 |
| Monday,
June 10, 2002, Chandigarh, India   
|
REAL ESTATE Is
investment in PF safe and secured?
‘I saw
future in plastic’ |
|
||||||||||||||||||||||||||||||||||
Market
continues to be uncertain & hesitant
Notify
new quality control orders for cement
Conveyance
allowance
Tax-payers
in a quandary
|
|
REAL ESTATE If the highly provocative current situation on the Indo-Pak border, indicative of war, defuses out peacefully without taking an untoward and ugly turn, the real estate is not going to remain an untouchable commodity for the investors and financiers. The trade, all time favourite for the investors, is certainly set to stage a comeback. For the last more than six years, this investment segment is been treated like a contagious disease. For this the investors/financiers can’t be blamed as they have suffered heavy to moderate losses in the mid nineties when the real estate prices crumbled down, eventually hitting the rock bottom in 1998. For those who have been putting their surplus investments in other fields like shares, stocks and gold thus intentionally maintaining a safe distance from real estate it is an information that this neglected field is going to fetch them dividends in the times to come. The yields in the sector may not be fast and bulky but surely it is going to take a start. Severe setback In spite of severe setback to the real estate sector during the period 1995-98 the investments made in 1992 in the real estate sector has increased 3.5 times whereas the investments made in other fields like gold, silver, stock market or even the US dollars have remained more or less static in the corresponding period. The fact may be verified from the statistic available by comparing the prices of gold and the BSE Sensex during this period. Otherwise also going by the prevailing buyer friendly conditions, the real estate is certainly going to be a best bet and less risky investment for the investor. With the housing finance companies running after you, quality townships coming up with quality constructions and the availability of plenty of housing accommodation affordable for each pocket, there couldn’t have been a better time to buy a house of one’s choice. With the current budgetary provisions of providing incentives to the investors interested to invest in the housing sector, you may even plan to earn returns higher than borrowings. By borrowing a housing loan @ 11% pa and availing income tax rebate on the tax paid (interest payments up to 1.5 lakh and the principal up to Rs 20,000 are eligible for exemption under section 88 of the IT Act), the net effective rate of interest payable, for an investor of 30 per cent income bracket, works out to be about 7.5 per cent pa. And then by putting your money in other investment avenues like mutual funds and bonds, most of these offering rates from 8-12 per cent range, you may earn higher returns. Example case: monthly instalment for a ten lakh loan proposition @ 11% pa (Rs 1,137 EMI per lakh) for fifteen years works out to be Rs 11,370 amounting to Rs 1,36,440 annually. By factoring tax benefit of about Rs 30,000 PA on the repayment of loan i.e., interest part of Rs 70,000 and Rs 20,000 of principal paid per annum, the net effective rate of interest works out to be less than 7.5 on reducing balance. NRIs’ preference NRIs have another valid reason to go for real estate proposition in India as the current budget allows them to repatriate their real estate earning such as rent in the foreign currency. Thus a NRI stands benefited from the depreciation of Rupee against the Dollar when he borrows a loan to buy property in India. A word of caution for those who get ready for a click in real estate is that having every thing favourable doesn’t mean you should jump blindfolded. Real estate is a long-term proposition. No easy money before a period of one year at least is assured. Moreover play safe when you are going to strike a bargain. Buying a piece of property in suburb or on the periphery of big cities, no doubt, works out to be cheaper, but it appreciates slowly as compared to a piece of property in the city limits even if it costs you a little more. Apartment Act In Chandigarh, with the apartment act now in force, the intending buyer is opting for upper floors of freehold residential properties. Buying a floor or apartment in a residential house is more or less like buying a flat. With highly ambiguous Chandigarh Apartment Act, without any clear-cut guidelines to the dealing staff, and many more other disadvantages, the proposition deserved to be assessed properly before going for a bargain. Firstly the triple storeyed marla houses in the city having limited common utility area are totally misfit for floor wise sale. Secondly the common utility services like electricity/water supply and sewerage were not designed and laid keeping in view the recently introduced apartment act. Whereas a flat in a high-rise building, constructed especially with the concept of providing free movement, independence and privacy to each of its occupants, have an added advantage of community feeling. With ample space for parking of vehicle, spacious staircases and circulation area and availability of many more value added services like standby generator, lift security guard and water shortage, which are otherwise missing in the old-concepted marla houses, these flats with modern design and planning have certainly an edge over the apartment in a marla house. However, the proposition of buying an apartment in a residential building having the zoning plan architectual control, by spending a little more than the cost of a bigger flat, should certainly be a wisely conceived idea as it provides ample provision for circulation area. In addition these buildings also provide adequate space for parking of vehicles etc. Builders have started entering the market to provide quality apartments for such buyers, by collaborating with the landlords of such residential properties. The concept is certainly going to act as a catalyst for creating new horizons in the sky of real estate trade. Small offices With acute shortage of affordable and smaller commercial/office spaces in the city, the apartment act, if restructured with practical feasibility in mind, shall be more useful for commercial buildings in the city. With the stock markets in the country
sustaining its upward trend in spite of highly volatile situation on
the border, the stage is set for the real estate sector to have a
start. History tells that the property trade follows the stock market
with approximately six months lag. Upward start is sure; it may or may
not be a booming trend in short time.
