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Monday,
February 17, 2003, Chandigarh, India  
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Dollar deals pump up real estate
J&K minister woos Punjab industry
US-Iraq row hits
pre-Budget rally |
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Review standards for consumer safety
Wipro has long-term potential
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Dollar deals pump up real estate Ludhiana In a city like Ludhiana, where a 500 square yard house in posh Sarabha Nagar could barely fetch around Rs 65 to 70 lakh, a year or two ago, the asking price has gone up to Rs one crore. Despite the hike, still there are buyers out there. Even before the NRI meet in Delhi, real estate had started showing signs of upward mobility, though mainly concentrated in the outskirts of most towns and cities as these areas provides affordable plots. But very recent trends have also put expensive properties in posh areas into the list of hot buys. The logic behind the sudden spurt is simple explains Mr. Rajinder Singh, himself a real estate agent when in India and a grocery store owner when in Toronto, "With the government of India taking a decision to offer dual citizenship and the Punjab government policies aimed at protecting the property interests of NRI's, more people are now willing to invest in real estate in India both for emotional reasons and for better investment returns". "Earlier NRI's holding foreign passports could only buy property on benami names or on the names of relatives, many people shied away from this. But once the dual citizenship comes around, many more people would like to invest in India — the country of their origin for both emotional and financial reasons. A lot many people have already started doing looking around for good properties", he adds. In the last budget, the Finance Ministry made all deposit schemes for non-resident Indians full convertibility and the Finance Minister announced that the schemes that do not offer full convertibility to NRIs would be discontinued from April 1, 2002. The government has lived up to its promise and today NRIs can take back their money without any questions asked. The existing balances in the Non-Resident (Non-Repatriable) rupee accounts have been allowed to be credited on maturity to convertible NRE account. This has boosted the real estate business. What has helped further is that the NRIs are free to repatriate in foreign currency their current earnings in India such as rent, dividend, pension, interest and the like based on appropriate certification. Explaining the economic advantages of moving investments to India, New York based Mr Kartar Singh says "A checking account in America fetches you only 0.25 per cent interest, while most saving bank deposits in India are still offering between 5 to 7 per cent making it much more sensible for people to park their surplus money in India till they actually need to use it. Given the inflation and its link to real estate, it is much wiser to buy a piece of property that is bound to appreciate with time rather than simply look for interests that are bound to come down and settle at the international level". A retired Air Force Officer, Mr Lali Sandhu, currently engaged in agro-forestry at Ludhiana says that the real estate business in the city is not picking up as was expected due to lack of interest in developmental work by the civic authorities and the district administration. Citing specific examples, he says “areas like Shaheed Bhagat Singh Nagar and Janata Enclave on the Pakhowal Road have started commanding huge premium due to the development in the area, similarly polluted areas like Urban Estate to have shown upward trends in real estate, but one of the most environmentally congenial areas like South City has no buyers because the promoters of the colony have not lived up to their promises of providing infrastructure and the administration has failed to fence and provide lighting along the canal that leads to the colony. The death of a LIC officer whose car fell into the unfenced canal has further discouraged people from buying property in this area". The Chief Patron of Punjab Property Dealers and Colonisers Association, Mr. Pritam Singh Bharowal, however, does not consider NRI investment to be the main reason for movement in the property prices. "NRI investment is still negligible. A substantial business comes from the middle classes wishing to buy their own homes rather than rent. The lowering of interest on lending to an all time low of around 8.25 per cent has provided the real push". This he adds "can be corroborated from the fact that rents too have gone down in a city like Ludhiana. Why would anyone rent a place if he or she could buy a house that has a loan instalment of almost the same amount as the rent". According to him, even today most of the investment in residential properties comes from employed couples, who can get easy term loans and commercial properties are bought by small business houses wanting to open branches in other areas of expanding cities. Despite the movement in real estate business, flats have somehow not attracted much attention from among the buyers, perhaps because of the poor quality of material used by builders such as the Improvements Trusts, Housing Federations, etc. In Ludhiana city, the only flats that command some premium over the allotted price are the ones located centrally. The flats on the outskirts of the city are going a begging, while plots in the same neighbourhood have increased in value and demand. For example, Shaheed Bhagat Singh Nagar has emerged as one of the most sought after areas in Ludhiana, but Housefed flats in this area yet to be completely sold out, many original allotees are willing to resell at par. Similarly there are no buyers for the Punjab Urban Development Authority (PUDA) Middle Income Group Flats in Urban Estate. The only flats in demand are the ones on Pakhowal Road, Maharani Jhansi Road, Bhai Randhir Singh Nagar, Raj Guru Nagar, etc. |
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J&K minister woos Punjab industry Ludhiana, February 16 This was disclosed here today by the J&K Minister for Industries, Mr Ramman Mattoo, talking to The Tribune. He was here yesterday to interact with the industrialists. The meeting was organised by Mr Manjeet Singh, Vice-President of the Ludhiana Management Association (LMA). The minister said the J&K Government was introducing a new industrial policy soon with focus on information technology, biotechnology, food processing, furniture and other sectors. To a question on how the government should provide the subsidy to the industry lest it should be misused, he clarified that the subsidy would be provided only on the production. Mr Mattoo also allayed the apprehensions of the industrialists about the situation in J&K. He pointed out the area earmarked for the industry in the Jammu region was absolutely free from militancy. The government would always prefer the Punjab industry since Punjab had a locational advantage as it was only about 4- hour run from here.
