Monday, July 6, 1998
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B U S I N E S S | Monday, July 6, 1998 |
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‘Punjab
should go in for industrialisation' CHANDIGARH, July 5 — A group of economic consultants led by Dr Raghavan Parthasarthy, has suggested to the Punjab Government that in order to ensure a better growth of the state, it should redefine its priorities for investment in the fields of industry, education and infrastructure. |
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Consumerism invades Shimla SHIMLA: After the CII consumer fair, it’s now the turn of “Shimla midnight bazaar bonanza”. R&D in agriculture needed: study NEW DELHI, July 5 — Investment for agricultural research and development (R&D) need to be stepped up to boost productivity in agriculture, a study has said. Haryana touches new high in exports CHANDIGARH, July 5 — Haryana has touched a new high of Rs 2,961 crore in exports during the 1997-98 as compared to Rs 2,454 crore during the 1996-97. |
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| Apollo
Tyres to buy back shares NEW DELHI, July 5 — Apollo Tyres Ltd (ATL) plans to buy-back its shares from the open market and its share holders along with introduction of employees stock option scheme to attract and retain its employees. |
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FDI
in China down by 6.85 pc BEIJING, July 5 — With major investment sources in South-East Asia running dry in the wake of financial turmoil in the region, China, the world’s second major destination for foreign direct investments (FDI), is forced to tap tax heavens like Bermuda and Virgin Islands, official China Daily Business Weekly said today. Corporate laws:Capital expenditure vs revenue expenditure THE dispute between capital expenditure and revenue expenditure has been going on since the very inception of the Tax Laws of the country. Aviation notes:Where passengers search for toilet rolls For Indian Airlines (IA), it was a case of being back home after being ‘thrown’ out of home for about two years. PFC to seek loan from banks NEW DELHI, July 5 — State-owned funding agency Power Finance Corporation (PFC) has sought a Rs 250 crore loan from public sector State Bank of India (SBI), Punjab National Bank and Oriental Bank. PM urged to ban meat export MUMBAI, July 5 — The Chairman of Animal Welfare Board of India (AWBI), Justice Guman Mal Lodha has appealed to the Prime Minister Atal Behari Vajpayee to ban export of meat.  |
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‘Punjab
should go in for industrialisation' By U.K. Bhanot Tribune News Service CHANDIGARH, July 5 — A group of economic consultants led by Dr Raghavan Parthasarthy, has suggested to the Punjab Government that in order to ensure a better growth of the state, it should redefine its priorities for investment in the fields of industry, education and infrastructure. As the state has already achieved agricultural affluence , it should now go in for full fledged industrialisation in order to not only absorb excess farm labour but also to promote agro business sector in a big way to exploit the enormous farm productivity. As power generation at present is insufficient to meet any programme of rapid industrialisation the state will have to implement its power generation programmes speedily. The group has emphasised that the new shift of focus of heavy investment from agriculture to industry — mostly related to agro business — should take into account volume of production and the demands of the consumer market. Growth in this field will naturally bring more economic prosperity to the farmers. As Punjab’s threefourth productive workforce is employed in farming, this workforce will look for a bright future in the agro industrial sector. For development almost in any field in the state proper growth of the infrastructure is very essential. Although some progress has been made in critical areas like communication system which is fast reaching international standards due to competition in telephone services and emergence of new technologies like cellular phones, wireless paging and internet etc., a proper fully developed smooth road system is most essential. Unless roads are modernised to provide for rapid movement of goods and services , even the progress achieved in agicultural sector cannot be sustained. The group has appreciated that Punjab grows large quantity of wheat , rice, fruits , vegetables, sugarcane and cotton and over two-thirds of wheat produce is exported. However, it feels that improved methods and technologies boosted by skilled labour can bring in still better results. Punjab has a rich reservoir of agricultural by-products which serve as raw material for chemical and pharmaceutical preparations. As there is a huge demand for processed food globally, investors must look for new opportunities in this direction. The group has suggested that Punjab should adopt an appropriate strategy to compete globally on a low cost position. It is strange that Indian investors are shying away from the Indian market from making large investment. The reason is