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B U S I N E S S

Govt to go ahead with SEZs, says Nath
New Delhi, March 17
Unfazed by Nandigram violence and political concerns, commerce and industry minister Kamal Nath has said the UPA government remains committed to the special economic zones (SEZs) with full backing of Prime Minister Manmohan Singh.

Bosch to invest Rs 1,800 crore
Mumbai, March 17
Automotive major Bosch today announced its plans of investing Rs 1800 crore on its India operations during the period between 2005 and 2008.

Vodafone case listed for Tuesday
New Delhi, March 17
The Foreign Investment Promotion Board (FIPB) will take up on March 20, the proposal of UK mobile giant Vodafone to acquire 52 per cent direct stake in Hutchison-Essar from Hong Kong-based Hutchison Telecom based on an enterprise value of $18.8 billion.


 

 

 
Kiran Matharu, the first Female British Asian Golf Champion, poses with items from the Puma Sports collection at a launch function in New Delhi on Saturday.  Puma Sports India launched the much-awaited golf collection, including golf footwear, apparels and bags.
Kiran Matharu, the first Female British Asian Golf Champion, poses with items from the Puma Sports collection at a launch function in New Delhi on Saturday. Puma Sports India launched the much-awaited golf collection, including golf footwear, apparels and bags. — AFP photo
 

Sachin’s ‘unfair’ ad game
New Delhi, March 17
Mobile operator Hutch, one of the official sponsors of the ongoing cricket world cup, has complained to the International Cricket Council (ICC) about Sachin Tendulkar endorsing Reliance Communications’ telecom products, saying it amounts to ambush marketing.

Investor Guidance
Public Provident Fund a 16-year account
by A.N. Shanbhag

Q: a) Is PPF 15 years or 16 years account?
Though the common understanding is that it is a 15 years account, the tenure of my account explained by my banker suggests that it is a 16 years account. If so, what is the extra one year?

Aviation Notes
Congestion fee unreasonable
by K.R. Wadhwaney

Many no-frills carriers have been ploughing through turbulent skies. Their losses continue to mount. They are taking extra-precautions to “play with the figures” in balance sheets. Their money-muscle is feeble. They find it difficult to stay afloat in such exacting conditions.

 

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Govt to go ahead with SEZs, says Nath

New Delhi, March 17
Unfazed by Nandigram violence and political concerns, commerce and industry minister Kamal Nath has said the UPA government remains committed to the special economic zones (SEZs) with full backing of Prime Minister Manmohan Singh.

“They (Nandigram and political concerns) have not put me off and the government is absolutely committed,” he said today.

When asked whether he enjoyed the support of the Prime Minister, Nath replied, “Of course, the (whole) government is committed”. The minister was confident that the empowered group of ministers headed by external affairs minister Pranab Mukherjee would go ahead with clearing the SEZ cases where there was no land dispute.

“Of course, there is a fear now where land acquisition is concerned... but where there is no land in dispute why should we be worried,” he said.

Nath said the land acquisition must be transparent and he was “personally in favour of giving farmers a stake in the development that comes up on their land in addition to the market price”.

He said the new national rehabilitation policy was likely to include a provision for making farmers stakeholders in the development.

“The new is looking at all these things and which ever it happens, whether by giving him (the farmer) a job or a stake... he must be part and parcel of new development,” he said.

Nath said there was no political wriggling out of the SEZ impasse.

“It is an act of Parliament. The cabinet has considered it... Nandigram was a very unfortunate incident of land acquisition and we must not confuse the land acquisition with SEZ. They are two distinct things,” he said.

However, Nath was concerned that if clearances on SEZs were not forthcoming many investors might opt out of India.

“Of course, I am worried. There is investment competitiveness from Thailand, the Philippines and Indonesia… Investment has to be attracted it cannot be demanded,” he said.

Nath refuted claims by the finance ministry that SEZs could lead to revenue loss of Rs 1,00,000 crore over four years. He said this was a distorted picture as the government was anyway refunding customs and excise on exports.

On FDI in retail, Nath said since the small retailers might be impacted, the big retail chains should be allowed only in the back-end.

“If Wal-Mart provides to every retailer good food products ... and if they put up packaging it strengthens my retailer,” he said.

Meanwhile, union home minister Shivraj Patil said the government had an “open mind” about “refining” the SEZ policy.

“If the SEZ policy has to be refined, it will be done. The government has an open mind on the issue,” he said. — PTI

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Bosch to invest Rs 1,800 crore

Mumbai, March 17
Automotive major Bosch today announced its plans of investing Rs 1800 crore on its India operations during the period between 2005 and 2008.

