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B U S I N E S S

OilMin welcomes REL demand on gas utilisation policy
New Delhi, August 5
Petroleum Ministry today welcomed Anil Ambani Group company Reliance Energy’s demand for a gas utilisation policy saying it should withdraw all court cases seeking at least half of the output from Reliance Industries’ Krishna-Godavari (KG) basin, for fair allocation of the fuel, a top Petroleum Ministry official said.


Govt may approve price soon

Reliance may put investment on hold
Mumbai, August 5
Reliance Industries is mulling to put on hold the $ 5.2-billion investment in developing a gas field off the east coast following a threat from lead vendors and bankers to stop equipment supplies and finances over doubts about the company’s ability to payback.

Hike in fuel prices likely
New Delhi, August 5
The government is under intense pressure to increase the retail prices of petrol, diesel, kerosene and LPG as the oil marketing companies are reeling under huge losses by selling their products below the international prices.

Real estate players under IT scanner
New Delhi, August 5
Concerned over huge tax evasion in realty sector, the Income-Tax Department is likely to scrutinise tax returns of all real estate players - be it a property dealer or a builder - with annual turnover of Rs 5 crore in the current fiscal.



EARLIER STORIES

 
A worker reveals the new Chrysler sign after removing the old DaimlerChrysler sign (on ground) at the Chrysler World headquarters on Saturday in Auburn Hills, Michigan. Cerberus Capital Management invested $7.4 billion, acquiring 80.1 per cent of Chrysler.
A worker reveals the new Chrysler sign after removing the old DaimlerChrysler sign (on ground) at the Chrysler World headquarters on Saturday in Auburn Hills, Michigan. Cerberus Capital Management invested $7.4 billion, acquiring 80.1 per cent of Chrysler. — AFP

Jet flight to US
Mumbai, August 5
Jet Airways today flagged off its maiden flight to the USA, becoming the second Indian carrier after Air India to fly to America.

Road Projects
Ficci for regulatory body
New Delhi, August 5
Expressing concern over the cost and time overrun while implementing the road development projects, including the national highway development project, Ficci has suggested a six-point agenda, including having an independent regulatory authority, to overcome hurdles in speedy development of road and highway network.

Market Scan
Tata Tea is a good buy
In this uncertain stock market marked, as it is, high global volatality, record institutional crude prices and reports of US sub-prime mortgage crises, it is hard to spot many investment-grade and well-managed companies with good growth prospects.

Tax Advice
FDRs u/s 80C cannot be prematurely withdrawn
Q. I want clarification on the following:
1. Whether the FDR, deposited in the bank under Section 80C, can be prematurely withdrawn?


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OilMin welcomes REL demand on gas utilisation policy

New Delhi, August 5
Petroleum Ministry today welcomed Anil Ambani Group company Reliance Energy’s demand for a gas utilisation policy saying it should withdraw all court cases seeking at least half of the output from Reliance Industries’ Krishna-Godavari (KG) basin, for fair allocation of the fuel, a top Petroleum Ministry official said.

The Petroleum Ministry comments came in response to Anil Ambani group company Reliance Energy Director J P Chalsani demanding a gas utilisation and pricing policy be put in place before deciding on the pricing of gas from KG-D6 fields of Reliance Industries.

“According to Anil Dhirubhai Ambani Group’s (ADAG) own presentation to us in June, power sector worldwide consumes 31 per cent of gas. If for argument sake we were to apply the same principle here, only 24 mmscmd out of the 80 mmscmd gas from KG-D6 will be available for the entire power sector that includes state-run firms like NTPC, Dabhol project, ADAG and other private projects. The remaining gas will be split in between other users like fertiliser plants, refineries, steel units and other factories,” he said.

“But if ADAG is to squat on 40 mmscmd as part of a private family agreement, to which the entire nation and its economy cannot be held hostage to, how is this utilisation policy possible.

The official said ADAG lacked basic understanding of the contracts signed under the Parliament-enacted New Exploration Licensing Policy (NELP) wherein the gas utilisation policy has been mentioned only to bestow upon the government a right to dictate the usage of gas in domestic market (not allow exports) and not for allocation of the same between different sectors.