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US-Iraq row hits pre-Budget rally The possibility of war has affected the market. It has hardly moved during the month of the Budget. Though there are still seven trading sessions left before the Budget, the market has hardly seen any buying till now. This is the first time since 1995 that we have seen equity markets plunge during February following a miserable January. The mood in the market remained bearish during the past week as fears of a possible US-Iraq conflict preoccupied the trading sentiment ahead of the UN chief weapons inspector’s crucial report on Iraq’s weapons status to the UN Security Council. For the week, Sensex shed 56.36 points to 3,223.41. But hopes of an investor-friendly Budget for 2003-04 are likely to prompt investors to take positions in select old economy stocks in the coming days. Here is an analysis of different sectors’ expectations that are likely to move post Budget. Automobiles Indications are that the excise duty on passenger cars is likely to be reduced from the current peak slab of 32 per cent to 28 per cent. The Ministry of Heavy Industry has made a recommendation to cut the duty by 8 per cent. The Kelkar Committee has recommended an excise duty of 20 per cent for the automobiles sector. The automobile industry has also recommended a two-phase reduction in duty to 24 per cent in 2003-04 and to 16 per cent in 2004-05 as such rationalisation will help improve a demand for passenger cars. In case the duty is cut in the Budget. Telco will be the major beneficiary on the bourses. Steel The steel industry wants the government to let the import duty on steel remain untouched at 40 per cent, it is in line with the global trends. At the same time the industry, which is coming out recession, wants the government to generate more demand in the country by focusing on investment in infrastructure. A cut in excise duty on passenger cars is also going to augur well for the steel industry as the demand of passenger cars will pick up. The company to watch out in this sector is Tisco. Cement The cement industry expects the Budget to stimulate demand through initiatives on housing and infrastructure. On the highway front, manufacturers feels that concrete roads should be made compulsory for more than two-lane national highways. They are also pressing the government to continue with the specific rate of excise on cement. The industry is also seeking a duty relief on inputs like non-coking coal to 5 per cent to bring it on a par with coking coal and curb the rising production cost. The stocks to keep watch are ACC, L&T and Gujarat Ambuja cement. Pharma Pharma companies have sought concessions in the fields of R&D, customs duty rationalisation and duty waivers for life-saving drugs. They are also hoping for VAT to be reduced to 4 per cent. Major beneficiaries will include Ranbaxy and Dr Reddy’s Labs. Coming fortnight In case there is a war between the USA and Iraq, the market’s future course will be decided by this major event. The weekly closing of the market just below the 40-weekly moving average with an engulfing bear pattern is an indication that the downtrend might continue for a longer time. The downmove will be further confirmed if the index breaks the 3180-90 support level that carries great significance from a medium-term perspective. |
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by Pushpa Girimaji Review standards for consumer safety First comes the results of tests on bottled water conducted by the Centre for Science and Environment (CSE), showing pesticide residues and the comment of the CSE Director that "The BIS norms are ambiguous, weak, and formulated in such a manner that pesticide residues will remain undetected even when they exist in water samples". Next, the Minister for Science and Technology, himself a scientist, gets the opinion of experts at the Department of Science and Technology and writes to no less an authority than the Prime Minister himself on the need for more precise standards in respect of bottled water. The Bureau of Indian Standards reacts quickly by calling a meeting of its Technical Committee that formulates and reviews standards and announces upgradation of its standards for pesticide residue limits to comply with stricter norms as stipulated in European Union regulations. So far, so good. Anyone who is aware of the process involved here knows that this is only the first step. Since these standards for bottled water have been made mandatory under the Prevention of Food Adulteration Act, the revised BIS standards need to be incorporated as amendments in the PFA Rules and that calls for notification in the official gazette, giving the manufacturers time to fulfil the requirements under the amended rules. And this is the time manufacturers get active- they write in their objections to the Ministry of Health, they lobby with ministries such as food processing, industry, to take up their cause. They try to get politicians on their side and they also seek the help of the law courts to challenge the amendments. If that fails, then they use the law courts to at least stall the implementation saying they require more time. Their