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RBI decides to drop FERA, FEMA cases against cos

Our Bureau

NEW DELHI, March 12

THE Reserve Bank of India (RBI) has decided not to proceed with the FERA and FEMA cases against some top corporates which had retained the proceeds of external commercial borrowings (ECBs) abroad, beyond the stipulated period.

Reliance Industries Limited (RIL), Sterlite Industries Ltd, Tata Electric and Essar Oil had raised ECBs aggregating $ 1.7 billion collectively over three years ago.

However, these companies did not repatriate the proceeds back into the country within the stipulated period, following which the RBI and the Finance Ministry had to intervene and force them to repatriate the funds.

Under the guidelines for ECBs, the RBI gives permission to corporates to retain funds abroad up to one year or until the capital expenditure is incurred. The period up to which the company which raises ECBs can retain the proceeds abroad is clearly indic ated. This is monitored by the RBI, although the approvals for the borrowings were being given by the Finance Ministry.

In a reply, given to Parliament, the Finance Ministry said that except Essar Oil, other companies have since repatriated their ECB proceeds retained abroad earlier. Essar Oil which was given permission by the RBI for retaining proceeds up to December, 20 00, has sought further extension up to June, 2001. The request is being examined by the RBI, according to the reply given by the Minister of State for Finance, Mr Balasaheb Vikhe Patil.

The Minister said that the RBI has taken a general view that the irregularities committed by the companies in retaining funds abroad beyond the stipulated period may not be construed as warranting action under FERA and FEMA, as the ECB proceeds held abro ad have since been repatriated.

However, RIL has petitioned the Finance Ministry for denying the company an exemption on withholding tax. RIL had retained over $ one billion abroad of the ECB proceeds, beyond the stipulated period, before being forced to repatriate the funds.

Sterlite had raised $ 81 million through ECBs in 1997 which was retained, Tata Electric Companies- $ 300 million and Essar Oil -$ 102 million.