Monday, March 1, 1999
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B U S I N E S S | Monday, March 1, 1999 |
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RBI announces revamping of
export schemes
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Multimedia show by Bank of
Punjab IEC
Softwares net rises 221 per cent US
delegation visits Cepham Milk Budget
‘disappointing’ National
small savings fund planned IA
plans overseas destinations |
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RBI announces revamping of export schemes MUMBAI, Feb 28 (PTI) — The Reserve Bank of India has announced a major simplification and revamping of export credit schemes in foreign currency for exporters in order to make available export credit at pre-shipment and post-shipment stages at internationally competitive rates. As per the existing instructions, interest to be charged for export credit under the scheme would be directly related to London Inter Bank Offer Rate (LIBOR), according to a RBI release here today. This follows Finance Minister Yashwant Sinha’s Budget proposal to devise a new scheme to enable exporters to get credit at rates prevailing in world markets and to bring about major simplification of export procedure. The interest rate to be charged by Indian banks over “LIBOR” for such credits would not exceed 1.5 per cent. On fresh transactions, banks would be allowed to use euro LIBOR (wherever applicable) as benchmark for purpose of determining the applicable interest rate. Under the scheme, export credit was expected to be made available to exporters without any exchange risk and at rates which were internationally competitive, the release said. The other highlights of the revamped schemes include, assessment of export credit limits being “need based” and not directly related to availability of collateral security. In case of established exporters having satisfactory track record, banks would consider sanctioning “line of credit” for a longer period with an in-built flexibility to step up/step down quantum of limits within the over-all outer limits assessed, the release said. The step-up limits would become operative on attainment of pre-determined performance parameters by exporters. Banks would also obtain security documents covering the outer limit sanctioned exporters for such longer periods. Under the scheme, banks
would not insist on submission of export order or letters
of credit for every disbursement of pre-shipment credit
from exporters with consistently good track-record. |
Government expects 1700 crore from
telecom companies NEW DELHI, Feb 28 — The Union Finance Ministry, struggling to cope with a huge revenue deficit, is pinning its hopes on the tough diktat of Communications Minister, Mr Jagmohan, asking private telecom companies to pay up their outstanding licence fee to the government. The government is expecting to garner Rs 1700 crore during 1999-2000 by way of outstanding licence fee of private telecom companies. Interestingly, this is only about half the entire amount that is due to government through this route and it appears that the Communications Ministry is not particularly hopeful of garnering the entire amount. Telecom companies owed the government around Rs 3,500 crore. The companies argued that they wanted to shift to a new revenue sharing arrangement rather than the current method of upfront payment of licence fees, mainly because the actual demand turned out to be far less than it was initially projected. Mr Jagmohan has, however, recently said that revenue sharing arrangement was constitutionally wrong. Moreover, if at all there was a favourable decision on revenue sharing, it could not be implemented retrospectively. Communications Ministry had initially set a deadline of February 15 which was later extended to February 28 to pay up at least 20 per cent of the licence fee or “ face consequences that could follow from contractual obligations”. Despite pleas and protests, 10 telecom companies complied and more are expected to follow suit. It has been reported that some companies have asked their lawyers to be ready and immediately move courts in case the Department of Telecommuni-cations (DoT) goes ahead with its threat to take action against those who have not complied with the deadline. It has been pointed out
that despite the payment of dues by 10 companies the
total collection was around Rs 30.5 crore against the
expected Rs 700 crore or more, which was hardly any
compliance. |
Sops make
