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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

Left to oppose Bill on FDI hike in insurance
New Delhi, August 21
As a part of the hard-bargaining tactics before the UPA-Left Coordination Committee meeting slated later this week, the CPM today flexed its muscle on the FDI cap hike issue. The party stated that it, along with other Left parties, would oppose any move by the government to increase the FDI cap in the insurance sector and would also oppose the move in this direction in Parliament.

Sebi to submit May 17 crash report soon
Kolkata, August 21
The Securities & Exchange Board of India would shortly submit to the government its report on the May 17 stock market crash that wiped off Rs 1,24,000 crore of market capitalisation.

Jeff Dutton adjusts the head of an original 1950’s Michelin Man that is expected to fetch more than Aus $ 5,000 in Melbourne on Saturday Jeff Dutton adjusts the head of an original 1950’s Michelin Man that is expected to fetch more than Aus $ 5,000 in Melbourne on Saturday. Highlight items range from model boats to historic enamel signs collected over family’s 93-year involvement in motoring business.
— AFP

Nissan X-Trail enters India
New Delhi, August 21
Japanese auto major Nissan Motor today launched its maiden offering — X-Trail — in India and said it will later diversify into the passenger car and the light commercial vehicle segments.

Zero customs duty on LPG, kerosene sought
New Delhi, August 21
The Standing Committee on Petroleum and Natural Gas has asked the government to bring down the customs duties on LPG and kerosene to nil to control domestic selling prices of both commodities as well as the peg fixed excise duties on all petroleum products.

Tata centenary celebrations from August 24
New Delhi, August 21
Prime Minister Manmohan Singh will inaugurate the JRD Tata centenary celebrations here on August 24, organised under the aegis of Associated Chambers of Commerce and Industry of India (Assocham).


A file photograph of Bollywood star Salman Khan
A file photograph of Bollywood star Salman Khan, who will lend his flair and flamboyance to the fashion footwear, Red Tape, as its new brand ambassador. Salman launched the latest range of trendy footwear for men at a function in Mumbai on Friday night.

EARLIER STORIES

 

Investor guidance

Declaring assets abroad in Indian IT return helps
Q: I had filed the first year’s return as status ‘resident-RNOR’ though I had not mentioned anything about the overseas asset or details of date of leaving the country or return (except advising Indian banks and DP about my return date to convert NRI status to resident, in the deposits/RFC a/c, as of that date).

  • Leave salary

  • Gilt scheme

Aviation Notes


Staff strength to decide no-frills airlines’ success
P
rofitability
is the key factor that determines the success of commercial venture. The airline trade is no different. The Air Deccan airline has been commercially successful because overhead expenses on the cabin cockpit food and ground crew have been kept at the minimum.

Le Passage

A US Airways Express regional jet departs from New Jersey on Friday
A US Airways Express regional jet departs from New Jersey on Friday. The US Airways is struggling to avoid a second bankruptcy in two years by looking to cut $1.5 billion in costs by the end of the summer. — Reuters photo

Graphic: Weekly stock movement

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Left to oppose Bill on FDI hike in insurance
Tribune News Service

New Delhi, August 21
As a part of the hard-bargaining tactics before the UPA-Left Coordination Committee meeting slated later this week, the CPM today flexed its muscle on the FDI cap hike issue. The party stated that it, along with other Left parties, would oppose any move by the government to increase the FDI cap in the insurance sector and would also oppose the move in this direction in Parliament.

However, the CPM leader did not indicate whether the party would move a cut motion in Parliament. If such a motion is mooted, mandatory voting has to take place and the government could be voted out if it fails to secure majority.

Although the Left has been critical of the hike in FDI cap in telecom and civil aviation sector, yet it cannot do much as the government can hike the FDI cap by Cabinet approval.

However, for the insurance sector, the government has to bring in a bill to amend the Insurance and Regulatory Development Act (IRDA) to hike the cap from 26 to 49 per cent.

CPM politburo member Sitaram Yechuri told a meeting of the National Federation of Insurance Field Workers of India, the party would oppose the government’s move in this sector.

He said the Left would also oppose the imposition of service tax on the Insurance Risk Premium as it amounts to a tax on social security.

Mr Yechuri spoke about the negative impact of privatisation of the insurance sector and the manner in which it was opposed by the Left in Parliament and outside.

“By manipulating various political combinations, the Bill on opening up of the private sector was passed. However, the privatisation of the LIC was prevented,” Mr Yechuri said.

