B U S I N E S S

IOC to invest Rs 5,850 cr; raise 940 cr from market
New Delhi, July 1
Indian Oil Corporation (IOC) has planned a capital expenditure of Rs 5850 crore during the current fiscal, for which it would raise Rs 940 crore from market borrowings, official sources said.

Deficit mounts to 1.15 pc of GDP
New Delhi, July 1
India’s fiscal deficit mounted to Rs 28,482 crore during April-May, which is almost one-fourth of Rs 1,16,314 crore budgeted for the entire fiscal year.

A Bangladeshi student talks on a mobile phone at Dhaka University campus on Sunday. GrameenPhone, owned 51 per cent by Norwegian telecom state-owned firm Telenor, said it would launch the country's first wireless application protocol (WAP) Internet service in Bangladesh later this month. — Reuters

Corporate India’s new awakening
In the wake of the earthquake that literally and metaphorically shook the grounds of one of the most affluent societies of India-Gujarat (7000 villages in all got affected by the lethal quake), it was astounding and heart-warming to see the response from ‘corporate’ India. Many well-established names of Indian industry have risen to the occasion and are trying to do their bit for rebuilding Gujarat.

‘Trade unions threat to industrial units’
Amritsar, July 1
A local industrialists association, representing various textile segments, today expressed concern over the issue of certain trade unions forcing the closure of industrial units in the district.

‘Textile industry in doldrums’
Ludhiana, July 1
The textile industry in India has been through ups and downs. The most recent being the recessionary trend prevailing all-over the major economies of the world. Having put up a good performance during 2000-2001 the textile industry is anticipating a slip in the first and second quarters of the 2001-2002 fiscal.

The new system likely to have slow start
The traditional system of trading and transactions based on badla system in the stock market makes an exit and the new system based on rolling settlement, uniform settlement day and derivative takes its place. Indeed, “futures” in Index trading had been introduced on the National Stock Exchange in June 2000, and in early 2001, it was also started on the Bombay Stock Exchange.

AVIATION NOTES

Need to prune staff strength
The Air India Board, at its recent meeting, has accepted the budget proposals, which paint a very rosy picture for the national carrier. The proposals, submitted jointly by the ministry and the airline, depict a huge profitability for the national carrier for the year ending March 31, 2002.

REAL ESTATE

Thinking of buying a house?
With no signs of buoyancy in the real estate in Chandigarh for the last five years, a comparative study of prices during the last decade still has another story to tell by having an effective increase of about 100 per cent. It is during this period that collector rates of property were doubled in this region.

IOC to invest Rs 5,850 cr; raise 940 cr from market

New Delhi, July 1
Indian Oil Corporation (IOC) has planned a capital expenditure of Rs 5850 crore during the current fiscal, for which it would raise Rs 940 crore from market borrowings, official sources said.

Gujarat refinery capacity would be increased from 12.5 million tonnes to 13.7 million tonnes through revamping units, sources added. PTI

Deficit mounts to 1.15 pc of GDP

New Delhi, July 1
India’s fiscal deficit mounted to Rs 28,482 crore during April-May, which is almost one-fourth of Rs 1,16,314 crore budgeted for the entire fiscal year.

Notwithstanding the high deficit, the government resorted to hefty market borrowing, mopping up over Rs 40,000 crore, which is 50 per cent more than the targeted Rs 77,353 crore for this fiscal. PTI

Forum for aviation, tourism development
Tribune News Service

Chandigarh, July 1
A forum for preparing a strategy for integrated development of aviation and tourism industry in the northern India states has become functional.

The forum which has the Union Minister for Civil Aviation, Prof Chaman Lal Gupta, as its chief patron consists of ministers and officials from the departments of for aviation and tourism from northern Indian states of Punjab, Haryana, Chandigarh, Himachal Pradesh, J and K and Uttaranchal, UP and Rajasthan. It is an autonomous, service-oriented and non-profit organisation dedicated to the spread of its work in the northern region.

The decision to set up the forum was taken last month at a national seminar organised by the Institute of Tourism and Future Management Trends, (ITFT) at Chandigarh, which is also the nodal agency for coordination, research and planning.

