|Sunday, January 2, 2000, |
Low inflation rate keeps government happy
Confusion over ST changes hits trade
World oil flows smoothly so far
Industry grows by 6.9 per cent
Railways plans debenture issue
Internet slows down in Asia
Cut interest rate to PLR level
Banks pass Y2K bug
NEW DELHI, Jan 1 (PTI) An year after the onion prices cost the BJP assembly elections in four States, the Government is confronting problem of a different kind the problem of plenty and unremunerative prices for agriculture produce.
Thanks to a bumper crop in foodgrains and pulses and the continued slackness in industrial demand, annual inflation rates based on Wholesale Price Index (WPI) touched an all time low time low at 1.9 per cent in July this year.
And had it not been for the sharp increase in the administered price of diesel in October, the year would have closed with an inflation much lower than the 2.84 per cent on December 11.
The low level of inflation during the year was mainly on account of comparison with the unprecedented rise in prices of agricultural products during the latter half of last year. Compared to a 0.8 per cent rise in prices of Primary Articles at the end of December 11 this year, it was way higher at 10 per cent at the end of last year.
The trend was also accentuated by the slowdown in the economy, which led to a demand slump in manufactured products. During the year, the prices of Manufactured Products grew by a paltry 1.6 per cent compared to 3.4 per cent last year.
However, prices of fuel, power, light and lubricants rose by a sharp 14.7 per cent during 1999 due to the recent 35 per cent hike in diesel prices. The continuing reforms in the bankrupt state electricity boards, which led to rationalisation of tariffs also contributed to the rise in fuel, power, light and lubricants
Following the trend in WPI, consumer price index for Industrial Workers also fell to single digit during the year. Annual inflation based on CPI-IW, which is more representative of price, stood at 0.9 per cent in October from an all-time high of 18.6 per cent during the same period last year.
During the year prices of vegetables and edible oils crashed compared to their highs in the previous year.
Rate of increase in the prices of vegetables fell by a massive 30.7 per cent as on December 11, compared to the previous year. Interestingly prices of vegetables had recorded a growth of 52 per cent at the end of the year.
Similarly, prices of edible oils fell by about 17.3 per cent during the year compared to a rise of 16.6 per cent during the last year.
In sharp contrast, mineral oils, which include the petroleum products like petrol and diesel rose by 20.5 per cent during the year compared to a fall of 1.8 per cent last year, while electricity tariffs were higher by 11.3 per cent during the year so far.
In core sectors, cement was hit badly during the year with its prices going down by as much as 10.2 per cent as pick up in demand in the sector, which has been undergoing a churning with a slew of mergers and acquisitions, remained elusive.
Confusion over ST changes hits trade
THE decision arrived at in the recent past by the standing committee of State Finance Ministers to bring about uniformity in the sales tax rates in the country has not only generated a great deal of controversy as to the application of the recommendations made to the States and the Union Territories but it has also evoked resentment from the trade and industry. One of the main reasons is the rashness displayed by the standing committee calling for introduction of common floor rates by January 1, 2000 and re-classification of the commodities. Before taking recourse to the large scale modifications in the existing sales tax provisions, it becomes essential to ensure proper deliberation over the issues involved therein. However, the seriousness of the matter involving extensive changes in the tax structure concerning all States and the Union Territories which is bound to affect the people at large has been completely overlooked by the standing committee.
What is more disturbing is that the state governments have shown no serious attempt so far in clarifying the legal position of the taxability of the commodities which will statedly come into operation from January 1, 2000. What items will be exempt from taxation and to which the concessional rate of sales tax will apply? What are the commodities which are now proposed to be placed in the category relating to higher rates from January 1, 2000? Ones does not really find any answers to these important questions from the authorities of the state government. The silence the most of the state governments are maintaining over the issues has indisputably led to confusion throughout the country.
As far as Haryana is concerned, the state government has no plans to effect any change in the existing provisions of the Haryana General Sales Tax Act, 1973 from January 1, 2000. Mr M. Shanker, Secretary to the Excise & Taxation Department, Haryana Government, Chandigarh ruled out the possibility of carrying out large scale amendments in the prevailing sales tax rates from January 1, 2000. He said the provisions of the Haryana General Sales Tax Act, 1973 and the corresponding notifications and relevant schedules, as they stand today, will continue to be in operation as such even after December 31,1999.
