Thursday, March 1, 2001,
Chandigarh, India







THE TRIBUNE SPECIALS
50 YEARS OF INDEPENDENCE

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It’s an economist’s Budget
New Delhi, February 28
Finance Minister Yashwant Sinha, promising a “new deal”, on Wednesday unveiled a tough Budget meant to roll back state control and revive flagging economic growth.






Trader S.K. Khetry (right) reacts as he monitors stock prices on a computer at the Calcutta stock exchange on Wednesday.
The stock market welcomes the Budget.
Trader S.K. Khetry (right) reacts as he monitors stock prices on a computer at the Calcutta stock exchange on Wednesday.

Software exports get more tax leeway
New Delhi, February 28

India’s booming software industry escaped getting slapped with a service tax, as had been widely expected, while receiving an income tax break in the annual Budget presented on Wednesday.

DSQ to acquire 3 US firms
Chennai, February 28
DSQ Software said on Wednesday it received shareholder approval for a preferential issue of up to 10 million shares to be used to acquire software companies in the USA and India.

Positive signals for IT sector
Chandigarh, February 28
Mr Atul Gupta, CMD, Pugmarks, and an IT expert here said the income tax benefits in the budget for the software sector would boost the onsite software services industry. Online information and data retrieval services will have to pay a 5 per cent service tax.


 

EARLIER STORIES

 

Better-than-expected: CII
Chandigarh, February 28
Representatives of industry today described the Union Budget 2001-2002 as “pro country”, giving it a commendable prima facie rating of 8 on a scale of 1-10. A Budget viewing session organised by CII here saw members across different sectors respond to the Finance Minister’s address with reactions like “excellent balance”, “a good beginning” and “better than what was anticipated”.

Bold on labour: PHDCCI
Chandigarh, February 28
Representatives of the PHDCCI complimented the Finance Minister for the rational and balanced Budget focussing on economic growth against the expected “harsh” Budget after the Gujarat tragedy. Initiatives, particularly in infrastructure, labour reforms and housing sector, were lauded.

Duty hike on palm oil welcomed
Chandigarh, February 28
The oil industry in Haryana, which is passing through a bad phase, is going ga ga over the Union Finance Minister’s proposal to steeply increase Customs duty on imported edible oils. The President of the Haryana Solvent Extractors Association, Mr Bharat Bhushan Jain, said here today that the imposition of 75 per cent import duty on crude palm oil, both for the vanaspati manufacturers and traders, would save the indegenous oil industry, which was on the verge of the closure due to cheap imported oil from Malaysia.

HPMC turns the corner
Shimla, February 28
After accumulating losses for the past two decades, the HPMC, a public sector undertaking engaged in processing and marketing of horticultural produce, has finally turned the corner achieving a record turnover of Rs 35 crore and reducing cash losses to a nought during the current year.

Duty cut to boost soft drinks
Chandigarh, February 28
The Budget 2001-2002 is a growth oriented and forward looking with an overall impetus to industry, the effort of the government in maintaining the fiscal deficit in the revised estimates at the same level at Budget estimates for 2000-01 is indeed commendable.
Top







 

It’s an economist’s Budget

New Delhi, February 28
Finance Minister Yashwant Sinha, promising a “new deal”, on Wednesday unveiled a tough Budget meant to roll back state control and revive flagging economic growth.

The Budget, which relies on lower interest rates to raise growth and keep government finances under control, was cheered by financial markets, and both stocks and the rupee rose on the view it had improved the overall investment climate.

Sinha told parliament the budget deficit would be cut to 4.7 percent of gross domestic product in the fiscal year starting in April from 5.1 per cent.

“This is a Budget for growth. This is a Budget for a new deal to the people of India in the new millennium,” he said, borrowing the “New Deal” phrase promised to Americans by U.S. President Franklin D. Roosevelt in the 1930s.

Sinha also raised the foreign investment limit in publicly listed Indian firms to 49 percent from 40 percent and halved the tax on dividends paid by companies to 10 percent.

