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THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

TERCENTENARY CELEBRATIONS
B U S I N E S S

SEBI mulls major reforms for mutual funds
New derivatives exchange on the cards
Mumbai, March 14
The market regulator is mulling over fundamental reforms for the mutual fund industry, SEBI chairman C B Bhave said yesterday. Speaking at an economic convention organised by Indian Merchants' Chamber here, SEBI chief said the recent liquidity crisis faced by mutual funds was over.

Car project on track: Bajaj
Mumbai, March 14
Bajaj Auto today clarified that it is fully on course to develop a fuel- efficient car irrespective of any financial or other constraints faced by partners Renault-Nissan.

Forex reserves shrink by $2 b
Mumbai, March 14
The country's foreign exchange reserves declined further by $1.986 billion for the week ended March 6 to $247.292 billion as compared to $249.278 billion in the previous week.

Tata Steel to restructure Corus finances
London, March 14
Tata Steel, which acquired Corus two years back for nearly $12 billion, is in talks with bankers to restructure finances of its Anglo-Dutch subsidiary, says a media report.

Aviation Notes
Bird-hit cases on the decline at IGIA
The menace of bird hits, nuisance of stray dogs and other animal hindrances have reduced considerably during the past six months at the Indira Gandhi International Airport (IGIA) where renovation and modernisation work is approaching final phase. Several bottlenecks have been removed and, according to airline officials and regular users, there is a marked improvement in handling flow of traffic, incoming and outgoing.

Investor Guidance
No cap on extension of PPF account
Q: My uncle had opened a PPF account in February 1983, completing 15 yrs on March 1998 and 25 years on March 2008. Till date he has not withdrawn/closed this account. Can he continue it for a further period of 5 yrs without depositing yearly contribution? Can he also get credit of regular interest (for the rest of 5 yrs)? Or alternatively, can he close this account?


A branch of Singapore's DBS Bank is viewed through glass windows in Hong Kong on Saturday.
A branch of Singapore's DBS Bank is viewed through glass windows in Hong Kong on Saturday. Singapore could lose a total of 99,000 jobs during the current recession, with more than half of the cuts in the key manufacturing sector, an analysis by local bank DBS said recently. — AFP

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SEBI mulls major reforms for mutual funds
New derivatives exchange on the cards

Mumbai, March 14
The market regulator is mulling over fundamental reforms for the mutual fund industry, SEBI chairman C B Bhave said yesterday.

Speaking at an economic convention organised by Indian Merchants' Chamber here, SEBI chief said the recent liquidity crisis faced by mutual funds was over.

"But it has showed chinks in armours of mutual funds. Fundamental reforms of mutual funds are necessary. We are half way through it," he said.

Bhave also indicated that the regulator was keen to continue the process of bringing reforms in the primary market despite the lull in the activity.

Although there is a feeling that primary market reform could be undertaken when the activity picks up, the regulator has decided to continue with the primary market reforms, he said.

Referring to Satyam, he said the investigation was still on. He observed in any company, there is a first level of defence (against scams) in form of internal audit. Then there is also a statutory audit. Besides, there is audit committee. SEBI is trying to find out at which level the problem arose, he said.

He also informed that the system of peer review of audit for Sensex and Nifty companies has started.

Speaking at a seminar “Indian growth miracle: Myth or reality”, Bhave said SEBI was working on method of payment and time period for issue of shares, rights issue contents in the financial markets.

''SEBI had also initiated a margin mechanism in the market soon after JP Morgan took over Bear Sterns in February last year. Our stock markets should be able to conduct business day in and day out.

For financial systems trust is the key, people may loose in the markets but they should not loose faith in the system. We need to be alert as we do not know the extent of the problem and the shocks it can deliver to our system. We have learnt since August that though our capital markets are not deeply integrated with the rest of the world, but we are closely linked through trade and commerce,'' he said.

One of the new reforms initiated by SEBI post Satyam, was the requirement for promoters to disclose the number of shares pledged to avoid scams and fraudulent manupilations of company funds, Bhave said, adding that a committee was also considering setting up of a new derivatives exchange under the Bombay Stock Exchange (BSE).

