Sunday, February 21, 1999
today's calendar
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B U S I N E S S | Sunday, February 21, 1999 |
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spotlight today's calendar |
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High sensex no indicator of
growing economy Insurance
companies seek level playing field |
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FIPB clears Shell, Daewoo,
McDonalds proposals
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Textile mills import cotton BATHINDA, Feb 20 — Textile mills in the country have started importing cotton in large quantities despite the fact that the domestic cotton crop position is comfortable. IBA,
bank unions to meet on Feb 23 FICCI
identifies areas for Indo-Pak trade Railways
to export coaches India
desires cut in Defence Budget: PM |
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High sensex
no indicator of growing economy LUDHIANA, Feb 20 — The recent upward movement of the sensex at major stock markets in the country does not necessarily indicate a strengthening of the economy, but it does signify that the BJP-led coalition government at the Centre may at long last be moving in the right direction on the road to further liberalise the economy. A talk with a cross-section of investors and dealers at Ludhiana Stock Exchange (LSE) here shows that the expectations are high as regards the new Union Budget to be presented next week by the Finance Minister, Mr Yashwant Sinha. It may further improve sentiment at the bourses, however, insiders emphasise that indices are mere “show-windows” of the stock markets and what is visible in a show-window may be different from what is available inside. Indices are also known to be one of the economic indicators but these are substantially different from other economic indicators. The markets are known to act in anticipation rather than on actual happenings. This whereas other indicators reflect the current status, the stock market indices act ahead predicting perceptions and sentimental visualisation of the “tomorrow” based on hopes and fears of the players in the market which are often belied. The BJP and its allies presented their first Budget on June 2, 1998. In anticipation of a “good” Budget, sensex had a pre-Budget built up to 3969, whereas in the post-Budget settlements it dipped to low of 3114. While the experienced players in the stock market thoroughly scan the news-papers to find the price and trends of the entire portfolio in which they have invested, a common investor just glances the head-lines on the business page of The Tribune or watches TV news bulletin to know the day’s closing figure of sensex. But sensex or for that matter any other index, never provides him the true value of his investments. Mainly because these “indexes” are based on market capitalisation of a few selective scrips, which are construed to be representative of various segments of the industry. There is unwritten rule in the stock markets that operators and speculators mere often operate in “pivotals” which have prominent place and weightage in the indices. In September 1992, sensex was around 3200 and now it is hovering around a little over 3300. But can an investor, who bought 100 scrips each of Nahar Industrial Enterprises, Nahar Fibre and Thapar Ispat at price of Rs 400, Rs 130 and Rs 90 respectively, encash them to buy a bicycle, had he invested equivalent amount in a bank. He could have purchased a brand-new Maruti-800 today. Same has been the fate of those investors who bought in the same period Oswal Fat and Punjab Wool Cumbers at a rate of Rs 395 and Rs 300 respectively. Sensex and other indices
keep on being restructured to exclude the dormant scrips
and replace them with emerging new heavy-weights |
Stir hits
solvent extractors MALERKOTLA, Feb 20 — The functioning of Solvent Extraction plants in Punjab have been affected due to an indefinite strike by Punjab Rice Millers since Wednesday. Mr A.R. Sharma, President
of the Solvent Extractors’ Association of Punjab
said the units might face closure due to the strike. The
association had urged the Union Food Supply Minister, Mr
Surjit Singh Barnala, to find out a solution to the
problems of the millers. |
Textile
