Monday, January 31, 2000,
Chandigarh, India






THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

Sinha allays foreign investors’ fears
DAVOS, Jan 30 — India has allayed foreign investors’ fears over hurdles in setting up of power plants, asserting that a “vigorous push” was being given to the power sector reforms in the country.


Morepen forms external audit committee
NEW DELHI, Jan 30 — Morepen Laboratories has constituted an external audit committee as a part of its ongoing exercise of corporate governance.

Punjab potential under-utilised, says PHDCCI
NEW DELHI, Jan 30 — The industry position in North India is worrisome and there is a need to take urgent measures to make investment in the region more lucrative, the newly elected President of the PHDCCI, Mr K.S.Mehta, has said.

How States lose Rs 4,000 crore
NEW DELHI, Jan 30 — The States are incurring a financial burden of Rs 4,000 crore annually in the wake of the Centre backtracking on its commitment to the Inter-State Council to implement the alternative devolution formula, a leading industry chamber said today.

PSEB to have own police force
THE PSEB has decided to have its own police force and set up its own police stations to check power theft. This has sent shockwaves throughout the State.

Internet facility for industry
HOSHIARPUR, Jan 30 — Mr Darbara Singh Guru, Director Industries, Punjab has said that latest information regarding procurement of raw material from various markets of the country and selling of finishing goods can be obtained through the Internet facility available at the local point in Udhyog Bhavan, Chandigarh.



EARLIER STORIES
 

Investors gain 4,000 crore from takeover bids
NEW DELHI, Jan 30 — Investors have profited by as much as Rs 4,000 crore after SEBI issued the regulations for takeover and substantial acquisition of shares in 1997, SEBI Chairman D.R. Mehta has said.

Inflation rises to 3.31 pc
NEW DELHI, Jan 30 — Annual inflation moved steadily upwards to a 32-week high of 3.31 per cent for the week ended January 15, despite Wholesale Price Index remaining unchanged. The inflation rate had touched the previous high of 3.53 per cent for the week ended June 5, 1999. Top




Sinha allays foreign investors’ fears

DAVOS, Jan 30 (PTI) — India has allayed foreign investors’ fears over hurdles in setting up of power plants, asserting that a “vigorous push” was being given to the power sector reforms in the country.There appear to be “distortions” abroad on the steps being taken to remove bottlenecks in getting foreign funds, Finance Minister Yashwant Sinha told top business executives during formal and informal meetings on the sidelines of the ongoing meeting of the World Economic Forum (WEF) here.

Mr Sinha’s comments came when a few business executives said there was an “impression” abroad that foreign companies needed “hundreds of clearances” like in the case of Enron power plant in Maharashtra.

He told the executives that state governments were in the process of unbridling the state electricity boards and streamlining the functioning of regulatory bodies.

An Enron representative said Dabhol, with Enron’s participation, was the first mega power project with a foreign partner after launching of economic reforms and therefore there were some teething troubles.

Mr Sinha was told that an “impression” was still there in the minds of foreign businessmen that India was a “difficult place” to make investments.

India must convey a strong message to the international community that days of red tape and extensive state-ownership are over and that economic liberalisation was being pursued with active vigour, the businessmen said.

The business executives told Mr Sinha that India has “tremendous advantages” and can “outstrip” China in getting foreign investments if it could “get its act together.

It was suggested that India should further streamline procedures for getting necessary approvals.

Mr Sinha’s interaction with the businessmen at a private meeting of the “business interaction group of India” and at the working dinner was his first major engagement since his arrival here last afternoon.

He could not participate in the main plenary session of the WEF themed “Redefining the Roles of Business and Government for the 21st century” as he had reached Davos literally a few minutes before the start of the session.

Mr Sinha said despite some misconceptions, there was an “upbeat mood” in the assessment of foreign businessmen about further liberalisation of the Indian economy.

He informed the meeting about the various steps taken regarding second generation reforms like privatisation of airports, selling of 51 per cent stake in the Indian Airlines and opening up of the roads sector.

