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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

FM asks ADB to promote private sector investment
Hyderabad, May 6
Finance Minister P. Chidambaram today asked multilateral development finance institution Asian Development Bank to readjust its focus from public sector lending to facilitating private sector investment in member countries and reduce its loan charges.

Private equity in India, China
India and China offer a huge market for private equity investment, the speakers at the ongoing annual general meeting of Asian Development Bank (ADB) said here today.

LNG supply worries industry
New Delhi, May 6
With the increasing prospects of failing of India’s $22-billion deal with Iran for import of liquefied natural gas (LNG), country may end suffering a loss of over $10 billion as the government is finding it difficult to arrange sufficient LNG supply from the international market.

Industry will fight quota, says Mittal
New Delhi, May 6
With Parliament session beginning next week, the reservation issue is hotting up with industry coming out in support of students in opposing quotas in premier educational institutions.

Da Milano marks presence in Punjab
Ludhiana, May 6
Da Milano, a premium Italian leather brand, is expecting turnover to rise to Rs 100 crore by the end of this financial year from the last year’s turnover of Rs 66 crore due to expansion plans. The company, which opened its first outlet in Punjab here today, would open showrooms in Amritsar and Chandigarh shortly.

HSIDC gets loan proposals worth Rs 116 crore
Chandigarh, May 6
The Haryana State Industrial Development Corporation (HSIDC) has received concrete term loan proposals worth Rs 116.38 crore in business contract programme at New Delhi recently.







A model displays a creation of B.D. Somani Institute of Art & Fashion Technology designers at a fashion show in Mumbai on Friday night.
A model displays a creation of B.D. Somani Institute of Art & Fashion Technology designers at a fashion show in Mumbai on Friday night. — PTI

EARLIER STORIES

 

Gujarat HC stays SEBI order against broker
Mumbai, May 6
The Gujarat High Court has stayed an interim SEBI order restraining broker Saumil Bhavnagari from dealing in the market in the wake of IPO demat scam, but allowed the market regulator to take appropriate action against him after giving him a hearing.

In video: Bull-run to continue unabated. (28k, 56k)

Godawari Power stake
Mumbai, May 6
HDFC Mutual Fund has acquired a total of 15 lakh equity shares of Godawari Power and Ispat Ltd (GPIL), which amounts to 6.04 percent of equity paid-up share capital of the company.

Aviation Notes
Overstaffing may bring down merged AI-Indian
The Prime Minister Manmohan Singh has, ‘in principle’ agreed to Aviation Minister Praful Patel’s proposal of merger of two national carriers, Indian and Air-India.

Investor guidance
Standard deduction on family pension has a ceiling of Rs 15,000
Q: I am an assessee as my income is above Rs 1,35,000 p.a. I am also getting family pension. I understand that Finance Minister has not withdrawn the deduction of 33.33 pc with a ceiling of Rs. 15,000 available to Family Pension either in the Budget of 2005-06 or of 2006-07. Please confirm. Is this deduction in addition to Rs. 35,000 available to females?

  • Mutual Funds
  • Service tax
  • Gift of shares
  • Securities Transaction Tax

 



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FM asks ADB to promote private sector investment

Hyderabad, May 6
Finance Minister P. Chidambaram today asked multilateral development finance institution Asian Development Bank to readjust its focus from public sector lending to facilitating private sector investment in member countries and reduce its loan charges.

“We believe that ADB needs to readjust its focus from public sector lending to a more fleet-footed financial intermediary and knowledge bank that helps developing member countries attract more private sector investment,” he said at a session on ADB Board of Governors here.

Mr Chidambaram, who chairs the Board, said higher international energy prices and global imbalances pose a downward risks to growth in Asia.

The multiplier effect of ADB’s assistance through a public-private partnership model would be much higher than the current approach of reliance on mostly public infrastructure projects, he said.

Despite surging oil prices and the possibility of sharp adjustments in exchange and interest rates induced by widening international payment imbalances, the Finance Minister expressed optimism on the outlook for growth in Asia and a healthy demand for Asian output in the next few years.

“Financial parameters of the bank have been robust for four consecutive years now. Loan charges should now be resorted to the lower levels prevailing before 2000,” he said.

The commitment fee should not be treated as a source of income and it should be possible either to eliminate or substantially reduce the commitment fee through improvements in operations and internal efficiency of the bank,” he said.