“The Finance Minister deserves a 10 out of 10 for the Budget,” said Gul Tekchandani, chief investment officer at Sun F&C Asset Management. “My expectations have been exceeded.”

The benchmark Bombay stock exchange index closed 4.36 percent higher at 4,247.04 points on budget euphoria, while the rupee and bonds also gained.Top

 


Reforms score over politics

Many analysts had expected Sinha to duck reforms in favour of political expediency ahead of state elections this year.

But Sinha insisted India needed to breathe new life into a decade-old economic liberalisation programme.

Analysts said the Budget depended on a classic economic gamble by which lower interest rates would raise growth.

This would allow Sinha to slightly increase spending while still reducing the Budget deficit as a proportion of growing GDP.

Sinha declined to give a specific growth forecast, though a Finance Ministry official estimated a rise in GDP of 6.5 percent in 2001/2002 compared to 6 per cent in the current year.

“I have tried to do whatever was needed for growth,” Sinha told Doordarshan.Top

 


Budget paves way for rate cuts

In particular, he announced a 100 to 150 basis point cut in the administered rate on small savings to between 9.5 and 10 percent.

Commercial banks benchmark their long-term deposit rates against this rate, and the measure was expected to cut the cost of corporate borrowing.

The deficit curbs also increased the possibility of a rate cut by the Reserve Bank of India (RBI), which had made fiscal discipline a condition for monetary easing.

The RBI last cut its benchmark lending rate by 50 basis points to 7.5 percent on February 16.

“I have done my bit, it is up to the Reserve Bank of India and banks to act on this,” Sinha told reporters.

Sinha also announced a host of tax measures, tweaking duties and taxes to meet the needs of different industries.

“This is truly an economist’s Budget and not a politician’s Budget. It’s brilliant,” said Adi Godrej, Chairman of Godrej Soaps. “It will kickstart the economy and put India on a new plane of economic growth.”

Analysts said Sinha’s Budget gamble would pay off only if industry expands as expected and if the agricultural sector — which influences over 70 percent of domestic demand — had a good year.

Economists reckon India needs growth of some 10 percent if it is to reduce poverty among its billion strong population.

Sinha, forced two years ago to roll back on reforms by political and popular opposition, will also have to stick to his guns this time if he is to lure back foreign investors. Reuters
Top

 

Software exports get more tax leeway

New Delhi, February 28
India’s booming software industry escaped getting slapped with a service tax, as had been widely expected, while receiving an income tax break in the annual Budget presented on Wednesday.

The industry also stands to benefit from moves to boost spending on technology education, while computer hardware and telecommunications companies will gain from reduced import duties — to 15 percent from 25 percent — on some equipment .

But online information, database services and leased circuit line providers were saddled with a service tax.

The tax was first imposed on select services in the mid-1990s. But only 5 per cent of services are currently taxed, even though services account for more than 50 percent of India’s economy.

Dewang Mehta, President of the National Association of Software and Service Companies (Nasscom), shrugged off the service tax as minor and hailed the overall thrust of the Budget.

“We are elated about this Budget. It is a hat-trick Budget after two consecutive good budgets. The other good news is that there is no e-commerce tax,” he told Reuters.

“He (Sinha) has not tinkered with our export incentives,” added Mehta.

The software service industry’s 50 percent-plus growth had made it a high-profile candidate for taxation by a cash-strapped government. But Sinha decided to defy expectations by not extending the 5 per cent service tax on revenue to the fastest growing sector of the Indian economy.

“The IT sector continues to do well and should be encouraged to do better,” Sinha said.

Nasscom predicts that India’s software exports will swell to $6.2 billion in the year to March, and to $9.4 billion next year.

Software exports had previously been exempt from income tax. Sinha has now proposed also exempting “on-site” services, or work performed at client premises. That work accounts for about 60 percent of overall software exports.

Acquisitions made easier

The minister also announced easing of income tax rules aimed at facilitating changes of ownership of companies. The move is expected to aid mergers and acquisitions.

Furthermore, Indian software firms are being given greater freedom to use as they choose funds raised abroad.

