SPECIAL COVERAGE
CHANDIGARH

LUDHIANA

DELHI


THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

PM’s I-Day vow: more jobs
New Delhi, August 15
Prime Minister Manmohan Singh today said the government would address the issue of additional employment generation by encouraging the growth of small and medium enterprises.

The Prime Minister, Dr Manmohan Singh, waves after addressing the nation on the occasion of the 58th Independence Day celebrations at the Red Fort in New Delhi on Sunday. The Prime Minister, Dr Manmohan Singh, waves after addressing the nation on the occasion of the 58th Independence Day celebrations at the Red Fort in New Delhi on Sunday. — PTI photo

If oil PSUs merge, retail petro prices may fall
New Delhi, August 15
At a time when crude oil prices have crossed $ 45 per barrel in the international market, the Ministry of Petroleum and Natural Gas has proposed to merge public sector oil companies to create two giant players that may reduce the price of petro-products by 7-8 per cent.

Oil price hike deferred
New Delhi, August 15
State-owned oil marketing companies (OMCs) have deferred a decision to hike prices of petrol and diesel today.

We are booming without you, India tells Pak
New Delhi, August 15
The message India conveyed to Pakistan at the just-concluded Commerce Secretary-level talks was that the Indian economy was booming without Islamabad and it was up to Pakistan to board the bus of economic development or miss it at its own peril.

Insurers oppose move of tax on premium
New Delhi, August 15
The insurance industry has urged the government to withdraw the proposal to impose a 10 per cent service tax on life insurance premium.

Tax advice

Transferring individual a/c amount
Q.
I am having both status in income tax of individual and HUF being assessed regularly.


Salman Khan does an impromptu performance at 'Kambhakt Piracy,' an anti-piracy initiative taken by Cinema Peoples Academy.
Salman Khan does an impromptu performance at “Kambhakt Piracy”, an anti-piracy initiative taken by Cinema Peoples Academy. It aims to bring about an awareness of the losses that the film industry incurs due to piracy in Mumbai on Saturday night. —PTI

EARLIER STORIES

 
  • Leave encashment

  • Credit

Market update

Inflation concerns may weaken market
H
igh oil prices and worries over inflation continue to weigh down sentiment at the bourses. This put an end to the six-week gaining streak on the bourses, Sensex shed 94 points to settle at 5,102.92.

  • PSU banks


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PM’s I-Day vow: more jobs
Tribune News Service

New Delhi, August 15
Prime Minister Manmohan Singh today said the government would address the issue of additional employment generation by encouraging the growth of small and medium enterprises.

“The government will address this deficiency in the growth process by encouraging the growth of small and medium enterprises, agro industry and sectors such as tourism, where there is a high job potential,” Dr Manmohan Singh said in his Independence Day speech.

There is also an urgent need to provide employment in rural areas, especially in areas suffering from prolonged drought, he said.

“The food-for-work programme will be an important part of our strategy to deal with this challenge. New investment in the infrastructure sector will also help generate new jobs,” he said.

The Prime Minister said policies of higher economic growth and modernisation will be combined with an emphasis on social justice, communal harmony, rural development, regional balance and concern for the environment.

IT-enabling

Dr Manmohan Singh also said the government would improve broadband access and “enable the required investment in IT infrastructure.”

“It is a matter of satisfaction today that IT is enabling us to improve the standard of living of ordinary people even in remote areas. We will continue to explore ways in which modern technology can improve the lives of ordinary people,” he said.

The Prime Minister said that science and technology had become an important determinant of power and wealth.

“For our country to attain its due place in the 21st century, it is necessary to integrate science and technology into all our development processes. The promotion of scientific temper must truly become a massive national movement,” he said.
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If oil PSUs merge, retail petro prices may fall
Manoj Kumar
Tribune News Service

New Delhi, August 15
At a time when crude oil prices have crossed $ 45 per barrel in the international market, the Ministry of Petroleum and Natural Gas has proposed to merge public sector oil companies to create two giant players that may reduce the price of petro-products by 7-8 per cent.

Union Minister of Petroleum and Natural Gas Minister Mani Shankar Aiyar had held a meeting with the CMDs of ONGC, IOC, HPCL and BPCL, and proposed the merger of HPCL, BPCL and Gail (India) Ltd. with ONGC and Oil India into Indian Oil Corporation (IOC). He has reportedly asked them to prepare detailed notes on the pros and cons of the merger before taking a final decision in this regard.

