<strong>By <keyword id="13186635" type="General" weightage="20" keywordseo="shripal-lakdawala" source="Orion">Shripal Lakdawala</keyword>, <keyword id="13186636" type="General" weightage="20" keywordseo="jatan-shah" source="Orion">Jatan Shah</keyword> and Aashni Shah</strong><br /><br />Even after 6 years of the government providing an ‘in-principle’ approval for strategic disinvestments of 36 of its public sector undertakings (‘PSUs’), the affairs remain in a torpid state. The proposal for such disinvestment was made to ensure reduction of financial burden on the government, elevate the use of technology and thus expand the overall business of the PSUs. However, only 8 out of 36 PSUs have successfully completed their disinvestment procedures and leveraged on the participation of private players. A large chunk of PSUs are still either in the process or haven’t even initiated the process of disinvestment.<br /><br />The ministry of finance, government of India, announced the policy of strategic disinvestment on 1 February 2021 to fulfil the government’s commitment under the Aatmanirbhar Bharat package. Through this policy, the government aims to sell a substantial portion of its stake in the PSUs and use the proceeds to finance various social sector and development programmes. In cases where there is a sale of the entire or even majority of the stake in PSUs, the decision-making power and the control of the companies will shift to a private player. <br /><br />Majority of the PSUs for which strategic disinvestment is proposed are loss making companies i.e., these companies have historically carried forward tax business losses, which are allowed to be carried forward for a period of 8 years under the Income-tax Act, 1961 (‘the Act’). Any potential buyer of these PSUs would want to utilise such losses and set it off against any future income generated by the company. Such losses play a crucial role in determining the value for such loss-making companies.<br /><strong><cmsannotation type="cmsannotation" annotationid="Current scenario" comment="subhead" text="Current scenario"><span data-til="noop">Current scenario</span></cmsannotation></strong><br />Currently, section 79 of the Act provides that in case of certain companies, the existing business losses shall lapse on account of a change in shareholding by more than 49%. Accordingly, if the government proposes to sell a stake in PSUs which are not listed or are not held by any listed entity and are not acquired by a listed entity, then in such a scenario, changes in shareholding by more than 49% will lead to a lapse of the existing tax business losses of the PSUs.<br /><strong><cmsannotation type="cmsannotation" annotationid="Proposed amendment" comment="subhead" text="Proposed amendment"><span data-til="noop">Proposed amendment</span></cmsannotation></strong><br />In order to facilitate the disinvestment of the PSUs, Budget 2022 proposes to exempt the erstwhile PSUs (i.e., the PSUs in which strategic disinvestment is made by the government), from the provisions of section 79, subject to the condition that the ultimate holding company of the erstwhile PSUs after the completion of strategic disinvestment, continues to hold, directly or indirectly through its subsidiaries, at least 51% of the voting power of such company in aggregate.<br /><strong><cmsannotation type="cmsannotation" annotationid="Is this enough to get the wheels rolling?" comment="subhead" text="Is this enough to get the wheels rolling?"><span data-til="noop">Is this enough to get the wheels rolling?</span></cmsannotation></strong><br />In Union Budget 2021, a similar relief was granted for amalgamation of PSUs. Further, clarificatory notification in this regard was issued by the Central Board of Direct Taxes ('CBDT') in September 2021, which is now being formalised by proposing an amendment under the relevant provisions of the act. The previous amendment coupled with the proposed amendment, ensures that there is no lapse on account of carried forward tax losses. While this amendment provides a major relief to the loss-making PSUs which are proposed to be acquired by private sector undertakings, there are a few other requests as well from the industry, to make acquisitions of PSUs lucrative from a tax perspective. Exemption of TDS [tax deducted at source] and TCS [tax collected at source] on such transactions, exemption from obtaining ‘no-objection’ certificates from the tax department, exemption on capital gains on sale of PSUs’ shares and deemed gift taxation on acquisition at a lower valuation, are the few requests from the industry. <br /><br />While there were several expectations from this Budget, only one has been addressed. The proposal in Finance Bill 2022 is a welcome move not only for PSUs which are in the process of disinvestment, but will also speed up upcoming disinvestments.<br /><br /><em><strong>Shripal Lakdawala is Partner, Deloitte India; Jatan Shah is Senior Manager with Deloitte Haskins and Sells LLP; and Aashni Shah is Deputy Manager with Deloitte Haskins and Sells LLP</strong></em><br />

