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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE
TERCENTENARY CELEBRATIONS

B U S I N E S S

ONGC sets sights on Sakhalin blocks
Chennai, October 13
Oil and Natural Gas Corporation (ONGC) has asked the government to shift the location of its shallow water oil exploration project in the Palk Bay as the current site comes under a marine biosphere, a top official has said. "We have only done some seismic survey and could not do more activities as the block comes under the marine biosphere, with the Environment Department objecting to any further work," ONGC chairman and managing director R.S. Sharma told reporters here last night.

China ups reserve ratio requirement
A Chinese artist uses 100 yuan bank notes to create a model of Beijing's Central Business District Beijing, October 13
China will raise the reserve requirement ratio by half a percentage point to 13 per cent, the highest in a decade, for commercial banks from October 25 to cool down the red-hot economy, the central bank announced here today.

A Chinese artist uses 100 yuan bank notes to create a model of Beijing's Central Business District (CBD), on Saturday. China's foreign exchange reserves, already the world's largest, surged 45.1 per cent in the first nine months of the year to $1.43 trillion. — AFP photo


 
Brand ambassador for Hero Honda Hrithik Roshan poses besides a mobike in New Delhi
Brand ambassador for Hero Honda Hrithik Roshan poses besides a mobike in New Delhi. Country's largest two-wheeler maker Hero Honda rolled out its 20 millionth bike on Friday and said sales prospect for the remaining of the year should look good for the industry with positive signs emerging again following recent interest rate cuts by banks. — Tribune photo by Mukesh Aggarwal

Hollister to operate from Haryana
Chandigarh, October 13
Hollister Inc Washington will set up a 100 per cent export oriented unit on 10-acres of land in Bawal industrial area of Haryana with the capital investment of Rs 250 crore to develop and manufacture its Medical Care (Austomy) products.

Biotech policy framework within fortnight
New Delhi, October 13
The government today said it would finalise the framework for the proposed biotech policy that seeks to incentivise research and development in the sector, within the next two weeks.

Aviation Notes
by K.R. Wadhwaney

Low-cost airport concept not advisable

Worldwide, it is the government's domain to build and modernise airports for public transportation. The main component is the land which only the government can afford to possess. Even in affluent countries, like the United States, private outfits do not build and develop airports for public use.

Investor Guidance
by A.N. Shanbhag

NRIs can’t open PPF account

  • Advance tax
  • Contribution to PPF
  • Remittance scheme
  • MIN no more needed
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ONGC sets sights on Sakhalin blocks

Chennai, October 13
Oil and Natural Gas Corporation (ONGC) has asked the government to shift the location of its shallow water oil exploration project in the Palk Bay as the current site comes under a marine biosphere, a top official has said.

"We have only done some seismic survey and could not do more activities as the block comes under the marine biosphere, with the Environment Department objecting to any further work," ONGC chairman and managing director R.S. Sharma told reporters here last night.

The Centre should shift it to another site in the Palk Bay, he added.

The board of directors of ONGC had recently approved an investment of Rs 6,300 crore towards the second phase of Mumbai High project, he stated. He said Rs 5,200 crore was the investment for the first phase.

A high-level delegation of ONGC officials, headed by petroleum minister Murli Deora, will leave for Moscow on October 23, to bid for Sakhalin-III oil and gas blocks, he said.

"The delegation is expected to stay there for about three to four days and we will use diplomatic sources to clinch the project," he said.

Presently, ONGC has 26 projects in 15 countries, with three new exploration blocks established by ONGC Videsh Ltd (OVL) in Columbia recently.

"We made 22 new discoveries in the last fiscal and are now in talks with Sri Lanka over their offering of some blocks," Sharma said.

However, a final decision on accepting the offer would be based on merit only, he stated.

Talks were also on to use blocks in Myanmar, he informed.

However, Sharma denied that ONGC was in talks with Bangladesh. "We have not participated in any round of talks in this regard". — PTI

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China ups reserve ratio requirement

Beijing, October 13
China will raise the reserve requirement ratio by half a percentage point to 13 per cent, the highest in a decade, for commercial banks from October 25 to cool down the red-hot economy, the central bank announced here today.

This is the eighth such move this year and only one month after the seventh hike of half a percentage point on September 25.

The move is aimed at “strengthening liquidity management in the banking system and checking excessive credit growth”, the People’s Bank of China (PBOC) said in a statement.

After the eighth rise, the reserve requirement ratio has reached a 10-year high.

