|B U S I N E S S||
Sunday, July 25, 1999
Namibian President Sam Nujoma addressing a luncheon meeting organised by FICCI (Karnataka State Council), jointly with the Greater Mysore Chamber of Industry and the Federation of Karnataka Chambers of Commerce and Industry in Bangalore on Saturday PTI
PMO move to contain
feels heat as Russian winter is delayed
Separate authority for power
USA backtracks on IMF gold sale
Time to reduce interest rates
Subsidy-starved units close down
to contain telecom damage
NEW DELHI, July 24 Smarting under criticism for its hasty move in pushing ahead with the telecom package for private cellular and basic telecom operators, the Prime Ministers Office today began a fire-fighting exercise to contain damaging reports on the move.
The PMO fired its first salvo today when it denied that President K.R.Narayanan had raised some more questions in response to a communication from the Prime Minister, justifying the need for going ahead with the new telecom policy.
An official release said here that the media reports on the Presidents query were baseless and mischievous.
No such communication has been either received by the Prime Minister or sent by the President. Reports of this nature are unfounded and designed to impair relations between the Heads of State and Government as well as to create avoidable confusion, the release said.
It said the media should ascertain facts properly before reporting such sensitive matters.
Having now quelled speculation on a standoff between the President and the Prime Minister on the telecom deal that allows private cellular and basic telecom operators to switch over to a revenue-sharing arrangement from the existing licence fee regime, the Government would now have to tackle opposition from the Telecom Regulatory Authority of India (TRAI) to certain clauses in the deal.
Soon after the Government despatched letters to the telecom operators asking them to confirm their participation in the new arrangement, the TRAI Chairman, Justice S.S.Sodhi, went on record saying that he was not happy with a key clause of the bailout package announced by DoT
The DoT in its letter to the operators had laid a precondition that they would have to withdraw all cases against the Government pending in the courts and the TRAI before moving over to the new arrangement.
These cases include those relating to the role and jurisdiction of the TRAI over licensor-licensee dispute being heard by a two-judge bench of the Delhi High Court.
The case went to the High Court after some operators and their representative organisation, the Cellular Operators Association of India (COAI) challenged the single-judge judgement that TRAI had no jurisdiction over the licensor-licensee dispute. The withdrawal of cases at this stage would lead to a vacation of stay on the earlier judgement and TRAI for all practical purposes would be debarred from its regulators role and its role would be confined to a mere tariff setting organisation.
Justice Sodhi has said that as a last resort the TRAI may intervene and move the court if the private operators decide to withdraw the appeal. TRAI may appeal to the court to pronounce upon the regulators jurisdiction and role under TRAI
It is not only
opposition from TRAI that the Government has to contend
with but it would also have to soothe ruffled feathers of
some private operators who have been discriminated
against in the new arrangement.
NEW DELHI, July 24 (UNI)
The Congress today accused Mr A.B. Vajpayee of
taking undue interest in clearing concessions worth
crores of rupees to the cellular and basic telephone
operators and condemned the caretaker Governments
attempts to undermine constitutional institutions,
including the President. Talking to newspersons here,
party spokesperson Ajit Jogi said the Finance Minister
was asked to expedite clearance to the package of
concessions and a Cabinet note on the issue was approved
by the Prime Minister without consultation with the
Finance and Law Ministries.
blocks IT revolution?
CHANDIGARH: Why do major software companies shun Punjab and instead embrace States like Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu ? Because of poor infrastructure, unhealthy industrial climate, inadequate human resources, sleepy bureaucracy and indifferent political leadership ? Right ?
Wrong. Barring the last named, Punjab beats these States on all fronts. In infrastructure development, it is the best in the country, going by the CMIE ranking. Power tariff in Punjab is the lowest in the country, except Himachal and Jammu and Kashmir, Punjab has lost fewer mandays in strikes than others. On the human resources front Punjab has four universities, 16 engineering colleges, six medical colleges and 110 ITIs and other training institutes. The bureaucracy has awakened to the need for IT industry. Mr Ramesh Inder Singh, Dr N S Kalsi and Mr Rakesh Singh ( who has been shifted to the UT of Chandigarh) have taken serious IT initiatives.
Mohalis earthstation and Jalandhars VSNL gateway have become operational. A separate Department for Information Systems and Reforms has been established. Single-window clearances have cut through red-tapism. Funds are no problem. The State Government has Rs 100 crore at its disposal to spend on IT development.
