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Maruti Udyog MD Jagdish Khattar looks at the live TV coverage of Union Budget 2007-08 in New Delhi India Inc despondent
New Delhi, February 28
India Inc today expressed disappointment over Union Budget 2007-08 and raised concerns on lack of measures to increase productivity and for losing an opportunity to provide relief to the corporate sector.


Maruti Udyog MD Jagdish Khattar looks at the live TV coverage of Union Budget 2007-08 in New Delhi on Wednesday. Maruti plans to hike car prices from March 15 and Ford and Hyundai may follow suit. — PTI

Taxing employees on stock option
New Delhi, February 28
Investing in the stock market would become simple, but a costly affair, with finance minister P Chidambaram proposing measures to tax employee stock option plans (ESOPs) and raise dividend distribution tax (DDT) levy.

Ban on futures trade in wheat and rice
New Delhi, February 28
The futures trade in wheat and rice have been banned with immediate effect, Finance Minister P. Chidambaram informed the Lok Sabha as he presented the Union Budget 2007-08.

Budget sticks to TUFS knitting
Extension to spur Rs 1,25,000-cr investment
Chandigarh, February 28
Even as the industry has given a thumbs-down to the Budget 2007-08, for failing to provide them any additional sops, textile seems to be the only sector to have a reason to smile.

Excise limit for SSI enhanced
New Delhi, February 28
In a bid to boost small and tiny industries, Finance Minister P. Chidambaram today proposed to raise excise waiver limit to Rs 1.5 crore turnover, an increase of Rs 50 lakh, and abolish surcharge on taxable income of up to Rs 1 crore.


Double Whammy!
A stock dealer reacts as he trades shares at a brokerage firm in Mumbai
A stock dealer reacts as he trades shares at a brokerage firm in Mumbai on Wednesday. Share prices fell sharply in line with a wave of selling that has swept global markets on fears of a US economic slowdown as well as due to lacklustre Budget. — AFP

EARLIER STORIES

 
Auto-rickshaw drivers push their vehicles forward in a queue outside a petrol station in New Delhi
Auto-rickshaw drivers push their vehicles forward in a queue outside a petrol station in New Delhi on Wednesday. Petroleum and Natural Gas Minister Murli Deora lauded the Budget stating that it was well balanced and has reduced excise duty on prices of petrol and diesel. However, for the common man, this cut will not mean that petrol and diesel prices will go down — AFP

Public units to be main investors
New Delhi, February 28
Public sector enterprises, often criticised for being sloths, would again be the main source of investments in the economy in 2007-08 with a contribution of Rs 1,65,053 crore, whereas government would give these undertakings about Rs 19,000 crore by way of equity and loans.

Income plan for senior citizens
New Delhi, February 28
In an innovative move to boost income of senior citizens owning a house, finance minister P. Chidambaram said today that the National Housing Bank would shortly introduce a novel product based on “reverse mortgage”.

Vardhman to knit thread biz with group co
New Delhi, February 28
Vardhman Textiles Ltd today announced plans to merge its sewing thread businesses and group firm Vardhman Threads Ltd into one subsidiary, at a cost of Rs 260 crore.

Jet asked to move tribunal on Sahara deal
Mumbai, February 28
In a setback to Jet Airways, the Bombay High Court today asked the airline to approach the arbitration tribunal (AT) for resolving the dispute over the bank guarantee given to Air Sahara for the failed takeover deal.

Qatari women attend the fourth Doha Exhibition for Jewellery and Watches
Qatari women attend the fourth Doha Exhibition for Jewellery and Watches on Wednesday. Nearly 400 renowned brand names are participating with organisers claiming it to be the biggest exhibition in West Asia. — AFP

Dow plummets
New York, February 28
Stocks prices plummeted sharply in the United States as a surprise plunge of 8.8 per cent in Shanghai index dragged down markets around world raising worries about a major slow down in the Chinese and world economy.

Plunge on bullion market
New Delhi, February 28
Both precious metals, silver and gold, plunged on the bullion market on reduced offtake by stockists following budgetary announcements lowering duty on cut and polished diamonds.

 

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India Inc despondent
Tribune News Service & Agencies

New Delhi, February 28
India Inc today expressed disappointment over Union Budget 2007-08 and raised concerns on lack of measures to increase productivity and for losing an opportunity to provide relief to the corporate sector.

Even though appreciating measures to uplift agriculture, health and education sectors, industry chambers criticised the Budget proposals almost in one voice for not rationalising the corporate tax and provide relief to industry, which they felt was spearheading India's growth.