|
|
Is investment in PF safe and secured?
Mumbai, June 9 Provident funds’ corpus is required to be invested predominantly in gilts, debt papers guaranteed by the Central or State governments and bonds of the public sector units, banks, financial institutions and many of them have either failed to meet repayment obligation or are prone to default due to financial strain and fiscal flux. The government guideline that investment once made have to be held till maturity without active management of portfolio focusing on use of interest rate expectations and yield spreads over the Government of India securities would lead to serious asset-liability mis-match at the time of redemption. According to a study, redemption will peak up in year 2007 and over 80 per cent of the redemption would take place in 2008. In keeping with falling yields, the PF payout rate in past one year has been slashed twice to 9.50 per cent and most PFs declare a return between 9.50 per cent and 11 per cent but to sustain the return would be really a challenge for PFs, said an analyst. The portfolio are never marked to market and therefore the loss or gain in the realisable value of the portfolio is never noted and known, according to an expert with a retirement benefit firm. One of the domestic development financial institution, IFCI, with which more than Rs 1000 crore have been invested by PFs, has already hinted to PFs to roll-over their investments with it at a lower coupon rate due to its inability to meet its repayment obligation. Financial institutions like IDBI and SIDBI have also witnessed downgrading of their papers. Many state governments are under a financial strain and a state of fiscal flux. The fact that investment in state level undertaking is as high as 75 per cent for some funds is really a concern. Recently, the Maharashtra Government had defaulted interest payment of Rs 74 crore to the investors in bonds issued by the Maharashtra Krishna Valley Irrigation Developments Corpoartion (MKVIDC). The crux of the issue lies in the strict investment norms which leave little room for choice of investments for provident funds. The norms specify that 25 per cent of the incremental funds have to be invested in gilts, 15 per cent in debt papers guaranteed by the central or state government, 40 per cent in bonds issued by financial institutions or public sector banks and 20 per cent in either of the three or corporate papers with dual rating. Provident funds should be allowed to buy or sell in a wider range of securities. It will have three benefits — PFs will be able to get out of weaker papers and thus safeguard themselves against a possible default, by selling securities in a falling interest rate scenario, PFs will book profits and create reserves and it would also promote the retail debt
market. UNI
|
rc
‘I saw future in plastic’
LUDHIANA: “As a student pursuing a Bachelors of Art degree at the local Arya College, Ludhiana, I was almost sure that I have to make a name for myself in the world of business. I had big dreams for my future, but did not know what to do. After lot of deliberations and discussions with friends and family, I was sure that plastic was a thing for the future and I decided to venture into production of plastic bags, becoming the first person in Punjab to produce plastic bags for the packaging industry”, says Mr. Sunil Jain, Managing Director of Oswal Polypack India Ltd and Oswal Plastic Industry. It was way back in 1981 when I started looking for ventures of my own as I did not want to live on a salary like my father, Mr. Sri Pal Oswal who has risen to be a Director with the Oswal and Nahar groups looking after their entire exports operations. I went around and assessed the potential of various industries like hosiery, cycle, auto, food packaging, etc. But what I discovered that each and every industry used stuff like newspapers and paper bags for packing their products. Plastic bags in small quantities had started coming to Punjab from Delhi and Bombay, seeing a potential for this product, I decided to go ahead with setting up a venture to manufacture plastic poly bags in 1992 with a small investment of a few lakh. Today my turnover is more than a hundred times from what I had started with. Today, the Oswal Polypack Pvt Limited has a network of over a hundred dealers throughout Punjab for their ‘Pick up carry bags’. Though there are others making similar products today like Shalimar, Bitu Plastic, etc, but the brand Atam and Monte Carlo produced by Oswal Polypack is a leading brand. In fact several other small manufacturers producing between 5 to 7 tonnes of polybags per month are trying to pass off their brands as duplicates of Atam and Monte Carlo with names such as Atom, Uttam, Atma, etc. But since all these brands put together manufacture only a fraction of our brand, we do not bother much.