lack of brand recognition in international market. Punjab should offer higher incentives that include allowances for large scale investment in manufacturing and warehousing to achieve cost competitiveness. The state needs aggressive export guidance in order to promote use of Indian / Punjabi logos. Punjab is on the one hand looking for foreign participation which is necessary for long term benefits , it has to take measures to ensure that it does not sap in the short run the available sources for building agro business industry. The group has expressed surprise that Punjab is chasing foreign firms for their technologies whereas in actual practice it should be the other way round. India has the largest market for processed food and Punjab has the largest quantity of agricultural supplies. With such volume and at cheaper prices it is the foreign firms which should be chasing the Indian/Punjabi firms for joint ventures in Punjab. What is essential is that Punjab should organise an image buidling programme so that the foreign firms become aware of the plenty of opportunities in the state. Somehow an impression has been created in the West that India is a difficult country to do business with. It is essential for the West to be properly educated about Punjab if foreign capital is to flow towards it. Punjab should have a good publicity campaign to highlight the opportunity in Punjab for agro business and elimination of all procedural bottlenecks. A “made in Punjab label” should be popularised to become matter of pride. Punjab should develop ties with other trade groups like chambers of commerce in foreign countries to create an awareness and interest in Punjab, invite foreign business delegations to visit Punjab and also to send Punjab delegations to foreign countries to explore possibilities of joint ventures and establish a Government — Industry — University Council to find out new opportunities in the agro business area. To aim at a higher GDP from current 20 per cent to 25 per cent by the year 2002 , the state must focus on current high performers like engineering and , hosiery, besides ancillary industries. Punjab should offer longer tax holidays and offer still better incentives to create a more congenial atmosphere for industry. Jointly with Haryana , Punjab should promote Chandigarh as a tourist attraction and a gateway to the Himalayan hills and induce foreign tourist operators to promote Punjab. The economist group which include Dr C. Gopinath, Mr Jan Hammond, Dr Shanthi G. Krishanan and Ms Susan Sciascia as members, has also laid sufficient stress on promotion of education facility in the state as Punjab wants to increase the rate of literacy from the current 60 per cent level to 90 per cent within the next five years. Like other developing societies, Punjab is also committed to free primary and secondary education. However, the group has recommended charging of fees for primary/secondary education based on family income and utilisation of these funds to expand the school sytem in the rural areas, provide attractive incentives to entrepreneurs to start and operate primary and secondary schools and also to induce employers through tax benefits to support the education of employees’ family members and run schools in shifts or on alternate days by employing retired government officials as teachers and invovling community leaders in rural enrolment. The economic group has made these and other recommendations in a short period of three months because of Punjab Chief Minister Parkash Singh Badal’s anxiety for quicker results to show his achievements to the people. Obviously, the members have made these recommendations after studying the details about the state and before going to the state to understand the ground realities. |
| Apollo
Tyres to buy back shares NEW DELHI, July 5 (PTI) — Apollo Tyres Ltd (ATL) plans to buy-back its shares from the open market and its share holders along with introduction of employees stock option scheme to attract and retain its employees. The company proposes to buy-back shares upto Rs 50 crore and for it (buy-back) ATL is planning to raise the same amount by issuing debentures. Apart from it ATL proposes to buy-back its shares from its free reserves and securities premium account .The Rs 1,370 crore company presently has Rs 67 crore in its share premium account and Rs 90.55 crore as free reserves upto March 1998. ATL is seeking its shareholders permission to buy-back the securities in its annual general meeting on July 22. It is also contemplating employees stock option scheme with a view to attract and retain talent, encourage and reward performance of employees to enable them to participate in the success of the company. During 1997-98, ATL reported higher net profit of Rs 40.68 crore compared to Rs 36.32 crore in the previous year. The board of directors have recommended a dividend of 40 per cent for 1997-98. As a part of its financing ATL plans to issue 40 lakh PCD with face value not exceeding Rs 225 each aggregating Rs 90 crore on preferential basis to Raunaq Singh, Chairman ATL, Onkar Singh Tanwar and their associates on preferential basis. ATL will be seeking