Another important question that arises in this context is the constitutional propriety of the decision of the standing committee as to whether it has a right to ask the states and the Union Territories to carry out drastic changes in the existing sales tax laws without discussion at the level of the respective State Assemblies mere in the name of Uniformity in sales tax rates. By virtue of Entry 54 in List II of Seventh Schedule to the Constitution of India every state has independent powers to provide for taxes on local sale or purchase in any manner it thinks fit having regarding to the prevailing circumstances. While making law in this respect the State Legislature takes into consideration the relevant situation which is bound to differ from the nature of things from state to state.
Every state has its own problem, as for instance, where particular goods constitute necessities for the poorer classes of people or where the goods in question are of such a nature as are required to be exempted from tax or taxed at a lower rate but it may not be so in other state or the Union Territory. Had uniformity in sales tax laws concerning local sale or purchase been possible, the Constitution-makers would have certainly placed the powers to taxation in the Union List (List I in the Seventh Schedule to the Constitution of India) instead of placing them in the State List II. This is why the powers relating to tax on inter-State sales or purchases have been specifically assigned to the Union of India as is evident from List I of Seventh Schedule.
LONDON, Jan 1 (Reuters) The millennium bug has failed so far to damage oil and gas flows in Asia, the Middle East and Russia, boding well for world energy supplies, the International Energy Agency said today.
The smooth transition to the new year means the agency sees no need so far for the release of emergency stockpiles of oil, IEA Deputy Executive Director William Ramsay told Reuters.
So far, so good, but its not over yet, he said from IEA headquarters in Paris, where the agency is monitoring world petroleum, gas and power supplies around the clock.
As the sun goes across the time zones, there is not much happening. Our own channels have not turned up anything you guys havent seen.
The IEA had not seen any signs of millennium bug hitches in potential troublespots Russia or Iraq. The sniffing around that we have done has shown nothing, he said.
Oil consuming nations worried about supply
The agency, grouping the worlds major industrialised nations, said in December that it was confident preparations for computer date rollovers on January 1, 2000 would minimise risks to the global energy sector.
Concerns had risen among oil consuming nations about the possible impact of the millennium bug because of a sharp rise last year in the world oil prices.
Supply curbs implemented by OPEC and other oil exporters have sliced spare inventories and driven prices to $ 25 a barrel for north sea brent.
The IEA has said steps have been planned by the member countries to deal with any residual Y2K problems and it was prepared for collective emergency measures in the event they were needed.
But Ramsay said: I dont see any particular reason (to tap emergency stocks). There are no discernible shortfalls in oil.
Mr Ramsay said a problem in Japan, where three equipment failures were reported at the Shiga nuclear power plant about 300 km northwest of Tokyo, was not apparently Y2K-related and had been quickly dealt with.
Gulf OPEC powers look bug-free so far. The big OPEC Gulf petroleum powers appeared to have sailed through the Y2K test and had stood ready to release emergency stockpiles of oil in case of an emergency shortage.
Industry grows by 6.9 per cent
NEW DELHI, Jan 1 The industry appeared to be turning around with the overall growth rate of industrial production during the first half of the current fiscal being recorded at 6.9 per cent as compared to 3.4 per cent during the corresponding period of the previous year.
The production in the manufacturing sector, electricity and mining and quarrying from April to October, 1999, was 7.5 per cent, 8.1 per cent and 0.2 per cent, respectively, as against 3.5 per cent, 6.3 per cent and (-) 0.4 per cent during the same period in 1998, according to official figures released here by the Government.
As per use-based classification, the production during April to October, 1999, registered an increase over corresponding period of 1998 in all sectors except capital goods, which recorded a lower growth of 8.6 per cent ( 11 per cent in April to October, 1998).
Core infrastructure industries displayed mixed performance with the average growth being 6.4 per cent during April to September, 1999, as against 3 per cent during the corresponding period last year.