Then whats blocking the IT revolution ? One, political leadership has other priorities. Two, Punjabs assets have not been aggressively marketed. Three, Mohali IT Park is getting delayed, courtesy the slow-moving Mahindras. The Electronics Corporation of Punjab, which was actively pursuing the Mohalis IT Park project has become headless. The government is yet to name Rakesh Singhs successor. Four, much of Punjabs IT policy is on paper only e.g. the smart city concept, e-governance, a knowledge valley - whatever it means.
The average investment per project in the Northern States is Rs 14.70 crore, which is lower than the all-India average.
According to a CII study, the total number of proposed investments in Chandigarh, Delhi, Haryana, Himachal, J&K, Punjab, Rajasthan and UP between August 1991 and March 1988 were 9,674 valued at Rs 1,42,258 crore.
Punjab, Haryana, Rajasthan and UP accounted for 91 per cent of the total investment proposals. Chandigarh received only 23 investment proposals involving an investment of Rs 206 crore and expecting to generate employment for 4,756 people.
All this is in spite of making it simpler for an entrepreneur to procure licences, expand and diversify business, greater transparency and liberalisation, and despite an investor-friendly climate free of political and ethnic disturbance. To lure investment, seminars were organised, the media was wooed, MoUs were signed presentations made, Ambassadors honoured and foreign trips made by bureaucrats. But at the end of the day there weret any concrete results.
Projects remained just
that-attractively packaged on paper. Out of a total of
9,657 investment proposals only 148 materialised.
According to Mr Sunil Kant Munjal, Chairman, CII
(Northern Region), outmoded rules, regulations and
legislation which still govern land, labour and taxation
policies serve as a major frustrating impediment.
competition law by next year
NEW DELHI, July 24 The new competition law providing for the establishment of an ombudsman for supervising the functions of other market regulatory authorities is expected to be in place early next year.
Speaking at a workshop on the competition law organised by Assocham here yesterday, the Secretary of the Department of Company Affairs, Mr T.S. Krishnamurthy, said a high-level committee to draft the provisions of the law is expected to be formed soon.
The committee will seek
to ensure that the competition authority keeps a constant
vigil over malpractices such as concentration of economic
power, collusive arrangements, price fixing and barriers
authority for power disputes needed
LUDHIANA, July 24 Industry in Ludhiana has called for the creation of an independent, full-fledged dispute settlement authority attached to the Punjab State Electricity Board for speedy disposal of cases relating to power consumption.
Ludhiana is the biggest power consumer in Punjab. The number of disputes relating to power consumption is also the highest in the State. In Ludhiana more than 500 cases are pending for adjudication. On an average the Ludhiana authorities settle between 20 and 25 cases per month and they invariably receive four to five fresh cases daily.
At present Ludhiana does not have any separate establishment to man the dispute settlement authorities which are chaired by Superintending Engineers and the Chief Engineer of the Board. Since they have other important jobs concerning regulation of electricity supply, maintenance jobs, installations etc., they find little time to attend to adjudicating cases.
In the limited time available just one or two sittings of the authority are held in a month. In view of the latest ruling of the Supreme Court, even civil courts have stopped accepting cases connected with electricity disputes and advise the complainants to approach the dispute settlement authorities only. Courts have also started transferring pending electricity related cases to these authorities.
As per the by-laws of the Board, an SE is empowered to decide cases involving a payment up to Rs 1 lakh, a Chief Engineer up to Rs 2 lakh and beyond this disputed payment, the power is vested with the dispute settlement authorities based at Patiala. Interestingly, separate establishments to man the Dispute Settlement Authorities at Patiala have been created, but this has not been done at the district level, with the result that disputes continue to pile up with these authorities. In big cities like Ludhiana, the situation is at its worst.
There are 3.5 lakh
electricity consumers in Ludhiana circle alone. In
addition to the creation of a separate establishment to
man the authorities, the Ludhiana Small Scale
Manufacturers Association chief, Mr Harish Khanna, and
the President of the Punjab Pradesh Beopar Mandal, Mr
Tulsi Das Jaitwani, have sought representation on these
WASHINGTON, July 24 (PTI) Strong congressional opposition and unhappiness of gold-producing states reeling under plunging prices has apparently forced US president Bill Clinton to back away from extending support to an IMF proposal to sell 10 million ounces of gold to reduce the debt burden of poorest states under strict conditionality.
We are exploring whether there are alternative ways of mobilising IMF gold reserves that would avoid any impact on the gold market and would be acceptable to the IMFs membership and would command the support of Congress, a senior treasury official said on condition of anonymity signalling that a policy reversal may be in the offing.
The much-publicised plan to sell gold, initially suggested by Washington, to bailout poor States groaning under huge debts, is unlikely to see the light of the day now.