“The increase in the limit of Indian firms with American Deposit Receipts being able to buy shares of foreign firms up to 100 million dollars compared to 50 million earlier is a welcome step,” said Suresh Senapaty, Corporate Executive Vice-President at Wipro Ltd.

“It can kickstart the acquisition plans of Indian companies.”

The government also proposed to help new telecom service firms by extending a five-year tax holiday which had been due to expire on March 31. The tax concession will now remain available to companies created up to March 31, 2003.

“These concessions will also be extended to Internet service providers and broadband networks,” Sinha said.

Additionally, Sinha proposed to upgrade regional engineering colleges and increase private funding of educational bodies.

“We are determined to maintain and strengthen our competitiveness in the field of technology education,” he said. Reuters
Top

 

DSQ to acquire 3 US firms

Chennai, February 28
DSQ Software said on Wednesday it received shareholder approval for a preferential issue of up to 10 million shares to be used to acquire software companies in the USA and India.

Managing Director Dinesh Dalmia told reporters after an extraordinary shareholders meeting that the company planned to use the new equity — to be allotted at a price of about Rs 500 per share — in a series of cash-cum-stock acquisition deals.

Dalmia said DSQ Software hoped to finalise deals to acquire two to three US-based software services firms in the next seven to 10 days.

“These firms are typically of $30 million to $100 million in size and serving niche areas for Fortune 100 clients, making profits and having no debts and our aim is to buy them through cash-cum-stock deals, increase the engagement size and move the projects offshore.” Dalmia said the acquisitions would help DSQ achieve sales of 10 billion rupees ($214.87 million) in calendar 2001.

“We have now benchmarked ourselves against some of the top Indian software firms such as Infosys, Wipro and Satyam and this strategy of ours will help boost our margins also significantly.”

Dalmia said e-commerce solutions provider San Vision Technology Inc was still the firm’s most preferred choice among the four to five U.S. firms that it was eyeing for acquisition.

In December, DSQ said it was renegotiating the price for buying San Vision, from the $30 million in stock it had said it would spend when it originally announced the deal in July.

“San Vision is still our most preferred choice today and we are still finalising the valuations for the purchases where we are looking at firms in places like San Jose or New York where we already have a base,” he added.

Dalmia added that the firm was also looking at an overseas listing in 2002.

“Now that we have a healthy balance sheet having retired debt of about 1.9 billion rupees and with a cash surplus of 2.2 billion rupees, definitely we will be looking at listing (overseas) next year.” Reuters
Top

 

Positive signals for IT sector
Tribune News Service

Chandigarh, February 28
Mr Atul Gupta, CMD, Pugmarks, and an IT expert here said the income tax benefits in the budget for the software sector would boost the onsite software services industry. Online information and data retrieval services will have to pay a 5 per cent service tax.

In the last two years the tele-density has doubled to reach 3.5 connections per 100 today. He said: “This has a direct bearing on the growth in IT. Electronic trading facilities are being pushed in the financial sector that would give an impetus to the IT applications and push e-commerce usage for the common man.”

There has been further liberalisation in the overseas investment sector where Indian companies can now invest up to 50 million per year through the automatic clearance route without any prior government approval. The three-year profitability factor has also been removed.

Companies with ADR/GDR listing can now invest abroad up to 100 per cent of the ADR/GDR value raised.

Previously, Indian companies could invest only up to 50 per cent of the ADR/GDR amount. The ceiling on overseas investment by Indian companies has been raised from $ 50 million to $ 100 million per year or 10 times the export revenue of the company, whichever is higher.

Ten per cent surcharge that is levied on the 15 per cent basic Customs duty has been removed. This is a minor change in the duty structure that will not even have a noteworthy affect on the hardware sector.

The Budget has also laid down certain benefits in the form of tax exemptions to be extended to companies outside STPI.

The Industrial Disputes Act has also been made applicable to only the specified industries employing over 1,000 employees. Earlier prior approval was required for employee retrenchment. “We will have to wait for the notification to see how it affects or covers IT,” he said.