Net bank credit to Government showed a lower growth of 12.1 per cent during the current financial year (March 31, 1999, to November 19, 1999) as compared to 14.8 per cent during the same period of the 1998-99.
The RBIs net credit to the Centre also showed a lower growth of 5.5 per cent compared to 12.3 per cent in 1998-99. The bank credit to the commercial sector increased by 6.2 per cent as against 3.6 per cent in the same period last year. Net foreign exchange assets of the banking sector increased by 5.5 per cent as against a higher increase of 12.5 per cent in the corresponding period of 1998-99.
The annual rate of inflation based on WPI stood at 2.4 per cent for the week ended December 24, 1999, compared to a 7.4 per cent increase in fuel, power and lubricants and a 2 per cent increase in manufactured products as against 14.2 per cent, 1.2 per cent and 3.5 per cent, respectively.
KOPARGAON, Jan 1 (PTI) Indian Railways is planning to come out with a debenture issue as the Ministry needs more funds to meet its expense on various projects, Union Minister of State for Railways Bangaru Laxman said today.
Railways need Rs 19,000 crore to complete several works in the country. The Ministry does not have adequate funds and hence we are thinking of bringing out debentures on the lines of Konkan Railway, Laxman told newspersons at Shirdi near here.
According to Laxman, a plan is being drafted to link all major pilgrim centres in the country through rail routes. The government was also thinking to set up computerised reservation centres at every pilgrim centre, he added.
On the increasing number of rail accidents, he said the Ministry was preparing an action plan to set up a machinery to prevent such accidents.
NEW DELHI, Jan 1 (PTI) Internet performance across Asia including India slowed down immediately after midnight as curious net surfers logged on to check whether everything was alright with the net and around the world.
Although no major Y2K bug hit the internet in the region, surfing speed in many Asian locations degraded immediately after midnight as users apparently logged on to the net to test internet availability. Keynote, a global internet testing authority said.
Keynote has been measuring the performance and availability of the internet in global time zones as the year 2000 dawned in different parts of the globe.
A top keynote official said other than transitory spikes in download times immediately after local midnight, there have been no obvious Y2K problems from any parts of Asia so far.
Web sites in the first time zones to experience the millennium turnover have jumped the hurdle and are delivering pages as usual, indicating that the internet in those regions is functioning properly.
Cut interest rate to PLR level
Industrial sickness and level of NPAs of banks and FIs have grown to frightful dimensions. At the end 1998-99 the gross NPAs of the banking sector were Rs 58,554 crore. The total number of sick units has been shown declined from 2,37,000 to 2,21,536. These figures are routinely compiled by RBI . In the case of SSIs, the actual number of sick units may be at least four times the indicated numbers; because only 15-20 per cent of SSI units have access to banks. RBI data relates only to them.
Interest cost of the capital is becoming burdensome to be listed as one reason for sickness. According to CMIE for 3988 select companies interest expenses to sales were 6.6 per cent in 1997-98. This interest is directly incurred by these companies. If the burden of interest is taken on the entire chain of manufacturing starting from the raw material it swells to over 13 per cent.
Despite low inflation and recession interest rates are ruling high. There are two reasons for this. High level of NPAs and bulk borrowing by Central and State Governments. Together Centre and States are expending Rs 1,25,000 crore per year on debt servicing alone. If urgent remedial steps are not taken it would lead to a grave crisis.
Before nationalisation the motive of banks was profit maximisation. Between 1969 and 1991 Government substituted it with the motive of social benefit to maximise political gain. Good portion of advances were at less than the usual rate of interest which were kept low for several years to keep down the interest burden of the public debt. High cash ratios and SLR pre-empted substantial portions of bank assets for investment in government and approved securities. Loan melas were organised for political gains. Appointment of Board of Directors and the top officials were governed largely by political considerations. As a cumulated result of all this NPA level of bank rose.
