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| Monday, February
12, 2001, Chandigarh, India   
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Govt to lift sectoral cap on FDI
Stock market prepares for a tough,
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Asia frets over US ‘recession’ Jet Airways reschedules flights PSEB justifies atomic plant
site Package for sick units urged
AI gesture towards quake-hit Power generation at Thein Dam: shutdown after 6
months Q: Whether this teaching allowance should be taken into account under the exempt category for computing the income-tax? If the answer is no, then due to misinterpretation of the clause, whether the loss caused to the government could be recovered from the salary of the employees at later stage? Pre-Budget rally as usual
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Govt to lift sectoral cap on FDI NANGUNERY (Tamil Nadu), Feb 11 — The government will soon lift sectoral caps for foreign equity to attract $10 billion annual foreign direct investment flows, announce a package of incentives for special economic zones and fix an over 18 per cent growth target for the next year in the face of surging exports. Setting at rest reports of opposition on lifting sectoral caps on foreign equity in non-strategic areas, Commerce and Industry Minister Murasoli Maran said the Group of Ministers had asked him to prepare a Cabinet note on it which would be ready in the next few days. Talking to reporters on the sidelines of a function to lay the foundation stone for India’s first Special Economic Zone here, Maran said: “We have given a package of benefits to be provided to Finance Minister Yashwant Sinha for consideration. I would not say anything more as it had budgetary implications.” “We want to open certain areas. FDI flows will come only if we open certain sectors,” he told The Tribune. The FDI flows this year had increased to $4.8 billion between January and December 2000 from $4.0 billion in 1999. The country’s first “original special economic zone (SEZ) is being set up here in an area of 3,000 acres at a cost of about $4.5 billion. Once completed, the zone is expected to provide employment to about 1 lakh people. Laying the foundation stone of the zone in this backward area of the state, Tamil Nadu Chief Minister M Karunanidhi described it as landmark in the history of Tamil Nadu. The zone, which will house major hi-tech
Industries, would become a major investment destination for foreign investment proposals. The Nanguneri zone, would be among the best in the world. Being developed by Advanced Technologies Manufacturing and Assembly (ATMAC) Ltd, the zone is a joint venture between in Infac India group, LLC and Tamil Nadu Industrial Development Corporation (TIDCO). The Nanguneri SEZ falling in the Tirunveli district of the state (about 500 km from Chennai), is being master planned by the Jurong Town Corporation. Though US promoters of the project hope to start operations in the next six months, it may take 15 years to fully develop the zone. Once operational with world class infrastructure, the zone would attract
investment of about $ 10 billion from giants in hi-tech sectors like IT, bio-technology, pharaceuticals and precision engineering . The country at present has four SEZs all of which were converted into the SEZs from the export processing zones. Nanguneri is the first project which has been conceptualised as an SEZ. Complimenting the state government for its initiative in setting up the zone, Mr Murasoli Maran said the high growth rate could be achieved only through export route. Empirical studies, revealed that open developing economies grow at a much faster pace compared to closed economies. Pointing out that buoyant economic growth rests on factors like social and economic infrastructure and healthy business environment, the Minister said the SEZs had been conceived to take care of these factors. Describing SEZs as economic powerhouses, Mr Maran said the USA, China, Mexico, Mauritius and the UAE had followed the SEZ model to give impetus to export-led growth. “When I went to China last year, I saw how their zones are not tiny enclaves but spread over thousands of acres without inspector raj,” he said. The SEZs, he indicated, would be considered as “virtual foreign territories, where export production will take place free from plethora of rules and regulations. Emphasising contribution of state governments to the export effort, Mr Maran said the scheme of corpus funds, which will devolve to states on the basis of export performance, had become a reality and funds would start flowing to the state government from next year. Billed as location that rivals Silicon valley in infrastructure and facilities, the Nanguneri SEZ will have a dedicated telecommunication infrastructure, including a fibre optic network, digital switching and a satellite earth station. Served by the Tuticorn airport and port, about 60 km away, the zone would have an independent power source and environment
standards not found anywhere else in the country. The promoters of the EPZ said that companies like Intel had started showing interest in the zone.