In case this amendment extends to the IT sector, it will give out very positive signals to the foreign companies who will now not be deterred by this clause of retrenchment in case of corrective measures or rightsizing policies.
Top

 

Better-than-expected: CII
Tribune News Service

Chandigarh, February 28
Representatives of industry today described the Union Budget 2001-2002 as “pro country”, giving it a commendable prima facie rating of 8 on a scale of 1-10. A Budget viewing session organised by CII here saw members across different sectors respond to the Finance Minister’s address with reactions like “excellent balance”, “a good beginning” and “better than what was anticipated”.

“It looks like a Budget that means business”, observed Mr I S Paul, Chairman, CII Chandigarh Council, summing up the general positive feeling. “The biggest contribution of this Budget is the admission that radical reforms are needed if India has to grow, remove poverty and complete with the likes of China. It takes industry and sector specific steps towards ‘second generation reforms’ to carry the entire economy forward”, he said.

Mr Paul said that the three vital sectors of the northern zone — agriculture, textiles and agri-processing — had been given the much needed fillip.

However, on the downside, he regretted the setting up of another disinvestment target without the framework to achieve it, and the absence of a time-frame to implement the agriculture policy. Further, it was unclear what steps had been taken to augment FDI.

Mr Sachit Jain, Chairman, CII Textile Sub-Committee and Executive Director, Vardhman, expressed satisfaction that the textiles had got some rationalisation in an overall good Budget. It was, however, important to ensure that implementation took place properly.

While Dr M J Zarabi, CMD, Semi-Conductor Complex, felt the Budget could not have been better under the circumstances, Mr Ashok K Tandon, MD, Milestone Gears, hoped tomorrow’s papers would serve no surprises based interpretations. In a lighter vein, he observed that the Budget appeared to have been drafted by CII.

The Budget was a right step in the direction of nation building, with commendable initiatives of education, labour and tax rationalisation, noted Capt. Alok Sharma, Chairman, CII HP State Council and MD and CEO Forge (India). He regretted that crucial issues like population control had been ignored by the Finance Minister. Concrete action for population control and more effective downsizing of government departments were areas that needed more focus, agreed Mr A Ahuja, ED, Mantec, Mr R S Gill of Amartex and Mr S Narsimhan of HFCL.

Though the Budget was better than expected with boosts for agriculture and infrastructure, there was no accountability, felt Mr Anil Sehgal, CEO, Precision Turners. Mr Sanjiv Singh, Director, Marketing, Gilard Electronics Pvt. Ltd noted that the direction was good, though the pace may need acceleration.

Appreciating the Budget’s initiatives on infrastructure, labour and reforms as well as the single duty in excise, Mr Rakesh R Aggarwal, General Secretary of the Dera Bassi Industries Association, felt that more could have been done for labour reforms at a fundamental level. Moreover, government downsizing alone was not enough. The machinery should move faster, felt Mr Tapishwar Kumar, Director, Mohan Paper Mouldings Pvt Ltd.

The Budget was growth-oriented, keeping the interests of all sections of society in mind, observed Mr K Sachdev, President and CEO, Gates India. He however felt that it could have been bolder in tackling disinvestment of PSUs, and in attracting FDI.

Mr Atul Gupta, CMD, Pugmarks Interweb Pvt. Ltd., endorsed this viewpoint saying that PSU disinvestment had not been as accelerated as required and government workforce cut should have been more than 2 per cent. Mr J S Randhawa of Spice Communications agreed that the Budget could have presented an implementation plan to downsize the government, and offered a structured policy/process towards disinvestment.

Exports had received no major initiative, regretted Mr Sanjiv Gupta, President, Appeal, while Mr Mukesh Aggarwal of Idma Laboratories wanted more focus on a vital sector like infrastructure.

Mr Ashok Das Gupta of Dabur India aptly encapsulated the general sentiment when he described the new Budget as one of “rationalisation and equilibrium, with a thrust towards economic growth”. 
Top

 

Bold on labour: PHDCCI
Tribune News Service

Chandigarh, February 28
Representatives of the PHDCCI complimented the Finance Minister for the rational and balanced Budget focussing on economic growth against the expected “harsh” Budget after the Gujarat tragedy.

