Introduction of Real Estate Investment Trusts (REITs)

Introduction of Real Estate Investment Trusts (REITs) as an eligible financial instrument / structure under Foreign Exchange Management Act (FEMA) 1999

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to allow the Real Estate Investment Trusts (REITs) as an eligible financial instrument / structure under the Foreign Exchange Management Act (FEMA) 1999.


The approval is expected to enable foreign investment inflows into the completed rent yielding real estate projects, which is, as of now, prohibited under the FEMA Regulations.

As a result of this decision, entities registered and regulated under the SEBI (REITs) Regulations 2014 will be able to access foreign investments which as of now are prohibited under the FEMA Regulations. The intent of introducing the instrumentality of REITs is to reduce pressure on the banking system to which the real estate sector looks for funds, free up existing funds of Banks and to encourage construction activities. REITs while attracting long term finance from foreign and domestic sources including NRIs would make available fresh equity to the sector.

Background:

The Finance Minister in his Budget 2014-15 Speech proposed the introduction of Real Estate Investment Trusts (REITs), which have been successfully used as an instrument for pooling of investment by several countries for investments in the real estate, with a view to earning income and distributing earnings from its investments to investors, who have contributed to the pooled corpus. SEBI (REITs) have been issued vide SEBI (Real Estate Investment Trusts) Regulations, 2014, however, on account of restriction under FEMA Regulations, actual investment has not occurred so far.

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Approval to operationalization of the Atal Pension Yojna (APY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY)

The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi today approved the operationalisation of the Atal Pension Yojna (APY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and the Pradhan Mantri Suraksha Bima Yojana (PMSBY).

Approval of the Cabinet was given to extend funding support for implementing the APY and apprise the Cabinet on operationalisation of the PMJJBY and the PMSBY. Approval was also given to provide Rs. 50 crore per annum for the next 5 years as the Government contribution for publicity / awareness creation related expenditure for PMJJBY and PMSBY.

Under the APY, subscribers would receive a fixed minimum pension of Rs. 1000 per month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per month, at the age of 60 years, depending on their contributions, which itself would vary on the age of joining the APY. The Central Government would also co-contribute 50 percent of the total contribution or Rs. 1000 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years, that is, from 2015-16 to 2019-20, to those who join the NPS before 31st December, 2015 and who are not members of any statutory social security scheme and who are not Income Tax payers. The pension would also be available to the spouse on the death of the subscriber and thereafter, the pension corpus would be returned to the nominee. The minimum age of joining APY is 18 years and maximum age is 40 years. The benefit of fixed minimum pension would be guaranteed by the Government.

Under PMJJBY, annual life insurance of Rs. 2 lakh would be available on the payment of premium of Rs. 330 per annum by the subscribers. The PMJJBY will be made available to people in the age group of 18 to 50 years having a bank account from where the premium would be collected through the facility of "auto-debit".

Under PMSBY, the risk coverage will be Rs. 2 lakh for accidental death and full disability and Rs. 1 lakh for partial disability. The Scheme will be available to people in the age group 18 to 70 years with a bank account, from where the premium would be collected through the facility of "auto-debit".

Government expenditure is expected to range between Rs. 2,520 crore and Rs. 10,000 crore on account of Government co-contribution to subscribers of the APY over a period of five years. Further, an expenditure of Rs. 2,000 crore for promotional and developmental activities for enrolment and contribution collection under APY and Rs. 250 crore for publicity, awareness building for PMJJBY and PMSBY is envisaged by the Government, over a period of five years.

It is expected that around two crore subscribers would be enrolled during the current financial year under APY.

Background

It was mentioned in the Budget Speech for 2015-16, that a large proportion of India’s population is without insurance of any kind, that is, health, accidental or life. Further, as the young population of India ages, it is also going to be pension and insurance- less. Therefore, Government has decided to work towards creating a universal social security system for all Indians, specially the poor and the under-privileged, to address longevity risks among workers in the unorganised sector and to encourage workers in the unorganised sector to voluntarily save for their retirement. Such workers constitute 88 percent of the total labour force of 47.29 crore according to the 66th Round of NSSO Survey of 2011-12.

