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Corporate houses worried about the Competition Commission of India (CCI) potentially slowing down their inorganic growth plans can take heart. India’s competition regulator is unlikely to finalise its merger control provisions before it becomes full-fledged, which, according to the current scheme of things, would take a year, at least.

This means that the draft regulations framed by the existing set-up (of one member, a few experts and supporting staff) which does not have the legal sanction to be a regulator with authority can be thoroughly rewritten by the full commission later when it finalises these regulations. As per the CCI Act, the commission acquires legal authority when it has a chairman and at least two members.

India Inc has of late been a strident critic of the merger control provisions - which are essentially contained in the act and supplemented by the regulations - for their potential to scupper -mergers, amalgamations and acquisitions. The investment commission chairman Ratan Tata has also denounced the draft regulations of the extant body.

According to official sources, the corporate affairs ministry is now in the process of paving the way for the formation of a selection committee which will find the chairman and members of the commission. The selection committee is to be headed by the chief justice of India or his nominee. The ministry has to recommend the names of two experts in the selection panel, which it will do soon. “We expect the (full-fledged) commission to be in place within a year,” said a ministry official. He added that the selection committee has full freedom to decide on the process to select the chairman and members.

The industry has opposed both the specific provisions in the recently amended competition law-particularly sections 5 and 6 that deal with M& As -as well as certain aspects of the draft regulations framed by the CCI. The industry’s major concern is that the time lines prescribed-21 0 days for CCI to clear a deal and the ambiguity on how long the appellate tribunal could take for a decision -would scuttle the sensitive transactions that corporate houses thrash out in a dynamic economy where time is much more valuable than money. Secondly, the asset turnover threshold for any transaction to come under CCI’s scrutiny is too low, says the industry.

The CCI has tried to allay these concerns of the industry, saying that 210 days would not be the standard time for clearing a merger proposal. It will be the maximum time within which a proposal will be decided upon. If one doesn’t hear from the commission within this time, the proposal will be deemed approved. Clearance of “straightforward cases” will normally take much shorter time (30 days or so), it said. The regulator will set internal time limits for itself. So, parties to the merger should not reckon 210 days as minimum period of compulsory wait for the approval.

These explanations, however, have not pacified the industry. The CCI has so far shown professionalism in the way it has been operating, but some fear that once it gets the full statutory mandate, there is no guarantee it might not act like any other bureaucratic body. While anti-competitive practices must be checked by an agency, it should not be reduced to a hurdle for corporates to function. For the corporate affairs minister Prem Chand Gupta, who is known for his consultative approach to policy making and empathy towards entrepreneurs’ genuine concerns, another round of discussions with the affected party India Inc-will not do much harm.

Anyway, the hands of the ministry are already full with a brand new companies bill and a limited liability partnership bill which would be introduced in the Parliament in the next few days.

The ministry’s priority is to get the Parliament’s ascent for these two major bills, which would be a land mark achievement.

The government introduced fringe benefit tax (FBT) on employee stock options (ESOPs) in the 2007 Budget. FBT is payable by the employer on the ESOP benefits granted to the employees, upon exercise of the option by the employee. While enacting the law, a provision was introduced enabling the recovery of the FBT from the employees: In December 2007, the Central Board of Direct Taxes (CBDT) came out with its circular, providing some important clarifications.

Employees who work in different countries incur personal tax liabilities in the respective countries, including ESOP benefits. The CBDT has stated in the circular that where the employer has paid FBT on ESOPs provided to an employee based in India and subsequently recovered the FBT from him, the employee can claim credit for such FBT against the tax payable in his home country on such ESOPs.

FBT paid by the employer and recovered from the employee, according to the CBDT, amounts to a surrogate tax on the employer in respect of fringe benefits provided to its employees. Again, CBDT has stated that where an employee has paid tax in a foreign country in respect of ESOPs, such tax cannot be allowed as a credit against the FBT payable by the employer on such ESOPs.

The government’s stand in this regard is contradictory. On the one hand, it is not allowing credit for taxes paid outside India against FBT payable in India, in spite of stating that FBT paid by employer and recovered from employee is a surrogate tax on the employer. At the same breath, the government says that the employees from whom FBT is recovered by the employer will be allowed credit for such FBT against their personal tax liability in their home country.

