Sugar industry not deregulated: Centre
NEW DELHI, Sept 27 — The Centre has told the state governments that levy sugar obligation for the mills will continue even after delicensing of the sector early this month.

MUL: no price cut
BANGALORE, Sept 27 — Maruti Udyog Limited today ruled out any price reductions of its brands in the wake of stiff competition from foreign entrants in the industry.

Rs 7.32 crore JK assistance given to non-existent units
JAMMU, Sept 27 — The Comptroller and Auditor General of India has reported that 15,968 small and medium units in Jammu and Kashmir are non-functional even after receiving an assistance of Rs 29.50 crore from the centre.

Jalandhar foundation for kids
NEW DELHI, Sept 27 — The sports goods manufacturers of Jalandhar plan to set up a foundation for educating children who stitch footballs.

Sugar industry not deregulated: Centre

NEW DELHI, Sept 27 (PTI) — The Centre has told the state governments that levy sugar obligation for the mills will continue even after delicensing of the sector early this month.

A communiqué in this regard was sent to the states by the Department of Sugar and Edible Oil in the Food Ministry last week, a top official of the ministry told PTI.

“We have clearly told the state governments that the Centre has only delicensed the sugar industry and no deregulation has been done,” Ravi Prakash Sinha, Secretary, Department of Sugar and Edible Oil, said.

The clarification has been sent following confusion over fulfilment of levy sugar obligations by the mills at the state level after the government decided to delicense the industry.

Levy sugar obligation makes it mandatory for sugar mills to offer 40 per cent of their production to the government for supply through the public distribution system (PDS).

While mills are paid a lower price for offering sugar for PDS supply, they are allowed to fix a higher price for the rest of their produce sold in the open market.

Delicensing, on the other hand, has only eliminated the process of prospective entrepreneurs having to obtain licence from the Food Ministry to set up a mill. However, they would have to ensure that new units do not come up within 15 km of an existing one.

Asked about discontinuation of incentives for levy sugar obligations to the mills following delicensing, Sinha said it would not hurt the units as the sops are being given only to small mills.

On the recommendations of a high-powered committee headed by former Food Secretary B.B. Mahajan to decontrol the sugar industry, the official said it was under consideration.

Under the control regime, the government follows dual-pricing policy of a lower price for ration sugar and higher price for the commodity sold in the open market.

The Mahajan Commission has recommended scrapping of the control regime in two years. Industry should not be asked to subsidise the PDS sugar and the government would have to bear the subsidy costs, it said.

The high-powered panel, however, favoured continuation of the current policy of determining the amount of sugar to be released for the PDS and in the open market.

On damage to the sugarcane crop, Sinha said there were reports of some damage but it was unlikely to affect next season’s (October 1998-September 1999) sugar production.

Rs 7.32 crore JK assistance given to
non-existent units

JAMMU, Sept 27 (PTI) — The Comptroller and Auditor General of India (CAG) has reported that 15,968 small and medium units in Jammu and Kashmir are non-functional even after receiving an assistance of Rs 29.50 crore from the centre.

Of the 34,556 units registered till March 31, 1994, it was found during a survey by the vigilance organisation assisted by the audit authorities, that 15,968 units were non-functional.

Ostensibly, 2,992 units were closed, 100 units dormant, 136 units defunct, 219 were sick and 367 units deregistered.

“Only 65 per cent of the units surveyed were functional.

The Industries Department attributed the poor percentage of functional units to unavailability of raw material, lack of working capital and marketing facilities.

Officials said even the unit owned by the State Industries Minister was sick.

“No efforts are being made to investigate and prosecute the owners of these 6,122 non-existent units, who have eaten up financial assistance of Rs 7.32 crore of the State Government,” it said quoting officials.

A State-level committee was constituted in February, 1996, for considering rehabilitation of sick units and a special fund “State fund for revival of sick units” was envisaged. But neither the fund was created nor any guidelines for identification and rehabilitation of sick units were formulated as on August 1997,” the CAG report said.