its shareholders permission for it in company’s annual general meeting (AGM). Each PCD will have two portion — part ‘A’ to be converted into one equity shares at premium and part ‘B’ (non-convertible) will carry interest not exceeding 17 per cent. After conversion of PCDs, promoters stake in ATL would increase to 27.87 per cent from existing 18.27 per cent, while banks and financial institutions stake would fall to 21.37 per cent from 24.22 per cent and public holding would drop from 57.51 per cent to 50.76 per cent. At the forthcoming AGM, ATL will also seek shareholders permission to issue fresh equity shares not exceeding Rs 10 crore through public/rights issue or private placement to funds its expansion. The current paid-up capital of the company is Rs 30.05 crore and its authorised capital is Rs 48 crore. Apollo Tyres is considering a rights issue along with overseas borrowing and preferential allotment to finance its proposed Rs 395 crore expansion plan. The expansion by ATL will be to increase the capacity of radial passenger car tyres from 700 to 2,000 per day at its Baroda plant. It is also planning to increase truck tyre capacity at the same plant from 2,000 to 3,200 tyres per day. The Rs 1,370 crore company is also looking into parameters of green field tyre plant envisaging an investment of Rs 125 crore in Punjab or Andhra Pradesh. However, the company has yet to decide final location.The expansion of the radial tyres would be completed by June 1999 and of truck tyres by March 1999 he added. Consumerism invades Shimla From Kanwar Yogendra SHIMLA: After the CII consumer fair, it’s now the turn of “Shimla midnight bazaar bonanza”. Another fair with various electronic and consumer good stalls has come up in a banquet hall in the town, which goes till midnight every day. The old and historic town of Shimla appears to be in the grip of multinational companies and a vast variety of commodities. It’s coke and woodland, catwalks and cellular phones everywhere. The lower middle service class of Shimla is zapped. Consumerism is fast spreading. It started with the CII fair a few days ago. There were numerous stalls of latest electronic goods displaying huge television sets, some expensive furniture, cosmetics and cornflakes of international makes and some lavish kitchen gadgets. “Though most of the products were out of our reach”, according to certain residents. “The organisers collected a huge amount of gate fee and had a gala time and summer sojourn in Shimla”, says Sanjay Chauhan, a resident. Approximately one lakh tourists come to Shimla in summer, with more than one lakh local residents already crowding it. A number of people invade the midnight bazaar. The Gaiety Theatre, a seat of art and culture, is host to shoes and apparel sales. The place reserved for paintings and sculpture exhibition is full of shoes now. Instead of theatre and plays, beauty contests sponsored by business groups are expected very soon. Major renovation of the halls of Gaiety Theatre is going on. The Ridge is flooded with cold drink and ice-cream parlours. A Chandigarh based dealer of Coca-Cola has done a brisk business of coke and ice cream just opposite the ice cream parlour of the govt-owned Ashiana restaurant. “The sales in the govt.-owned parlour have dropped”, says a salesman on the Ashiana counter. The Tourism Department, also selling Himachali fruit juices, are not allowed any extension of their counter by the Municipal Corporation. The rates of this private party are higher than the govt. rates, but it did better business as its location was much more inviting. Why the initiative is not taken by the Ashiana management to make their hidden parlour more catchy is also seen with suspect. R&D in agriculture needed: study NEW DELHI, July 5 (PTI) — Investment for agricultural research and development (R&D) need to be stepped up to boost productivity in agriculture, a study has said. “Despite impressive achievements the Indian agriculture continues to face serious problems such as low productivity levels and land degradation and sub-optimal use of water,” the study said. Emphasis should be on greater research and development by the private sector, a paper on “agriculture development for the 21st century” prepared by the PHD Chamber of Commerce and Industry (PHDCCI), said. The study laid emphasis on the need to augment supply of commodities through crop diversification by diverting resources from low yield coarse cereals to high yield crops. |
| Haryana touches new high