The move came after the central bank’s announcement yesterday that the country’s foreign exchange reserve has exceeded $1.43 trillion by the end of September, up 45.1 per cent from the same period last year.

A total of $367.3 billion were added to the country’s foreign exchange reserve in the first nine months, $120 billion more than the increment in the entire 2006.

The huge foreign exchange reserve is considered the main reason for excess liquidity in China, as the central bank has to spend money to purchase foreign exchange.

Excess liquidity could lead to price hikes and pour more fuel into the sizzling economy. By the end of September, the M2 - a broad measure of money supply, which indicates the monetary demand of the whole country, grew by 18.45 per cent from a year ago to 39.31 trillion yuan.

China’s commercial banks lent out 3.36 trillion yuan in the first nine months, surpassing the full-year figure in 2006. — PTI

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Hollister to operate from Haryana
Tribune News Service

Chandigarh, October 13
Hollister Inc Washington will set up a 100 per cent export oriented unit on 10-acres of land in Bawal industrial area of Haryana with the capital investment of Rs 250 crore to develop and manufacture its Medical Care (Austomy) products.

A delegation from Hollister Inc. (USA), a leading manufacturer for the medical care equipment, led by its President George Malickel met Haryana Chief Minister Bhupender Singh Hooda, currently on visit to Washington and apprised him about plans for Asia.

The proposal of the company was discussed in detail, and it was decided to allot a 10 acres of plot in the Growth Centre, Bawal. 

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Biotech policy framework within fortnight

New Delhi, October 13
The government today said it would finalise the framework for the proposed biotech policy that seeks to incentivise research and development in the sector, within the next two weeks.

“The proposed policy would focus on incentivising research and development activities in biotechnology by way of public-private-participation and we would give a final shape to the policy within the next couple of weeks,” Minister for Science and Technology Kapil Sibal said. He said the new policy was aimed at providing assistance to lifescience companies.— PTI

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Aviation Notes
by K.R. Wadhwaney
Low-cost airport concept not advisable

Worldwide, it is the government's domain to build and modernise airports for public transportation. The main component is the land which only the government can afford to possess. Even in affluent countries, like the United States, private outfits do not build and develop airports for public use.

For a private party to own a piece of real estate is one thing but to combine it with the building for the development of the airports for public use will be a dangerous exercise.

Operations of civil aviation are very complex and hazardous. In addition to aircraft, crews, fuel and passengers, there are other vital components, like fire fighters, medical and security.

Will any private undertaking, no matter how wealthy and well meaning, be able to provide all these facilities without any loss of time when emergency occurs or, God forbid, an accident takes place? Any compromise on the aspect of safety and security of passengers will be nothing but suicidal.

During the last 18 years since the opening of skies in ’90s, more than two dozen private airlines have surfaced.

But a majority of them have folded up. Some have been bought by bigger players. The civil aviation is meant only for the fittest players to survive. In such a situation, is it advisable for private bodies to think of building and developing low-cost airports?

It is laudable to promote the concept of flying. It is also laudable to improve connectivity. But it is inadvisable to promote flying without possessing the barest minimum facilities.

The fares will stay within limits only when overhead expenses on pilots and crews are drastically reduced. The expenses on fuel may not be within the scope of private operators but reducing other overhead expenses are within the reach of those who own airlines.

To run the airlines successfully will be possible only when owners reduce their greed for profitability.

It is incorrect and illogical to think of “bare bone" airports or airstrips in the 21st century. 

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Investor Guidance
by A.N. Shanbhag
NRIs can’t open PPF account

Q: I have opened PPF account on my name before becoming NRI. Presently my child (8 years) is also an NRI. Can I open PPF account in his name? I am not interested in tax exemption as applicable for filing tax return for Indian citizen, but interested in 8 per cent return earned on PPF.

— Padukon

A: NRIs are prohibited from opening a PPF account or investing in any of the post office schemes as well as the RBI savings bonds. However, if a resident who subsequently becomes NRI during the currency of its term or an NRI who has opened the account before the date of this notification (GSR 585(E) dt 25.7.03) may continue to subscribe till maturity on a non-repatriation basis. This means, they cannot open a new account or extend the scheme beyond maturity.

Advance tax

Q: I am a salaried person. I have booked a profit/gain of Rs 8,000 in June 2007 from Nitin Fire Protection IPO and Rs 9,000 profit/gain in July 2007 from Vishal Retailers’ IPO. Altogether, profit/gain is Rs 17,000 from the shares allotted through IPOs. I sold these shares immediately after the allotment to book the profit.