When a question was raised about the uncertainty in the Indian telecom sector following some confusion on the regulatory front, Mr Sinha said “everything has been sorted out. There need not be any doubts.”

The Finance Minister also sought to clear the impression that information technology development was confined only to Andhra Pradesh and Karnataka.

Mr Sinha also spoke about reforms in the insurance sector like giving 26 per cent equity to foreign insurers, liberalisation in the capital markets and steps being taken to have a uniform value added tax (VAT) regime in the country.

Responding to a point, he said the government was not in a position to allow participation of more foreign banks in the Indian banking sector because of certain WTO commitments.

Mr Sinha’a comments assume significance in the wake of Cogentrix pulling out of the Mangalore power project and delay in the Visag thermal power station.Top




 

Morepen forms external audit committee
From P.N. Andley
Tribune News Service

NEW DELHI, Jan 30 — Morepen Laboratories has constituted an external audit committee as a part of its ongoing exercise of corporate governance.

Mr Manoj Joshi, a management consultant, has been appointed Chairman of this committee. The other members are Dr P.S. Pritam, Executive Director, Marketing and Foreign Operations, LIC, Mr N.H. Bhatter, Deputy Managing Director of SICOM Ltd, and Mr Sushil Suri, Director, Finance and Marketing Affairs of Morepen Laboratories as a coordinator.

The committee will act as a bridge between the board, the statutory auditors and the internal auditors and review the adequacy of internal control system.

In keeping with its plan for US market and Nasdaq listing, Morepen had also appointed Price Water House for compiling and auditing its accounts as per US General Accounting and Auditing Practices (GAAP). The report will be ready in next few weeks after which the company will apply for the Nasdaq listing. The entire plan of listing is expected to be completed within six months.

The company has appointed RABO Bank, Europe’s leading agri-financer, its merchant banker, for private placement of its shares. In addition, the bank will also assist the company in seeking marketing joint ventures in Europe.

Meanwhile, Morepen has registered an increase of 43 per cent in the profit after tax at Rs 124 million (as compared to the corresponding period of 1998). The company has recorded a 30 per cent growth in sales and income from operations for the third quarter.

The third quarter’s gross revenues surged to Rs 847 million as compared to Rs 650 million for the corresponding period of 1998. The gross revenue in nine months of 1999 soared to Rs 2,401 million as compared to Rs 1,864 million.

The net profit in nine months of 1999 has also jumped to Rs 339 million vis-a-vis Rs 238 million for the same period of 1998.Top



 

Punjab potential under-utilised, says PHDCCI
From T.V. Lakshminarayan
Tribune News Service

NEW DELHI, Jan 30 — The industry position in North India is worrisome and there is a need to take urgent measures to make investment in the region more lucrative, the newly elected President of the PHDCCI, Mr K.S.Mehta, has said.

The States in western and southern India have made progress by leaps and bounds in the last few years as setting up new industrial ventures in the northern region is hit by the bureaucratic tangle and high cost of entry, Mr Mehta told The Tribune in an interview.

Mr Mehta, who is a renowned chartered accountant and expert on corporate governance concept, spoke about his concerns and priorities for the industrial sector and the measures needed to put them in a higher growth path.

Speaking on the lack of adequate industrial growth in the northern region, Mr Mehta cited the example of Punjab, which he said was not performing according to its potential.

For instance, entrepreneurship of Punjabis came to the fore during the days of terrorism when not a single unit fell sick in the State and no unit was referred to BIFR.

He said there was a need to create a supportive environment for promoting industrialisation in North India and ensure supply of timely, quality and cheap power.

There was also a need to ensure good shipping transport linkages with ports and undertake exports from the region through air cargo.

A policy for the export of food processing items from the State should be formulated and small and medium enterprises should be encouraged.

There was a need to simplify rules and procedures to create an investor friendly and promotional industrial environment. In this connection change of trade should be freely permissible for different types of industries as long as there is compliance with regard to pollution control norms.