Meanwhile, Reliance Industries’ challenged Chalsani’s assertion that the company was targeting exorbitant return of up to 225 per cent the KG-D6 investments saying its investment of 5.2 billion dollar investment can be audited by independent consultant.

A Reliance Industries official also challenged Chalsani’s assertion for a regulated price for gas since consuming sectors like power and fertilizer were regulated, saying in the exploration and production business model, as inputs (rig cost and services) are deterministic at market prices, and outputs probabilistic, no regulated price regime can provide adequate risk-reward balance.

Govt may approve price soon

New Delhi: The government is likely to approve this week a price for natural gas from Reliance Industries’ KG basin field.

In addition, the Centre will bring more clarity on the policy of working out the price of gas from new strikes in acreages auctioned from the seventh round of NELP.

The PMO has referred the matter to the Petroleum Ministry and has asked it to arrive at a conclusion, incorporating the recommendations of a Committee of Secretaries (CoS), headed by Cabinet Secretary K M Chandrasekhar. Sources said the CoS had recommended formulation of gas utilisation (allocation of gas to different sectors) and transparent pricing policies while keeping in mind the state’s contractual obligations for areas similar to one won by Reliance in 2000 through global bidding under NELP. — UNI

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Reliance may put investment on hold

Mumbai, August 5
Reliance Industries is mulling to put on hold the $ 5.2-billion investment in developing a gas field off the east coast following a threat from lead vendors and bankers to stop equipment supplies and finances over doubts about the company’s ability to payback.

The doubt has arisen following absence of government approval of its proposed fuel price.

A leading European lender and several equipment suppliers, including Aker Kvaerner of Norway, who is supplying subsea production system, have over the past few weeks raised serious queries about the cash flow Reliance has projected from sale of gas from KG-D6 fields beginning July 2008, in absence of the government approval for gas price of up to $ 4.58 per million British thermal unit, industry sources said.

More serious is the threat from vendors who have asked Reliance if they can squeeze in works of rivals like Oil and Natural Gas Corp (ONGC) and Gujarat State Petroleum Corp (GSPC), in their already overbooked production facilities.

Once vendors like Aker Kvaerner take up work of ONGC or GSPC, Reliance may not get a berth for at least next couple of years due to tight global supply scenario.

Sources said Reliance is sending its top officials to Europe and the US next week to try and convince them to stay on the project in the backdrop of further delays in gas price approval being anticipated because of demands from certain quarters that the whole issue be addressed by either an Empowered Group of Ministers or the Cabinet itself.

When contacted, Reliance officials declined to comment. — PTI

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Hike in fuel prices likely

New Delhi, August 5
The government is under intense pressure to increase the retail prices of petrol, diesel, kerosene and LPG as the oil marketing companies are reeling under huge losses by selling their products below the international prices.

There seems to be no respite for the oil companies in the near future with the average price of Brent crude crossing $77 a barrel.

Last week, Indian Oil Corporation (IOC) chairman Sarthak Behuria had said the company was losing Rs 90 crore every day on the sale of fuel and Rs 5.88 per litre on petrol and Rs 4.8 on diesel.

The under-recovery for kerosene is around Rs 14.63 a litre and for cooking gas it is Rs 189.14 per cylinder.

Sources said the petroleum ministry has approached the cabinet committee of economic affairs seeking its approval for increase in the prices of petrol, diesel, kerosene and LPG.

Currently, the subsidy on the four petroleum products is shared equally by the government, upstream oil and marketing companies.

The petroleum ministry has also requested the finance ministry to approve oil bonds worth around Rs 19,000 crore for the financial year to recover oil PSUs from the losses.

The government is also considering a three-pronged strategy to end the practise of issuing of oil bonds to PSU oil marketing companies to offset part of the losses suffered on account of sale of fuel at lower-than-market prices. — UNI

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Real estate players under IT scanner

New Delhi, August 5
Concerned over huge tax evasion in realty sector, the Income-Tax Department is likely to scrutinise tax returns of all real estate players - be it a property dealer or a builder - with annual turnover of Rs 5 crore in the current fiscal.

“The Central Board of Direct Taxes (CBDT) has asked the field IT officials to sent scrutiny notices to all builders having an annual turnover of Rs 5 crore or more,” a finance ministry source said.