in exports Tribune News Service CHANDIGARH, July 5 — Haryana has touched a new high of Rs 2,961 crore in exports during the 1997-98 as compared to Rs 2,454 crore during the 1996-97. The Haryana Industries Minister, Mr Shashi Pal Mehta, said yesterday the state had become a pioneer in the export of motor cars. Besides two-wheelers, bi-cycles, auto parts, electronic goods, ready made garments, scientific instruments, handloom and leather products, rice, gaurgum and other important items were also exported from State. He said that the state government instructed all its concerned departments to give priority in rendering various services to the 100 per cent export-oriented industrial units in the state. Such exports-oriented units enjoyed the public utility status in accordance with state government instructions and had been issued green cards. FDI in China down by 6.85 pc BEIJING, July 5 (PTI) — With major investment sources in South-East Asia running dry in the wake of financial turmoil in the region, China, the world’s second major destination for foreign direct investments (FDI), is forced to tap tax heavens like Bermuda and Virgin Islands, official China Daily Business Weekly said today. "Years of continued growth of FDI in China will not be repeated this year, but pledged foreign investment is expected to bottom out after 1999," the paper said quoting Cao Derong, a senior official with the State Trade and Economic Commission. According to the latest statistics released by the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), FDI decreased by 6.85 per cent last year to $ 3.17 billion in May this year. The drop followed a 19 per cent year-on-year plunge in April after steady gains in the first three months of this year, the report says. The decline in FDI was due to the battered investment capacity of China’s major investors in Asia, Cao said. In the past decade, Asia, led by Hong Kong, Taiwan and Japan provided more than 80 per cent of FDI to the Chinese mainland, hitting a record $ 45.28 billion last year. They said China had received pledges of increased investment from foreign firms registered in island territories like Virgin Islands, West Samoa and Bermuda, where taxes are not levied on capital inflow and outflow. These firms, mostly European and American, are focussed on China’s potentially huge market with the world’s largest population of 1.2 billion. "They are expected to continue investing in China in the future," the paper reports. However, officials said the continued decline of FDI was not unexpected and now they think the foreign investment from the South-East Asia region will persist throughout the year. Capital expenditure vs revenue expenditure THE dispute between capital expenditure and revenue expenditure has been going on since the very inception of the Tax Laws of the country. In many cases, the dividing line between capital expenditure and revenue expenditure is very thin and sometimes it is so blurred that it would be better to decide the issue with the toss of a coin. The only way to decide the nature of the expenditure is to apply the various tests laid down by the courts over the last many years. The following are in brief some of the important tests for deciding the controversy between capital expenditure and revenue expenditure: 1. Whether the expenditure is on account of revenue or capital is to be decided by looking at the facts and circumstances of each particular case and from the point of view of a practical and prudent businessman rather than from the point of view of the tax gatherer or upon strict juristic classification of the legal right secured in the process. 2. In order to arrive at a just and proper conclusion, one must look at the true nature and character of the advantage in a commercial sense without giving undue emphasis to the form thereof or the terminology used. If the expenditure is so related to the carrying on or conduct of the business that it may be regarded as an integral part of the profit making process and not for equisition of an asset or right of a permanent character, the expenditure may be regarded as revenue in nature even though the advantage may endure for indefinite future. 3. If the expenditure is incurred for acquiring a profit-making apparatus, the same shall be capital expenditure. On the other if the expenditure is incurred for the efficient running of the day to day business, the same shall be revenue expenditure though the benefits may be for an indefinite period. What is relevent is the purpose of the outlay and it’s intended object and effect, considered in a common sense way, having regard to the business realities. Despite various tests evolved by the courts in a long string of cases to determine what is attributable to capital and what to revenue, the controversy has to be decided afresh in each case by applying one test or the other. None of the tests is either exhaustive or universal. Each case depends on it’s own facts and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire picture. It has been held by the Supreme Court that the “once for all” payment test is also inconclusive. The Supreme Court in the case of Empire Jute Co Ltd v/s CIT reported in (1980) 124 ITR 1, has held that the test of “enduring benefit” might also break down in a particular case. In a recent case of CIT v/s Kirloskar Tractors Limited reported in (1998) 231 ITR 849 (Bom), the assessee which was engaged in the manufacture and sale of tractors and engines, entered into an agreement for technical collaboration with a German company. The German company agreed to supply to the assessee for use in India full and correct technical and other confidential information and know-how, drawings of each machine and of components, patterns, forgings, etc, and all confidential advice as might be necessary in connection with the manufacture of the tractors and diesel engines. It was provided that the German company would continue to be the owner of the aforesaid know-how. The assessee was also granted the sole and exclusive licence to manufacture and sell the said machines during the continuance of the agreement. The German company also guaranteed, for the period of the agreement, to supply the latest technical developments in connection with the tractors and diesel engines known to them or which may be known to them during the period of the agreement. It was provided that the rights conferred by the agreement were not capable of assignment, encumbrance, letting or sub-licence by the assessee and they were always to be treated as confidential. It