Spotlight on Amritsar
No end in sight to strike by textile workers
From Our Correspondent

AMRITSAR, Sept 27 — The 20-day-old strike by the powerloom workers here to demand a wage hike has hit the labour hard as the factory owners facing recession have failed to respond.

Depressed markets and little consumer enthusiasm have added to the discomfiture of the local factory owners.

The labour demand for a 7 to 9 per cent increase in the wages has been cold-shouldered by the industry which already has huge stocks. A spokesman of the Industrial Association told The Tribune that it was for the first time that both the industrial workers and factory owners were on the road.

The city has over 30,000 powerlooms with a one-lakh strong labour force, all of them in synthetics, art silk, woollen fabrics of various blends primarily for the lower and middle segments catering to northern and north-eastern States.

The administration has failed to intervene and work out any settlement.

The government’s apathy to growing industrial unrest and its failure to address problems of the industry, notwithstanding the oft-repeated statement of the Punjab Chief Minister of having declared the 1998 as the “year of development” has unnerved entrepreneurs. A recent example is the permanent closure of a premium woollen factory here, the Essma Woollen Mill.

Another factor which has hit the textile units here is that certain unscrupulous businessmen are producing fabrics with fake stamping of famous brands like Raymonds, Gwalior, Vimal, Grasim, Essma etc.

Last month raids on a number of such units by the police on the intervention of the managements of the reputed companies had a telling effect on the textile business here.

The local textile committee of the Ministry of Textiles, Government of India, has failed to check the production of duplicate cloth under its very nose.

Lack of proper infrastructure and latest technology to manufacture quality products has further affected the local textile industry. Although cloth manufacturing in the holy city dates back to the early thirties, its total neglect has led to its decay. It is slowly getting sick.

There are, however, some exceptions like OCM Woollen, the Amritsar Swadeshi Woollens Mills and the Essma, which have survived the crisis due to better brand marketing and financial management.

Jalandhar foundation for kids
Tribune News Service

NEW DELHI, Sept 27 — The sports goods manufacturers of Jalandhar plan to set up a foundation for the promotion of education of children who stitch footballs.

Addressing a press conference here yesterday, Mr I.P. Anand, Chairman of the advisory committee on child labour in the sports goods industry, said a programme to eliminate child labour is being jointly undertaken by three organisations — the ILO, FICCI and the International Programme for the Elimination of Child Labour (IPEC).

“All members of the foundation will pay a monthly contribution equal to 0.25 per cent of the value of the football exports,” he said.

A survey by the VV Giri National Labour Institute on behalf of FICCI in Jalandhar and its adjoining villages had found that nearly 75 per cent of the school going children in the area were also into football stitching.

MUL: no price cut

BANGALORE, Sept 27 (PTI) — Maruti Udyog Limited (MUL) today ruled out any price reductions of its brands in the wake of stiff competition from foreign entrants in the industry.

“Though there is a big competition in the small car category, I hope we can continue to smile,” MUL Director K. Senga told reporters here.He said though the car sales market witnessed a slump by 2.4 per cent, Maruti’s sale had increased by 1.7 per cent.

No plan to devalue currency: China

BEIJING, (PTI): China has ruled out devaluation of its currency, yuan, and expressed confidence in attaining the targeted 8 per cent economic growth rate through increased government spending and stimulatory economic policies.

“The Chinese government has confidence in maintaining a stable yuan and we see no reason for the yuan to devalue” Minister of State, Development Planning Commission Zeng Peiyan said at a press conference on the state of China’s economy.

“A depreciation of the yuan can hardly help China’s export and on the contrary it may have a negative effect on China’s economic development, “Zeng said while pointing to the high content of imported input in China’s exports of processed goods.

Jute output

DHAKA, (PTI): Jute production in Bangladesh is likely to fall short of target by at least five lakh bales due to the devastating floods that have damaged the crop and machinery worth 356 crore taka (about Rs 325 crore).

