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Monday,
March 17, 2003, Chandigarh, India  
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Housing
sector needs reforms Inflation
skids to 4.69 pc FIIs net
buyers in equities
Tax rebate |
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Market
slipping amid uncertainty
MICO’s
prospects satisfactory
Boycott
sub-standard food manufacturers
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Housing sector needs reforms Adequately supported by soft-termed housing loans offered by MNC-FIs and banks at nominal rates, the construction sector has created a trend of upswing in the overall real estate trade. With the prevailing tax exemptions to the investors interested to invest in the housing sector, availability of the affordable housing accommodations to suit each pocket has improved. By borrowing a housing loan @ 10 per cent PA and availing income tax rebate on the tax paid (interest payments up to 1.5 lakh/the principal up to Rs 20,000/- are eligible for exemption under Section 88 of the IT Act), the net effective rate of interest payable, for an investor of 30 per cent income bracket, works out to be about 7.5 per cent PA. Banks and MNC-FIs are offering housing loans to the borrowers on floating interest rates. Under this scheme the applicable rate of interest shall keep on changing with the market trend. The proposition till date was looking favourable when the interest rates were reducing in competition. Now the situation is expected to take a reverse turn in the wake of predicted better market situation. With better prospects on the business front under the improved market conditions and the investors expected to turn to the equity, the interest rate to the housing sector, may take an upward revision. Under such expected situation the borrowers are advised to go for fixed interest rate proposition rather than a floating rate of proposition. Options are available for the borrowers to opt for any of the two options i.e., fixed or floating rate of interests. The borrowers having opted for a floating rate of interests in their already borrowed projects are advised to change their option to fixed rate of interest by paying certain fee. A trend of housing on the peripheries of big cities, away from the madding crowd, has picked up as the land value is considerably low as compare to the cities itself. For an example Group housing societies are being offered land by the Chandigarh Administration as well as by HUDA in Panchkula, in the remote pockets, @ about Rs 3000 per sq yd approximately whereas land, in big chunks, on the periphery of the city in the state of Punjab is available at Rs 1000-1200 per sq yard to the colonisers. Reasonably conducive atmosphere for the developers in the state of Punjab i.e., reasonable rate of stamp duty (6% as against 15.5 per cent in Haryana), effective and simplified apartment act and availability of a system for approval of housing project and change of land use, has shown results. Housing Board Haryana has literally closed its shop in competition as there are no takers for their units. Thousands of Group housing flats in Panchkula are lying vacant whereas a number of housing projects developed by the colonisers are getting tremendously good response in Zirakpur. There would have been a different situation in the real estate sector had the suggested reforms to the sector been properly taken care of. None of the states came forward to implement much needed reforms to the real estate sector such as
rationalisation of stamp duty regimes, reformed rent laws, repealing of urban land ceiling acts, revision of byelaws to streamline the approval process for construction of buildings/ development of sites-for that revision of municipal laws in line with model legislation prepared by the Ministry of Urban development and poverty alleviation and simplification of legal and procedural framework for change of land use from agriculture to non agriculture purposes programmed in the last budget by the Union Government. Even the UDIF (urban development incentive fund) with an initial instalment of Rs 500 crore earmarked to incentivise those states coming forward to implement these reforms has failed to lure the states. State governments, having diversified political interests, have preferred to shelve these plans even against the most vital national interest. A word of caution for those who get ready to click a deal is that having every thing favourable doesn’t mean you should jump blindfolded. Real estate is a long-term proposition. No easy money before a period of one year at least is assured. Moreover play safe when you are going to strike a bargain. When intending for buying a piece of property in suburb or on the periphery of big cities, go only for the government approved projects having good surroundings besides ensuring about the infrastructural development. Proposition in the unapproved colonies, no doubt works out cheaper, besides having risks of legal action by the authorities for unauthorised construction, appreciates slowly as compared to a piece of property in an approved colony.
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Inflation skids to 4.69 pc
New Delhi, March 16 The point-to-point price change, as measured by Wholesale Price Index, fell from the previous week’s level of 4.91per cent, though it remained at mere 1.95 per cent in the year-ago period. The WPI rose by 0.4 per cent to 169.6 during the latest reported week from the previous week’s figure of 168.9 due to a sharp increase in domestic fuel prices and marginal hike in primary articles, even as manufactured products prices stood firm. The index was 162 in the year-ago period.