The issue is likely to be raised by the opposition parties in the Parliament session, starting tomorrow. The sources said in view of the likely increase in the prices of petrol and diesel, the government has moved the idea of the merger.

The Petroleum Ministry has estimated that the merger will result in a saving of over Rs 25,000 crore in the next 3-4 years. Since it will substantially cut down the cost of marketing, transportation and distribution of companies, the retail prices of petrol and diesel may come down by Rs 2-3 per litre, in addition to cutting down the subsidy bill on LPG and kerosene.

Industry experts, however, say that the idea is not new. Since the oil companies are already contemplating to increase the prices of LPG and kerosene by Rs 4 per cylinder and 20 paise per litre, respectively, the government has raised this issue only to divert the attention of the public, claiming that the merger of oil companies would bring down the overlapping costs and retail prices.

They point out that first the government should set up a regulator to watch the costs and prices of retail oil products. Official sources say that executives of small PSUs like HPCL and BPCL have also opposed the government move, pointing out that potential benefits may not translate into reality as the merger would also affect the efficiency of the oil companies.

“The corporate culture of the BPCL and HPCL is quite different from that of the ONGC and IOC. Secondly, it is competition among public sector companies and threat from one another that has forced them to improve their efficiencies,” the executives have reportedly told the minister.

But the ministry has pointed out, “Since the public sector oil companies are competing with one another in the domestic market for selling diesel and petrol and in the international market bidding against each other to grab a share in the oil exploration fields, the merger will bring down costs significantly.”

Regarding competition, it points out that since Reliance and other private players would be major players in the retail market, the public sector companies will not find it easy to compete with them.

The sources said the government has also plans to set apart about Rs 5,000 crore to fund the voluntary retirement scheme for the surplus staff following the merger. Further, the surplus real estate and assets could be sold off to private sector companies, which are planning to enter the retail marketing of petroleum products. It would also generate additional revenue to the government worth hundreds of crores of rupees.
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Oil price hike deferred

New Delhi, August 15
State-owned oil marketing companies (OMCs) have deferred a decision to hike prices of petrol and diesel today.

However, it is unclear when the OMCs will revise the prices for the next fortnight.

Highly placed sources said the oil companies had deferred the decision following the government assurance that it would come out with a fiscal incentives shortly as the 10 per cent price band was breached during the fortnight ending today. While prices of both diesel and petrol moved up further as compared to previous fortnight and even crossed the price band, oil companies approached the government for clearance under the new pricing scheme. — UNI
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We are booming without you, India tells Pak
Rajeev Sharma
Tribune News Service

New Delhi, August 15
The message India conveyed to Pakistan at the just-concluded Commerce Secretary-level talks was that the Indian economy was booming without Islamabad and it was up to Pakistan to board the bus of economic development or miss it at its own peril.

The Indian plain speaking came as a consequence of Pakistan’s reluctance to engage fully with the far-reaching and wide-ranging proposals which India made at these talks.

The Indian Government’s belief is that if Pakistan had responded positively to these proposals, it would have consolidated the mutual economic relationship and helped create a habit of interaction and cooperation.

The following proposals were made by India at August 11-12 Commerce Secretary-level talks in Islamabad to promote the bilateral political and economic cooperation:

Trade promotion
1. India continues to extend the Most Favoured Nation (MFN) status to Pakistan. Pakistan should reciprocate by granting the same to India.

2. The grant of transit facilities to each other’s goods on a reciprocal basis.

Trade routes
3. The two sides could consider opening of the Attari-Wagah land route for trade.

Business interactions
4. The promotion of investment in joint ventures in identified sectors.

5. The participation in trade fairs/exhibitions.

Other trade-related measures
6. Undertake measures to tackle rampant piracy of Indian music and films in Pakistan.

Telecommunications
7. Laying down/extension of optical fibre cable from Attari to Lahore.

8. Facilitate counterpart arrangement between the mobile operators on the two sides.

9. The participation of Indian companies in telecom projects in Pakistan.

Civil aviation
10. Allow multiple airlines for operations of scheduled services on a reciprocal basis.