"This Budget is disappointing as there have been no steps announced to increase productivity in agriculture, electricity and other sectors which are not producing up to their potential," CII president R Sesashayee said.

He pointed out since revenues from peak customs and excise were increasing, this could have been a time to reduce excise duty to 20 per cent, if not 15 per cent overall, which would have been in line with Kelkar committee report.

Ficci president Habil Khorakiwala said a wrong signal has gone to the corporate world as the government has increased cess and dividend distribution tax.

"One does not understand how the multiple taxes should be charged. I think the feeling of the chamber is that the finance minister has lost an opportunity of providing relief to the corporate world," Khorakiwala said.

Measures like bringing ESOPs under the FBT net, extension of MAT to IT sector and service tax on rental property for commercial purpose would also put additional burden on the corporate sector, he said.

Describing the Budget as “not a path-breaking Budget”, PHDCCI president Sanjay Bhatia said the finance minister should have introduced path-breaking policy initiatives capitalising on the resurgence in economic growth and tax buoyancy. “The direct tax proposals have come as a disappointment and will further increase the effective tax burden on the corporates, rather than aligning the same to the Asean rates,” he said adding the enhancement of Rs 10,000 in the basis exemption limit for personal taxation is too meagre and does not even take into account the rising inflation in the past two years.

"...but introduction of yet another one per cent of education cess will add to the complexities of taxation," Bhatia lamented.

While welcoming the reduction in peak customs duty rate from 12.5 per cent to 10 per cent, he said the CENVAT rate should have been reduced and roadmap for implementation of GST by 2010 should have bee announced.

Assocham president Venugopal N Dhoot said impact of increase in the dividend distribution tax on corporates to 15 per cent will be negative on growth, investor sentiment and capital markets.

Dhoot, chairman of the Videocon Group, also said Chidambaram should have clarified policy on SEZ and made it transparent in the Finance Act, while the reforms in banking and insurance sectors needed to be liberalised further.

He, however, said the overall Budget proposals would create conducive environment for agri sector, provide boost to the rural employment and connect rural urban for inclusive growth.

Mr Deepak Pahwa of Indo-American Chamber of Commerce said: "Imposition of FBT on ESOPS and 3 per cent import duty on private airlines and helicopters could have been avoided." While expressing dissatisfaction over the lack of proposal for the industry, Bharti Group chairman Sunil Bharti Mittal said there was not much choice in the hands of the finance minister.

"We asked to simplify duties on telecom sector and that has been addressed by setting up of a committee," Mittal said.

Maruti Udyog Ltd managing director Jagdish Khattar expressed disappointment that the auto sector has been completely ignored. "Nothing is there for the auto sector in the Budget. Presently, it is a disappointment," he said.

Commenting on the variable excise duties based on MRP for cement, Grasim CFO D D Rathi said: "The tax structure is a hybrid type and cement contributes very low in inflation. So I see no reason why such steps should be taken."

Welcoming Chidambaram's focus on healthcare, specially for combating diseases like HIV/AIDS, CII National Healthcare Committee chairman Naresh Trehan, said: "The steps are in the right direction, it is very positive. But it remains to be seen how the implementation of the National Rural scheme takes place." 

MAT floors IT sector

The levy of fringe benefit tax (FBT) on Employee Stock Option Plan (ESOP) will impact the Information Technology industry in the country as it has been used as a retention tool, leading company Infosys said today.

“The industry was surprised on introduction of Minimum Alternate Tax (MAT) which would eat into the margins,” company’s CFO V. Balakrishnan said.

He, however, welcomed the higher allocation to education and infrastructure and measures taken to give a fillip to agricultural production that may help cut price rise.

TCS Chief Financial Officer S. Mahalingam said the introduction of MAT has re-booted the benefits that this sector was to enjoy until 2009.

“The IT industry does pay tax in other geographies currently, but it remains to be seen whether the MAT burden can be off-set to some extent,” he added.

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Taxing employees on stock option

New Delhi, February 28
Investing in the stock market would become simple, but a costly affair, with finance minister P Chidambaram proposing measures to tax employee stock option plans (ESOPs) and raise dividend distribution tax (DDT) levy.

In a major setback for the market, Chidambaram today proposed raising the rate of DDT from 12.5 per cent to 15 per cent on dividends by companies and bringing ESOP under fringe benefit tax (FBT) regime, a move that could be a dampener for stock markets, as it will discourage companies from rewarding their employees by giving shares.

“These amendments will take effect from April 1, 2008, and will accordingly apply in relation to the assessment year 2008-09,” as per the memorandum explaining the finance bill.