PTI
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FIIs net buyers in equities
Mumbai, March 16 Mutual Funds (MFs) recorded net purchases of Rs 48.63 crore in equities but netted sales of Rs 10.19 crore in the period under review, according to data available with SBI here. FIIs bought and sold equity instruments worth Rs 145.8 crore and Rs 110.2 crore respectively on March 11, thus registering their highest net inflows of the week at Rs 35.6 crore ($ 7.5 mn).
PTI
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by R.N. Lakhotia Tax rebate Q: Myself and my wife are both Punjab Government employees. My retirement from service is on 31.12.2003. I want to discountinue monthly deduction of GPF w.e.f. 1.4.2003 from the salary. My wife has GPF A/C as well as PPF A/C. “My question is whether I can get tax benefit on PPF A/C of my wife for the year 2003-2004, If I
deposit the amount in the PPF A/C of my wife. As the limit of Rs 70,000 as admissible to her will be completed in the GPF A/C of her office as monthly deduction from the salary”. —
Madan Lal Singla, Chandigarh Ans: You can may payment to the PPF Account of your wife and claim the tax rebate.
House rent Q: I am working as Senior Scale Stenographer in Punjab State Electricity Board, Patiala. The house in which, at present, I am residing, is in the name of my father. My mother/father have since expired. In that house also, the wife of my elder brother alongwith her children, are also residing. My wife is a housewife. Kindly suggest me can I obtain a receipt for having house rent paid, to my wife or not, for taking exemption in gross salary? —
Ramesh Kumar, Patiala Ans: You may obtain a receipt from your wife for payment of house rent paid and you can get the tax benefit of deduction from house rent allowance received by you. However, for this purpose the most important point to be considered is to find out whether the wife is the owner of the property. In case you become the owner of the property after the demise of your parents, then the benefit from HRA cannot be taken advantage of.
Account books Q: The case of one firm for the Assessment year 2001-2002 has been fixed u/s 143 (3). The local Income Tax Officer detained the books. When the assessee demanded books back after one month, the officer replied that he had kept his books for one month as a brotherhood and issued the summon for detention of the books on the same day. What is remedy for the assesses. —Adesh Agnihotri, Advocate, Tarn Taran Ans: The Income-Tax Officer can detain the books of account for retention for the purpose of examination.
Senior citizen Q: 1.As per government record I have completed 65 years of age on 30 June, 2002. I may be advised whether I will be treated as a senior Citizen for the assessment year 2003-2004 for the Income earned during the financial year 2002-2003. 2. I have been getting pension from Punjab Government, being a Punjab
Government retiree at the Rs 1,00,000 per year approx. 3. After retirement I have joined private service and my annual income from private service is Rs 90,000. 4. Computation of my income and payable income-tax may be advised to me and it may also be mentioned how much standard deduction will be admissible and how much rebate will be admissible in Income Tax. —S.K. Narad, Ludhiana Ans: You have completed 65 years of age on 30.6.2002. Hence, you would be eligible to the tax rebate u/s 88B for a senior citizen amounting to Rs 15,000 from the tax payable by you. The standard deduction available to you would be on combined salary and pension taken together. As the total gross amount of salary is Rs 1,90,000 (Rs 1,00,000 pension + Rs 90,000 salary) on which the permissible standard deduction would be Rs 25,000.
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Market slipping amid uncertainty Uncertainty over the war in the Middle East saw considerable unwinding of positions ahead of the long weekend and the 30-share Bombay Stock Exchange sensitive index lost 44.82 points to settle at 3,108.24 in the “four-day” last week. The S&P CNX Nifty breached the psychological 1,000 level. It shed 1.7 per cent to settle at 999.65. The much-feared war has had considerable effect on the FII inflow as well and the total amount of money put in by the FIIs till last week this year ($ 0.35 billion) was half that during the corresponding period last year ($0.73 billion). The sentiment has been affected the world over and the price of oil has been soaring. The Indian oil companies decided last Saturday to increase the oil prices by 5 per cent. This is the second hike in the last one month. It is an accepted fact that the rising oil prices send economic activity in reverse gear. The key industries likely to be affected due to soaring prices are automobiles and petrochemicals.