Initial problems Initially between 1992 and 1996 the state government went all out to promote this industry by offering subsidies. But once the Akali-BJP alliance government came to power in 1997, all subsidies were stopped and this affected us too as we were still in the initial phase. This coupled with an overall recession in the market led to about 40 per cent plastic polybags units becoming sick. On top of it, the state government imposed a heavy sales tax of 4.4 per cent hampering the industry further and preventing it from flourishing. Lack of adequate power supply and corruption in getting clearances, etc caused a lot of hardship in the beginning, but we overcame all problems with the grace of almighty.
Secret of success From the very first day, I decided that I will be honest in my dealings. Never have I till date made an attempt to make a fast buck by dubious means. It is perhaps this reason that my product is made from one of the purest forms of plastic. Besides we adhere strictly to the norms prescribed by the Supreme Court with regard to manufacturing of polybags. The thickness of the product is maintained at 20 micron making it environment friendly. The various units controlled and owned by me produce about 75 per cent of the polybags consumed in the state.
Trends in the industry Today, almost every industry is getting dependent on use of polybags for packaging, may it be the automobile industry, cycle industry or the food processing industry. Every eatable from pan, chatni, lassi curd, pickles, processed foods, etc uses plastic bags as it not only helps conserve environment, but also has a life that is eight times longer than paper. We have always tried to keep ourselves updated with the technology and at the same time made bags that are environment friendly. Consequentially, we do not use any recycled plastic, especially for our product to be used in the food packaging industry. It has a distinct advantage over other packaging material as it provides clear space for printing of manufacturing, exporting and expiry date, besides the price.
Future plans Both China and Malaysia are exporting the polybags to the western countries at prices that are much below our manufacturing cost. We are trying to bring in the latest technology that will bring down production costs close to that of the China and Malaysia’s level, and enable us to enter the international
market. (As told to Naveen S Garewal)
|
ty
Market continues to be uncertain & hesitant The four-day rally on bourses petered out on Friday as selling at higher levels enveloped the market. Investors and traders preferred to book profits ahead of the weekend. Despite assurances by India and Pakistan that they were looking for peace, the undertone in the market continued to be uncertain and hesitant. The 30-share BSE Senex shed 41.55 points last Friday to settle at 3,217.76, after rising 133.58 points in four previous trading sessions to 3,259.31. Banking, steel and select automobile scrips witnessed buying support last week. Reports of steel majors like Tisco and SAIL having hiked steel prices yet again, with effect from June 1, 2002, led to buying in some steel stocks. SAIL gained 37.5 per cent during the week to close at Rs 11.55. Tisco gained 9.2 per cent to close at Rs 119.85. Some banking stocks also gained ground on the back of good results.
Aurobindo Pharma Aurobindo Pharma is one of the largest manufacturers of semi-synthetic penicillin bulk drugs — ampicillin and amoxicillin. It has integrated facilities to manufacture bulk drugs, intermediates and formulations. Its product range includes antibiotic bulk drugs like cloxacillin and dicloxacillin and high-value drugs like astemizole, famotidine, domeperidone, omeprazole, norfloxacin and ciprofloxacin. For the nine months ended December 2001, Aurobindo Pharma (APL) has reported a negative growth in sales as well as net profit. Sales are down by 4 per cent to Rs 718.67 crore, while net profit has declined by 34 per cent to Rs 45.91 crore. Aurobindo Pharma had embarked on a major restructuring and expansion of its manufacturing facilities which led to closing down of certain units and expansion at certain locations as well as upgradation of key facilities to conform to USFDA and other international standards. This restructuring programme is now in its last phase and the benefits are becoming visible in the company’s third quarter performance. In the first two quarters of the current year, the company’s top and bottom lines had been significantly affected on account of downtime and consequent loss of production due to the manufacturing facilities taken up for restructuring. It is expected that with increased cost efficiencies, higher value added product mix and improved margines, the performance in the current fiscal will ensure that the EPS for the year surpasses the target of Rs 30. At the current price Rs 225, the company commands a discounting of just 7.5 times of its earning. In view of the benefits that are going to accrue to the company in the current fiscal the discounting seems on the lower side and once the market realises its full potential a re-rating of the company’s stock will take place.