US-64 attractive again NEW DELHI, Feb 28 — For over 200 lakh holders of Unit Trust of India’s US-64 units, who were worried over the fate of the popular scheme only three months ago, the government’s announcement to initiate a two-pronged measure to shore up the mutual fund has come as good news. While providing income tax exemption for mutual funds, the Finance Minister, Mr Yashwant Sinha, announced in his Budget proposals the restructuring of US-64, based on the Deepak Parekh committee recommendations. The committee headed by the expert banker was set up by the Government after the announcement by UTI in early October 1988, that is reserves had turned negative leading to widespread concern amongst investors. There was widespread turmoil in the capital markets and it raised the spectre of widespread redemption of US 64 units. The key recommendations of the Parekh Committee is that US-64 would need to generate the attributes of safety and liquidity, but through a readjusted asset allocation coupled with entry and exit options for investors at NAV related or intrinsic prices. The Committee expects this to be achieved over a period of three years. The general slide in the market has adversely affected the valuation of the equity holdings of US-64, like any other fund. Besides large investments in the equities of private sector companies, US-64 has also invested in the shares of public sector undertakings. The committee has said that for the US-64 to become self sustaining in future, and maintain its attributes of stability and regularity of income distribution, it would be necessary for the scheme to restructure its portfolio and review its asset allocation policy. In this regard the Government has accepted the suggestion made by the Parekh Committee to transfer the PSU stocks having a book value of approximately Rs 4,800 crore to a new scheme, called the Special Unit Scheme-99. The US-64 would be paid the transfer consideration through the issue of Government of India securities as follows: - Government will buy units of SUS-99 with face value of Rs 4810 crore. — UTI (SUS-99) will simultaneously invest the proceeds in special Government securities proposed to be issued for this purpose. Thus the government will pay the purchase consideration of SUS-99 units through Government securities, not in cash. — SUS-99 will buy portion of the stock of shares held by US-64 valued at Rs 4810 crore in its investment portfolio. Here again, the purchase consideration will be paid through issue of securities, not in cash. SUS-99 will issue its own securities to US-64 on the strength of Government securities held by it. — The tenor of government securities issued to SUS-99 and the securities issued by SUS-99 to US-64 will be almost identical. Assured debt servicing on government securities will enable SUS-99 to discharge its liabilities of repayment and interest payment to US-64 in a synchronous manner. — Tenor of government securities is yet to be firmed up. These will typically be of five year maturity and coupon rate etc. being comparable to similar instruments floated by Government for market borrowing. These measures according to the government would help US-64 in several ways, including improving the Net Asset Value of the scheme by an amount, which is the difference between the book value and the market value of these PSU holdings. The proactive management of the portfolio can provide a stable income to US-64 in future. The fears of continuing sale of equity by US-64 will abate, and could contribute to buoyancy of the stock market. In addition in this
Budget, the Government has also announced significant tax
concessions to mutual fund including US-64. These
measures would also assist the US-64 in its transition. |
Multimedia
show by Bank of Punjab CHANDIGARH, Feb 28 — The Bank of Punjab presented Bole so Nihal, a multimedia light and sound show on 500 years of Punjab, captured in verse and song and depicting history, sacrifices and glory of the people of Punjab, at PAU, Ludhiana, yesterday. There was a fusion of audio, video and panorama in the second of 12 such shows being presented by the bank. The first show was held in Nawanshahr and other shows are scheduled to be held in Anandpur Sahib on March 1 followed by Jalandhar, Amritsar, Patiala, Moga, Chandigarh, Sriganganagar, Yamunanagar, Bathinda and Delhi. The shows have been
produced by Dr Harcharan Singh and directed by Latta
Harbux Singh. These are the brainchild of Mr Darshanjit
Singh, Chairman and Mr Tejbir Singh Executive Director of
the Bank of Punjab.
