THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

Hero Honda to pump in Rs 200
cr next year
Brijmohan LallNew Delhi, December 6
Hero Honda Motors Limited is planning to foray into the scooter segment but no time- frame has yet been finalised for expanding into this line of production. “We have plans of getting into scooters though we have not finalised a time-frame for that.

No levy on sale, purchase of seeds, says SC
New Delhi, December 6
In a judgement benefiting seed producers and dealers in the country, the Supreme Court has held that seeds cannot be specified as agriculture produce and no fee is liable to be imposed on the sale and purchase of the same by the government.

Indian Airlines cuts losses
New Delhi, December 6
Improvement in operations and financial management along with increase in productivity has helped Indian Airlines to cut down its losses as compared to last year.

Reserves cross $ 96 b
Mumbai, December 6
India’s foreign exchange reserves surged ahead by $ 698 million to race past the $ 96 billion mark for the week ended November 28, inching towards the $ 100 billion figure.






EARLIER STORIES

  New Safexpress centre
Chandigarh, December 6
Safexpress today inaugurated its state-of-the-art centre here which would act a nerve centre for company's operating in Punjab, Himachal Pradesh and Haryana.


AVIATION NOTES

India to save Rs 50 crore by using Pak airspace
When over-flights become reality, both India and Pakistan will be able to save expenses on fuel and cut time in reaching several destinations. According to an estimate, India will save about Rs 50 crore annually.

  • New A-I chief
INVESTOR GUIDANCE

Gifts by NRIs are tax-free
Q: I am a resident of Bathinda . My younger brother is in Japan for studying on Japan government scholarship, which is tax free at his hands in Japan. Out of that he saved Rs. 2,50,000 and remitted to me in India in my savings bank account.

  • Commutation beneficial

IN GRAPHIC: WEEKLY STOCK MOVEMENT

A man walks past Christian Dior, the French brand's flagship store in Japan, at Tokyo's Omotesando shopping district on Saturday A man walks past Christian Dior, the French brand's flagship store in Japan, at Tokyo's Omotesando shopping district on Saturday. — Reuters

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Hero Honda to pump in Rs 200 cr next year
Gaurav Choudhury
Tribune News Service

New Delhi, December 6
Hero Honda Motors Limited (HHML) is planning to foray into the scooter segment but no time- frame has yet been finalised for expanding into this line of production.

“We have plans of getting into scooters though we have not finalised a time-frame for that. We are currently studying the market to understand the right product opportunities and also right time to venture. We are closely watching the developments in this segment”, Chairman of Hero Honda Motors Brijmohan Lall said.

He hastened to add that “at present, motorcycle is the most favoured two-wheeler with 80 per cent share. However, scooter may stage a comeback as tastes do change over a period”.

From a corporate growth strategy Mr Lall said HHML was expecting to see a double-digit growth for the company for this fiscal year and also next year.

“Investments for replacement and refurbishment is a continuous process”, he said.

Besides, an investment plan amounting to about Rs 200 crore is being planned for the next year and the company was also considering setting up another manufacturing plant. “We will invest Rs 80crore or Rs 100 crore in plant expansion next year. Besides, approximately another Rs 100 crore will be invested in new products. We are also currently studying the market for our third plant, which will mean further investment depending on the kind of plant required”, Mr Lall said.

The company was expecting the next big push to come from the entry-level and executive segment motorcycles.

“The entry-level and the executive segments are the ones, which are likely to push growth in the motorcycle market in the near future. We already have consolidated our presence in both these segments with the launch of CD Dawn and the entry level Splendor Plus and Passion Plus in the executive category”, he said.

He pointed out that the company had bikes in the power segment and “they cater to niche market and are slow moving products in nature. We have an even balance between segments. We will also introduce two new models in 2004”.

The growth of the automobile industry is critically linked to the developments in the roads sector. “The infrastructure plan of the government, particularly the golden quadrilateral has enabled the road availability for movement of vehicles. The state governments too are investing in roads to connect the national highways. All these developments will have a positive impact on the two-wheeler market”, he observed.

The company, however, had no plans for revising the prices of its models “at least in the immediate future” although the price movements in the steel industry had “definitely impacted” the company.

“The steel price rise has definitely impacted us, we have been able to avoid passing on the impact to the customers through continuous improvement in our operations”, he said. At the same time there were no plans for revising the prices of the models. On the company’s overseas operations, the Chairman said at present there were no plans for setting an overseas assembly line production facility.