An official comment from the ministry on the issue could not be obtained.

The source said through these notices, assessing officials could ask builders to appear before them to explain the sources of income, net profit and tax deduction at source. They could also be asked to disclose details of income and expenditure during past three years.

A decision in this regard was recently taken as part of the annual action plan of the department to take measures for meeting direct tax collections’ target of Rs 2,67,490 crore and unearth black money in realty sector. — PTI

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Jet flight to US

Mumbai, August 5
Jet Airways today flagged off its maiden flight to the USA, becoming the second Indian carrier after Air India to fly to America.

However, unlike Air India, Jet would have a two-hour stop at Brussels, which would be brought down to 90 minutes in the future, a company official said, adding that customer feedback suggests that they are comfortable flying transatlantic with a break in-between.

Jet plans to add services to Toronto from September 5 and Johannesburg from October or November as soon as its new fleet arrives.

Earlier, Jet chairman Naresh Goyal said the company would look at collaboration with its competitor Air India in the transatlantic route.

Jet Airways executive VP Anita N Goyal said Jet may look at maintenance and engineering services as both the airlines fly the same type of aircraft. — PTI

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Road Projects
Ficci for regulatory body
Tribune News Service

New Delhi, August 5
Expressing concern over the cost and time overrun while implementing the road development projects, including the national highway development project, Ficci has suggested a six-point agenda, including having an independent regulatory authority, to overcome hurdles in speedy development of road and highway network.

Noting that delays due to land acquisition, law and order issues, obtaining clearances and encroachments as some of the prominent hurdles in the speedy implementation of any infrastructure project, it has suggested setting up of an independent regulatory authority coupled with efficient arbitration mechanism.

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Market Scan
Tata Tea is a good buy
by J.C. Anand

In this uncertain stock market marked, as it is, high global volatality, record institutional crude prices and reports of US sub-prime mortgage crises, it is hard to spot many investment-grade and well-managed companies with good growth prospects.

One such company is Tata Tea, which has the second largest branded tea operations in the world with a comprehensive brand portfolio. It has also overtaken Hindustan Unilever as the top branded tea-selling company. From primarily a plantation company, Tata Tea has transformed itself into a branded consumer goods company. For its financial year ended March 31, the company has achieved the highest-ever profit. Its net profit after tax was Rs 306.57 crore.

During the year, the company also acquired 25 per cent share holding in Energy Brand Inc. USA (EBI). EBI’s estimated value was $ 2.2 billion and cost of investment $ 677 million. But in May 2007, Coca Cola Company, USA offered to acquire the entire shareholding of EBI at an enterprise value of $ 4.2 billion. Tata Tea, as a minority shareholder, also decided to sell its 25 per cent shareholding in EBI. The deal is likely to be concluded by the end of the year. Tata Tea may make a substantial gain in this transaction in addition to getting into a position to write off a large part of its international loans contacted for the purchase of EBI.

Tetley, which is now a part of Tata Tea, recorded strong performance in the United Kingdom, Canada and Western Europe. It also acquired JEMCA the leading specialty tea manufacturer and marketer in the Czech Republic, and share in joekels Tea Ltd. of the South Africa.

Tata Tea has also acquired 15 per cent stake in Mount Everest Mineral Water Company in India, which would be followed by another 9.15 per cent stake from the current promoter. It will also make an open offer to the shareholders for acquiring another 20 per cent of Mount Everest Mineral Water Co.

During 2006-07, the turnover of Tata Tea and its subsidiaries was Rs 4043.23 crore. it was higher in UK (Rs 1326.72 crore) and in the USA and Canada (Rs 1172.21 crore) than in India (Rs 1012.51 crore). Tata Tea has also patented an herbal flover tea composition and manufacturing process and has already marketed herbal tea. Tata Tea has an equity capital of Rs 61.84 crore and the “book value” of its Rs 10 face value share is Rs 279.1. Its EPS is 34.3. The promoters hold 32 per cent in the equity capital. Last week, the scrip closed at Rs 728.5. During the year, the price has been fluctuating between Rs 558 and Rs 990. Tata Tea share is attractively priced at present. It has more scope for upward movement than of sharp slide down. It has high prospects for higher growth and profitability. The company is also moving into specialty drinks in India and abroad. The annual general meeting of Tata Tea will be held on August 10, 2007.