OPINION: Indian government is still oiling the wheels for disinvestment of PSUs

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5cc2c191daa9a954fa3f7738-1500/2012-05-22t120000z1130541018gm1e85m139v01rtrmadp3india-potatoes.jpg" border="0" alt="india potato gujarat lawsuit pepsico lays" data-mce-source="Reuters" data-mce-caption="Sorted potatoes carried at the market yard of the western Indian city of Ahmedabad, Gujarat. May 16, 2012." /><p class="source"><span>Reuters</span></p><p class="caption">Sorted potatoes carried at the market yard of the western Indian city of Ahmedabad, Gujarat. May 16, 2012.</p></div><p></p></div></div></p><ul class="summary-list"><li>PepsiCo, the owner of Lay's potato chips, is suing a small group of Indian farmers for growing a potato variety they say they belongs to them alone.</li><li>PepsiCo say they've had "exclusive rights" to the FL-2027 potato in India since 2016, and want four farmers to pay $143,000 each for growing it without permission.</li><li>Dozens of activists and farmers' unions have written to India's Department of Agriculture condemning the suit and accusing PepsiCo of intimidation.  </li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories.</a></li></ul><p>PepsiCo, the $177 billion owner of potato chip brand Lay's, has sued a group of farmers in India for growing a variety of potato they say they own the exclusive rights to.</p><p>The company is seeking reparations of $143,000 each from four farmers accused of growing the <a href="https://patents.google.com/patent/US20050081269A1/en">FL-2027 potato</a>, which PepsiCo says it has had exclusive rights to in India since 2016, according to legal documents submitted to a district court in Ahmedabad, <span>Gujarat, on April 11, <a href="https://edition.cnn.com/2019/04/25/business/pepsico-india-potato-farmer-lawsuit/index.html">and seen by CNN</a>.</span></p><p><span>"PepsiCo is India's largest process grade potato buyer and amongst the first companies to work with thousands of local farmers to grow a specific protected variety of potatoes for it," a spokesperson told CNN.</span></p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5cc2c59fd1a2f8574a5a77b4-1300/2019-04-17t125204z2074285938rc17e050e540rtrmadp3pepsico-results.jpg" border="0" alt="Ramon Laguarta, Elected Chief Executive Officer of PepsiCo." style="color: #000000;" data-mce-source="Reuters" data-mce-caption="Ramon Laguarta, CEO of PepsiCo." /><p class="source"><span>Reuters</span></p><p class="caption">Ramon Laguarta, CEO of PepsiCo.</p></div><p></p></div></div></p><p><span>"In this instance, we took judicial recourse against people who were illegally dealing in our registered variety."</span></p><p>PepsiCo says it's given permission to several hundred Indian farmers to grow the special potato before, but not to the farmers in the lawsuit.</p><p>Two of the farmers are named as Fulchand Kachchhawa and Suresh Kachchhawa, both from near the city of Deesa, in the northwestern region of Gujarat.</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5cc2c908b14bf4082a7ff418-2000/lays chips 2.jpg" border="0" alt="Lays chips 2" style="color: #000000;" data-mce-source="Hollis Johnson" /><p class="source"><span>Hollis Johnson</span></p><p class="caption">PepsiCo owns Lay's chips, as well as Gatorade and Quaker Oats.</p></div><p></p></div></div></p><p>PepsiCo say the growing of FL-2027 without permission is a rights infringement under Section 64 of the Protection of Plant Varieties and Farmers' Rights Act 2001.</p><p><em><strong>Read more:</strong> <a href="https://www.thisisinsider.com/giant-idaho-potato-hotel-boise-airbnb-2019-4">A giant potato in Idaho has been turned into an Airbnb, and you can rent it for $200 a night</a></em></p><p>Lawyers, activists, and farmers unions have rallied to the farmers' defence. </p><p>More than 190 activists penned a joint letter to the Indian Department of Agriculture opposing the "false and untenable" lawsuit from the food and drink behemoth, <span> <a href="https://www.indiatoday.in/business/story/pepsico-india-lays-potato-farmers-gujarat-sued-1510090-2019-04-25">India Today wrote.</a></span> PepsiCo also owns<span> brands such as Gatorade, Quaker Oats, and of course, Pepsi.</span></p><p><span>Activists are also raising legal aid to help the farmers fight the case. </span></p><p><span>One of the signatories, Kapil Shah of advocacy group Jatan, told CNN PepsiCo's actions were "against food sovereignty" and the "sovereignty of the nation."</span></p><p><span>"We will fight it out, no matter how big the company," Shah said. "Pepsi has made a huge mistake."</span></p><p>The case will be heard in Ahmedabad district court on Friday. </p><p>PepsiCo did not immediately respond to a request for comment from Business Insider.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/twin-sisters-started-cigar-company-with-only-500-investment-2019-4">Twin sisters started cigar company with only a $500 investment - and now they're shipping nationwide</a></h3>        <div>            <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/THiOR6Hr-CEZHWCBG.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script>        </div>    </div>

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OPINION: Indian government is still oiling the wheels for disinvestment of PSUs

BI India Bureau

The $177 billion owner of Lay's chips is suing small-time Indian farmers for growing a type of potato it claims exclusive rights over

Bill Bostock,Bill Bostock