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| Monday, June 25, 2001, Chandigarh, India   
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CAG pulls up FCI for weak internal audit
Bearish trend may continue
Indian IT sector fears US slump impact
Drawback issue: bicycle makers threaten stir |
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WB hikes India’s lending to $2.5 bn Offer price for Castrol acquisition ‘justified’ Allegations on A-I selloff rejected Mill workers’ protest
Q: Please enlist the deposit/investment scheme, interest of which are exempted under Sec. 80-L, and upto which extent. Whether interest from undernoted deposits/securities are exempted under Sec. 80-L. Deposits with Bank, NSC, NSS, KVP, Monthly income scheme of post office. Recurring deposits with post office, Intt. on tax saving bond of ICICI/IDBI.— Ajay Sharma, Una.
Videocon opposes
fleet expansion
How insurance firms dupe unsuspecting clients
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CAG pulls up FCI for weak internal audit
New Delhi, June 24 “Internal Audit System was not adequate and commensurate with the size and nature of the business of Corporation. As a result of these weaknesses, there was no assurance to external auditors regarding the adequacy and effectiveness of internal controls and reliability of its financial statements,” CAG said in its recent report. Pointing out that no credit balance available with the branch of banks had been transferred to Zonal cash credit account on the same day, CAG said, “this resulted in loss of interest income to the corporation.” It said no controls existed to ensure timely renewal of securities and Fixed Deposits receipts and National Savings Certificates worth Rs 2.86 crore were held by the FCI and allowed to expire. On fraud control, it said, “FCI did not have a clearly laid policy since there was no Vigilance Manual specific to it and based on information provided, reasonable assurance on the adequacy measures to control fraud could not be drawn.” CAG said FCI’s finance division lacked information on the pending court cases, CBI cases, cases registered with state police and cases being processed for internal disciplinary action. “Therefore, proper treatment of such cases in accounts could not be ensured,” CAG said. CAG said the Rs 224.55 crore claims receivable by FCI was over-stated by Rs 20.65 crore due to inclusion of old claims aggregating to Rs 17.68 crore lodged on various shipping agents. Another Rs 2.97 crore claims lodged on millers towards penalty at half of the economic cost of 17,607 metric tonne (MT) of paddy in the crop year 1994-95 was “misappropriated” by them, it said. On the consumer subsidy, it said the Rs 7153.41 crore on foodgrains reimbursable by government included subsidy claims of Rs 18.69 crore on account of deterioration in the quality of stock which was not specifically covered by government’s instruction on the subject. In procedures prescribed for write-off of transit and storage losses, CAG said, there was a need for fixing norms so that individual receipts relating to consignments might form the basis for applicability of norms.
PTI
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Bearish trend may continue WORLDWIDE market crashes, which are now an everyday occurrence, remind us of 1998. Markets throughout the world crashed three years ago, as part of the contagion emanating from East and South East Asia. The contagion spread to Russia and Brazil, and later threatened to engulf the US markets. This time the contagion is spreading outwards from the USA. There is, however, one big difference. In 1998, the US economy was very strong and there was nothing wrong with the fundamentals. Now, profit warnings are the routine because America is already in recession. Last time, Mr Alan Greenspan, Chairman of Federal Reserve Board, led a wave of interest rate cuts and the USA became the engine of world growth. But this time that engine is huffing and puffing. Our own economy is also not in a good shape. Moreover, the markets have recently left everybody shattered. Besides the destruction of wealth, the meltdown in markets has a negative impact on real economy. It is possible the repercussions will be on industry, jobs and incomes. Already, the IT industry has stopped fresh recruitments and salaries have begun to taper off. It will not be long before our own software majors begin to layoff employees if the slowdown in US markets continues for another two to three quarters. On the corporate front, the portal Arzoo.com, promoted by our Sabeer Bhatia has decided to close shop. Tata Engineering (Telco) has declared a mammoth loss of Rs 500 crore and the banking giant State Bank of India (SBI) has declared that its net profit for the year 2000-2001 is down by 22 per cent compared to last year. It was the end of an era in the stock markets this week when the last session of badla was held at the BSE on June 23. The NSE has still one more session of ALBM on June 27, which will have a carry over period of three days. As for the market, it has continued to lose ground with lacklustre volumes, worsening depth and gradual fall in the upward momentum. Some of the notable losers during the week were Global Telesystems (down by Rs 51), Himachal Futuristic (down by Rs 28) and DSQ Software (down by Rs 16). The market is showing inability to rally. Fresh long positions should not be initiated and any rally should be used to exit from such positions. In another fortnight the results of the first quarter will start trickling in. Those of the software sector are not expected to be very encouraging, with the slow down spreading to Europe as well. So any buying in this sector should be contemplated only after the announcement of results. Meanwhile, investors can go bargain hunting in the old economy stocks, some of which are quoting at heavy discount to their intrinsic value. One such stock is Godrej Consumer Products Ltd (GCPL). It is demerged consumer product entity of the erstwhile Godrej Soaps. GCPL boasts of a lean balance sheet, professional management, powerful brands and a good distribution network. The company owns some of the well-known brands like Cinthol, Fairglow, Ezee and Godrej hair dye. Godrej Consumer is also
increasing its distribution network to nearly one million outlets. Besides, the company derives 87 per cent of its turnover from consumer products, and this is growing at the rate of 25 per cent per annum. Despite all the pluses that the company has, it is still quoting at seven times its earning. So investors may grab this scrip, which is quoting at Rs 50, with a one-year perspective.