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Stock market prepares for a tough, quake-hit Budget MUMBAI, Feb 11 — Participants in the stock market are prepared to face a tough Budget in view of the devastating earthquake in Gujarat, but still hoping for some sops for the revival of sagging secondary market. “We are mentally prepared for a burden of taxes indicated by the Prime Minister in wake of the severe natural calamity in Gujarat” said Ms Deena Mehta, a leading stock broker and Vice-President of the Bombay Stock Exchange (BSE). However, Ms Mehta is hopeful of continuation of economic reforms and certain sops to strengthen sentiments of the capital market. The BSE Vice-President ruled out any negative reaction from the market even the Budget would be little harsh this time. The market has gone down considerably since the last Budget as the bellweather 30-stock Bombay Stock Exchange sensitive index (sensex) registered a fall of about 20 per cent during the year (February 29, 2000 and Feb 10, 2001). The benchmark BSE sensex which was closed at 5740.69 points on February 29, 2000, came down by 1149 points (20 per cent) to 4397.33 points on February 9, 2001. The BSE has suggested certain remedies for the revival of the stock market through a pre-Budget memorandum. The BSE in its pre-Budget memorandum to the Finance Minister has urged to initiate capital market reforms, attain fiscal balance, divest public sector units, lower interest rates and reduce taxation related to investors to boost sentiments in the market, Ms Mehta said. Association of Mutual Funds in India (AMFI) Chairman A.P. Kurian stressed on the implementation of various recommendations given by the Economic Council of the Prime Minister to achieve the targeted economic growth. “The members of the PM’s Economic Council gave concrete suggestions and all those should be accepted,” he said. Mr Kurian also urged the Finance Minister to scale down the dividend tax by 50 per cent to 10 per cent from 20 per cent to boost the sentiments at the secondary market. The dividend tax introduced by the Finance Minister during the last Budget caused much harm to the MF industry and reflected into the bearish trend in the stock market too. Therefore both the BSE as well the AMFI have stressed for bringing down the tax by 50 per cent in their memorandums this time. Mr Kurian has also urged the government to start an “Equity-PPF scheme” to be managed by the Unit Trust of India (UTI). The AMFI Chairman also suggested the Finance Minister for a definate time bond for completing PSU disinvestment to accelerate the economic growth. According to Ms Mehta, the BSE in its memorandum urged the government to earmark 24 per cent of equity in the Indian venture of a foreign company for the Indian public. All Indian companies wishing to list abroad must have a local listing to enable Indian investors to participate and to introduce the concept of Indian Depository Receipts (IDRs). The BSE has reiterated its demand that the Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) must increase their investments in equities to international levels, deploy at least 5 per cent of pension funds in equities and allow trading in ADRs and GDRs in India. The memorandum also requested the government to come out with clear guidelines on taxation inderivatives. Currently, profit in derivatives trading is taxed as speculative gains, as the transaction does not result in delivery. The BSE seeks provision in the Income Tax Act, which would consider gain/loss from such transaction as business gain/loss. The country’s premier bourse also prescribed four pronged strategies to the government for attaining fiscal balance through lowering of interest rates by creating vibrant debt market. The BSE also stressed on speeding the disinvestment process and suggested for eliminating cross-subsidisation and adhering to fiscal responsibility and Budget management Bill. The BSE pointed out that the strong retail debt market would be able to reduce the cost of funds for the government by about 1 per cent per annum. Veteran stock broker Raman Parikh expressed concern over the decline in the growth of the economy and the likely impact of the natural calamity in Gujarat on it. According to him, the market may witness sharp reaction to the Budget in view of the lacklusture situation. Shrikant Chauhan, a retail dealer at Motilal Oswal Ltd, was however optimistic about the Budget proposals. Mr Chauhan said that the market is expecting some special benefits to the fertiliser companies and R&D oriented domestic pharma companies in the current Budget. According to him, there are strong views that the Budget may not be as harsh as
expected to be. He said that market will go down during the last five days, prior to the Budget and may bounce back immediately after the Budget as the Budget would not be harsh and it may address various issues mooted by the capital market experts to boost the sentiments.
