The Tribune, Chandigarh, India

	BSNL — ‘Disconnecting’ India! Our Roving Editor Man Mohan writes from New Delhi Bharat Sanchar Nigam Limited (BSNL), which prides itself as the world’s seventh largest telecommunication company, is getting ready to witness a major tussle in the corridors of power for the top management position. A search is on to find the replacement of Kuldeep Goyal, CMD, whose term ends this June. Controversial Telecom Minister A. Raja is reported to be doing his best to get an extension for him. The BSNL’s slide from numero uno position to number four position, with steep fall in the market share coupled with sharp profit erosion, huge operational losses, when private companies are posting growth numbers, has caused serious concerns at the highest level in the government. Recently, BSNL employee associations wrote to the Prime Minister seeking his intervention in professionally running the company, which was once the market leader. Experts fear that the BSNL may soon end up as a sick company. The government has appointed a high-level committee to determine how to arrest it’s slide. It is feared that it’s “mismanagement” can lead to a serious threat to the national security as it is responsible for communication for various arms of the government. Last year, the BSNL issued a statement posting a profit of Rs. 574.85 crore on total revenue of Rs. 3,5811.92 crore, avoiding a comparison with the previous years as the profits had nosedived 81 per cent and revenues fell 6 per cent. According to IE Market Research Corp’s report, at the current rate, the BSNL will continue to lose market share to Bharti Airtel, RCom, and Idea and will decline to 7.3 per cent in 2013. Industry experts point out that there is a complete lack of accountability at the upper echelons of the BSNL. The top team has been dodging the real issues by citing excuses such as lack of autonomy and interference from the Central Vigilance Commission. One major excuse is the negative growth in landline demand because the wireline segment forms over 31 per cent of the BSNL’s subscriber base. Experts concur that the landline subscriber base was an advantage that they lost to competition by not converting the landline subscriber asset to wireless subscriber base. The performance audit report on the BSNL submitted by the Comptroller and Auditor General observed systemic deficiencies in planning, procurement of equipment and stores, quality of telephone services, execution and monitoring of long-distance projects, inadequate demand forecast, lack of control mechanism, execution of work without inviting tenders and lack of budgetary control. “The BSNL's race toward the bottom, therefore, does not come as a surprise,” says a retired senior telecommunication official. Former Telecom Minister Dayanidhi Maran sought to tender 45 million mobile lines three years ago to open up growth opportunities for the state operator. Soon after finalisation of the order, Maran was replaced by A Raja, who scrapped the order and the BSNL did not protest. A later tender process in 2007, for half the capacity, fell apart after a rejected vendor took the BSNL to court questioning the rejection on technical grounds. As the BSNL's expansion plans got mired into litigation, its rivals continued to expand, while the BSNL struggled and lost its market share. During the past two years, the BSNL has issued no new major contracts for mobile networks and equipment although its existing networks are running at near full capacity. The BSNL’s efforts to develop a WiMAX broadband wireless service fell flat last year after five of the shortlisted bidders for the tender turned out to be fake. According to the Joint Forum of the BSNL Associations, the needle of suspicion pointed towards a top BSNL official. The PMO had to intervene to cancel the process. Prior to this, the Expression of Interest (EoI) was scrapped three times in a row, with the intervention by the CVC and the PMO, owing to suspicious circumstances. But this has not deterred the BSNL’s management from continuing to “scam the process”. Recently, the BSNL reissued this EoI to select WiMAX franchisees for 16 circles - the bidding criteria were constructed with “dubious intent” to prevent participation from genuine bidders. The BSNL finalised bids from relatively unknown entities, four out of five of which have no telecom experience, one of them, an auto parts company, was non-functional at the time of bid submission, and had not filed returns since 2004. Further, after limiting bidders to a maximum of three circles, and severely constraining competition, the BSNL then justified award of eight circles to Teracom, citing lack of interest from bidders. “If the BSNL continues like this,” a former top Telecom Ministry bureaucrat warns, “it will certainly endanger the government's initiative on e-governance, healthcare, primary education and public welfare in rural India, where the BSNL is the only service provider.”