“We are already exporting to many countries. Since we are a joint venture company with Honda Motor Co., Japan, we have an arrangement to export to countries where Honda does not have presence already. We are currently exporting to neighbouring countries such as Bangladesh, Nepal etc, though we are exploring the possibility of exporting to other markets as well. There could be possibilities of need-based export of components”, he said.

In a bid to drive growth and control costs, a number of companies, specially the older ones, had gone in for vendor rationalisation in a big way.

Mr Lall said rationalisation was not very much required in Hero Honda’s case as the company had developed the vendor base carefully “from the very beginning and according to requirements”. “We work very closely with the vendors and ancillaries and therefore, the costs are kept under control”, he added.
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No levy on sale, purchase of seeds, says SC
Our Legal Correspondent

New Delhi, December 6
In a judgement benefiting seed producers and dealers in the country, the Supreme Court has held that seeds cannot be specified as agriculture produce and no fee is liable to be imposed on the sale and purchase of the same by the government.

A three-judge Bench headed by Chief Justice V.N. Khare said seeds could not be specified as agriculture produce and the business of purchase and sale of the same under the supervision of the Seed Certification Agency (SCA), was not required to be under a licence, or no market fee be imposed on the producers and dealers.

The ruling came on an appeal by the Krishi Utpadan Mandi Samiti (KUMS), an Uttar Pradesh Government agency, against the Allahabad High Court’s verdict, quashing its March, 1999, order imposing market fee on the sale and purchase of wheat seed in the state.

The Bench, having Mr Justice S B Sinha and Mr Justice A.R. Lakshmanan as the other two judges in separate but concurring judgements held that: "Seeds are not meant to be used as a cereal, which is an agriculture produce within the meaning of the provisions of the Seeds Act, 1966."
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Indian Airlines cuts losses
Tribune News Service

New Delhi, December 6
Improvement in operations and financial management along with increase in productivity has helped Indian Airlines to cut down its losses as compared to last year.

The Board of Directors of the airlines, who met yesterday, while approving the annual accounts for the fiscal ,2002-03, noted the 20 per cent fall in the net losses of Indian Airlines. The net loss came down to Rs 196.56 crore against Rs 246.75 crore in the fiscal year 2001-02.

Indian Airlines ended the financial year, 2002-03, with an operating loss of Rs 134.73 crore as against Rs 220.65crore in the previous year. It showed a 39 per cent improvement over the previous year.

The operating revenue of the airlines has moved up to Rs 4,071.72 crore from Rs 3,769.91 crore in 01-02. While there was an increase of Rs 147 crore in fuel and oil bill besides Rs 16.36 crore in landing, parking and navigational charges, the savings in cost of maintenance and administration totalled Rs 70.72 crore.

The meeting, presided over by IA Chairman and Managing Director Sunil Arora, also focussed on several areas to tap synergy with Air India (A-I).

The board meeting also approved the sale of domestic tickets through computerised reservation system (CRS) based on finalisation of negotiations on rate and terms. The decision will enable bookings at implanted offices of travel agents, expansion of IA’s distribution base, removal of irritants for agents like having different sets and staff for IA connectivity.
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Reserves cross $ 96 b

Mumbai, December 6
India’s foreign exchange reserves surged ahead by $ 698 million to race past the $ 96 billion mark for the week ended November 28, inching towards the $ 100 billion figure.

The country’s foreign exchange reserves increased to $ 96,071 million for the reporting period, despite the government recently prepaying foreign loans aggregating $ 1.4 billion.

According to the Reserve Bank of India’s weekly statistical supplement released here today, the foreign currency assets rose by $ 698 million at $ 92,148 million.

The RBI said the gold reserves and special drawing rights remained unchanged at $ 3,920 million and $ 3 million.

Reserve Tranche Position (RTP) with the International Monetary Policy increased by $ 4 million at $ 1,219 million.

The RTP may change, from time to time, due to India’s transactions under Financial Transaction Plan with the IMF. — PTI
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New Safexpress centre
Tribune News Service

Chandigarh, December 6
Safexpress today inaugurated its state-of-the-art centre here which would act a nerve centre for company's operating in Punjab, Himachal Pradesh and Haryana.

Mr Pawan Jain, Chairman and MD, Safexpress, said, " We are opening this centre to provide two-way facility for transport of logisctics of the industry and trading community. The company is setting up the centre with an investment of over Rs 2 crore. The company has customers like Ranbaxy, Dr Reddy's Lab, HFCL besides textile manufacturers in this region."