He said the government is committed to deepening reforms to put the country on a high growth path of 8 to 10 per cent, which is needed to eliminate poverty.

“We are aware of the challenges before us. It will be our constant endeavour to address these challenges by deepening the reforms and put the country on a trend growth rate of 8-10 per cent for eliminating poverty,” Mr Chidambaram told a business session at Asian Development Bank (ADB) annual meeting here.

Stating that the investment rate in the country was around 30 per cent of the GDP with a major chunk of it being funded by domestic savings, Mr Chidambaram sought more foreign investments to take the country on a higher growth trajectory.

Lauding the ADB for its crucial role in economic development of the Asia-Pacific region, he sought the bank’s support in attracting private investments in the developing member countries. — PTI

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Private equity in India, China

India and China offer a huge market for private equity investment, the speakers at the ongoing annual general meeting of Asian Development Bank (ADB) said here today.

Addressing roundtable on China and India: State of Affairs and Implications for Private Equity Investors, Ms Renuka Ramnath, Managing Director and CEO, ICICI Venture Funds Management Co. Ltd, said that private equity investments in India could increase to $25 billion within the next five years from the present $2 billion.

The private equity investment, which was $7 billion last year, could go up to $70 billion over the next 10 years. This figure can even go up to $35 billion if the process of privatisation is speeded up further Ms Ramnath said.

Mr Fang Wang, Managing Director, Asset Management, CITIC Capital, said the growth in China was being driven by new-generation of government officials, entrepreneurs and investor-friendly local governments. — TNS

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LNG supply worries industry
Manoj Kumar
Tribune News Service

New Delhi, May 6
With the increasing prospects of failing of India’s $22-billion deal with Iran for import of liquefied natural gas (LNG), country may end suffering a loss of over $10 billion as the government is finding it difficult to arrange sufficient LNG supply from the international market.

The end users like power sector, fertiliser and steel plants would suffer additional losses, as the industry is finding it hard to get LNG supply even at $8- 9 per Million British Thermal Unit (Mbtu) in the global market as against about $ 4-5 per Mbtu under the 25 year proposed deal with the Iran.

The sources said the northern Power Grid, which is facing a power deficit of around 4,000 MW today could have got some relief had Indian government succeeded in signing the deal at the previously agreed price.

It is widely believed among the industrial circles that the Indian government’s decision to vote against Iran at Vienna has resulted in heavy losses to the Indian economy due to rise in energy prices.

Union Steel Minister Ram Vilas Paswan, who was pressing upon the fertiliser plants in the Panipat, including at Nangal in Punjab to shift to gas fuel, is finding it difficult in view of severe shortage of gas.

“Although it is certain whether in case of UN sanctions on Iran, the LNG deal between Iran and India, besides Iran-Pakistan- India gas pipeline would have survived, but it would not be surprising if the country ends up suffering financial losses worth $10 to $ 20 billion by losing this contract,” said a senior official in the Ministry.

India is finding it difficult even to sign contracts for gas to run the Dabhol project. Consequently, government is forced to run it on the naptha fuel, leading to about Rs 7 per unit generation cost of power.

The Punjab government, which has plans to set up 1,000 gas-based power plant near Ludhiana, will not find it easy to push the project in view of severe shortage of gas supply in the country.

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Industry will fight quota, says Mittal
Tribune News Service

New Delhi, May 6
With Parliament session beginning next week, the reservation issue is hotting up with industry coming out in support of students in opposing quotas in premier educational institutions.

The apex industry group, CII, has come out with a candid stand that it would fight against reservations, but sought two-year time period from the government to act before bringing in any legislation on reservations.

“We will fight reservations. Anything that is going to hurt industry’s competitiveness will be fought,” said vice-president of the CII and chairman of Bharti Group, Mr Sunil Mittal.

Mr Mittal said he did not think the government would enforce reservation through a legislation.

"I think the government will fall short of going through with legislation. I believe the government has the good of the nation at heart and there is not much good that’s going to come out of legislation," he said in an interview to CNN-IBN weekly programme.

He said when Prime Minister Manmohan Singh gave a call to the industry to give openings to the weaker sections, he did not mean only the Scheduled Castes and Scheduled Tribes. "For our point of view, weaker sections are all those people who are economically backward. I would take them as all those people who are under privileged today. Everybody," he said.