Should I

(a) pay 10 per cent tax on the profit/gain amount i.e. Rs.17000 or

(b) Just pay 10 per cent tax now on the profit/gain amount i.e. Rs17,000 and then add this gain amount (17,000) later on at the year end to my salary and then pay the tax accordingly as per the slab I fall in.

I am confused on this subject because one of the CA I consulted told me to pay simply 10 per cent of the profit/gain and need not to add this gain to the salary. But one of my friends having some exposure in tax related matter suggested to pay 10 per cent advance tax of the profit/gain and then add the profit/gain to your annual salary and pay the remaining tax as per the income slab I fall in.

— Ketan Patil

A: Both your friend and the CA are correct. Right now, you should pay 10 per cent as advance tax. Later on, aggregate your income in the tax return at the end of the year. However, any capital gain income is treated as a separate block and not subject to slab rates applicable on normal income. Assuming that Rs 17,000 is the only short-term gain you earn in the year, the tax on this would work out to Rs 1,700. However, since you have already paid the same in advance, you will take credit for that and there will be no balance payable on this gain.

Contribution to PPF

Q: I am a doctor by profession. I have a PPF account opened in 1986 that matured in 2001 after 15 years. A five-year extension was taken which expired in March 2006. I have neither extended nor withdrawn it. Now, my query is that after the account matures, do I will continue to get the tax-free interest till I withdraw or will the interest cease after March 31, 2006? In the latter case, can I request another five-year extension?

— Dr Mahale

A: At its maturity, the PPF can be continued for a block of five years. This facility is available for any number of blocks on expiry of the extended term. The continuation can be with or without contribution. Once an account is continued without contributions for one year, the subscriber cannot change over to with-contributions extension. (Notification F.3(6)-PD/86 dt August 20, 1986).

A subscriber, continuing his account with fresh subscriptions, can withdraw up to 60 per cent of the balance to his credit at the commencement of each extended period in one or more installments, but only one per year. On the other hand, in the case of account extended without contribution, withdrawals can be affected in installments, not exceeding one in a year. The balance will continue to earn interest till it is completely withdrawn.

Remittance scheme

Q: My daughter and son-in-law live in the US whereas we are in India. I wanted to remit some money to them. In this context, I learnt that the remittance limit for overseas investments has been increased to $50,000 and gifts are included therein. Earlier, there was a limit of $5,000 on gifts that Indian residents can make to persons abroad. But now, in view of the increased limit, can I send the entire amount of $50,000 per calendar year as a gift under the Liberalised Remittance Scheme of the RBI. My bankers tell me that the limit of gift under this scheme stays put at $5,000 per year.

— Neel

A: No, your bankers are mistaken. The Liberalised Remittance Scheme clearly mentions that the total limit for investment, gifts and donations per calendar year is $50,000. Incidentally, the limit, which was $ 50,000, was first hiked to $1,00,000 and subsequently to $2,00,000. The erstwhile independent limits for gifts and donations have since been dropped and the now aggregated under the $2,00,000 scheme. Moreover, an additional amount up to $1,00,000 p.a. can be sent under family maintenance seeing as it is your daughter to whom you want to remit the funds. So in all you may remit up to $3,00,000 per year if you so desire.

MIN no more needed

Q: I understand that one can invest in mutual funds in India as an NRI either using an NRE savings account or an NRO savings account. I also understand that you will need a PAN and a recently introduced ‘Mutual Fund Identification Number’ (MIN).

If you set repatriability aside, are there any further advantages in using an NRE savings account as opposed to an NRO savings account for trading in mutual funds?

As an NRI currently residing in the USA, how would I go about getting PAN and MIN numbers in India? I hold an NRE savings account, an NRO savings account and an NRO fixed deposit account jointly with my wife.

From a mutual funds investment standpoint, what are the tax implications between using an NRE and NRO savings account?

— Matta

A: The requirement of MIN stands cancelled. So you do not need MIN anymore. PAN is a necessity and information on the same can be obtained from http://tin-nsdl.com. Though the website specifies that online application is available, it would help if there was someone in India to execute the same for you.

As far as your second question is concerned, for mutual fund investment, there is no difference between using the NRE or the NRO account. Tax wise or even repatriability wise. This is because for financial assets and property, up to $1 million can be remitted each year from an NRO account. Taxation of the mutual fund investment depends upon the type of mutual fund (whether equity oriented or not), it does not depend upon the type of account that you are investing from.

—The authors may be contacted at wonderlandconsultants@yahoo.com

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