was also provided that the know-how, documents, materials
etc provided could be used by the assessee solely for the
purpose of the agreement and were not to be communicated
to any person, firm or company. The assessee was also
obliged under clause 15 of the agreement to keep the
technical documents secret. In consideration of the use
of the know-how furnished by the German company to the
assessee in West Germany, the assessee was to pay to the
German company, free of tax, certain sums of money at
fixed intervals i.e. 60 days, twelve months, twenty-four
months, and thirty-six months, from the date of the
agreement. This was in addition to royalty on sales. The
ques tion before the court was whether the payments made
in consideration for the supply of the know-how were
deductible as revenue expenditure. It was held that the expenditure in question related to the carrying on of the business of the assessee and was an integral part of it’s profit-making process. The aim and object of the expenditure was to run the business more profitably. There was a secrecy clause in the agreement which precluded the assessee from giving any of the information supplied to it to any third party. All these factors clearly indicated that the various services under the agreement were for the efficient running of the business of the assessee and for better profitability. The conditions in the agreement as to non-partibility, confidentiality and the secrecy of the know-how also indicated that the right obtained by the assessee was the right to use the know-how. Since there was no aquisition of the know-how by the assessee, the expenditure incurred by the assessee for getting the technical know-how and other assistance from the German company represented revenue expenditure which was allowable as a deduction in the computation of the income of the assessee. Where passengers search for toilet rolls For Indian Airlines (IA), it was a case of being back home after being ‘thrown’ out of home for about two years. Breathing free in refreshing surroundings in spacious and beautiful newly built terminal building (1-A) at the Indira Gandhi International Airport (IGIA), the national carrier handled its operations superbly and provided all the facilities to passengers to make their flight comfortable and enjoyable on the inaugural day (July 3). All Indian Airline staff, from ground hostesses to supervising incumbents, were keyed up to prove that the national carrier would continue to retain the pride of position in domestic operations, no matter what might be threats and pinpricks from private functionaries. The passengers, particularly regular fliers, looked relaxed and comfortable as they found no congestion in any area. “This is how it should be so that we feel proud of our operations”, echoed passengers while, undertaking their respective flights. While inaugurating the terminal building, the Minister of Home Affiars, L.K. Advani, made two very pertinent points. He said that the airport should be ‘friendly’ as it is a geteway to the country and the building should be maintained at all costs. Will the AAI heed to these suggestions? It looks unlikely judging from the functioning of the international building where even ‘toilet rolls’ for passengers, men and women, in arrival and departures areas continue to be in short supply. There are instances when passengers, Indian and foreigners, request ‘jamadarin’ or ‘jamadar’ for ‘paper’ for the ‘paper-work’. Can their be anything more disgraceful than this? When AAI senior officials are asked, they come out with ready answer that they are helpless as ‘toilet rolls’ are stolen. Who is stealing them, by the way? Are passengers stealing them or staff is guilty of pilferage ? Whoever may be guilty for it, the moot point is : why should passengers be harassed for no fault of theirs and why national and other operations suffer for the errors, omissions and sins of the AAI? It was felt that the AAI would function well after the amalgamation of the International Airports Authority of India (IAAI) and the National Airports Authority (NAA). Unfortunately the performence of the AAI has dipped low instead of improving, since amalgamation. Maybe, the new incumbent, who is shortly to take over as chairman from the officiating bureaucrat will be able to set the AAI house into order. The first and foremost function of the AAI is to provide service