Mr Mehta also stressed the need to fine-tune labour policies in order to encourage employment creation and promote competitiveness in trade and industry.

In this connection employers’ right to manage business under the relevant labour laws of the States was desirable. The existing labour laws militate against organised working in employment-intensive export industry and this was one reason that China exported ten times more textiles than India. The reason he said was that garments was a seasonal trade and there was a need to have flexibility in terms of employing workers.

He said there was a need to create an effective safety net so that the workers’ interests were protected.

Mr Mehta, who is a member of the advisory committee on primary markets of SEBI and a Director of NSE, also spoke about the need to contain fiscal deficit in the country, the need to downsize the Government and increase efficiency and productivity in both public and private sectors.

On disinvestment, he felt the Government was not going about it in a professional manner. Instead of fixing a target of Rs 10,000 crore disinvestment in public sector units, there was a need to set up a much higher target of say Rs 50,000 crore. This would have twin benefits: first at least Rs 40,000 crore could be used for debt retirement and another Rs 10,000 crore, which would have been pumped in by the Government in these PSUs would have been saved.

The area of hidden subsidy was also a matter of concern. The Government should weed out demerit subsidy and thus reduce fiscal deficit on a long term basis, he added.Top


 

How States lose Rs 4,000 crore

NEW DELHI, Jan 30 (PTI) — The States are incurring a financial burden of Rs 4,000 crore annually in the wake of the Centre backtracking on its commitment to the Inter-State Council to implement the alternative devolution formula, a leading industry chamber said today.In a note to the Finance Ministry, Assocham President Shekhar Bajaj said the commitment made by the Centre in the 1997-98 Budget to bring in a constitutional amendment to give a better deal to the States from the present 29 per cent devolution should be introduced.

The deteriorating financial condition of the states would only worsen even if the proposed increase in the plan allocation to the States by 15 per cent, as recommended by the Planning Commission, comes through in the 2000-01 Budget, Bajaj said.

He said the hike was unlikey to compensate the States for even by a quarter of the loss they were currently incurring due to the failure of the Centre to meet its obligations under the 10th Finance Commission recommendations.

“The alternative devolution formula recommended by the 10th Finance Commission stipulates that the States would get 29 per cent of the total central tax revenues in lieu of what they are entitled to as their share of revenues from central income tax an excise duties,” Bajaj said.

Stating that the precarious financial position of the States could be gauged from the fact that its finances had shown no significant improvement in recent years, Bajaj said there was an urgent need to mobilise more non-tax revenues by increasing user charges on various social and economic services provided by state governments.

Bajaj said the ratio of State non-tax revenue to the domestic product had in fact declined from 2.1 per cent in 1995-96 to 1.4 per cent in 1999-2000 and added that though the ratio of state government spending to gross domestic product had been lowered, the quality of government spending continued to deteriorate.

The non-development revenue expenditure accounts for more than half of the revenue receipts of the States and the share of interest payments in total revenue receipts of the States had almost doubled in the second half of the nineties as compared to the second half of the eighties.Top


 

PSEB to have own police force
By P.D. Sharma

THE PSEB has decided to have its own police force and set up its own police stations to check power theft. This has sent shockwaves throughout the State. Power theft is one subject which is irritating consumers all over.

A high powered committee set up by Supreme Court to go into the ills plaguing UPSEB has submitted its report. This committee was headed by the former Cabinet Secretary, P.K. Kaul. It has indicted politicians and bureaucrats for this. Malpractices in transfers and postings are a pointer to this. The report says that “transfer industry” is thriving. Similar things are now happening in PSEB.

The Central Government is planning to have legislation to prevent power theft. Proposed Act intends to penalise senior officials of SEBs including Chairman for their failure to prevent power thefts.

Power theft is rampant in all SEBs. Bulk of it is concealed in the agriculture consumption which is subsidised and unmetered. Rest is shown as R & D losses which are above 40 per cent. As a result SEBs have become bankrupt. They owe more than Rs 20,000 crore to Central power utilities.

