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| Tuesday, December 26, 2000, Chandigarh, India   
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Ministries lock horns over VSNL privatisation Guarantee on
employment loan schemes waived
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Economy
in reverse gear FICCI for lowering of
corporate tax Winding up bells ring for MRTPC, BIFR CII fair generates
Rs 7 cr business Demand for DNA test on Basmati denied Takefumi Suzuki, an employee from the Japanese convenience store chain
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Ministries lock horns over VSNL privatisation
NEW DELHI, Dec 25 (PTI) — In a virtual volte face the Communication Ministry has opposed privatisation of Videsh Sanchar Nigam (VSNL) by bringing in a strategic partner on the grounds of ‘security risk’ even as Disinvestment Ministry dismissed apprehensions after talking to security agencies. Communication Ministry wrote to Disinvestment Ministry on December 22 suggesting divestment of only 4 per cent equity in VSNL to bring down government holding to 49 per cent which in effect would take the corporation out of the purview of Parliamentary and other statutory controls. Following the letter, Disinvestment Ministry cancelled the meeting of the Cabinet Committee on Disinvestment (CCD) on December 23, even though agenda papers relating to VSNL privatisation were circulated only the previous night. Officials of either ministry were not available for comments on privatisation of VSNL, whose share value had nosedived to Rs 198 from the year’s peak of about Rs 1100 after the bonus issue. Prior to bonus the scrip had crossed the Rs 3,000 mark on the bourses. CCD agenda was circulated after a broad understanding was reached between Communication Minister Ram Vilas Paswan and Disinvestment Minister Arun Shourie that government equity in VSNL would be brought down from about 53 per cent to 26 per cent. Disinvestment Ministry had also talked to intelligence agencies on security aspects, sources said adding these agencies were not opposed to inclusion of a strategic partner. Sources in the Department of Disinvestment (DoD) said that intelligence agencies simply wanted some portion of communication facilities in the privatised VSNL earmarked for them and that these had their own equipment to take care of security needs. DoD had earlier warned that VSNL would turn sick if not privatised and restructured to face growing competition in the international communication field with scheduled opening up of the arena for private sector by the year 2002. The government had decided to advance the date for breaking VSNL’s monopoly in ISD communication from 2004 to 2002 as part of reforms in telecom sector, sources said and pointed to the recent tie-up between Bharati and Singapore Telecom for laying an undersea communication line for international communication. On its part, Communication Ministry ensured a compensation package for VSNL for advancing of date for opening up ISD to private sector with officials saying that all the facilities would be provided to communication PSUs to survive in the free market.
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Guarantee on employment loan schemes waived PATNA, Dec 25 — In a landmark decision that may have far reaching impact on the social economy of the nation and specially, that of states like Bihar, the RBI has waived the condition of bank guarantee for the loans under employment schemes like Prime Minister’s Rojgar Yojna (PMRY), Swarna Jayanti Shahari Rojgar Yojna and Gramim Rojgar Yojna. This new directive issued by the RBI does away with the security the loan providing banks had made mandatory for the loans for educated and non-skilled youth. The RBI has sent the copy of the decision to the Central Government and letters to all states are being sent for prompt and suitable follow up actions. The apex bank has issued letters to all scheduled banks and has asked them to notify the directive to all gramin banks for compliance. This decision of the RBI is bound to prove a boon for states like Bihar where the money meant for the centrally sponsored schemes could not be utilised properly owing to stringent guarantee demands by the banks. The Chief General Manager of RBI in its letter to the Centre and nationalised banks said that after the receipt of complaints and the official report of the study group, the RBI has decided that there shall not be the need of any bank guarantee for the loans of Rs one lakh for the PMRY and other group loans upto Rs 3 lakh under the employment schemes. The asset created by the loan money shall itself be the security of the loan. It is to be mentioned here that owing to the security clause on the loans, thousands of rupees meant for the centrally sponsored employment schemes could not be utilised in Bihar. Moreover, the bank personnel used this provision to extract the “speed money” or “nazrana” from the beneficiaries as the security deposit demand used to be on the discretion of the branch managers. It is for public knowledge that the Central Government provides assistance of 75 per cent to the states for the implementation of the PMRY and other centrally sponsored self-employment schemes. The RBI decision has wider ramification for poor states like Bihar, Orissa and Madhya Pradesh where the credit-deposit (CD) ratio of banks is poor. In Bihar the CD-ratio has fallen down to as low as 23 per cent. The RBI decision will squeeze some liquidity in the states, making the CD ratio go up a bit. According to official sources, almost all states have been informed of the RBI decision and are preparing to ask the district officials and other government agencies to ensure compliance. However, in states like Bihar, where the executive decisions still remain the pocket affair of the powers that be, the RBI decision may not instantly bring in the desirable changes. The masses being oblivious of the RBI decision will continue to be looted and befooled by the corrupt bank staff who will extract “nazrana” even after the RBI directive aimed at doing away with it.