Mr Mittal said if India has to achieve progress, a large part of the weaker sections would have to be taken on board. "I believe this is something industry must have right in front of their agenda", he said.

He opposed any move to take a roll call to find out the social or economic status of the people employed by the industry. But he rejected the accusations by some segments that the industry actively discriminated while hiring employees.

The CII, which has opposed tooth and nail the legislation on the reservation policy, has set up a task force under the chairmanship of Mr J.J. Irani to come out with specific affirmative actions that the industry can initiate.

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Da Milano marks presence in Punjab
Tribune News Service

Ludhiana, May 6
Da Milano, a premium Italian leather brand, is expecting turnover to rise to Rs 100 crore by the end of this financial year from the last year’s turnover of Rs 66 crore due to expansion plans. The company, which opened its first outlet in Punjab here today, would open showrooms in Amritsar and Chandigarh shortly.

“Expansion is on the cards and the current focus is Punjab in the North and a few cities in South as well, following which we expect a major increase in our turnover,” Mr Sahil Malik, Managing Director of the company, said.

The brand has an existence of 31 years in India and exports its products throughout the world. The company imports leather and accessories from Italy to manufacture its products at Baddi in Himachal Pradesh.

“Since the raw material comes from Italy, Indian consumer gets the best of the products including handbags, corporate accessories, women footwear, travel accessories and leather garments.”

With Indian customer becoming increasingly brand conscious, multinational brands in fashion segment are likely to find a big market in India, he added. On pricing of brands, he said it was competitive compared to international prices.

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HSIDC gets loan proposals worth Rs 116 crore

Chandigarh, May 6
The Haryana State Industrial Development Corporation (HSIDC) has received concrete term loan proposals worth Rs 116.38 crore in business contract programme at New Delhi recently.

Mr Rajiv Arora, Managing Director, HSIDC, said here today that the HSIDC would organise business meet in all important towns of Haryana on regular basis in the near future.

These projects, when implemented, were likely to catalyse an investment of over Rs 250 crore besides generating a number of employment opportunities and revenue for the state.

The major projects accepted in this meet included textiles, automobile components, sports and leather goods, readymade garments, packaging and electricals.

He said this was the highest-ever term loan business generated by the corporation in a single business meet. — PTI

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Gujarat HC stays SEBI order against broker

Mumbai, May 6
The Gujarat High Court has stayed an interim SEBI order restraining broker Saumil Bhavnagari from dealing in the market in the wake of IPO demat scam, but allowed the market regulator to take appropriate action against him after giving him a hearing.

Hearing a petition filed by the broker, Mr Justice K.S. Jhaveri, on May 4, stayed the SEBI order but allowed it to take appropriate action after hearing the petitioner.

SEBI sources said here that they would abide by the high court order. The petitioner contended that SEBI had passed the order without giving him a proper hearing and also without giving him an opportunity of being represented in the matter. — PTI

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Godawari Power stake

Mumbai, May 6
HDFC Mutual Fund has acquired a total of 15 lakh equity shares of Godawari Power and Ispat Ltd (GPIL), which amounts to 6.04 percent of equity paid-up share capital of the company.

As per the details of this acquisition, the company said 10 lakh equity shares have been bought under the HDFC Core and Satellite Fund Scheme, 2.5 lakh equity shares under HDFC Monthly Income Fund — Short Term Plan and 2.5 lakh equity shares under HDFC Children's Gift Fund Investment Plan. — UNI

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Aviation Notes
Overstaffing may bring down merged AI-Indian
by K.R. Wadhwaney

The Prime Minister Manmohan Singh has, ‘in principle’ agreed to Aviation Minister Praful Patel’s proposal of merger of two national carriers, Indian and Air-India.

The veteran aviation analysts and senior pilots, connected with two airlines for 3-4 decades, are of firm view that the merger, if brought about, will not be a success.

The analysts are of the belief that ‘one company, one entity and common fleet’ will remain a mere outcry. They predict that the ‘merged entity’ will collapse under the weight of army of staff (35,000) of varying experience, length of service and sense of belonging and loyalty.

Analysts feel unifying the staff, achieving efficiency in operations, bringing about huge cuts in costs and maintaining image and reputation in razor-sharp flying market will not be possible because the powers that be have subtle agenda of creating two divisions within one airline — international and national. If this is done, where is the merger.