However, the minister sought to soothe investors with proposals like allowing delivery-based short-selling by institutional investors and making PAN the sole identification number for all participants in securities market.

In the Budget for 2007-08, the minister also proposed to permit individuals to invest in overseas securities through domestic mutual funds.

“In line with measures announced every year to strengthen the market, I propose to make PAN the sole identification number for all participants in the securities market with an alpha-numeric prefix or suffix to distinguish a particular kind of account,” he said. — PTI

* PAN to be made sole identification number for all participants in securities market.

* Idea of Self Regulating Organisations to be taken forward for different market participants .

* MFs to be permitted to launch and operate infrastructure funds.

* Individuals to be permitted to invest in overseas securities through Indian mutual funds.

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Ban on futures trade in wheat and rice
Tribune News Service

New Delhi, February 28
The futures trade in wheat and rice have been banned with immediate effect, Finance Minister P. Chidambaram informed the Lok Sabha as he presented the Union Budget 2007-08.

The ban comes almost a year after the concerns were expressed at the state Chief Ministers’ conference and Parliamentary Standing Committee calling for putting an end to trade in essential commodities.

The spiralling prices of essential commodities had resulted in the inflation, now standing at a two year high, cost the Congress-led UPA coalition politically as it could not hold on to Punjab and Uttarakhand due to rising prices of day-to-day items.

With the forthcoming polls in Uttar Pradesh and elections to other assemblies later this year, the government hopes to tide over the inflationary trend with the ban.

He announced setting up of a Committee headed by Planning Commission Member Abhijit Sen to go into the aspects of forward trading in essential commodities that impact the consumer and the report would be submitted in two months.

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Budget sticks to TUFS knitting
Extension to spur Rs 1,25,000-cr investment
Ruchika M. Khanna
Tribune News Service

Chandigarh, February 28
Even as the industry has given a thumbs-down to the Budget 2007-08, for failing to provide them any additional sops, textile seems to be the only sector to have a reason to smile.

Conceding to the textile industry's demand, finance minister P Chidambaram today announced extension of the technology upgradation fund scheme (TUFS) for another five years, a step that is likely to spur an investment of at least Rs 1,25,000 crore in the sector.

"A rejuvenated textile industry is geared to meet the global challenge. TUFS will be continued during the 11th Plan and against a provision of Rs 535 crore in 2006-07, Rs 911 crore would be provided for TUFS in 2007-08," Chidambaram said while presenting Budget.

The extension of TUFS and extension of exemption on excise duty has been hailed by the textile industry in the region. TUFS allows a 5 per cent interest subsidy on the loan for upgradation of technology in textile industry and a 10 per cent capital subsidy on dyeing and processing machines.

Chairman and managing director of Vardhaman Group S.P. Oswal said the decision to extend TUFS for the next five years would help the government raise the investment in the textile sector to Rs 1,00,000 crore in the next five years. “The additional investment would help generate at least three to four million jobs. The expectations of the textile industry have been suitably met in the Budget,” he said.

Hailing the Budget, Spentex Industries managing director Mukund Chaudhary said the decision to cut the customs duty from 10 per cent to 7.5 per cent and reduction in central sales tax to 3 per cent would add to the bottom line of the textile industry.

It may be noted that investments made under the TUFS have grown substantially to over Rs 25,000 crore in this fiscal. The apparel exports from India were to the tune of $17.88 billion, while the domestic apparel market was to the tune of $29.12 billion. The government’s vision is that by 2010, the exports from the country would touch $50 billion and the domestic industry would touch a $ 45 billion mark. India’s market share in the world textile market is also expected to grow from 3 per cent to 6 per cent.

Supreme Yarns MD Sanjay Gupta said the sops announced for the textile sector would also help the government raise its foreign exchange reserves.

Ram Niwas Gupta, a leading textile exporter and president of the exporters association of Panipat, said the sops announced for the textile sector would help the industry gain an edge over competition from China. “Other than the big textile majors, other textile units could not avail the benefits under TUFS. With the extension of this scheme, more factories would be able to benefit by upgrading their technology,” he added.

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Excise limit for SSI enhanced

New Delhi, February 28
In a bid to boost small and tiny industries, Finance Minister P. Chidambaram today proposed to raise excise waiver limit to Rs 1.5 crore turnover, an increase of Rs 50 lakh, and abolish surcharge on taxable income of up to Rs 1 crore.

Earlier, this exemption from excise was available to those units, whose turnover was less than Rs 1 crore and the industry had been asking for a raise.

The Finance Minister also said he would ask banks to lend more to small and medium enterprises.