Initiatives, particularly in infrastructure, labour reforms and housing sector, were lauded. However, more could have been done so far as the agricultural sector is concerned and exports too have not been given much attention, it was felt.

“The Finance Minister has been bold in taking decisions regarding certain sectors which were completely untouched for a long time like labour laws etc.”, said Mr Ashok Khanna, Past President, PHDCCI. “Increasing the number of workers limit from 100 to 1,000 under Chapter 5-B of the Industrial Disputes Act and allowing contract labour in certain social sectors has indeed been a bold step taken”, he said.

He welcomed the annual 2 per cent downsizing of the government departments and also the reviewing of the Essential Commodities Act.

The general opinion is that the Finance Minister has not done much to favour the Small and Medium Enterprises. However, the capital market, automobile and textile industry will get a boost with more relaxations in terms of excise duty cuts and increase in Customs duty.

Mr Satish Bargodia, Member, Managing Committee, PHDCCI, said that the textile industry would benefit

from reverting to independent processors at ad valorem duty, withdrawing exemption to SSIs producing cotton yarn and levy of excise on branded garments.

The removal of surcharge on corporate tax (except 2 per cent Gujarat relief), reduction of dividend tax from 20 to 10 per cent and exemption from capital gains tax on re-investment in primary issues will give new lease to stock markets and corporate sectors.

“The sagging auto industry would also seek respite from the fact that 180 per cent Customs duty has been imposed on the import of second-hand cars and the depreciation rate has been increased to 50 per cent for India’s automobile industry”, said Mr R.S. Sachdeva, Co-Chairman, Punjab Committee, PHDCCI.

Exemption to food preparations based on fruits and vegetables completely from excise duty and special incentives to the agro-processing sector were also appreciated. “The Budget would also give an impetus to the agro processing sector”, said Mr Amarjit Goyal, Chairman Punjab Committee PHDCCI. He also felt that the Budget would boost investment and give fillip to exports. The domestic industry has been protected as higher Customs duty on edible oil, tea, coffee has been imposed, he said.

It was opined that the public sector disinvestment proposals should be pursued more vigorously. “PSU disinvestment is the need of the day, but these proposals should be persued more vigorously and in a time bound manner”, said Mr A.L. Aggarwal, President of the Chandigarh Industrial Fasteners Association.

He also said that th e proposal to give loans up to 25 lakh to SSIs without collateral security and creation of Technology Upgradation Fund of Rs 5,000 crore to be disbursed in five years are positive steps. Top

 

Duty hike on palm oil welcomed
Tribune News Service

Chandigarh, February 28
The oil industry in Haryana, which is passing through a bad phase, is going ga ga over the Union Finance Minister’s proposal to steeply increase Customs duty on imported edible oils.

The President of the Haryana Solvent Extractors Association, Mr Bharat Bhushan Jain, said here today that the imposition of 75 per cent import duty on crude palm oil, both for the vanaspati manufacturers and traders, would save the indegenous oil industry, which was on the verge of the closure due to cheap imported oil from Malaysia.

He said this welcome step would also be beneficial to oilseed growers of the country, who were in distress because of the low market rates for their produce. This would also motivate those farmers who had shifted to the wheat-paddy rotation to take to oilseed crops, which, till a couple of years ago, yielded good returns to the farmers.

The Haryana Chamber of Commerce and Industry complimented Yashwant Sinha for presenting a Budget which was by and large acceptable to the industry and trade and would give an impetus to growth.

The President and the Senior Vice-President of the chamber, Mr Manmohan Singal and Dr N.C. Jain, respectively, said in a joint statement issued here today that the increase in the import duty on edible oils would ultimately benefit the agriculture sector.

They said while the reduction in the excise duty on cars, CNG kits and three-wheelers was a welcome step, the imposition of 8 per cent excise duty on CNG would discourage the people from using the environment-friendly fuel.

They criticised the reduction in interest on small savings as it would discourage savings and would hurt the salary class. Similarly they were also not happy with the lowering of TDS limit on interest from Rs 10,000 per annum to Rs 2500, which would adversely affect the small investors.