Talking to reporters here, Dr Albert Hieronimus, managing director of Motor Industries Company Ltd (MICO), the flagship of the global Bosch Group in India, said, “We have already spent 65 per cent of the amount on our India operations”. Also, he made it clear that Rs 1400 crore, out of a total projected investment of Rs 1800 crore, would be spent on the automotive parts only. The remaining part of the investment would be made on the company’s ventures in the non-automotive segments.

“We will be investing our money on the development of new products like common rail system, gasoline injection, starters and generators, electronic control units, packaging machinery and power tools.”

Hieronimus said: “We are under the process of setting up of a plant in Goa on a rented venue, which would be developed by some other company for the installation of a packaging machinery unit”. — UNI

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Vodafone case listed for Tuesday

New Delhi, March 17
The Foreign Investment Promotion Board (FIPB) will take up on March 20, the proposal of UK mobile giant Vodafone to acquire 52 per cent direct stake in Hutchison-Essar from Hong Kong-based Hutchison Telecom based on an enterprise value of $18.8 billion.

The FIPB meeting comes within five days of the previous meeting, where a host of proposals were recommended for clearance of finance minister 
P. Chidambaram.

Vodafone, the world’s largest mobile services company, had applied to the FIPB for clearance on February 22 through Vodafone International Holdings BV Netherlands.

Last month, Vodafone acquired controlling stake in Hutchison-Essar, India’s fourth largest cellular operator for $11.1 billion.

On Thursday, Vodafone signed shareholders agreement with local partner Essar, as per which Vodafone will hold 52 per cent and Essar 33 per cent. Minority Indian shareholders Asim Ghosh, Analjit Singh and IDFC hold 15 per cent. — PTI

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Sachin’s ‘unfair’ ad game

New Delhi, March 17
Mobile operator Hutch, one of the official sponsors of the ongoing cricket world cup, has complained to the International Cricket Council (ICC) about Sachin Tendulkar endorsing Reliance Communications’ telecom products, saying it amounts to ambush marketing.

A Hutch spokesperson said players taking part in the world cup were not allowed to endorse the competition of sponsors and Hutch was the global sponsor of the mega event.

“The company has taken it up with ICC, saying this is illegal. None of the players who are participating in the world cup can endorse competition because Hutch is the global sponsor of the ICC world cup,” the spokesperson said. “This amounts to ambush marketing and despite Hutch writing to the ICC over a week back, the world cricket body has so far not taken any action on this front,” he added. — PTI 

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Investor Guidance
Public Provident Fund a 16-year account
by A.N. Shanbhag

Q: a) Is PPF 15 years or 16 years account?

Though the common understanding is that it is a 15 years account, the tenure of my account explained by my banker suggests that it is a 16 years account. If so, what is the extra one year?

b) If post-maturity, I continue my account for five years without further contribution, is the interest earned on it is free from tax? From your article, I suppose the answer is yes but just want to have my understanding confirmed.

— Borkar

A: The PPF account is actually a 16-year account, that is the year you open the account, adding 15 years to it. Therefore, one should always try and open the account as late as possible, preferably on the last day of the FY such that full tax deduction is available even though the account is one day old. After that, the 15-year period begins.

The answer to your second question is positive; you will continue to earn interest even if you do not invest further.

RBI bonds

Q: In the budget (2007-08) analysis it has been reported that effective July 1, 2007, TDS will be deducted on 8 per cent taxable RBI bonds. Will this provision be applicable on existing bondholders or will it be meant for new buyers?

— Parth

A: This is applicable on interest on old bonds as well.

Fringe benefit tax

Q: Budget 2007 provides to tax ESOPs as fringe benefits. However, it is not clear whether ESOPs granted prior to March 31, 2007, and applied prior to March 31, 2007, but actual shares allotted sometime in the first week of April 2007. Are they liable for FBT?

Specific case: I have been granted options in November 2005. Entitled to apply within 5 years beginning November 2006.

However, applied on March 2, 2007. Cheque given to employer cleared in March 2007.

Actual allotment is likely to be in the first week of April 2007.

Kindly reply whether in the above case, FBT will have to be paid?

— Vashistha

A: Finance Bill, 2007, seeks to tax ESOPs as fringe benefits. The fringe benefit value is defined as the FMV of the shares on the date of exercise of the option by the employee as reduced by the amount actually paid by or recovered from the employee in respect of such shares.

From the above, you will find that the tax is applicable as on the date of exercise of the option. The Income Tax Act does not define the term "exercise". However, as per SEBI (Employee Stock Option Scheme And Employee Stock Purchase Scheme) Guidelines, 1999, the term "exercise" means making of an application by the employee to the company for issue of shares against option vested in him in pursuance of the ESOS.