According to Dr Gulshan Sharma, Director, ITFT, Aviation and Tourism Ministers from the northern India States including the Speaker, Punjab Vidhan Sabha have also been associated with the forum while Directors, Civil Aviation and Tourism, besides academicians and experts from the Tourism and Aviation sectors are being enrolled as its members.

The first formal meeting of the forum would be held on the eve of World Tourism Day on September 26, 2001 at Chandigarh.

One of the objectives of the forum is to encourage private participation, secure cooperation from the NRI’s and help create opportunities for investment with a view to stimulate trade, tourism and overall economic activity and growth in the northern Indian states. The role of the government in the times to come would now be more of a facilitator rather than developer, points out Dr Sharma.

The forum is now working out a strategy for better connectivity of important places in northern Indian states, improve infrastructure, private sector participation, make people air-minded, generate employment opportunities, to make efforts for providing adequate subsidies and funds to the flying and gliding clubs and promote tourism, trade and business.

As air services improve, destinations become easily accessible. This will generate demand for accommodation, restaurants, local transport, recreation and entertainment facilities, and other activities, including adventure sports. 

Corporate India’s new awakening
Ankur Aggarwal and Ruchita Taneja

In the wake of the earthquake that literally and metaphorically shook the grounds of one of the most affluent societies of India-Gujarat (7000 villages in all got affected by the lethal quake), it was astounding and heart-warming to see the response from ‘corporate’ India. Many well-established names of Indian industry have risen to the occasion and are trying to do their bit for rebuilding Gujarat. The reason for such large-scale response, apart from these businesses themselves getting affected by the quake or having their roots in Kutch, is the awakening of the Indian Business to the concept of “Corporate Citizenship’. Abroad, more specifically in the Western World, this concept has gained significance over the last few years and many businesses have suffered losses on account of not paying enough importance to this concept.

In India, most of the big, renowned names of the corporate world have had been spending a fraction of their earnings in doing their bit for the society but, in a very random and dis-aggregate manner.

This time around though, many corporates have responded in an organised fashion and have shown interest in getting involved with the reconstruction and rehabilitation of Gujarat rather than just announcing a particular sum of money and then washing their hands off the responsibility they have towards the society. This change in the relationship of the business with the community is a step in the right direction and would most definitely bring high rewards for both, increased sales and more potential consumers for the corporate and development for the society.

One of the examples that is worth mentioning for its efforts in the reconstruction and rehabilitation of Gujarat is that of the Apex body of Indian Industry, FICCI. What is remarkable about it is the fact that it has partnered with probably the most internationally acclaimed and biggest development organisation-CARE for the cause. Together they are going to completely rebuild and rehabilitate 30 villages at a cost of $15 Mn, which they have raised from the business community here and abroad.

This is the first time that a corporate body and a social body have come together for a project of such a big scale. The partnership makes logical sense as the two sectors can gain from each other’s separate strengths. In developing economies like ours this model may work better by establishing new ideas and strategies. The two sectors have complementary strengths and through their combination would bring in much needed broadening of the financial base for social service to occur. This unprecedented alliance might prove to be the trendsetter for the way development projects would be handled in future.

We are working with CARE India to study this unique synergy and develop a model process for use by organisations (social or corporate) in future. This model alongwith the lessons learnt from the partnership between FICCI and CARE might enable the corporate and the development sector to work in a more collaborative manner to improve their response to such emergency situations and other development projects. Whether this emerges as the new way of working to bring about about development of the Indian community at large remains to be seen and the acceptability of this way of working would depend upon the success of the partnership between FICCI and CARE.

‘Trade unions threat to industrial units’
Our Correspondent

Amritsar, July 1
A local industrialists association, representing various textile segments, today expressed concern over the issue of certain trade unions forcing the closure of industrial units in the district.

The Chairman of the local Textile Manufacturers Association, Mr Om Parkash Mehra, today alleged that the industry was facing a serious crisis due to globalisation and unhealthy competition due to cheaper imports, besides the heavy burden of taxation.

He said the association had written to the Chief Minister, the Labour Minister and the Local Administrator to check the activities of such unions which were posing a threat to the running of industrial units.