Recently we saw a bitter controversy triggered by CII report on banks. Bank unions reacted sharply which compelled CII to withdraw the report. However, it has thrown light on some issues. It has been alleged by bank unions big industrial units are big defaulters. To pin down CPI M.P., Mr Gurudas alleged that out of Rs 58,554 crore of NPA more than Rs 30,000 crore is due to default of the large industrial houses who are members of CII. He further elaborated that 5 members of CII panel which made bank recommendations were defaulters in the order of Rs 100 crore.
Many factors are responsible for the ill health of banks and unless they are all rectified banks health can not be restored. SSI industry is blamed for high level of NPA. SSIs are getting bank money at interest rates higher than those for large units. This excess interest goes up to 4 per cent. Then many a times large units get the opportunity to get bank finance at very low interest of around 8 per cent through commercial paper (C.P.) route. Mr Ayyapa Raddy, one of the directors of RBI, has stated that farmers are getting loans at 16.5 per cent and they losing heavily.
NEW DELHI, Jan 1 (PTI) Majority of banks in the country remained unaffected by the Y2K bug with most of them reporting to (RBI) about smooth sailing.
Punjab National Bank, CMD Rashid Jilani said we received reports from all our regions that our computer systems are working normally. RBI has also been informed about the smooth functioning.
Official spokesman for Bank of Baroda also reported smooth rollover to the next century without any hitches.
Banks had been working 24 hours to check the Y2K bug and were taking every step to avoid any uncertainty, he said.
THE grapevine has it that the modus operandi of the New Bull borders on the diabolic. Having taken a severe beating at the bourses in October 99 when FII selling triggered panic at the bourses, the New Bull is rumoured to have registered a handful of offshore funds that qualify as FIIs. Now these desi FIIs lap up genuine sales of the other FIIs and ensure that the FII net figures remain positive. Diabolic, isnt it?
Anyone who looked into the annual report of this Indian pharma formulation company a year would have sworn that this is a BIFR candidate. But the grapevine now has it that this company is on the turnaround track. Is that why its trading volumes have multiplied? If the grapevine is to be believed this Rs 5 share will touch Rs 25 within six months. Watch this counter!
After facing rough weather and much controversy during its book-building and subsequent public issue, this companys management looks set to have the last laugh. Why? The grapevine has it that the grey market price of this scrip already exceeds Rs 1600 and the list price is expected to be thereabout. If so, alls well that ends well.
Our grapevine was among the earliest to cotton to something cooking at the counter of BFL SOFTWARE and now the news is out. A marriage is on between this company and Digital Equipment and resultantly, the share price of BFL Software has risen sharply and if the grapevine update is to be believed, the party at this counter has just begun!
by Praful R. Desai
Q: When once Industrial Court reaches prima facie conclusion of no unfair labour practice, does it lose the power to grant interim relief?
Ans: In Maharashtra State Road Transport Corporation v M.S.R.T. Kamgar Sangathan. (1999-II-LLJ.-1082) Bombay H.C. expressed the view thus:
Petitioners submit that in view of the finding by the Industrial Court that no unfair labour practice has been proved, there is no power left for the Industrial Court to make any order granting interim relief in favour of the complaint.
The respondents on the other hand, submits that the interim order that was made by the Industrial Court has been complied with by the petitioners. This statement is disputed by the petitioners. According to them, by the impugned order not only meetings were to be held, but minutes of the meetings were also to be submitted before the courts. In the submission therefore the Respondent is not right in submitting that the order has been complied with. The petitioners further submit that the order of the Industrial Court set a bad preccedants in the sense that the Industrial Court even if found that there is unfair labour practice makes an interim direction.
The HC opined that the power of the Industrial Court of granting interim relief is contained in S.30(2). A power of any Court to grant interim relief is always to be exercised in aid of the final relief that is claimed in the complaint. For that purpose the Court has to first find out whether prima facie case has been made out by the complanant.
The HC observed that the Court for that purpose held an enquiry and had reached prima facie conclusion that there is no unfair labour practice on the part of the employer.
The HC held that once the Court reaches that finding, the Court loses the power to grant an interim relief such case. The impugned order therefore, is liable to be set aside. Accordingly, the HC set aside the said order and allowed the petition.
by R. N. Lakhotia
Q: Could you kindly advise me on the points as under:
(1) Whether any body give gift to his relatives. (Rs 50,000 or so).