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India may face milk deficit after 2005 NEW DELHI, Dec 25 — India may fall short of milk supplies to the tune of around 20 million tonnes per year after 2005 if the current trend of falling growth rate of milk in the country continues, said a report. The Mumbai-based think tank Initiatives”, in its latest policy-oriented paper titled “The White Reality” noted that the growth rate of milk in the country has fallen from 7.1 per cent to 4.1 per cent. This could have serious impact on the milk demand that is going up because of the rising population and increasing demand, the report said. “In order to improve yields, it is necessary to enable farmers to have an average herd size of 10 to 15 animals, required capital and training, and professional farm practices,” the study observed. “Dairy farming should be transformed from a marginal activity of marginal farmers to a prestigious business opportunity for rural youth,” the study said. The study is based on extensive field research carried out in collaboration with the Purushottam Academy, a Nasik-based rural research institute. For instance, milk is available to urban consumers without any problem due to lopsided government policy. But, the availability of milk in rural areas is only 121 gm per day or barely half of the minimum nutritional standards prescribed by medical experts. About 75 per cent of children below three years of age, when milk is a vital nutritional input, are suffering from anaemia and about half of the children below five are malnourished. The study cited lack of hygiene and adulteration as serious problem in milk sector. About a third of the consumers interviewed reported personal experience of adulteration. Between 3 to 10 per cent of the consumers have had family members suffering from sickness related to adulterated or unhygienic milk. The condition of dairy farmers is much worse. Most farmers do not take into account the cost of labour and fodder while calculating their income from milk. If they include these, an average of 82.5 per cent of the dairy farmers would be making losses. The Indian dairy farmers have no resources to invest in hygiene at the farm level due to the low profitability. Even those who manage to earn some surplus, it is invariably beyond Rs 1000 per month. The poor condition of farmers has resulted in low productivity and low quality of milk. As a result, India finds it difficult to export milk and milk products, the study said, adding that despite a global milk trade of $ 10,000 million, India’s exports in this sector are mere $ 10 million.
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Changes in one-by-six income tax scheme NEW DELHI, Dec 25 (PTI) — The government will consider changes in the one-by-six scheme for income tax payers during the ensuing budgetary exercise, though the taxpayers in the country have almost doubled since the introduction of the scheme. “Suggestions relating to amendment of the statute including, the modification of the scheme, will be duly considered during the budgetary exercise and the decision will be reflected in the annual budget proposals”, Minister of State for Finance G.N. Ramachandran said. The impact of the scheme on increasing the tax base can be gauged by the fact that the number of taxpayers have increased from 1.16 crore in April, 1997, to 2.30 crore in October 2000. The minister told Parliament that any modification in the one-by-six scheme would entail an amendment of the Income-Tax Act and the government was receiving suggestions for amending the scheme. “The positive impact of the scheme is reflected in the increase in personal income tax collections from Rs 17,101 crore in 1997-98 to Rs 25,655 crore in 1999-2000”, the minister said, adding that up to the end of November 2000, income tax collections were higher by 45.03 per cent compared to the actual collection in the corresponding period of the previous year. In addition to the one-by-six scheme which makes it mandatory for those who fulfil either of the economic criteria such as possessing a house, telephone, car, credit card, undertake foreign travel or hold membership of a well-known club, the government has also taken other measures to widen tax base, he said. Mr Ramachandran said quoting a Permanent Account Number (PAN) had been made compulsory in documents relating to certain specified high value transaction. With a view to promoting the use of PAN as a common business identification number, powers have been delegated to the Central Government to notify certain class or classes of persons for whom it will be obligatory to apply for PAN, the minister said. “To begin with, a notification has been issued specifying persons assessable under the Central Excise Rules and the Service Tax Rules as well as importers and exporters for the purpose, the minister said. The minister said the government had also come out with a scheme of presumptive income in respect of those engaged in the business of civil construction, transportation and retail trade.