The output is likely to be around 35 lakh bales this year but the losses on account of flood havoc may increase rapidly as the government assessment is yet to be completed, Jute Minister A.K. Faizul Haq has said.

EU fund

COLOMBO, (PTI): Sri Lankan Foreign Minister Lakshman Kadirgamar has proposed the establishment of a SAARC-EU fund to finance mutually-acceptable projects.

Kadirgamar made this proposal to the EU during the first-ever ministerial level consultation meeting between SAARC and the EU troika held in New York to speed up co-operation between the two trade blocs.

Banks

TOKYO (AFP): Japan’s monetary authorities plan to use their dollar holdings to support Japanese banks faced with difficulty in raising dollar funds due to their eroding credit abroad.

Under the emergency plan, the Government will deposit part of its massive foreign currency reserves with Japanese banks that are unable to make dollar settlements on overseas markets. The Bank of Japan for its part will sell dollars to these banks in exchange for yen in a swap deal for a certain period, a leading business daily said on Sunday.

Cotton

BEIJING, (PTI): China will deregulate its market for cotton in order to reduce huge stockpiles and cut subsidies, an official report said here on Sunday.

The (Chinese) government is increasingly sensitive to the burden of large stockpiles and financial subsidies to the cotton sector, Wang Zhaoyang, a senior official with the state development planning commission, said.

By A.K. Sachdeva

Q: We are registered as a dealer both under the Punjab General Sales Tax Act, 1948 and the Central Sales Tax Act, 1956. Last week we purchased certain goods from a party based outside the State of Punjab. While the goods were en route these were intercepted by an Excise and Taxation Officer, Enforcement Wing, Punjab and subsequently orders under sub-section (6) of section 14-B of the Punjab General Sales Tax Act, 1948 came to be passed detaining the goods on the simple ground that transaction seems to be ingenuine and needs verification. We are called upon through a notice issued by the Checking officer to produce the complete books of account. After examination of the account books produced before the Checking Officer and the Assistant Excise and Taxation Commissioner, Enforcement Wing, Punjab, a penalty of Rs 45,000 was levied under sub-section (7) of section 14-B of the Punjab General Sales Tax Act, 1948 on the sole ground that one transaction of sale which was allegedly effected in the past had not been accounted for in the books of account. Kindly advise if the officer was justified in law in levying penalty on a baseless ground particularly when no transaction outside the books of account had taken place.

— Anil Kumar

Ans: Under sub-section (7) of section 14-B of the Punjab General Sales Tax Act, 1948 an officer is authorised to impose penalty only if it is established by him that the person carrying the goods intended to evade the payment of the tax due. It is no ground at all to say that some other transaction was found unaccounted for and therefore penalty was liviable. What has happened earlier with respect to a particular transaction cannot be a relevant ground for imposing penalty under sub-section (7) of section 14-B of the Punjab General Sales Tax Act, 1948 more particularly when the same is seriously contested by the party concerned. The ground taken by the Assistant Excise and Taxation Commissioner for the imposition of penalty is therefore inconsistent with the provisions of law. The validity of this action can will be challenged by the queriest by way of an appeal under section 20.

Q: We are engaged in the business of iron and steel goods in Himachal Pradesh. The process employed by us in our factory is drawing wires from steel wire rods. Kindly clarify if wire rod is purchased from within the State of payment of sales tax, whether wire drawn out of such wire rod would again be liable to sales tax in the State?

— Gautam Pandey

Ans: The issue raised by the queriest is fully covered by a Judgement of the Supreme Court of India that came to be delivered in the case of Telengana Steel Industries V. State of Andhra Pradesh, (1994) 93 STC 187. In this case it was held on identical facts that a different commercial product is not obtained as a result of the process of drawing wires from steel wire rods and therefore this process is not a manufacture. It was also held that where the wire rods purchased by an assessee has suffered sales tax in a particular State, steel wires produced out of it could not be subjected to tax once again as wire and wires rods are not different commodities within the meaning of sub-item (XV) of item (IV) of section 14 of the Central Sales Tax Act, 1956. It may also be clarified in this context that section 14 of the Central Sales Tax Act, 1956 declare these commodities to be special important and according to section 15, no declared goods can be subjected to tax twice over.