— UNI
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Asia frets over US ‘recession’
WASHINGTON, Feb 11 — If the US economy sneezes — will Asia catch a cold? Mounds of data suggesting the speeding American economic juggernaut is slowing — and may slip into reverse — makes unpalatable reading for Asian finance ministries. While the region pulled off a swifter-than-expected turnaround after its 1997 crisis, a prolonged US slump could wreak havoc, especially on governments still struggling with economic reform. Asia is seen as especially vulnerable by US-based economists as the recovery in many nations, including Thailand and the Philippines, is based on an explosion in exports primarily directed at hungry US consumers. “The USA cannot be the market of last resort any more,” Mark Groombridge, a scholar at the Cato Institute, told a forum of Asia-Pacific journalists here. After heady years of growth, the US economy is cooling at a disconcerting pace as a debate rages as to whether a recession has already started.
— AFP
Jet Airways reschedules flights NEW DELHI, Feb 11
— Several Jet Airways flights operating from and to Mumbai have been rescheduled as the airport will be closed from February 12 to 18. While the airport will be closed from 10.20 a.m. till 12 noon on February 12, 13, 16 and 17, it will be closed from 10.45 a.m. to 12.20 p.m. on February 14, 15 and 18. The airport will also remain closed on February 16 from 2 p.m. to 2.55 p.m. to undertake civil works. The Boeing 737 flight 9W 302 Delhi-Mumbai would depart Delhi at 10.10 a.m. and arrive Mumbai at 12.05 p.m. on February 12, 13, 16 and 17, a company release said here. Three flights to Bangalore from Mumbai have been rescheduled. Flight 9W 443 departing Mumbai at 10.15 a.m. and arriving Bangalore at 11.50 a.m. has been advanced by 15 minutes. Flight 9W 449 will depart Mumbai at 12 noon and arrive Bangalore at 1.35 p.m. while Flight 9W 447 would depart Bangalore at 4.15 p.m. and arrive Mumbai at 5.50 p.m. The Boeing 737 flight 9W 464 (Chennai-Mumbai) originally departing Chennai at 9 a.m. and arriving Mumbai at 10.45 a.m. would depart Chennai at 10.25 p.m. and arrive Mumbai at 12.10 a.m. Flight 9W 453 (Mumbai-Hyderabad) has been advanced by 10 minutes to depart Mumbai at 6.25 a.m. Flight 9W 458 will depart Hyderabad at 11a.m. and arrive Mumbai at 12.15 p.m. On February 14, 15 and 18, Boeing 737 flight 9W 334 (Delhi-Mumbai) has been advanced by 15 minutes to depart Delhi at 7.45 a.m. and arrive Mumbai at 9.40 a.m. Flight 9W 302 would depart Delhi at 10.35 a.m. and arrive Mumbai 12.30 p.m.