mills import cotton BATHINDA, Feb 20 — Textile mills in the country have started importing cotton in large quantities despite the fact that the domestic cotton crop position is comfortable. Unavailability of quality cotton, low international prices and high domestic prices are the major factors which have forced the textile and spinning mills of the country to import cotton. India is the third largest producer of cotton after China and the USA. Sources said that it was for the first time that the textile mills were importing cotton despite the fact that the cotton cultivation had increased manifold in the country and consumption of cotton by mills had gone down considerably due to a cheaper substitute in synthetic fibres and bad financial conditions of the mills. According to the statistics made available by the East India Cotton Association to TNS, Indian mills have already contracted for the import of 3.5 lakh bales of cotton and more deals may be put through as the domestic prices of cotton are not in parity with international prices. However, Mr Ashok Kapur, Vice-President, Northern India Cotton Association, said as the cotton prices were not affordable for the industry to maintain viability, the mills had already contracted for the import of six lakh bales. If the domestic prices did not come in parity with the international prices, the import of the cotton could touch eight lakh bales. The Indian cotton has
usually commanded a respectable position in the
international market and fetched prices 20 to 25 per cent
higher than the domestic prices. |
FIPB clears Shell, Daewoo, McDonalds proposals NEW DELHI, Feb 20 (UNI) — The Foreign Investment Promotion Board (FIPB) today cleared 35 proposals involving a foreign direct investment inflow of Rs 800 crore, including Shell India’s application to increase activities in India even as the conglomerate was barred from indulging in retail trading and marketing. The major proposals approved include McDonalds’ application to acquire properties for opening retail outlets, Osram’s and ELF Lubricant’s proposals to convert their respective joint ventures into a wholly owned subsidiaries and Daewoo’s plea to test market clocks and stereos for its cars in India, FIPB sources said here. However, the board deferred UDI’s proposal for cooling tower by four weeks. McDonalds has been allowed to acquire properties in Delhi and Mumbai for operating outlets, which will be managed by franchisees. The approval was given with the condition that the properties would be strictly limited to running their operations and the company would not indulge in any real estate activities. The company has also been barred from selling land in case it plans to wind up the outlet. For the purpose, the company will have to seek prior approval from the FIPB. The investments required for the purpose have not been specified. McDonalds will now identify the sites. Shell India has been allowed to expand its activities in the country to include leasing of port facilities, warehousing and storage. The company would be increasing its paid-up capital by Rs 2 to 3 crore. However, its proposal to indulge in trading and marketing has been rejected by the board. Osram of Germany has been allowed to convert its lighting joint venture in India into a wholly owned subsidiary by picking up the 17 per cent stake owned by Surya Roshni, besides, the company would also increase its paid-up capital from 60 million Deutsche Mark to 100 million DM. ELF Lubricants has also been given the go ahead to convert its joint venture into a 100 per cent subsidiary by buying out Raysif India Limited’s stake in the venture. The approval has been granted with the condition that 26 per cent stake in the venture would be divested within five years. Sumitomo Corporation has been allowed to market the products manufactured by its joint ventures. However, it has been directed not to indulge in any retail trading. Chambal Fertilisers and Chemicals Limited has been allowed to set up a 50-50 joint venture with Technico PTY Limited of Australia for developing and selling potato seeds in India. The approval was granted with the condition that the joint venture would not develop terminator seeds. The Australian company is infusing Rs 10 crore to pick up the 50 per cent stake in the venture. Riico-Daewoo has been
given the nod to test market clocks and stereos for Matiz
and Cielo in India. The board directed that simultaneous
to the test marketing of the products for two years, the
company would also invest in manufacturing them locally. |
Insurance companies seek level playing field BHUBANESWAR, Feb 20 (PTI) — Officers of various insurance firms have opposed the move to privatise the insurance sector, saying the Centre should ensure a “level playing field” before deciding on opening the industry to private companies. Participating in a seminar on reforms in insurance sector here yesterday, they argued that there was no justification behind the move to privatise the industry which had shown a Rs 1500 crore profit during the current year. The seminar was organised by the state regional committee of the General Insurance Officers’ All India Association. In his address,