The chamber demanded that the income tax exemption limit should be raised to Rs 85,000 and the age limit for senior citizens for the purposes of income tax should be reduced from 65 years to 60 years. Top

 

 

HPMC turns the corner
Tribune News Service

Shimla, February 28
After accumulating losses for the past two decades, the HPMC, a public sector undertaking engaged in processing and marketing of horticultural produce, has finally turned the corner achieving a record turnover of Rs 35 crore and reducing cash losses to a nought during the current year.

Concerted efforts to improve efficiency, ensure better capacity utilisation and bring down the cost of production over the past three years have started showing results. The cost of apple juice concentrate has come down from Rs 37 to Rs 32 per kg at the Parwanoo plant. Similarly, the cost of production at the Jarol plant was brought down by Rs 2.85 per kg, leading to an overall saving of Rs 31.35 lakh.

However, the major achievement has the improvement in capacity utilisation and the markeing front with the annual sale of juice concentrate increasing from 644 tonnes in 1997 to over 1,300 tonnes this year.

Mr Narinder Bragta, Horticulture Minsiter, said consequently the turnover shot up from Rs 23.14 crore to Rs 35 crore during the period and the corporation which had been suffering cash losses to the tune of Rs 3.50 crore annually was set to achieve the break even point. Top

 

Duty cut to boost soft drinks
Tribune News Service

Chandigarh, February 28
The Budget 2001-2002 is a growth oriented and forward looking with an overall impetus to industry, the effort of the government in maintaining the fiscal deficit in the revised estimates at the same level at Budget estimates for 2000-01 is indeed commendable. The incentives given to industry at large will contribute to a boost in the domestic production. The enhanced outlay of infrastructure will aid in the overall growth of economy.

The much-awaited reduction in excise duty on soft drinks is a welcome step and will definitely help in the overall growth of this industry which has been experiencing minimal growth for the last couple of years, said Mr Kewal Dhillon, Chairman, Dhillon Group of Industries.Top

 

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BIZ BRIEFS

SBP new MD
Chandigarh, February 28
Mr A.K. Purwar, Dy Managing Director and Chief Credit Officer, Central Office, State Bank of India, Mumbai took over as Managing Director of State Bank of Patiala, today from Mr A.K. Batra, who has been transferred to Central Office, SBI, Mumbai. TNS

Canbank MF
Chandigarh, February 28
Canbank Mutual Fund has declared a second Income Distribution of 5 per cent under Canpremium Scheme. The Interim Income Distribution of 10 per cent for the fiscal year 2000-2001 was declared during September 2000. This is the fifth income distribution since 01.02.1998, the date of conversion, taking the total distribution to Rs 3.65 on the face value of Rs 10 per unit. TNS

Price index
Shimla, February 28
The All-India consumer price index number for industrial workers base 1982-100 decreased by one point during the month of January to stand at 445. PTI

Frick India
Chandigarh, February 28
Frick India Ltd, a pioneer in the refrigeration and air-conditioning field in India, announced today the launch of its Ultra Low Oxygen (ULO) cold stores that will alter the storage and cooler industries in the country for the better by reducing wastage of crops and produce. TNS

Kolson India
Chandigarh, February 28
Kolson India introduces the world acclaimed Chronol 500 mg tab to Indian market that is effective in treatment of alcoholism and prevention of alcohol abuse. For product information: Email: kolsonindia@hotmail.com  TNS

SBI MF
Chandigarh, February 28
SBI Mutual Fund, today announced the launch of its open-end monthly income plan, Magnum Monthly Income Plan (MMIP). This scheme will endeavor to meet the needs of regular income of investors, through payouts in the form of monthly dividends. The initial offer of the scheme will be from February 22, 2001 to March 23, 2001. TNS

Dubai type festival
Dubai, February 28
Organisers of the famous Dubai Shopping Festival (DSF) plan to help the authorities in Mumbai to hold a similar event in India’s commercial capital. According to Mr Asoke Mukerji, Consul General of India in Dubai, the authorities in the two cities were discussing the modalities of the venture.
TNSTop

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