“Following the announcement of credit policy for the sector in August 2005, credit to SMEs has gone up from Rs 1,35,200 crore at end December 2005 to Rs 1,73,460 crore at December 2006,” Chidambaram said in his Budget speech.

“I propose to ask banks to have regard to the credit rating acquired by an SME while fixing interest rate,” he said. The Budget for 2007-08 has a provision of Rs 186 crore for credit support programme for the sector and Rs 144 crore for quality control and technology support programmes.

The Finance Minister, however, did not announce removal of entries from the list of items reserved for the small-scale sector. In fact, the Advisory Committee that met last week decided to further de-reserve 125 items from the SSI list.

The latest round of dereservation would bring down the number of items in the list to just 114 from 239 items at present. Last year, Chidambaram had announced pruning the list of items for exclusive manufacture by small units by 180.

In January, 87 more items were de-reserved. — PTI

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Public units to be main investors

New Delhi, February 28
Public sector enterprises, often criticised for being sloths, would again be the main source of investments in the economy in 2007-08 with a contribution of Rs 1,65,053 crore, whereas government would give these undertakings about Rs 19,000 crore by way of equity and loans.

"The Central Public Sector Enterprises will, through internal and extra budgetary resources, will invest Rs 1,65,053 crore.

"The government will provide equity support of Rs 16,361 crore and loans of Rs 2,970 crore to CPSEs," Finance Minister P. Chidambaram said in his Budget .

This year, the government restructured eight CPSEs with cash infusion of Rs 1,590 crore and non-cash sacrifices of Rs 1,612 crore. Since coming to power, the UPA government sanctioned revival plans of 21 CPSEs.

The biggest recipient of government support will be the companies under the Department of Atomic Energy. The government will provide equity support of Rs 926 crore to Bharatiya Nabhikiya Vidyut Nigam Ltd and Rs 90 crore to he Uranium Corp. The government will extend a loan of Rs 1,418 crore to Nuclear Power Corporation.

As a group, oil PSUs would account for the single-largest investment at Rs 38,902 crore followed by Railways at Rs 30,275 crore, power with Rs 28,388 crore and communication and IT with Rs 25,471 crore - highlighting the importance being given to energy security, transportation and communication.

Among PSUs, BSNL will be the biggest investor followed by ONGC. BSNL will invest Rs 22,881 crore and ONGC Rs 17,887 crore from their own resources. ONGC Videsh will invest and additional Rs 5,287 crore. NTPC will spend Rs 12,792 crore from internal accruals.

The government will give Rs 6,541 crore as equity and Rs 447 crore as loans to the National Highways Authority. — PTI

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Income plan for senior citizens
Tribune News Service

New Delhi, February 28
In an innovative move to boost income of senior citizens owning a house, finance minister P. Chidambaram said today that the National Housing Bank would shortly introduce a novel product based on “reverse mortgage”.

The minister said under “reverse mortage” a senior citizen, who is owner of a house can avail of a monthly stream of income against the mortgage of his or her house, while remaining the owner and occupying the house throughout lifetime without repayment or servicing of the loan.

He said the people want housing loans. “Bank and housing finance companies that lend against mortgages would have greater comfort if the mortgage can be guaranteed through a three-way contract among borrower, lender and guarantor. Regulations will be put in place to allow the creation of mortgage guarantee companies,” he said.

As a step to boost employment of the physically challenged, Chidambaram proposed a scheme under which the government will reward an employer once a physically challenged employee was regularised and enrolled under the Employees Provident Fund (EPF) and Employees State Insurance (ESI).

“Under the scheme, the government will reimburse the employer’s contribution to the EPF and ESI for the first three years. The government is ready to support the creation of about 100,000 jobs every year for the physically challenged persons with a salary limit of Rs 25,000 per month.”

“Next year, we will appoint 200,000 more teachers and construct 500,000 more class rooms,” the minister said.

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Vardhman to knit thread biz with group co

New Delhi, February 28
Vardhman Textiles Ltd today announced plans to merge its sewing thread businesses and group firm Vardhman Threads Ltd into one subsidiary, at a cost of Rs 260 crore.

The proposal includes vesting of the sewing thread business, including thread units at Hoshiarpur and Ludhiana, Perundurai in Tamil Nadu, along with the spinning unit at Hoshiarpur, in the company’s subsidiary, Vardhman Yarns & Threads Ltd (VYTL).

The cost has been arrived based on the valuation done by ICICI Securities Ltd. The plan also envisages merger of the threads undertaking of Vardhman Threads Ltd (VTL) with VYTL.