— PTI
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PSEB justifies atomic plant
site CHANDIGARH, Feb 11
— Certain “doubts” have been raised about the selection of the site at Daroli village in Patiala district for an atomic power plant in an article written by Dr G.S. Dhillon which appeared in Business Tribune on January 29, 2001. In a statement the PSEB has clarified these “doubts”. The atomic plant is being located farthest from the international border for safety reasons. The Kahuta plant in Pakistan is very close to the Line of Control in J&K and the Chasma power plant in Punjab (Pakistan) is at only a slightly greater distance from the international border than Daroli. The suggestion that the plant should have been located close to the international border so that Pakistan will not indulge in sabotage as its fallout will also spread to Pakistan is not valid. The sabotage may take place at a stage when most of the money has been spent and the plant is about to start. Atomic plants can easily withstand any air attack to the extent that there is no spread of activity as long as conventional weapons are used for the attack. Spread of activity is a function of wind direction and there is no guarantee that wind will be in the direction of Pakistan. The requirement of water for the atomic power plant has already been committed after taking into consideration all requirements of irrigation. The water discharged into the canal system is cool water from the base of the natural draft cooling towers and strict control on release of radio activity in the cooling water is maintained as per international standards which are enforced by an independent statutory authority of the Government of India i.e. the Atomic Energy Regulatory Board. The discharged water has to be fit for drinking from considerations of radioactivity. The site is located in the safest zone of Punjab regarding earthquakes. Some other plants in India are also located in Zone-III and are operating safely. The soil studies regarding bearing capacity, type of soil and liquefaction of soil which is a function of the watertable, soil characteristics and earthquake faces have been carried out and more studies will be conducted if the site is finally accepted by the Department of Atomic Energy. The Narora Atomic Power Station has already been built on identical soil conditions. The complete plant is designed after taking into consideration all the parameters, including earthquake response spectra and accelerations at various floor levels of the buildings. The Kakrapara Atomic Power Station in Gujarat continued to operate safely without any damage whatsoever during the worst earthquake in Gujarat and Narora Atomic Power Station also continued to work safely during worst earthquake in Uttaranchal. With the experience gained by the Nuclear Power Corporation of India in building nuclear power plants, the construction period of the atomic plant in Punjab is likely to be shortest — say five and a half years after the first pour of concrete. |
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Package for sick units urged TARN TARAN, Feb 11 — Mr Jatinder Pal Singh Dhillon, President and Lt Col (retd) Amarjit Singh, General Secretary, the Goindwal Industries Welfare Association, in a letter to Mr Parkash Singh Badal have demanded a special package for the rehabilitation of sick units at the country’s first nucleus industrial complex at Goindwal Sahib. Mr Dhillon and Col Amarjit Singh said under the Centre’s industrial policy 1980, the land of Goindwal Sahib was selected for the country’s first nucleus town which was to be developed as the fourth big town of the state after Amritsar, Jalandhar and Ludhiana. The alleged that the policies of the past governments had ignored the interests of
entrepreneurs and reversed the fundamental idea of the complex as had been done with the Goindwal Industrial and Investment Corporation (GIICO) which had been emerged with the Punjab Small Scale and Export Corporation. GIICO was formed to solve the problems of these
entrepreneurs. |
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AI gesture towards quake-hit As is customary during any national crisis. Air India and Indian Airlines rose to the occasion in recent unprecedented earthquake in Gujarat. Air India provided free ground handling equipment and manpower at Delhi and Mumbai airports for all chartered flights with relief material and personnel. All out efforts were made that funds provided by donor countries and organisations were given to the authorities for prompt utilisation. More than 113 tonnes of relief material brought in by Air India from various points on its global network had been delivered in Bhuj in one day for the earthquake victims. Relief material had been transported from various stations on Air India’s network, — London, Paris, Dubai, Bahrain, Kuwait, Doha, Abu Dhabi, Singapore, Osaka and Nairobi to Mumbai, Delhi and Ahmedabad. The commodities included life saving drugs, medicines and medical equipment.