Glaxo SmithKline Glaxo declared improved fourth-quarter results last Wednesday. The pharma MNC posted a small loss of Rs 2.57 crore on a total income Rs 227.16 crore as compared to the loss of Rs 40.43 crore on a total income of Rs 269.56 crore during the corresponding period last year. For the full financial year ended December 31, 2002, the company posted a net profit of Rs 98.06 crore (up by 122 per cent) on a total income of Rs 1.046.90 crore. The company has declared a dividend of Rs 7 per share for last year. The company's stock, which has been on a downward spiral for one year closed the week, flat at Rs 292. Patient long-term investors looking for decent returns can buy it with two to three years perspective. Tisco A huge outstanding position in Tisco in the derivatives segment has continued to weigh on the stock. A weakness in it has also come amid concerns that Asian steel prices which surged sharply in the last one year may soon peak out due to a surge in inventories especially in Japan even as demand remains strong from China and Korea. The scrip lost 2 per cent for the week to close at Rs 135. Divi’s Lab Divi’s Laboratories, which came out with an initial public offer of 32,04,684 equity shares of Rs 10 each made a big bang debut on the markets last week. These shares which were offered at Rs 140 per share through the book building process, closed the week at Rs 180, thereby gaining over 26 per cent over the issue price. Divi’s Laboratories is a leading contract research and manufacturing company based in Hyderabad. Market forecast On fundamentals: Iraq, being a leading oil exporter, marketmen are worried that any war will hamper oil supplies and prompt an oil price spiral. If war breaks out and lasts for a prolonged period, the already fragile economies of the world will be hurt further and stock prices will plunge as well. At the same time, if the war is brief, oil prices will fall and the bourses will bounce back. On technicals: The market has continued to lose steam but the sensex at 3100 level is acting as a support in the short term. A break of 3100 can take the Sensex further down to 3050-2980. The stock markets are an oversold globally and any minor news with positive implications will trigger a rebound. But all the upward spirals in the market are unlikely to cause the index to surpass the 3180 level on its way up for the time being.
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by Ashok Kumar MICO’s prospects satisfactory Q: Please comment on the prospects of MICO? — Anita Chibber, Kurukshetra Motor Industries Company (MICO) was founded in 1951 to manufacture spark plugs for petrol engines and fuel injection equipments for diesel engines. Currently, around 95 per cent of its revenues come from automotive technology. In a move to diversify its revenue stream, MICO has decided to diversify into the business of security systems including fire reporting system, house information system, local security network, burglary alarm system, video systems, time and access control systems. The demand for security systems, be it fire alarms or burglary alarm systems, has been steadily on the rise in India and offers considerable opportunity for growth. The security systems industry in India is primarily made up of a clutter of private companies, with the market leader in electronic security and surveillance systems being Zicom Electronic Security Systems. The company has also started doing well in both, the OEM (original equipment manufacturer) segment and the replacement market, unlike earlier years where spurious sales ate into its share in the replacement market. Yet, sales of spurious and reconditioned parts are still estimated to be in the range of 15 per cent of MICO’s topline, and thus it does hurt the company’s growth. Overall then, the prospects of MICO appear satisfactory, albeit unexceptional.
Q: Is it worthwhile to buy shares of Oriental Bank of Commerce (OBC)? — Dalbir Kohli, Ludhiana The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (debt recovery law) has been passed by Parliament. The passage of the debt recovery law paved the way for a positive re-rating of the banking sector. While the government is doing its job in improving the recovery laws, public sector banks (PSBs) themselves are improving asset quality, cutting costs, embracing technology for integrated operations and increasing their focus on marketing. This coupled with good liquidity in the system and low borrowing costs have helped PSBs to report consistently good performance in the past couple of years and are well poised for growth. Enhanced debt recoveries will further improve their asset quality and boost profitability. For year ended March 2002, OBC’s total assets stood at Rs 32,262.92 crore, while total income and net profit were Rs 3,547.06 crore and Rs 320.55 crore. Its net worth stood at Rs 1,619.73 crore and has a branch network of 967 branches. The bank, as on March 2002, had one of the lowest net NPA (non-performing assets) 3.2 per cent. Over the last three years, the bank’s deposits, advances and total assets grew at a compounded annual growth rate (CAGR) of 19.2 per cent, 22.5 per cent and 19.8 per cent, respectively. The total income also grew at 19.8 pc. This growth record is one of the best amongst the PSU banks. The bank’s net NPA ratio also came down from 4.5 pc in FY 1998-99 to 3.2 pc in FY 2001-02. The book value per share stood at Rs 84.12. Notably, even if all the outstanding net NPAs, amounting to Rs 453.80 crore till March 2002, are deducted from the reserves, the adjusted book value (adj.-BV) works out to Rs 60.6. For the half year ended September 2002, interest income rose 13 pc to Rs 1649.87 crore, while interest expenses were up only 8 pc to Rs 1084.22 crore. Thus, the net interest income showed a rise of 23 pc to Rs 565.65 crore. The net profit was up by 26 pc at Rs 215.75 crore. For the current year ended March 2003, one can expect the bank to report an EPS of around Rs 22. Moreover it is also possible that the Life Insurance Corporation may increase its stake in the bank. Given this backdrop, one could consider including this banking stock in one’s portfolio with a long-term perspective. |
