NEW DELHI (PTY) India’s federal finance minister Dr.Manmohan Singh Nov.10 agreed to “look into” the demands of the private sector, including amendment of company law for issues of nonvoting shares by companies and reduction in real interest rates, to have a level playing field With foreign companies, ‘This assurance was given when a group of eight leading Indian industrialists, called the “Bombay Club,” met Dr, Singh and submitted a six page charter of demands.

industrialists Hari Shankar Singhania, L.M ‘Thapar and Bharat Ram, who led the group, told a news conference here that it was quite likely that some of their demands, including amendment to the company law, may be met ¢ven before budget.

Underlining the importance for the amendment to issue nonvoting shares, they said in the true Spirit of liberalization, it should be left to the shareholders alone to decide the terms of such nonvoting shares, They said the argument given for allowing foreign Companies to increase their equity to 51% in Indian companies was that historically they had been forced to dilute their holdings at a low price fixed by the CI.

Similarly, the stake of the Indian groups was also diluted through industrial licensing, malpractices and restrictive trade practices, wealth tax and the mechanism of convertibility of loans at very low cost Noting that the financial institutions held a large percentage of capital of Indian companies, they said it would be prudent to Work out a mechanism to reduce these stakes gradually to24% with the possibility of a time table for Indian promoters or company to buy some of the stakes of the institutional shareholders. They said Indian promoters should be able to have access to low cost funds abroad for investment in equity as real interest rates in India were among the highest in the world.

They also wanted the legal processes for restructuring, including mergers and acquisitions, to be made easier and speedier. There ‘was a glaring difference in the tax Tales on capital gains made on the Same securities by Indian companies, nonresident Indians and foreigners. While foreign investors pay only 10% of long terms capital gains, Indian companies pay as high as 57.5% on the same profits. They said the levels of corporal lax overseas were not only lower, tax laws allowed “claw back” adjustment of taxes paid on past profits against present losses.

The restrictions imposed by Reserve Bank of India on banks regarding their lending against pledge of shares needed to be removed. Constraints imposed by the companies act and the authority of the government should be replaced by that of shareholders, who should be given the freedom to decide upon the deployment of company resources.

There were several other issues which needed to be addressed to make the Indian Industry competitive and these included interest rates, tax rates, inadequate infrastructure, employment policy and urban land ceiling.

Article extracted from this publication >>  November 19, 1993