The upgraded facility would have a significant impact on the transit time for consignments to and from Chandigarh on a national basis. With the introduction of new routes and enhanced fleet capacity the turnaround time for consignments would be reduced significantly.
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AVIATION NOTES

by K.R. Wadhwaney

India to save Rs 50 crore by using Pak airspace

When over-flights become reality, both India and Pakistan will be able to save expenses on fuel and cut time in reaching several destinations. According to an estimate, India will save about Rs 50 crore annually. Pakistan’s gain will also be substantial.

According to aviation experts, the over-flight regulation will come about much sooner than resumption of flights between the two countries. There are several rough edges that have to be sorted out before flying becomes possible.

Indian Airline officials are currently busy working on schedule of flights to Pakistan from India. Earlier, before the withdrawal of flights, Delhi was linked with Lahore while Mumbai was linked with Karachi. The same will be the scenario this time also but there may be changes in schedules and timings of flights.

The Pakistan International Airline’s flights on these two sectors were very popular. Its service was comparable with any other airline.The PIA cabin crew showed a lot of pride in serving passengers.

According to airport sources, the customs and immigration rules should also be liberalised when operation of flights becomes a reality. Both governments should see to it that the passengers are cleared without causing them any avoidable problem.

New A-I chief

Turnaround of Air-India and Indian Airline continues to be a far cry. But there is a hope that happy days for the two carriers are possible because far-reaching improvements have been brought about in the thinking and concept of officials.

All other reforms have been possible because there is a common managing director, who has impressed upon his staff, senior and junior, that they should function as friends and comrades instead of as rivals.

When all seem “honey” in the functioning of the two carriers, there is now a talk of providing a new MD to A-I. Why bring about any split at this point of time? But the Civil Aviation Ministry, where top bosses seldom function in harmony, is again trying to “divide and rule”. Air-India and Indian Airline should be treated as single identity in the existing climate. Leave the airlines to function as commercial outfits more than ministry or government units. This is the rub of the matter if the government is genuinely keen on improving the welfare of the two airlines.

The existing official has secured the “hang” of the two airlines. He is in full command. He needs to be given time to bring about further reforms in the two airlines. But if the government is committed to bring new MD, he should be an airline professional. Let it be remembered by the government that an IAS -cadre official cannot be cure for all diseases.
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INVESTOR GUIDANCE

by A. N. Shanbhag

Gifts by NRIs are tax-free

Q: I am a resident of Bathinda . My younger brother is in Japan for studying on Japan government scholarship, which is tax free at his hands in Japan. Out of that he saved Rs. 2,50,000 and remitted to me in India in my savings bank account. Are there any tax liabilities on him or me?

— Rocky Singh

A: Your brother is a resident if he is in India for 365 days out of the preceding 4 financial years and 60 days in the financial year. Since he has not gone abroad for purpose of employment or as a member of the crew of an Indian ship, this period of 60 days cannot be replaced with 182 days. In all probability, your brother is a resident and his scholarship is taxable in India, though it is tax-free in Japan. If a person is taxed in both countries, India as well as the host country, the Double Taxation Avoidance Agreement between them will protect you. Such agreements between India and other countries, are available on www.incometaxindia.gov.in.

If your brother is NRI (his stay in India during the FY is less than 60 days) his income in Japan is tax-free in India. If he has sent you the money as gift it will not be taxable in your hands also if you follow the proper procedure as follows.

Gifts in foreign exchange by NRIs is always tax-free. The Gift Tax Act has been abolished from 1.10.98. All gifts, made by anyone, NRI or otherwise, through foreign exchange or Indian assets, are free from gift tax. All that is required is an offer by the donor and acceptance thereof by the donee in black and white. To safeguard against any hassles, the donee should request the donor for a gift and then the donor should remit the amount to the donee. Alternatively, the donor can offer the gift. In either case, it is necessary for the donee to accept the gift in writing (may be through a thank you note). Only then it would be considered as a gift in India.

It is better to prepare a gift deed and get it registered (with related stamp duty) but such a precaution is normally needed in the case of high-value gifts, particularly those of real estate.

However, note the fact that the department has a right to inquire into the genuineness of the gift to ensure that it is not a payment made for any havala or smuggling transaction.

There is no income tax on the amount gifted. However, any income earned thereon subsequent to the gift is chargeable to tax.

Commutation beneficial

Q: I have been offered a VRS by my employer. In case of pension optees is it beneficial or not to opt for commutation of pension? Is there any difference in taxability for those opting for commutation and those taking full pension? In my case pension without commutation is Rs. 12,000 and after commutation is Rs. 8,000. Is there any recent amendment that for those opting for commutation of pension, full pension will not be restored? Is there any upper limits for investments in RBI bonds for both tax-free and taxable types?