The USA has a veto on all major IMF decisions. Under IMF rules, major decisions need 85 per cent of the votes while the USA has 18 per cent. Unlike in the UN Security Council where five countries have a veto, in the IMF only Washington has a veto.
Instead of auctioning
off 10 million ounces of IMF gold a part of its
gold hoard one idea under consideration is that
the financial body sell it to rich central banks so that
it would not end up being dumped in the market, The
Washington Post said.
feels heat as Russian winter is delayed
LUDHIANA, July 24 The local knitwear industry, especially units manufacturing export material, is in dire straits because of a 51 per cent fall in the demand for knitwear material from Russia, the biggest customer of this industry.
There is little hope of recovery. Sources said whereas by now winter should have started in Russia and other erstwhile states of the USSR, the temperature was hovering around 28 degree Celsius, prolonging the summer.
In 1997-98 the export of knitwear merchandise to the Russian region was of Rs 467 crore which came down to Rs 448 crore last year but this time the fall was wrecking.
In the past two or three years, exporters from this country flooded the Russian market and merchandise sent was many times more than the Russian market could digest. Even popular Indian patri shop culture (sale on pavements) was introduced lowering the status of marketing. Ultimately a stage was reached when exporters had to sell their products at a throw-away prices. The Russian market is still over -stocked by Indian merchandise, it is said.
However, manufacturers blame the Union Government for the situation. No proper statistics were maintained of the merchandise shipped and flown to Russia.
Mr Raj Chaudhry, Chairman of the Indian Export Organisations and Wool and Woollen Export Promotion Council, he said had been pressing the Textile Ministry for the past several years to authorise the Council for the endorsement of shipping documents for the products.
The exporters, who focused on the Russian market all these years have not started looking beyond Russia to find new markets. They are turning their direction towards Scandinavian countries like Norway. There is a little increase in exports to the USA, Ukarine, France the UK, and the UAE but the export to these countries is insignificant compared to Russia where exports of all sort of merchandise amounted to Rs 1000 crore.
Another problem with the Indian industry is that it has not raised its standard to cater to A category material which was in demand in the European market.
According to data available, there was a 20 per cent fall in the export of the worsted fabric, 79 per cent in woollen yarn, 10 per cent in acrylic, 23 per cent in woollen ready-made and 4 per cent in shawls and scarves till June this year.
During a recent visit to
Ludhiana. Mr Rama Krishna Hegde, Union Commerce Minister,
had told the exporters that incentives extended by the
government could help them to some extent but until they
ensure quality products at competitive prices they would
continue to face problems. Korea and China have become a
challenge for Indian exporters in the woollen and other
reduce interest rates
KARGIL tax and reducing bank interest rates are the two issues now hotly debated. The rising cost of key industrial inputs, thinning of margins of manufacturers, unequal competition thrown by MNCs and unreformed state governments are the issues for which there are no takers.
People have been donating very generously to the NDF. They may hesitate to pay taxes honestly but they do not lack patriotic fervour. The Government should keep up the tempo of this feeling and its coffers will swell. The government should reorder its own expenditure by cutting waste. Kargil tax will be the burden mainly on industry which is already under pressure. As an additional expenditure to keep vigil on Kargil, the government just needs less than Rs 2,000 crore a year which does not justify any additional specific tax.
Inflation measured by the WPI is down to 1.83 per cent which is the lowest in the past 17 years. This calls for reducing interest rates by banks and FIs. The real rate of interest as calculated on the difference between PLR and the WPI is 10.2 per cent. This is the fourth time real interest rates have risen above 10 per cent. Real rate of interest in the USA are currently ruling at 6.5 per cent with banks PLR pegged at 8 per cent and producer price inflation (PP) at 1.5 per cent. Among major trading partners of India Japan accounts for the lowest real interest rate at 2.08 (PLR 1.38%, PP-1.7%) followed by the UKs 5% (PLR 6%, PP-1%) and Euro land 5.55% (PLR 4.15% and PP-1.4%). So our inflation has touched an international level and interest rates should also be reduced accordingly.
Inflation has gone down so low mainly because of vastly improved agricultural performance. The falling trend has been aided by continued slackness in industrial demand. Increased competition due to the opening up of the economy has resulted in pruning of manufacturers margins. Inflation in the manufacturing sector is down to 0.9% which is below the danger mark.
Short-term dollar interest rates are currently much lower and may even soften further in the days ahead; given the benign US inflation scene. The fear of speculation as put forth by some bankers due to cheaper money are unfounded. Bankers themselves are purchasing commercial papers of corporates at much lower rates than PLR. They also prefer to invest in government securities as a safe bet.