association President G.R. Singh regretted that public
sector companies were not allowed to take commercial
decisions which affected their business prospects. |
IBA, bank unions to meet on February 23 NEW DELHI, Feb 20 (PTI) — The Indian Banks Association (IBA) representing the bank management and representatives of the United Forum of Bank Unions (UFBU) will meet on February 23 in Mumbai to discuss the vexatious wage revision issue, reportedly at the behest of the Finance Minister, Mr Yashwant Sinha. The bank unions have written to the Finance Minister for his intervention to solve the issue as otherwise the banking services would be thrown out of gear following their indefinite strike call on March 17. The Regional Labour Commis-sioner of Mumbai will also be present during the talks. “We have requested
the Finance Minister to intervene as the recent talks
with the IBA have proved futile due to the rigidity of
the management”, a union leader told PTI here today. |
FICCI identifies areas for Indo-Pak trade NEW DELHI, Feb 20 (PTI) — Federation of Indian Chambers of Commerce and Industry (FICCI) has identified eight sectors including automobiles and agriculture which can boost bilateral trade between India and Pakistan. Industries like engineering, textiles, machinery, automobiles, tyres, chemicals and plastic have potential for trade between the two countries, FICCI said in a study paper titled “Trade and economic cooperation between India and Pakistan”. “The imports of products like iron ore, machinery and steel products, chemicals and dyes will meet Pakistan industries’ requirements for capital goods, raw materials and other inputs at lowest cost”, the study added. Pakistan can benefit from the import of agricultural products like wheat, spices, tea and other edible goods for meeting production shortfall. For engineering industry, FICCI said free trade with India would enable engineering units in Pakistan to acquire steel from India at cheaper rates and enable it to produce steel at lower cost as raw materials imported from India would be cheaper. About the textile
machinery, the study said free trade would ensure
Pakistan acquires machinery directly from India at
cheaper costs compared to imports from Switzerland and
Germany. In the automobile sector, possibility of trade
and joint venture is vast, the study said adding
consumers in Pakistan can benefit if vehicles are
imported from India. |
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KAPURTHALA, Feb 20 (UNI) — Indian Railway is gearing up to export rail coaches in a big way by appointing Indian Railway Construction Company (IRCON) as a marketing agency for international markets. The Rail Coach Factory (RCF) has entered into an agreement with IRCON recently and is expected to get some orders in the near future, Mr V.P. Ojha, General Manager of the RCF, has said. The production unit of the
Railway Ministry has sufficient capacity to produce any
quantity of coaches for exports by adding minor balancing
equipment, he said and added the coach factory has a
capacity of around 1,100 passenger coaches every year.
However, during the current financial year, it is
expected to cross the target of 1,075 coaches — 838
general coaches and 237 AC coaches. |
India desires cut in Defence Budget: PM NEW DELHI, Feb 20 (PTI) — Prime Minister Atal Behari Vajpayee today said India desired reduction in its Defence Budget. Mr Vajpayee told reporters at the airport here before leaving for Amritsar en route to Pakistan that “India wants reduction in defence expenditure.... The defence outlay even today in comparison to the gross domestic product (GDP) is less”. The Prime Minister said he was confident and hopeful that his journey to Pakistan would further improve relations between New Delhi and Islamabad. His visit would also help find solutions to the disputes existing between the two countries, he said. Mr Vajpayee said he was visiting Pakistan at the invitation of his counterpart Nawaz Sharif. Asked whether Sharif would accompany him to India, Vajpayee said he would extend an invitation to him. Replying to a question whether there would be a joint declaration at the end of his visit, he said “something will happen”. Earlier at his Race Course road residence, Vajpayee said he was feeling sorry that the two countries had wasted a lot of time in coming together. “My heart is full of mixed feelings. I am happy I am going to strengthen ties. I am also sorry that we have lost so much time in coming together like this,” he added. Mr Vajpayee will return to
Delhi tomorrow evening. |
