Telecoms
The significance of telecommunications licensing was underscored recently as mobile telecommunications operators moved to block the issuance of licences covering multiple technologies. The Cellular Operators Association of India (COAI), a lobby group representing GSM operators, has challenged a decision by the Telecom Dispute Settlement and Appellate Tribunal to allow “dual technology” whereby telecommunications companies would be permitted to offer both GSM and CDMA services under a single licence. COAI claims that the move is illegal. What’s more, the association believes the decision reflects favouritism towards certain operators. The government, however, has made it clear to the tribunal that the decision to allow dual technology is a matter of policy taken in the larger public interest and that GSM operators have no right to challenge it.
Derivatives
India’s capital markets regulator, the Securities and Exchange Board of India (SEBI), has approved several new derivative products that will provide a wide range of risk-mitigation options and encourage overseas investors to enter the domestic market. The move follows SEBI’s recent decision to curb the use of participatory notes, or P-notes. It is hoped that the new products will provide attractive alternatives to P-notes and create more activity in the onshore market. The new derivatives relate to mini-contracts on equity indices, options with longer life, volatility index and futures and options (F&O) contracts, options on futures, bond indices and F&O contracts, foreign exchange F&Os and exchange-traded products.
Insurance
Proposed amendments to the Insurance Act, 1938, which are pending before parliament, will open the door to international reinsurers to set up operations in India. Once the amendments are approved, international reinsurers will have legal and regulatory clearance to transact business in the country subject to meeting a minimum capitalization requirement of Rs50 billion (about US$1.26 billion).
Aviation
A set of proposals by the Planning Commission of India to lift the embargo on foreign carriers investing in domestic airlines have been dealt a major blow by the Department of Industrial Policy & Promotion (DIPP). In a note recently submitted by the DIPP to the Cabinet Committee on Economic Affairs, the ban on investment by foreign airlines was strongly emphasized. The note was written in consultation with the Civil Aviation Ministry which also opposes investment by foreign airlines in the domestic aviation sector. While 49% foreign direct investment is permitted in domestic airlines, foreign airlines are prohibited from investing in the sector. Non-resident Indians are allowed to hold up to 100% equity in a domestic airline on the condition that there is no direct or indirect participation by a foreign airline.
Taxation
The recent decision by the state government of Uttar Pradesh to implement a value-added tax (VAT) has brought a nationwide goods and services tax (GST) closer to reality. Uttar Pradesh is the last state to adopt VAT, holding out until now on the grounds that it would cause inconvenience to traders and lead to a loss of revenue. The introduction of GST is intended to harmonize state tax regimes across the country.
Technology
The US is set to make it easier for selected companies in India and China to import sensitive technology. Under the “Validated End User” scheme, pre-screened companies with strong export compliance programmes and a track record of using US technology responsibly will be able to import certain US technologies without applying for individual licences. The move will reduce the administrative and regulatory burden associated with the import of sensitive technologies and is likely to boost US exports to India in the fields of electronics, avionics, aerospace, and life sciences.
The Indian government has decided to set up a National Biotechnology Regulatory Authority to provide a single-window mechanism for the bio-safety clearance of all genetically modified products and processes. The Department of Biotechnology has been entrusted with setting up the authority and funding it. The move follows a two-year consultation process between the government and various stakeholders. The necessary legislation is expected to be ready in three months.
On 13 November the government approved the National Biotechnology Development Strategy. In addition to enabling the full utilization of currently available opportunities in manufacturing and services, the strategy aims to lay a foundation for discovery and innovation in India. By effectively utilizing novel technology platforms, it is hoped that the new strategy will contribute to long-term benefits in agriculture, animal productivity, human health, environmental security and sustainable industrial growth.
The wrap is compiled by Luthra & Luthra Law Offices, which can be reached at luthra@luthra.com. The wrap is designed to provide general information on key legal developments. Readers should not act on the basis of this information without seeking professional advice.