Honest consumers of Punjab are getting harassed through arbitrary decisions on power theft. Cases go to the dispute settlement mechanisms of PSEB where emphasis seems to vindicate official version. For just decisions such mechanisms should have independent experts both technical as well as judicial.

PSEB should drop the plan to set up its own police station. Apart from heavy financial burden it will result in harassment to honest consumers. Such consumers will be subjected to double edged weapon; bear the extra financial burden and face prosecution for just no fault.Top


 

Internet facility for industry
From Our Correspondent

HOSHIARPUR, Jan 30 — Mr Darbara Singh Guru, Director Industries, Punjab has said that latest information regarding procurement of raw material from various markets of the country and selling of finishing goods can be obtained through the Internet facility available at the local point in Udhyog Bhavan, Chandigarh.

With this facility, availability of raw material on cheaper rates and exploration of new markets for selling of industrial goods and become easier. Mr Guru said, addressing a meeting of the owners of handicraft units and artisans of Hoshiarpur district here yesterday.

Mr Guru said there was a great scope for setting up rubber, plastic, leather, chemical, paper and cardboard units in Hoshiarpur district.

Mr Iqbal Singh Sidhu, DC, said that new markets were required for handicrafts so that artisans could get maximum for their goods.

Mr Madhu Sudan Jain, Secretary, Hoshiarpur Handicraft Manufacturers Association, and other artisans highlighted their problems.Top



 

Investors gain 4,000 crore from takeover bids

NEW DELHI, Jan 30 (UNI) — Investors have profited by as much as Rs 4,000 crore after SEBI issued the regulations for takeover and substantial acquisition of shares in 1997, SEBI Chairman D.R. Mehta has said.

“The investors gained Rs 4,000 crore as 617 companies took advantage of the takeover code’’, Mehta said. The Justice Bhagwati report on takeovers and substantial acquisition of shares, approved by SEBI in 1997, laid the conditions under which a public announcement was to be made to acquire a minimum of 20 per cent shares of a target company from existing shareholders by an open offer.Top


 

Inflation rises to 3.31 pc

NEW DELHI, Jan 30 (PTI) — Annual inflation moved steadily upwards to a 32-week high of 3.31 per cent for the week ended January 15, despite Wholesale Price Index remaining unchanged. The inflation rate had touched the previous high of 3.53 per cent for the week ended June 5, 1999.

The 0.20 percentage points rice in the inflation rate to 3.31 per cent (provisional) as against 3.11 per cent (P) in the previous week was mainly on account of rise in select indices under the manufactured products category.Top


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AVIATION NOTES

by K.R. Wadhwaney

Ifs & buts of privatisation

FIVE international airports in Delhi, Mumbai, Chennai, Calcutta and Bangalore may have operations under “private eye”. the idea has been a long drawn-out but delivery may still be more hazardous than expected because the change-over means a loss of about 100 crore to the Airports Authority of India (AAI).

The Government has decided to open up the five badly-managed airports to the private sector. But will it continue to be serious on the project? The analysts are doubtful because there are wheels within wheels. The Ministry of Disinvestment, which was formed recently, has already voiced its protest at not being consulted.

The AAI is the most affected unit. It will lose about 65 per cent of revenue since a bulk of traffic is handled at these airports.

The change-over will be in phases. Bangalore and Calcutta will be taken over in the first phase followed by Chennai and Mumbai. Delhi will be in the last phase because there are many loose ends before Indira Gandhi International Airport (IGIA) goes private.

The KPMG Peat Marwick has been appointed consultants for the project. It has been assigned various functions, including evaluation, marketing and estimated revenue that will accrue. The consultants will also suggest the Government as to how and where to reduce the over-head expenses so that losses are considerably slashed.

Those who are aware of the functioning of airports feel all operations should have gone private instead of only ground operations. The Air operations will continue to be under the AAI.