''The growth of the Indian economy is real but should not be taken for granted. We have the right to be critical but we should shoulder the responsibility of contributing to its growth,'' he said.— Agencies

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Car project on track: Bajaj

Mumbai, March 14
Bajaj Auto today clarified that it is fully on course to develop a fuel- efficient car irrespective of any financial or other constraints faced by partners Renault-Nissan.

In a release here, Bajaj Auto managing director Rajiv Bajaj said the constraints of the foreign partners had no bearing on the ability of Bajaj to implement the project.

Bajaj had primary responsibility for the design, development, manufacturing, and supply chain activities of this project, he added.

''Bajaj is proceeding as before to implement this project,'' he said adding that the intention was not to build a low-cost car, but a fuel-efficient vehicle.

He said, ''The project remains largely on schedule though in the course of development some specifications have been reviewed leading to adjustments in the overall schedule.'' However, Bajaj categorically denied that the project was delayed by any significant period such as a year, as had been reported in the business media today.

He said the key issue that Bajaj has addressed, in consultation with Renault-Nissan, had been towards the purpose of ensuring that this car will, true to its originally intended brief, be positioned not on low price but on high fuel economy.

A breakthrough in fuel economy had thus been achieved and would serve as a powerful competitive edge in differentiating this product from its potential competitors.

Bajaj considers this critical to ensure that the product was worthy of being priced to enable the project to demonstrate the intended profitability.

Furthermore, a car as fuel efficient as this is expected to redefine the benchmarks for exhaust emissions including CO2, which is of primary social concern in the context of global warming.

With this result, Bajaj is moving ahead confidently and expeditiously to implement this project as close to the original schedule as possible, he added. — UNI

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Forex reserves shrink by $2 b

Mumbai, March 14
The country's foreign exchange reserves declined further by $1.986 billion for the week ended March 6 to $247.292 billion as compared to $249.278 billion in the previous week.

Reserves had fallen by $249 million in the week ended February 27.

Foreign currency assets, during the week, declined to $236.727 billion as compared to $238.715 billion in the previous week, RBI said in its weekly report today.

FCAs expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies such as Euro, Sterling and Yen, the central bank said.

India's gold reserves and special drawing rights (SDR), during the week, stood unchanged at $9.746 billion and $1 million respectively, RBI said. — PTI

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Tata Steel to restructure Corus finances

London, March 14
Tata Steel, which acquired Corus two years back for nearly $12 billion, is in talks with bankers to restructure finances of its Anglo-Dutch subsidiary, says a media report.

"If conditions in the steel market continue to deteriorate, the Indian steel producer could ask lenders to its UK arm — which owns Corus — to reset the covenants on some $4.1 billion of loans put in place for the acquisition," the daily said in a report published online. Covenant is a promissory agreement.

Tata Steel spokesperson when contacted declined to comment on the report.

"Tata Steel... might also consider an equity injection to the company (Corus). It would continue talks described as informal, with bankers as it monitored the situation over the next couple of months," the report said.

"The situation is not seen as urgent but there is a concern that the UK subsidiary could be at risk of breaching covenants on its loans this year if the downturn in the sector continues and if it does not reset the terms of its finances," it added. — PTI

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Aviation Notes
Bird-hit cases on the decline at IGIA
by K.R. Wadhwaney

The menace of bird hits, nuisance of stray dogs and other animal hindrances have reduced considerably during the past six months at the Indira Gandhi International Airport (IGIA) where renovation and modernisation work is approaching final phase. Several bottlenecks have been removed and, according to airline officials and regular users, there is a marked improvement in handling flow of traffic, incoming and outgoing.

The private developer at the IGIA has brought into functioning of an integrated approach to scare birds and animals. Several other measures, particularly a separate cell under the guidance of a bird expert (ornithologist), have been set up to minimise activities of birds and dogs at and around airport. The analysts accept improvements but are of the view that many government-appointed committees should be more activity-oriented than they have been.