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by Pushpa Girimaji Boycott sub-standard food manufacturers This week, I would like to focus attention on the urgent need for a comprehensive mechanism to ensure safe food to all citizens. Considering that the health of a nation depends on the quality of food that the citizens get, food safety should get the highest priority. Yet, this has been a highly neglected area. As a result, today, from our morning cup of milk and tea to vegetables, edible oil, dal, wheat and spices, every item of food on our daily menu is suspect. Milk is supposed to be a nutritious food, but it could contain anything from detergent to refined oil, caustic soda or urea. Or it may have traces of pesticides, heavy metals, preservatives or even harmones fed to the cattle. . The edible oil scenario is no better. Despite the Prevention of Food Adulteration Act, in 1998 we witnessed one of the most well-organised and large scale adulteration of mustard oil in the country, resulting in hundreds of consumers in Delhi suffering from epidemic dropsy. More recently, Bangalore witnessed another oil-related health problem— a large number of people who consumed a particular brand of fried ‘chakli’ a salted delicacy, took seriously ill, highlighting the absence of quality control measures over such fried and packed foods sold in the market. Look at ‘dals’ sold in the market. The arhar dal that you buy could well be coloured with a toxic dye to camouflage poor quality. So also spices, particularly the ground variety. That’s not all. The sweetmeats that you buy may well contain prohibited colours, so also vegetables. Even water melons have been found injected with a red dye.. Besides adulteration, contamination of food with pesticide residues, heavy metals, mycotoxins, etc, pose an equally major health risk. Studies conducted by the Central Food Technological Research Institute, Mysore, some years ago had shown the presence of heavy metals like lead, chromium, arsenic and mercury in green vegetables grown in and around Mysore, Karnataka, thanks to untreated effluents released by industries in the area. Punjab Agricultural University, Ludhiana, had also reported similar contamination of vegetables including potatoes, mustard, mint, cauliflower, peas and ‘methi’ with heavy metals like mercury, lead, arsenic, chromium and nickel. The Indian Council of Medical Research, in its report published in 1993 on ‘Surveillance of food contaminants in India’, had revealed wide-spread occurrence of pesticide residues in bovine milk samples collected from 12 states. Infant food too had shown not only presence of pesticide residues but also heavy metals like arsenic, cadmium and lead. Similarly, 21 per cent of groundnut samples and 26 per cent of maize samples tested had aflatoxin contamination exceeding the maximum permissible limit prescribed under the Prevention of Food Adulteration Act. Mycotoxins are produced by various species of fungi that invade food during pre and post harvest stages in weather conditions conducive to fungal growth. They are known to be hepatotoxic, nephrotoxic, carcinogenic or mutagenic, depending on the variety. Subsequent studies conducted by ICMR have shown high mycotoxin contamination in rice, wheat, maize, bajra and groundnut, that were not properly stored or damaged in the rain. The National Institute of Nutrition’s investigations into many outbreaks of food-borne diseases in different parts of the country have also shown the cause and effect relationship between ingestion of mycotoxins and acute disease outbreak. In addition to these, we also need to deal with newer issues on food safety vis-a-vis genetically modified foods. The ongoing process of globalisation and the rapid advances in the area of genetic engineering pose a new challenge to food safety and require comprehensive measures to protect consumer interest. Consumers International, a coalition of consumer organisations the world over, which had in the year 2000 focused on consumer concerns over the safety of genetically modified foods, is now taking up this issue even more strongly. In order to address all these issues and protect consumer interest, we need to have an independent Food Safety Commission that would look at food safety in its entirety, formulate food policies keeping in mind the consumers’ right to safety, information, choice and a healthy and sustainable environment. The Commission should also be empowered to constantly review food laws, keeping in mind the interests of consumers and also monitor the enforcement of various food laws by state agencies. It should also have the power to investigate independently into the safety of various foods and order withdrawal of food found to be unsafe. While this is a long-term measure, as an immediate step, there is need for educational institutions, research institutions, governmental and non-governmental organisations to come together to create public awareness on issues concerning food safety. Whether it is food that is sold through public distribution system or raw and processed food imported into the country, it is only when consumers start questioning the quality, can one hope for improvement. Besides, in India we have never used the weapon of boycott to effectively deal with those who sell or manufacture unsafe or sub-standard food. We have to think along those lines now and for that, consumer education is essential. |
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