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MoU between India and Seychelles on renewable energy cooperation

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval for the signing of a Memorandum of Understanding (MoU) on Renewable Energy Cooperation between India and Seychelles in March, 2015, during the visit of the Prime Minister to Seychelles.

The objective of the MoU is to strengthen, promote and develop renewable energy cooperation between the two countries on the basis of equality and mutual benefit.

The MoU will also help in strengthening bilateral cooperation between the two countries in the field of renewable energy.

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Approval for GSAT-18 communication satellite and launch services

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval for building of the GSAT-18. This is a communication satellite, weighing about 3425 Kg, for providing replacement capacity.

The GSAT-18 spacecraft project will require a total budget of Rs. 1022 crore including launch services. All heritage proven bus system will be used to build the satellite in 30 months period. The satellite structure will be similar to the GSAT-10 satellite.

The GSAT-18 spacecraft will provide replacement capacity supporting the existing television, telecommunication, Digital Satellite News Gathering (DSNG) and VSAT services in the country.

The GSAT-18 spacecraft will also augment and support the existing telecommunication, television, DSNG and VSAT services in the country, hence benefiting all sections of society.

Background:

The proposal to build the GSAT-18 is part of the Indian Space Research Organisation’s (ISRO) efforts towards protecting services of existing users.

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Approval to amendments in the Whistle Blowers Protection Act, 2011 (17 of 2014)

The Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi today approved amendments in the Whistle Blowers Protection Act, 2011 by moving an amendment Bill in Parliament during the Budget Session, 2015. This is being done with a view to incorporate necessary provisions aimed at strengthening safeguards against disclosures which may prejudicially affect the sovereignty and integrity of the country, security of the State, etc.

The amendments would address concerns relating to national security. This would strengthen the safeguards against disclosures which may prejudicially affect the sovereignty and integrity of the country, security, strategic, scientific or economic interest of the State, relations with a foreign State or leads to incitement of an offence. Safeguard have also been provided in respect of such disclosures which have been exempted under section 8(1) of the Right to Information Act, 2005.

Background:

In order to give statutory protection to whistle blowers in the country, the Public Interest Disclosures and Protection to Persons making the Disclosures Bill, 2011 was introduced in the Lok Sabha in August, 2010. The said Bill was passed by the Lok Sabha, in December, 2011, as the Whistle Blowers Protection Bill, 2011 and was passed by the Rajya Sabha on 21.02.2014. The Bill has received the assent of the President on 9th May, 2014.

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Approval for GSAT-17 communication satellite and launch services

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval for building of the GSAT-17. This is a communication satellite, weighing about 3425 Kg, for providing replacement capacity and in-orbit back up.

The GSAT-17 spacecraft project will require a total budget of Rs.1013.20 crore including launch services. All heritage proven bus system will be used to build the satellite in a period of 30 months. The satellite structure will be similar to the GSAT-10 satellite.

The GSAT-17 will provide replacement capacity in different frequency bands and protect operational services.

The GSAT-17 spacecraft will also augment and support existing telecommunication, television and VSAT services in the country, apart from providing in-orbit redundancy for societal services. This would, therefore, benefit all sections of society. The footprints of the GSAT-17 spacecraft would cover the entire mainland of the country.

Background:

The proposal to build the GSAT-17 is part of the Indian Space Research Organisation’s (ISRO) efforts towards protecting the services of existing users and also building in-orbit spare capacity to meet contingency.

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Revised Agreement between India and the Republic of Korea for the Avoidance of Double Taxation and Prevention of fiscal evasion taxes on income

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval for revising the Double Taxation Avoidance Convention (DTAC) which was signed in 1985, between India and the Republic of Korea, for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income.

The revised Double Taxation Avoidance Agreement (DTAA) will provide tax stability to the residents of India and Korea and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between the two countries.