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IEC
Softwares net rises 221 per cent CHANDIGARH, Feb 28 — IEC Software Ltd an infotech company is emerging as a total IT solutions company, with global links. The company has repeated its impressive performance during the three quarters ending December 31, 1998 with a net profit of over 221 per cent on annualised basis. The company’s gross turnover at Rs 466.53 lakh during the 9 months reflects a healthier growth, compared to the last year. The profit before depreciation, interest and tax, zoomed to Rs 105.93 lakh in this period showing an increase of 180 per cent annualised basis. The foundation stone of the IEC College of Engineering & Technology was laid down today at Institutions Area, in Greater Noida. The college will offer
four-year degree courses in Computer Engineering and
Information Technology, besides other streams. |
US
delegation visits Cepham Milk CHANDIGARH, Feb 28 — The Governor Tommy G. Thompson along with Senator Gary George of Wisconsin USA and the Wisconsin Trade Mission delegation visited Cepham Milk Specialities Ltd. (CMSL) today. Mr Dewan Pruthi, MD of the company and Dr Wani, President of Landau Foods Group (LFG) of Arlington Taxas welcomed the delegates. Cepham Milk is a big dairy exporter of casein and whey protein concentrate (WPC) in India. According to Dr Wani, the potentials offered in the dairy sector of Punjab, are exciting. In order to realise the complete potential of Punjab, the LFG group has invested approximately $ 5 million and is looking to do more projects with CMSL like the manufcture of cheese and milk minerals accounting for another $ 20 million. CMSL has an annual
turnover of about Rs 100 crore out of which 50 per cent
is out of exports with Japan and the USA. |
Budget
‘disappointing’ JALANDHAR, Feb 28 — The Union Budget for 1999-2000 is very disappointing for the small-scale sector as no relief has been given to this sector. This was stated by Mr Avnish Arora, president, Jalandhar Chamber of Commerce and Industry, and Mr Ashwani Kapoor, president, Jalandhar Auto Parts Manufacturers Association, at a meeting here today. They criticised the
imposition of 10 per cent surcharge on income tax, as it
would put the economy in reverse gear at a time when the
results of lowering of income tax rates had started
showing encouraging results. |
Budget to stimulate market, says Crisil MUMBAI, Feb 28 (PTI) — The 1999-2000 Union Budget has provided significant boost to capital markets and is expected to translate into higher level of investment and trading activity in the short term, according to Credit Rating and Information Services of India Ltd (Crisil). A clear intent has been indicated to institutionalise the capital markets by providing tax incentives to investors for channelising their savings through the mutual fund industry, Crisil said in its analysis of the Budget’s impact on capital markets. The Budget has provided stimulus to the capital markets, which to be sustained over the long term and would need to be supported by significant revival of real sector, it said. Crisil said an attempt had also been made to create a level playing field between resident and non-resident investors through the unification of capital gains structure. The Budget had remained silent on the status on derivatives trading (Securities & Contracts Regulation Act was proposed to be amended in the last Budget) and on pension and provident fund reforms, the rating agency said. Referring to the tax exemption on all income from UTI and other mutual funds in the hands of investors, it said the Indian mutual fund industry had recorded a compounded annual growth rate of only 4.8 per cent since 1994, after a strong growth in the preceding period post 1991. Crisil said historically, retail investors have been the largest players in the mutual fund industry and this trend had reversed in the last three years in favour of the institutional investors. Internationally, the growth in mutual fund industry had been catalysed by retail participation through tax incentives. In India, there is immense potential for channelising the retirement funds (corpus estimated at Rs two trillion) through the mutual fund industry into the capital markets. However, the government has yet to address this issue, Crisil said. In the Budget, a small but significant beginning had been made to attract retail investors into the markets through an institutional framework and by signalling the government’s support to UTI, Crisil said. The gross amount mobilised by the mutual fund industry was Rs 110 billion in 1997-98 and is already estimated to have crossed Rs 150 billion in the first 10 months of the current financial year. The proposals made in the
Budget will lead to higher mobilisations by the mutual
fund industry in the short term, Crisil said. |
National