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Indian IT sector fears US slump impact Bangalore, June 24 As the first "knee-jerk reaction" quarter heads towards an end, those who believed their fortunes would turn around with outsourcing orders from the USA now say the upturn "should not be expected before April-June 2002." The USA is the world's biggest IT market. As the gestation period for outsourcing projects gets extended by four to six months against the earlier standard of 45 days, the Indian industry is "feeling a clear pressure" on rates and, consequently, its impact on margins. "The rate pressure is beginning to be seriously felt and its subsequent impact on margins is bound to happen," Mr Ravi Chandar, managing director, Feedback Services, which conducts market studies for IT companies, said. "The worst hit will be smaller companies that did not have a good business model and are, therefore, facing a funds crunch. This is how the story of layoffs in India will not end in a hurry," he said. Added Mr Som Mittal of Digital India: "This quarter would reflect the knee-jerk reaction to the slowdown. I don't think the industry expects outsourcing to take place before the third or fourth quarter. Companies that are restructuring their businesses would take another quarter or two to look at outsourcing their requirements." "What is key and critical to their businesses, either in the USA or Europe, are still coming through with longer cycle time for decision making," says Mr Krishna Kumar, vice-chairman and president, Mind Tree Consulting. "The scenario will become more than grim for those organisations that did not create marketing infrastructure during boom time and depended too much on dotcoms and failed to create revenue sources to fall back on," he observes. And those companies that have revenue sources to fall back on are competing like never before. "The number of bidders for one contract reminds one of the tenders called for the supply of hardware," says Mr Kumar. In the past six months, the number of bidders has increased from two to six. As a reflection of the situation, a medium-sized company is competing with the biggest of companies for contracts worth less than $1 million. There are also competitors at different levels of value add from countries like Ireland and even Lithuania. "At the end of the day, more people will look at the value addition. Timing, delivery and quality would be major factors for projects," says Mr Anand Sudarshan, CEO, Planetasia.com. In the bargain, it will be the quality of human resources that would come into focus. This is where, both Mr Chandar and Mr Kumar say, the worst-hit would be those with limited skill sets or the "diploma holding variety or those who have passed out of the numerous IT schools."