(2) For this is he required to execute any document on Stamped paper.
(3) I am advised that a stamped paper worth ½ per cent of amount of gift is required i.e. on Rs 50,000 gift (250 stamped Paper @ ½ per cent is required).
(4) How one can prove whether the amount has been given as a gift or loan (For this purpose what documents are required).
R.L. Mehra, Sri Ganganagar
Ans: After 1.10.98 a gift can be made to any person. No stamp paper is necessary for gift of movable assets. However, for gift of immovable property it is necessary to execute Gift Deed on stamp paper. The quantum of stamp paper to be used will be informed to you by the Office of the Sub-Registrar. However, for the purpose of loan, no specific agreement or document is required. If you want to give loan to someone please ensure that it is by account payee cheque so as to avoid problem at a future stage.
Q: 1. Benami Transactions are now stopped by law. A purchase of Property by HUF/HUF Karta through HUF funds in the name of any one member of HUF will a benami transaction or not.
2. The income from the funds permanently given or loaned by HUF to all or any particular member of HUF (equally or otherwise) will be added or not in the income of the HUF.
P.L. Garg, Bathinda.
Ans: The purchase of the property out of the funds of the HUF in the name of one of the members of the HUF or in the name of Karta will be perfectly legal. It will not be a Benami transaction. If the HUF has given loan to its member, then the income accruing to the member as a result of this loan amount cannot be added with the income of the HUF. However, please ensure that partial partition of the HUF does not take place and the transaction remains pure and simple as a loan transaction only. Please appreciate that I receive questions for Tribune about 100 times more than the space available in the paper. Hence, only short replies of readers questions can be given and it is bound to take long-time to answer the questions specially because of space constraint.
Q: I retired from PSEB I compute my pension and received Rs 1,81,376. Is it my Income or Service Benefits.
Please intimate in future. I shall submit the income tax return with the total pension received or net pension received after deducting the compute pension Rs 1445 per month.
Hans Raj, Dhuri
Ans: The commuted pension is not income within the Income Tax law. Hence while filing your Income Tax return you should only show the yearly pension income for Income Tax purposes.
Q: I shall earn accrued interest of Rs 16100 on NSCs during the financial year 1999-2000. I have taken an overdraft limit against the NSCs for domestic purposes for which I am likely to pay interest above Rs 5000/-, I wish to know whether interest of Rs 5000 paid on overdraft should be deducted from accrued interest of Rs 16100 or not. If deduction is admissible, can my employer i.e the bank allow me rebate and need not deduct income tax or I may have to get refund from income tax authorities.
Chander Arora, Panchkula.
Ans: From your accrued interest on NSC, the interest paid by you for overdraft will be deductible only if the money has been used for making some investments, etc. If the overdraft has been taken for personal purposes and the money is utilised by you will for the purpose of household and personal expenses, then you will not be eligible to claim deduction in respect of interest paid on overdraft.
Q: Tax consultants and Chartered accountant have different versions on the subject. I seek your expert guidance for my reference:
Gift tax has been abolished and one who is a regular assessee can now gift without any reservation:
My question is:
(i) Can any amount of gift be made.
(ii) Can immovable property be gifted.
(iii) Donor & Donee may not be close relations
(iv) Can NRI be a donor. (No close relations
(iv) No Tax liability on the donor/donee for the gifted amount/property.
(vi) Income on the gifted amount is taxable in the hands of Donee as per I/Tax laws in force.
(vii) Donor has to be a regular assessee and amount to be gifted through Bank account by cheque or D/D.