Meanwhile, exporters here resent the slow movement of sugar and cake wagons as more than 27 rakes were stranded on the Indian side. The Amritsar Exporters Chamber of commerce have made a representation to Northern Railway officers, New Delhi and urged them to expedite the movement of wagons.

‘Textile industry in doldrums’
K. S. Chawla

Ludhiana, July 1
The textile industry in India has been through ups and downs. The most recent being the recessionary trend prevailing all-over the major economies of the world. Having put up a good performance during 2000-2001 the textile industry is anticipating a slip in the first and second quarters of the 2001-2002 fiscal.

Mr S.P. Oswal, chairman, Textile Committee of the CII, said due to a sluggishness in the economy, there had been a sudden drop of demand for textile items. As a result, the export of readymade garments had declined by almost 20 per cent in the first five months of 2001 against the corresponding period last year.

As on date, there are 382 mills lying closed in the country, out of which 263 are the spinning mills and 119 composite. Due to this, nearly 3.40 lakh workers are facing an uncertain future.

Lamenting the poor modernisation of the textile industry, Mr Oswal pointed out that nearly 80 per cent of the processing units in the country were hand-processing units. As a result of which, the processing sector has the capacity to deal with only 20 per cent of the fabric produced in the country. Hence, 46 per cent of the fabric exported from the country is processed fabric.

Mr Oswal maintained that the spinning sector of the textile industry had been able to keep pace with the international technological trends to a fair degree. However, sectors like weaving, finishing and processing suffered a severe lack of technology upgrading efforts, affecting the quality of the fabrics.

He alleged that the discriminatory government policies like the benefits of the SSI sector, Indo-Nepal treaty, duty drawback and allowing duty free import of sewing thread and other accessories to the RMG manufacturers led to a slow pace of technological upgradation in the country.

Mr Oswal said the phasing out of MFA by 2005 and the removal of quotas available to the developing countries like India, the regional trading arrangements linking huge markets of the world with their trading partners like EU and NAFTA were leaving India vulnerable.

Mr Oswal was critical of the government policies which, he said, were effected without consulting the industry and realising the impact of the same on its growth.

Referring to the cut in the duty drawbackrates, he said while the garment exports had been affected due to recession in the developed nations and loss demand coming from the Indian textile goods, the government took steps to readjust the drawback rates and reduced the cap level on each garment. 

TAX & YOU

by R. N. Lakhotia

Q: In your advise in the column ‘Tax and You’ of the Business Tribune dated 29.3.1998, to one of the queries, you had clarified that in terms of Section 88 on Income Tax Act, a person is eligible for tax rebate in respect of payment for instalments paid for Self-Financing House irrespective of the fact whether the payment is made for the cost of land or for the instalment of the construction of the said house.

My query is whether that rebate is within or beyond the limit of saving up to Rs 14,000 (Maximum Saving of Rs 70,000). If it is beyond the above mentioned limit, then how much rebate is admissible to me on the amount of Rs 84,700 deposited by me towards the cost of land for a flat to be constructed by a Group Housing Society, out of my savings?

— Sheela Datta, Chandigarh

Ans: The maximum amount on which the tax rebate is permissible u/s 88 is Rs 80,000 for the assessment year 2001-2002 as well as for the assessment year 2002-2003. With regard to tax rebate in respect of payment for purchase or construction of a residential house, the maximum amount which will be eligible for tax rebate u/s 88 within the above mentioned overall limit is Rs 20,000. Hence, you will be eligible to claim tax rebate on Rs 20,000.

Q: I am a bank employee posted at Patiala. My total taxable salary including arrear of last 3 years for 2000-01 is Rs 173260. Arrears of Rs 32470 on A/c of salary revision w.e.f. 1.11.97 includes in 173260. As per form 10E u/s 89 (1) tax relief comes to Rs 3569 after diverting arrear in past years. Please guide whether my employer can allow exemption in tax.

— Sushil Kumar, Patiala

Ans: Where the employee is working in a company or a Co-operative Society, Local Authority, University, Institution, Association or Body, the relief u/s 89 (1) can be granted by the employer. In your case, as you are working with Banking company the benefit of Section 89 (1) has correctly been granted to you by your employer.