IANS
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Drawback issue: bicycle makers threaten stir Ludhiana, June 24 The United Cycle & Parts Manufacturers Association, a body of more than 1500 manufacturers, Engineering Exports Promotion Council, All-India Cycle Association and Engineering Exporters Associations of India participated in the meeting. Mr D.S. Chawla, President, United Cycle and Parts Manufacturers Association,
said,' The government’s decision to cut down the drawback duty has hit the bicycle industry comprising of more than 7000 industrial units, which are giving employment directly or indirectly to more than 10 lakh persons in the country. The industry is already struggling to come out of the rough weathers by its own efforts as the Chinese manufacturers are threatening to enter even the domestic market.’’ While regretting the government’s decision, Mr Satish K. Dhanda, Vice Chairman, Engineering Export Promotion Council, said, ‘‘The targets of bicycle exports will not be achieved if the government does not review its decision as it would be almost impossible to supply material at the old rates. The rates are settled in advance with the buyers. The exporters will suffer heavy losses by exporting at the new rates.’’ Mr Chawla pointed out that the cycle and cycle parts exports had reached about Rs 700 crore against Rs 500 crore during the past year. The industry that had recently sent a delegation to China to study their strategies, has tried to face the competition by its own efforts, but the government seems to ruin the industry. He added that earlier the duty drawback was available on the ‘per unit’ by which up to 78 per cent of the duties were reimbursed. But, now by linking the duty drawback to value besides maximum cap value, duties refund will be less than 50 per cent thus making our exports unviable. The speakers urged the government to give full refund of customs and excise duty paid by the manufacture of bicycles and bicycle parts. Otherwise, the industry will not only loose its global share, but, the matter of survival may also arise. Mr Lajpat Rai, member Parliament, and Mr Satpal Gosain, Deputy Speaker, Punjab Vidhan Sabha assured the industry to take up the matter with the Finance Ministry. The industry has decided to strongly place the case with the Finance Minister so that the matter may be sorted out in the interest of the country. The association warned that otherwise, the bicycle industry will have no other option, but to be on roads to show their resentment which will lead to a great revenue loss to the government also.
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WB hikes India’s lending to $2.5 bn Washington, June 24 The amount is more than what India received before its 1998 nuclear tests. In 1999, following U.S. and Western sanctions against India, the Bank cut to half New Delhi’s developmental funding. That year, New Delhi received only $1.05 billion as against $2.1 billion in 1998. India’s nuclear tests were conducted a month before the end of the World Bank’s fiscal year 1998. Therefore, lending for that year remained almost unaffected at $2.1 billion. But in 1999 it came down to $1.05 billion. Lending began to pick up last year when it touched $1.8 billion. This year, in fiscal 2001, it is $2.5 billion. According to informed sources, the U.S. has of late begun to abstain from opposing loans for India’s development projects, including those relating to infrastructure, at the bank’s executive board, permitting their clearance.
IANS |
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Offer price for Castrol acquisition ‘justified’ New Delhi, June 24 The open offer for Castrol India was scheduled to begin on January 29 and close on February 28 this year, but ran into rough weather when market watchdog SEBI asked BP to revise the offer price to Rs 350 per share. BP appealed against this SEBI directive to the SEBI Appellate Tribunal (SAT) and on rejection of this appeal it had now moved the High Court. “We believe Rs 311.91 is the correct price, not Rs 350. SEBI is using March 14, 2000 as the date for price calculation whereas we have used July 7 as the date to arrive at Rs 311.91 per share,” Associate President of BP Clyde D’Mello said here adding he hoped the HC would soon hear the case. Meanwhile, Delhi-based Abhishek Dalmia, who had earlier written to SEBI on behalf of Castrol India shareholders asking the latter to expedite the offer, today rejected D’Mello’s claim of Rs 311.91 being the “justified” price. “The takeover code clearly says the offer price should be calculated from the date a company says it will acquire stake in another company. SEBI is insisting on the higher price of Rs 350 keeping this very provision in mind, and this also protects shareholder interest,” he said. Dalmia holds about one per cent equity of Castrol India.
PTI |
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Allegations on A-I selloff rejected New Delhi, June 24 Hindujas had recently stated that the bogey of the Bofors case, in which three Hinduja brothers have been chargesheeted, was being raised by certain vested interests as a matter of security concern to scuttle the process or restrict it to a single bidder, Tatas, in combination with the Singapore Airlines. Samajwadi Party leader Amar Singh had alleged yesterday that the government had made all arrangements to keep Hindujas out of the race in view of their alleged involvement in Bofors pay off case and hand over the prestigious airline to Tatas.