SAIL Besides the reports about hike in price of steel, SAIL gained ground on the hope that the government would divest its stake in the company. The news that the company had recorded domestic sales at 1.42 million tonnes of steel for the period April-May 2002 also helped the stock to gain 37.5 per cent during the week to close at Rs 11.55. Other steel scrips also posted gains following the turnaround in the international steel markets. Increase in demand for steel in other parts of the world is also having a positive impact on Indian steel companies. Decline in exports from Russia, Korea and Japan due to the rise in demand in their domestic markets is said to have eased the competition for Indian steel firms in the global market. Marketmen say that the sector will also benefit form the government’s infrastructure development programmes.
Coming fortnight The Sensex has been moving in the 3100-3280 trading range for the past 14 trading sessions due to the developments on the border. Presently the index appears to be heading towards the lower end of the 3100-3280 range. The Index has a support at 3185 and a fall below this level would see the index slipping to 3100 or to still lower levels. Chances are that the market will break out of the trading range next week one way or the other.
|
sti
by Pushpa Girimaji Notify new quality control orders for cement Since the quality of cement has a direct bearing on the quality of construction, the Union Government had in 1995 brought cement under compulsory ISI (Indian Standards Institution) certification. But today, thanks to the government’s inefficiency, the mandatory quality control no longer exists, exposing consumers to cements to doubtful quality. As per the Cement (Quality Control) Order, 1995, issued under the Essential Commodities Act, 1955, no person could manufacture, store for sale, distribute or sell cement without the ISI marks issued by the Bureau of Indian Standards (BIS). And the mandatory certification applied to different kinds of cement including ordinary Portland cement, Portland slag cement, masonry cement, super-sulphated cement, hydrophobic Portland cement and white Portland cement. However, last year the government decided to remove certain goods from the purview of the Essential Commodities Act. Cement was one of them. Since such a move would effect the quality control order issued under the Act, the government had suggested, at an inter-ministerial meeting held in September last year that in order to protect the interests of consumers, it was essential to first check whether similar quality control order could be issued under some other law. Only after confirming this would cement be removed from the list, the government had said. It had then suggested that the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, in consultation with the Bureau of Indian Standards (BIS), examine this issue. If this had only been followed up with alacrity, and the new quality control order to replace the old one had got ready, there would have been no problem. But that did not happen and on February 15, the Consumer Affairs Ministry went ahead and removed cement from the purview of the Essential Commodities Act. And till today, the new quality control order replacing the old one and bringing cement under mandatory ISI certification has not been notified. In fact till recently, DIPP was supposed to bring out the new order and the Bureau of Indian Standards had sent them a draft order for their consideration as it was to be notified under Section 14 of the BIS Act. But apparently now, on the advice of the law ministry, DIPP has sent the papers back to the Ministry of Consumer Affairs, suggesting that since these are to be issued under the BIS Act, the Consumer Affairs Ministry (BIS comes under it) would be the appropriate authority to issue the order. The Consumer Affairs Ministry now says that it will issue the order without further delay and bring cement again under mandatory quality control. The government’s dilly-dallying has affected consumer interest in other areas too. Under the General Services Electric Lamps (Quality Control) Order, 1989, also issued under the Essential Commodities Act, no person could manufacture, distribute, store for sale or sell, commonly used electric bulbs without the ISI quality seal. Today even these bulbs are not under mandatory certification because they also no longer come under the purview of the Essential Commodities Act and new quality control order has not been issued. Similarly, in order to safeguard consumer interest in respect of certain essential electric appliances and accessories, the government had brought plugs and sockets, switches, electric iron, stoves, immersion water heaters and radiators under mandatory ISI quality certification through a quality control order issued under the Essential Commodities Act. Since the February 15th notification removed all these items too from the list of essential commodities, new quality orders are required to be issued in respect of these goods too. Here too, till recently, the department of Industrial Policy and Promotion was to issue a comprehensive quality control order bringing all these and more electrical items such as electrical wires and cables, circuit breakers, fuses and energy meters under mandatory quality control. But now the papers are back in the consumer affairs ministry, which hopes to issues it soon. The inordinate delay in issuing the new orders has proved to be a major setback for enforcement of quality standards in these essential goods. This is really unfortunate because consumers and consumer groups have fought hard for each of these orders to be issued and subsequently, for them to be implemented. Complaints on the quality of bulbs by Common Cause, Delhi, comparative testing of electric goods including plugs and sockets, iron, immersion rods by Consumer Education and Research Centre and a writ petition by Grahak Panchayat, Delhi in the High Court on the poor enforcement of quality control orders had all contributed to the Bureau of Indian Standards as well as the departments of industry in various state governments tightening the enforcement mechanism. Given these circumstances, the government should not only notify the new quality control orders immediately, but also ensure their immediate and stringent enforcement. That would also eliminate manufacture and trading in spurious brands, particularly in respect of cement, bulbs, plugs, sockets and switches. In fact only last week, the Delhi Police cracked down on a unit manufacturing spurious bulbs. There have also been raids on units manufacturing spurious cement in the recent past.