— P. R. Neglur

A: Commutation is always attractive if you can invest the commuted amount giving more returns than otherwise. Thanks to the process of liberalisation a new avenue serving as panacea for all investment problems has emerged in the form of pure-growth, open-ended, debt-based schemes (PODs) of UTI/MFS. Being open-ended, these behave like an SB account where you can deposit and withdraw at will. The only difference is that the banks take five minutes to effect a withdrawal but MFs take 5 working days or less. Being debt-based, the safety of the capital as well as the income (around 9 per cent+ at this juncture) is implicitly certain but not explicitly assured. Being pure-growth, these are so much tax efficient that you can earn as much take-home (= tax-free) income as Rs. 5 lakh on a corpus of Rs. 55 lakh.

The last point requires elaboration for better insight.

Instead of paying tax on normal income at10 pc, 20 or 30 pc, depending upon the size of the income, it is good to pay it at 10pc, which is the rate applicable to long-term capital gains. Now suppose you invest Rs. 80 lakh in a POD and at the end of one year, it grows to 86.4 lakh (= growth rate of 8pc p.a.). You decide to strip the grown by withdrawing Rs. 6.4 lakh. The capital portion of this withdrawal is Rs. 5,92,593, the rest Rs. 47,407 being capital gain. The tax on this growth is Rs. 4,701 (= 10pc of 47,407).

This implies that you have got Rs. 6.4 lakh in hand but tax thereon is only Rs. 4,701. This works out at 0.73pc tax and not 10pc, as is the general impression.

Finally, if you have no other income, your total income is Rs. 47,407 and this being lower than the tax threshold of Rs. 50,000, you do not have to pay any tax. This facility is not available to NRIs, who have to pay tax on capital gains irrespective of the tax threshold.

Incidentally, the same income earned by way of interest, the tax payable is Rs. 1,66,000.

2. There is no ceiling on the recent RBI Savings Bonds. You can invest as much as you desire in both the 6.5pc tax-free as well as the 8 pc fully taxable bonds.
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BRIEFLY

HDFC reduces deposit rates
Mumbai, December 6
HDFC has reduced interest rates for individual deposits by 0.25 per cent across the board from December 10. The annual income plan for a tenure of 12-23 months will now attract an interest rate of 5.75 per cent (earlier 6 per cent) while it will be 6.25 per cent for deposits of 36-84 months, HDFC said in a release here today. Under the monthly income plan, the revised rate is 5.5 per cent and 6 per cent for these tenures. — PTI

Gold at Rs 6,090
Mumbai, December 6
Gold ended at Rs 6,090, peaking at its highest-ever closing level today following heavy stockists’ buying reflecting steeply high price trends in overseas centres. Though the metal had touched an all-time high of Rs 6,100 in early trade today, it failed to maintain the same price level due to late profit-selling. Silver also gained handsome ground on fresh industrial and stockists’ buying. — PTI

Broker held
New Delhi, December 6
Broker Rajinder Jhunjunwala was arrested by the Delhi Police Economic Offences Wing for allegedly conspiring with former Managing Director of Tata Finance (TFL) Dilip Pendse in cheating the firm of Rs 10 crore. Jhunjunwala was arrested last night after he was summoned to Delhi for interrogation. Later he was remanded to 10 days in the police custody by the Metropolitan Magistrate Digvijay Singh. — TNS

Oswal equity
New Delhi, December 6
Oswal Spinning and Weaving Mills has decided to hold an extraordinary general meeting on December 26 to seek members’ approval for reduction of equity share capital. The firm will also seek members’ consent for conversion of outstanding simple interest, due to financial institutions, and unsecured loans of promoters into equity shares. — UNI

GM to up prices
New Delhi, December 6
General Motors India said yesterday it would effect a price hike by next month, GMI vice-president P. Balendran told PTI here. The Corsa range of car would cost Rs 8,000-10,000 more while Optra would be costlier by Rs 15,000, he said. Prices of Forester and Vectra would remain the same, the said. — PTI

Vijaya Bank
Mumbai, December 6
Vijaya Bank intends to amalgamate its subsidiary Vibank Housing Finance Ltd (VHFL) with itself and has got the approval from National Housing Bank for this move. — PTI

New tractor
New Delhi, December 6
Same Deutz-Fahr India Limited, a fully-owned subsidiary of the Same Deutz-Fahr group, Italy, today announced the launch of a new series of tractors meant for construction purposes in India. — UNI

Passport card
Mumbai, December 6
Punjab National Bank’s (PNB) Board has approved a proposal for sale of cash passport card, a new pre-paid product of Travelex with Visa through the bank’s authorised branches subject to clearance from the RBI of India. — PTI
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