small savings fund planned NEW DELHI, Feb 28 — The government has admitted that moving small savings from the Union Budget would bring down the Centre’s fiscal deficit but would get reflected in the states’ fiscal deficit. Addressing mediapersons, Finance Secretary Vijay Kelkar said the decision to take out small savings out of the central account was done on recommendations of a high-level committee headed by former Deputy RBI Governor, Mr R.V. Gupta. In accordance with the recommendations of the R.V. Gupta Committee the government has decided to establish a “National Small Savings Fund” in the public account of India. All transactions pertaining to the small savings schemes would flow into and out of this fund and 75 per cent of the net collections would be invested in state government securities and the balance would be invested in Central Government securities. The committee examined the present system of accounting of transactions under small savings and collections under small savings constitute a liability of the Central Government. Seventy five per cent of the net collections under small savings are disbursed as loans to state governments and union territories with legislature. However, loans to State
and UT Governments with collections are paid out from the
Consolidated Fund of India. |
IA plans overseas destinations CHENNAI, Feb 28 (PTI) — Indian Airlines (IA) which is likely to end up with ‘marginal’ net profit during 1998-99, is proposing to add new foreign destinations and strengthen its existing ones, besides giving further fillip to its profit centres. Indian Airlines Chairman and Managing Director Anil Baijal said the airline proposed to add Hong Kong to its services and a committee constituted for conducting a feasibility study was already in Hong Kong. Efforts were underway to
strengthen existing services to Kuala Lumpur, Singapore
and Bangkok, he added. |
SIX airlines have formed an alliance, Oneworld, to grab market globally. The endeavour by American Airlines, British Airways, Canadian Airlines, Cathy Pacific and Qantas, may sound reasonable. But their hidden attempt is to throttle small carriers, which have been finding their survival difficult. Because of double standards and under-cutting in fares, the trade has become tricky and vex. The Oneworld Airlines are giving more facilities and opportunities when nearly 174 million passengers fly to more than 600 destinations worldwide. The facilities available to passengers of these airlines are: 1. Closer linking of their frequent flyer programmes. 2. Cards with emerald, sapphire, and ruby symbols has been reissued so that members get the appropriate recognition and privileges. 3. Members of these airlines have access to 200-plus exclusive lounges. 4. Smooth transfers for passengers travelling across the global net-works of the five carriers. Mr Bob Ayling, Chief Executive of BA says: “As an alliance Oneworld can offer our customers benefits on a scale that we could not think of as an individual airlines. “Together we are committed in making Oneworld the leading, most customer-focussed and most customer-friendly airline alliance. Our approach is to make travel easier and more rewarding for our customers”. New flights Indian Airlines will shortly start operating flights to Shimla and Kulu. The flights will be three days a week to Shimla (Jabarhati) and three days to Kulu (Buntur). These sectors, like those in eastern region, will be loss making. But airlines is keen to fulfil its social obligations. The new Chairman and Managing Director Anil Baijal is a realistic official “we have several ways to offset losses and we will achieve our aim in turning the tide”, Mr Baijal is reported to have said. Vayudoot’s 17-seater Dornier 22-A aircraft which is about 12 years old will fly on the sectors of Shimla and Kulu. Pilots will be assigned the job on these sectors on a contract basis. IA officials are happy
over the success of the new Lucknow-Sharjah flight,
“there is a lot of response from passengers
belonging to Uttar Pradesh”, said airlines official,
adding: “The traffic is both ways and that makes us
happy”. |
THE Budget proposals for the financial year 1999-2000 have been welcomed by the capital market as is testified by a rise of 165 points on the sensitive index in the post-Budget trading. Would the mood persist? I do not think so and expect the market to move down even during this week. There are no doubt some positive features in the Budget proposals but not enough to push up the capital market on a long-term basis and to reverse the course of industrial recession. A part of the foundation has been laid on which industrial revival may be built in a piecemeal manner but it would take at least a year or more for the industry to register perceptible improvement. What are the positive features? First, the long-term capital gains tax on equity shares and securities has been cult down from 20 per cent to 10 per cent. There is, however, no change in respect of long-term capital gains tax in respect of other assets like property etc. This significant reduction in the long-term capital gains tax must be welcomed and will benefit the long-term investors. The second positive feature is that all income received from the UTI and other mutual funds will be fully exempt from income tax in the hands of investors (item No 89 from the Finance Minister’s speech). The UTI and other mutual funds, however, shall have to pay income tax at the rate of 10 per cent in respect of schemes where investment in equity shares is less than 50 per cent. The UGS-64 and other open-ended schemes of the UTI and other mutual funds with more than 50 per cent investment in equity shares shall enjoy this exemption for a period of three years. A logical consequence of these two measures would be an ample inflow of funds into the UTI and other