Q: I am a salaried person and also drawing pension from my previous Defence service, rendered by me as Ex-Defence personnel. I would like to know whether I am eligible for standard deduction from salary and pension separately. Please explain.

— Parveen Chander, Chandigarh.

Ans: The standard deduction would be permissible to you on your salary as well as on your pension amount. However, the total amount of such standard deduction would be restricted to the permissible limit, namely, 331/3rd of the salary or Rs 30,000 in case the pension and the salary does not exceed Rs 1,50,000. In case it exceeds Rs 1,50,000 but does not exceed Rs 3,00,000, the standard deduction for salary and pension taken together would be Rs 25,000. Likewise in case salary and the pension exceeds Rs 3,00,000 but does not exceed Rs 5,00,000 the standard deduction would be a maximum of Rs 20,000. No standard deduction will be allowed in case salary and pension exceeds Rs 5 lakh in a year.

Q: I am a retired government employee and a senior citizen aged 70. My income for Financial Year 2000-2001 will be as under:

(i) Pension: Rs 75,500.

(ii) Bank Fixed Deposit Interest Rs 4500.

Kindly tell me the amount of income tax, if any, payable by me. Is it necessary for me to file Income Tax return for F.Y. 2000-2001 even if there is no tax liability due to rebate as a senior citizen?

— M.K. Trehan, Amritsar?

Ans: On the facts stated by you no income-tax will be payable by you, after granting you tax deduction u/s 80L and also granting you standard deduction from your pension amount and the tax rebate applicable for a senior citizen. However, you are required to file income-tax return specially because of the fact that the net taxable income before tax rebate exceeds Rs 50,000 in one year.

MARKET SCAN

by J. C. Anand

The new system likely to have slow start

The traditional system of trading and transactions based on badla system in the stock market makes an exit and the new system based on rolling settlement, uniform settlement day and derivative takes its place. Indeed, “futures” in Index trading had been introduced on the National Stock Exchange in June 2000, and in early 2001, it was also started on the Bombay Stock Exchange. But “futures and options” in stock derivatives will be in operation only with effect from July 2, that is today. The rolling settlement had been in operation in a large number of scrips but a majority of forward — list scrips remained outside it. Now according to SEBI’s latest announcement, 301 scrips comprising almost all important and fluid scrips have been moved into the compulsory rolling settlement mode. In addition to these 301 scrips, another 108 scrips quoted on the BSE have been placed in the rolling settlement list.

The old system of circuit breakers has been dismantled but a new form of circuit breakers has found its way into the new system. According to the latest announcement of SEBI, circuit breakers will be applicable when the benchmark indices (BSE-30 Sensitive and Index or Nifty) move beyond 10, 15 and 20 per cent. For the quarter from July 2 to September 28, the Sensex will hit 10, 15 and 20 per cent if it moves by 350, 525 and 700 points in any direction.

A major question to pose is: how would the stock market react to the new system this month? There is hardly any doubt that the volumes of business will fall and the market is likely to remain depressed. Factors responsible for likely fall in the volumes may be: unfamiliarity with the new system, absence of arbitrage opportunities due to uniform settlement system and absence of badla system. The readers will recall that last month this column had cautioned the investors and traders about the likely depressed behaviour of the market in the month of June. This has been confirmed by the way the market has moved during this month.

The economy is not doing well. The fourth quarter of the financial year 2000-2001 was very depressed and it pulled down the GDP growth rate from 6.4 per cent in 1999-2000 to 5.2 per cent in 2000-2001. The rate of industrial growth has fallen further during the first quarter (April-June). Investors should not expect good reports about the working of the corporate sector during the first quarter this year, except for some top ICE companies. In fact, the timing for the introduction of the new system has been unfortunate, and it may affect the behaviour of the market.

Many well-informed analysts, involved in the actual conduct of the stock market business, believe that the badla system may reappear in some form even under the new system. The badla financiers may advance funds against demat shares in rolling settlement business.

Many analysts believe that a lot of business will pick up in B-I and B-II scrips which are outside the rolling settlement. There is, however, no doubt that the new system is more transparent and less vulnerable to the kind of scams which have been managed by some top brokers in the past under the old system. With time, which may extend from one to two years, the new system will come into full bloom, provided the economy recovers.