11. Allowing the designated carriers of Pakistan, seeking to have air connectivity with India, seven flights a week to one international airport and then seven more flights to a second international airport, on a reciprocal basis.

Shipping services
12. Amendment to the 1974 Protocol on Resumption of Shipping Services between India and Pakistan -

  • Deleting Article 3, thereby, allowing third country flag ships/vessels to lift India/Pakistan bound cargo.

  • Deleting Article 5, thereby, allowing flag carriers of both countries to lift cargo for third country from each other’s ports.

Petroleum and natural gas sector
13. Supply of petroleum products, including diesel, from India to Pakistan and the possibility of extending a diesel pipeline to Pakistan.

14. Exchange of experience and exploitation of the commercial opportunities in the CNG sector.

15. Participation of Indian companies in exploration and production activities in Pakistan, both onshore and offshore.

Customs
16. Harmonisation of customs procedures and valuation, and standardisation and quality control measures.

Capital market
17. Cooperation between SEBI and the Securities and Exchange Commission of Pakistan.

Information technology
18. Cooperation in the field of information technology, especially IT-enabled services, e-commerce, e-governance, IT education, manpower training, holding joint seminars/workshops, IT and electronics hardware, etc.

Postal services
19. Introducing SALMAIL between India and Pakistan.

20. Bringing out a joint commemorative stamp.

21. Exchange of philatelic exhibitions.

Banking sector
22. Exploring the possibility of opening branches of the nationalised banks on a reciprocal basis.

Agriculture sector
23. Collaboration in post-harvest technologies, including an exchange of information and experts on the development of processing units/scientific research, production, marketing and exports.

Water resources
24. Exchange of information and experience in the field of planning, construction, operation and maintenance of projects in the water resources sector.
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Insurers oppose move of tax on premium

New Delhi, August 15
The insurance industry has urged the government to withdraw the proposal to impose a 10 per cent service tax on life insurance premium.

Insurers, including Life Insurance Corporation, have given a representation to the regulator IRDA, which has taken up the matter with the Union Finance Ministry.

The proposed service tax of 10 per cent and the education cess of 2 per cent would only increase the premium, as insurers would pass on the additional cost to the consumers, industry sources said. It would also make the calculation of premium more complex as the tax is on the savings portion of the premium and not on the risk component.

Insurers said risk and savings components change every year, depending on the age of the person and the type of policy.

Industry sources said it would be unfair to tax the existing policies, as consumers had bought policies based on the assumption that they would get rebate on their investment rather than being taxed. — PTI
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Tax advice

by S.C. Vasudeva

Transferring individual a/c amount

Q. I am having both status in income tax of individual and HUF being assessed regularly. Can I transfer some amount from my individual a/c to HUF a/c? With this shall I be able to earn interest income in both status.

— A.K. Jain

A. From your question what I understand is that you are asking whether you in your individual capacity can gift an amount to your HUF a/c. If my understanding is not correct, please specify what exactly would you want to know. The answer to your question is being given on the aforesaid presumption.

You can transfer an amount from your individual account to the HUF account. However, as per the provisions of Section 64(2) of the Act, the income derived from the amount that you have transferred will be taxed in your individual hands.

Leave encashment

Q. 1. Is the leave encashment paid by the employer after death of a serving Army officer counted under taxable income of the officer/his widow, or is it non taxable?

2. Is the housing loan taken by the same officer and repaid within the same financial year even after the death of an officer (from the resources created by the officer who was the only earning member of the family) qualify for seeking rebates for negative income (interest component) and for the refund of HBA (under Section 88) in the tax return of late officer/his wife?

— Manju Jain

A1. Vide circular letter No. F.35/1/65-IT(B) dated November 5, 1965 issued by the CBDT, salary paid to the legal heir of the deceased employee in respect of privilege leave standing to the credit of the employee at the time of his death is not taxable as salary. Further, vide circular No. 309 dated July 3, 1981, the board has clarified that sum equivalent of leave received by the family of a government servant who dies in harness is not taxable in the hands of the recipient. In view of the above circulars, the amount of leave salary received by you from your husband’s employer, will not be taxable.