Test finds packed milk contaminated THE Consumer Education and Research Society of Ahmedabad has tested 28 widely sold brands of milk and found all of them contaminated with bacteria. The presence of bacteria reduces the shelf life of milk and may affect health. Most of the brands carried coliforms and E. Coli which cause gastroenteritis and urinary tract infections. Children, pregnant women, the elderly and patients are most vulnerable to such ailments. Twelve brands were found to have “hypochlorities”, a chlorine derivative. If consumed regularly, it may cause diarrhoea and intestinal irrigation. The Prevention of Food Adulteration (PFA) Act is silent on the issue of microbiological contamination of milk. But then, even the BIS standards apply only to the dairy plant level and not the safety, or lack of it, of the milk as it reaches the consumer’s door-step. The milk packets despatched from the dairy plant at about 11 p.m. reach the consumers around 8 a.m. the next day. The brands tested included: Amul (Taaza), Gayatri, Gokul, Kapoor (Taaza), Royal (24 carats), Samruddh Shresth and Uttam. Dispossessed of car A Delhi-based exporter who failed to pay two instalments of a car loan to the Bank of America has been dispossessed of his Maruti 800 De luxe by the bank. A resident of Panchsheel Park, Mr Gautam Sood told The Tribune that he woke up on Wednesday to find that his car parked near his house was missing. I thought the car had been stolen but the cleaner told me that he had seen some people tow away the car in the morning. A cell to the Bank of America confirmed that the car was in their custody. Mr Sood says he sought a five-year loan of Rs 2.2 lakh for his vehicle in May 1995 in the name of his export unit, Skyriders. Since then, he has been paying instalments of Rs 5441 every month. The last instalment of the loan is to be paid in May next year. I deposited the instalment for December on February 13 and assured their executives that the balance for January and February would be paid on Friday. They agreed to this but did not give me a chance to honour my commitment. Dispossession can only take place by the due course of law. What happens to my documents, cash and car accessories like stereo, deck and air-conditioner? The Vice-President of the Bank of America, Mr Sunil Sharma, denied the borrower’s allegations. Mr Sharma said that a loan recall notice had been sent to the borrower by registered post. Apart from this, several telephone calls had been made to him in the last one month asking him to pay the dues. Questioning Mr Sood’s commitment to pay, he said, “From September” 96 till date, the borrower has defaulted several times. Of the 29 cheques due, 24 have been dishonoured. This kind of default among borrowers is rare. His car was repossessed in August ‘96 also.’ Moral of the story: think before you borrow. Number plates After the cars, it is time now for the licence plates on the Indian roads to get a facelift. Going by the way talks are proceeding between the Centre and a German firm — Erich Utsch Kg — and number plates of all vehicles will become more flashy and the bland black background will be a thing of the past. And, according to the company, these new licence plates will not only improve the face value of the cars but also go a long way in containing detailed information about the owner, his tax arrears and whether the vehicle’s insurance premium has been deposited or not. The company has displayed these licence plates at the recently concluded Automechanika 1999. It is also in the process of setting up a joint venture with the Delhi-based Metro Paints Private Limited for producing these hi-tech licence plates in the country. A memorandum of
understanding for this has already been inked by the two
partners and the plant is being set up in Delhi. |
Lack of supervision Q: Whether alleged lapses and lack of supervision and failure to pursue matter came within the purview of ‘misconduct’? Ans: The question was answered by the Calcutta H.C. in the case of Dipankar Sengupta v United Bank of India (1999-I-L.L.J. 208). Appellant were Assistant Manager and Dy. General Manager of the respondent bank. They were found by the Enquiry Officer not guilty of most of the charges made against them except in respect of certain procedural and supervisory lapses. The disciplinary authority, however, held the petitioners guilty of the charges levelled against them and imposed a major penalty of reduction of basic pay by two stages lower in their pay scale. Hence the present writ petition before the H.C. The H.C. opined at the outset that the word ‘misconduct’ is a generic term. In the instant case, the petitioners had not been charged with commission of any specific misconduct in terms of the conduct Regulations. Keeping in view the decisions of the Apex