|
co
by R. N. Lakhotia Conveyance allowance Q: I am a bank officer and have taken a loan from my employer for purchase of a car. My employer is not paying me any sort of conveyance allowance. I use my vehicle/car to go to office and come back regularly during odd hours also. Am I entitled for any rebate for the expenses I incur on my car/petrol for the income-tax purpose. 2) One of my dependents is an acute patient of Epilepsy and I spend a good amount every year on the treatment. Am I entitled to get tax deduction under rule 11DD (1). Whether Epilepsy is prescribed in the above rule. — Jaspal Singh, Mandi (HP) Ans: You are not entitled to any deduction in respect of expenses incurred by you on your travel. Epilepsy is not included in the list of specified diseases and ailments under Rule 11DDA of the Income-tax Rules, 1961.
Disability pension Q: I am an ex-serviceman drawing disability basic pension Rs 1275 per month in addition to Rs 52401 as my service pension from Punjab Government. My disability was assessed 30 per cent by Army medical board. Please let me know, whether my disability pension is to be counted for income-tax or not — (i) If it is not to be counted, then under which section of Income-tax Act do I get rebate? (ii) If it is to be counted for income-tax then do I count it for standard deduction? — Er. G. S. Dhaliwal, Ludhiana Ans: Disability pension received from the Army will be exempted from income-tax as per communication issued by CBDT to the Army Department. You are requested to obtain a copy of the said notification from your office or in the alternative you may write to the Secretary, Central Board of Direct Taxes, North Block, New Delhi-1.
LIC premium Q: Myself and my wife are both government employees. I want to ask you if my wife can claim tax benefit on my LIC premium which is paid in cash. As limit of 60,000 due to me is completed in GPF+PPF. — Dr Manish Gupta, Jamani Mandi Ans: Your wife is eligible to claim tax rebate in respect of Life Insurance Premium payment on your life.
Pension Q: a) I have retired from Army with 30 per cent disability attributable to military service. I have received arrears of disability w.e.f. January 1, ’96 due to increase. Is disability pension exempted from income-tax if so under which section. If not how should I show these arrears in my I.T. return from 1.1.96 to 31.3.02 (in lumpsum along with pension or year-wise). b) Is service pension of Army personnel exempted from I.T. — Lt. Col. S. S. Chhina (retd), Mohali Ans: Disability pension from the Army is exempted from income-tax. You may ask your office to supply to you an exact copy of the communication received by them to this effect. |
 |
| Punjab | Haryana | Jammu & Kashmir | Himachal Pradesh | Regional Briefs | Nation | Editorial | | Business | Sport | World | Mailbag | In Spotlight | Chandigarh Tribune | Ludhiana Tribune 50 years of Independence | Tercentenary Celebrations | | 122 Years of Trust | Calendar | Weather | Archive | Subscribe | Suggestion | E-mail | |
LUDHIANA:
“As a student pursuing a Bachelors of Art degree at the local Arya
College, Ludhiana, I was almost sure that I have to make a name for
myself in the world of business. I had big dreams for my future, but did
not know what to do.