The cost of key industrial inputs is rising. Due to a rise in the prices of crude, fuels oils used by industry have become costly. Power cost will correspondingly rise further. Consumer price index CPI is still high; 7.71% in May 1999. Labour cost is thus also rising. All these factors dont speak well for the industry especially at the lower segment when margins are actually thinning.
The small sector is most vulnerable to banks policy on interest rates. Rates above PLR even go up to 4% which is a sure recipe for drowning this sector.
In view of the rising
NPAs and increased international competition the right
thing is to reduce PLR by at least 2%. All national level
bodies representing industry are clamouring for this.
Even the Finance Ministry seems to be inclined to accept
units close down
PATIALA, July 24 Nearly 25 per cent of the small scale industrial units in this district have been closed down due to non-payment of subsidy since 1995 by the State Government.
Claiming this at a press conference here today, Mr N.S. Khurana, President Patiala Chamber of Industries, said the Punjab Government had in early 90s introduced a scheme of providing subsidy of 20 per cent of the total investment in order to encourage industrialisation in the State. However after 1995, no subsidy has been released.
He said while the industry is already hit with recession, the non-payment of subsidy, which amounts to more than Rs 10 crore for this district only, has dealt a fatal blow to many units.
Mr Khurana said delegations of the Chamber have met the Chief Minister and the Finance Minister several times to apprise them of the gravity of the situation but they were curtly told the subsidy could not be released due to paucity of funds.
Mr Amarjit Singh Senior
Vice-President of the Chamber, said the combine
manufacturers in the State were also given a
step-motherly treatment by the Government. Under the new
tax structure the manufacturers were paying a 2.2 per
cent tax on the purchase of raw material and another 2.2
per cent again of the sale of combine harvesters.
Q: Is the concurrent findings of the lower courts that notice issued by landlady was duly proved as having received by the petitioner company tenable?
Ans: In Indian Air Gases Limited v Smt Tarawati Sood (1999 (1) R.C.J. 388) the Delhi H.C. expressed the view thus:
The H.C. noted that the courts below have concurrently held that the notice dated 30.1.96 was issued by the respondent landlady was duly proved as having been received by the petitioner company. In this background it was not required for further evidence to be led.
The petitioner company came in possession of the premises by virtue of lease-deed dated 10.7.78 at a monthly rate of Rs 3,000 and receipt of notice dated 5.12.92 by the respondent/landlady expressing her intention to increase rent by 10 per cent as postulated by S.6A read with S.8 of the Delhi Rent Act, 1958 from 1.2.93 was not disputed by the petitioner though it was maintained that there was a mutual oral understanding that on paying an increase rent of Rs 3300 the eviction petition would be withdrawn.
This was not believed by the courts below as the respondent was merely asking for statutory increase of rent and there was no need of any oral understanding between the parties. The petitioner company obviously did not take a correct stand in the matter and this approach was adopted prima facie only with a view to delay proceedings which have been going on between the parties since the year 1991.
The H.C. concurred with the view of the Rent Control Tribunal that the natural consequence would be that the rent stood unilaterally increased from Rs 3300 to Rs 3630 per month with effect from the expiry of 30 days of service of the notice. The HC held that the impugned orders do not suffer from any illegality nor there is an erroneous exercise of jurisdiction which will call for interference in the present petition. The same was accordingly dismissed.
Q: My wife is a Government servant. She is a tax payer and tax is being deducted from her salary. In April, 1991 she deposited Rs 10,000 lumpsum with the UTI under the Scheme MISG-1991. The duration of the scheme was 7 years. After completion of the scheme, in July, 1988, she has received Rs 25,000. Kindly guide what will be her tax liability for the amount, i.e. Rs 25,000 for the financial year 1998-99.
Satinder Vir Singh, Patiala.
Ans: In respect of long-term capital gains arising on sale of units, your wife will be eligible to the benefit of Cost Inflation Index. The cost will have to be adjusted with reference to the cost inflation index of the year of purchase (182) with the index of year of sale (351). Thus, the adjusted cost as per cost inflation index works out to Rs 19,285. Hence, the long-term capital gains would be Rs 5,715. On this tax will be payable @ 20 per cent.
Q: Please clarify:
1. The amount of Rs 2250 being paid by me to Pb Finance Department includes both principal and accured interest as sanction letter only depicts that loan is recoverable in 100 instalments (2250x100= 2,25,000).
2. Is self-occupied propertys housing loan (taken from F.D. Pbs) accrued interest is rebatable u/s 24?
3. Is principal amount is also rebatable u/s 88 if above (2) rebate has been availed?
4. My place of posting is at a distance of 30 km and living in a rented house. My family is living in the said house allotted by CHB. Can I avail HRAs rebate?