By K.R. Wadhwaney
Airline initiates austerity drive

THE government has decided not to increase fares of domestic sector to secure continued “patronage” from the influential section of society.

Indian Airlines has axed unviable flights and embarked upon several other austerity measures, including closure of booking offices which have not been generating sufficient business.

Mr P.C. Sen, airline Chairman and Managing Director, feels that sizable amount may be saved by entrusting the work to handling agent instead of incurring a huge amount in maintaining booking offices at several places.

While slashing its publicity and sales budget, airline officials are of the view that the exercise of attending conferences and seminars abroad may be reduced to effect saving. The airline is also reviewing the expenditure on the accommodation provided to the flight crew when away from their headquarters.

Defaulting airlines

Almost all private operators have been guilty of evading taxes. The Parliamentary Standing Committee has viewed it as a very unhealthy trend.

When the skies were opened up to private operators, many jumped in the bandwagon. Soon operators realised that running an airline was not any easy affair. Since then, many have discontinued their operations without clearing outstanding dues.

Two airlines — Jet Airways and Sahara — have been expanding. They have been inducting new aircraft. This is laudable. But what is disturbing it that both of these airlines owe to the government taxes amounting to several crore.

The committee also feels that the Civil Aviation Ministry has been adhering to two sets of rules — one for Jet Airways and Sahara and another for others.

Meanwhile, Jet Airways will introduce the next generation of Boeing 737-800 aircraft on some of the busy routes replacing the existing Boeing 737-400 aircraft from September 28. Jet Airways is the first airline in South East Asia to operate 737-800 aircraft.

But the point is the airways has funds to expand its fleet but it refuses to pay dues outstanding against it for years. Why is not government acting in the matter? This is baffling, according to experts.

By K. Garima
Turnround next year?

The two-wheeler industry has posted a strong, yet declining growth rate in the past three years. Industry experts expect the growth rate to recover next year led by a rebound in scooter sales.

It is expected that the motor cycle segment will record the highest growth rate overall. This recovery scenario is based on expectations of an improvement in consumer confidence and expectations of a gradual sustainable economic growth.

Hero Honda
Hero Honda has a cutting edge on account of its technological expertise, owing primarily to its association with Honda Motors, its sales and distribution capability, skills in niche marketing and financial strength. One perceived weakness that this company has is in its cost structure, though this is less of a concern when seen in the light of the shift within the industry towards four stoke technology, an area in which Honda has demonstrable strengths. It is expected that Hero Honda will continue to expand its market share in the motor cycle segment, though at a slower pace than in the past and enhance its market share from 36.2 per cent to 37.2 per cent by the year 2000.

Bajaj Auto
Based on current forecasts, Bajaj Auto’s earnings growth over the next year will fall short of its three major rivals in the two wheeler industry, though the underlying trend in earnings is expected to improve. This company scores highly over its rivals in the terms of cost advantage, sales and distribution capability and financial strength, but lags the competitive edge in terms of technological expertise.

With tough competition emerging in new products and stronger earnings growth prospects elsewhere there could be continued slippage in Bajaj’s market share on the back of continued market fragmentation. Yet, given the company’s inherent strength coupled with the fact that its competitors have been at the receiving end of the last Union Budget, it should not be too long before this company bounces back.