Cargo village India had all opportunities to become a super cargo power in the international aviation sphere. Many airlines had offered help for constructing “cargo village” for completing all formalities under one roof. But the AAI procrastinated and missed the bus. The AAI’s delayed response led to many airlines constructing their own “villages” to augment movement of cargo, which, according to experts, is better money earner than passenger traffic. Beaten in “village” concept the AAI is now endeavoring for documentation to be fully computerised. The system will improve efficiency and expedition clearance. The AAI will shortly introduce automatic storage and retrieval systems on the import side. This will help achieve optimum utilisation of vertical and horizontal space at terminal. Pilferage of cargo is a worldwide evil. It is more so in this country where certain agencies have to be obliged to get clearance of assignments. To check the theft menace the Airports’ Authority of India is taking several measures. It has beefed up the security. The services of ex-servicemen are being utilised. The physical frisking of workers is also undertaken. The AAI also introduced mandatory wearing of canvas shoes to check theft of expensive shoes. |
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Power generation at Thein Dam: shutdown after 6
months After the removal of the snags from the power tunnels P1 and P2, when it was announced in August last year that the Thein Dam’s power plant of 600 MW capacity was ready to produce power, expectations rose that this block of 144 lakh units power from the dam would help alleviate the power shortage to a large extent. Power generation started on August 16, 2000, when the reservoir level stood at El. 503.20 m and inflow into the dam was 10,404 cusecs. The above phase came to an end on February 4, 2001, when it was decided to shutdown power generation till there was improvement in the inflows into the reservoir and its level. On February 4 the reservoir level stood at El. 497.7 m and it provided a seal or water depth above the intake-mouth of 0.7 m (the intake tunnel top being at El. 497.2m). Working with such a low seal could lead to structural damage to the liner of the penstock and also to the runners of the turbine. This phase lasted 172 days of power generation at the Thein Dam which has cost the nation some Rs 3,400 crore till date. It would be interesting to know the tale of power generation during Phase I and the mode of release made. During August 2000, the daily power generated was some 36.53 lakh units
(KWH) of electricity. One unit of 150 MW each is capable of producing daily 36 lakh units of power. During this month the reservoir stood at El. 503.02 m on the day generation started and rose to El. 506 1m by the end of the month. The reservoir level touched El. 508.2 m on September 25 but dropped to El. 508.1 m by the end of the month. The power generation during the month averaged 27 lakh units of power daily. Almost a similar pattern continued for the next few months till in February 2001, it was found that with El. 497.9 m it would not be “wise” to continue power generation. So it was decided to shutdown the power plant till the monsoon rain lifted the reservoir level. Before the shutdown, i.e. on February 3, the power production from the Thein Dam power plant was 22.9 lakh units of power and a day before it was a slightly more i.e. 26.7 lakh units. So during this phase the power generation was loading one unit to nearly 100 per cent in the beginning and to a load of 70 to 80 per cent for the rest of the period.
Excess water released During August 2000, excess water released over and above the IE was some 73,098 acre foot of water. In September, 2000, the excess water release was some 108,246 acre foot and during October the volume released was much greater, i.e. 163,900 acre foot. So during the three-month period (August to October) the “excess water” released over and above the irrigation indent, amounted to 3.45 lakh acre foot (0.345 MAF). Projecting the above pattern for the rest of the period works out that during the Phase I period some 0.7 MAF of water was released in excess of the irrigation water demand. The total annual irrigation water indent of the UBDC System is around 2.53 MAF. So in six months, water to the tune of 28 per cent of total annual supply in the UBDC System had been wasted as due to the absence of a balancing reservoir below the Thein Dam, the fluctuating flows cannot be evened off to uniform flow for use in the canal system.
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Q: Whether this teaching allowance should be taken into account under the exempt category for computing the income-tax? If the answer is no, then due to misinterpretation of the clause, whether the loss caused to the government could be recovered from the salary of the employees at later stage? Manjit Singh, Kapurthala Ans: Teaching allowance granted by the employer would be liable to income-tax. This allowance is not specifically exempted under the Income-tax Rules, hence it cannot be treated as exempt allowance. Due to misinterpretation of the clause if loss has been caused to the government, the employee can include the same in his total income while filing the Income-tax Return. Q: I am working in a govt aided Sr Sec School as a Science Teacher. has the rebate on HRA against receipt ceased as per the judgment of the Supreme Court for the F.Y. 2000-2001? What is the income-tax limit for the salaried people for the year 2000-2001. Ashok Bhanot, Jalandhar Ans: For claiming tax benefit or tax exemption in respect of House Rent allowance received from the employer, the ex-employee is required to submit necessary receipt, evidencing the payment for HRA. However, as