5. Can I avail all three (2, 3, 4) rebates at a stretch?
Kulwant Singh Dhand Chandigarh.
Ans: As per section 88 of the Income-tax Act, 1961, tax rebate @ 20 per cent would be admissible on the principal amount repaid by you for the house loan. It is provided in this section that tax rebate would be available in respect of payment for purchase of construction of residential house which would also include any instalment or part payment of the amount due under any self-financing or other scheme of any development authority/housing board or similar authority or to any company/co-operative society, etc. etc. However, the interest payment in respect of self-occupied house property would be eligible for tax deduction u/s 24 of the Income-tax Act, 1961. Thus, the entire interest on loan upto maximum extent of RS 30,000 p.a. will be eligible for tax deduction. This amount will be deducted from the gross total income of the assessee. Thus, the repayment of the loan would be eligible for tax rebate u/s 88 while interest deduction would be eligible for tax deduction u/s 24. You can avail tax deduction from house rent allowance in respect of the payment made by you towards rent of a house. All the above mentioned tax benefits can be given by your employer.
Q: 1. What is the maximum exemption limit u/s 80-L during the Assessment Year 1999-2000 (F.Y. 1998-99)? Is interest from P.O. S/B account and recurring deposit exempted u/s 80-L?
2. Suppose I have Rs 13,150 from interest of NSCs during F.Y. 1998-99 can I claim exemption u/s 80-L?
3. What is the standard deduction during the F.Y. 1998-99.
Balram Chawla, Dharuhera.
Ans: The maximum exemption limit u/s 80-L of the Income-tax Act, 1961 is Rs 12,000. In addition there is a further deduction to the extent of Rs 3,000 on account of certain incomes from interest on security of the Central/State Government. The interest income from P.O. SB A/C is completely exempt without any upper limit u/s 10 of the Income-tax Act, 1961. However, the income from P.O. recurring deposit A/C and P.O. Time deposit A/C will be recovered u/s 80-L as per notification No 820(E) dated 21.10.92. In respect of your interest income from NSC amounting to Rs 13,150 during the F.Y. 1998-99 you can claim exemption u/s 80-L to the extent of Rs 12,000 only. The standard deduction for the salaried employees for the Assessment Year 1999-2000 and the Assessment Year 2000-2001 is @ 33 1/3rd per cent of the salary in case the salary does not exceed Rs one lakh. If the salary exceeds Rs one lakh but does not exceed Rs 5 lakh, the standard deduction would be Rs 20,000. However, if the salary exceeds Rs 5 lakh then no standard deduction would be permissible.
Q: I have not received possession of the house allotted by CHB to the undersigned. However, to pay the instalments of the allotted house, I have taken housing loan from my department and can Fin. Homes Ltd., Chandigarh. I have paid an interest of more than Rs 30,000 towards this housing loan during 1998-99. Is the deduction of interest payment of Rs 30,000 admissible through employer as in case of self-occupied house.
Er. H.L. Arora, Nangal Township.
THERE are whispers that Nocil is once again being eyed by one of Indias largest industrial groups. Last time around apparently, they had opined that the offer price to Nocils management should be Rs 15 per share. Wonder what it will now? Incidentally, the share price of this company has begun moving lately.
The grapevine has it that the balance-sheet cleansing exercise undertaken by the dynamic Narasimham ever since he took over at the helm of IFCI is showing signs of bearing fruit. Only signs, as yet, swear insiders as there is a major damage control exercise on that should logically run for a couple of years. Interestingly, with ICICI having refurbished its image, it seems that IFCI and IDBI too have taken the cue.
Indian business houses are known for splits between warring brothers but Ranbaxy Laboratories will be an exception is the opinion in corporate circles. Why? Well, apparently the late Dr Parvinder Singh, who was one of corporate Indias more dynamic managers had drawn up an excellent blueprint on exactly how the company should be run before taking the last bow.
A foreign mutual fund
seems to be extremely interested in the shares of Sri
Adhikari Brothers, if the grapevine is to be believed.
Apparently, one research report prepared on this company
by a FII analyst projects a price of Rs 500 for this
scrip within 18 months. Any takers?
LUDHIANA, July 24 (FOC) Punjab National Bank today opened a fully computerised & air-conditioned Tatkal Suvidha Kendra at Sarabha Nagar here for quick disbursal of housing finance consumer durables and conveyance loans. Mr Tejveer Singh, IAS, inaugurated the kendra and Mr S.K. Chawla, General Manager, PNB, presided.
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