“Today the attempt of the government to increase the FDI cap and imposition of service tax was another step in the direction of weakening the public sector and allowing foreign companies to invade the insurance market and reap the profits,” Mr Yechuri said.

He said the purpose of allowing foreign companies was intended to bring in foreign capital, upgrade technology and improve insurance products. The three- and-a-half- years of performance of the private insurers establishes that these objectives had not been met.

These foreign companies are themselves in financial crisis in their own countries and under scrutiny. A majority of these companies are also having solvency problems.

In contrast, Mr Yechuri said the LIC’s performance over the years has been excellent., most important being the claim settlement performance to the extent of 99.8 per cent. “The LIC has contributed in a big way to the development of infrastructure, rural development and industrial growth. Besides it has cross-subsidised insurance to the rural sector,” he said.

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Sebi to submit May 17 crash report soon
Tribune News Service and PTI

Kolkata, August 21
The Securities & Exchange Board of India (Sebi) would shortly submit to the government its report on the May 17 stock market crash that wiped off Rs 1,24,000 crore of market capitalisation.

Chairman of Sebi G N Bajpai told PTI today that “the report would be submitted to the government soon.” He did not give a time-frame.

Asked if SEBI would fix responsibility on market intermediaries, which had caused the crash, Mr Bajpai said: “Of course we would do that”.

Earlier, speaking at ‘CNBC TV-18 Investor Camp’ here, Mr Bajpai said barring the stock market crash on May 17, Indian indices had shown much lesser volatility in recent times than they did in previous years.

Mr Bajpai said statistical research had shown that the correlation between Nifty and S&P was as low as 0.29, which showed that foreign investors were placing greater reliance on Indian equity portfolio.

Mr Bajpai said foreign investors like CalPERs of the US had also shown keen interest in the Indian securities market, which had become a more attractive place for overseas funds to invest in than the Chinese market.

Sebi is also trying to eliminate the differences arising out of overlap in the regulatory framework with the Ministry of Company Affairs (MCA).

“There are no two views about the regulatory overlap, which can at best be removed by Sebi becoming the primary regulator for companies listed and to be listed on stock exchanges under the Indian Companies and Securities Laws,” head of listing of Sebi Neelam Bharadwaj said while speaking at a seminar organised by the PHD Chamber of Commerce and Industry (PHDCCI) in New Delhi yesterday.

The Sebi would have the jurisdiction to regulate the activities of shareholders that usually affect the rights of the shareholders, including those pertaining to financial reporting, continuous disclosures, corporate governance, and other associated transactions.

On the other hand, MCA would have jurisdiction over matters such as fundamental company affairs like company formation, external administration etc.

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Nissan X-Trail enters India

New Delhi, August 21
Japanese auto major Nissan Motor today launched its maiden offering — X-Trail — in India and said it will later diversify into the passenger car and the light commercial vehicle (LCV) segments.

The rugged sports utility vehicle X-Trail comes in two versions — the Comfort costing Rs 19,78,211 (ex-showroom) and Elegance costing Rs 22,64,660. It has a 2.2-litre turbo diesel engine with a six-speed manual transmission and a four-wheel drive that can take off in any terrain.

The Nissan X-Trail will be imported from Japan into India as a Completely Built Unit (CBU) form and sold through dealers in major cities.

“We are entering India with our best-selling sports utility vehicle. We have plans to diversify into the passenger car and light commercial vehicle segments,” Nissan Motor Senior Vice-President Toshiyuki Shiga told reporters here.

Besides X-Trail, the Japanese auto major has models such as Cube, Cube Cubic and March in the B-segment, which are possible entrants to the Indian market.

Mr Shiga said the company has plans to set up an assembly plant in India. However, he did not rule out the possibility of building the units in India. “All this depends on the customer response and sales of the X-Trail,” he added. — UNI

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Zero customs duty on LPG, kerosene sought
Tribune News Service

New Delhi, August 21
The Standing Committee on Petroleum and Natural Gas has asked the government to bring down the customs duties on LPG and kerosene to nil to control domestic selling prices of both commodities as well as the peg fixed excise duties on all petroleum products.

The government had two days ago reduced customs duties on both products by 5 per cent. Now LPG and kerosene attract duty at the rate of 5 per cent.