The revised DTAA provides for source based taxation of capital gains, provisions for making adjustments to profits of associated enterprises on the basis of arm's length principle, provides for residence based taxation of shipping income, provisions for service of permanent establishment, rationalizes tax rates in the Articles on Dividends, Interest and Royalties and Fees for Technical Services.

The Agreement further incorporates provisions for effective exchange of information and assistance in collection of taxes between tax authorities and also incorporates limitation of benefits provisions, to ensure that the benefits of the Agreement are availed of by genuine residents of both countries.

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Modification in the Scheme of Infrastructure Development for Food Processing: Mega Food Parks.

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has approved the modification in Mega Food Park Scheme guideline of infrastructure development for food processing. These modifications will streamline the implementation of the scheme and make the implementation of the Mega Food Parks smooth.

These modifications are expected to trigger further investment in the food processing sector and ensure smooth implementation of the Mega Food Parks scheme particularly, projects at initial phases of the scheme’s implementation.

The Scheme will be implemented in a market driven manner commensurate with both global and national demands. Innovative supply chain management will be the key to implementation of this scheme. The project proposals for focusing on the processing and preservation of perishable food products will be given weightage in selection.

Each Mega Food Park is expected to generate the following financial outcomes:

i. Expected to benefit 6000 farmers / producers directly and about 25000 farmers indirectly,

ii. Estimated investment in each project will be about Rs. 100 crore in common facilities and will leverage an additional investment of about Rs. 250 crore.

iii. Expected annual turnover of each project will be Rs. 500 crore.

iv. About 30 food processing units are expected to be setup in each project.

The modification will also bring Central Government agencies on par with the State Government agencies by removing the restriction of a maximum 26 percent on their equity holding in the Special Purpose Vehicle (SPV) and allowing all Government agencies to become shareholders in the SPV without any restriction on their shareholding.

Background:

The Infrastructure Development Scheme for Mega Food Parks aims at providing modern infrastructure facilities for food processing industries along the value chain from farm to market. As per the Scheme, ownership and management of the Mega Food Park vests with a SPV in which organized retailers, processors, service providers etc may be the equity holders or there may be an anchor investor along with its ancillaries, associated companies and other stakeholders. The Farmer organisations are encouraged to participate in the SPV. The Anchor Investor in the SPV holding majority (at least 51 percent), stake with or without other promoters of the SPV, will be required to set up at least one food processing unit in the park with an investment of not less than Rs. 10 crore. However, State Government / State Government entities and Co-operatives applying for projects under the scheme are not required to form a separate SPV and set up processing unit(s) in the Park. In case, the Central Government agencies become shareholders in the SPV, their equity has been restricted to a maximum 26 percent.

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Review of the investment limit for cases requiring prior approval of the Foreign Investment Promotion Board (FIPB)

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has approved the proposal of Department of Industrial Policy & Promotion to review of the investment limit for cases requiring prior approval of the Foreign Investment Promotion Board (FIPB) / Cabinet Committee on Economic Affairs (CCEA), as provided in the Consolidated FDI Policy Circular effective from April 17, 2014. Amended provisions in this regard are as under:

(a) The Minister of Finance who is in-charge of FIPB would consider the recommendations of FIPB on proposals with total foreign equity inflow up to Rs.3000 crore.

(b) Recommendations of FIPB on proposals with total foreign equity inflow of more than Rs.3000 crore would be placed for consideration of CCEA.

(c) The CCEA would also consider the proposals which may be referred to it by the FIPB / the Minister of Finance (in-charge of FIPB).

(d) The FIPB Secretariat in the Department of Economic Affairs (DEA) will process the recommendations of FIPB to obtain the approval of Minister of Finance and the CCEA.

This decision is expected to expedite the approval process and result in increased foreign investment inflows.

Background:

Liberalisation of the FDI policy has been done in a calibrated manner. Most of the sectors are presently under the automatic route, under which, only intimation is required to be given to the Reserve Bank of India (RBI) and approval of the FIPB/CCEA is not required. No limit for foreign investment has been prescribed for the automatic route. However, approval route cases are decided by the FIPB, only if the investment is less than Rs. 2000 crore.