The reduction in untoward incidents at the IGIA is said to be because bird chasers have been increased from 25 to 50 for every shift. The burnt tyre pieces and other useless materials lying on the runway are being removed without any delay. Bird controllers and inspectors along with sharp shooters on the shoulders of the three runways have been undertaking patrolling exercises.

When asked whether there were 13 go-rounds between October and December 2008 owing to stray dogs and bird-hits, the officials said that the statistics did not substantiate this. "In the three months, the airport had only four go-rounds due to birds or dogs. In 2008, the strike rate or bird-hit per 10,000 movements has reduced from 1.77 in 2007 to 1.56 in 2008", they emphasised.

Variety of equipment/ devices, such as, zon guns, visual scarecrows are being regularly used in addition to fire crackers of varying decibels and ranges to fear away birds from flight path of aircraft. In addition, the vegetation on air side is cut well below six inches, in accordance to the International Civil Aviation Organisation (ICAO) standards.

However, certain problems persist because several illegal slaughterhouses around the airport continue to exist. They need to shut down without any delay.

While IGIA developer is doing his bit, the directorate-general of civil aviation (DGCA) must bring into play strict procedural norms for monitoring and controlling bird/wildlife activity around the airport, as laid down by the ICAO. Similarly, the officialdom should see to it that full compliment of cabin crew is on board the flight and all crew members are fully trained to handle evacuation procedures.

Frisking

The security at all airports, particularly international, needs to be tightened but it does not seem feasible to undertake frisking of passengers at the arrival point. Such a measure will entail long queue, passengers will be subjected to needless inconvenience and flights will get delayed. The Central Industrial Security Force (CISF) is of the firm view that the 'concourse security system' that entails checking of passengers when they alight at the terminal was unsuitable for the Indian airports. The CISF officialdom is of the firm view that, maybe, random checks are undertaken.

Since the traffic has increased and three runways are in operation at the IGIA, the developers are working on the premises of installing the Perimeter Intrusion Detection System (PIDS) from July, 2009.

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Investor Guidance
No cap on extension of PPF account
by A.N. Shanbhag

Q: My uncle had opened a PPF account in February 1983, completing 15 yrs on March 1998 and 25 years on March 2008. Till date he has not withdrawn/closed this account. Can he continue it for a further period of 5 yrs without depositing yearly contribution? Can he also get credit of regular interest (for the rest of 5 yrs)? Or alternatively, can he close this account?

— R.K. Ratnani

A: As per Sec. 9(3) of PPF Scheme, at its maturity, the account can be continued for a block of 5 years. This facility is available for any number of blocks on expiry of each of the extended period. 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 20.8.86].

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

No new account can be opened if the old one is in extended mode either with or without contributions [MOF (DEA) letter F.7/2/97-NS II dt 9.2.98].

If he is a taxpayer, he should continue the account with contribution.

IT return

Q: I would like to know what is the penalty amount if one files the return after the assessment year?

— Kishore Matta

A: U/s 234A an assessee who defaults in not furnishing or late filing of the returns is liable to pay 1 per cent simple interest per month or part of the month on the tax as returned by the assessee as reduced by the advance tax and TDS, from the due date to i) the date of filing the return or ii) the date of completion of assessment where no return has been furnished. There is no provision for reduction or waiver of interest and the question of granting opportunity of being heard does not arise — CIT v. R. Ramalingair [2000] 108Taxman1 (Ker). Interest is leviable on the tax on the total income declared in the return and not on the income as assessed and determined by the assessing authority [Tej Kumari v CIT 22TCR250 (Pat), 2001].

It is okay even if the returns are not filed by 31st July if correct taxes are paid. However, late filing of return suffers from the embargo on carry forward of loss from business (speculative or otherwise), capital loss and loss from the activity of owning and maintaining race horses earned during that year. The ITO has no powers to condone such a lapse. Note that only such losses suffered during the current year cannot be carried forward. The losses already carried forward from the earlier years suffer no damage.