Novartis India’s net profit is lower to Rs 52.6 crore from Rs 103.4 crore for the year ended March 31, 2001. But this pertains only to its pharma business, for its agro-chemicals business has been separated. The face value of Novartis’ share is only Rs 5 only now and its equity capital has been halved from Rs 31 crore to Rs 15.5 crore. But even then, its profitability has been under severe strain.

AVIATION NOTES

by K. R. Wadhwaney

Need to prune staff strength

The Air India Board, at its recent meeting, has accepted the budget proposals, which paint a very rosy picture for the national carrier. The proposals, submitted jointly by the ministry and the airline, depict a huge profitability for the national carrier for the year ending March 31, 2002.

Those, who have been monitoring Air India’s turbulent existence are emphatic in their opinion that it is nothing but a tall claim because national carrier’s over-head expenses, particularly on the army of staff, are so enormous that it is virtually impossible to translate a loss-making unit into profit-making one.

Air India’s fleet is meagre but staff mammoth. Any other airline, like Singapore Airlines, Cathay Pacific, British Airways, Lufthansa or United Airlines, will slash the staff by at least 50 per cent, if not more.

If and when Air India goes private, the new owners of the ‘Maharaja’ will immediately launch a formula of ‘golden hand-shake’ to prune the staff. A sizeable percentage of them is totally dead-wood. The sooner it is got rid of the better it will be for the airline. No wonder employees unions are opposed to the move of disinvestment. But the Disinvestment Ministry, led by Mr Arun Shourie, seems unconcerned by union leaders cries.

Most of the bilateral agreements between India and foreign countries have already been signed. While foreign carriers are endeavouring to make capital out of these agreements, India’s two flagships, Air India and Indian Airlines, have been unable to make full use of these agreements because of the paucity of fleet. These agreements, already signed, will stay in operation for another seven years.

By the time the disinvestment process is completed, there will be open market on fares. Each airline, domestic or international, will be allowed to sell tickets at its own price. It will be then the matter of demand and supply.

According to Disinvestment Minister Arun Shourie, the decision on AI selloff will be in the first week of the next month (July). The Cabinet Committee on Disinvestment (CCD) will reveal share-holders’ position vis-a-vis the government. Wiser on several discrepancies that have creft in the sale of Modern Food Industry, the Disinvestment Ministry is expected to take precautions so that similar pitfalls do not surface in the transfer of two national carriers from the government to private sector.

REAL ESTATE

Thinking of buying a house?
R. P. Malhotra

With no signs of buoyancy in the real estate in Chandigarh for the last five years, a comparative study of prices during the last decade still has another story to tell by having an effective increase of about 100 per cent. It is during this period that collector rates of property were doubled in this region. The Chandigarh Administration enhanced the allotment rate of land to housing societies and housing board from Rs 750 to Rs 2500 per sq yd during this period of recession. In a recently floated housing scheme the Chandigarh Housing Board has almost doubled the allotment price of the dwelling units.

This increase being slow but gradual has given the feeling of a stable market. Although the atmosphere is not yet favourable for financiers the conditions are really ideal for the end users and this is the most appropriate time of investment for those who want a safer investment, as the buyer can dictate his terms in the present day buyers’ market. As the “end user” category of buyers goes for the bargain once in a lifetime, here are a few points to be taken care of.

There are widely two categories of properties-transferable and non-transferable. The word freehold does not at all convey that the property is transferable. One must ascertain the status of the property before going for a bargain. Only the title of the freehold and transferable property can be transferred in the buyers’ name through a sale deed duly registered and whereas the bargain of the nontransferable property is finalised by executing indirect sale documents like General Power of Attorney, Will, sale agreement etc. As it is not easy to raise finance on a non-transferable property, one should only plan to go for such proposition if one can afford it without raising any loan.

The independent houses/plots in Chandigarh are widely categorised in-to two categories. One, those were sold/allotted to the allottees-in the open public auction held-either under freehold or leasehold system and second, allotted to a few special category of allottees, out of priority on concessional rates. First category is transferable but the second category, even after got converted into freehold under the leasehold to freehold conversion policy, is not allowed to be sold/transferred till the expiry of the period debarring sale/transfer as per allotment letter.