	COUNTDOWN TO BUDGET Small, medium units want stimulus to continue Ruchika M. Khanna Tribune News Service Chandigarh, February 20 Braving the effects of global recession for the past two years, small and medium enterprises are now dreading the withdrawal of benefits granted to these through stimulus packages by the government. As the Finance Minister gets ready to present his Budget proposals for the year 2010-11, the SME sector only hopes for the concessions to continue, so that they can now make up for the losses suffered in the past two years. These small and medium enterprises are now looking to the Budget for some relief in the form of reduced interest rates as well as a technical upgradation fund for this sector, besides praying that the excise duty and service tax limits are not raised, as is being expected because of the rising revenue deficit. Since the SMEs work on very small margins, they are also hoping that the Finance Minister will enhance working capital limits and cut interest rates on bank loans. Amarjit Goyal, chairman and managing director, Modern Steels, said the industry had still not recovered completely from the aftereffects of the economic slowdown. “It was the two stimulus packages, which brought down the excise duty and managed to save the SME sector and the economy from going into a tailspin. By investing in infrastructure and development schemes, the government did its bit in improving demand and kept the economy afloat. But we have yet to reach back at the level that we were at two years ago. So, we hope that all concessions are not withdrawn at one go as it will be detrimental to the growth of the industry, which is now also facing a rise in interest rates by banks,” he said. He added that the need of the hour is to control production costs and become price competitive in world markets. Agreeing with him on softening of interest rates being charged on SMEs, Yashpal Malik, who runs a dyeing unit in Panipat and is president of the Panipat Dyers Association, said the SME sector still needed government intervention to help it recover its losses. “Concessions on exports should be extended further so as to give a fillip to small exporters. Other than setting up funds for technical upgradation and coming out with incentives to boost research and development in various sectors by SMEs, the government should ask banks to charge lower interest on loans to SMEs, if meant for technical upgradation of their plants,” he added. R S Sachdeva, co-chairman, Punjab committee of the PHD Chamber, hoped that the excise duty was not raised from the present 8 per cent and the service tax remains at the level of 10 per cent. “Since the SMEs contribute in a big way to the country’s economy, accounting for 45 per cent of total sales and over 40 per cent of exports, the Budget should provide relief to this sector. Besides, the individual Income Tax exemption limits should be raised, especially at a time when everyone is reeling under a high inflation,” he added.
	Aviation Notes Rahul Gandhi, A-I’s only hope by K.R. Wadhwaney Worldwide, civil aviation's physical health remains feeble. Most airlines continue to face critical to unsatisfactory scenario. There are multiple factors for this unstable situation. The international fares continue to be unsteady. The prices of tickets on popular and busy routes are much higher than shown on websites. Officials say that they vary from day-to-day fares, according to analysts, it jumps to and fro on the basis of “demand and supply”. The fuel prices continue to vary from country to country. In India, for example, prices are much higher than the prices on many other countries. The flow of traffic has improved, but over-head expenses have not been arrested. The statistics show that most airlines continue to be in the red. The contrasting views on the international air traffic cause further uncertainty in the trade already plagued by malpractices. The airlines have officially slashed commission to agents, but the functioning has not been as transparent and professional as the situation warrants. According to analysts, the civil aviation slowdown has ended and satisfactory picture is emerging. In this murky environment, the International Air Transport Association (IATA) has predicted that the fliers will bleed less in the year that has commenced. According to a survey, Asian airlines have much more improvement than European airlines. The picture of US airlines is gloomier than others as according to the survey, 60 per cent airlines have posted decline in profitability. The IATA had earlier predicted that the net losses of the airlines would fall by about 50 per cent. It said losses in 2010 would be $ 5.6 billion instead of $ 11 billion in 2009. The scenario on the national front is murkier than in most other countries. Air-India continues to fly indifferently. Politicians continue to rob it. National Commission for Scheduled Castes (NCSC) members, for example, splurged Rs 5.72 lakh on lodging and boarding in December, 2009. It is not understood why this expenditure should have been debited to Air India (AI)? Employees are up in arms. There is likelihood of far-reaching changes in the set-up of National Aviation Company Limited, an amalgamated outfit of Air-India and Indian Airlines. It is possible that Rahul Gandhi may take more interest in the affairs of Air-India, which is on a very difficult flight-path. He recently had a scheduled meeting with CMD Arvind Jadhav. If he moves into the aviation sector and succeeds in bringing about a few changes in the set-up of politicians, there is every possibility of Air-India being rescued. The demerger of the two airlines may also come about. In any case, the merger has failed and is proving counter-productive. The aviation analysts firmly believe that his entry will be a positive move.