TVS Suzuki
Based in the south, TVS Suzuki has been one of the major beneficiaries of the boom in the automobile industry. The company is a manufacturer of scooters, motor cycles, and mopeds. Its venture into the manufacture of scooterettes, which is a hybrid version of a scooter and a moped, resembling a scooter but below 65cc has been a great success with the introduction of its TVS Scooty. TVS Suzuki was immensely benefited by the two wheeler boom in the south which was reflected in the company’s financial highlights. On the financial front, the company has fared satisfactorily over the years. Its future plans include ambitious plans which will enable the company to enhances its bottomlines along with its capacities. Overall, TVS Suzuki appears to be a company with sound fundamentals and given these factors, its prospects in the medium to long term should prove satisfactory.

LML
LML, the second largest player in the two wheeler market in India has a 29 per cent share in its segment. The company has been in news lately due the tiff between the two joint venture partners, the Singhanias and the Piaggio’s. However, on the financial front the company’s performance has not yet been been affected.

The company’s present manufacturing capacity is 4,50,000 scooters and by the end of this year, it plans to increase the production to 6,00,000 scooters. LML is launching four motor cycle models in 99 for which it has tied up with a Korean company for technology. The company also plans to launch 60 cc scooters and 75 cc scooters this year. Though the management claims that this controversy would not effect introduction of new models, further technology upgradation by Piaggio is unlikely until the controversy lasts. This in turn could affect its growth prospects.

Amtrex
AHMEDABAD based Amtrex Appliances Ltd, is a well based player in the airconditioner industry. The key assets of the company are its innovative technology and a good market position. On the financial front the company’s performance has been moderate. Although the company does not have any expansion plan, it is making a beeline for the foreign market. It plans to target the Middle East and West Asian market through local dealers. It is also commencing its operations in Sri Lanka and Bangladesh. Thus the company’s future prospects seems reasonably bright.

BHEL
WHILE the power and capital goods segments witnessed negative growth, Bharat Heavy Electricals Ltd (BHEL) has consistently outperformed its contemporaries. The capacity utilisation across all segments of BHEL was over 70 per cent during 1997-98. With depreciated plants and a phenomenal cash generation of Rs 950 crore per annum, BHEL is in a position to meet its recurring capital investment of Rs 100 crore per annum over the next few years, meet annual debt repayments of Rs 140 crore and even provide suppliers credit. On March 31, 1998, BHEL had an order book of Rs 10,000 crore, of which fresh orders aggregated Rs 5853 crore. BHEL expects a turnover growth of 10 per cent during ‘98-99 with a matching increase in profits. Notably, about half of these orders will be executed during ‘98-99. Considering these facts, it would be worthwhile for investors to watch this company closely.

Hi-tech Drilling
OWING to a significant increase in exploratory activity and an increase in crude prices over the last few years, the rates for rigs have shot up by 100 per cent. Hitech Drilling is engaged in providing drilling and related services. The company has two offshore rigs, Hitdrill-I and Marine 201.

The offshore drilling rig Hitdrill-I is operating for the ONGC. Marine 201 continued to perform drilling operations for Command Petroleum which had hired it in November ‘95.

The Tata group has a 55 per cent stake in Hitech Drilling while institutions and FIIs hold 7 per cent of the Rs 20.32 crore equity base. The good run for the company is likely to continue for a couple more of years with the management expecting the demand for drilling rigs to remain high both in India and abroad.

Furthermore, there could be an improvement in the profitability margins as the level of expenditure on stores, spares and maintenance is likely to come down. Overall, the prospects of this company appear to be quite promising.

Reliance
MUMBAI, Sept 27 (PTI) —Reliance Industries Limited is negotiating with the royal family of a Gulf kingdom for the purchase of a Boeing 737-200. Official sources said here today that RIL officials had sought the approval of the Director General of Civil Aviation to find out if the import or purchase was within the guidelines of the regulatory body.

SEBI probe
NEW DELHI, Sept 27 (PTI) — The independent panel probing the alleged price rigging of select scrips by Harshad Mehta and others will submit its report to SEBI this week. When contacted SEBI Chairman D.R. Mehta refused comment saying: “Just wait for a few days.”