common refrain is that standards should reflect the "Indian reality" — a euphemism for lower standards. But this time ironically, it was the standards making body that initiated the lobbying process and against its own revised standards. If the BIS was convinced that its earlier standard was adequate to render the water safe and that it did not require any improvement, it should have said so right at the beginning with scientific data to back it or it should have called a meeting of experts from the government as well as the non-government sector, including the CSE, asked them to make presentations on the basis of scientific data, discussed the issue threadbare impartially and come out with the final verdict. That would have been the right approach. However, it does no such thing. It first calls a meeting of its Technical Committee and on its recommendation, revises the standards, announces it and advises the Health Ministry to issue the necessary amendments to their Rules based on the amended standards. Once this is done, it organizes a short seminar of one and a half hours, with participants from various scientific organizations in the country and representatives of the industry and announces immediately thereafter that in the opinion of the experts gathered there, the earlier BIS standards were adequate to protect consumers and did not need any revision! If the intention of the BIS was to allay consumer fears about the safety of bottled water in the market and restore their confidence in the standards making body, it certainly went about it the wrong way. The unfolding events not only added to consumer confusion but also put a question mark on the standards making body's priorities. Fortunately, a press release issued by Union Minister for Consumer Affairs Sharad Yadav the next day clarified that the ministry stood by the revised BIS norms on bottled water. The standards are reviewed every five years, unless any comments are received in between and the standards on bottled water were anyway due for revision in mid 2003. While upgrading the standards in respect of pesticide residue limits, the BIS has also stipulated that the manufacturer has to produce a "no objection certificate" from the Central/state government ground water authority. The BIS should go one step further and recommend the states and Union Territories where manufacturing or bottling units need to be located, on the basis of available data that indicates pesticide consumption by different states. Those that consume the least amount should be the preferred sites. The success of any standards making and enforcing body depends on the trust and the confidence that the public reposes in its standards. The BIS is no exception. The chain of events following the test results of bottled drinking water put out by the Centre for Science and Environment has shaken consumer confidence in the national standards making body. The BIS and the Ministry of Consumer Affairs will now have to take immediate steps to restore it. One of the first tasks in this direction should be to call for immediate review of some of its important standards , such as those that are mandatory and concern consumer safety. Needless to say that the process should be transparent and consumer interest should be the guiding principle behind such independent review and public interest should outweigh the interests of the industry. |
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Wipro has long-term potential Q: Is it worthwhile to buy shares of WIPRO for the long-term. — Karan Mathur, Shimla Wipro was engaged in the business of providing corporate ISP services. Based on a review of this business, the company had decided to discontinue the existing infrastructure based ISP business, but continue with the managed network and remote management services. After the acquisition of majority stake by Wipro, the results of Spectramind e-Services Pvt. Ltd. are now consolidated with that of Wipro effective July 1, 2002, and it is being reported as a separate business segment — IT Enabled Services (Wipro Spectramind). With India-based Offshore initiatives a key priority for global corporations, Wipro is confident of maintaining the momentum in volume growth of the last two quarters in future as well. Wipro is well positioned to take advantage of this opportunity with its wide range of Offshore services offerings for enterprise clients and its depth of R&D skills for the technology clients. On the back of this, the company expects a sequential growth of 56 per cent in Spectramind, its IT enabled services business and a sequential growth of 8.6 per cent in Global IT services. For the fiscal ended March 2002 sales were Rs 3416.2 crore, PBIDT was 32 per cent, net profit was Rs 863.8 crore and the EPS was Rs 37.2. Notwithstanding the fact that its latest quarterly results have failed to enthuse the market, there is undoubted long-term potential in this IT major. However, from a price viewpoint, it might be prudent to await a correction before considering any fresh investments. Q: Please comment on the future financial prospects of BHEL. — Somnath Jha, Solan Bharat Heavy Electricals is returning to a period of robust earnings