-shipment export credit to facilitate international trade, but many exporters face difficulties in utilizing these facilities effectively, prompting the need for interventions.

Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO), highlighted a significant difference in the cost of export credit between India and countries like China, Vietnam, and South Korea, impacting export competitiveness. With India's goods exports declining in FY24, exporters are seeking longer-term funding amidst global uncertainty. Specific measures to enhance access to export credit, including extending the interest subvention scheme, are under consideration to address these challenges and support exporters during periods of demand slowdown and rising transportation costs.

Wednesday, 1 May 2024 (Business Standard) India replaces China as top Russia oil importer

In April, India surpassed China as the largest purchaser of discounted seaborne Russian crude oil, with imports rising by 12 per cent to a nine-month high. This shift was driven by the depletion of cheaper Venezuelan supplies following US sanctions, prompting Indian refiners to turn to Russian crude. The increase in Russian oil imports to India, reaching 1.85 million bpd in April, reflects the country's growing reliance on discounted Russian grades like Urals.

Indian refiners continued to prioritize cheaper grades like Urals to circumvent US sanctions, as evidenced by Urals accounting for 77 per cent of Russian crude imports in April. The price differential between the Urals and sweeter crudes enables Indian refiners to stay below the $60 per barrel price cap imposed by G-7 nations. Meanwhile, shipments from Venezuela to India decreased significantly in April due to the end of a six-month relaxation in US sanctions, highlighting India's vulnerability to disruptions in its crude supply chain.

Thursday, 2 May 2024 (The Indian Express) Vedanta to invest $20 billion in 4 years in India: Anil Agarwal

The Vedanta Group plans to invest $20 billion in India over the next four years, primarily focusing on technology, electronics, semiconductors, and glass segments. Chairman Anil Agarwal emphasised the importance of these investments in fostering industries and creating jobs, particularly highlighting the significance of semiconductors and glass for future technological advancements. The group aims to bolster its semiconductor business in Gujarat and expand its glass production within India, seeking partnerships to facilitate growth.

Agarwal reiterated the group's commitment to divesting its steel business if the right price is offered, but emphasised a willingness to continue running the business independently if necessary. Regarding environmental concerns in mining, Agarwal stressed the need for India to utilise its own natural resources, such as gold and diamonds, rather than depending solely on imports. Additionally, Agarwal downplayed the significance of the closure of the copper smelter in Tamil Nadu, noting its minimal impact on the group's overall business.

Friday, 3 May 2024 (The Economic Times) PSBs Plan to Set up ‘Green Cells’ for Climate Funding

State-run lenders are gearing up to establish specialized 'green cells' as part of the Enhanced Access and Service Excellence (EASE) reform version 7.0, introduced recently. These cells will focus on climate-specific initiatives, including raising green funds and expanding green lending portfolios. Responsibilities will also include assessing the environmental, social, and governance (ESG) risks of borrowers, aligning with RBI's draft guidelines on climate-related financial risk disclosure.

With India's green financing requirement estimated at 2.5% of GDP annually until 2030, according to the RBI, banks are pushing for incentives to promote green financing, including deposits. State Bank of India chairman Dinesh Kumar Khara has advocated for relaxation in the cash reserve ratio (CRR) requirement for green deposits, highlighting the importance of incorporating green financing incentives into regulatory policies.