At present, the stock market lacks stability. International crude prices around $ 78 per cent barrel, weaker inflow of foreign funds, heavy sales by FIIs and tightened liquidity in bank funds due to further raise in CRR by the Reserve Bank of India are worrying indicators. Long-term prospects for the Indian economy and Indian stock market, however, still remain high and rosy.

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Tax Advice
FDRs u/s 80C cannot be prematurely withdrawn
by S.C. Vasudeva

Q. I want clarification on the following:

1. Whether the FDR, deposited in the bank under Section 80C, can be prematurely withdrawn?

2. One of my relative has taken premature retirement on medical grounds from the bank under total incapacitation and got ex-gratia of Rs 10 lakh at source. Please advise whether any rebate is allowed on this ex-gratia and under which section.

— Puneet Sokhi

A. The replies to your queries are as under:

1. The fixed deposits, made in a bank in accordance with the requirements of Section 80C of the Act, cannot be prematurely withdrawn. This is in accordance with the Clause 11(2) of the bank term deposit scheme 2006, which provides that no term deposit shall be encashed before the expiry of five years from the date of its receipt.

2. In my opinion, there is no section which provides for any relief or rebate for the ex-gratia amount received by an employee on termination of his employment. The only exemption provided by Section 10C of the Act is in respect of amount received on the voluntary retirement or termination of the services of an employee in accordance with any scheme or scheme of voluntary retirement or in the case of public sector company, scheme of voluntary separation to the extent such amount does not exceeds Rs 5 lakh. If your friend is covered within the aforesaid scheme, an amount to the extent of Rs 5 lakh would be exempt from tax.

TDS deduction

Q. I am a senior citizen and my gross total income from deposits under senior citizen’s savings scheme-2004 (SCSS), interest from bank FDs, PO MIS, NSC intt., GOI bonds and house property during financial year 2007-08 is expected to be Rs 2,60,000. I will claim deduction of Rs 70,000 under Section 80C on account of purchase of five year tax saving scheduled bank FD leaving me with net taxable income of Rs 1,90,000 as chargeable to tax. Being less than the exempted limit of Rs 1,95,000 to senior citizens, no tax shall be payable by me.

However, I fear TDS deduction as recently banks have been directed to deduct TDS on interest income under SCSS-2004 in case the total interest income is more than Rs 10,000 per annum for assessment year 2008-09.

Since no tax is payable by me, will it be appropriate for me to submit Form H to the bank so that TDS is not deducted and I get spared from the futile exercise of first falling in the TDS net and then claiming refund through tax return.

— Ved Parkash Bhardwaj, Naya Nangal

A. In accordance with the provisions of Section 197A(1C) of the Act, in case of an individual, who is 65 years of age or more, may at any time during the previous year can file a declaration in the Income-Tax Department in duplicate in the prescribed form i.e. Form 15H and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil. However, in view of the proviso to Section 139 of the Act, which has been made effective from the assessment year 2006-07, you will have to file your income-tax return as your income without giving effect to the deduction under Section 80C of the Act is more than Rs 1,95,000. The issue whether Section 197A(1C) of the Act would be applicable to a case like yours is debatable. Pending any clarification on the issue, you may file Form 15H to avoid tax deduction at source.

Medical reimbursement

Q. I am a university employee. After an accident, I had to undergo orthopaedic surgery on my right arm for which a sum of Rs 15,700 was incurred at a private orthopaedic nursing home.

My employer has given me a total of Rs 12,500 as medical expenses reimbursement. I have come to know that medical reimbursement up to Rs 15,000 is tax-free. In this connection, what will be my tax liability?

— Raj Vashishta, Patiala

A. Section 17(2) of the Act defines perquisites, which are includible in the term salary for the purpose of taxability thereof. However, proviso to Section 17(2)(vi) exempts any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment so, however, that such sum does not exceed Rs 15,000 in the previous year. In view thereof, the reimbursement of Rs 12,500 would not be taxable in case the total reimbursement does not exceed Rs 15,000 in respect of the previous year.

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