Divergent views persist despite the Government’s keenness to privatise the airports. All are, however, unanimous that the airports should have an international rating. The airports must wear a look of mini townships so that passengers and visitors are able to spend their time when flights are bunched together or delayed.

All analysts that bureaucratic interference should be minimum, if the airports are to function smoothly.

The Government has initiated a move to appoint a Director to over sees functions of the AAI along with Customs and immigration. But the incumbent should be one who knows aviation matter instead of “Mr know-all IAS official”.Top


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TAX & YOU

by R.N. Lakhotia

Q: My father opened PPF account of my both the minor daughters in 1994 without my knowledge. Though he is paying Income Tax every year, he did not claim any rebate on account of these deposits. Can I or my husband start depositing in the same accounts with effect from financial year 1999-2000 and claim rebate thereon or else open fresh PPF accounts in their names? In case of the former please advise how the money will be distributed on maturity of the PPF accounts; or in the latter case, whether the existing PPF accounts (opened by nanaji of minor daughters) can be fore-closed.

— Anju, Barnala

Ans: There is no point in closing the PPF A/C opened in the name of children by their Nanaji. As parents you can contribute to these PPF A/C and claim tax benefit u/s 88 of the Income Tax Act, 1961. On maturity the amount received will actually belong to the persons who made the contributions. However, if you start making a gift every year and the amount deposited in PPF A/c in the name of minor children then when actually the amount is received after closing the PPF A/c it will belong to your children and not to you.

Q: In March 1999, I sold back to UTI, units of Master Equity Plan (MEP), 1991, MEP, 1992 and MEP 1995 which were purchased by me in March 1991, March 1992 and March 1995 respectively. While calculating my Capital Gains/Loss in respect of sale of units to UTI, for the Assessment Year 1999-2000, will the Cost Inflation Index concept apply for the purpose of working out the cost of acquisition of the units?

— D.S. Chawla, New Delhi

Ans: While calculating the long-term capital gains you will be eligible to compute such gains after applying the Cost Inflation Index. The Cost Inflation Index for the financial year 1999-2000 is 389.

Q: Income Tax Department is very keen and advertises every fortnightly about filing the return but silent since 1996-97 about the refunds. Dr Manmohan Singh the then Finance Minister had recommended 2 per cent interest if refund is delayed. Will Income Tax Department look into it and satisfy the Income-tax payees.

—Dr M.S. Sultan, PAU, Ludhiana

Ans: In respect of Income-tax refund to be received by you, you will be eligible to interest from Income tax department at the rate 1% permonth.

Q: My father wants to gift me cash through crossed cheque for keeping it with me in bank to meet my expenses on my marriage. presently I am a student (final year) and have no other income.

Kindly advise, if there is any tax liability on the gift and also on the interest income that may be earned by me from bank. I think that income of interest shall be my income and not of my father. The formalities to be completed may kindly be advised.

— Priti, Delhi

Ans: Your father can make gift through account payee cheque of any amount. There is no liability to payment of Gift Tax in respect of the gift made by you. Please remember that w.e.f. 1-10.98 gift Tax has been abolished. Assuming that you are a major child, the income arising from the gifted amount henceforth will belong to you only and not to your father. The question of clubbing of the income will also not arise.Top



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INVESTMENT PLANNER

Hold Nelco, invest in Punjab Chem
by Ashok Kumar

Q. Would it be advisable to consider an investment in the shares of Transchem?

— R.K. Behl, Chandigarh

Transchem was primarily engaged in the manufacture of pharmaceuticals products namely, Frusemide IP/BP and Fenbendazole. Recently, it entered into the production of white button mushrooms, for which it set up a 100 per cent division. However, close on the heels of this project the US imposed heavy dumping duties on mushroom imported from various countries including India.

In addition, when the company commenced business, it used glass jars for packaging. However, with the western market changing over to tin packaging, the company suffered major loss yet again.

An investment is not recommended for the present although a watch over its progress could be maintained.

Q: Please comment on the track record of Siltap Chemicals.