per C.B.D.T. Circular, it is provided that as an administrative measure the salaried employees drawing HRA up to Rs 3,000 per month will be exempted from production of rent receipt. However, it may be noted that this concession is only for the purpose of tax deduction at source and, in the regular assessment of the employee, the Assessing Officer will be free to make such enquiry as is deemed fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent. Hence, the employer may not insist on the rent receipt so as to validly claim tax exemption in respect of House Rent Allowance. The exemption limit for the financial year 2000-2001 is Rs 50,000. Thus, if the net income of the salaried employee inclusive of salary income and other income is up to Rs 50,000 p.a., there is no liability to income-tax. However, taking into account the standard deduction available to the salaried employee as also the benefit of tax rebate permissible to the tax payers, substantial tax saving can be effected. Q: Will the tax relief of Rs 5000 to female tax payers be on the same pattern as for senior citizens? There was a news in the press that surcharge on tax will continue to be at 10 per cent for the assessment year 2001-2002 in case of those whose tax is deducted at source even if their taxable income exceeds Rs 1,50,000. Kindly confirm. Can an employee claim standard deduction both on his/her salary and his/her family pension separately? Sita Ram Goel, Tapa Ans: The tax rebate for female employees will be on the same pattern as is permissible to senior citizens. The surcharge in respect of the assessment year 2001-2002 for individual tax payer having taxable income in excess of Rs 1,50,000 will be at 15 per cent. However, for administrative purpose in certain cases the government has permitted tax deduction at source based on a flat surcharge of 10 per cent only. The employee can claim standard deduction in respect of a salary income, while on the other hand he would be free to claim a deduction separately in respect of family pension.  |
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Pre-Budget rally as usual The stock market had a good time last week and the Sensitive Index moved up by one per cent. The same trend is likely to continue this week. The market, or at least a section of it, expects some concessions in the budget, notably in the automobile sector, plantations, and infra-structural industries. partly, the rally is also due to the announcement of divestment in some major public sector units. It is usual for the market to move up in the pre-budget weeks and to drop in the post-budget weeks. This is likely to be repeated even this year, particularly when the government is so hard-pressed by enhanced demands on the Union government’s budget that no finance minister can offer any substantial concessions. It is no time for a populist budget. I believe that this rally should be used to book profit in over-priced scrips. There is no doubt that some PSU scrips which are now soaring high in the expectation of early divestment may continue to hold their present gains during the next three weeks, but this divestment is likely to take a pretty long time and these scrips may lose their buoyancy, in the post-budget
depressed market. It may be wise to book profit even in these scrips now, and pick them up, if considered profitable later, in a depressed market. The new economy shares have poor support in the market at present even though the software companies are reporting very good results and EPS rates. PSI Data Systems has recorded a 74 per cent net profit for the year ended December, 2000. SSI has reported a net profit of Rs 2508.34 lakh (as against Rs 874 lakh) for the second quarter ended December 31, 2000. Silverline Technologies has also earned a higher net profit of Rs 6,268,990 as against Rs 4,806,088 for the 4th quarter ended December 31, 2000. Some of them top scrips in the software sector can be picked up during the post-budget market which, as I expect, will be a depressed one. Two Tata group companies are offering rights to the shareholders in the form of convertible and non-convertible debentures. Tata Finance and TELCO need funds at relatively low interest rates. These rights issues will be discussed in this column when full details are available and the bank rates are known in the post-budget weeks. It is widely expected that there will be reduction in the provident and interest rates in the post-budget period. Karur Vysya Bank scrip, which had been recommended in this column when it was quoting around Rs 175-180 on the stock exchanges some two weeks back is now quoting at Rs 318 (with upper end freeze). It is likely to be merged with some bigger private sector bank. Even otherwise its credentials are very good. Profit-taking at this level may be considered a wise step even though the scrip may move a bit higher. Tata Chemicals has announced good third quarter results with a net profit of Rs 261.82 crore (as against Rs 114.82 crore) for the quarter and the nine-month results indicate a net profit of Rs 312.41 crore (as against Rs 174.20 crore). Its market price has moved up from Rs 50 to Rs 63 but the investors should wait for investment till its final results are known and the government policy for the fertilizers is spelt out. Castrol India has reported a 34.2 per cent decline in its net profit for the accounting year ended December 31, 2000. Pfizer has reported a 27.6 per cent rise in its net profit for the year ended November 30, 2000, but the scrip is fully priced and it is not clear as to how the company will fare when its parent company sets up its wholly-owned subsidiary in India and for which the government permission has already been received. |
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