Court in the Union of India v J. Ahmed (1979-II-LIJ-14 (SC), the HC took the view that in terms of the findings arrived at by the Enquiry Officer himself, the alleged procedural lapses and lack of supervision and/or failure on the part of one of the petitioners to pursue the matter cannot come within the purview of the word ‘misconduct’. The disciplinary authority as evident was guided by the directions of Central Vigilance Commission. The HC pointed out that consultation with the commission was necessary only if the matter had a vigilance angle, which was absent in the present case. The HC was of the clear opinion that the disciplinary authority could not have consulted the Central Vigilance Commission. Once the court comes to
the conclusion that the findings arrived at by the
Enquiry Officer, even if given face value and are to be
taken to be correct in their entirety, do not constitute
a misconduct, or the disciplinary authority is found
guilty of a total non-application of mind, the HC held
that it can exercise its jurisdiction under Art. 226 of
the Constitution. In the instant case, the disciplinary
authority has totally failed to apply its mind on the
materials on record. The very fact that there was mere
reproduction of the charges, so to show total
non-application of mind and as such the HC held that the
impugned orders cannot be sustained. Consequently,
appeals were allowed and the impugned orders were set
aside. |
AS we had been repeatedly stating, the markets were overheated and a sharp reaction from the heady 3500 points sensex level was long overdue. And now that it is happening, our clients who had wisely sold earlier and were liquid by the time the reaction set in, are now on the lookout for bargain buys. So which are the bargain buys available in the market for long-term investors at this stage. For starters, take a look at Gujarat Gas. Gujarat Gas enjoys strong promoter backing. It is a 60 per cent subsidiary of British Gas, which is a world-leader in natural gas transmission and which has identified India as a major growth area and has shown a willingness to invest large sums of money in the country. Gujarat Gas operate in a relatively recession proof natural monopoly industry, which creates tremendous entry barriers. It operates in an unregulated environment, free from government interference. Neither volumes nor pricing is regulated by law. It enjoys an assured gas supply, assured off-take and assured margins (under agreement with clients). The southern Gujarat industrial belt, which Gujarat Gas caters to is regarded as the most concentrated industrial zone in the whole of Asia. During 1998-99, the company is expected to report an EPS of Rs 30 (prior to extra-ordinary provisions) and an EPS of Rs 20 (after extra-ordinary provisions of Rs 10 per share). It has tremendous potential for growth. The company has recorded a growth in revenues and net profits at 27 per cent and 37 p.a. respectively. The compounded growth in revenues upto the year 2004 is expected to be at least 30 per cent per annum. This company has reported an average RoNW of 35 per cent and an average Net profit margin of 18.5 per cent for the last 5 years. RoNW for 1997-98 stands at above 48 per cent (after adding back provisions). What is really impressive is that these returns have been achieved on a net worth that itself has tripled over the last five years. Average dividend payout has also been an impressive 26 per cent of net profit over the last five years. Dividend is also like to rise this year, on the back of strong earnings. Overall thus, Gujarat Gas appears to be an excellent portfolio choice for discerning long-term investors. Now, for some asides related to the market. A veteran BSE broker who has a track record of making fairly accurate sensex predictions, has been advising all and sundry to start selling their stocks. He expects the sensex to fall even below the 2700 points level in the aftermath of the Budget announcement. Sounds ominous? Around the Budget time, marketmen invariably run up their own lists of best buys. Well, to each his own, but two common scrips that adorn the list of every BSE broker worth mentioning are Reliance Industries and Bajaj Auto. Could it have something to do with the Swadeshi lobby? And so, the final
countdown to this year’s Union Budget has begun. |