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Economy
in reverse gear NEW DELHI, Dec 25 — Daunted by oil shock, surging inflation, volatile rupee and stocks, the ‘feelgood factor’ generated early this year evaporated with even ambitious estimates fearing economic slowdown at the dawn of new year. Notwithstanding the buoyancy in revenue collections and surging exports both averaging over 20 per cent growth this year, slippages in Fiscal Deficit coupled with industrial and Agriculture slowdown is expected to push down economic growth to less than 6 per cent sending clear signals to government to push hard reforms with renewed vigour in the new year. Finance Minister Yashwant Sinha may dismiss the fears of slowdown as grossly exaggerated and attribute lower growth to external factors not under control of the government. But the fact remains that reform process was moving at a snail’s pace with whole lot of economic legislations promised in the Budget still remaining a non starter. More frightening is the fiscal situation of the states due to increased borrowing for current consumption which are pushing their debt burden to an unsustainable levels. On the positive side, the government notified the much touted Insurance Regulatory and Development Act and Foreign Exchange Management Act, to replace draconian FERA. Reformed the Telecom sector and announced new agriculture and textile policies. But privatisation of Public Sector Enterprises including Air India and Indian Airlines, passage of crucial reform legislations like fiscal responsibility Act and banking companies bill are painfully slow. Surging exports due to booming software as well as overall improved performance of traditional sectors have helped the economy along with the mopping up of $ 5.5 billion foreign exchange through India Millennium Bond to partially offset the burgeoning oil import bill due to volatile international crude prices. But increased dumping of Chinese goods has added to the worry of the government which would face more such dangers with the total dismantling of quantative import Restrictions by April next year. Expenditure control, downsizing government, cut in government borrowing have become mantras of the Finance Ministry but very little headway appears to have been made this year on these and the first two reports of expenditure reforms commission on rationalising food and fertiliser subsidies and downsizing of government were gathering dust in the Finance Ministry. Even as government made some efforts to cut food subsidy, the overflowing foodgrains godowns have posed new challenges forcing the government to permit exports but ad hoc and piecemeal policies on agricultural exports were coming in the way justifying the demand of exporters to have a long-term and continuous policy framework. World Bank though lauding India for achieving high growth in nineties has warned of a slowdown this year but said the economy could grow faster with more reforms. It was also
critical of government efforts in poverty alleviation saying much more needed to be done through increased spending on social sectors. |
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FICCI for
lowering of corporate tax BARODA, Dec 25 (PTI) — Newly elected President of the Federation of Chamber of Commerce and Industries (FICCI) Chirayu Amin has demanded lowering of corporate tax saying that countries having higher rate of taxation would face problems as investors tend to avoid such countries. Amin, who is Chairman and Managing Director of city-based Alembic group of companies, said in a release that this was one of the several demands contained in the pre-Budget memorandum submitted to the Finance Minister Yashwant Sinha. Other demands included doing away with provisions of capital gain tax, especially on items such as transfer of domain and other e-commerce applications. Amin emphasised the need for setting up of special courts for speedy disposal of cases and grievances related to e-commerce business. The President also demanded a five-year tax holiday for e-commerce to enable software industry to plough back its resources for future development. According to Amin, the industry has to carry a higher burden of tax and power tariff because the government has been averse to taxing the farm sector. |
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Winding up bells ring for MRTPC, BIFR NEW DELHI, Dec 25 — The government, in the very first year of the new millennium, rang the winding up bell for Monopolies and Restrictive Trade Practices Commission (MRTPC) and Board for Industrial and Financial Reconstruction (BIFR) by expressing its intention to replace these two quasi-judicial bodies with a “Competition Commission”. While the expert committee on competition law proposed hiving off the unfair trade practices part of MRTPC’s work to the consumer court, it also recommended winding up of BIFR and repeal of Sick Industrial Companies Act (SICA). Even as the fate of MRTPC remained uncertain, appointment of Justice B.M. Lal as Chairman in place of Justice A.N. Divecha, who completed his tenure in May 2000, led to a skirmish between the then Law Minister Ram Jethmalani and Chief Justice A.S. Anand. The S.V.S. Raghavan committee had in May this year submmitted its competition law report to Prime Minister Atal Behari Vajpayee, which had listed out pre-requisites for a competition policy, including progressive liberalisation and privatisation, and enactment of open trade policies. The Raghavan Committee had recommended enactment of an Indian Competition Act, along with the setting up of a Competition Commission of India (CCI), repeal of MRTP Act and winding up of the commission. It suggested pre-notification of merger above a specified threshold limit, treatment of predatory pricing as an abuse only if a dominant undertaking engages in it, and the setting up of a two-member mergers’ commission within the CCI. However, it refrained from prescribing any figure, for instance, a percentage of market share, to define dominance. According to the report, other pre-requisites for such a policy were elimination of the BIFR and repeal of SICA, amendment of Industrial Disputes Act, 1946 and disinvestment in state-owned companies and monopolies other than those sub-serving