Additionally, the allowability of tax credit in the home country of the employee is doubtful. Credit in the employee’s home country will be according to the provisions of the domestic tax laws of the country or as per the tax treaty which India has with -the respective home country. The Indian tax treaties do not specifically include FBT within the definition of ‘Indian taxes’ covered by the treaty. Further, the domestic laws of various countries, including the US, do not permit credit of Indian FBT in its current form against the personal income tax liabilities of the individuals (employees). Given this, the CBDT’s statement in its circular will not necessarily entitle the employee to obtain credit for tax payable in their home countries. The fundamental legal liability to pay FBT rests with the employer. Recovery of FBT from the employee is a contractual arrangement between the employer and employee which may not be sufficient to shift the legal burden even though the economic burden shifts to the employee. Further, the Indian government not granting credit for taxes payable by employees in foreign countries against the FBT payable by the employer in India, will also weaken the position overseas.

Given this, it would be better if the government initiates discussions with various countries, with which it has tax treaties, for including Indian FBT as a tax which is creditable in the respective treaty countries, whether through amendments to the treaty or through protocol. Australia, which also imposes FBT on various fringe benefits granted, by taxing right over the benefit if the value of the benefit were paid to the employee as ordinary employment income. The government can also consider an amendment to the Indian Income Tax Act in the ensuing Budget whereby FBT paid by the employer and recovered from the employee would be statutorily considered as tax paid by employee so that the employee can claim credit therefore in his home country. A retrospective amendment would enable the claim for the financial year 2007 -08 also.

It used to be the stuff of science fiction, dystopian visions of a place and state where individual freedom and privacy are quaint concepts, long consigned to nebulous memory. And so far, we’ve felt other countries, say, the US and the UK were already at an Orwellian ‘Big Brother is watching you’ stage. What with their plethora of CCTVs eyeing all except the contents of the kitchen sink, the high-tech, invasive snooping recording the recipe mother relates over the phone et al.

Now, the Indian state also seems desirous of making a foray into that hazy world. It’s to do with the potential subversive, anti-national character of BlackBerry devices. A tame start may be, but unseemly eventualities can have a quiet beginning - think of a murder in an Agatha Christie book cascading from, say, a granny having a quiet cup of tea amid well-tended gardens and birdsong. Perhaps not an apt comparison, but hopefully illustrative!

The department of telecom (DoT), it is learnt, is unhappy over the security layers surrounding the data on BlackBerry devices. And is now clamouring that all such data is saved somewhere, so it can be perused for offensive elements. One could ask whether the sort of people likely to own these handheld things would fit the profile of an undesirable, but then, these are troubling, topsy-turvy times.

By and by, one also learns that the same solicitous concerns had led to DoT forcing all ISPs in India to reduce their encryption levels way below the global standard. Thus, next times you pay for something online, and then find a large part of your money has seceded from your bank balance, don’t blame the bank! Sure, the logic of surveillance is the same as ever: better administration and protection. But aren’t some of those same things being jeopardized in all this? Better not ask, someone might be listening!

In a first-of-its-kind move, the drug price regulator asked pharmaceutical companies to pass on the benefit of the recent excise duty cut to consumers even on medicines that are outside government’s price control. This will reduce prices by 4.58% on brands that account for three fourth of the Rs 33,000-crore domestic pharmaceutical market.

While intervening in the control-free segment of the market for the first time to emphasise that excise cut benefit should be passed on to consumers, the price regulator said emphatically that companies “must” reduce prices.

The regulator also said it will use a public interest clause in the drug pricing law to enforce Monday’s order. Finance minister P Chidambaram had halved the excise duty on all medicines from 16 % to 8 % in this year’s budget. Excise duty will now be levied on 64.5% of the MRP instead of 57.5% earlier. This works out to a 4.58% cut in the MRP on all medicines.

Drug makers have to submit a revised price list to NPPA soon. The National Pharmaceutical Pricing Authority (NPPA) had reduced the prices of controlled medicines, accounting for the rest one fourth of the market, by an equal measure immediately after the budget.

To enforce the current price cut, NPPA will use the norms meant for monitoring the price movements in control-free drugs. As per these norms (Para 10 b of the Drug Price Control Order), a company can raise the price of a control-free brand only by up to 10% in any 12 consecutive months. NPPA expects companies to first reduce the price by 4.58% and inform it. The reduced price will be the basis for any annual increase a company might want to avail in the year beginning March 1, 2008. Although companies are allowed to raise prices of control-free drugs by 10% in a year, market competition sometimes discourage them from it.

Companies increasing prices beyond the ceiling risk their products to be brought under government’s direct price control. Companies avoid that because once a product is under direct price control, they cannot hike prices within 10% ceiling too. Even for a minor revision, they have to go to the regulator. NPPA entertains requests for price revisions only after the company first complies with its order within 15 days of bringing it under government control. If the company misses the 15-day period, even that window is lost almost permanently.