Presenting its report in the Lok Sabha today, Standing Committee on Petroleum and Natural Gas Chairman N. Janardhana Reddy noted that reduction in custom duties on LPG and kerosene would not involve any financial burden on oil companies and the government would not lose much revenue because no import of kerosene was taking place and only 15 per cent of LPG requirement was imported.

The committees suggested that the loss in revenue on account of LPG could be made by the cess collected on crude oil. The committee also felt that it was an anomaly to charge excise duty on subsidised products.

The standing committee wanted continuation of subsidy on domestic LPG and PDS kerosene. It noted that the Ministry of Petroleum and Natural Gas urged the Finance Minister to increase the period of subsidy from three to five years.

The committee noted with concern that consumers were hit hard because of higher import duty, excise duty and sales tax as the fuel prices increased globally.

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Tata centenary celebrations from August 24
Tribune News Service

New Delhi, August 21
Prime Minister Manmohan Singh will inaugurate the JRD Tata centenary celebrations here on August 24, organised under the aegis of Associated Chambers of Commerce and Industry of India (Assocham).

Assocham president M.K. Sanghi said that more than 600 corporate houses, business leaders and policy makers would participate in the event. Prominent among those who will address the Indian industry during the event include Planning Commission Deputy Chairman Dr Montek Singh Ahluwalia and ONGC Chairman and Managing Director Subir Raha .

In a statement, he recalled that the late Tata was closely associated with the chamber and contributed a great deal to its growth. 

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Investor guidance

by A.N. Shanbhag

Declaring assets abroad in Indian IT return helps

Q: I had filed the first year’s return as status ‘resident-RNOR’ though I had not mentioned anything about the overseas asset or details of date of leaving the country or return (except advising Indian banks and DP about my return date to convert NRI status to resident, in the deposits/RFC a/c, as of that date).

If you confirm that it is of use, I will put the note detailing the foreign asset value as of the date of my second year completion after return and state that it is held abroad as of that date, when I file the second year's IT return.

After this step, I will arrange for its remittance through banking channel for my Indian use/investment.

I hope that would avoid any potential issues about source of ‘income’/fund, in future and a possible threat of losing RNOR privilege of tax exemption for the first two years’ earnings.

I would appreciate your additional clarification if the above step will redeem the situation for the future.

— E Ahmed

A: Yes, you are right. Though it is not necessary to declare your foreign-held assets in your Indian tax returns, it is advisable to do so. In future, if you convert your foreign assets into Indian ones, the source of additional income would come into question. At that juncture, having already declared the existence of forex assets in previous returns would be of immense importance.

Leave salary

Q: Recently I resigned from a company after serving for over 10 years. However, it does not mean that I have retired as I would be seeking a job elsewhere. Consequent to my resignation, I was duly given my dues, which included a substantial amount of leave salary that I had to my credit. Now I was under the impression that the amount of leave salary is exempt u/s 10 (10A) up to a specified limit. However, the accounts department has cut TDS on the entire amount of the leave salary without taking into account the exemption. Upon inquiry, I was told that the exemption u/s 10(10A) was available only in the case of retirement and not upon resignation. I seek your opinion and advise in this matter.

— C M Balsara, Mumbai

A: Leave salary is exempt u/s 10 (10AA) and not u/s 10 (10A) as mentioned in the query. However, this might have been an oversight. Such leave salary is exempt upon retirement on superannuation or otherwise. The phrase ‘or otherwise’ has caused a lot of confusion and consequent litigation. I hope the authorities define the meaning of or otherwise unambiguously, or otherwise ITOs will continue to interpret the same differently.

In respect of leave encashment, CIT v Malhotra 142CTR325 (Bom) has observed: "On acceptance of resignation the employee stands retired from service. The word ‘retirement’ has not been used in the restricted sense to mean ‘retirement on superannuation’. On the other hand it is clear that it has been used in the widest possible terms to mean and include all cases of retirement, whether on superannuation or otherwise. What is relevant is ‘retirement’. How it took place is immaterial for the purpose of the clause. It is therefore clear that on retirement, even on resignation, the employee will be entitled to the benefit of the exemption."

Gilt scheme

Q: As regards Gilt scheme, no doubt they are safer than income funds, but do Gilt schemes give better returns than income schemes? The better opinion of investment advisors is that income schemes give higher returns. Please comment.

Further, many MFs have come up with monthly income plans that invest 85 per cent in debts and 15 per cent in equities. Which allocation has the potential to give higher returns than income schemes. May I have your valuable opinion on these MIPs?