defence and security needs and sovereign functions. The committee had recommended that mergers should require pre-notification if the value of the assets of the merged entity was Rs 500 crore or more, and that of the group to which the merged entity belonged was Rs 2000 crore or more, both linked to the Wholesale Price Index. While the government was looking into the winding up of the commission, at least 1,000 new applications were received by the commission and at least 500 cases disposed of. The commission had at least 5,000 cases pending before it at the end of the year. Some of the major companies seen floundering in MRTPC’s net this year were leading ones like the Indian arm of Bill Gate’s Microsoft, automobile major Telco and Maruti Udyog Ltd along with its 110 authorised dealers across the country. Sterlite industries and state-owned MMTC were also seen hauled up by MRTPC for pegging discounts and sales commission to quantity offtake. And the commission exonerated some leading photocopier companies like Canon, Kores and HCL from the charges of unfair and restrictive trade practices. The commission also had a few airlines cases during the year, including modiluft airliner and British Airways. Even as the winding up of BIFR gained momentum, the board saw over 3,043 cases registered with it till middle of the year. The much hyped Manu Chabbria company, Dunlop, submitted a revised rehabilitation proposal to the board in mid-year. The company was later pulled up for not reaching a consensus on the draft rehabilitation scheme (DRS) submitted by it. In another BIFR case of
Amitabh Bachchan’s ailing entertainment company, Amitabh Bachchan Corporation Ltd (ABCL), dues of Rs 13.25 crore were recovered by income tax authorities from the Bollywood star and balance amounts allowed to be paid in instalments of Rs 2.5 lakhs per month. Seven government-owned textile mills under BIFR were the highlight of the year as the board issued winding up notices to four of them, including NTC (UP) Ltd, NTC (WB) Ltd, NTC (MP) Ltd, NTC (Gujarat). The board, however, sanctioned draft rehabilitation scheme for NTC (Maharashtra) Ltd and NTC (South Maharashtra) Ltd. While Mafatlal Industries Ltd was under enquiry, Matushree Textiles Ltd was sanctioned revival scheme by BIFR.
— PTI
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CII fair generates
Rs 7 cr business LUDHIANA, Dec 25 — The four-day consumer fair organised by the northern chapter of the Confederation of Indian Industry (CII) concluded here today with a grand finale marked by a special sound and light programme. Besides a special musical troupe Tantarix from Goa also kept visitors enthralled with special musical numbers. The organisers of the show claimed that business enquiries amounting to about Rs 7 crore were generated in the fair. The show attracted about one lakh visitors during the past four days, which was organised at Punjab Agricultural University. The show was mainly dominated by the consumer items ranging from small kitchen items to the Korean luxury cars. The Information Technology pavilions and the Good Health 2000 remained the centres of main attraction during the fair. The CII officials disclosed that the show would go a great deal in bringing the industry and the common man together. The theme of the show remained consumer oriented. Except for the cars most of the goods exhibited at the show were within the affordable means of the middleclass people. On the sidelines of the fair, the CII also organised a seminar on ayurveda in modern era. The seminar was attended among others by the Health Minister, Punjab, Dr Baldev Raj Chawla, and leading doctors of the city. Encouraged by the phenomenal response, the CII officials said more such shows with the maximum participation of the common people would be organised. This bridges the gap between the industry and the consumers as the company comes directly to the consumers. During the show a high-level meeting of the representatives of the industry was held under the chairmanship of Chief Minister Parkash Singh Badal. Several major decisions were taken at the meeting, including setting up of a textile city in the vicinity of Ludhiana. The Chief Minister also announced the constitution of a high power community with representatives from the industry and the government to monitor the growth of the industry in the state.
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Demand for DNA test on Basmati denied NEW DELHI, Dec 25 (UNI) - Fearing seeds propagation, India has rejected a demand from the British Government for samples of Basmati rice for the DNA testing but instead has agreed for providing the aromatic grain in the powdered form. “The samples would be provided in powdered form or as an extracted genomic DNA to avoid propagation of the seeds,” official sources said. The British Government had asked the Ministry of Commerce for providing the samples of Basmati Rice for the DNA testing. Britain said it needed to carry out the DNA testing to identify and distinguish all varieties of Basmati rice. The move had led to fears among exporters, who said the motive behind subjecting the Indian rice to the DNA test could be suspicion. They wanted the government to accept the British request only after the UK Food Standards Agency made its intentions clear. Some political leaders had expressed their apprehensions over the British move to the government. Indian exporters are at present enjoying the maximum concessional duty from the UK under the European Union’s arrangement. However, these benefits will not continue since the EU is reconsidering the concessional duty rates. The export of Basmati rice to the EU, including the UK, was worth Rs 267.29 crore in 1999-2000. The exports in the current financial year were Rs 125.37 crore between April and July. While the British motive in seeking the DNA test has come under suspicion here, Action India, a UK-based non-government organisation, is fighting the US companies which are trying to get the Basmati rice patented in their names. The Action India had supported India in contesting the patents claimed by the Rice Tec. India has since succeeded in getting the US firm withdraw majority of the patent claims. |
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