After chalking out budgetary limits for the proposed investment, one should prepare a list of priorities according to the size of one’s pocket. If for certain reasons the size of your pocket is falling short for your minimum requirement of house/plot there exist number of loan schemes floated by nationalised and MNC banks on very nominal interest and easy repayment schedules spread over as long as 10 to 20 years of period. One may select the plan as per one’s monthly paying capacity. EMI (Equated monthly instalment) for a loan of one lakh roughly drives out to Rs 1100, Rs 1200 and Rs 1430 for the terms of 20, 15 and 10 years respectively as per a plan floated by one of the nationalised banks. The interest rate is 12.25 to 12.75 per cent per annum, on reducing balance, depending upon the plan of repayment. Moreover recently raised income tax rebate limit on the interest of the housing loan, declared in the current union budget, from Rs 100, 000 to Rs 150, 000 and a 20 per cent rebate in income tax on the repayment of housing loan upto Rs 20000 are a few added advantages for consumers thinking of buying a house by raising loans.

As per the prevailing town wise detail of residential properties available for sale in Chandigarh: 5 marla, 7 marla, 10 marla, 15 marla and one kanal houses of average livable construction are available for Rs 20, Rs 25, Rs 40, Rs 52 and Rs 65 lakh respectively, in Panchkula: 6 marla, 10 marla, 14 marla and one kanal houses of average livable construction are available for Rs 18, Rs 23, Rs 35, and Rs 45 lakh respectively and whereas in Mohali: 5 marla, 8 marla, 10 marla, 16 marla and one kanal category of houses of similar construction are available for 12, 17, 22, 35 and Rs 45 lakh.

Low budget category of buyers not adjustable into the above segments has the wide choice of going for housing boards and society flats/houses. The Chandigarh Administration, in its recently notified transfer policy, has allowed the GPAs of those allottees of the housing boards and societies, who are in possession of the DU (dwelling unit) for at least five years at the time of applying for transfer, to get the DU transferred in their names. Although, both the allottee and GPA get debarred from applying to any future scheme floated by the administration/board, the property cannot change hands subsequently till next five years.

Even though imposing a hefty transfer fee the administration has not allowed a direct transfer as the intending purchaser, as per the policy, initially shall have to make full payment to the allottee and then as a GPA he shall be allowed to apply for the transfer of the property. Under these limitations, only option left with the intending purchasers is to go for flats/houses in Mohali/Panchkula.

BIZ BRIEFS

Inflation dips
New Delhi, July 1
The annual inflation rate dipped by 0.21 percentage points to 5.23 per cent in the week ended June 16 despite a rise in the price of primary food articles. The point-to-point inflation rate based on Wholesale Price Index (WPI) for all commodities (base: 1993-94 = 100) declined from 5.44 per cent in the previous week and 6.62 per cent a year ago, mainly on account of cheaper manufactured products and non-food primary articles. PTI

SBI branch
Chandigarh, July 1
Mr S.K. Mishra, Dy General Manager, State Bank of India, today inaugurated “seven days banking” at the State Bank of India, Railway Road, Bahadurgarh branch. The bank will function from 10 am to 4 pm from Sunday to Friday and 10 am to 1 pm on Saturday. Mr Jagdish Kumar, AGM said the bank has recently introduced a scheme for senior citizens wherein one per cent higher interest is given. TNS

Tetra Pak
Chandigarh, July 1
Mr Igor Akimov, new managing director, Tetra Pak India Limited, is optimistic about the company’s readiness for growth. Mr Akimov has taken charge of the operations for India from his predecessor, Mr Lars Nygren, who retired recently. Prior to this, Mr Akimov was managing director of Tetra Pak, Pakistan. TNS

Food park
New Delhi, July 1
A Rs 7.8 crore food park is being set up in Khonmoh, on the outskirts of Srinagar, as part of the Centre’s effort to boost exports of fruits and vegetables from the state. The foundation stone for the park was laid by the Minister of State for Food Processing Chaoba Singh yesterday. PTI