PTI |
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Mill workers’ protest Mansa, June 24 Mr Baldev Singh Gurne and Ms Bant Kaur, leaders of the workers’ union, went on fast unto death as the district police picked Mr Beant Singh Kainth, president of the union, on June 10 and Mr Binder Singh Gurne and Mr Ajmer Singh Kotli on June 18 and admitted them to hospital. They were on an indefinite fast. |
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by R.N. Lakhatia Q: Please enlist the deposit/investment scheme, interest of which are exempted under Sec. 80-L, and upto which extent. Whether interest from undernoted deposits/securities are exempted under Sec. 80-L. Deposits with Bank, NSC, NSS, KVP, Monthly income scheme of post office. Recurring deposits with post office, Intt. on tax saving bond of ICICI/IDBI. — Ajay Sharma, Una. A: The income in respect of investments and deposits which will qualify for tax deduction u/s 80L are interest on Government Securities, interest on National Saving Certificates, interest on Post Office Time Deposit Account as well as interest from Post Office Recurring Deposit Account and NSS Account, Savings Bank interest from a bank, fixed deposit interest from bank as well as Co-operative Bank, etc. These are the important investment items, the interest on which will qualify for tax deduction u/s 80L. Out of the items mentioned by you the interest of all items qualify for deduction u/s 80L with the exception of KVP. Thus, interest on KVP does not qualify for tax deduction u/s 80L. Q: I am a retired Army officer, and drawing disability basic pension Rs 651 p.m. addition to my service pension. My disability pension pertains to multi-injury case with femur fractured and operated upon during my
service. On retirement my disability was assessed 50% by medical board and sanctioned by Ministry of Defence. I want to know 1. How much income tax rebate I am entitled for year 2001-02. 2. Under which section of Income Tax Act this rebate is authorised? 3. Rebate is authorised monthly or yearly? Capt Atma Singh Sandhu (Retd.), Ludhiana. Ans: The entire amount of disability pension will be fully exempt from income-tax in terms of communication dated 6.6.2000 issued by Government of India, Ministry of Finance, Dept. of Revenue, Central Board of Direct Taxes vide letter No. 200/51/99-ITA-1. This letter was written by the CBDT to Director (Pension), Govt of India, Ministry of Defence, Deptt. of Defence, New Delhi. As per this circular, the entire disability pension will be fully exempt from income-tax. It is stated in the said letter that the entire disability pension i.e. disable element and service element will be exempted from income-tax. Q: Myself and my wife are salaried persons. We have gifted Rs 70,000 and Rs 50,000 (out of our savings) to my sister on her birthday. My question is that: 1. Whether there is any tax liability on us. 2. Whether we should show the amount in our returns. — K.R. Garg, Ludhiana Ans: There is no tax liability on you as well as on your wife in respect of gift to your sister from your savings. It is also not compulsory to show the gifted amount in your tax return. |
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by K.R. Wadhwaney Videocon opposes fleet expansion MINISTER for Civil Aviation Sharad Yadav has said Indian Airlines will induct 10 more aircraft, including six 50-seeter turboprops for feeder routes. To this,
Videocon, one of the bidders, has protested. According to ministry officials, it has every right to bring about changes in IA including fleet expansion as long as it is in command. Videocon holds different view. It says there should not be major changes in assets and liabilities in the data provided to it. This confusion may lead to further delay in the process of
disinvestment. Turbulent weather persists in Air India, which is embroiled in litigations. The Minister has again said there will soon be a full-fledged Managing Director and the name of the appointee will be sent to the appointment Cabinet Committee for clearance. According to the Minister, there are now 11 international airports instead of five. It is one thing to accord international status to the airports but it is quite another to have enough facilities to handle traffic. Diverting traffic from busy airports, like in Mumbai and Delhi, may be a good idea but are new airports ready with installation of ultra-modern gadgets? Any minor lapse can prove suicidal. Are these airports ready for wide-bodied aircraft to land and take-off? Have runways be adequately lengthened? Cosmetic touch-up has been given to the “Maharaja” with a view to presenting profitable budget for this year. Aviation analysts say it is nothing but jugglery with figures to say that the estimated budgeted profit for the fiscal year 2001-2002 will be of 30-40
crore. In last financial year, AI had shown loss of Rs 180 crore. It closed the last fiscal with a net loss of Rs 28
crore. No one in Air India or the Ministry has explained how the national carrier will make profit of Rs 30-40 crore in the current year. Even exemption of sales-tax on ATF will not help the national carrier make so much money. The tenders for the dry leasing of Airbus-310 have not yet been floated. Only after new aircraft join the family and only after flights start operating on many unutilised routes can there be hope of augmentation of revenue. Until so many ifs and buts remain, it is merely a tall claim to say that AI will show Rs 30-40 crore of profit before the year ends in March 2002. New revenue system Air India has introduced the Automated Revenue Management System (ARMS). The system has been procured from Pros Revenue Management Inc (USA). |