Q: Myself is Income tax payee and handicapped having more than 40 per cent permanent partial disability. Is there any rebate in income tax being handicapped? If yes please intimate the head and amount. 2. I received leave encashment for 10 months Rs 84100/- due to retirement from Government Service. Is it income or service benefits? —Hans Raj, Dhuri Ans: You are eligible to a deduction u/s 80U of the Income-tax Act, 1961 in case of permanent physical disability. The maximum amount which is allowed as a deduction is Rs 40,000. The leave encashment received by you amounting to Rs 84,100 due to your retirement is completely exempt from Income Tax u/s 10 (10AA) of the IT Act, 1961. Q: My daughter is presently serving in a multi national Co. at Noida. She had gone abroad for on the job training for acquiring latest know how. She had gone about 4 months back and her tenure of stay is not specified as yet. She is also getting salary for the project assigned to her in foreign country and getting payment in dollars on which income tax is deducted in foreign country. She is receiving salary in India. She has sent cheque to me in dollars out of her savings. Please intimate if there is any income tax liability on her part or on my part. She doesn’t hold NRE status. I want to invest this amount in India in some saving schemes of Government of India. Please advise if there is any tax liability on the earning against saving schemes. I am housewife & have no source of income. —Suman Gupta, Patiala Ans: There is no income tax liability on the part of your daughter or on your part in receiving a gift from your daughter out of her savings from abroad. Please remember that from October 1, 1998 the Gift Tax has been abolished. Hence, there is no liability to Gift Tax either on the donor or the donee. The income derived by you from out of the gift amount would be liable to income tax in case your income exceeds the maximum exempted amount of income tax. Q: I request you very kindly to clarify the following few questions connected with the income tax return for the year 1998-99. All the staff members of this department Technical Education & Industrial Training Punjab has been allowed the scale of Rs 1800-3200 w.e.f 1.1.1986. Almost 20 staff members of ITI Bassi Pathana are the beneficiaries who will get the arrears during this accounting year. The full amount of arrears upto 1996 is to be deposited in the GP Fund account of the staff member concerned and from 1996 onwards the half amount is to be paid in cash and half to be deposited in the GP Fund. The questions are as follows: 1. If all the staff members have to submit an income tax return for every year from 1986 to split the income of every year or some other way out is there to reach the tax liability to minimum/zero. Also quote Rule No. & Section under which rebate is admissible. 2. As the maximum amount of the arrears is to be deposited in the GPF account of the staff members I request you to suggest fine way to get the tax liability to Nil, for all the staff members. The DDO concerned is interested to cooperate and accommodate in every possible and correct way. —Duni Chand Karwal, Pathana Ans: On the facts stated by you, please remember that as per Section 89 the relief in respect of arrear salary can be granted to you by your employer. To save maximum income tax for the current year the employees should take the full benefit of tax rebate u/s 88 of the Income-Tax Act, 1961. The maximum amount which can be contributed to various savings for the purposes of tax rebate is Rs 70,000 and the tax saving on the same comes to Rs 14,000 by way of tax rebate u/s 88. Q: Please clarify as to whether employer now, as per Budget 1998-1999, can allow its employees to avail rebate in respect of interest on housing loan upto Rs 30,000 at source. Instead of claiming refund from Income-tax Office later. —Ishwar Datt Sharma, Kangra, HP Ans: The employer can now grant you deduction in respect of housing loan interest payment for self-occupied house property to the extent of Rs 30,000 for the current financial year ‘98-99. Q: I am a Central Govt employee, I underwent heart bye-pass surgery. I paid Rs 1,50,000 as medical expenses. Rs 90,000 has been re-imbursed to me by my department. Please let me know if I can claim exemption of IT on the remaining amount i.e. Rs 60,000 under Section 80D. If so, please let me know as to what documents are required to be attached with IT return. —Veekaps, Shimla Ans: On
the facts stated by you, you cannot claim any deduction
u/s 80D of the Income-tax Act, 1961. Please remember that
u/s 80D, the deduction can be claimed only in respect of
medical insurance premium paid by you. |
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| ONGC NEW DELHI, Feb 20 (PTI) — The Government and state-owned Oil and Natural Gas Corporation today jointly signed a production sharing contract for an oil block located in Assam and Nagaland with a consortium led by Canada-based Centurion Energy. Sturdy
Polymers ICRA ISO-9002 Escotel Motorola |
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