TDS on prize money

Q: Recently I won a semi-automatic washing machine in lucky draw coupons of National Savings Organisation, the consideration of which was Rs 5456. I want to know if any income tax is deductible as TDS on this price, and if yes, then what rate is applicable or how much tax is due as TDS.

— Gurdev Singh Thind

A: Yes, tax deduction at source is applicable @30.9% on this income.

Winnings from race, lottery, card game, crossword puzzle, etc is taxed u/s 115BB at the maximum marginal rate of 30.9% (plus surcharge, if any). The scope engulfs any game show, an entertainment programme on TV or electronic mode, in which people compete to win prizes. No expenditure is allowed except that on owning and maintaining racehorses. Even the benefit of the basic threshold of Rs 1,50,000 is not available but the various income deductions can be claimed.

Investment in ULIPs

Q: I had made some investment in unit linked insurance plans (ULIPs) in 2006 and have paid Rs 2000 every month till 8-2-2009 for 3 years.

In the last 3 years I have read about ULIPs not being a good option of saving.

I would like to know how can I optimise my savings i.e.

1) Should I continue paying premium ? If yes, then till how many years?

2) Should I stop paying premium & not withdraw the amount ? If so, for how many years should I not withdraw the amount?

3) Any other advice that you may have for me.

— Rustom Sethna

A: ULIPs are long-term investments and the real value of the investment can only be perceived over a period of 8-10 years. However, if you aren’t happy with the performance of the particular ULIP that you have invested in, you have two options. The first one is to stop investing and let the fund lie dormant. As long as you do not withdraw the funds, your insurance cover will continue. Plus, this will give you the opportunity to recover over time the front end load that would already have been deducted. The other alternative is to withdraw the entire money, take the loss and reinvest in an alternative avenue where the chances of growth are far better.

Gift to NRI son

Q: My husband is retiring from his Central government job soon. Out of the terminal benefits that he will get, he wants to gift a certain amount to my son, who, at present, is studying for his MS in the USA. Can I deposit that cheque amount into the joint account of myself and my son and then put it into a fixed deposit in his name and instruct the bank to deposit the interest into the joint account. Will such a structure circumvent any clubbing provisions for income tax purpose? Kindly advise.

— Vijayalakshmi

A: Since your son is studying abroad, he will be an NRI as per FEMA. It would be advisable to open an NRO account in his name with you as a second / joint holder. An FD may be purchased in his name by debiting such NRO account. As you have yourself pointed out, the interest from this FD may be credited to this NRO account. This way, the transaction would be considered as a gift from your husband to his son and thus escape clubbing provisions. This is, of course, assuming your son is above 18 years of age and not a minor.

The authors may be contacted at wonderlandconsultants@yahoo.com

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BRIEFLY

RCom launches wireless broadband service
Chandigarh:
Reliance Communications (RCom) has announced the rollout of its CDMA wireless broadband service, Reliance Netconnect Broadband Plus. Netconnect Broadband Plus has a downlink speed of upto 3.1 Mbps and a separate uplink speed of up to 1.8 Mbps. As part of this launch, Reliance is embarking on the largest and most aggressive rollout of a broadband Internet service in India as this service will be available in 35 cities with seamless handover to high speed service covering 20,000 towns and 4.5 lakh villages.— TNS

NHPC to commission two power projects by Dec
New Delhi:
The country's largest hydropower producer, NHPC, on Friday said it would commission two projects, including Teesta in West Bengal, by December this year which will raise its generation capacity by over 250 MW. "We plan to commission one of the Teesta hydroelectric projects of 132 MW by December this year and also 120 MW Sewa-II project in Jammu & Kashmir," NHPC chief S K Garg told reporters here. — PTI

IIFCL to raise $250 m
New Delhi:
State-owned infrastructure financing company IIFCL on Friday said it would soon raise $250 million (about Rs 1,250 crore) through its UK subsidiary for funding infrastructure projects. "RBI will subscribe to the bonds issued by the IIFCL UK. The first tranche of $250 million will be raised today or tomorrow," IIFCL chairman and managing director S S Kohli told reporters here. — PTI

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