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by Pushpa Girimaji How insurance firms dupe unsuspecting clients ‘BE prepared to meet the expenses of sudden and unexpected medical emergencies. Take a mediclaim insurance policy’, say insurance
companies offering this policy. Mrs Meepakshi Anand, a resident of Bareilly, was one of those who followed this advice. She not only took the policy in May 1999, but renewed it promptly in May 2000. And on June 15, 2000, while visiting her parents in Dehradun, Meepakshi suddenly experienced severe abdominal pain. A doctor was called in, but the treatment did not help. As her condition quickly deteriorated, she was shifted to a surgical clinic late in the night, where her condition was diagnosed as ‘ruptured ectopic gestation’ requiring emergency surgery to save her life. If a copy writer were scripting a mediclaim advertisement, he or she would have probably shown a beaming Meepakshi coming out of the hospital and receiving a cheque from the insurance company towards the reimbursement of her medical expenses. But Meepakshi’s experience with the insurance company turned out to be quite different. She sent the claim form, submitted all the relevant papers and bills adding up to Rs 35,347 and when got no reply, sent several reminders, only to be told in October that her claim had been rejected. The reason given by the insurance company was that her treatment attracted an exclusion clause! Ironically, Meepakshi’s treatment at the surgical clinic took 12 days, by the end of which she battled and emerged victorious. But her struggle with the insurance company over her claim continues even after 12 months! According to National Insurance, Meepakshi’s claim cannot be entertained because in the opinion of medical experts, the treatment undergone by her related to pregnancy and clause 2.1.10 of the policy specifically excluded expenses incurred towards the treatment arising from or traceable to pregnancy. Exclusion clause 2.1.10 of her mediclaim (Hospitalisation and domiciliary hospitalisation benefit) policy says: “treatment arising from or traceable to pregnancy, child birth including caesarean section”. Now a general reading and understanding of this clause would mean that the policy does not pay for reimbursement of medical or hospitalisation expenses towards childbirth, including caesarean section and also may be expenses incurred towards regular check-ups, consultation, etc, during the normal course of pregnancy. Even here, I would expect a good medical insurance policy to cover emergencies that may not be anticipated or expected. After all, that is the very purpose of a medical insurance policy. Now ectopic gestation or ectopic pregnancy as it is commonly referred to, is a serious medical problem where a fertilised egg or ovum gets implanted outside the uterine cavity, the most common site in such case being the fallopian tube. Now, only the uterus contains the space and the nutrient rich tissues that are required to nurture a fertilised ovum to develop into a full-grown foetus. So if the fertilised egg gets implanted anywhere else like the fallopian tube, it cannot progress to full term or produce a viable foetus. Such ‘pregnancy’, medical experts say, rarely lasts more than a few weeks. In fact in such cases, since the fallopian tube is narrow, the growing fertilised ovum causes the tube to rupture. Such a situation requires immediate hospitalisation and surgery because the patient bleeds into her abdomen and if not treated in time, may collapse and die of haemorrhage. In fact the use of the word ‘pregnancy’ in such cases is an aberration because childbirth is not a natural corollary of such implantation of the fertilised egg into the fallopian tube. It is basically an unforeseen medical problem which is potentially dangerous and if not treated as an emergency, fatal. How can this medical emergency which is neither expected nor anticipated, be linked to pregnancy and childbirth in the exclusion clause to deny the benefits of an insurance cover to a woman? If you see the dictionary meaning of pregnancy, it denotes the period during which a developing foetus is carried within the uterus or the womb till childbirth. Obviously in Meepakshi’s case the insurance company either did not apply its mind to the case or preferred to exploit the word ‘pregnancy’ commonly used to describe such a problem to link it to the exclusion clause and deny her the benefit of the insurance policy! A policy of insurance is a contract of utmost good faith, requiring both the parties to the contract to be truthful and honest. The insurers in addition are expected to be fair, just and reasonable in their dealings with policy holders, particularly in drawing up and interpreting the terms and conditions of the contract. Consumer courts, and more recently, Insurance Ombudsmen, have in fact repeatedly told insurers this. Obviously, the message has not gone home. Meepakshi’s case is extremely important because on it rests not only her right to a fair deal as a policy holder, but also that of thousands of women like her. Meepakshi is aware of this and says she will not allow the insurer to take undue advantage of an exclusion clause. |
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