to passengers, visitors and rent-payers instead of caring for the health of the balance-sheet. The better is the service provided by the AAI at airports, the better will be the image of the country. If Singapore, Malaysia and many other small countries can throb on tourists in-flow, why not India, which has more tourist spots than most of the countries in the world. The international fare war in the country continues unabated. Each airline blames the other. It will continue to be so until there is an ‘open market’ in which every carrier is free to sell its product at whatever price it deems proper. Almost all airlines, affluent and others, have been guilty of not adhering to the pledges taken by them for ‘maintaining cleanliness’ in international fares. Recently, a foreign airline provided 20 per cent reduction in fares on two days a week (Wednesdays and Thursdays) on a particular sector. It was introduced to control capacity bringing it to the level of other days of the week. What was wrong in providing this incentive to passengers ? Nothing basically. But affected carriers cried ‘wolf’ dubbing it as ‘price war’. All airlines flying through this country are known to initiate their own schemes and innovations to sell their product. In lean season, the discounts are offered to woo passengers. The fares also keep fluctuating. There are high fare seasons and low fare seasons. This being the case, it is shocking that some carriers should object to one or two carriers adopting to new schemes to woo passengers. India is ‘bleeding’ in international air fares not because of this or that airline. But all airlines, Indian and foreign, are instrumental for mal-practices. No one is clean. All are guilty for dubious dealings and transactions. PFC to seek loan from banks NEW DELHI, July 5 (PTI) — State-owned funding agency Power Finance Corporation (PFC) has sought a Rs 250 crore loan from public sector State Bank of India (SBI), Punjab National Bank and Oriental Bank. Director Finance of PFC, Tantra Narayan Thakur told PTI that the corporation had sought Rs 100 crore as a fresh line of credit from SBI. The amount, which forms part of the Rs 700 crore domestic fund raising exercise of PFC in 1998-99 would be disbursed to State Electricity Boards (SEBs) and power utilities during the current fiscal, Thakur said. The corporation sources said that PFC had also sought a total Rs 150 crore loan from the Punjab National Bank and the Oriental Bank and the interest rates would depend on the prime lending rates. PFC has already used up the Rs 200 crore loan it had got from SBI at 12.75 per cent interest, the sources said. The letter seeking the fresh credit from SBI was sent last month. The corporation intends to mobilise about Rs 1950 crore for the current fiscal year and its disbursal target has been set at Rs 2500 crore, they said .PFC proposes to raise a major portion of its Rs 1950 crore through External Commercial Borrowings (ECBs), they said adding about Rs 1250 crore could be raised through ECBS and Rs 700 crore through domestic borrowings. The sources also indicated that PFC might raise Rs 970 crore from financial institutions by selling government stake upto 49 per cent in the corporation. A recommendation to this effect was made in the report of the Narasimham Committee which had gone into various aspects of PFC’s financial operations. Government’s contribution in PFC’s paid up capital stands at Rs 1030 crore out of Rs 2000 crore authorised capital. Equity could be raised to Rs 2,000 crore from financial institutions after PFC reaches saturation in its debt mobilisation capacity, the sources said. PFC had disbursed Rs 2025 crore in 1997-98 as against the target of Rs 1500 crore and had sanctions to the tune of Rs 2932 crore during the same year which was more than Rs 818 crore compared to the previous year. PM urged to ban meat export MUMBAI, July 5 (PTI) — The Chairman of Animal Welfare Board of India (AWBI), Justice Guman Mal Lodha has appealed to the Prime Minister Atal Behari Vajpayee to ban export of meat. Though India would lose foreign exchange worth over Rs 1500 crore if meat export was banned, it should be stopped, he said yesterday at a felicitation function organised here by Akhil Bharat Krishi Go-Seva Sangh. Lodha, who took charge on June 10, also urged Shiv Sena supremo Bal Thackeray and Maharashtra Deputy Chief Minister Gopinath Munde to initiate a movement to stop animal slaughter in the state for export. Every year about 15 crore animals are being slaughtered and every day 4.1 lakh animals are being killed in the country, he said adding that with an export target of Rs 1000 crore, the government was providing hundred per cent subsidies to the mechanised slaughter houses. Stressing the need to amend the laws regarding animal slaughter, Lodha appealed to industrialists to take interest in animal welfare. Several animal welfare activists at the function alleged that due to loopholes in the legal system, cruelty and slaughtering were treated under different categories. While cruelty was offensive, slaughtering was not, they added. Biz briefs |
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