Ans: Yes, the Gift tax has been abolished w.e.f. 1-10-98. Thus, any quantum person can make any question of gift without any hesitation and problem. However, you should avoid making gift to your spouse in particular. Likewise, avoid making gift to minor children otherwise the income from these gifts will be clubbed with your income. The immovable property can also be gifted. However, proper document on stamp paper shuold be executed and registered for the purpose of gift of immovable property. It is not necessary to have any relationship between the donor and donee. NRI can be donor as per the law. Yes, there is no tax liability either on the donor or in the donee for the gifted amount/property. The income arising from the gifted amount will henceforth be taxed in the hands of the donee as per the prevailing Income Tax law. The donor may or may not be a regular Income Tax assessee. However, what is relevant is that the donor should have substantial source of gifting the funds. The gift can be given not merely by cheque or bank draft but even by cash. However, from a practical angle, it is better to make a gift by Account Payee Cheque or a bank draft.
by Pushpa Girimaji
1999 gave impetus to consumer interest
WHEN one looks back at a year gone by, tragedies always tend to overshadow happy events. The year 1999 is no exception. Even in a country where railway accidents are not rare, the Gaisal disaster shook the confidence of the railway passengers in the public sector organisations ability to reach them to their destinations safe.
The collision between Brahmaputra Mail and Awadh-Assam Express was all the more tragic because it was easily avoidable. The Gaisal mishap brought home two important points: one, the indifference to passenger safety exhibited by the biggest monopoly in the country and two, that passengers never got to see the reports of inquiry commissions on railway accidents. So much for the consumers right to safe and quality service and the right to information!
There were many positive developments too during the year and I will put on the top of the list, the passing of the Insurance Regulatory and Development Authority. Bill by Parliament, thereby providing for competition in the insurance sector. Will the opening up of the insurance sector bring about a wider choice in insurance policies, particularly in the health sector? Will it mean quick settlement of insurance claims? Will the competition mean better pricing of policies? In other words, will the consumer finally have a better deal vis-a-vis insurance companies? These are some of the many questions that are uppermost in the minds of consumers today, as they wait expectantly for private insurance companies to start their business. The new millennium will hold answers to these questions.
The fate of the Hire Purchase Act of 1972 will also be known only in the new millennium. In fact, consumers and consumer groups will have to become far more assertive and demanding in the new year, if they want a fair deal. And this applies to hire purchase transactions too. Even though the Law Commission has submitted its report on the amendments to the Hire Purchase Act, whether the 28-year old law will eventually be amended on the lines suggested by the Law Commission and whether the law meant to protect the interests of hirers will get a fresh lease of life depends on the power that the consumers and consumer groups will wield.
The year 1999 will also be remembered for two landmark judgements given by the Supreme Court, providing relief to the beneficiaries of the Salary Savings Scheme of LIC and the Employees Provident Fund Scheme. In the first case, the Supreme Court held that the employer, who undertook to pay the premium of the employees under the Salary Savings Scheme was acting as an agent of LIC and if the employer or the agent failed to pay the premium on time, thereby resulting in the lapsing of the policy, then the LIC cannot take the plea that it was not liable to pay. LIC in such cases was liable for the failure of is agent to pay the premium, the court said. This judgement will help many nominees of LIC policies under the scheme, who have been unjustifiably denied the insured amount by LIC on the ground that the employer failed to pass on the premium deducted from the employees salary.
In the second judgement, the Supreme Court held that a member of the employees provident fund was a consumer under the Consumer Protection Act and had every right to seek relief under the Act for any deficiency in the service rendered by the Provident Fund Commissioner.
Another development to cheer about was the coming together of consumer organisations in the country for formulating a programme of action for the new millennium. If consumer movement is to gain strength, if consumers are to become a force to reckon with in the country, then consumer unity is a must. A beginning was made in this direction some years ago when consumer organisations came together under the umbrella of the Consumer Coordination Council. The CCC, which organised the consumer meet, is now all set to move forward in the new millennium. And this time the agenda is not restricted only to issues pertaining to goods and services. Consumer groups have also decided to demand better accountability from their elected representatives. Another important decision at the meet was to fight corruption, particularly in public service delivery.
I will rank the successful campaign in Delhi schools against the bursting of firecrackers, as one of the most important and significant developments of the year. To get the school students to voluntarily give up bursting of firecrackers because of the use of child labour in the industry and also because of the damage it caused to the environment, was not an easy task. But voluntary groups, officials of the pollution control board and the fire control department succeeded in their task through sheer perseverance. This is a lesson that consumers and consumer groups should always remember in the new millennium.
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