— Mohan Mallahar, Shimla

Siltap Chemicals is the sole manufacturer of cross-laminated film in the India and the product finds usage as a resistant packaging material in the manufacture of tarpaulins, fumigation cover, roof-lining and monsoon sheds. It has technical collaboration with Rasmussen Polymer Development AG, Switzerland. On the financial front, the company’s trackrecord was fairly satisfactory until recently when a marked decline in the demand for cross laminated films has been noticed and that too in spite of the softening of polyethylene prices, which is a major input in the manufacture of cross laminated films.

Needless to say that the same has had an adverse effect on the bottomlines of the company during the last few years and its margins are likely to remain under pressure in the medium term.

Q. Do you recommend a hold for Nelco?

— Tarun Arora, Kotla

National Radio & Electronics (Nelco), a Tata group company, recently implemented a restructuring programme and has moved out of the consumer electronics business. The company now has three divisions. I. Supervisory Control & Data Acquisition Systems (SCADA) 2. Software division and 3. V-Sat division.

On the financial front, the company appears to have a fairly large debt burden and the same has been a major restricting factor for its bottomline thus far. However, with a major portion of the same not having been paid off, the company’s bottomlines should benefit. With several plans on the anvil, its future prospects should improve and hence existing shareholders could continue to stay invested.

Q. Could you please comment on the fundamentals of Punjab Chemicals? Do you recommend an investment in its shares ?

— Sanjana Shukla, Delhi,
Praduman Varma, Delhi

Punjab Chemicals & Pharmaceuticals (PCPL) recently restructured its product-mix and decided to go in for high value-added products, which are targeted to the export markets. The company is gradually shifting its focus from commodities to Agrochemicals, specially chemicals and pharmaceutical intermediates and later into pharmeceuticals.

The company lays considerable stress on its R & D and a sizeable chunk of its expenditure is allotted thereto. It has also undertaken heavy investment in the development of new products such as agrochemicals and pharmaceutical intermediates and its future plans include the introduction of several new pharma and agrochemicals’ products.

On the financial front, the company has fared satisfactorily in recent times. Overall, its fundamentals appear fairly strong a moderate long term investment in the scrip could be considered.

Q. How do you rate the investment prospects of Revathi CP Equipment?

— S.K. Saheria, Sonepat

Revathi-CP Equipment Ltd (RCPEL) is engaged in the manufacture of water-well and blast hole drill rigs which find application in coal and iron mines and limestone quarries. RCPEL, is a constituent of the Swedish Atlas Copco group and is one of the two major players in Indian market for blast hole rigs. The other and more dominant one is Ingersoll Rand. Besides a lack of fierce competition in the domestic scenario, other features like the relatively small size of the market as well as advanced technology also have resulted in the company being totally unaffected by any of the new entrants in this field.

Considering its strong position in the industry and the fairly good future prospects, discerning investors could consider taking up a position in this scrip.Top



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GRAPEVINE

Pfizer
Notwithstanding its having the dubious distinction of being the first from its segment of setting up a 100 per cent subsidiary, the share price of this company has been on the upswing of late. Could it be because of the rumours of a possible bonus at the end of the year?

Zenith Comp
After all the fire and brimstone during the course of its public issue, courtesy a leading financial institution and another voluntary organisation, the promoters of this company and those who invested in it are reportedly poised to have the last laugh. Why? This scrip is expected to open at more than a 100 per cent premium over its IPO price.

Old Bull
Market circles have it that the New Bull and his relatively lower profile style of operations which however reap windfall gains are attaining legendary proportions. What about the still operational Old Bull then, one may well ask? Well, given that it is the New Bull who calls the shots these days, there is little for the Old Bull to do these days besides dreaming of his lost past glory and of course, accumulating shares of an electronics giant.

DSQ Software
The grapevine has it that the management of this company is considering declaring a bonus shortly. Quite possible too, given the sudden upsurge in the fortunes of the company and of course, no prizes for guessing, its share price. In fact, the rumour doing the rounds is that the share price of this company will touch Rs 5000 within two years.Top




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