	Investor Guidance PPF redemption tax-free by A.N. Shanbhag Q: I have a PPF account, which is maturing in March, 2010. My queries are: a) Would the maturity amount be subject to income tax levy? b) Where and in which scheme can I reinvest the maturity amount of the PPF for a short period (ranging from 4 months to a year) so that it comes handy without tax implications? — Rakesh A: 1. The maturity amount of PPF is not subject to tax. 2. The best way of handling your problem is to opt for post-maturity extension of the account without contribution. From such an account, withdrawals can be effected in one or more instalments, not exceeding one in a year. The balance will continue to earn interest till it is completely withdrawn. Else you may invest the funds in a liquid fund of a mutual fund. PPF account Q : I am a senior citizen pensioner. I don't have PPF account of my own. Can I make a deposit in my son's PPF account and claim income tax rebate. — Khosa A: Yes, you can. Sec. 80C(4) of the Income Tax Act allows deductions on PPF contributions made in the case of an individual, in the account of the individual, the wife or husband and any child (major or minor, married or not) of such individual, and in the case of an HUF, any member thereof. Senior Citizen Scheme Q: Kindly advise me to whether up to Rs.1,00,000 deposited by a senior citizen in the Post Office Senior Citizen Saving Scheme (SCSS) in a year is eligible for income tax exemption u/s 80C. — S.L. Mahajan A: Yes, it is. The benefit of Sec. 80C has been extended to investments in SCSS from April 1, 07. Joint demat account Q : I am holding some equity shares in demat form with a depository jointly with my minor son. In this way I am able to handle and have full control on the shares independently. But I wish that my wife should replace me and have joint holding with my minor or major son according to the time but only after my death. Please advise me what should I do which should be legal and acceptable to the depository. — S. J. Singh, A: It is dangerous to hold a joint account with a minor. Realise that a minor is not allowed to enter into a sale/purchase contract with anyone. You may open another dmat account of your major son with you and your wife as joint holders and transfer the shares to that account. NRI tax implications Q : My father is an NRI senior citizen of 83 years age and also holds registration as “Overseas Citizen of India” (OCI) under the provisions of section 7A of the Citizenship Act, 1955. He has recently sold some Indian agricultural land which was given to him by his father. What will be his tax implications? Can he purchase with the same sale amount, any other Indian housing or agricultural property in his own name or in the name of his wife who is Indian National or in the names of his NRI children? If yes, what are the limits? Can he, being OCI operate resident bank account in India, if he spends 182 days or more in India during a financial year? — Anil Kumar A: 1. Any agricultural land will be treated as a capital asset if it is situated within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than 10,000 according to the last preceding census of which the relevant figures have been published before the first day of the previous year. Further, the scope for this purpose is extended to lands situated within eight kilometres from the local limits of these municipalities or cantonment boards and the Central Government has notified such extended areas. Consequently, sales made of such agricultural lands would attract tax as capital gains. [CIT v Shubhlata & Others 13TCR91 (1998)]. 2. If he is exigible to the tax, he can make it exempt u/s 54F by purchasing a residential house in his own name. It is he who has earned the capital gains and not his wife or his NRI children. If the cost of the house is equal to or more than the sale proceeds of the agricultural land, then the entire tax will be exempt. If the cost is less, he can claim proportional benefit. The tax on all long-term capital gains which are chargeable to tax can be saved by investing within six months the amount of capital gains in infrastructure-related Bonds of NHAI or REC u/s 54EC. The lock-in period is 3 years. The current interest rate is around 5.5 per cent and this is fully taxable. The ceiling on this investment is Rs 50 lakh per financial year. 3. There is a possibility that he can also earn exemption u/s 54B by buying another agricultural land. An NRI is not allowed to purchase any agricultural property in India. OCI too is ultimately a PIO and hence not eligible to purchase agricultural land. However, the law is not clearly worded in this regard. 4. If he stays in India for 182 days or more he becomes a resident, and he will have to redesignate his NRI-related accounts into resident accounts. Flat sale Q: I am an NRI. My mother-in-law has a flat in Mumbai which could fetch about Rs 50 lakh if sold today. The flat was bought in 1997. She is retired and based in the US now. Can she gift the proceeds of the flat to me without any tax liability? If yes, is there any restriction on using the money so gifted. — Mathew Samuel A: Yes, she may gift you the proceeds of the sale of the flat without any tax liability being attracted either on her or on you. However, note that this is restricted to the event of gifting. In other words, the transaction of the gift per se, will not attract any tax. However, the sale of the flat by her will give rise to long-term capital gain tax liability. She will have to pay the capital gain tax. If she desires to save the same, she can do so by either investing the capital gain amount in another property or investing the money into capital gain tax saving bonds. The bonds as also the property has a lock in of three years. The authors may be contacted at wonderlandconsultants@yahoo.com