growth and free cash generation, as its strong order book should drive 9 per cent revenue CAGR over the next three years ( FY 02-05 ) as compared to 3 per cent for the previous three years ( FY 99-02 ). We expect reported earnings to grow 23 per cent, due to operating leverage, an improved business mix and reduced charges for prior-period expenses. The enhanced earnings stability, free cash generation and rising ROE are potential catalysts. BHEL’s Rs 135 billion order book up Rs 10bn from the beginning of the year and equivalent to 20 months of revenue is near its all-time high and looks set to strengthen over the next two to three years. The step-up in power orders (70 per cent of revenue), especially from financially stronger utilities such as the National Thermal Power Corporation, is largely related to “project bunching” after a phase of poor capacity addition. Its industry sector (30 per cent) is also rising from a trough, led by a revival of capex in the oil and gas sector. The order-book build-up has mitigated the earnings risk arising from the inherent lumpiness of BHEL’s business; for instance, the impact on FY04 EPS of a full year’s delay in the award of a 1,000 MW project expected in 4QFY03, will be only 7 per cent. A rise in dividend payout to the 30 per cent norm for profitable PSUs will improve the company’s dividend yield to 4.5 per cent and still leave it with its highest ever cash balance. With its wide product range, competitive cost structure and strong track record. BHEL will be a primary beneficiary of growth in the Indian power equipment market as it is well positioned to handle this hike in power capacity addition. BHEL can potentially deliver 15-20 per cent growth by FY04 — just on account of its recent MoU with ONGC for oil rigs. For the fiscal ended March 2002 sales were Rs 6774.4 crore, PBIDT was 16.6 per cent, net profit was Rs 592.7 crore and the EPS was Rs 24.2. For the quarter ended September 2002 sales were Rs.1289.1 crore, PBIDT was 14.1 per cent and net profit was Rs 108.5 crore. Overall the financial future prospects, appear quite promising. |
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by R.N.Lakhotia Tax liability Q: Please advise me on the following Income Tax problems:- (i) I am a government employee and I have received Rs 75000 as the share of my father on account of sale of shop which was purchased in 1990 for Rs 1,00,000 in instalments. The shop was in the joint name of my father and my uncle. My father has since been expired. Kindly advise whether any part of this payment is taxable? (ii) Rs 25000 has been received on the maturity of fixed deposit which was in the name of my father. Please advise whether the receipt is taxable or not. — Narinder Dewan, Patiala Ans: Apparently you are not required to pay any tax in respect of the sale proceeds of shop inherited by you because after taking into account the impact of cost inflation index, there would be no liability in respect of long-term capital gains. The maturity amount received in respect of bank fixed deposit is not taxable. However, if any interest is received by you in respect of fixed deposit of your father, then the same would become taxable.
Tax problem Q: Clarify following points about Income Tax for the current financial year. 1. Gross Salary: Rs 1,52,000 Standard- Deduction: Rs 25,000 Net Taxable- Salary: Rs
1,27,000 Savings Rs 28,000/- Whether rebate on savings will be 15 per cent or 20 per cent of savings in this case. 2. Gross Salary: Rs 1,85,000 Standard- Deduction: Rs 25,000
Rs 1,60,000 Deduction on account of Taxable- Salary: Rs 1,30,000 Rebate on saving in this case will be 15 per cent or 20 per cent of savings. — Vinod Bhatia, Ambala City Ans: In both the illustrations mentioned by you, the tax rebate would be available u/s 88 @ 20 per cent because the net taxable income is below Rs 1,50,000.
Tax exemption Q: As the financial year is closing and all employees are planning for the saving to save income tax. So please give in brief the general rules, e.g. STD rebate, max saving, rebate under 80L, max. exemption of interest, NSC interest, rebate Under 88 (Bonds), etc rebate under
HBA. How much tax will be saved on saving (% of tax saving). Specially change of Rules in this financial year. It will be beneficial for all the general public especially employees. — S. Sharma, Naya Nangal Ans: For the financial year 2002-03 the rebate of tax on investments made would be @ 20 per cent in case the taxable income is upto Rs 1,50,000. The same would be 15 per cent only in case the income exceeds Rs 1,50,000 but is below Rs 5 lakh. In case the taxable income is over Rs 5 lakh, then no tax rebate is permissible. The maximum permissible amount for investment is Rs 1,00,000 out of which upto Rs 70,000 can be invested in Insurance Premium, PF,
PPF, NSC, Infrastructure Bonds, etc. and the balance sum of Rs 30,000 is exclusively for investment made in infrastructure bonds. If you desire, you may make the entire investment in Infrastructure Bonds. |
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Inflation highest at 4.86 pc FII, MF net sellers in equities Bike sales jump 19.5 pc |
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