mutual fund schemes — though at some cost to the banks and corporate sector debenture issues. The mutual funds are likely to make investments only in the upper crust equity shares with good management and growth prospects. While the upper crust of the capital market stock may remain buoyant, the bottom stock (call them “penny stock”) would not have any prospect of revival. Such stock may further deteriorate. The third positive feature is the prop to the housing sector. Some tax concessions have been proposed to be accorded to the house finance companies. Tax ceiling for housing loans has been raised from Rs 30,000 to Rs 75,000. The Reserve Bank will be advising scheduled banks to lend up to 3 per cent of their incremental deposits for housing finance. The government’s housing policy may in time revive the cement and steel industry but this too will take sometime to come. Building up the infrastructure like roads, generating electricity etc may also help the industry to revive. On the negative side, the Budget proposals have imposed 10 per cent surcharge on the corporate tax and income tax. Those in the tax bracket of 20 per cent for example, will have to pay 22 per cent and this kind of increase will apply to those in the tax bracket of 30 per cent and the corporate tax. This would raise tax burden on the corporate sector. The Finance Minister has displayed great ingenuity in dealing with the excise and customs duties. The excise rates have been reduced to three slabs and the custom rates have been reduced to five slabs. While this process of simplification and rationalisation must be welcomed, the Finance Minister has lifted the custom duties on the higher side of the slabs. This results in bringing in substantially higher funds to the government. Again, the zero import duty has been abolished and replaced by a minimum of 5 per cent duty. Power, coal, oil, telecom and fertilisers come under this levy. Power projects have, however, been exempted. The Budget proposals have raised the income tax and corporate tax by imposing surcharge of 10 per cent. Railway freight charges, postal charges, Custom duties, cooking gas rates, fertilisers and food items in the public distribution channels have all been raised. Then how is it that the stock market has welcomed Budget? There are at least three inter-related explanations. The first explanation is purely psychological. The investing public had been mentally prepared to expect a hard Budget; and it is not so hard a Budget that has been presented. The government’s success in the Lok Sabha in securing an easy passage of the “President’s rule in Bihar” measure has also contributed to the psychological factor as it provides an assurance that at least for the Budget session the government will be able to stay; and may be for a longer time. The second factor is the government’s bold effort to revive the economy by raising up additional revenues and its resolve to accelerate the policy of liberalisation. Thirdly, by the process of raising up custom duties and by abolishing zero-import duty items, the government has provided protection to the Indian industry. The Finance Minister must
be complimented for proposing a good Budget in the face
of the conflicting demands of the coalition partners and
the populist pulls of the consumers. The Budget may be
inflationary but it is a distinct step towards industrial
revival and healthy economy. |
UTI My certificate No. M 914039147 (ADU No. 426542) in respect of 13,800 units under the 7 years cumulative monthly income scheme expired on 30-6-98. But the maturity proceeds are still awaited despite half of dozen visits to the Chandigarh UTI office and as many reminders to the Registrars. Dastur & Co, Computer Division, New Delhi. I have also long back furnished an indemnity bond, not once but twice, as advised. DR SHAKUNTLA
DUGGAL Black Gold Ref I was allotted 2500 shares with numbers from 23168231 to 23170730, by the Black Gold Refiners of Rs 10 each for Rs 25,000. My registered letters to company have come back without being delivered. B.S. MAKAN IPCL I was allotted 100 shares of IPCL against Folio 184651, I made payment of allotment money, call money for which I received stickers also. After receiving stickers I discarded the proof. Company has now forfeited my shares, though payment was made & right shares were offered to me. SAROJ LATA Dalmia Ind I invested Rs 8,000 with Dalmia Industries Ltd.. IE/I Jhandewalan Extension, New Delhi and received FDR No. 35802 dated 22.02.97. The FDR has matured and I sent the FDR for refund under registered cover. The registered letters addressed to the company have been received back undelivered. AMRESH KHOSLA Padmini Polymer I applied for transfer of share certificate No. 057615 & 057616 (total 200 shares) with Padmini Polymer Ltd., 240 Othla Industries Estate, New Delhi on 9.11.98. But till today I have not received the said share certificates duly transferred in my name. SURAJ PARKASH
JOSHI |
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| Jagjit Singh Shad dead LUDHIANA, Feb 28 (TNS) — Prominent industrialist and PHD Chamber of Industry and Commerce President Jagjit Singh Shad died here today after prolonged illness, family sources said. He was 64. Shad is survived by his wife and two sons. Inflation ISO-9002
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