— N.S. Money Mahesh

A: The Gilt schemes are theoretically safer than income schemes but I hope that you realise that in practice the difference is miniscule. Since income schemes have a broader playing field, it has the propensity of earning higher rewards. However, at this particular juncture, both these are volatile and it is advisable to wait and watch.

MIPs are essentially income schemes with around 20-30 per cent exposure to equities. Yes, their performance in the rising equity market has proved to be better than income (leave alone Gilts), thanks to the market being bullish. However, note that when the market falls (as it is now) the NAV will also plummet. So invest knowing the downside.

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Aviation Notes

by K.R. Wadhwaney

Staff strength to decide no-frills airlines’ success

Profitability is the key factor that determines the success of commercial venture. The airline trade is no different.

The Air Deccan airline has been commercially successful because overhead expenses on the cabin cockpit food and ground crew have been kept at the minimum. The airline does not depend upon travel agents because its flights are overbooked for months in advance.

Alliance Air’s conversion into no-frill airlines may not be a successful venture because its overhead expenses cannot be drastically cut at this point of time. Alliance Air is a full-fledged subsidiary of the Indian Airlines and its staff will have to be paid even if their services are not utilised.

Aviation experts feel that the Civil Aviation Ministry should have a separate, tiny unit devoted to no-frill operations instead of converting Alliance Air into no-frill airline.

Jet Airways has no plans to start the low-cost or no-frills operations because it cannot reduce the staff already on the rolls of the airline. Any hasty action may prove to be counter-productive, according to airline experts.

Le Passage

The two-year old Le Passage to India company has evolved several innovative measures to help provide refreshing meaning to tourism, which according to Tourism Ministry officials, has started stabilising after several hiccups during preceding two years or so.

We achieved a turnover of Rs 45 crore in 2003—04 in foreign exchange,” company’s chairman Ghulam Naqshband said, adding” “Our target for the year 2004-05 is Rs 70 crore.”

The company, specialising in in-bound travel, offers package tours for groups and individual travellers.

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WEEKLY STOCK MOVEMENT.

  bb
BRIEFLY

Excise raids
Sonepat, August 21
The Central Excise Department has launched a special campaign against the industrial units allegedly indulging in evading the excise duty in the Sonepat circle comprising the districts of Sonepat, Jind and Jhajjar. The officials of the department carried out raids on some units and detected cases of excise duty evasion. These units are located in the Sonepat and Bahadurgarh areas. — OC

Forex reserves
Mumbai, August 21
India's foreign exchange reserves fell by $ 14 million during the week ended August 13 after witnessing a rise of $ 1.01 billion a week earlier. The dip in the foreign exchange reserves was due to revaluation vis-a-vis the dollar and intervention in the forex market. — PTI

Rakhi Express
Mumbai, August 21
Blue Dart, a courier company, has launched a special service for Raksha Bandhan to ensure that rakhees are delivered to their destinations on time in specially designed envelopes. The service, Rakhee Express, is available at Blue Dart counters in Mumbai, Delhi, Bangalore, Kolkata and Pune for any destination in the country, the company said here. — UNI

SembCorp
Singapore, August 21
Singapore-based SembCorp Environmental Management has acquired a 51 per cent stake in the Indian company Medicare Incin for a consideration of Singapore $ 9 million, making a foray into the massive $ 5 billion Indian waste-management market. — UNI

Steel duty
Chandigarh, August 21
PHD Chamber of Commerce and Industry today hailed the cut in import duties on a range of non-alloy steel and on ship-breaking by 5 and 10 per cent respectively. It also lauded the Union government's role for abolishing 5 per cent customs duty on melting scrap of iron and steel, saying it will improve the market scenario in the steel sector. — TNS

Gold prices
Mumbai, August 21
Gold prices shot up by Rs 70 per 10 grams in the bullion market here today on hectic buying by stockists in view of the sharp rise in global markets. Standard gold rose to Rs 6,280 from the overnight closing levels of Rs 6,210 per 10 grams. Pure gold also hardened by Rs 75 per 10 grams to Rs 6,315 from Rs 6,240 earlier. — PTI

Allahabad Bank
Nagpur, August 21
Allahabad Bank has brought down its non-performing assets (NPA) to Rs 850 cr and has earned a net profit of Rs 182 cr in the first quarter, its Chairman and Managing Director O.N. Singh said today. — PTI
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