2. In case of death of an assessee, the legal heir of the deceased steps into the shoes of the assessee and is liable to pay taxes in similar manner as would have been paid by the assessee himself, if he had not died. Accordingly, you can claim the interest paid on housing loan as deduction and the rebate U/S 88 in case of repayment of housing loan in the return of your late husband, which you are liable to file as a legal representative.

Credit

Q. Is credit availed under Section 115JAA is eligible for interest under Section 244A of the Act?

— Santosh Kumar

A. As per the Sub-Section (2) of Section 115JAA of the Act, no interest is payable under Section 244A on the tax credit allowed under Sub-Section (1) of Section 115JAA of Act.
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Market update

by Lalit Batra

Inflation concerns may weaken market

High oil prices and worries over inflation continue to weigh down sentiment at the bourses. This put an end to the six-week gaining streak on the bourses, Sensex shed 94 points to settle at 5,102.92.

Apprehensions with respect to high inflation and its impact on interest rates have forced investors to take a cautious approach towards equities. Though the hike in interest rates by the government should not derail growth prospects, it certainly has the potential to slow down the growth rate, as the corporate profitability would be affected.

Oil and steel stocks lost ground last week due to high international crude prices and concerns that the government may reduce customs duty on steel.

The inflationary situation for the economy warrants some concern in the near-term because of the fact that inflation has already touched 7.6 per cent and is yet to take into account the recent hike in steel and oil prices. Investors can still buy the equities on declines with a strict long-term perspective, though the market in the short run looks weak and may drift lower in the coming week.

PSU banks

Public sector banks have been on a roll, boosting their bottomline over the past three years through treasury profits. Now all that is set to change.

With inflation spiralling to 7.6 per cent, the yield on sovereign will increase, thereby turning the treasury profits of the banks into treasury losses. According to banking sources, except a few like HDFC bank and IndusInd bank, most others continue to hold bulk of their gilt portfolio with tenor of over five years.

Given the fact that most public sector banks had in past relied on treasury profits to boost bottomlines, the banks specially the public sector ones would report flat to the negative growth in their profits in the current fiscal.

Due to this, the investors can book profit on their PSU bank holding bought over the past couple of years.
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BRIEFLY

RBI to tackle inflation
Mumbai, August 15
The Reserve Bank of India indicated here yesterday that it would be taking immediate steps to tackle inflation which is hovering at 7.61 per cent. Addressing newspersons here, the RBI Deputy Governor Rakesh Mohan said the apex bank will take ‘measured’ steps to contain the rise in price level and a spurt in the yields of government papers will not impact the Centre’s borrowing. “We hope to continue to keep the extent of inflation lower than before. Price stability is also a key concern for a central bank as we have been maintaining in all the annual policy statements,” Mr Mohan said. He added that the average inflation for about 30 years till 1997 was around seven per cent before declining to between four and five per cent since then. — TNS

EPF notice may be delayed
New Delhi, August 15
Employees Provident Fund (EPF) interest rate notification for financial years 2002-03 and 2003-04 is likely to be delayed as the Finance Ministry is yet to receive any formal communication in this regard from the Labour Ministry. The Central Government has so far not notified the EPF rate for two years. The notification will be issued only after the ratification of 9.5 per cent interest rate for 2002-03 and 2003-04 by the Finance Ministry. — UNI

Honda recalls 2,200 Accords
New Delhi, August 15
Auto major Honda Siel has said it is recalling around 2,200 Accord cars sold in India to replace faulty parts. This is the second recall that Honda is undertaking in the past three months. The company has decided to implement some modifications in some Accord cars sold in the country, in line with its international campaign. The modifications will be carried out free of cost. — UNI

NTPC
New Delhi, August 15
The National Thermal Power Corporation (NTPC) has announced to establish a technology development platform to develop new power generation technologies, including micro technology solutions targeted at improved and cost effective operations at power stations. The forum, Energy Technologies, will network with leading agencies in the field worldwide. — TNS

ITC Hotels
Mumbai, August 15
The ITC Ltd is planning to merge some of its subsidiaries including the ITC Hotels Ltd with the company as part of its plans to consolidate business operations. The board would meet on August 25 to consider the proposal to amalgamate Ansal Hotels and the ITC Hotels Ltd and its wholly-owned subsidiary Bay Islands Hotels Ltd, the Kolkata-based company informed the National Stock Exchange (NSE). — PTI 
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