Who will be the Chairman and Managing Director of the airline? If V. Thulasidas continues at the helm (since he has been empanelled secretary, the CMD’s post has been upgraded), what will be the status of Indian CMD Vishwapati Trivedi? He joined the airline only recently. Will his deputation be cut short?

In both airlines, there are Deputy Managing Directors and Directors of different portfolios, like commercial, personnel, finance, public relations and engineering. Then there are pampered areas of cockpit crews and cabin crews. What yardstick will be used in organising their fitment. Postings and transfers abroad will be other areas that will cause problems to the powers that-be.

What will be the name of the airline? Will it be Air India? If it is so, it will mean Indian (Airlines) is wiped away. Some suggest that the new name should be Indian Air accommodating both carriers.

According to dispassionate analysts, two airlines should be left alone to grow as their problems will be over with the induction of new aircraft. They will be firmly on take-off stage as modernisation of airports will further ease their woes. With induction of new fleet, synergy and rationalisation of routes can be achieved if the ministry issues a directive forbidding ‘over-lapping of flights’.

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Investor guidance
Standard deduction on family pension has a ceiling of Rs 15,000
by A.N. Shanbhag

Q: I am an assessee as my income is above Rs 1,35,000 p.a. I am also getting family pension. I understand that Finance Minister has not withdrawn the deduction of 33.33pc with a ceiling of Rs. 15,000 available to Family Pension either in the Budget of 2005-06 or of 2006-07. Please confirm. Is this deduction in addition to Rs. 35,000 available to females?

— Anita

A: Yes, you are right. Standard deduction for salaried employees was removed by Budget 2005, however, the standard deduction on family pension has not been removed. It is still maintained at 33.33 pc with a ceiling of Rs 15,000. This is in addition to the tax threshold of Rs 1,35,000 for female assessees.

Mutual Funds

Q: I have holdings in funds in mutual fund.

In the event of switching in to another fund how the date of investment will be reckoned in the switched-in fund for the purpose of calculating capital gains in the event of final sale out afterwards. Will the investment date in the switching-in fund be the date of switching in or it will be considered as the date of investment of the switched out fund.

— Rajiv Seth

A: The switch attracts provisions of capital gains. This means that the switch is a new transaction in itself. For the first leg of the transaction, that is at the time of switch, the switch price would be the selling price. During the second leg, at the time of sale, the switch price would be the cost price.

Service tax

Q: I have done my MBA from one unaided autonomous institute, and am yet to give my final semester exam. We have paid Rs 1,20,000 annual fees. Now, college is forcing us to pay, 10.2 p.c. on Rs. 1,20,000 . We are really confused. Please guide us whose responsibility is it to pay service tax? Is college stand justifiable?

— Akshay

A: Yes, the college is justified in doing so since the related service tax provision was not in place at the time of your admission. Your complaint should be against the government for not providing for cases like yours while bringing a new service in their net. You will do well by going to a consumer grievance redressal forum.

Gift of shares

Q: In 2003, I had gifted 100 shares of a company to my wife. Now the company has declared a 1:1 bonus making her share holding to 200 shares. There are some questions regarding the income from such shares. First, the dividend from these shares will be taxed in whose hands? For now there is no problem as the dividends from shares is tax-free, however, if it were to become taxable, who would pay the tax? Secondly, if the shares are sold, the capital gains would be taxed in whose hands?

— Kiran Arora

A: All shares are your wife's property. However, any income from the original shares will be clubbed in your hands for tax purposes as per Section 64. This means any dividends or capital gains from the original shares will be taxed in your hands.

Income from bonus shares will be taxable in your wife's hands and will not be clubbed in your hands.

However, note that since both dividends and long-term capital gains are tax-free there will be no tax incidence either from clubbing or otherwise.

Securities Transaction Tax

Q: What are the implications of changes carried out on Securities Transaction Tax (STT). Is it levied on both while buying and selling or only during selling in FY 2006-07

— S. S. Bhatia

A: The STT has increased by 25 pc across the board. For example earlier on the buying and selling of shares the STT rate was 0.1 pc, now it has been increased to 0.125 pc. The other rates for various transactions are given in the following table

The author may be contacted at wonderlandconsultants@yahoo.com

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