ICICI Securities has also suggested a swap ratio of one share of Vardhman Textiles for every two shares of VTL. The scheme is subject to the requisite approval of the shareholders and creditors of the company. — UNI

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Jet asked to move tribunal on Sahara deal

Mumbai, February 28
In a setback to Jet Airways, the Bombay High Court today asked the airline to approach the arbitration tribunal (AT) for resolving the dispute over the bank guarantee given to Air Sahara for the failed takeover deal.

Jet Airways had last year submitted a bank guarantee of Rs 500 crore for a share-purchase agreement (SPA) to acquire Air Sahara, but the deal went sour. The companies had earlier approached AT in London to resolve the matter related to the failed takeover deal, but the issue of bank guarantee was not included.

Jet had moved the high court to get the guarantee money back, but a bench of Justice D.K. Deshmukh today disallowed the petition and asked the carrier to approach the tribunal.

Sahara’s counsel Fali Nariman had earlier contended that the guarantee money was incorporated as part of the SPA and should be dealt with by the tribunal. — PTI

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Dow plummets

New York, February 28
Stocks prices plummeted sharply in the United States as a surprise plunge of 8.8 per cent in Shanghai index dragged down markets around world raising worries about a major slow down in the Chinese and world economy.

Analysts in the United States were divided whether it was nervous selling that led to fall of 3.3 per cent in the Dow Jones Industrial Average to 12,216.24 or was the result to more deep-rooted malaise in the world economy.

This was the biggest point drop since the market reopened after the September 11, 2001, terrorist attacks. The analysts said they would need to watch the trend for over next few days but several opined that the stock would recover.

All 30 stocks in the Dow fell as Nasdaq composite dropped 96.66, or 3.9 per cent to finish 2,407.86 and the Standard and Poor's 500 index lost 3.5 per cent or 50.33 point to end the day at 1,399.04.

Coincidently, the stock prices took a hit a day after former chairman of United States Federal Reserve Alan Greenspan said in Hong Kong that a recession in the United States was possible later this year. — PTI

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Plunge on bullion market

New Delhi, February 28
Both precious metals, silver and gold, plunged on the bullion market on reduced offtake by stockists following budgetary announcements lowering duty on cut and polished diamonds. Marketmen said lowering of import duty to 3 per cent from 5 per cent in his general budget had some indirect impact on the bullion market and reduced the prices of silver and gold.

Standard gold and ornaments plunged by Rs 145 each at Rs 9,725 and Rs 9,575 per 10 gram, respectively. Sovereign also lost Rs 50 at Rs 7,950 per piece of eight gram.

Similarly, silver prices tumbled on reduced offtake amid new stocks arrival. Silver ready rolled down by Rs 410 at Rs 20,550 per kg. — PTI

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BRIEFLY

CPI-IW static
Shimla, February 28
The all-India consumer price index number for industrial workers (CPI-IW) remained static at 127 points for January 2007, remaining virtually a mute witness to the government’s “genuine concern” over rising prices. The index registered an increase of four points in Sholapur, followed by three points in Rajkot, two points in 11 centres and one point in 24 centres. It decreased by four points in Labac-Silcher, three each in Giridih, Raniganj and Mongher-Jamalpur and one point in 12 centres. It remained static in 25 centres. — PTI

India Cements
New Delhi, February 28
India Cements Ltd said today it would merge Visaka Cement Industry Ltd (VCIL), an associate company with an annual capacity of 1.2 million tonnes, with itself. Post the merger, India Cements will be one of the top cement companies in India and will have a total capacity of around 12 million tonnes. As per the arrangement, one equity share of Rs 10 in the company will be issued to VCIL’s shareholders for every five equity shares of Rs 10 each. — UNI

Moser Baer pact
Mumbai, February 28
Optical storage device maker Moser Baer India said today its wholly-owned subsidiary Moser Baer Photo Voltaic Ltd (MBPV) has tied up with Germany’s Deutsche Solar for procuring silicon wafers. “This arrangement will ensure that we have an assured supply of silicon wafers of top quality at competitive prices,” MBPV chief executive Ravi Khanna said in a statement to the BSE. — PTI

Oil bonds
New Delhi, February 28
The petroleum ministry will seek oil bonds worth Rs 5,500 crore for the under-realisation on crude sales in the fourth quarter, petroleum ministry secretary M.S. Srinisvasan said. — PTI

Nod from Finland
New Delhi, February 28
Aurobindo Pharma Ltd said today its facility in Andhra Pradesh to manufacture cefuroxime injections has secured the approval of national agency for medicines (NAM), Finland. The Finnish authorities were satisfied regarding the manufacturing practices at the facility at unit-VI and certified that it fulfills the prescribed EU-GMP standards. — UNI

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