It would follow from the above that you have exercised your option on March 2, 2007, when the law treating ESOP as FBT is not applicable. Hence, there would be no fringe benefit tax applicable since the exercise has taken place in FY 06-07.

Dividend reinvested

Q: I opted for dividend reinvestment plan on ELSS mutual fund. My employer is not considering the units purchased for dividend amount for tax benefit. Please clarify with section numbers. This will be helpful.

— S V Kharkar

A: The dividend is deemed to be reinvested. Section 80C does not need the investment to be made from income chargeable to tax. There is no specific section, which specifies that dividend reinvested in ELSS will be given Section 80C benefit, however, the same is implied by pure logic and purpose. In other words had you received the dividend and then reinvested it, you would have got the benefit, this is not . different. The reinvested units also are locked in for three years. Your employer is not justified in denying you the benefit. Your question and our answer will be published in the papers if you so desire. If you don't want your name to be published, kindly indicate so.

NRO account

Q: As per RBI rules, money cannot be repatriated from NRO account. What should a pensioner do when his pension amount is credited to NRO account and he wants to repatriate that amount?

Will you please elicit your views and how one should go about to have the pension repatriated. Pension is income of the NRI/PIO.

— Prasad Kotian

A: Money cannot be transferred from an NRO account freely the way it can be from an NRE account. However, for your pension amount, you can remit this after tax thereon is paid. You will be required to submit an undertaking and an accountant's certificate certifying having paid the tax if any is due.

PIO child

Q: No one is born an NRI. If so, take the case of a child born in UK to NRI parents. He is not a UK citizen. Will he not be an NRI?

— Shailendra

A: The child will not be an NRI but a Person of Indian Origin (PIO). The rights and privileges of an NRI and a PIO are almost the same.

The authors may be contacted at wonderlandconsultants@yahoo.com

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Aviation Notes
Congestion fee unreasonable
by K.R. Wadhwaney

Many no-frills carriers have been ploughing through turbulent skies. Their losses continue to mount. They are taking extra-precautions to “play with the figures” in balance sheets. Their money-muscle is feeble. They find it difficult to stay afloat in such exacting conditions.

Quite a few airlines are unable to adhere to their schedule of departures and arrivals. Their fare structure is inconsistent and taxes vary. They provide no more than negligible facilities to passengers on their flights. There are several other problems that passengers have to encounter while opting to fly these carriers which have no reputation to lose.

All these are causes enough to paint a gloomy picture of Indian civil aviation. But what is the cause for serious concern is that some airlines are guilty of not carrying 
full compliment of hostesses on flights.When the going is normal, every thing seems alright. But when the emergency descends on the aircraft, there will be virtually problem because less than the stipulated number of hostesses will not be able to evacuate passengers, who become panicky and hysterical.

An Indian top official, in his recent interview to a contemporary newspaper, has gone on record saying: “There should be some sense in it. I too, would like to price tickets at Rs 2 like LCCs. With IA strength, this will wipe them out. I might even do it sometimes”. Are LCCs in a position to accept this threat or challenge?

Operating under various pressures, private airlines opt for any reason to hike fares. Recently they have started charging Rs 150 from passengers as ‘congestion fee’. What does this mean? Who is responsible for congestion — they are passengers? They opt for ‘peak time’ to woo passengers who choose convenient timings for departures and arrivals. These private airlines seem to believe ‘heads they win, tails passengers lose’.

Following complaints from passengers and litigations, the Directorate General of Civil Aviation, (DGCA) has asked the airlines to withdraw the ‘congestion surcharge’ which, according to aviation analysts, is unreasonable.

The trouble in aviation sector surfaces because civil aviation ministry also issues statements. The ministry should speak on only policy affairs allowing DGCA to deal with all other day-to-day matters. Only DGCA can instil some sense of discipline among private airlines, some of which are controlled by highly influential individuals.

Caught in a ticklish situation, the airlines may withdraw this cess but increase fares. If they do it, it will not be likened by passengers.

In this congestion episode, the authorities are not unblemished. They keep issuing licences without assessing space available in skies.

The alarming situation will continue as long as small VVIP flights continue to operate from IGIA. They should operate from any nearby airport, like Hindon. A senior aviation analysts, who has been connected with flying for more than 30 years, feels that the Safdurjung Airport should be thrown open for operations and one or two VIPs shifted from that vicinity. “It is better to shift VIPs instead of wasting such a prestigious airport. 

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